UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-4108
OPPENHEIMER VARIABLE ACCOUNT FUNDS
(Exact name of registrant as specified in charter)
6803 SOUTH TUCSON WAY, CENTENNIAL, COLORADO 80112-3924
(Address of principal executive offices) (Zip code)
ROBERT G. ZACK, ESQ.
OPPENHEIMERFUNDS, INC.
TWO WORLD FINANCIAL CENTER, NEW YORK, NEW YORK 10281-1008
(Name and address of agent for service)
Registrant's telephone number, including area code: (303) 768-3200
Date of fiscal year end: DECEMBER 31
Date of reporting period: DECEMBER 31, 2005
ITEM 1. REPORTS TO STOCKHOLDERS.
OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE Oppenheimer Aggressive Growth
Fund/VA produced strong returns relative to its benchmark, the S&P 500 Index,
for its fiscal year ended December 31, 2005. We attributed these favorable
results to our disciplined bottom-up stock selection process. The Fund benefited
particularly from our holdings within the consumer discretionary, consumer
staples, healthcare, financials and industrials sectors.
Despite the Fund's solid performance, a few holdings within a variety of
sectors, information technology, healthcare and consumer discretionary, produced
disappointing results.
The Fund's investment strategy focuses on high-growth companies that are
industry leaders within their marketplace. We target those we believe possess
competitive advantages, stable earnings, sustainable growth rates and
experienced management teams with proven records.
Our investment strategy succeeded in identifying high performing companies
across many market sectors. During the period, our holdings within the consumer
discretionary sector performed quite well, benefiting from a healthy economy and
strong consumer spending. Top contributors to performance included women's
clothing retailer, Chico's FAS, Inc. and O'Reilly Automotive, Inc., a specialty
retailer of automotive aftermarket parts, tools and supplies.
Within the consumer staples sector, the world's top natural foods chain,
Whole Foods Market, Inc., benefited from a strong management team that
successfully executed on its corporate plan, driving the company's stock price
higher during the period.
Stocks within the healthcare sector also performed well for the Fund. The
strongest healthcare holding was Coventry Health Care, Inc., a firm that
provides managed healthcare services. Coventry Health Care, Inc. successfully
completed its acquisition of First Health Group Corp., which boosted
profitability and produced greater margins.
The financial sector also helped performance. Among the best performing
stocks in this sector were the Chicago Mercantile Exchange Holdings, Inc. and
Legg Mason, Inc. The Chicago Mercantile Exchange Holdings, Inc. profited from
its new products and trading platform. Legg Mason, Inc.'s stock soared after a
successful strategic realignment of the firm.
Within industrials, Fastenal Co., a nuts and bolts distributor and
Expeditors International of Washington, Inc., a freight forwarding company,
benefited from a strong domestic and global economy.
Among the few disappoints, Investors Financial Services Corp. suffered
from a reduction in profitability due to the flattening of the yield curve as
well as competitive pressures. Within healthcare, The Cooper Companies Inc.'s
stock declined due to an increasingly competitive marketplace. In the consumer
discretionary sector, Brunswick Corp., a global leader in the leisure products
industry, suffered from weak sales due to consumer concerns over rising energy
prices. Lastly, information technology services providers, Affiliated Computer
Services, Inc. and Alliance Data Systems Corp. underperformed for the period.
COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that follow show the
performance of a hypothetical $10,000 investment in each share class of the Fund
held until December 31, 2005. In the case of non-service shares, performance is
measured over a ten-year period. In the case of service shares, performance is
measured from inception of the class on October 16, 2000. Performance
information does not reflect charges that apply to separate accounts investing
in the Fund. If these charges were taken into account, performance would be
lower. The graphs assume that all dividends and capital gains distributions were
reinvested in additional shares.
The Fund's performance is compared to the performance of the S&P 500
Index, an unmanaged index of equity securities that is a measure of the general
domestic stock market. Index performance reflects the reinvestment of income but
does not consider the effect of transaction costs, and none of the data in the
graphs shows the effect of taxes. The Fund's performance reflects the effects of
the Fund's business and operating expenses. While index comparisons may be
useful to provide a benchmark for the Fund's performance, it must be noted that
the Fund's investments are not limited to the investments in the index.
4 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
NON-SERVICE SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Aggressive Growth Fund/VA (Non-Service)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Aggressive
Growth Fund/VA
(Non-Service) S&P 500 Index
---------------------- -------------
12/31/1995 10,000 10,000
03/31/1996 10,842 10,537
06/30/1996 11,892 11,009
09/30/1996 12,398 11,349
12/31/1996 12,022 12,295
03/31/1997 10,600 12,625
06/30/1997 12,796 14,827
09/30/1997 14,543 15,937
12/31/1997 13,426 16,395
03/31/1998 15,176 18,680
06/30/1998 15,762 19,300
09/30/1998 12,097 17,385
12/31/1998 15,085 21,084
03/31/1999 16,549 22,134
06/30/1999 18,255 23,691
09/30/1999 18,992 22,215
12/31/1999 27,697 25,518
03/31/2000 34,801 26,103
06/30/2000 33,571 25,409
09/30/2000 35,638 25,163
12/31/2000 24,584 23,196
03/31/2001 18,030 20,447
06/30/2001 17,947 21,643
09/30/2001 15,541 18,468
12/31/2001 16,898 20,441
03/31/2002 16,025 20,497
06/30/2002 13,984 17,753
09/30/2002 11,864 14,687
12/31/2002 12,202 15,925
03/31/2003 12,014 15,423
06/30/2003 13,876 17,796
09/30/2003 14,640 18,267
12/31/2003 15,324 20,490
03/31/2004 16,151 20,837
06/30/2004 16,869 21,195
09/30/2004 16,318 20,799
12/31/2004 18,355 22,718
03/31/2005 18,229 22,230
06/30/2005 18,797 22,535
09/30/2005 19,791 23,347
12/31/2005 20,617 23,833
AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/2005
1-Year 12.33% 5-Year -3.46% 10-Year 7.50%
SERVICE SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Aggressive Growth Fund/VA (Service)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Aggressive
Growth Fund/VA
(Service) S&P 500 Index
---------------------- -------------
10/16/2000 10,000 10,000
12/31/2000 7,240 9,257
03/31/2001 5,311 8,161
06/30/2001 5,285 8,638
09/30/2001 4,575 7,370
12/31/2001 4,973 8,158
03/31/2002 4,713 8,181
06/30/2002 4,110 7,085
09/30/2002 3,484 5,862
12/31/2002 3,578 6,356
03/31/2003 3,521 6,156
06/30/2003 4,067 7,103
09/30/2003 4,290 7,291
12/31/2003 4,489 8,178
03/31/2004 4,728 8,316
06/30/2004 4,936 8,459
09/30/2004 4,769 8,301
12/31/2004 5,361 9,067
03/31/2005 5,320 8,872
06/30/2005 5,481 8,994
09/30/2005 5,767 9,318
12/31/2005 6,003 9,512
AVERAGE ANNUAL TOTAL RETURN OF SERVICE SHARES OF THE FUND AT 12/31/2005
1-Year 11.99% 5-Year -3.68% Since Inception (10/16/00) -9.33%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, CALL US AT 1.800.981.2871. THE FUND'S
TOTAL RETURNS SHOULD NOT BE EXPECTED TO BE THE SAME AS THE RETURNS OF OTHER
FUNDS, WHETHER OR NOT BOTH FUNDS HAVE THE SAME PORTFOLIO MANAGERS AND/OR SIMILAR
NAMES. THE FUND'S TOTAL RETURNS DO NOT INCLUDE THE CHARGES ASSOCIATED WITH THE
SEPARATE ACCOUNT PRODUCTS THAT OFFER THIS FUND. SUCH PERFORMANCE WOULD HAVE BEEN
LOWER IF SUCH CHARGES WERE TAKEN INTO ACCOUNT.
5 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
FUND EXPENSES
- --------------------------------------------------------------------------------
FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1)
transaction costs, which may include redemption fees, if any; and (2) ongoing
costs, including management fees; distribution and service fees; and other Fund
expenses. These examples are intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning
of the period and held for the entire 6-month period ended December 31, 2005.
ACTUAL EXPENSES. The "actual" lines of the table provide information about
actual account values and actual expenses. You may use the information on this
line for the class of shares you hold, together with the amount you invested, to
estimate the expense that you paid over the period. Simply divide your account
value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00
= 8.60), then multiply the result by the number in the "actual" line under the
heading entitled "Expenses Paid During Period" to estimate the expenses you paid
on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The "hypothetical" lines of the
table provide information about hypothetical account values and hypothetical
expenses based on the Fund's actual expense ratio for each class of shares, and
an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of investing
in the Fund and other funds. To do so, compare this 5% hypothetical example for
the class of shares you hold with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any charges associated with the separate
accounts that offer this Fund. Therefore, the "hypothetical" lines of the table
are useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these separate
account charges were included, your costs would have been higher.
- ----------------------------------------------------------------------------
BEGINNING ENDING EXPENSES PAID
ACCOUNT ACCOUNT DURING 6 MONTHS
VALUE VALUE ENDED
(7/1/05) (12/31/05) DECEMBER 31, 2005
- ----------------------------------------------------------------------------
Non-Service shares Actual $1,000.00 $1,096.80 $3.65
- ----------------------------------------------------------------------------
Non-Service shares Hypothetical 1,000.00 1,021.73 3.52
- ----------------------------------------------------------------------------
Service shares Actual 1,000.00 1,095.20 5.08
- ----------------------------------------------------------------------------
Service shares Hypothetical 1,000.00 1,020.37 4.90
Hypothetical assumes 5% annual return before expenses.
Expenses are equal to the Fund's annualized expense ratio for that class,
multiplied by the average account value over the period, multiplied by 184/365
(to reflect the one-half year period). Those annualized expense ratios based on
the 6-month period ended December 31, 2005 are as follows:
CLASS EXPENSE RATIOS
- -----------------------------------
Non-Service shares 0.69%
- -----------------------------------
Service shares 0.96
- -----------------------------------
- --------------------------------------------------------------------------------
6 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
STATEMENT OF INVESTMENTS December 31, 2005
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS--100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--18.8%
- ------------------------------------------------------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--2.1%
Cheesecake Factory, Inc. (The) 1 241,000 $ 9,010,990
- ------------------------------------------------------------------------------------------------------------------------------------
Starbucks Corp. 1 569,600 17,093,696
------------------
26,104,686
- ------------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES--1.4%
Harman International Industries, Inc. 181,300 17,740,205
- ------------------------------------------------------------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS--2.0%
Brunswick Corp. 628,800 25,567,008
- ------------------------------------------------------------------------------------------------------------------------------------
MEDIA--2.7%
Getty Images, Inc. 1 384,100 34,288,607
- ------------------------------------------------------------------------------------------------------------------------------------
SPECIALTY RETAIL--6.9%
Bed Bath & Beyond, Inc. 1 142,000 5,133,300
- ------------------------------------------------------------------------------------------------------------------------------------
Chico's FAS, Inc. 1 564,900 24,816,057
- ------------------------------------------------------------------------------------------------------------------------------------
O'Reilly Automotive, Inc. 1 1,069,524 34,235,463
- ------------------------------------------------------------------------------------------------------------------------------------
Tractor Supply Co. 1 188,000 9,952,720
- ------------------------------------------------------------------------------------------------------------------------------------
Urban Outfitters, Inc. 1 299,200 7,572,752
- ------------------------------------------------------------------------------------------------------------------------------------
Williams-Sonoma, Inc. 1 146,100 6,304,215
------------------
88,014,507
- ------------------------------------------------------------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS--3.7%
Coach, Inc. 1 736,000 24,538,240
- ------------------------------------------------------------------------------------------------------------------------------------
Polo Ralph Lauren Corp. 391,800 21,995,652
------------------
46,533,892
- ------------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--2.0%
- ------------------------------------------------------------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--2.0%
Whole Foods Market, Inc. 329,000 25,461,310
- ------------------------------------------------------------------------------------------------------------------------------------
ENERGY--8.1%
- ------------------------------------------------------------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--3.3%
BJ Services Co. 469,000 17,198,230
- ------------------------------------------------------------------------------------------------------------------------------------
Smith International, Inc. 659,700 24,481,467
------------------
41,679,697
- ------------------------------------------------------------------------------------------------------------------------------------
OIL & GAS--4.8%
Apache Corp. 310,600 21,282,312
- ------------------------------------------------------------------------------------------------------------------------------------
Murphy Oil Corp. 372,500 20,111,275
- ------------------------------------------------------------------------------------------------------------------------------------
XTO Energy, Inc. 428,399 18,823,852
------------------
60,217,439
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIALS--9.4%
- ------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS--2.1%
Commerce Bancorp, Inc. 765,800 26,351,178
VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--5.6%
Chicago Mercantile Exchange (The) 81,000 $ 29,766,690
- ------------------------------------------------------------------------------------------------------------------------------------
Legg Mason, Inc. 343,500 41,113,515
------------------
70,880,205
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE--1.7%
Brown & Brown, Inc. 715,400 21,848,316
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE--16.1%
- ------------------------------------------------------------------------------------------------------------------------------------
BIOTECHNOLOGY--2.3%
Affymetrix, Inc. 1 200,200 9,559,550
- ------------------------------------------------------------------------------------------------------------------------------------
Gilead Sciences, Inc. 1 378,000 19,894,140
------------------
29,453,690
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--7.3%
Bard (C.R.), Inc. 518,500 34,179,520
- ------------------------------------------------------------------------------------------------------------------------------------
Gen-Probe, Inc. 1 388,900 18,974,431
- ------------------------------------------------------------------------------------------------------------------------------------
Idexx Laboratories, Inc. 1 17,900 1,288,442
- ------------------------------------------------------------------------------------------------------------------------------------
ResMed, Inc. 1 299,900 11,489,169
- ------------------------------------------------------------------------------------------------------------------------------------
Varian Medical Systems, Inc. 1 509,800 25,663,332
------------------
91,594,894
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--6.5%
American Healthways, Inc. 1 28,500 1,289,625
- ------------------------------------------------------------------------------------------------------------------------------------
Coventry Health Care, Inc. 1 646,575 36,828,912
- ------------------------------------------------------------------------------------------------------------------------------------
Health Management Associates,
Inc., Cl. A 1,107,600 24,322,896
- ------------------------------------------------------------------------------------------------------------------------------------
Patterson Cos., Inc. 1 588,300 19,649,220
------------------
82,090,653
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS--19.0%
- ------------------------------------------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE--3.1%
L-3 Communications Holdings, Inc. 176,700 13,137,645
- ------------------------------------------------------------------------------------------------------------------------------------
Rockwell Collins, Inc. 561,200 26,078,964
------------------
39,216,609
- ------------------------------------------------------------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS--5.2%
C.H. Robinson Worldwide, Inc. 719,700 26,650,491
- ------------------------------------------------------------------------------------------------------------------------------------
Expeditors International of
Washington, Inc. 573,100 38,689,981
------------------
65,340,472
- ------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--3.6%
Corporate Executive Board Co. 283,900 25,465,830
- ------------------------------------------------------------------------------------------------------------------------------------
Stericycle, Inc. 1 349,100 20,555,008
------------------
46,020,838
7 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
MACHINERY--3.9%
Donaldson Co., Inc. 538,000 $ 17,108,400
- ------------------------------------------------------------------------------------------------------------------------------------
Joy Global, Inc. 138,750 5,550,000
- ------------------------------------------------------------------------------------------------------------------------------------
Oshkosh Truck Corp. 598,000 26,664,820
------------------
49,323,220
- ------------------------------------------------------------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS--3.2%
Fastenal Co. 1,048,200 41,078,958
- ------------------------------------------------------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--25.7%
- ------------------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--2.7%
Comverse Technology, Inc. 1 1,291,300 34,335,667
- ------------------------------------------------------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--1.2%
CDW Corp. 275,600 15,866,292
- ------------------------------------------------------------------------------------------------------------------------------------
IT SERVICES--9.3%
Alliance Data Systems Corp. 1 552,900 19,683,240
- ------------------------------------------------------------------------------------------------------------------------------------
Cognizant Technology
Solutions Corp. 1 546,000 27,491,100
- ------------------------------------------------------------------------------------------------------------------------------------
Fiserv, Inc. 1 506,200 21,903,274
- ------------------------------------------------------------------------------------------------------------------------------------
Global Payments, Inc. 487,400 22,717,714
- ------------------------------------------------------------------------------------------------------------------------------------
NAVTEQ Corp. 1 290,700 12,753,009
- ------------------------------------------------------------------------------------------------------------------------------------
SRA International, Inc., Cl.A 1 409,100 12,493,914
------------------
117,042,251
- ------------------------------------------------------------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--4.0%
Linear Technology Corp. 703,600 25,378,852
- ------------------------------------------------------------------------------------------------------------------------------------
Microchip Technology, Inc. 772,500 24,835,875
------------------
50,214,727
- ------------------------------------------------------------------------------------------------------------------------------------
SOFTWARE--8.5%
Activision, Inc. 1 1,297,200 17,823,528
- ------------------------------------------------------------------------------------------------------------------------------------
Adobe Systems, Inc. 710,600 26,263,776
- ------------------------------------------------------------------------------------------------------------------------------------
Amdocs Ltd. 1 345,900 9,512,250
- ------------------------------------------------------------------------------------------------------------------------------------
Autodesk, Inc. 430,400 18,485,680
- ------------------------------------------------------------------------------------------------------------------------------------
Electronic Arts, Inc. 1 241,400 12,627,634
- ------------------------------------------------------------------------------------------------------------------------------------
FactSet Research Systems, Inc. 271,050 11,156,418
- ------------------------------------------------------------------------------------------------------------------------------------
Intuit, Inc. 1 213,800 11,395,540
------------------
107,264,826
- ------------------------------------------------------------------------------------------------------------------------------------
MATERIALS--0.1%
- ------------------------------------------------------------------------------------------------------------------------------------
CHEMICALS--0.1%
Ecolab, Inc. 35,800 1,298,466
- ------------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--0.8%
- ------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--0.8%
NeuStar, Inc., Cl.A 1 328,700 10,022,063
------------------
Total Common Stocks
(Cost $913,364,850) 1,264,850,676
VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS--0.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Blaze Network Products, Inc., 8% Cv.,
Series D 1,2,3 (Cost $7,346,317) 1,147,862 $ 2,586
PRINCIPAL
AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--0.2%
- ------------------------------------------------------------------------------------------------------------------------------------
Undivided interest of 3.09% in joint repurchase agreement (Principal Amount/Value $59,548,000,
with a maturity value of $59,570,297) with DB Alex Brown LLC, 3.37%, dated 12/30/05, to be
repurchased at $1,842,690 on 1/3/06, collateralized by U.S. Treasury Bills, 6/1/06 with a value of
$60,758,966 (Cost $1,842,000) $1,842,000 1,842,000
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $922,553,167) 100.2% 1,266,695,262
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF
OTHER ASSETS (0.2) (2,263,239)
-------------------------------
NET ASSETS 100.0% $ 1,264,432,023
===============================
8 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
2. Illiquid or restricted security. The aggregate value of illiquid or
restricted securities as of December 31, 2005 was $2,586, which represents less
than 0.005% of the Fund's net assets, all of which is considered restricted. See
Note 5 of Notes to Financial Statements.
3. Affiliated company. Represents ownership of at least 5% of the voting
securities of the issuer, and is or was an affiliate, as defined in the
Investment Company Act of 1940, at or during the period ended December 31, 2005.
The aggregate fair value of securities of affiliated companies held by the Fund
as of December 31, 2005 amounts to $2,586. Transactions during the period in
which the issuer was an affiliate are as follows:
SHARES GROSS GROSS SHARES
DECEMBER 31, 2004 ADDITIONS REDUCTIONS DECEMBER 31, 2005
- --------------------------------------------------------------------------------------------------------------------------
Blaze Network Products, Inc., 8% Cv., Series D 1,147,862 -- -- 1,147,862
BroadBand Office, Inc., Cv., Series C 211,641 -- 211,641 --
Centerpoint Broadband Technologies, Inc., Cv., Series D 1,298,701 -- 1,298,701 --
Centerpoint Broadband Technologies, Inc., Cv., Series Z 262,439 -- 262,439 --
MicroPhotonix Integration Corp., Cv., Series C 633,383 -- 633,383 --
Multiplex, Inc., Cv., Series C 2,330,253 -- 2,330,253 --
Questia Media, Inc., Cv., Series B 2,329,735 -- 2,329,735 --
VALUE DIVIDEND REALIZED
SEE NOTE 1 INCOME LOSS
- --------------------------------------------------------------------------------------------------------------------------
Blaze Network Products, Inc., 8% Cv., Series D $ 2,586 $ -- $ --
BroadBand Office, Inc., Cv., Series C -- -- 4,000,015
Centerpoint Broadband Technologies, Inc., Cv., Series D -- -- 13,999,997
Centerpoint Broadband Technologies, Inc., Cv., Series Z -- -- 6,999,992
MicroPhotonix Integration Corp., Cv., Series C -- -- 4,000,004
Multiplex, Inc., Cv., Series C -- -- 17,061,344
Questia Media, Inc., Cv., Series B -- -- 8,999,990
----------------------------------------------
$ 2,586 $ -- $ 55,061,342
==============================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
9 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 31, 2005
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Investments, at value - see accompanying statement of investments:
Unaffiliated companies (cost $915,206,850) $ 1,266,692,676
Affiliated companies (cost $7,346,317) 2,586
------------------
1,266,695,262
- ------------------------------------------------------------------------------------------------------------------------------------
Cash 120,065
- ------------------------------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest and dividends 263,837
Shares of beneficial interest sold 164,392
Other 19,522
------------------
Total assets 1,267,263,078
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
- ------------------------------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 1,867,743
Shares of beneficial interest redeemed 788,827
Shareholder communications 71,029
Trustees' compensation 25,182
Distribution and service plan fees 21,502
Transfer and shareholder servicing agent fees 1,785
Other 54,987
------------------
Total liabilities 2,831,055
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 1,264,432,023
==================
- ------------------------------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 25,611
- ------------------------------------------------------------------------------------------------------------------------------------
Additional paid-in capital 1,692,523,839
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated net investment loss (19,505)
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (772,240,017)
- ------------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 344,142,095
------------------
NET ASSETS $ 1,264,432,023
==================
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- ------------------------------------------------------------------------------------------------------------------------------------
Non-Service Shares:
Net asset value, redemption price per share and offering price per share (based on net assets of $1,227,881,350
and 24,863,416 shares of beneficial interest outstanding) $ 49.39
- ------------------------------------------------------------------------------------------------------------------------------------
Service Shares:
Net asset value, redemption price per share and offering price per share (based on net assets of $36,550,673
and 747,871 shares of beneficial interest outstanding) $ 48.87
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
10 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 31, 2005
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends $ 4,960,043
- ------------------------------------------------------------------------------------------------------------------------------------
Interest 137,712
------------------
Total investment income 5,097,755
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
- ------------------------------------------------------------------------------------------------------------------------------------
Management fees 8,080,149
- ------------------------------------------------------------------------------------------------------------------------------------
Distribution and service plan fees - Service shares 71,776
- ------------------------------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service shares 10,746
Service shares 10,045
- ------------------------------------------------------------------------------------------------------------------------------------
Shareholder communications:
Non-Service shares 49,947
Service shares 1,198
- ------------------------------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 39,594
- ------------------------------------------------------------------------------------------------------------------------------------
Trustees' compensation 22,330
- ------------------------------------------------------------------------------------------------------------------------------------
Administration service fees 1,500
- ------------------------------------------------------------------------------------------------------------------------------------
Other 66,914
------------------
Total expenses 8,354,199
Less reduction to custodian fees (47)
------------------
Net expenses 8,354,152
- ------------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT LOSS (3,256,397)
- ------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments:
Unaffiliated companies 71,149,451
Affiliated companies (55,061,342)
------------------
Net realized gain 16,088,109
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation on investments 126,872,800
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 139,704,512
==================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2005 2004
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment loss $ (3,256,397) $ (4,465,478)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) 16,088,109 (417,401)
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation 126,872,800 213,639,469
-----------------------------------
Net increase in net assets resulting from operations 139,704,512 208,756,590
- ------------------------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from beneficial interest transactions:
Non-Service shares (117,803,338) (109,692,557)
Service shares 8,921,013 9,104,838
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Total increase 30,822,187 108,168,871
- ------------------------------------------------------------------------------------------------------------------------------------
Beginning of period 1,233,609,836 1,125,440,965
-----------------------------------
End of period (including accumulated net investment loss of $19,505 and $13,347, respectively) $ 1,264,432,023 $ 1,233,609,836
===================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
12 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 2001
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 43.97 $ 36.71 $ 29.23 $ 40.72 $ 70.77
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.12) 1 (.15) 1 (.15) (.10) .23
Net realized and unrealized gain (loss) 5.54 7.41 7.63 (11.16) (21.38)
---------------------------------------------------------------------------------
Total from investment operations 5.42 7.26 7.48 (11.26) (21.15)
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income -- -- -- (.23) (.54)
Distributions from net realized gain -- -- -- -- (8.36)
---------------------------------------------------------------------------------
Total dividends and/or distributions to
shareholders -- -- -- (.23) (8.90)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 49.39 $ 43.97 $ 36.71 $ 29.23 $ 40.72
==================================================================================
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 12.33% 19.78% 25.59% (27.79)% (31.27)%
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 1,227,881 $ 1,209,459 $ 1,113,743 $ 979,919 $1,621,550
- -----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 1,177,979 $ 1,124,874 $ 1,041,584 $ 1,240,435 $1,898,088
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income (loss) (0.26)% (0.39)% (0.43)% (0.29)% 0.47%
Total expenses 0.69% 4 0.69% 4 0.70% 4 0.68% 4 0.68% 4
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 32% 53% 154% 54% 134%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Total returns are not annualized for
periods less than one full year. Total return information does not reflect
expenses that apply at the separate account level or to related insurance
products. Inclusion of these charges would reduce the total return figures for
all periods shown. Returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
13 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SERVICE SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 2001
- ----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 43.64 $ 36.54 $ 29.13 $ 40.70 $ 70.77
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.25) 1 (.27) 1 -- 2 .16 .19
Net realized and unrealized gain (loss) 5.48 7.37 7.41 (11.53) (21.36)
--------------------------------------------------------------------------------
Total from investment operations 5.23 7.10 7.41 (11.37) (21.17)
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income -- -- -- (.20) (.54)
Distributions from net realized gain -- -- -- -- (8.36)
--------------------------------------------------------------------------------
Total dividends and/or distributions to
shareholders -- -- -- (.20) (8.90)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 48.87 $ 43.64 $ 36.54 $ 29.13 $ 40.70
================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 11.99% 19.43% 25.44% (28.05)% (31.31)%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 36,551 $ 24,151 $ 11,698 $ 144 $ 54
- ----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 28,798 $ 17,579 $ 3,858 $ 72 $ 31
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income (loss) (0.54)% (0.68)% (0.72)% (0.56)% 0.09%
Total expenses 0.97% 0.99% 0.95% 1.55% 0.83%
Expenses after payments and waivers
and reduction to custodian expenses 0.97% 0.99% 0.95% 0.98% 0.83%
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 32% 53% 154% 54% 134%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Less than $0.005 per share.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Total returns are not annualized for
periods less than one full year. Total return information does not reflect
expenses that apply at the separate account level or to related insurance
products. Inclusion of these charges would reduce the total return figures for
all periods shown. Returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
4. Annualized for periods of less than one full year.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Aggressive Growth Fund/VA (the Fund) is a separate series of
Oppenheimer Variable Account Funds, an open-end management investment company
registered under the Investment Company Act of 1940, as amended. The Fund's
investment objective is to seek capital appreciation by investing in "growth
type" companies. The Fund's investment advisor is OppenheimerFunds, Inc. (the
Manager).
The Fund offers two classes of shares. Both classes are sold at their
offering price, which is the net asset value per share, to separate investment
accounts of participating insurance companies as an underlying investment for
variable life insurance policies, variable annuity contracts or other investment
products. The class of shares designated as Service shares is subject to a
distribution and service plan. Both classes of shares have identical rights and
voting privileges with respect to the Fund in general and exclusive voting
rights on matters that affect that class alone. Earnings, net assets and net
asset value per share may differ due to each class having its own expenses, such
as transfer and shareholder servicing agent fees and shareholder communications,
directly attributable to that class.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for business. Securities may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. Securities listed or traded on National
Stock Exchanges or other domestic exchanges are valued based on the last sale
price of the security traded on that exchange prior to the time when the Fund's
assets are valued. Securities traded on NASDAQ are valued based on the closing
price provided by NASDAQ prior to the time when the Fund's assets are valued. In
the absence of a sale, the security is valued at the last sale price on the
prior trading day, if it is within the spread of the closing "bid" and "asked"
prices, and if not, at the closing bid price. Securities traded on foreign
exchanges are valued based on the last sale price on the principal exchange on
which the security is traded, in the country that is identified by the portfolio
pricing service, prior to the time when the Fund's assets are valued. In the
absence of a sale, the security is valued at the official closing price on the
principal exchange. Corporate, government and municipal debt instruments having
a remaining maturity in excess of sixty days and all mortgage-backed securities
will be valued at the mean between the "bid" and "asked" prices. Futures
contracts traded on a commodities or futures exchange will be valued at the
final settlement price or official closing price on the principal exchange as
reported by such principal exchange at its trading session ending at, or most
recently prior to, the time when the Fund's assets are valued. Securities
(including restricted securities) for which market quotations are not readily
available are valued at their fair value. Foreign and domestic securities whose
values have been materially affected by what the Manager identifies as a
significant event occurring before the Fund's assets are valued but after the
close of their respective exchanges will be fair valued. Fair value is
determined in good faith using consistently applied procedures under the
supervision of the Board of Trustees. Short-term "money market type" debt
securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated funds
advised by the Manager, may transfer uninvested cash balances into joint trading
accounts on a daily basis. These balances are invested in one or more repurchase
agreements. Securities pledged as collateral for repurchase agreements are held
by a custodian bank until the agreements mature. Each agreement requires that
the market value of the collateral be sufficient to cover payments of interest
and principal. In the event of default by the other party to the agreement,
retention of the collateral may be subject to legal proceedings.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
15 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders.
The tax components of capital shown in the table below represent distribution
requirements the Fund must satisfy under the income tax regulations, losses the
Fund may be able to offset against income and gains realized in future years and
unrealized appreciation or depreciation of securities and other investments for
federal income tax purposes.
NET UNREALIZED
APPRECIATION
BASED ON COST OF
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED SECURITIES AND OTHER
NET INVESTMENT LONG-TERM LOSS INVESTMENTS FOR FEDERAL
INCOME GAIN CARRYFORWARD 1,2,3,4 INCOME TAX PURPOSES
- -------------------------------------------------------------------------------
$-- $-- $772,178,091 $344,080,160
1. As of December 31, 2005, the Fund had $753,038,745 of net capital loss
carryforwards available to offset future realized capital gains, if any, and
thereby reduce future taxable gain distributions. As of December 31, 2005,
details of the capital loss carryforwards were as follows:
EXPIRING
-----------------------------
2009 $ 522,813,923
2010 230,224,822
-------------
Total $ 753,038,745
=============
2. As of December 31, 2005, the Fund had $19,139,346 of post-October losses
available to offset future realized capital gains, if any. Such losses, if
unutilized, will expire in 2014.
3. During the fiscal year ended December 31, 2005, the Fund utilized $24,465,493
of capital loss carryforward to offset capital gains realized in that fiscal
year.
4. During the fiscal year ended December 31, 2004, the Fund utilized $9,896,185
of capital loss carryforward to offset capital gains realized in that fiscal
year.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Fund. Accordingly, the
following amounts have been reclassified for December 31, 2005. Net assets of
the Fund were unaffected by the reclassifications.
REDUCTION TO
REDUCTION TO ACCUMULATED NET
PAID-IN CAPITAL INVESTMENT LOSS
-------------------------------------------
$3,250,239 $3,250,239
No distributions were paid during the years ended December 31, 2005 and December
31, 2004.
The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for
federal income tax purposes as of December 31, 2005 are noted below. The primary
difference between book and tax appreciation or depreciation of securities and
other investments, if applicable, is attributable to the tax deferral of losses
or tax realization of financial statement unrealized gain or loss.
Federal tax cost of securities $ 922,615,102
===============
Gross unrealized appreciation $ 356,795,108
Gross unrealized depreciation (12,714,948)
---------------
Net unrealized appreciation $ 344,080,160
===============
16 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred
compensation plan for independent trustees that enables trustees to elect to
defer receipt of all or a portion of the annual compensation they are entitled
to receive from the Fund. For purposes of determining the amount owed to the
Trustee under the plan, deferred amounts are treated as though equal dollar
amounts had been invested in shares of the Fund or in other Oppenheimer funds
selected by the Trustee. The Fund purchases shares of the funds selected for
deferral by the Trustee in amounts equal to his or her deemed investment,
resulting in a Fund asset equal to the deferred compensation liability. Such
assets are included as a component of "Other" within the asset section of the
Statement of Assets and Liabilities. Deferral of trustees' fees under the plan
will not affect the net assets of the Fund, and will not materially affect the
Fund's assets, liabilities or net investment income per share. Amounts will be
deferred until distributed in accordance to the Plan.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date. Income and capital gain distributions, if
any, are declared and paid annually.
- --------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and amortization
of premium, is accrued as earned.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. Custodian Fees and Expenses in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts to the extent they are not
offset by positive cash balances maintained by the Fund. The Reduction to
Custodian Expenses line item, if applicable, represents earnings on cash
balances maintained by the Fund during the period. Such interest expense and
other custodian fees may be paid with these earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
YEAR ENDED DECEMBER 31, 2005 YEAR ENDED DECEMBER 31, 2004
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------
NON-SERVICE SHARES
Sold 2,464,320 $ 113,044,647 2,254,599 $ 88,253,010
Redeemed (5,107,185) (230,847,985) (5,085,553) (197,945,567)
--------------------------------------------------------------
Net decrease (2,642,865) $(117,803,338) (2,830,954) $(109,692,557)
==============================================================
- -----------------------------------------------------------------------------------------------
SERVICE SHARES
Sold 298,427 $ 13,509,067 312,167 $ 12,156,781
Redeemed (103,986) (4,588,054) (78,906) (3,051,943)
--------------------------------------------------------------
Net increase 194,441 $ 8,921,013 233,261 $ 9,104,838
==============================================================
17 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended December 31, 2005, were as
follows:
PURCHASES SALES
-----------------------------------------------------------------
Investment securities $383,650,177 $490,898,987
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee at an
annual rate of 0.75% of the first $200 million of average annual net assets,
0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the
next $200 million, 0.60% of the next $700 million and 0.58% of average annual
net assets over $1.5 billion.
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the year ended December 31, 2005, the Fund paid
$20,730 to OFS for services to the Fund.
Additionally, funds offered in variable annuity separate accounts are
subject to minimum fees of $10,000 per class, for class level assets of $10
million or more. Each class is subject to the minimum fee in the event that the
per account fee does not equal or exceed the applicable minimum fee.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN FOR SERVICE SHARES. The Fund has adopted a
Distribution and Service Plan for Service shares to pay OppenheimerFunds
Distributor, Inc. (the Distributor), for distribution related services, personal
service and account maintenance for the Fund's Service shares. Under the plan,
payments are made periodically at an annual rate of up to 0.25% of the average
annual net assets of Service shares of the Fund. The Distributor currently uses
all of those fees to compensate sponsor(s) of the insurance product that offers
Fund shares, for providing personal service and maintenance of accounts of their
variable contract owners that hold Service shares. The impact of the service
plan is to increase operating expenses of the Service shares, which results in
lower performance compared to the Fund's shares that are not subject to a
service fee. Fees incurred by the Fund under the plan are detailed in the
Statement of Operations.
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit
transfer and shareholder servicing agent fees for all classes to 0.35% of
average annual net assets per class. This undertaking may be amended or
withdrawn at any time.
- --------------------------------------------------------------------------------
5. ILLIQUID OR RESTRICTED SECURITIES
As of December 31, 2005, investments in securities included issues that are
illiquid or restricted. Restricted securities are purchased in private placement
transactions, are not registered under the Securities Act of 1933, may have
contractual restrictions on resale, and are valued under methods approved by the
Board of Trustees as reflecting fair value. A security may also be considered
illiquid if it lacks a readily available market or if its valuation has not
changed for a certain period of time. The Fund will not invest more than 15% of
its net assets (determined at the time of purchase and reviewed periodically) in
illiquid or restricted securities. Certain restricted securities, eligible for
resale to qualified institutional investors, are not subject to that limitation.
Securities that are illiquid or restricted are marked with the applicable
footnote on the Statement of Investments. Information concerning restricted
securities is as follows:
ACQUISITION VALUATION AS OF UNREALIZED
SECURITY DATE COST DECEMBER 31, 2005 DEPRECIATION
- ---------------------------------------------------------------------------------------------------------------------
Blaze Network Products, Inc., 8% Cv., Series D 10/17/00 $7,346,317 $2,586 $7,343,731
18 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
- --------------------------------------------------------------------------------
6. LITIGATION
A consolidated amended complaint has been filed as putative derivative and class
actions against the Manager, OFS and the Distributor, as well as 51 of the
Oppenheimer funds (as "Nominal Defendants") excluding the Fund, 30 present and
former Directors or Trustees and 8 present and former officers of the funds.
This complaint, initially filed in the U.S. District Court for the Southern
District of New York on January 10, 2005 and amended on March 4, 2005,
consolidates into a single action and amends six individual previously-filed
putative derivative and class action complaints. Like those prior complaints,
the complaint alleges that the Manager charged excessive fees for distribution
and other costs, improperly used assets of the funds in the form of directed
brokerage commissions and 12b-1 fees to pay brokers to promote sales of the
funds, and failed to properly disclose the use of assets of the funds to make
those payments in violation of the Investment Company Act of 1940 and the
Investment Advisers Act of 1940. Also, like those prior complaints, the
complaint further alleges that by permitting and/or participating in those
actions, the Directors/Trustees and the Officers breached their fiduciary duties
to shareholders of the funds under the Investment Company Act of 1940 and at
common law. The complaint seeks unspecified compensatory and punitive damages,
rescission of the funds' investment advisory agreements, an accounting of all
fees paid, and an award of attorneys' fees and litigation expenses.
The defendants believe that the allegations contained in the Complaints
are without merit and that they have meritorious defenses against the claims
asserted. The defendants intend to defend these lawsuits vigorously and to
contest any claimed liability. The defendants believe that it is premature to
render any opinion as to the likelihood of an outcome unfavorable to them and
that no estimate can yet be made with any degree of certainty as to the amount
or range of any potential loss.
19 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER AGGRESSIVE GROWTH
FUND/VA:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer Aggressive Growth Fund/VA, a series of Oppenheimer Variable Account
Funds, including the statement of investments, as of December 31, 2005, and the
related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the periods then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
The Fund is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audit includes consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of December 31, 2005, by correspondence with the
custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer Aggressive Growth Fund/VA as of December 31, 2005, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for each
of the five years in the periods then ended, in conformity with accounting
principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
February 13, 2006
20 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2006, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2005. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Fund to the Internal Revenue Service. Because of
the complexity of the federal regulations which may affect your individual tax
return and the many variations in state and local tax regulations, we recommend
that you consult your tax advisor for specific guidance.
21 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file Form N-PX, with its complete proxy voting record for the 12 months ended
June 30th, no later than August 31st of each year. The Fund's voting record is
available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at
www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC
for the first quarter and the third quarter of each fiscal year on Form N-Q. The
Fund's Form N-Q filings are available on the SEC's website at
http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public
Reference Room in Washington D.C. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
22 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew the Fund's
investment advisory agreement (the "Agreement"). The Investment Company Act of
1940, as amended, requires that the Board request and evaluate, and that the
Manager provide, such information as may be reasonably necessary to evaluate the
terms of the Agreement. The Board employs an independent consultant to prepare a
report that provides information, including comparative information, that the
Board requests for that purpose. In addition, the Board receives information
throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager, including an analysis of the
cost of providing services, (v) whether economies of scale are realized as the
Fund grows and whether fee levels reflect these economies of scale for Fund
investors and (vi) other benefits to the Manager from its relationship with the
Fund. Outlined below is a summary of the principal information considered by the
Board as well as the Board's conclusions.
NATURE, QUALITY, AND EXTENT OF SERVICES. The Board considered information
on the nature and extent of the services provided to the Fund and information
regarding the Manager's key personnel that provide such services. The Manager's
duties include providing the Fund with the services of the portfolio manager and
the Manager's investment team, who provide research, analysis and other advisory
services in regard to the Fund's investments; securities trading services;
oversight of third party service providers; monitoring compliance with
applicable Fund policies and procedures and adherence to the Fund's investment
restrictions. The Manager is responsible for providing certain administrative
services to the Fund as well. Those services include providing and supervising
all administrative and clerical personnel that are necessary in order to provide
effective corporate administration for the Fund; compiling and maintaining
records with respect to the Fund's operations; preparing and filing reports
required by the Securities and Exchange Commission; preparing periodic reports
regarding the operations of the Fund for its shareholders; preparing proxy
materials for shareholder meetings; and preparing the registration statements
required by Federal and state securities laws for the sale of the Fund's shares.
The Manager also provides the Fund with office space, facilities and equipment.
The Board also considered the quality of the services provided and the
quality of the Manager's resources that are available to the Fund. The Board
took account of the fact that the Manager has had over forty years of experience
as an investment adviser and that its assets under management rank it among the
top mutual fund managers in the United States. The Board evaluated the Manager's
administrative, accounting, legal and compliance services, and information the
Board has received regarding the experience and professional qualifications of
the Manager's key personnel and the size and functions of its staff providing
investment management services to the Fund. The Board also considered compliance
reports from the Fund's Chief Compliance Officer. In its evaluation of the
quality of the portfolio management services provided, the Board considered the
experience of John O'Hare and the Manager's Growth Equity investment team and
analysts. Mr. O'Hare has had over 18 years of experience managing equity
investments. The Board members also considered the totality of their experiences
with the Manager, as directors or trustees of the Fund and other funds advised
by the Manager. In light of the foregoing, the Board concluded that the Fund
benefits from the services provided under the Agreement as a result of the
Manager's experience, reputation, personnel, operations, and resources.
INVESTMENT PERFORMANCE OF THE MANAGER AND THE FUND. During the year, the
Manager provided information on the performance of the Fund and the Manager at
each Board meeting, including comparative performance information. The Board
also reviewed information, prepared by the Manager and by the independent
consultant, comparing the Fund's historical performance to relevant market
indices and to the performance of other mid-cap growth funds (including both
funds advised by the Manager and funds advised by other investment advisers).
The Board noted that the Fund's one-year performance was better than its peer
group median. However its three-year, five-year and ten-year performance were
below its peer group median.
23 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited/Continued
- --------------------------------------------------------------------------------
COSTS OF SERVICES AND PROFITS REALIZED BY THE MANAGER. The Board
considered information regarding the Manager's costs in serving as the Fund's
investment adviser, including the costs associated with the personnel and
systems necessary to manage the Fund, and information regarding the Manager's
profitability from its relationship with the Fund. The Board reviewed the fees
paid to the Manager and the other expenses borne by the Fund. The Board also
evaluated the comparability of the fees charged and the services provided to the
Fund to the fees and services for other clients or accounts advised by the
Manager. The independent consultant provided comparative data in regard to the
fees and expenses of the Fund, other mid-cap growth funds and other funds with
comparable asset levels and distribution features. The Board concluded that the
Fund's contractual and actual management fees and total expenses, which are all
lower than its peer group median and average, are reasonable in light of the
Fund's recent performance.
ECONOMIES OF SCALE. The Board reviewed the extent to which the Manager may
realize economies of scale in managing and supporting the Fund, the extent to
which those economies of scale benefit the Fund's shareholders and the current
level of Fund assets in relation to the Fund's breakpoint schedule for its
management fees. The Board considered that the Fund has experienced moderate
asset growth and that, based on current asset levels, the Fund is nearing, but
has not reached its last management fee breakpoint.
OTHER BENEFITS TO THE MANAGER. In addition to considering the profits
realized by the Manager, the Board considered information that was provided
regarding the direct and indirect benefits the Manager receives as a result of
its relationship with the Fund, including compensation paid to the Manager's
affiliates and research provided to the Manager in connection with permissible
brokerage arrangements (soft dollar arrangements). The Board considered that the
Manager must be able to pay and retain experienced professional personnel at
competitive rates to provide services to the Fund and that maintaining the
financial viability of the Manager is important in order for the Manager to
continue to provide significant services to the Fund and its shareholders.
CONCLUSIONS. These factors were also considered by the independent
Trustees meeting separately from the full Board, assisted by experienced counsel
to the Fund and to the independent Trustees. Fund counsel and the independent
Trustees' counsel are both independent of the Manager within the meaning and
intent of the Securities and Exchange Commission Rules.
Based on its review of the information it received and its evaluations
described above, the Board, including a majority of the independent Trustees,
concluded that the nature, extent and quality of the services provided to the
Fund by the Manager are a benefit to the Fund and in the best interest of the
Fund's shareholders and that the amount and structure of the compensation
received by the Manager and its affiliates are reasonable in relation to the
services provided. Accordingly, the Board elected to continue the advisory
agreement for another year. In arriving at this decision, the Board did not
single out any factor or factors as being more important than others, but
considered all of the factors together. The Board judged the terms and
conditions of the advisory agreement, including the management fee, in light of
all of the surrounding circumstances.
24 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NAME, POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S) DURING THE PAST 5
THE FUNDS, LENGTH OF SERVICE, YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS HELD;
AGE NUMBER OF PORTFOLIOS IN THE FUNDS COMPLEX
CURRENTLY OVERSEEN
INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW
TRUSTEES IS 6803 S. TUCSON WAY, CENTENNIAL, COLORADO
80112-3924. EACH TRUSTEE SERVES FOR AN
INDEFINITE TERM, OR UNTIL HIS OR HER
RESIGNATION, RETIREMENT, DEATH OR REMOVAL.
WILLIAM L. ARMSTRONG, Chairman of the following private mortgage
Chairman of the Board of banking companies: Cherry Creek Mortgage
Trustees (since 2003), Company (since 1991), Centennial State Mortgage
Trustee (since 1999) Company (since 1994), and The El Paso Mortgage
Age: 68 Company (since 1993); Chairman of the following
private companies: Ambassador Media Corporation
(since 1984) and Broadway Ventures (since
1984); Director of the following: Helmerich &
Payne, Inc. (oil and gas drilling/production
company) (since 1992), Campus Crusade for
Christ (since 1991) and The Lynde and Harry
Bradley Foundation, Inc. (non-profit
organization) (since 2002); former Chairman of
the following: Transland Financial Services,
Inc. (private mortgage banking company)
(1997-2003), Great Frontier Insurance
(insurance agency) (1995-2000), Frontier Real
Estate, Inc. (residential real estate
brokerage) (1994-2000) and Frontier Title
(title insurance agency) (1995-2000); former
Director of the following: UNUMProvident
(insurance company) (1991-2004), Storage
Technology Corporation (computer equipment
company) (1991-2003) and International Family
Entertainment (television channel) (1992-1997);
U.S. Senator (January 1979-January 1991).
Oversees 38 portfolios in the OppenheimerFunds
complex.
ROBERT G. AVIS, Director and President of A.G. Edwards Capital,
Trustee (since 1993) Inc. (General Partner of private equity funds)
Age: 74 (until February 2001); Chairman, President and
Chief Executive Officer of A.G. Edwards
Capital, Inc. (until March 2000); Director of
A.G. Edwards & Sons, Inc. (brokerage company)
(until 2000) and A.G. Edwards Trust Company
(investment adviser) (until 2000); Vice
Chairman and Director of A.G. Edwards, Inc.
(until March 1999); Vice Chairman of A.G.
Edwards & Sons, Inc. (until March 1999);
Chairman of A.G. Edwards Trust Company (until
March 1999) and A.G.E. Asset Management
(investment adviser) (until March 1999).
Oversees 38 portfolios in the OppenheimerFunds
complex.
GEORGE C. BOWEN, Assistant Secretary and Director of Centennial
Trustee (since 1999) Asset Management Corporation (December
Age: 69 1991-April 1999); President, Treasurer and
Director of Centennial Capital Corporation
(June 1989-April 1999); Chief Executive Officer
and Director of MultiSource Services, Inc.
(March 1996-April 1999); Mr. Bowen held several
positions with the Manager and with subsidiary
or affiliated companies of the Manager
(September 1987-April 1999). Oversees 38
portfolios in the OppenheimerFunds complex.
EDWARD L. CAMERON, Member of The Life Guard of Mount Vernon
Trustee (since 1999) (George Washington historical site) (since June
Age: 67 2000); Director of Genetic ID, Inc. (biotech
company) (March 2001-May 2002); Partner at
PricewaterhouseCoopers LLP (accounting firm)
(July 1974-June 1999); Chairman of Price
Waterhouse LLP Global Investment Management
Industry Services Group (July 1994-June 1998).
Oversees 38 portfolios in the OppenheimerFunds
complex.
JON S. FOSSEL, Director of UNUMProvident (insurance company)
Trustee (since 1990) (since June 2002); Director of Northwestern
Age: 64 Energy Corp. (public utility corporation)
(since November 2004); Director of P.R.
Pharmaceuticals (October 1999-October 2003);
Director of Rocky Mountain Elk Foundation
(non-profit organization) (February
1998-February 2003); Chairman and Director
(until October 1996) and President and Chief
Executive Officer (until October 1995) of the
Manager; President, Chief Executive Officer and
Director of the following: Oppenheimer
Acquisition Corp. ("OAC") (parent holding
company of the Manager), Shareholders Services,
Inc. and Shareholder Financial Services, Inc.
(until October 1995). Oversees 38 portfolios in
the OppenheimerFunds complex.
SAM FREEDMAN, Director of Colorado Uplift (charitable
Trustee (since 1996) organization) (since September 1984). Mr.
Age: 65 Freedman held several positions with the
Manager and with subsidiary or affiliated
companies of the Manager (until October 1994).
Oversees 38 portfolios in the OppenheimerFunds
complex.
BEVERLY L. HAMILTON, Trustee of Monterey Institute for International
Trustee (since 2002) Studies (educational organization) (since
Age: 59 February 2000); Director of The California
Endowment (philanthropic organization) (since
April 2002); Director of Community Hospital of
Monterey Peninsula (since February 2002); Vice
Chair of American Funds' Emerging Markets
Growth Fund, Inc. (mutual fund) (since October
1991); President of ARCO Investment Management
Company (February 1991-April 2000); Member of
the investment committees of The Rockefeller
Foundation and The University of Michigan;
Advisor at Credit Suisse First Boston's Sprout
venture capital unit (venture capital fund)
(1994-January 2005); Trustee of MassMutual
Institutional Funds (investment company)
(1996-June 2004); Trustee of MML Series
Investment Fund (investment company) (April
1989-June 2004); Member of the investment
committee of Hartford Hospital (2000-2003);
and Advisor to Unilever (Holland) pension fund
(2000-2003). Oversees 38 portfolios in the
OppenheimerFunds complex.
25 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
TRUSTEES AND OFFICERS Unaudited/Continued
- --------------------------------------------------------------------------------
ROBERT J. MALONE, Director of Jones International University
Trustee (since 2002) (educational organization) (since August 2005);
Age: 61 Chairman, Chief Executive Officer and Director
of Steele Street State Bank (commercial
banking) (since August 2003); Director of
Colorado UpLIFT (charitable organization)
(since 1986); Trustee of the Gallagher Family
Foundation (non-profit organization) (since
2000); Former Chairman of U.S. Bank-Colorado
(subsidiary of U.S. Bancorp and formerly
Colorado National Bank) (July 1996-April 1999);
Director of Commercial Assets, Inc. (real
estate investment trust) (1993-2000); Director
of Jones Knowledge, Inc. (2001-July 2004); and
Director of U.S. Exploration, Inc. (oil and gas
exploration) (1997-February 2004). Oversees 38
portfolios in the OppenheimerFunds complex.
F. WILLIAM MARSHALL, JR., Trustee of MassMutual Select Funds (formerly
Trustee (since 2000) MassMutual Institutional Funds) (investment
Age: 63 company) (since 1996) and MML Series Investment
Fund (investment company) (since 1996), Trustee
and Chairman of the Investment Committee (since
1994) of the Worcester Polytech Institute
(private university); President and Treasurer
of the SIS Funds (private charitable fund)
(since January 1999); Chairman of SIS & Family
Bank, F.S.B. (formerly SIS Bank) (commercial
bank) (January 1999-July 1999); Member of the
Investment Committee of the Community
Foundation of Western Massachusetts
(1998-2003); and Executive Vice President of
Peoples Heritage Financial Group, Inc.
(commercial bank) (January 1999-July 1999).
Oversees 40 portfolios in the OppenheimerFunds
complex.
- --------------------------------------------------------------------------------
INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD
AND OFFICER FINANCIAL CENTER, 225 LIBERTY STREET, 11TH
FLOOR, NEW YORK, NEW YORK 10281-1008. MR.
MURPHY SERVES AS A TRUSTEE FOR AN INDEFINITE
TERM, OR UNTIL HIS RESIGNATION, RETIREMENT,
DEATH OR REMOVAL AND AS AN OFFICER FOR AN
INDEFINITE TERM, OR UNTIL HIS RESIGNATION,
RETIREMENT, DEATH OR REMOVAL. MR. MURPHY IS AN
INTERESTED TRUSTEE DUE TO HIS POSITIONS WITH
OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES.
JOHN V. MURPHY, Chairman, Chief Executive Officer and Director
President and Trustee (since June 2001) and President (since
(since 2001) September 2000) of the Manager; President and
Age: 56 Director or Trustee of other Oppenheimer funds;
President and Director of OAC and of
Oppenheimer Partnership Holdings, Inc. (holding
company subsidiary of the Manager) (since July
2001); Director of OppenheimerFunds
Distributor, Inc. (subsidiary of the Manager)
(since November 2001); Chairman and Director of
Shareholder Services, Inc. and of Shareholder
Financial Services, Inc. (transfer agent
subsidiaries of the Manager) (since July 2001);
President and Director of OppenheimerFunds
Legacy Program (charitable trust program
established by the Manager) (since July 2001);
Director of the following investment advisory
subsidiaries of the Manager: OFI
Institutional Asset Management, Inc.,
Centennial Asset Management Corporation,
Trinity Investment Management Corporation and
Tremont Capital Management, Inc. (since
November 2001), HarbourView Asset Management
Corporation and OFI Private Investments, Inc.
(since July 2001); President (since November
2001) and Director (since July 2001) of
Oppenheimer Real Asset Management, Inc.;
Executive Vice President of Massachusetts
Mutual Life Insurance Company (OAC's parent
company) (since February 1997); Director of DLB
Acquisition Corporation (holding company parent
of Babson Capital Management LLC) (since June
1995); Member of the Investment Company
Institute's Board of Governors (since October
3, 2003); Chief Operating Officer of the
Manager (September 2000-June 2001); President
and Trustee of MML Series Investment Fund and
MassMutual Select Funds (open-end investment
companies) (November 1999-November 2001);
Director of C.M. Life Insurance Company
(September 1999-August 2000); President, Chief
Executive Officer and Director of MML Bay State
Life Insurance Company (September 1999-August
2000); Director of Emerald Isle Bancorp and
Hibernia Savings Bank (wholly-owned subsidiary
of Emerald Isle Bancorp) (June 1989-June
1998). Oversees 87 portfolios in the
OppenheimerFunds complex.
- --------------------------------------------------------------------------------
OTHER OFFICERS OF THE ADDRESSES OF THE OFFICERS IN THE CHART
THE FUND BELOW ARE AS FOLLOWS: FOR MESSRS. O'HARE AND
ZACK, TWO WORLD FINANCIAL CENTER, 225 LIBERTY
STREET, NEW YORK, NEW YORK 10281-1008, FOR
MESSRS. VANDEHEY AND WIXTED, 6803 S. TUCSON
WAY, CENTENNIAL, COLORADO 80112-3924. EACH
OFFICER SERVES FOR AN INDEFINITE TERM OR UNTIL
HIS OR HER RESIGNATION, RETIREMENT DEATH OR
REMOVAL.
JOHN O'HARE, Vice President of the Manager since September
Vice President and Portfolio 2003; Executive Vice President and Portfolio
Manager (since 2003) Manager (June 2000-August 2003) and Portfolio
Age: 47 Manager and Senior Vice President (August
1997-June 2000) at Geneva Capital Management,
Ltd. (an investment advisor). Mr. O'Hare holds
a BBA in Finance and Economics from the
University of Wisconsin and is a Chartered
Financial Analyst. An officer of 2 portfolios
in the OppenheimerFunds complex.
26 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
MARK S. VANDEHEY, Senior Vice President and Chief Compliance
Vice President and Chief Officer of the Manager (since March 2004); Vice
Compliance Officer President of OppenheimerFunds Distributor,
(since 2004) Inc., Centennial Asset Management Corporation
Age:55 and Shareholder Services, Inc. (since June
1983); Vice President and Director of Internal
Audit of the Manager (1997-February 2004). An
officer of 87 portfolios in the
OppenheimerFunds complex.
BRIAN W. WIXTED, Senior Vice President and Treasurer of the
Treasurer and Principal Manager (since March 1999); Treasurer of the
Financial and Accounting following: HarbourView Asset Management
Officer (since 1999) Corporation, Shareholder Financial Services,
Age: 46 Inc., Shareholder Services, Inc., Oppenheimer
Real Asset Management Corporation, and
Oppenheimer Partnership Holdings, Inc. (since
March 1999), OFI Private Investments, Inc.
(since March 2000), OppenheimerFunds
International Ltd. and OppenheimerFunds plc
(since May 2000), OFI Institutional Asset
Management, Inc. (since November 2000), and
OppenheimerFunds Legacy Program (since June
2003); Treasurer and Chief Financial Officer of
OFI Trust Company (trust company subsidiary of
the Manager) (since May 2000); Assistant
Treasurer of the following: OAC (since March
1999), Centennial Asset Management Corporation
(March 1999-October 2003) and OppenheimerFunds
Legacy Program (April 2000-June 2003);
Principal and Chief Operating Officer of
Bankers Trust Company-Mutual Fund Services
Division (March 1995-March 1999). An officer of
87 portfolios in the OppenheimerFunds complex.
ROBERT G. ZACK, Executive Vice President (since January 2004)
Vice President and Secretary and General Counsel (since March 2002) of the
(since 2001) Manager; General Counsel and Director of the
Age: 57 Distributor (since December 2001); General
Counsel of Centennial Asset Management
Corporation (since December 2001); Senior Vice
President and General Counsel of HarbourView
Asset Management Corporation (since December
2001); Secretary and General Counsel of OAC
(since November 2001); Assistant Secretary
(since September 1997) and Director (since
November 2001) of OppenheimerFunds
International Ltd. and OppenheimerFunds plc;
Vice President and Director of Oppenheimer
Partnership Holdings, Inc. (since December
2002); Director of Oppenheimer Real Asset
Management, Inc. (since November 2001); Senior
Vice President, General Counsel and Director of
Shareholder Financial Services, Inc. and
Shareholder Services, Inc. (since December
2001); Senior Vice President, General Counsel
and Director of OFI Private Investments, Inc.
and OFI Trust Company (since November 2001);
Vice President of OppenheimerFunds Legacy
Program (since June 2003); Senior Vice
President and General Counsel of OFI
Institutional Asset Management, Inc. (since
November 2001); Director of OppenheimerFunds
(Asia) Limited (since December 2003); Senior
Vice President (May 1985-December 2003),
Acting General Counsel (November 2001-February
2002) and Associate General Counsel (May
1981-October 2001) of the Manager; Assistant
Secretary of the following: Shareholder
Services, Inc. (May 1985-November 2001),
Shareholder Financial Services, Inc. (November
1989-November 2001), and OppenheimerFunds
International Ltd. (September 1997-November
2001). An officer of 87 portfolios in the
OppenheimerFunds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION
ABOUT THE FUND'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT CHARGE, UPON
REQUEST, BY CALLING 1.800.981.2871.
27 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
OPPENHEIMER BALANCED FUND/VA
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. During its fiscal year ended
December 31, 2005, the Oppenheimer Balanced Fund/VA performed well, but slightly
underperformed its primary benchmark, the S&P 500 Index, however, produced
higher returns than the 60% S&P 500/40% Lehman Aggregate Bond blended benchmark.
We attribute this modest underperformance to the Fund's conservative asset
allocation, which resulted in the Fund being underweight equities versus its
benchmark. In addition, multiple Fund holdings underperformed during the last
few months of the period, and gave up the strong performance the Fund had
experienced earlier in the year. The Fund's fixed-income portion, while
significantly outperforming its benchmark, produced modest gains.
The Fund's performance was strong on the equity side for much of the
period with particularly competitive performances coming from the financials and
energy sectors. In the financials sector, strong security selection benefited
performance. Top contributors to performance included, investment firm, Lehman
Brothers Holdings, Inc., and investment management firm, UBS AG.
The energy sector proved to be the highest performing sector within the
S&P 500 Index, producing returns of over 30% for the period. Although the Fund
was slightly underweight in energy versus its benchmark, the Fund's security
selection in that sector added value to the overall Fund.
In the consumer staples area, tobacco giant, Altria Group, Inc., benefited
from easing litigation concerns and a planned corporate restructuring designed
to unlock shareholder value.
On the negative side, most of the Fund's underperformance came from its
conservative asset allocation. To a lesser extent, a few individual stocks
underperformed including Take-Two Interactive Software, Inc., Cendant Corp. and
IDT Corp.
On the fixed-income side, the bulk of the Fund's positive performance came
from active interest rate management as we took advantage of what we perceived
to be market overreactions to events. By maintaining a shorter position versus
our benchmark, we were able to successfully navigate through the volatility that
dominated this area of the market. The Fund's emphasis on short-maturity
corporate bonds helped performance, as did the overweight to financials at the
expense of industrial sector issuers. Among mortgage-backed securities, the
Fund's focus on seasoned, higher-coupon mortgages helped support performance.
COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that follow show the
performance of a hypothetical $10,000 investment in each share class of the Fund
held until December 31, 2005. In the case of non-service shares, performance is
measured over a ten-year period. In the case of service shares, performance is
measured from inception of the class on May 1, 2002. Performance information
does not reflect charges that apply to separate accounts investing in the Fund.
If these charges were taken into account, performance would be lower. The graphs
assume that all dividends and capital gains distributions were reinvested in
additional shares. The Fund's performance is compared to the performance of both
the S&P 500 Index, an unmanaged index of U.S. equity securities that is a
measure of the general domestic stock market and the Lehman Brothers Aggregate
Bond Index, an unmanaged index of U.S. corporate, government and mortgage-backed
securities that is a measure of the domestic bond market. Index performance
reflects the reinvestment of income but does not consider the effect of
transaction costs, and none of the data in the graphs shows the effect of taxes.
The Fund's performance reflects the effects of the Fund's business and operating
expenses. While index comparisons may be useful to provide a benchmark for the
Fund's performance, it must be noted that the Fund's investments are not limited
to the investments in the index.
4 | OPPENHEIMER BALANCED FUND/VA
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
NON-SERVICE SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Balanced Fund/VA (Non-Service)
S&P 500 Index
Lehman Brothers Aggregate Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Lehman Brothers
Balanced Fund/VA S&P Aggregate
(Non-Service) 500 Index Bond Index
---------------- --------- ---------------
12/31/1995 10,000 10,000 10,000
03/31/1996 10,339 10,537 9,823
06/30/1996 10,618 11,009 9,879
09/30/1996 11,031 11,349 10,061
12/31/1996 11,550 12,295 10,363
03/31/1997 11,553 12,625 10,305
06/30/1997 12,607 14,827 10,684
09/30/1997 13,584 15,937 11,039
12/31/1997 13,539 16,395 11,364
03/31/1998 14,473 18,680 11,540
06/30/1998 14,499 19,300 11,810
09/30/1998 12,983 17,385 12,309
12/31/1998 14,440 21,084 12,351
03/31/1999 14,673 22,134 12,289
06/30/1999 15,662 23,691 12,181
09/30/1999 15,145 22,215 12,264
12/31/1999 16,143 25,518 12,249
03/31/2000 17,130 26,103 12,519
06/30/2000 17,224 25,409 12,737
09/30/2000 17,276 25,163 13,121
12/31/2000 17,182 23,196 13,673
03/31/2001 17,039 20,447 14,088
06/30/2001 18,099 21,643 14,168
09/30/2001 16,115 18,468 14,821
12/31/2001 17,563 20,441 14,828
03/31/2002 17,626 20,497 14,842
06/30/2002 16,334 17,753 15,390
09/30/2002 14,744 14,687 16,095
12/31/2002 15,737 15,925 16,348
03/31/2003 15,576 15,423 16,576
06/30/2003 17,527 17,796 16,991
09/30/2003 18,145 18,267 16,966
12/31/2003 19,664 20,490 17,019
03/31/2004 20,115 20,837 17,472
06/30/2004 19,928 21,195 17,045
09/30/2004 20,078 20,799 17,590
12/31/2004 21,650 22,718 17,758
03/31/2005 21,412 22,230 17,673
06/30/2005 21,978 22,535 18,204
09/30/2005 22,637 23,347 18,082
12/31/2005 22,492 23,833 18,189
AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/05
1-Year 3.89% 5-Year 5.53% 10-Year 8.44%
SERVICE SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Balanced Fund/VA (Service)
S&P 500 Index
Lehman Brothers Aggregate Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Lehman Brothers
Balanced Fund/VA S&P Aggregate
(Service) 500 Index Bond Index
---------------- --------- ---------------
05/01/2002 10,000 10,000 10,000
06/30/2002 9,407 9,220 10,172
09/30/2002 8,491 7,628 10,638
12/31/2002 9,056 8,271 10,806
03/31/2003 8,951 8,010 10,956
06/30/2003 10,075 9,242 11,230
09/30/2003 10,423 9,487 11,214
12/31/2003 11,291 10,641 11,249
03/31/2004 11,542 10,822 11,548
06/30/2004 11,427 11,008 11,266
09/30/2004 11,506 10,802 11,626
12/31/2004 12,397 11,799 11,737
03/31/2005 12,254 11,545 11,681
06/30/2005 12,565 11,703 12,032
09/30/2005 12,936 12,125 11,951
12/31/2005 12,852 12,378 12,022
AVERAGE ANNUAL TOTAL RETURNS OF SERVICE SHARES OF THE FUND AT 12/31/05
1-Year 3.67% 5-Year N/A Since Inception (5/1/02) 7.08%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS.
THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE
PERFORMANCE QUOTED. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH END,
CALL US AT 1.800.981.2871. THE FUND'S TOTAL RETURNS SHOULD NOT BE EXPECTED TO BE
THE SAME AS THE RETURNS OF OTHER FUNDS, WHETHER OR NOT BOTH FUNDS HAVE THE SAME
PORTFOLIO MANAGERS AND/OR SIMILAR NAMES. THE FUND'S TOTAL RETURNS DO NOT INCLUDE
THE CHARGES ASSOCIATED WITH THE SEPARATE ACCOUNT PRODUCTS THAT OFFER THIS FUND.
SUCH PERFORMANCE WOULD HAVE BEEN LOWER IF SUCH CHARGES WERE TAKEN INTO ACCOUNT.
5 | OPPENHEIMER BALANCED FUND/VA
FUND EXPENSES
- --------------------------------------------------------------------------------
FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1)
transaction costs, which may include redemption fees, if any; and (2) ongoing
costs, including management fees; distribution and service fees; and other Fund
expenses. These examples are intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning
of the period and held for the entire 6-month period ended December 31, 2005.
ACTUAL EXPENSES. The "actual" lines of the table provide information about
actual account values and actual expenses. You may use the information on this
line for the class of shares you hold, together with the amount you invested, to
estimate the expense that you paid over the period. Simply divide your account
value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00
= 8.60), then multiply the result by the number in the "actual" line under the
heading entitled "Expenses Paid During Period" to estimate the expenses you paid
on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the
table provide information about hypothetical account values and hypothetical
expenses based on the Fund's actual expense ratio, and an assumed rate of return
of 5% per year before expenses, which is not the Fund's actual return. The
hypothetical account values and expenses may not be used to estimate the actual
ending account balance or expenses you paid for the period. You may use this
information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any charges associated with the separate
accounts that offer this Fund. Therefore, the "hypothetical" lines of the table
are useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these separate
account charges were included, your costs would have been higher.
- ----------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
(7/1/05) (12/31/05) DECEMBER 31, 2005
- ----------------------------------------------------------------------------
Non-Service shares Actual $1,000.00 $ 1,023.40 $3.78
- ----------------------------------------------------------------------------
Non-Service shares Hypothetical 1,000.00 1,021.48 3.78
- ----------------------------------------------------------------------------
Service shares Actual 1,000.00 1,022.90 5.11
- ----------------------------------------------------------------------------
Service shares Hypothetical 1,000.00 1,020.16 5.10
Hypothetical assumes 5% annual return before expenses.
Expenses are equal to the Fund's annualized expense ratio for that class,
multiplied by the average account value over the period, multiplied by 184/365
(to reflect the one-half year period). Those annualized expense ratios based on
the 6-month period ended December 31, 2005 are as follows:
CLASS EXPENSE RATIOS
- -------------------------------------
Non-Service shares 0.74%
- -------------------------------------
Service shares 1.00
- ----------------------------------------------------------------------------
6 | OPPENHEIMER BALANCED FUND/VA
STATEMENT OF INVESTMENTS December 31, 2005
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS--51.6%
- ------------------------------------------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--6.2%
- ------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED CONSUMER SERVICES--0.2%
Corinthian Colleges, Inc. 1 119,600 $ 1,408,888
- ------------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES--0.3%
WCI Communities, Inc. 1 63,500 1,704,975
- ------------------------------------------------------------------------------------------------------------------------------------
MEDIA--5.5%
Liberty Global, Inc., Series A 391,021 8,797,973
- ------------------------------------------------------------------------------------------------------------------------------------
Liberty Global, Inc., Series C 1 391,021 8,289,645
- ------------------------------------------------------------------------------------------------------------------------------------
Liberty Media Corp., Cl. A 1 1,469,400 11,564,178
- ------------------------------------------------------------------------------------------------------------------------------------
Viacom, Inc., Cl. B 120,200 3,918,520
------------------
32,570,316
- ------------------------------------------------------------------------------------------------------------------------------------
SPECIALTY RETAIL--0.2%
Gap, Inc. (The) 75,000 1,323,000
- ------------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--4.0%
- ------------------------------------------------------------------------------------------------------------------------------------
BEVERAGES--0.9%
Constellation Brands, Inc., Cl. A 213,800 5,607,974
- ------------------------------------------------------------------------------------------------------------------------------------
FOOD PRODUCTS--0.6%
Tyson Foods, Inc., Cl. A 213,200 3,645,720
- ------------------------------------------------------------------------------------------------------------------------------------
TOBACCO--2.5%
Altria Group, Inc. 194,700 14,547,984
- ------------------------------------------------------------------------------------------------------------------------------------
ENERGY--4.8%
- ------------------------------------------------------------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--0.7%
Halliburton Co. 67,000 4,151,320
- ------------------------------------------------------------------------------------------------------------------------------------
OIL & GAS--4.1%
BP plc, ADR 47,400 3,044,028
- ------------------------------------------------------------------------------------------------------------------------------------
Kinder Morgan, Inc. 15,800 1,452,810
- ------------------------------------------------------------------------------------------------------------------------------------
LUKOIL, Sponsored ADR 84,900 5,009,100
- ------------------------------------------------------------------------------------------------------------------------------------
Petroleo Brasileiro SA, Preference 304,000 4,837,634
- ------------------------------------------------------------------------------------------------------------------------------------
Talisman Energy, Inc. 129,600 6,867,702
- ------------------------------------------------------------------------------------------------------------------------------------
TotalFinaElf SA, Sponsored ADR 22,500 2,844,000
------------------
24,055,274
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIALS--9.5%
- ------------------------------------------------------------------------------------------------------------------------------------
CAPITAL MARKETS--1.5%
UBS AG 92,467 8,803,030
- ------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS--1.8%
Bank of America Corp. 64,468 2,975,198
- ------------------------------------------------------------------------------------------------------------------------------------
Wachovia Corp. 55,715 2,945,095
- ------------------------------------------------------------------------------------------------------------------------------------
Wells Fargo & Co. 79,800 5,013,834
------------------
10,934,127
- ------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--2.7%
Capital One Financial Corp. 61,800 5,339,520
- ------------------------------------------------------------------------------------------------------------------------------------
Citigroup, Inc. 89,100 4,324,023
- ------------------------------------------------------------------------------------------------------------------------------------
JPMorgan Chase & Co. 163,200 6,477,408
------------------
16,140,951
VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE--2.3%
American International Group, Inc. 29,300 $ 1,999,139
- ------------------------------------------------------------------------------------------------------------------------------------
Everest Re Group Ltd. 32,200 3,231,270
- ------------------------------------------------------------------------------------------------------------------------------------
Genworth Financial, Inc., Cl. A 176,000 6,086,080
- ------------------------------------------------------------------------------------------------------------------------------------
Platinum Underwriters Holdings Ltd. 66,800 2,075,476
------------------
13,391,965
- ------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE--0.4%
Host Marriott Corp. 128,000 2,425,600
- ------------------------------------------------------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE--0.8%
Countrywide Financial Corp. 66,300 2,266,797
- ------------------------------------------------------------------------------------------------------------------------------------
Freddie Mac 34,000 2,221,900
------------------
4,488,697
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE--6.4%
- ------------------------------------------------------------------------------------------------------------------------------------
BIOTECHNOLOGY--1.3%
MedImmune, Inc. 1 81,900 2,868,138
- ------------------------------------------------------------------------------------------------------------------------------------
Wyeth 99,100 4,565,537
------------------
7,433,675
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--0.7%
Beckman Coulter, Inc. 55,500 3,157,950
- ------------------------------------------------------------------------------------------------------------------------------------
Cooper Cos., Inc. (The) 24,700 1,267,110
------------------
4,425,060
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--0.5%
Manor Care, Inc. 43,400 1,726,018
- ------------------------------------------------------------------------------------------------------------------------------------
Tenet Healthcare Corp. 1 188,300 1,442,378
------------------
3,168,396
- ------------------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS--3.9%
GlaxoSmithKline plc, ADR 79,900 4,033,352
- ------------------------------------------------------------------------------------------------------------------------------------
Pfizer, Inc. 258,200 6,021,224
- ------------------------------------------------------------------------------------------------------------------------------------
Sanofi-Aventis SA, ADR 131,200 5,759,680
- ------------------------------------------------------------------------------------------------------------------------------------
Schering-Plough Corp. 2 159,700 3,329,745
- ------------------------------------------------------------------------------------------------------------------------------------
Watson Pharmaceuticals, Inc. 1 112,800 3,667,128
------------------
22,811,129
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS--5.7%
- ------------------------------------------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE--3.7%
Empresa Brasileira de Aeronautica SA,
ADR 101,400 3,964,740
- ------------------------------------------------------------------------------------------------------------------------------------
Honeywell International, Inc. 162,600 6,056,850
- ------------------------------------------------------------------------------------------------------------------------------------
Orbital Sciences Corp. 1 680,864 8,742,294
- ------------------------------------------------------------------------------------------------------------------------------------
United Technologies Corp. 61,500 3,438,465
------------------
22,202,349
- ------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--1.8%
Cendant Corp. 601,100 10,368,975
7 | OPPENHEIMER BALANCED FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--0.2%
GrafTech International Ltd. 1 159,100 $ 989,602
- ------------------------------------------------------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--11.4%
- ------------------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--1.0%
Cisco Systems, Inc. 1 351,600 6,019,392
- ------------------------------------------------------------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--1.9%
Hutchinson Technology, Inc. 1 89,700 2,551,965
- ------------------------------------------------------------------------------------------------------------------------------------
International Business Machines Corp. 103,500 8,507,700
------------------
11,059,665
- ------------------------------------------------------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--0.5%
Flextronics International Ltd. 1 317,100 3,310,524
- ------------------------------------------------------------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--1.5%
ATI Technologies, Inc. 1,3 215,300 3,657,947
- ------------------------------------------------------------------------------------------------------------------------------------
Freescale Semiconductor, Inc., Cl. A 1 198,000 4,987,620
------------------
8,645,567
- ------------------------------------------------------------------------------------------------------------------------------------
SOFTWARE--6.5%
Compuware Corp. 1 184,400 1,654,068
- ------------------------------------------------------------------------------------------------------------------------------------
Microsoft Corp. 482,300 12,612,145
- ------------------------------------------------------------------------------------------------------------------------------------
Novell, Inc. 1 548,900 4,846,787
- ------------------------------------------------------------------------------------------------------------------------------------
Synopsys, Inc. 1 184,500 3,701,070
- ------------------------------------------------------------------------------------------------------------------------------------
Take-Two Interactive Software, Inc. 1 898,050 15,895,485
------------------
38,709,555
- ------------------------------------------------------------------------------------------------------------------------------------
MATERIALS--1.2%
- ------------------------------------------------------------------------------------------------------------------------------------
CHEMICALS--0.5%
Praxair, Inc. 55,400 2,933,984
- ------------------------------------------------------------------------------------------------------------------------------------
Sterling Chemicals, Inc. 1,4 18 225
------------------
2,934,209
- ------------------------------------------------------------------------------------------------------------------------------------
METALS & MINING--0.7%
Companhia Vale do Rio Doce,
Sponsored ADR 108,900 3,947,625
- ------------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--0.9%
- ------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--0.9%
IDT Corp., Cl. B 1 479,400 5,608,980
- ------------------------------------------------------------------------------------------------------------------------------------
WorldCom, Inc./WorldCom Group 1,4 375,000 --
------------------
5,608,980
- ------------------------------------------------------------------------------------------------------------------------------------
UTILITIES--1.5%
- ------------------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES--1.5%
AES Corp. (The) 1 355,500 5,627,565
- ------------------------------------------------------------------------------------------------------------------------------------
Reliant Energy, Inc. 1 297,500 3,070,200
------------------
8,697,765
------------------
Total Common Stocks (Cost $225,768,505) 305,532,289
VALUE
UNITS SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- ------------------------------------------------------------------------------------------------------------------------------------
HF Holdings, Inc. Wts., Exp. 9/27/09 1,4 2,593 $ --
- ------------------------------------------------------------------------------------------------------------------------------------
Lucent Technologies, Inc. Wts.,
Exp. 12/10/07 1 8,881 5,018
- ------------------------------------------------------------------------------------------------------------------------------------
Sterling Chemicals, Inc. Wts.,
Exp. 12/19/08 1 31 3
------------------
Total Rights, Warrants and
Certificates (Cost $38,932) 5,021
PRINCIPAL
AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--6.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Ace Securities Corp., Home Equity
Loan Pass-Through Certificates, Series
2002-HE7, Cl. A2B, 4.559%, 11/25/35 5 $ 510,000 510,315
- ------------------------------------------------------------------------------------------------------------------------------------
Aesop Funding II LLC, Automobile
Asset-Backed Certificates,
Series 2005-1A, Cl. A2, 4.43%, 4/20/08 5 370,000 370,264
- ------------------------------------------------------------------------------------------------------------------------------------
BMW Vehicle Owner Trust, Automobile
Loan Certificates, Series 2005-A, Cl. A2,
3.66%, 12/26/07 2,324,419 2,317,286
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Auto Receivables Asset Trust,
Automobile Mtg.-Backed Nts.:
Series 2004-2, Cl. A3, 3.58%, 1/15/09 1,270,000 1,246,708
Series 2005-1, Cl. A2B, 3.73%, 7/16/07 456,421 455,832
- ------------------------------------------------------------------------------------------------------------------------------------
Capital One Prime Auto Receivables
Trust, Automobile Loan Asset-Backed
Securities, Series 2005-1, Cl. A2, 4.24%,
11/15/07 1,380,000 1,376,910
- ------------------------------------------------------------------------------------------------------------------------------------
Centex Home Equity Co. LLC, Home
Equity Loan Asset-Backed Certificates:
Series 2004-D, Cl. AF1, 2.98%, 4/25/20 92,334 92,074
Series 2005-B, Cl. AF1, 4.02%, 3/26/35 224,944 223,786
Series 2005-C, Cl. AF1, 4.196%, 6/25/35 585,382 582,295
Series 2005-D, Cl. AF1, 5.04%, 10/25/35 1,109,443 1,106,517
Series 2005-D, Cl. AV2, 4.649%,
10/25/35 5 1,000,000 1,000,618
- ------------------------------------------------------------------------------------------------------------------------------------
Chase Manhattan Auto Owner Trust,
Automobile Loan Pass-Through
Certificates, Series 2005-A,
Cl. A2, 3.72%, 12/15/07 1,020,000 1,015,622
- ------------------------------------------------------------------------------------------------------------------------------------
CIT Equipment Collateral, Equipment
Receivable-Backed Nts., Series
2004-DFS, Cl. A2, 2.66%, 11/20/06 442,674 441,410
- ------------------------------------------------------------------------------------------------------------------------------------
Citibank Credit Card Issuance Trust,
Credit Card Receivable Nts.,
Series 2003-C4, Cl. C4, 5%, 6/10/15 180,000 176,691
- ------------------------------------------------------------------------------------------------------------------------------------
Citigroup Mortgage Loan Trust, Inc.,
CMO, Series 2005-WF2, Cl. AF2,
4.922%, 8/25/35 5 1,384,208 1,379,863
8 | OPPENHEIMER BALANCED FUND/ VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Credit Reference Index
Securities Program, Credit Card
Asset-Backed Certificates, Series
2002-B, Cl. FX, 10.421%, 3/22/07 6 $ 1,130,000 $ 1,129,013
- ------------------------------------------------------------------------------------------------------------------------------------
Countrywide Asset-Backed
Certificates, Inc., Home Equity
Asset-Backed Certificates:
Series 2002-4, Cl. A1, 4.749%,
2/25/33 5 18,836 18,873
Series 2005-7, Cl. AF1B, 4.317%,
11/25/35 5 708,346 704,654
Series 2005-16, Cl. 2AF2, 5.382%,
5/25/36 5 360,000 360,000
Series 2005-17, Cl. 1AF1, 4.58%,
12/27/35 5 750,000 749,976
Series 2005-17, Cl. 1AF2, 5.363%,
12/27/35 5 240,000 240,059
- ------------------------------------------------------------------------------------------------------------------------------------
DaimlerChrysler Auto Trust,
Automobile Loan Pass-Through
Certificates:
Series 2004-B, Cl. A2, 2.48%, 2/8/07 24,443 24,446
Series 2004-C, Cl. A2, 2.62%, 6/8/07 577,855 576,429
Series 2005-A, Cl. A2, 3.17%, 9/8/07 870,451 867,889
- ------------------------------------------------------------------------------------------------------------------------------------
Equity One ABS, Inc., Home Equity
Asset-Backed Security, Series 2004-3,
Cl. AF2, 3.80%, 7/25/34 5 1,060,000 1,055,795
- ------------------------------------------------------------------------------------------------------------------------------------
First Franklin Mortgage Loan
Asset-Backed Certificates, Home
Equity Receivables, Series 2005-FF10,
Cl. A3, 4.589%, 11/25/35 5 1,480,000 1,480,914
- ------------------------------------------------------------------------------------------------------------------------------------
Ford Credit Auto Owner Trust,
Automobile Loan Pass-Through
Certificates:
Series 2005-A, Cl. A3, 3.48%, 11/17/08 930,000 918,825
Series 2005-B, Cl. A2, 3.78%, 9/15/07 600,281 599,032
- ------------------------------------------------------------------------------------------------------------------------------------
GS Auto Loan Trust, Automobile
Loan Asset-Backed Securities,
Series 2005-1, Cl. A2, 4.32%, 5/15/08 2,650,000 2,643,038
- ------------------------------------------------------------------------------------------------------------------------------------
Honda Auto Receivables Owner Trust,
Automobile Receivable Obligations:
Series 2005-1, Cl. A2, 3.21%, 5/21/07 385,751 384,697
Series 2005-3, Cl. A2, 3.73%, 10/18/07 950,000 945,461
- ------------------------------------------------------------------------------------------------------------------------------------
Household Home Equity Loan Trust,
Home Equity Loan Pass-Through
Certificates, Series 2005-3, Cl. A1,
4.63%, 1/20/35 5 735,824 736,349
- ------------------------------------------------------------------------------------------------------------------------------------
Lehman XS Trust, Home Equity Mtg
Pass-Through Certificates, Series
2005-2, Cl. 2A1B, 3.63%, 8/25/35 5 1,178,368 1,180,032
- ------------------------------------------------------------------------------------------------------------------------------------
MBNA Credit Card Master Note
Trust, Credit Card Receivables, Series
2003-C7, Cl. C7, 5.719%, 3/15/16 5 1,710,000 1,813,716
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Nissan Auto Lease Trust, Automobile
Lease Obligations, Series 2004-A,
Cl. A2, 2.55%, 1/15/07 $ 78,631 $ 78,611
- ------------------------------------------------------------------------------------------------------------------------------------
Onyx Acceptance Owner Trust,
Automobile Receivable Obligations,
Series 2005-B, Cl. A2, 4.03%, 4/15/08 780,000 777,603
- ------------------------------------------------------------------------------------------------------------------------------------
Popular ABS Mortgage Pass-Through
Trust, Home Equity Pass-Through
Certificates:
Series 2004-5, Cl. A F2, 3.735%,
11/10/34 5 340,000 335,931
Series 2005-1, Cl. A F2, 3.914%,
5/25/35 5 260,000 256,419
Series 2005-2, Cl. A F2, 4.415%,
4/25/35 5 420,000 415,885
- ------------------------------------------------------------------------------------------------------------------------------------
Residential Asset Mortgage Products,
Inc., Home Equity Asset-Backed
Pass-Through Certificates, Series
2004-RS7, Cl. AI3, 4.45%, 7/25/28 750,000 746,232
- ------------------------------------------------------------------------------------------------------------------------------------
Structured Asset Securities Corp.,
CMO Pass-Through Certificates,
Series 2005-4XS, Cl. 3A1, 5.18%,
3/26/35 1,581,283 1,581,879
- ------------------------------------------------------------------------------------------------------------------------------------
USAA Auto Owner Trust, Automobile
Loan Asset-Backed Nts.:
Series 2004-2, Cl. A2, 2.41%, 2/15/07 25,105 25,097
Series 2004-3, Cl. A2, 2.79%, 6/15/07 266,266 265,842
- ------------------------------------------------------------------------------------------------------------------------------------
Volkswagen Auto Lease Trust,
Automobile Lease Asset-Backed
Securities:
Series 2004-A, Cl. A2, 2.47%, 1/22/07 251,402 250,986
Series 2005-A, Cl. A2, 3.52%, 4/20/07 995,523 992,471
- ------------------------------------------------------------------------------------------------------------------------------------
Wachovia Auto Owner Trust,
Automobile Receivable Nts.,
Series 2004-B, Cl. A2, 2.40%, 5/21/07 118,641 118,476
- ------------------------------------------------------------------------------------------------------------------------------------
Wells Fargo Home Equity Trust,
Home Equity Asset-Backed Certificates,
Series 2004-2, Cl. AI1B, 2.94%,
9/25/18 5 489,236 485,786
- ------------------------------------------------------------------------------------------------------------------------------------
WFS Financial Owner Trust,
Automobile Receivable Obligations,
Series 2002-2, Cl. A4, 4.50%, 2/20/10 224,691 224,802
- ------------------------------------------------------------------------------------------------------------------------------------
Whole Auto Loan Trust, Automobile
Loan Receivable Certificates, Series
2004-1, Cl. A2A, 2.59%, 5/15/07 425,935 424,365
---------------
Total Asset-Backed Securities (Cost $35,856,799) 35,705,774
- ------------------------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS--29.9%
- ------------------------------------------------------------------------------------------------------------------------------------
GOVERNMENT AGENCY--25.0%
- ------------------------------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED--24.9%
Federal Home Loan Mortgage Corp.:
5%, 1/1/36 7 3,264,000 3,159,960
6.50%, 4/1/18-4/1/34 1,435,518 1,476,652
7%, 5/1/29-11/1/32 2,015,419 2,100,336
9 | OPPENHEIMER BALANCED FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal Home Loan Mortgage
Corp., CMO Gtd. Real Estate Mtg
Investment Conduit Multiclass Pass-
Through Certificates:
Series 1669, Cl. G, 6.50%, 2/15/23 $ 7,859 $ 7,850
Series 2055, Cl. ZM, 6.50%, 5/15/28 503,457 516,776
Series 2075, Cl. D, 6.50%, 8/15/28 1,143,077 1,177,639
Series 2080, Cl. Z, 6.50%, 8/15/28 318,062 326,017
Series 2387, Cl. PD, 6%, 4/15/30 371,201 374,730
Series 2456, Cl. BD, 6%, 3/15/30 122,606 122,858
Series 2500, Cl. FD, 4.869%, 3/15/32 5 169,224 171,087
Series 2526, Cl. FE, 4.769%, 6/15/29 5 224,826 226,446
Series 2551, Cl. FD, 4.769%, 1/15/33 5 174,126 175,751
Series 2583, Cl. KA, 5.50%, 3/15/22 845,180 846,793
- ------------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
Interest-Only Stripped Mtg.-Backed
Security:
Series 176, Cl. IO, 13.464%, 6/1/26 8 319,307 67,968
Series 183, Cl. IO, 11.095%, 4/1/27 8 501,263 104,278
Series 184, Cl. IO, 16.712%, 12/1/26 8 542,118 107,200
Series 192, Cl. IO, 15.433%, 2/1/28 8 145,898 29,823
Series 200, Cl. IO, 14.015%, 1/1/29 8 173,243 37,662
Series 2003-118, Cl. S, 20.029%,
12/25/33 8 2,304,512 251,747
Series 2130, Cl. SC, 7.80%, 3/15/29 8 400,836 29,890
Series 2796, Cl. SD, 12.349%, 7/15/26 8 568,484 44,119
Series 2920, Cl. S, 14.307%, 1/15/35 8 3,282,354 158,671
Series 3000, Cl. SE, 20.785%, 7/15/25 8 3,000,954 109,673
- ------------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
Principal-Only Stripped Mtg.-Backed
Security, Series 176, Cl. PO, 4.477%,
6/1/26 9 140,525 118,542
- ------------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
5%, 6/1/18-7/1/18 3,054,916 3,027,578
5%, 1/1/36 7 16,111,000 15,612,558
5.50%, 3/1/33-11/1/34 22,355,816 22,193,656
5.50%, 1/1/21-1/1/36 7 45,501,000 45,242,596
6%, 5/1/16-11/1/32 17,354,560 17,662,733
6%, 4/1/16-2/1/36 7 3,530,000 3,580,464
6.50%, 11/1/27-10/1/30 893,520 920,764
6.50%, 1/1/36 7 11,314,000 11,607,463
7%, 11/1/17 1,044,823 1,086,363
7.50%, 7/1/30-9/1/30 653,978 685,583
8.50%, 7/1/32 33,369 36,133
- ------------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.
Grantor Trust, CMO, Trust 2002-T1,
Cl. A2, 7%, 11/25/31 1,099,542 1,138,392
- ------------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.,
CMO Gtd. Real Estate Mtg.
Investment Conduit Pass-Through
Certificates:
Trust 1993-87, Cl. Z, 6.50%, 6/25/23 905,468 934,511
Trust 1998-63, Cl. PG, 6%, 3/25/27 27,026 26,962
Trust 2001-50, Cl. NE, 6%, 8/25/30 201,342 202,523
Trust 2001-51, Cl. OD, 6.50%, 10/25/31 1,210,444 1,246,693
Trust 2001-70, Cl. LR, 6%, 9/25/30 237,660 239,939
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal National Mortgage Assn.,
CMO Gtd. Real Estate Mtg.
Investment Conduit Pass-Through
Certificates: Continued
Trust 2001-72, Cl. NH, 6%, 4/25/30 $ 143,748 $ 144,863
Trust 2001-74, Cl. PD, 6%, 5/25/30 58,300 58,447
Trust 2002-77, Cl. WF, 4.77%,
12/18/32 5 270,586 272,654
Trust 2003-28, Cl. KG, 5.50%, 4/25/23 1,052,000 1,074,984
Trust 2004-101, Cl. BG, 5%, 1/25/20 1,110,000 1,095,452
- ------------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.,
CMO Gtd. Real Estate Mtg.
Investment Conduit Pass-Through
Certificates, Interest-Only Stripped
Mtg.-Backed Security:
Trust 2002-47, Cl. NS, 9.594%,
4/25/32 8 677,333 54,618
Trust 2002-51, Cl. S, 9.762%, 8/25/32 8 621,952 50,378
- ------------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.,
Interest-Only Stripped Mtg.-
Backed Security:
Trust 222, Cl. 2, 13.259%, 6/1/23 8 1,094,893 259,744
Trust 233, Cl. 2, 15.317%, 8/1/23 8 1,013,690 213,200
Trust 240, Cl. 2, 16.943%, 9/1/23 8 1,709,984 356,094
Trust 252, Cl. 2, 7.415%, 11/1/23 8 827,071 182,636
Trust 273, Cl. 2, 14.617%, 8/1/26 8 239,064 49,343
Trust 319, Cl. 2, 13.424%, 2/1/32 8 305,558 69,279
Trust 321, Cl. 2, 8.583%, 3/1/32 8 3,183,222 718,432
Trust 329, Cl. 2, 11.440%, 1/1/33 8 788,623 174,777
Trust 331, Cl. 9, (13.274)%, 2/1/33 8 888,280 201,543
Trust 333, Cl. 2, 11.739%, 3/1/33 8 9,059,836 2,030,151
Trust 334, Cl. 17, 2.19%, 2/1/33 8 511,105 113,255
Trust 338, Cl. 2, 10.333%, 6/1/33 8 3,482,532 778,253
Trust 346, Cl. 2, 13.216%, 12/1/33 8 324,296 71,910
Trust 350, Cl. 2, 12.229%, 2/1/34 8 2,414,476 535,453
Trust 2001-65, Cl. S, 21.164%,
11/25/31 8 1,364,146 126,249
Trust 2001-81, Cl. S, 11.605%, 1/25/32 8 314,337 27,369
Trust 2002-9, Cl. MS, 10.350%,
3/25/32 8 457,432 39,989
Trust 2002-52, Cl. SD, 6.658%, 9/25/32 8 755,815 62,207
Trust 2002-77, Cl. SH, 12.545%,
12/18/32 8 414,224 39,017
Trust 2002-84, Cl. SA, 21.481%,
12/25/32 8 1,172,738 112,431
Trust 2003-4, Cl. S, 20.563%,
2/25/33 8 759,145 80,593
Trust 2004-54, Cl. DS, 6.243%,
11/25/30 8 627,185 36,108
Trust 2005-6, Cl. SE, 13.927%,
2/25/35 8 2,225,278 115,774
Trust 2005-19, Cl. SA, 12.727%,
3/25/35 8 8,724,656 485,728
Trust 2005-40, Cl. SA, 13.682%,
5/25/35 8 1,901,755 101,330
Trust 2005-71, Cl. SA, 19.968%,
8/25/25 8 1,925,193 115,046
10 | OPPENHEIMER BALANCED FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal National Mortgage Assn.,
Principal-Only Stripped Mtg.-Backed
Security, Trust 1993-184, Cl. M,
5.779%, 9/25/23 9 $ 355,448 $ 298,366
---------------
147,333,052
- ------------------------------------------------------------------------------------------------------------------------------------
GNMA/GUARANTEED--0.1%
Government National Mortgage
Assn., 8%, 4/15/23 226,606 242,655
- ------------------------------------------------------------------------------------------------------------------------------------
Government National Mortgage
Assn., Interest-Only Stripped Mtg.-
Backed Security:
Series 2001-21, Cl. SB, 3.873%, 1/16/27 8 659,075 45,383
Series 2002-15, Cl. SM, 0.947%, 2/16/32 8 766,022 53,266
Series 2002-76, Cl. SY, 5.13%, 12/16/26 8 1,519,058 66,609
Series 2004-11, Cl. SM, (0.493)%,
1/17/30 8 548,353 23,126
---------------
431,039
- ------------------------------------------------------------------------------------------------------------------------------------
NON-AGENCY--4.9%
- ------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL--4.5%
Banc of America Commercial
Mortgage, Inc., Commercial Mtg. Pass-
Through Certificates:
Series 2004-6, Cl. A3, 4.512%, 12/10/42 1,000,000 968,877
Series 2005-2, Cl. A4, 4.783%, 7/10/43 5 1,280,000 1,256,724
Series 2005-3, Cl. A2, 4.501%, 7/10/43 1,050,000 1,025,198
- ------------------------------------------------------------------------------------------------------------------------------------
Banc of America Funding Corp., CMO
Pass-Through Certificates, Series
2004-2, Cl. 2A1, 6.50%, 7/20/32 992,031 993,108
- ------------------------------------------------------------------------------------------------------------------------------------
Banc of America Mortgage Securities,
Inc., CMO Pass-Through Certificates:
Series 2004-8, Cl. 5A1, 6.50%, 5/25/32 775,609 787,728
Series 2004-E, Cl. 2A9, 3.712%, 6/25/34 5 21,222 21,216
Series 2005-E, Cl. 2A2, 4.983%, 6/25/35 5 223,020 222,008
- ------------------------------------------------------------------------------------------------------------------------------------
Bear Stearns Commercial Mortgage
Securities, Inc., Commercial Mtg
Obligations, Series 2005-PWR7, Cl. A2,
4.945%, 2/11/41 490,000 484,612
- ------------------------------------------------------------------------------------------------------------------------------------
Citigroup/Deutsche Bank Commercial
Mortgage Trust, Commercial Mtg
Obligations, Series 2005-CD1, Cl. A4,
5.225%, 7/15/44 3 1,180,000 1,193,036
- ------------------------------------------------------------------------------------------------------------------------------------
Countrywide Alternative Loan Trust,
CMO, Series 2004-J9, Cl. 1A1, 4.559%,
10/25/34 5 287,805 288,027
- ------------------------------------------------------------------------------------------------------------------------------------
First Chicago/Lennar Trust 1,
Commercial Mtg. Pass-Through
Certificates, Series 1997-CHL1, Cl. D,
7.674%, 4/29/39 5,6 770,000 773,850
- ------------------------------------------------------------------------------------------------------------------------------------
First Union National Bank/Lehman
Brothers/Bank of America Commercial
Mtg. Trust, Pass-Through Certificates,
Series 1998-C2, Cl. A2, 6.56%, 11/18/35 615,853 633,344
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL Continued
GE Capital Commercial Mortgage
Corp., Commercial Mtg. Obligations:
Series 2005-CA, Cl. A3, 4.578%,
6/10/48 $ 440,000 $ 428,277
Series 2005-C3, Cl. A2, 4.853%,
7/10/45 620,000 615,889
- ------------------------------------------------------------------------------------------------------------------------------------
GMAC Commercial Mortgage
Securities, Inc., Commercial Mtg
Pass-Through Certificates:
Series 1997-C1, Cl. A3, 6.869%,
7/15/29 370,886 379,333
Series 2004-C3, Cl. A4, 4.547%,
12/10/41 640,000 619,902
- ------------------------------------------------------------------------------------------------------------------------------------
Greenwich Capital Commercial
Funding Corp., Commercial Mtg. Pass-
Through Certificates:
Series 2005-G G3, Cl. A2, 4.305%,
8/10/42 890,000 867,199
Series 2005-G G5, Cl. A2, 5.117%,
4/10/37 680,000 682,076
- ------------------------------------------------------------------------------------------------------------------------------------
GS Mortgage Securities Corp. II,
Commercial Mtg. Pass-Through
Certificates:
Series 2004-C1, Cl. A1, 3.659%,
10/10/28 677,741 656,816
Series 2004-GG2, Cl. A3, 4.602%,
8/10/38 410,000 404,980
- ------------------------------------------------------------------------------------------------------------------------------------
JPMorgan Chase Commercial
Mortgage Securities Corp.,
Commercial Mtg. Pass-Through
Certificates, Series 2005-LDP2,
Cl. A2, 4.575%, 7/15/42 260,000 254,856
- ------------------------------------------------------------------------------------------------------------------------------------
LB-UBS Commercial Mortgage Trust,
Commercial Mtg. Pass-Through
Certificates, Series 2005-C5, Cl. A2,
4.885%, 9/15/30 740,000 735,154
- ------------------------------------------------------------------------------------------------------------------------------------
Mastr Alternative Loan Trust, CMO
Pass-Through Certificates:
Series 2004-6, Cl. 10A1, 6%, 7/25/34 1,314,232 1,321,442
Series 2004-9, Cl. A3, 4.70%, 8/25/34 5 2,476,850 2,465,554
- ------------------------------------------------------------------------------------------------------------------------------------
Mastr Seasoned Securities Trust,
Mtg. Pass-Through Certificates,
Series 2004-2, Cl. A1, 6.50%, 8/25/32 1,845,692 1,863,572
- ------------------------------------------------------------------------------------------------------------------------------------
Nomura Asset Securities Corp.,
Commercial Mtg. Pass-Through
Certificates, Series 1998-D6, Cl. A1B,
6.59%, 3/15/30 3 780,000 806,637
- ------------------------------------------------------------------------------------------------------------------------------------
Prudential Mortgage Capital Co. II
LLC, Commercial Mtg. Pass-Through
Certificates, Series PRU-HTG
2000-C1, Cl. A2, 7.306%, 10/6/15 983,000 1,075,406
- ------------------------------------------------------------------------------------------------------------------------------------
Residential Accredit Loans, Inc.,
Mtg. Asset-Backed Pass-Through
Certificates, Series 2003-QS1, Cl. A2,
5.75%, 1/25/33 656,798 658,065
11 | OPPENHEIMER BALANCED FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL Continued
Wachovia Bank Commercial
Mortgage Trust, Commercial Mtg.
Obligations:
Series 2005-C17,
Cl. A2, 4.782%, 3/15/42 $ 1,450,000 $ 1,434,005
Series 2005-C20, Cl. A5, 5.087%,
7/15/42 5 740,000 735,147
- ------------------------------------------------------------------------------------------------------------------------------------
Washington Mutual Mortgage
Securities Corp., CMO Pass-Through
Certificates, Series 2005-AR5, Cl. A1,
4.681%, 5/25/35 5 862,701 862,081
- ------------------------------------------------------------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed
Securities Trust, CMO, Series
2004-DD, Cl. 2A1, 4.522%, 1/25/35 5 856,248 853,630
---------------
26,367,749
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER--0.1%
JPMorgan Chase Commercial
Mortgage Securities Corp., Commercial
Mtg. Pass-Through Certificates,
Series 2005-LDP4, Cl. A2, 4.79%,
10/15/42 890,000 878,671
- ------------------------------------------------------------------------------------------------------------------------------------
RESIDENTIAL--0.3%
Countrywide Alternative Loan Trust,
CMO, Series 2005-J1, Cl. 3A1, 6.50%,
8/25/32 3 1,910,817 1,944,854
---------------
Total Mortgage-Backed Obligations
(Cost $177,844,257) 176,955,365
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--5.4%
- ------------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank Unsec.
Bonds:
3.125%, 11/15/06 2,150,000 2,120,592
3.50%, 11/15/07 650,000 635,595
- ------------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.
Unsec. Nts.:
3.625%, 9/15/06 10 2,535,000 2,517,174
4.125%, 7/12/10 3 1,707,000 1,666,280
4.375%, 11/16/07 970,000 963,983
- ------------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn
Unsec. Nts.:
4%, 2/28/07 1,470,000 1,457,668
4.25%, 7/15/07 3 2,215,000 2,199,307
6%, 5/15/11 2,500,000 2,647,123
7.25%, 1/15/10-5/15/30 1,575,000 1,901,423
- ------------------------------------------------------------------------------------------------------------------------------------
Tennessee Valley Authority Bonds:
4.65%, 6/15/35 3 1,100,000 1,044,041
Series A, 6.79%, 5/23/12 7,916,000 8,771,862
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
5.375%, 2/15/31 3 1,025,000 1,151,684
8.875%, 8/15/17 3 440,000 611,566
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
3.875%, 7/15/10-9/15/10 3 1,939,000 1,899,645
4.25%, 11/30/07 138,000 137,639
4.25%, 10/15/10-8/15/15 3 263,000 260,036
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS Continued
- ------------------------------------------------------------------------------------------------------------------------------------
4.375%, 12/15/10 $ 171,000 $ 171,187
4.375%, 11/15/08 3 455,000 455,213
5%, 2/15/11-8/15/11 3 933,000 962,602
---------------
Total U.S. Government Obligations
(Cost $32,028,590) 31,574,620
- ------------------------------------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS--0.2%
- ------------------------------------------------------------------------------------------------------------------------------------
United Mexican States Nts., 7.50%,
1/14/12 (Cost $1,169,010) 1,065,000 1,190,138
- ------------------------------------------------------------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES--13.5%
- ------------------------------------------------------------------------------------------------------------------------------------
ABN Amro Bank NV (NY Branch),
7.125% Sub. Nts., Series B, 10/15/93 400,000 480,480
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna, Inc., 7.375% Sr. Unsec. Nts.,
3/1/06 1,185,000 1,189,742
- ------------------------------------------------------------------------------------------------------------------------------------
Albertson's, Inc., 8% Sr. Unsec. Debs.,
5/1/31 3 710,000 700,402
- ------------------------------------------------------------------------------------------------------------------------------------
Allied Waste North America, Inc.,
8.875% Sr. Nts., Series B, 4/1/08 555,000 588,300
- ------------------------------------------------------------------------------------------------------------------------------------
Allstate Financial Global Funding II,
4.25% Nts., 9/10/08 6 245,000 240,962
- ------------------------------------------------------------------------------------------------------------------------------------
Archer Daniels Midland Co., 5.375%
Nts., 9/15/35 615,000 592,025
- ------------------------------------------------------------------------------------------------------------------------------------
AT&T Wireless Services, Inc., 8.125%
Sr. Unsec. Nts., 5/1/12 815,000 942,861
- ------------------------------------------------------------------------------------------------------------------------------------
Bankers Trust Corp., 7.375% Unsec.
Sub. Nts., 5/1/08 100,000 105,356
- ------------------------------------------------------------------------------------------------------------------------------------
Barclays Bank plc, 6.278% Perpetual
Bonds 11 960,000 966,614
- ------------------------------------------------------------------------------------------------------------------------------------
Beazer Homes USA, Inc., 6.875%
Sr. Unsec. Nts., 7/15/15 3 595,000 573,431
- ------------------------------------------------------------------------------------------------------------------------------------
British Sky Broadcasting Group plc,
7.30% Unsec. Nts., 10/15/06 216,000 219,536
- ------------------------------------------------------------------------------------------------------------------------------------
British Telecommunications plc,
8.875% Bonds, 12/15/30 520,000 697,787
- ------------------------------------------------------------------------------------------------------------------------------------
CenterPoint Energy, Inc., 7.25% Sr. Nts.,
Series B, 9/1/10 3 650,000 697,971
- ------------------------------------------------------------------------------------------------------------------------------------
Chancellor Media CCU, 8% Sr. Unsec.
Nts., 11/1/08 1,100,000 1,170,203
- ------------------------------------------------------------------------------------------------------------------------------------
CIT Group, Inc.:
4.75% Sr. Nts., 8/15/08 170,000 169,455
7.75% Sr. Unsec. Unsub. Nts., 4/2/12 460,000 522,355
- ------------------------------------------------------------------------------------------------------------------------------------
Citigroup, Inc., 6.625% Unsec. Sub.
Nts., 6/15/32 465,000 527,184
- ------------------------------------------------------------------------------------------------------------------------------------
Coca-Cola Co. (The), 7.375% Unsec.
Debs., 7/29/93 360,000 467,017
- ------------------------------------------------------------------------------------------------------------------------------------
ConAgra Foods, Inc., 6% Nts., 9/15/06 610,000 614,329
- ------------------------------------------------------------------------------------------------------------------------------------
Constellation Energy Group, Inc.,
7.60% Unsec. Nts., 4/1/32 795,000 959,413
12 | OPPENHEIMER BALANCED FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Countrywide Financial Corp., 4.50%
Nts., Series A, 6/15/10 $ 620,000 $ 602,419
- ------------------------------------------------------------------------------------------------------------------------------------
Cox Communications, Inc., 4.625%
Unsec. Nts., 1/15/10 1,230,000 1,191,781
- ------------------------------------------------------------------------------------------------------------------------------------
Credit Suisse First Boston, Inc. (USA),
5.50% Nts., 8/15/13 1,130,000 1,154,487
- ------------------------------------------------------------------------------------------------------------------------------------
D.R. Horton, Inc., 6.125% Nts., 1/15/14 525,000 525,937
- ------------------------------------------------------------------------------------------------------------------------------------
DaimlerChrysler NA Holdings Corp.,
8% Nts., 6/15/10 1,040,000 1,138,454
- ------------------------------------------------------------------------------------------------------------------------------------
Dana Corp., 6.50% Unsec. Nts., 3/1/09 3 785,000 631,925
- ------------------------------------------------------------------------------------------------------------------------------------
Delhaize America, Inc., 9% Unsub.
Debs., 4/15/31 775,000 914,979
- ------------------------------------------------------------------------------------------------------------------------------------
Deutsche Telekom International
Finance BV, 8.50% Unsub. Nts.,
6/15/10 5 725,000 822,754
- ------------------------------------------------------------------------------------------------------------------------------------
Dominion Resources, Inc., 8.125% Sr
Unsub. Nts., 6/15/10 845,000 940,082
- ------------------------------------------------------------------------------------------------------------------------------------
DTE Energy Co., 6.45% Sr. Unsub. Nts.,
6/1/06 580,000 583,775
- ------------------------------------------------------------------------------------------------------------------------------------
EOP Operating LP:
6.763% Sr. Unsec. Nts., 6/15/07 180,000 183,804
8.10% Unsec. Nts., 8/1/10 700,000 773,879
8.375% Nts., 3/15/06 425,000 427,931
- ------------------------------------------------------------------------------------------------------------------------------------
Federated Department Stores, Inc.,
6.625% Sr. Unsec. Nts., 9/1/08 760,000 788,112
- ------------------------------------------------------------------------------------------------------------------------------------
FedEx Corp., 2.65% Unsec. Nts.,
4/1/07 1,230,000 1,196,800
- ------------------------------------------------------------------------------------------------------------------------------------
FirstEnergy Corp.:
5.50% Sr. Unsub. Nts., Series A,
11/15/06 495,000 496,882
7.375% Sr. Unsub. Nts., Series C,
11/15/31 600,000 710,209
- ------------------------------------------------------------------------------------------------------------------------------------
Ford Motor Credit Co.:
5.80% Sr. Unsec. Nts., 1/12/09 1,440,000 1,257,002
7.375% Nts., 10/28/09 255,000 226,336
- ------------------------------------------------------------------------------------------------------------------------------------
France Telecom SA, 8.50% Sr. Unsec.
Nts., 3/1/31 5 180,000 240,897
- ------------------------------------------------------------------------------------------------------------------------------------
Gap, Inc. (The):
6.90% Nts., 9/15/07 685,000 700,212
9.55% Unsub. Nts., 12/15/08 5 141,000 156,794
- ------------------------------------------------------------------------------------------------------------------------------------
General Mills, Inc., 3.875% Nts.,
11/30/07 890,000 872,953
- ------------------------------------------------------------------------------------------------------------------------------------
General Motors Acceptance Corp.:
6.15% Nts., 4/5/07 1,855,000 1,752,649
8% Bonds, 11/1/31 3 855,000 821,158
- ------------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The),
5.70% Sr. Unsec. Nts., 9/1/12 1,710,000 1,761,462
- ------------------------------------------------------------------------------------------------------------------------------------
Harrah's Operating Co., Inc., 5.625% Sr.
Unsec. Bonds, 6/1/15 615,000 605,278
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued
- ------------------------------------------------------------------------------------------------------------------------------------
HCA, Inc., 7.125% Sr. Unsec. Nts.,
6/1/06 $ 565,000 $ 572,458
- ------------------------------------------------------------------------------------------------------------------------------------
Hilton Hotels Corp., 8.25% Sr. Unsec.
Nts., 2/15/11 525,000 575,954
- ------------------------------------------------------------------------------------------------------------------------------------
HSBC Finance Corp., 4.75% Sr. Unsec.
Nts., 7/15/13 1,210,000 1,170,902
- ------------------------------------------------------------------------------------------------------------------------------------
IPALCO Enterprises, Inc., 8.375% Sr.
Sec. Nts., 11/14/08 5 540,000 568,350
- ------------------------------------------------------------------------------------------------------------------------------------
iStar Financial, Inc.:
5.125% Sr. Unsec. Nts., Series B, 4/1/11 3 375,000 365,810
5.15% Sr. Unsec. Nts., 3/1/12 450,000 436,370
- ------------------------------------------------------------------------------------------------------------------------------------
J.C. Penney Co., Inc. (Holding Co.),
7.40% Nts., 4/1/37 1,060,000 1,189,547
- ------------------------------------------------------------------------------------------------------------------------------------
JPMorgan Chase Capital XV,
5.875% Sub. Nts. Series O, 3/15/35 820,000 818,098
- ------------------------------------------------------------------------------------------------------------------------------------
K. Hovnanian Enterprises, Inc., 6.50%
Sr. Nts., 1/15/14 595,000 571,989
- ------------------------------------------------------------------------------------------------------------------------------------
Kaiser Aluminum & Chemical Corp.,
10.875% Sr. Nts., Series B, 10/15/06 12 250,000 253,750
- ------------------------------------------------------------------------------------------------------------------------------------
KB Home, 5.75% Sr. Unsec. Unsub.
Nts., 2/1/14 750,000 710,903
- ------------------------------------------------------------------------------------------------------------------------------------
Kinder Morgan, Inc., 6.50% Sr. Unsec.
Nts., 9/1/12 655,000 694,834
- ------------------------------------------------------------------------------------------------------------------------------------
Kraft Foods, Inc., 5.25% Nts., 6/1/07 795,000 798,496
- ------------------------------------------------------------------------------------------------------------------------------------
Kroger Co. (The), 6.80% Sr. Unsec. Nts.,
4/1/11 1,350,000 1,417,377
- ------------------------------------------------------------------------------------------------------------------------------------
Lear Corp., 8.11% Sr. Unsec. Nts.,
Series B, 5/15/09 1,000,000 931,368
- ------------------------------------------------------------------------------------------------------------------------------------
Lennar Corp., 5.95% Sr. Unsec. Nts.,
3/1/13 3 585,000 589,652
- ------------------------------------------------------------------------------------------------------------------------------------
Liberty Media Corp., 5.70% Sr. Unsec.
Nts., 5/15/13 3 615,000 576,108
- ------------------------------------------------------------------------------------------------------------------------------------
Liberty Property Trust, 5.65% Sr. Nts.,
8/15/14 595,000 603,616
- ------------------------------------------------------------------------------------------------------------------------------------
Marsh & McLennan Cos., Inc., 5.875%
Sr. Unsec. Bonds, 8/1/33 735,000 705,927
- ------------------------------------------------------------------------------------------------------------------------------------
May Department Stores Co., 7.90%
Unsec. Debs., 10/15/07 410,000 427,049
- ------------------------------------------------------------------------------------------------------------------------------------
MBNA Corp., 7.50% Sr. Nts., Series F,
3/15/12 905,000 1,020,609
- ------------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., 5% Sr. Unsub.
Nts., Series C, 2/3/14 1,205,000 1,191,952
- ------------------------------------------------------------------------------------------------------------------------------------
MetLife, Inc., 5.70% Sr. Unsec. Nts.,
6/15/35 3 605,000 609,406
- ------------------------------------------------------------------------------------------------------------------------------------
MidAmerican Energy Holdings Co.,
5.875% Sr. Unsec. Nts., 10/1/12 1,005,000 1,038,962
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley, 6.60% Nts., 4/1/12 570,000 613,461
- ------------------------------------------------------------------------------------------------------------------------------------
National City Bank, 6.20% Sub. Nts.,
12/15/11 83,000 87,932
13 | OPPENHEIMER BALANCED FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Nationwide Financial Services, Inc.:
5.90% Nts., 7/1/12 $ 440,000 $ 459,345
6.25% Sr. Unsec. Nts., 11/15/11 130,000 136,994
- ------------------------------------------------------------------------------------------------------------------------------------
NiSource Finance Corp.:
3.20% Nts., 11/1/06 180,000 177,432
7.875% Sr. Unsec. Nts., 11/15/10 790,000 876,187
- ------------------------------------------------------------------------------------------------------------------------------------
Pemex Project Funding Master Trust,
5.75% Unsec. Unsub. Nts., Series 12,
12/15/15 3,6 965,000 961,381
- ------------------------------------------------------------------------------------------------------------------------------------
Petroleum Export Ltd. Cayman SPV,
4.623% Sr. Nts., Cl. A1, 6/15/10 6 1,798,000 1,782,057
- ------------------------------------------------------------------------------------------------------------------------------------
PF Export Receivables Master Trust,
3.748% Sr. Nts., Series B, 6/1/13 6 382,567 363,513
- ------------------------------------------------------------------------------------------------------------------------------------
Popular North America, Inc., 5.20%
Nts., 12/12/07 1,195,000 1,194,387
- ------------------------------------------------------------------------------------------------------------------------------------
Portland General Electric Co., 8.125%
First Mortgage Nts., 2/1/10 6 470,000 519,209
- ------------------------------------------------------------------------------------------------------------------------------------
Prudential Holdings LLC, 8.695% Bonds,
Series C, 12/18/23 6 1,095,000 1,391,300
- ------------------------------------------------------------------------------------------------------------------------------------
Prudential Insurance Co. of America,
8.30% Nts., 7/1/25 920,000 1,193,988
- ------------------------------------------------------------------------------------------------------------------------------------
PSE&G Energy Holdings LLC, 7.75%
Unsec. Nts., 4/16/07 595,000 618,800
- ------------------------------------------------------------------------------------------------------------------------------------
PSE&G Power LLC, 6.875% Sr. Unsec.
Nts., 4/15/06 560,000 562,939
- ------------------------------------------------------------------------------------------------------------------------------------
PSEG Funding Trust I, 5.381% Nts.,
11/16/07 610,000 611,199
- ------------------------------------------------------------------------------------------------------------------------------------
R&B Falcon Corp., 9.50% Sr. Unsec. Nts.,
12/15/08 500,000 561,637
- ------------------------------------------------------------------------------------------------------------------------------------
Safeway, Inc., 7.50% Sr. Unsec. Nts.,
9/15/09 795,000 849,801
- ------------------------------------------------------------------------------------------------------------------------------------
SBC Communications, Inc., 5.30% Nts.,
11/15/10 885,000 888,623
- ------------------------------------------------------------------------------------------------------------------------------------
Sempra Energy, 7.95% Sr. Unsec. Unsub.
Nts., 3/1/10 865,000 951,024
- ------------------------------------------------------------------------------------------------------------------------------------
Simon Property Group LP, 5.375% Nts.,
6/1/11 6 910,000 913,191
- ------------------------------------------------------------------------------------------------------------------------------------
Socgen Real Estate LLC,
7.64% Bonds 6,11 45,000 46,839
- ------------------------------------------------------------------------------------------------------------------------------------
Sprint Capital Corp., 8.75% Nts.,
3/15/32 730,000 971,702
- ------------------------------------------------------------------------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide,
Inc., 7.375% Nts., 5/1/07 900,000 922,500
- ------------------------------------------------------------------------------------------------------------------------------------
Sterling Chemicals, Inc., 10% Sr. Sec. Nts.,
12/19/07 3,4,13 93,882 90,596
- ------------------------------------------------------------------------------------------------------------------------------------
TCI Communications, Inc., 9.80% Sr.
Unsec. Debs., 2/1/12 1,095,000 1,322,563
- ------------------------------------------------------------------------------------------------------------------------------------
Time Warner Entertainment Co. LP:
8.375% Sr. Nts., 7/15/33 370,000 438,364
10.15% Sr. Nts., 5/1/12 500,000 609,500
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Travelers Property Casualty Corp., 3.75%
Sr. Unsec. Nts., 3/15/08 $ 880,000 $ 858,720
- ------------------------------------------------------------------------------------------------------------------------------------
TXU Energy Co., 6.125% Nts., 3/15/08 755,000 767,798
- ------------------------------------------------------------------------------------------------------------------------------------
Tyco International Group SA:
6.125% Unsec. Unsub. Nts., 11/1/08 1,010,000 1,031,645
6.125% Unsec. Unsub. Nts., 1/15/09 3 136,000 139,093
6.375% Sr. Unsec. Unsub. Nts., 2/15/06 745,000 746,237
- ------------------------------------------------------------------------------------------------------------------------------------
Univision Communications, Inc., 3.50%
Sr. Unsec. Nts., 10/15/07 955,000 926,810
- ------------------------------------------------------------------------------------------------------------------------------------
Verizon Global Funding Corp.:
5.85% Nts., 9/15/35 3 600,000 580,194
7.25% Sr. Unsec. Unsub. Nts., 12/1/10 540,000 586,577
- ------------------------------------------------------------------------------------------------------------------------------------
Vornado Realty LP, 5.625% Sr. Unsec.
Unsub. Nts., 6/15/07 1,175,000 1,183,626
- ------------------------------------------------------------------------------------------------------------------------------------
Western Forest Products, Inc., 15% Sec.
Nts., 7/28/09 6,13 151,402 162,757
- ------------------------------------------------------------------------------------------------------------------------------------
Yum! Brands, Inc., 8.50% Sr. Unsec. Nts.,
4/15/06 1,230,000 1,242,099
---------------
Total Non-Convertible Corporate
Bonds and Notes (Cost $80,094,919) 80,085,881
- ------------------------------------------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--6.2%
- ------------------------------------------------------------------------------------------------------------------------------------
Undivided interest of 2.61% in joint repurchase
agreement (Principal Amount/Value $1,414,200,000,
with a maturity value of $1,414,844,247) with UBS
Warburg LLC, 4.10%, dated 12/30/05, to be
repurchased at $36,876,792 on 1/3/06,
collateralized by Federal Home Loan
Mortgage Corp., 5%, 1/1/35, with a value
of $157,513,104 and Federal National
Mortgage Assn., 5%--5.50%,
3/1/34--10/1/35, with a value of
$1,301,420,187 (Cost $36,860,000) 36,860,000 36,860,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (excluding Investments
Purchased with Cash Collateral from Securities
Loaned) (Cost $589,661,012) 667,909,088
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED--2.6%
- ------------------------------------------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--2.4%
Undivided interest of 0.45% in joint repurchase
agreement (Principal Amount/Value $3,150,000,000,
with a maturity value of $3,151,501,500) with
Nomura Securities, 4.29%, dated 12/30/05, to be
repurchased at $14,166,566 on 1/3/06, collateralized
by U.S. Agency Mortgages, 3.34%--9.50%,
6/1/08--5/1/38, with a value of
$3,213,000,000 14 14,159,816 14,159,816
14 | OPPENHEIMER BALANCED FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
MASTER FLOATING NOTE--0.2%
Bear Stearns, 4.37%, 1/3/06 14 $ 500,000 $ 500,000
- ------------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch Mortgage Capital, 4.35%, 1/3/06 14 500,000 500,000
--------------
1,000,000
--------------
Total Investments Purchased with Cash
Collateral from Securities
Loaned (Cost $15,159,816) 15,159,816
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $604,820,828) 115.4% $ 683,068,904
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (15.4) (91,159,850)
---------------------------------
NET ASSETS 100.0% $ 591,909,054
=================================
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
2. A sufficient amount of liquid assets has been designated to cover outstanding
written call options, as follows:
CONTRACTS EXPIRATION EXERCISE PREMIUM VALUE
SUBJECT TO CALL DATE PRICE RECEIVED SEE NOTE 1
- --------------------------------------------------------------------------------------------------
Schering-Plough Corp. 539 1/23/06 $ 22.50 $ 66,159 $ --
3. Partial or fully-loaned security. See Note 10 of Notes to Financial
Statements.
4. Illiquid security. The aggregate value of illiquid securities as of December
31, 2005 was $90,821, which represents 0.02% of the Fund's net assets. See Note
9 of Notes to Financial Statements.
5. Represents the current interest rate for a variable or increasing rate
security.
6. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $8,284,072 or 1.40% of the Fund's net
assets as of December 31, 2005.
7. When-issued security or forward commitment to be delivered and settled after
December 31, 2005. See Note 1 of Notes to Financial Statements.
8. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline. Most other fixed income securities
increase in price when interest rates decline. The principal amount of the
underlying pool represents the notional amount on which current interest is
calculated. The price of these securities is typically more sensitive to changes
in prepayment rates than traditional mortgage-backed securities (for example,
GNMA pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future cash
flows. These securities amount to $8,330,322 or 1.41% of the Fund's net assets
as of December 31, 2005.
9. Principal-Only Strips represent the right to receive the monthly principal
payments on an underlying pool of mortgage loans. The value of these securities
generally increases as interest rates decline and prepayment rates rise. The
price of these securities is typically more volatile than that of coupon-bearing
bonds of the same maturity. Interest rates disclosed represent current yields
based upon the current cost basis and estimated timing of future cash flows.
These securities amount to $416,908 or 0.07% of the Fund's net assets as of
December 31, 2005.
10. All or a portion of the security is held in collateralized accounts to cover
initial margin requirements on open futures sales contracts. The aggregate
market value of such securities is $1,290,858. See Note 6 of Notes to Financial
Statements.
11. This bond has no contractual maturity date, is not redeemable and
contractually pays an indefinite stream of interest.
12. Issue is in default. Non-income producing. See Note 1 of Notes to Financial
Statements.
13. Interest or dividend is paid-in-kind.
14. The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned. See Note 10 of Notes to Financial
Statements.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
15 | OPPENHEIMER BALANCED FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------
Investments, at value (including securities loaned of
$21,629,669) (cost $604,820,828)
- --see accompanying statement of investments $ 683,068,904
- --------------------------------------------------------------------------------
Cash 150,494
- --------------------------------------------------------------------------------
Unrealized appreciation on swap contracts 9,971
- --------------------------------------------------------------------------------
Receivables and other assets:
Investments sold (including $14,057,962 sold on a
when-issued basis or forward commitment) 14,873,541
Interest, dividends and principal paydowns 2,668,849
Shares of beneficial interest sold 299,712
Futures margins 178
Other 15,156
-----------------
Total assets 701,086,805
- --------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------
Return of collateral for securities loaned 15,159,816
- --------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased (including $86,495,417 purchased on a
when-issued basis or forward commitment) 93,416,936
Shares of beneficial interest redeemed 462,285
Distribution and service plan fees 52,151
Shareholder communications 41,586
Trustees' compensation 17,838
Transfer and shareholder servicing agent fees 1,755
Other 25,384
-----------------
Total liabilities 109,177,751
- --------------------------------------------------------------------------------
NET ASSETS $ 591,909,054
================
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- --------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 34,704
- --------------------------------------------------------------------------------
Additional paid-in capital 474,605,891
- --------------------------------------------------------------------------------
Accumulated net investment income 12,162,267
- --------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign
currency transactions 26,524,548
- --------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation
of assets and liabilities denominated in foreign currencies 78,581,644
-----------------
NET ASSETS $ 591,909,054
=================
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- --------------------------------------------------------------------------------
Non-Service Shares:
Net asset value, redemption price per share and offering
price per share (based on net assets of $503,753,415 and
29,507,745 shares of beneficial interest outstanding) $ 17.07
- --------------------------------------------------------------------------------
Service Shares:
Net asset value, redemption price per share and offering
price per share (based on net assets of $88,155,639
and 5,196,304 shares of beneficial interest outstanding) $ 16.97
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
16 | OPPENHEIMER BALANCED FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Interest $ 12,116,204
- --------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $116,955) 4,060,409
- --------------------------------------------------------------------------------
Portfolio lending fees 38,039
-----------------
Total investment income 16,214,652
- --------------------------------------------------------------------------------
EXPENSES
- --------------------------------------------------------------------------------
Management fees 4,290,435
- --------------------------------------------------------------------------------
Distribution and service plan fees--Service shares 182,249
- --------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service shares 10,441
Service shares 10,085
- --------------------------------------------------------------------------------
Shareholder communications:
Non-Service shares 28,182
Service shares 3,897
- --------------------------------------------------------------------------------
Trustees' compensation 15,431
- --------------------------------------------------------------------------------
Custodian fees and expenses 9,965
- --------------------------------------------------------------------------------
Administration service fees 1,500
- --------------------------------------------------------------------------------
Other 49,003
-----------------
Total expenses 4,601,188
Less reduction to custodian expenses (8,035)
-----------------
Net expenses 4,593,153
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 11,621,499
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- --------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments 28,797,282
Closing and expiration of option contracts written (29,123)
Closing and expiration of futures contracts 2,132,682
Foreign currency transactions 324,698
Swap contracts (92,399)
-----------------
Net realized gain 31,133,140
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments (19,476,737)
Translation of assets and liabilities denominated in
foreign currencies (700,128)
Futures contracts (220,128)
Option contracts 66,159
Swap contracts (29,506)
-----------------
Net change in unrealized appreciation (20,360,340)
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 22,394,299
=================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
17 | OPPENHEIMER BALANCED FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2005 2004
- -----------------------------------------------------------------------------------------------
OPERATIONS
- -----------------------------------------------------------------------------------------------
Net investment income $ 11,621,499 $ 8,957,568
- -----------------------------------------------------------------------------------------------
Net realized gain 31,133,140 52,689,657
- -----------------------------------------------------------------------------------------------
Net change in unrealized appreciation (20,360,340) (6,010,809)
--------------------------------------
Net increase in net assets resulting from operations 22,394,299 55,636,416
- -----------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------
Dividends from net investment income:
Non-Service shares (9,339,985) (5,486,430)
Service shares (1,047,623) (294,219)
- -----------------------------------------------------------------------------------------------
Distributions from net realized gain:
Non-Service shares (19,081,318) --
Service shares (2,361,220) --
- -----------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from beneficial interest transactions:
Non-Service shares (34,790,673) (31,808,087)
Service shares 29,195,366 29,880,516
- -----------------------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------------------
Total increase (decrease) (15,031,154) 47,928,196
- -----------------------------------------------------------------------------------------------
Beginning of period 606,940,208 559,012,012
--------------------------------------
End of period (including accumulated net investment
income of $12,162,267 and $9,981,717, respectively) $ 591,909,054 $ 606,940,208
======================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
18 | OPPENHEIMER BALANCED FUND/VA
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 2001
- -----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 17.35 $ 15.92 $ 13.16 $ 15.40 $ 16.55
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .33 1 .26 1 .27 .50 .53
Net realized and unrealized gain (loss) .31 1.33 2.90 (2.02) (.19)
--------------------------------------------------------------------
Total from investment operations .64 1.59 3.17 (1.52) .34
- -----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.30) (.16) (.41) (.51) (.64)
Distributions from net realized gain (.62) -- -- (.21) (.85)
--------------------------------------------------------------------
Total dividends and/or distributions to shareholders (.92) (.16) (.41) (.72) (1.49)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 17.07 $ 17.35 $ 15.92 $ 13.16 $ 15.40
====================================================================
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 3.89% 10.10% 24.96% (10.40)% 2.22%
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 503,753 $ 547,290 $ 533,710 $ 458,848 $ 593,033
- -----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 522,754 $ 528,655 $ 475,389 $ 517,516 $ 599,324
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 1.98% 1.59% 1.82% 3.31% 3.42%
Total expenses 0.74% 4 0.74% 4 0.76% 4 0.74% 4 0.76% 4
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 67% 5 68% 5 248% 42% 30%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Total returns are not annualized for
periods less than one full year. Total return information does not reflect
expenses that apply at the separate account level or to related insurance
products. Inclusion of these charges would reduce the total return figures for
all periods shown. Returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
5. The portfolio turnover rate excludes purchases and sales of To Be Announced
(TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
- --------------------------------------------------------------------------------
Year Ended December 31, 2005 $1,224,652,741 $1,250,455,539
Year Ended December 31, 2004 $1,460,076,994 $1,473,590,963
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19 | OPPENHEIMER BALANCED FUND/VA
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SERVICE SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 1
- ---------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 17.26 $ 15.87 $ 13.14 $ 14.51
- ---------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .29 2 .23 2 .39 .13
Net realized and unrealized gain (loss) .31 1.31 2.74 (1.50)
------------------------------------------------------------
Total from investment operations .60 1.54 3.13 (1.37)
- ---------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.27) (.15) (.40) --
Distributions from net realized gain (.62) -- -- --
------------------------------------------------------------
Total dividends and/or distributions to shareholders (.89) (.15) (.40) --
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 16.97 $ 17.26 $ 15.87 $ 13.14
============================================================
- ---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 3.67% 9.79% 24.69% (9.44)%
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 88,156 $ 59,650 $ 25,302 $ 2,306
- ---------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 72,977 $ 39,851 $ 9,908 $ 1,037
- ---------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 1.74% 1.41% 1.37% 3.30%
Total expenses 1.00% 5 1.02% 5 1.01% 5 0.99% 5
- ---------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 67% 6 68% 6 248% 42%
1. For the period from May 1, 2002 (inception of offering) to December 31, 2002.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Total returns are not annualized for
periods less than one full year. Total return information does not reflect
expenses that apply at the separate account level or to related insurance
products. Inclusion of these charges would reduce the total return figures for
all periods shown. Returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
4. Annualized for periods of less than one full year.
5. Reduction to custodian expenses less than 0.01%.
6. The portfolio turnover rate excludes purchases and sales of To Be Announced
(TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
- --------------------------------------------------------------------------------
Year Ended December 31, 2005 $1,224,652,741 $1,250,455,539
Year Ended December 31, 2004 $1,460,076,994 $1,473,590,963
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20 | OPPENHEIMER BALANCED FUND/VA
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Balanced Fund/VA (the Fund), formerly Oppenheimer Multiple
Strategies Fund/VA, is a separate series of Oppenheimer Variable Account Funds,
an open-end management investment company registered under the Investment
Company Act of 1940, as amended. The Fund's investment objective is to seek a
high total investment return, which includes current income and capital
appreciation in the value of its shares. The Fund's investment advisor is
OppenheimerFunds, Inc. (the Manager).
The Fund offers two classes of shares. Both classes are sold at their
offering price, which is the net asset value per share, to separate investment
accounts of participating insurance companies as an underlying investment for
variable life insurance policies, variable annuity contracts or other investment
products. The class of shares designated as Service shares is subject to a
distribution and service plan. Both classes of shares have identical rights and
voting privileges with respect to the Fund in general and exclusive voting
rights on matters that affect that class alone. Earnings, net assets and net
asset value per share may differ due to each class having its own expenses, such
as transfer and shareholder servicing agent fees and shareholder communications,
directly attributable to that class.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for business. Securities may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. Securities listed or traded on National
Stock Exchanges or other domestic exchanges are valued based on the last sale
price of the security traded on that exchange prior to the time when the Fund's
assets are valued. Securities traded on NASDAQ are valued based on the closing
price provided by NASDAQ prior to the time when the Fund's assets are valued. In
the absence of a sale, the security is valued at the last sale price on the
prior trading day, if it is within the spread of the closing "bid" and "asked"
prices, and if not, at the closing bid price. Securities traded on foreign
exchanges are valued based on the last sale price on the principal exchange on
which the security is traded, in the country that is identified by the portfolio
pricing service, prior to the time when the Fund's assets are valued. In the
absence of a sale, the security is valued at the official closing price on the
principal exchange. Corporate, government and municipal debt instruments having
a remaining maturity in excess of sixty days and all mortgage-backed securities
will be valued at the mean between the "bid" and "asked" prices. Futures
contracts traded on a commodities or futures exchange will be valued at the
final settlement price or official closing price on the principal exchange as
reported by such principal exchange at its trading session ending at, or most
recently prior to, the time when the Fund's assets are valued. Securities
(including restricted securities) for which market quotations are not readily
available are valued at their fair value. Foreign and domestic securities whose
values have been materially affected by what the Manager identifies as a
significant event occurring before the Fund's assets are valued but after the
close of their respective exchanges will be fair valued. Fair value is
determined in good faith using consistently applied procedures under the
supervision of the Board of Trustees. Short-term "money market type" debt
securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).
- --------------------------------------------------------------------------------
SECURITIES ON A WHEN-ISSUED BASIS OR FORWARD COMMITMENT. Delivery and payment
for securities that have been purchased by the Fund on a when-issued basis or
forward commitment can take place up to ten days or more after the trade date.
Normally the settlement date occurs within six months after the trade date;
however, the Fund may, from time to time, purchase securities whose settlement
date extends six months or more beyond trade date. During this period, such
securities do not earn interest, are subject to market fluctuation and may
increase or decrease in value prior to their delivery. The Fund maintains
internally designated assets with a market value equal to or greater than the
amount of its purchase commitments. The purchase of securities on a when-issued
basis or forward commitment may increase the volatility of the Fund's net asset
value to the extent the Fund executes such transactions while remaining
substantially fully invested. The Fund may also sell securities that it
purchased on a when-issued basis or forward commitment prior to settlement of
the original purchase. As of December 31, 2005, the Fund had purchased
21 | OPPENHEIMER BALANCED FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
$86,495,417 of securities issued on a when-issued basis or forward commitment
and sold $14,057,962 of securities issued on a when-issued basis or forward
commitment.
In connection with its ability to purchase or sell securities on a
when-issued basis, the Fund may enter into forward roll transactions with
respect to mortgage-related securities. Forward roll transactions require the
sale of securities for delivery in the current month, and a simultaneous
agreement with the same counterparty to repurchase similar (same type, coupon
and maturity) but not identical securities on a specified future date. The Fund
records the incremental difference between the forward purchase and sale of each
forward roll as realized gain (loss) on investments or as fee income in the case
of such transactions that have an associated fee in lieu of a difference in the
forward purchase and sale price.
Risks of entering into forward roll transactions include the potential
inability of the counterparty to meet the terms of the agreement; the potential
of the Fund to receive inferior securities at redelivery as compared to the
securities sold to the counterparty; counterparty credit risk; and the potential
pay down speed variance between the mortgage-related pools.
- --------------------------------------------------------------------------------
SECURITY CREDIT RISK. The Fund invests in high-yield securities, which may be
subject to a greater degree of credit risk, market fluctuations and loss of
income and principal, and may be more sensitive to economic conditions than
lower-yielding, higher-rated fixed-income securities. The Fund may acquire
securities in default, and is not obligated to dispose of securities whose
issuers subsequently default. As of December 31, 2005, securities with an
aggregate market value of $253,750, representing 0.04% of the Fund's net assets,
were in default.
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in
U.S. dollars. The values of securities denominated in foreign currencies and
amounts related to the purchase and sale of foreign securities and foreign
investment income are translated into U.S. dollars as of the close of The New
York Stock Exchange (the Exchange), normally 4:00 P.M. Eastern time, on each day
the Exchange is open for business. Foreign exchange rates may be valued
primarily using dealer supplied valuations or a portfolio pricing service
authorized by the Board of Trustees.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
values of assets and liabilities, including investments in securities at fiscal
period end, resulting from changes in exchange rates.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated funds
advised by the Manager, may transfer uninvested cash balances into joint trading
accounts on a daily basis. These balances are invested in one or more repurchase
agreements. Securities pledged as collateral for repurchase agreements are held
by a custodian bank until the agreements mature. Each agreement requires that
the market value of the collateral be sufficient to cover payments of interest
and principal. In the event of default by the other party to the agreement,
retention of the collateral may be subject to legal proceedings.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
22 | OPPENHEIMER BALANCED FUND/VA
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders.
The tax components of capital shown in the table below represent distribution
requirements the Fund must satisfy under the income tax regulations, losses the
Fund may be able to offset against income and gains realized in future years and
unrealized appreciation or depreciation of securities and other investments for
federal income tax purposes.
NET UNREALIZED
APPRECIATION BASED
ON COST OF SECURITIES
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED AND OTHER INVESTMENTS
NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME
INCOME GAIN CARRYFORWARD 1,2,3,4 TAX PURPOSES
--------------------------------------------------------------------------
$15,937,671 $23,453,889 $368,687 $78,259,604
1. The Fund had $664 of post-October foreign currency losses which were
deferred.
2. The Fund had $368,023 of straddle losses which were deferred.
3. During the fiscal year ended December 31, 2005, the Fund did not utilize any
capital loss carryforward.
4.During the fiscal year ended December 31, 2004, the Fund utilized $28,540,378
of capital loss carryforward to offset capital gains realized in that fiscal
year.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Fund. Accordingly, the
following amounts have been reclassified for December 31, 2005. Net assets of
the Fund were unaffected by the reclassifications.
REDUCTION TO
INCREASE TO ACCUMULATED NET
INCREASE ACCUMULATED NET REALIZED GAIN
TO PAID-IN CAPITAL INVESTMENT INCOME ON INVESTMENTS 5
------------------------------------------------------------------------
$2,276,220 $946,659 $3,222,879
5. $2,276,220, including $1,962,296 of long-term capital gain, was distributed
in connection with Fund share redemptions.
The tax character of distributions paid during the years ended December 31, 2005
and December 31, 2004 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2005 DECEMBER 31, 2004
------------------------------------------------------------------------
Distributions paid from:
Ordinary income $ 10,387,608 $ 5,780,649
Long-term capital gain 21,442,538 --
----------------------------------------
Total $ 31,830,146 $ 5,780,649
========================================
The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for
federal income tax purposes as of December 31, 2005 are noted below. The primary
difference between book and tax appreciation or depreciation of securities and
other investments, if applicable, is attributable to the tax deferral of losses
or tax realization of financial statement unrealized gain or loss.
Federal tax cost of securities $ 604,843,283
Federal tax cost of other investments (94,325,512)
----------------
Total federal tax cost $ 510,517,771
================
Gross unrealized appreciation $ 94,510,175
Gross unrealized depreciation (16,250,571)
----------------
Net unrealized appreciation $ 78,259,604
================
23 | OPPENHEIMER BALANCED FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred
compensation plan for independent trustees that enables trustees to elect to
defer receipt of all or a portion of the annual compensation they are entitled
to receive from the Fund. For purposes of determining the amount owed to the
Trustee under the plan, deferred amounts are treated as though equal dollar
amounts had been invested in shares of the Fund or in other Oppenheimer funds
selected by the Trustee. The Fund purchases shares of the funds selected for
deferral by the Trustee in amounts equal to his or her deemed investment,
resulting in a Fund asset equal to the deferred compensation liability. Such
assets are included as a component of "Other" within the asset section of the
Statement of Assets and Liabilities. Deferral of trustees' fees under the plan
will not affect the net assets of the Fund, and will not materially affect the
Fund's assets, liabilities or net investment income per share. Amounts will be
deferred until distributed in accordance to the Plan.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date. Income and capital gain distributions, if
any, are declared and paid annually.
- --------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and amortization
of premium, is accrued as earned.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. Custodian Fees and Expenses in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts to the extent they not offset
by positive cash balances maintained by the Fund. The Reduction to Custodian
Expenses line item, if applicable, represents earnings on cash balances
maintained by the Fund during the period. Such interest expense and other
custodian fees may be paid with these earnings. At December 31, 2005, the Fund
had $7 of such earnings on cash balances available to offset future custodian
fees or interest expenses incurred during the next fiscal year.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
YEAR ENDED DECEMBER 31, 2005 YEAR ENDED DECEMBER 31, 2004
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------
NON-SERVICE SHARES
Sold 1,776,358 $ 29,867,328 2,625,394 $ 42,309,798
Dividends and/or distributions reinvested 1,726,689 28,421,303 342,260 5,486,430
Redeemed (5,537,549) (93,079,304) (4,948,306) (79,604,315)
---------------------------------------------------------------
Net decrease (2,034,502) $(34,790,673) (1,980,652) $(31,808,087)
===============================================================
- -------------------------------------------------------------------------------------------------------------
SERVICE SHARES
Sold 1,918,395 $ 32,184,682 2,003,047 $ 32,170,140
Dividends and/or distributions reinvested 207,983 3,408,843 18,400 294,219
Redeemed (385,436) (6,398,159) (160,331) (2,583,843)
---------------------------------------------------------------
Net increase 1,740,942 $ 29,195,366 1,861,116 $ 29,880,516
===============================================================
24 | OPPENHEIMER BALANCED FUND/VA
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended December 31, 2005, were as
follows:
PURCHASES SALES
- ----------------------------------------------------------------
Investment securities $ 327,895,921 $ 332,518,100
U.S. government and government
agency obligations 39,886,096 47,874,199
To Be Announced (TBA)
mortgage-related securities 1,224,652,741 1,250,455,539
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee at an
annual rate of 0.75% of the first $200 million of average annual net assets,
0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the
next $200 million and 0.60% of average annual net assets over $800 million.
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the year ended December 31, 2005, the Fund paid
$20,480 to OFS for services to the Fund.
Additionally, funds offered in variable annuity separate accounts are
subject to minimum fees of $10,000 per class, for class level assets of $10
million or more. Each class is subject to the minimum fee in the event that the
per account fee does not equal or exceed the applicable minimum fee.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN FOR SERVICE SHARES. The Fund has adopted a
Distribution and Service Plan for Service shares to pay OppenheimerFunds
Distributor, Inc. (the Distributor), for distribution related services, personal
service and account maintenance for the Fund's Service shares. Under the plan,
payments are made periodically at an annual rate of up to 0.25% of the average
annual net assets of Service shares of the Fund. The Distributor currently uses
all of those fees to compensate sponsor(s) of the insurance product that offers
Fund shares, for providing personal service and maintenance of accounts of their
variable contract owners that hold Service shares. The impact of the service
plan is to increase operating expenses of the Service shares, which results in
lower performance compared to the Fund's shares that are not subject to a
service fee. Fees incurred by the Fund under the plan are detailed in the
Statement of Operations.
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit
transfer and shareholder servicing agent fees for all classes to 0.35% of
average annual net assets per class. This undertaking may be amended or
withdrawn at any time.
- --------------------------------------------------------------------------------
5. FOREIGN CURRENCY CONTRACTS
A foreign currency contract is a commitment to purchase or sell a foreign
currency at a future date, at a negotiated rate. The Fund may enter into foreign
currency contracts to settle specific purchases or sales of securities
denominated in a foreign currency and for protection from adverse exchange rate
fluctuation. Risks to the Fund include the potential inability of the
counterparty to meet the terms of the contract.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using prevailing foreign currency exchange rates.
Unrealized appreciation and depreciation on foreign currency contracts are
reported in the Statement of Assets and Liabilities as a receivable or payable
and in the Statement of Operations with the change in unrealized appreciation or
depreciation.
25 | OPPENHEIMER BALANCED FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. FOREIGN CURRENCY CONTRACTS Continued
The Fund may realize a gain or loss upon the closing or settlement of the
foreign transaction. Contracts closed or settled with the same broker are
recorded as net realized gains or losses. Such realized gains and losses are
reported with all other foreign currency gains and losses in the Statement of
Operations.
As of December 31, 2005, the Fund had no outstanding foreign currency
contracts.
- --------------------------------------------------------------------------------
6. FUTURES CONTRACTS
A futures contract is a commitment to buy or sell a specific amount of a
commodity or financial instrument at a negotiated price on a stipulated future
date. Futures contracts are traded on a commodity exchange. The Fund may buy and
sell futures contracts that relate to broadly based securities indices
(financial futures) or debt securities (interest rate futures) in order to gain
exposure to or protection from changes in market value of stocks and bonds or
interest rates. The Fund may also buy or write put or call options on these
futures contracts.
The Fund generally sells futures contracts as a hedge against increases in
interest rates and decreases in market value of portfolio securities. The Fund
may also purchase futures contracts to gain exposure to market changes as it may
be more efficient or cost effective than actually buying securities.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities (initial margin) in an amount equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Fund each day. The variation margin payments are equal
to the daily changes in the contract value and are recorded as unrealized gains
and losses. The Fund recognizes a realized gain or loss when the contract is
closed or has expired.
Cash held by the broker to cover initial margin requirements on open
futures contracts is noted in the Statement of Assets and Liabilities.
Securities held in collateralized accounts to cover initial margin requirements
on open futures contracts are noted in the Statement of Investments. The
Statement of Assets and Liabilities reflects a receivable and/or payable for the
daily mark to market for variation margin. Realized gains and losses are
reported in the Statement of Operations as the closing and expiration of futures
contracts. The net change in unrealized appreciation and depreciation is
reported in the Statement of Operations.
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market and that a change in the value
of the contract or option may not correlate with changes in the value of the
underlying securities.
As of December 31, 2005, the Fund had outstanding futures contracts as follows:
UNREALIZED
EXPIRATION NUMBER OF VALUATION AS OF APPRECIATION
CONTRACT DESCRIPTION DATES CONTRACTS DECEMBER 31, 2005 (DEPRECIATION)
- -------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
U.S. Long Bonds 3/22/06 163 $ 18,612,563 $ 329,306
---------------
CONTRACTS TO SELL
Euro-Bundesobligation, 10 yr. 3/8/06 30 4,327,370 (32,925)
U.S. Treasury Nts., 2 yr. 3/31/06 373 76,534,938 (4,749)
U.S. Treasury Nts., 5 yr. 3/22/06 180 19,141,875 (34,750)
U.S. Treasury Nts., 10 yr. 3/22/06 118 12,909,938 498
---------------
(71,926)
---------------
$ 257,380
===============
26 | OPPENHEIMER BALANCED FUND/VA
- --------------------------------------------------------------------------------
7. OPTION ACTIVITY
The Fund may buy and sell put and call options, or write put and covered call
options on portfolio securities in order to produce incremental earnings or
protect against changes in the value of portfolio securities.
The Fund generally purchases put options or writes covered call options to
hedge against adverse movements in the value of portfolio holdings. When an
option is written, the Fund receives a premium and becomes obligated to sell or
purchase the underlying security at a fixed price, upon exercise of the option.
Options are valued daily based upon the last sale price on the principal
exchange on which the option is traded and unrealized appreciation or
depreciation is recorded. The Fund will realize a gain or loss upon the
expiration or closing of the option transaction. When an option is exercised,
the proceeds on sales for a written call option, the purchase cost for a written
put option, or the cost of the security for a purchased put or call option is
adjusted by the amount of premium received or paid.
Securities designated to cover outstanding call options are noted in the
Statement of Investments where applicable. Contracts subject to call, expiration
date, exercise price, premium received and market value are detailed in a note
to the Statement of Investments. Options written are reported as a liability in
the Statement of Assets and Liabilities. Realized gains and losses are reported
in the Statement of Operations.
The risk in writing a call option is that the Fund gives up the
opportunity for profit if the market price of the security increases and the
option is exercised. The risk in writing a put option is that the Fund may incur
a loss if the market price of the security decreases and the option is
exercised. The risk in buying an option is that the Fund pays a premium whether
or not the option is exercised. The Fund also has the additional risk of not
being able to enter into a closing transaction if a liquid secondary market does
not exist.
Written option activity for the year ended December 31, 2005 was as follows:
CALL OPTIONS PUT OPTIONS
--------------------- ---------------------
NUMBER OF AMOUNT OF NUMBER OF AMOUNT
CONTRACTS PREMIUMS CONTRACTS PREMIUMS
- -----------------------------------------------------------------------------
Options outstanding as of
December 31, 2004 -- $ -- -- $ --
Options written 539 66,159 575 29,503
Options closed or expired -- -- (575) (29,503)
---------------------------------------------
Options outstanding as of
December 31, 2005 539 $ 66,159 -- $ --
=============================================
- --------------------------------------------------------------------------------
8. TOTAL RETURN SWAP CONTRACTS
The Fund may enter into a total return swap transaction to maintain a total
return on a particular investment, or portion of its portfolio, or for other
non-speculative purposes. Because the principal amount is not exchanged, it
represents neither an asset nor a liability to either counterparty, and is
referred to as notional. The unrealized gain (loss) related to the valuation of
such contracts as well as the amount due to (owed by) the Fund at termination or
settlement is combined and separately disclosed as an asset (liability) on the
Statement of Assets and Liabilities. The Fund also records any periodic payments
received from (paid to) the counterparty under such contracts as realized gain
(loss) on the Statement of Operations. Total return swaps are subject to risks
(if the counterparty fails to meet its obligations).
27 | OPPENHEIMER BALANCED FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8. TOTAL RETURN SWAP CONTRACTS Continued
As of December 31, 2005, the Fund had entered into the following total return
swap agreements:
SWAP NOTIONAL TERMINATION UNREALIZED
COUNTERPARTY SWAP DESCRIPTION AMOUNT DATE APPRECIATION
- ---------------------------------------------------------------------------------------------------------------
Received or paid monthly. If the sum of the Lehman
Brothers CMBS Index Payer Payment Amount and the
Floating Rate Payer Payment Amount is positive, the
Counterparty will pay such amount to the Fund.
Goldman Sachs If the sums are negative, then the Fund shall pay the
Group, Inc. (The) absolute value of such amount to the Counterparty $3,530,000 6/1/06 $ 9,971
Abbreviations are as follows:
CMBS Commercial Mortgage Backed Securities Markets
- --------------------------------------------------------------------------------
9. ILLIQUID SECURITIES
As of December 31, 2005, investments in securities included issues that are
illiquid. A security may be considered illiquid if it lacks a readily available
market or if its valuation has not changed for a certain period of time. The
Fund will not invest more than 15% of its net assets (determined at the time of
purchase and reviewed periodically) in illiquid securities. Securities that are
illiquid are marked with the applicable footnote on the Statement of
Investments.
- --------------------------------------------------------------------------------
10. SECURITIES LENDING
The Fund lends portfolio securities from time to time in order to earn
additional income. In return, the Fund receives collateral in the form of U.S.
Treasury obligations or cash, against the loaned securities and maintains
collateral in an amount not less than 100% of the market value of the loaned
securities during the period of the loan. The market value of the loaned
securities is determined at the close of business of the funds and any
additional required collateral is delivered to the Fund on the next business
day. If the borrower defaults on its obligation to return the securities loaned
because of insolvency or other reasons, the Fund could experience delays and
cost in recovering the securities loaned or in gaining access to the collateral.
Cash collateral is invested in cash equivalents. The Fund retains a portion of
the interest earned from the collateral. The Fund continues to receive the
economic benefit of interest or dividends paid on the securities loaned in the
form of a substitute payment received from the borrower. As of December 31,
2005, the Fund had on loan securities valued at $21,629,669. Collateral of
$22,050,962 was received for the loans, of which $15,159,816 was received in
cash and subsequently invested in approved instruments.
- --------------------------------------------------------------------------------
11. LITIGATION
A consolidated amended complaint has been filed as putative derivative and class
actions against the Manager, OFS and the Distributor, as well as 51 of the
Oppenheimer funds (as "Nominal Defendants") excluding the Fund, 30 present and
former Directors or Trustees and 8 present and former officers of the funds.
This complaint, initially filed in the U.S. District Court for the Southern
District of New York on January 10, 2005 and amended on March 4, 2005,
consolidates into a single action and amends six individual previously-filed
putative derivative and class action complaints. Like those prior complaints,
the complaint alleges that the Manager charged excessive fees for distribution
and other costs, improperly used assets of the funds in the form of directed
brokerage commissions and 12b-1 fees to pay brokers to promote sales of the
funds, and failed to properly disclose the use of assets of the funds to make
those payments in violation of the Investment Company Act of 1940 and the
Investment Advisers Act of 1940. Also, like those prior complaints, the
complaint further alleges that by permitting and/or participating in those
actions, the Directors/Trustees and the Officers breached their fiduciary duties
to shareholders of the funds under the Investment Company Act of 1940 and at
common law. The complaint seeks unspecified compensatory and punitive damages,
28 | OPPENHEIMER BALANCED FUND/VA
rescission of the funds' investment advisory agreements, an accounting of all
fees paid, and an award of attorneys' fees and litigation expenses.
The defendants believe that the allegations contained in the Complaints
are without merit and that they have meritorious defenses against the claims
asserted. The defendants intend to defend these lawsuits vigorously and to
contest any claimed liability. The defendants believe that it is premature to
render any opinion as to the likelihood of an outcome unfavorable to them and
that no estimate can yet be made with any degree of certainty as to the amount
or range of any potential loss.
29 | OPPENHEIMER BALANCED FUND/VA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER BALANCED FUND/VA:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer Balanced Fund/VA, a series of Oppenheimer Variable Account Funds,
including the statement of investments, as of December 31, 2005, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the periods presented. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
The Fund is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audit includes consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of December 31, 2005, by correspondence with the
custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer Balanced Fund/VA as of December 31, 2005, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the periods presented, in conformity with accounting
principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
February 13, 2006
30 | OPPENHEIMER BALANCED FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2006, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2005. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
Capital gain distributions of $0.6181 per share were paid to Non-Service
and Service shareholders, respectively, on March 14, 2005. Whether received in
stock or in cash, the capital gain distribution should be treated by
shareholders as a gain from the sale of the capital assets held for more than
one year (long-term capital gains).
Dividends, if any, paid by the Fund during the fiscal year ended December
31, 2005 which are not designated as capital gain distributions should be
multiplied by 18.84% to arrive at the amount eligible for the corporate
dividend-received deduction.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Fund to the Internal Revenue Service. Because of
the complexity of the federal regulations which may affect your individual tax
return and the many variations in state and local tax regulations, we recommend
that you consult your tax advisor for specific guidance.
31 | OPPENHEIMER BALANCED FUND/VA
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file Form N-PX, with its complete proxy voting record for the 12 months ended
June 30th, no later than August 31st of each year. The Fund's voting record is
available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at
www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC
for the first quarter and the third quarter of each fiscal year on Form N-Q. The
Fund's Form N-Q filings are available on the SEC's website at
http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public
Reference Room in Washington D.C. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
32 | OPPENHEIMER BALANCED FUND/VA
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew the Fund's
investment advisory agreement (the "Agreement"). The Investment Company Act of
1940, as amended, requires that the Board request and evaluate, and that the
Manager provide, such information as may be reasonably necessary to evaluate the
terms of the Agreement. The Board employs an independent consultant to prepare a
report that provides information, including comparative information, that the
Board requests for that purpose. In addition, the Board receives information
throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager, including an analysis of the
cost of providing services, (v) whether economies of scale are realized as the
Fund grows and whether fee levels reflect these economies of scale for Fund
investors and (vi) other benefits to the Manager from its relationship with the
Fund. Outlined below is a summary of the principal information considered by the
Board as well as the Board's conclusions.
NATURE, QUALITY, AND EXTENT OF SERVICES. The Board considered information
on the nature and extent of the services provided to the Fund and information
regarding the Manager's key personnel that provide such services. The Manager's
duties include providing the Fund with the services of the portfolio managers
and the Manager's investment team, who provide research, analysis and other
advisory services in regard to the Fund's investments; securities trading
services; oversight of third party service providers; monitoring compliance with
applicable Fund policies and procedures and adherence to the Fund's investment
restrictions. The Manager is responsible for providing certain administrative
services to the Fund as well. Those services include providing and supervising
all administrative and clerical personnel that are necessary in order to provide
effective corporate administration for the Fund; compiling and maintaining
records with respect to the Fund's operations; preparing and filing reports
required by the Securities and Exchange Commission; preparing periodic reports
regarding the operations of the Fund for its shareholders; preparing proxy
materials for shareholder meetings; and preparing the registration statements
required by Federal and state securities laws for the sale of the Fund's shares.
The Manager also provides the Fund with office space, facilities and equipment.
The Board also considered the quality of the services provided and the
quality of the Manager's resources that are available to the Fund. The Board
took account of the fact that the Manager has had over forty years of experience
as an investment adviser and that its assets under management rank it among the
top mutual fund managers in the United States. The Board evaluated the Manager's
administrative, accounting, legal and compliance services, and information the
Board has received regarding the experience and professional qualifications of
the Manager's key personnel and the size and functions of its staff providing
investment management services to the Fund. The Board also considered compliance
reports from the Fund's Chief Compliance Officer. In its evaluation of the
quality of the portfolio management services provided, the Board considered the
experience of the Fund's portfolio managers and the Manager's value and
fixed-income investment teams and analysts. The equity component of the Fund's
portfolio has been managed by Emmanuel Ferreira and Christopher Leavy since
January 2003. Messrs. Leavy and Ferreira each have had over 11 years of
experience managing equity investments. The Fund's fixed-income component has
been managed by a portfolio management team comprised of Angelo Manioudakis,
Benjamin Gord, Charles Moon, Geoffrey Caan and Antulio N. Bomfim who have been
portfolio managers of the Fund since 2003. Messrs. Manioudakis, Gord, Caan, Moon
and Bomfim have each had between 11 and 15 years of experience managing
fixed-income investments. The Board members also considered the totality of
their experiences with the Manager, as directors or trustees of the Fund
33 | OPPENHEIMER BALANCED FUND/VA
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited / Continued
- --------------------------------------------------------------------------------
and other funds advised by the Manager. In light of the foregoing, the Board
concluded that the Fund benefits from the services provided under the Agreement
as a result of the Manager's experience, reputation, personnel, operations, and
resources.
INVESTMENT PERFORMANCE OF THE MANAGER AND THE FUND. During the year, the
Manager provided information on the performance of the Fund and the Manager at
each Board meeting, including comparative performance information. The Board
also reviewed information, prepared by the Manager and by the independent
consultant, comparing the Fund's historical performance to relevant market
indices and to the performance of other balanced funds (including both funds
advised by the Manager and funds advised by other investment advisers). The
Board noted that the Fund's one-year, three-year, five-year and ten-year
performance were all better than its peer group median.
COSTS OF SERVICES AND PROFITS REALIZED BY THE MANAGER. The Board
considered information regarding the Manager's costs in serving as the Fund's
investment adviser, including the costs associated with the personnel and
systems necessary to manage the Fund, and information regarding the Manager's
profitability from its relationship with the Fund. The Board reviewed the fees
paid to the Manager and the other expenses borne by the Fund. The Board also
evaluated the comparability of the fees charged and the services provided to the
Fund to the fees and services for other clients or accounts advised by the
Manager. The independent consultant provided comparative data in regard to the
fees and expenses of the Fund, other balanced funds and other funds with
comparable asset levels and distribution features. The Board noted that the
Fund's contractual and actual management fees are higher than its peer group
average and median and that its total expenses are lower than its peer group
average but higher than its peer group median. The Board concluded, however,
that in light of the Fund's strong performance record, the management fee was
reasonable.
ECONOMIES OF SCALE. The Board considered whether the Manager may realize
economies of scale in managing and supporting the Fund, whether those economies
of scale benefit the Fund's shareholders and the current level of Fund assets in
relation to the Fund's management fee breakpoints, which are intended to share
with shareholders economies of scale that may exist as the Fund grows.
OTHER BENEFITS TO THE MANAGER. In addition to considering the profits
realized by the Manager, the Board considered information that was provided
regarding the direct and indirect benefits the Manager receives as a result of
its relationship with the Fund, including compensation paid to the Manager's
affiliates and research provided to the Manager in connection with permissible
brokerage arrangements (soft dollar arrangements). The Board also considered the
nature and quality of services provided by affiliates of the Manager, which it
reviews at other times during the year in connection with the renewal of the
Fund's service agreements. The Board considered that the Manager must be able to
pay and retain experienced professional personnel at competitive rates to
provide services to the Fund and that maintaining the financial viability of the
Manager is important in order for the Manager to continue to provide significant
services to the Fund and its shareholders.
CONCLUSIONS. These factors were also considered by the independent
Trustees meeting separately from the full Board, assisted by experienced counsel
to the Fund and to the independent Trustees. Fund counsel and the independent
Trustees' counsel are both independent of the Manager within the meaning and
intent of the Securities and Exchange Commission Rules.
Based on its review of the information it received and its evaluations
described above, the Board, including a majority of the independent Trustees,
decided to continue the advisory agreement for another year. In arriving at this
decision, the Board did not single out any factor or factors as being more
important than others, but considered all of the factors together. The Board
judged the terms and conditions of the advisory agreement, including the
management fee, in light of all of the surrounding circumstances.
34 | OPPENHEIMER BALANCED FUND/VA
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) HELD WITH THE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS; OTHER
FUNDS, LENGTH OF SERVICE, AGE TRUSTEESHIPS/DIRECTORSHIPS HELD BY TRUSTEE; NUMBER OF PORTFOLIOS IN THE
FUNDS COMPLEX CURRENTLY OVERSEEN
INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY,
TRUSTEES CENTENNIAL, COLORADO 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE
TERM, OR UNTIL HIS OR HER RESIGNATION, RETIREMENT, DEATH OR REMOVAL..
WILLIAM L. ARMSTRONG, Chairman of the following private mortgage banking companies: Cherry Creek
Chairman of the Board Mortgage Company (since 1991), Centennial State Mortgage Company (since
of Trustees (since 2003), 1994), and The El Paso Mortgage Company (since 1993); Chairman of the
Trustee (since 1999) following private companies: Ambassador Media Corporation (since 1984) and
Age: 68 Broadway Ventures (since 1984); Director of the following: Helmerich &
Payne, Inc. (oil and gas drilling/production company) (since 1992), Campus
Crusade for Christ (since 1991) and The Lynde and Harry Bradley
Foundation, Inc. (non-profit organization) (since 2002); former Chairman
of the following: Transland Financial Services, Inc. (private mortgage
banking company) (1997-2003), Great Frontier Insurance (insurance agency)
(1995-2000), Frontier Real Estate, Inc. (residential real estate
brokerage) (1994-2000) and Frontier Title (title insurance agency)
(1995-2000); former Director of the following: UNUMProvident (insurance
company) (1991-2004), Storage Technology Corporation (computer equipment
company) (1991-2003) and International Family Entertainment (television
channel) (1992-1997); U.S. Senator (January 1979-January 1991). Oversees
38 portfolios in the OppenheimerFunds complex.
ROBERT G. AVIS, Director and President of A.G. Edwards Capital, Inc. (General Partner of
Trustee (since 1993) private equity funds) (until February 2001); Chairman, President and Chief
Age: 74 Executive Officer of A.G. Edwards Capital, Inc. (until March 2000);
Director of A.G. Edwards & Sons, Inc. (brokerage company) (until 2000) and
A.G. Edwards Trust Company (investment adviser) (until 2000); Vice
Chairman and Director of A.G. Edwards, Inc. (until March 1999); Vice
Chairman of A.G. Edwards & Sons, Inc. (until March 1999); Chairman of A.G.
Edwards Trust Company (until March 1999) and A.G.E. Asset Management
(investment adviser) (until March 1999). Oversees 38 portfolios in the
OppenheimerFunds complex.
GEORGE C. BOWEN, Assistant Secretary and Director of Centennial Asset Management
Trustee (since 1999) Corporation (December 1991-April 1999); President, Treasurer and Director
Age: 69 of Centennial Capital Corporation (June 1989-April 1999); Chief Executive
Officer and Director of MultiSource Services, Inc. (March 1996-April
1999); Mr. Bowen held several positions with the Manager and with
subsidiary or affiliated companies of the Manager (September 1987-April
1999). Oversees 38 portfolios in the OppenheimerFunds complex.
EDWARD L. CAMERON, Member of The Life Guard of Mount Vernon (George Washington historical
Trustee (since 1999) site) (since June 2000); Director of Genetic ID, Inc. (biotech company)
Age: 67 (March 2001-May 2002); Partner at PricewaterhouseCoopers LLP (accounting
firm) (July 1974-June 1999); Chairman of Price Waterhouse LLP Global
Investment Management Industry Services Group (July 1994-June 1998).
Oversees 38 portfolios in the OppenheimerFunds complex.
JON S. FOSSEL, Director of UNUMProvident (insurance company) (since June 2002); Director
Trustee (since 1990) of Northwestern Energy (public utility corporation) (since November 2004);
Age: 64 Director of P.R. Pharmaceuticals (October Corp. 1999-October 2003);
Director of Rocky Mountain Elk Foundation (non-profit organization)
(February 1998-February 2003); Chairman and Director (until October 1996)
and President and Chief Executive Officer (until October 1995) of the
Manager; President, Chief Executive Officer and Director of the following:
Oppenheimer Acquisition Corp. ("OAC") (parent holding company of the
Manager), Shareholders Services, Inc. and Shareholder Financial Services,
Inc. (until October 1995). Oversees 38 portfolios in the OppenheimerFunds
complex.
SAM FREEDMAN, Director of Colorado Uplift (charitable organization) (since September
Trustee (since 1996) 1984). Mr. Freedman held positions with the Manager and with subsidiary or
Age: 65 affiliated companies of the Manager (until October several 1994). Oversees
38 portfolios in the OppenheimerFunds complex.
BEVERLY L. HAMILTON, Trustee of Monterey Institute for International Studies (educational
Trustee (since 2002) organization) (since February Director of The California Endowment
Age: 59 (philanthropic organization) (since April 2002); Director of 2000);
Community Hospital of Monterey Peninsula (since February 2002); Vice Chair
of American Funds' Emerging Markets Growth Fund, Inc. (mutual fund) (since
October 1991); President of ARCO Investment Management Company (February
1991-April 2000); Member of the investment committees of The Rockefeller
Foundation and The University of Michigan; Advisor at Credit Suisse First
Boston's Sprout venture capital unit (venture capital fund) (1994-January
2005); Trustee of MassMutual Institutional Funds (investment company)
(1996-June 2004); Trustee of MML Series Investment Fund (investment
company) (April 1989-June 2004); Member
35 | OPPENHEIMER BALANCED FUND/VA
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
BEVERLY L. HAMILTON, of the investment committee of Hartford Hospital (2000-2003); and Advisor
Continued to Unilever (Holland) pension fund (2000-2003). Oversees 38 portfolios in
the OppenheimerFunds complex.
ROBERT J. MALONE, Director of Jones International University (educational organization)
Trustee (since 2002) (since August 2005); Chairman, Chief Executive Officer and Director of
Age: 61 Steele Street State Bank (commercial banking) (since August 2003);
Director of Colorado UpLIFT (charitable organization) (since 1986);
Trustee of the Gallagher Family Foundation (non-profit organization)
(since 2000); Former Chairman of U.S. Bank-Colorado (subsidiary of U.S.
Bancorp and formerly Colorado National Bank) (July 1996-April 1999);
Director of Commercial Assets, Inc. (real estate investment trust)
(1993-2000); Director of Jones Knowledge, Inc. (2001-July 2004); and
Director of U.S. Exploration, Inc. (oil and gas exploration)
(1997-February 2004). Oversees 38 portfolios in the OppenheimerFunds
complex.
F. WILLIAM MARSHALL, JR., Trustee of MassMutual Select Funds (formerly MassMutual Institutional
Trustee (since 2000) Funds) (investment company) (since 1996) and MML Series Investment Fund
Age: 63 (investment company) (since 1996), Trustee and Chairman of the Investment
Committee (since 1994) of the Worcester Polytech Institute (private
university); President and Treasurer of the SIS Funds (private charitable
fund) (since January 1999); Chairman of SIS & Family Bank, F.S.B.
(formerly SIS Bank) (commercial bank) (January 1999-July 1999); Member of
the Investment Committee of the Community Foundation of Western
Massachusetts (1998-2003); and Executive Vice President of Peoples
Heritage Financial Group, Inc. (commercial bank) (January 1999-July 1999).
Oversees 40 portfolios in the OppenheimerFunds complex.
- ------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY
AND OFFICER STREET, 11TH FLOOR, NEW YORK, NEW YORK 10281-1008. MR. MURPHY SERVES AS A
TRUSTEE FOR AN INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT,
DEATH OR REMOVAL AND AS AN OFFICER FOR AN INDEFINITE TERM, OR UNTIL HIS
RESIGNATION, RETIREMENT, DEATH OR REMOVAL. MR. MURPHY IS AN INTERESTED
TRUSTEE DUE TO HIS POSITIONS WITH OPPENHEIMERFUNDS, INC. AND ITS
AFFILIATES.
JOHN V. MURPHY, Chairman, Chief Executive Officer and Director (since June 2001) and
President and Trustee President (since September 2000) of the Manager; President and Director or
(since 2001) Trustee of other Oppenheimer funds; President and Director of OAC and of
Age: 56 Oppenheimer Partnership Holdings, Inc. (holding company subsidiary of the
Manager) (since July 2001); Director of OppenheimerFunds Distributor, Inc.
(subsidiary of the Manager) (since November 2001); Chairman and Director
of Shareholder Services, Inc. and of Shareholder Financial Services, Inc.
(transfer agent subsidiaries of the Manager) (since July 2001); President
and Director of OppenheimerFunds Legacy Program (charitable trust program
established by the Manager) (since July 2001); Director of the following
investment advisory subsidiaries of the Manager: OFI Institutional Asset
Management, Inc., Centennial Asset Management Corporation, Trinity
Investment Management Corporation and Tremont Capital Management, Inc.
(since November 2001), HarbourView Asset Management Corporation and OFI
Private Investments, Inc. (since July 2001); President (since November
2001) and Director (since July 2001) of Oppenheimer Real Asset Management,
Inc.; Executive Vice President of Massachusetts Mutual Life Insurance
Company (OAC's parent company) (since February 1997); Director of DLB
Acquisition Corporation (holding company parent of Babson Capital
Management LLC) (since June 1995); Member of the Investment Company
Institute's Board of Governors (since October 3, 2003); Chief Operating
Officer of the Manager (September 2000-June 2001); President and Trustee
of MML Series Investment Fund and MassMutual Select Funds (open-end
investment companies) (November 1999-November 2001); Director of C.M. Life
Insurance Company (September 1999-August 2000); President, Chief
Executive Officer and Director of MML Bay State Life Insurance Company
(September 1999-August 2000); Director of Emerald Isle Bancorp and
Hibernia Savings Bank (wholly-owned sub sidiary of Emerald Isle Bancorp)
(June 1989-June 1998). Oversees 87 portfolios in the OppenheimerFunds
complex.
- ------------------------------------------------------------------------------------------------------------
OTHER OFFICERS OF THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR
THE FUND MESSRS. FERREIRA, LEAVY, MANIOUDAKIS AND ZACK, TWO WORLD FINANCIAL CENTER,
225 LIBERTY STREET, NEW YORK, NEW YORK 10281-1008, FOR MESSRS. VANDEHEY
AND WIXTED, 6803 S. TUCSON WAY, CENTENNIAL, COLORADO 80112-3924. EACH
OFFICER SERVES FOR AN INDEFINITE TERM OR UNTIL HIS OR HER RESIGNATION,
RETIREMENT DEATH OR REMOVAL.
EMMANUEL FERREIRA, Vice President of the Manager since January 2003; Portfolio Manager at
Vice President and Portfolio Lashire Investments (July 1999-December 2002). An officer of 5 portfolios
Manager (since 2003) in the OppenheimerFunds complex.
Age: 38
36 | OPPENHEIMER BALANCED FUND/VA
CHRISTOPHER LEAVY, Senior Vice President of the Manager since September 2000; portfolio
Vice President and Portfolio manager of Morgan Stanley Dean Witter Investment Management
Manager (since 2003) (1997-September 2000). An officer of 8 portfolios in the OppenheimerFunds
Age: 34 complex.
ANGELO MANIOUDAKIS, Senior Vice President of the Manager (since April 2002), of HarbourView
Vice President and Portfolio Asset Management Corporation (since April, 2002 and of OFI Institutional
Manager (since 2003) Asset Management, Inc. (since June 2002); Executive Director and portfolio
Age: 39 manager for Miller, Anderson & Sherrerd, a division of Morgan Stanley
Investment Management (August 1993-April 2002). An officer of 14
portfolios in the OppenheimerFunds complex.
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since
Vice President and Chief March 2004); Vice President of OppenheimerFunds Distributor, Inc.,
Compliance Officer Centennial Asset Management Corporation and Shareholder Services, Inc.
(since 2004) (since June 1983); Vice President and Director of Internal Audit of the
Age: 55 Manager (1997-February 2004). An officer of 87 portfolios in the
OppenheimerFunds complex.
BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999);
Treasurer and Principal Treasurer of the following: HarbourView Asset Management Corporation,
Financial and Accounting Shareholder Financial Services, Inc., Shareholder Services, Inc.,
Officer (since 1999) Oppenheimer Real Asset Management Corporation, and Oppenheimer Partnership
Age: 46 Holdings, Inc. (since March 1999), OFI Private Investments, Inc. (since
March 2000), OppenheimerFunds International Ltd. and OppenheimerFunds plc
(since May 2000), OFI Institutional Asset Management, Inc. (since November
2000), and OppenheimerFunds Legacy Program (since June 2003); Treasurer
and Chief Financial Officer of OFI Trust Company (trust company subsidiary
of the Manager) (since May 2000); Assistant Treasurer of the following:
OAC (since March 1999), Centennial Asset Management Corporation (March
1999-October 2003) and OppenheimerFunds Legacy Program (April 2000-June
2003); Principal and Chief Operating Officer of Bankers Trust
Company-Mutual Fund Services Division (March 1995-March 1999). An officer
of 87 portfolios in the OppenheimerFunds complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since
Vice President and Secretary March 2002) of the Manager; General Counsel and Director of the
(since 2001) Distributor (since December 2001); General Counsel of Centennial Asset
Age: 57 Management Corporation (since December 2001); Senior Vice President and
General Counsel of HarbourView Asset Management Corporation (since
December 2001); Secretary and General Counsel of OAC (since November
2001); Assistant Secretary (since September 1997) and Director (since
November 2001) of OppenheimerFunds International Ltd. and OppenheimerFunds
plc; Vice President and Director of Oppenheimer Partnership Holdings, Inc.
(since December 2002); Director of Oppenheimer Real Asset Management, Inc.
(since November 2001); Senior Vice President, General Counsel and Director
of Shareholder Financial Services, Inc. and Shareholder Services, Inc.
(since December 2001); Senior Vice President, General Counsel and Director
of OFI Private Investments, Inc. and OFI Trust Company (since November
2001); Vice President of OppenheimerFunds Legacy Program (since June
2003); Senior Vice President and General Counsel of OFI Institutional
Asset Management, Inc. (since November 2001); Director of OppenheimerFunds
(Asia) Limited (since December 2003); Senior Vice President (May
1985-December 2003), Acting General Counsel (November 2001-February 2002)
and Associate General Counsel (May 1981-October 2001) of the Manager;
Assistant Secretary of the following: Shareholder Services, Inc. (May
1985-November 2001), Shareholder Financial Services, Inc. (November
1989-November 2001), and OppenheimerFunds International Ltd. (September
1997-November 2001). An officer of 87 portfolios in the OppenheimerFunds
complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION
ABOUT THE FUND'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT CHARGE, UPON
REQUEST, BY CALLING 1.800.981.2871.
37 | OPPENHEIMER BALANCED FUND/VA
OPPENHEIMER CAPITAL APPRECIATION FUND/ VA
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. Over the 12-month period ended
December 31, 2005, the Fund participated in most of the U.S. stock market's
overall gains. However, the Fund's returns were lower than those of its market
benchmark, the S&P 500, primarily due to disappointing stock selections in the
media industry. 1
During the reporting period, the Fund's performance benefited from its
holdings in Broadcom Corp., Google, Inc., Teva Pharmaceutical Industries Ltd.
and Exxon Mobil Corp. On the negative side, the Fund's holdings in Tyco
International Ltd., Cisco Sytstems, Inc., Mercury Interactive Corp. and Wal-Mart
Stores, Inc. all detracted from the Fund's performance.
The Fund also had identified a number of dominant media companies selling
at substantial discounts to historical averages due to a persistent advertising
slump. The slump did not end for companies focused on traditional media, and
their shares largely failed to rebound. Finally, some of the Fund's holdings of
large pharmaceutical companies disappointed when company-specific problems,
including product safety issues, put downward pressure on earnings.
When the new management team took the Fund's reins in October, our focus
was to build positions on attractively valued growth stocks and increase its
focus on fundamentally sound and reasonably valued companies that we believed
were poised to benefit from certain long-term, secular trends. In the health
care area, we changed the Fund's emphasis from large pharmaceutical companies to
leaders in the biotechnology industry, including several companies with drugs
nearing FDA approval. It is important to note that biotechnology stocks may be
especially volatile.
We shifted the Fund's media holdings away from broadcasters and publishers
toward companies in the vanguard of the faster-growing "new media," such as
online advertising vehicles. We also complemented some of the Fund's
attractively valued technology holdings, such as networking equipment provider
Cisco Systems, Inc., with Internet leaders, including online auctioneer eBay,
Inc. and search engine Google, Inc. Although just three months is too short a
period to judge the merits of any long-term investment, we nonetheless are
encouraged that these changes have produced a rapid improvement in the Fund's
performance.
COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that follow show the
performance of a hypothetical $10,000 investment in each share class of the Fund
held until December 31, 2005. In the case of non-service shares, performance is
measured over a ten-year period. In the case of service shares, performance is
measured from inception of the class on September 18, 2001. Performance
information does not reflect charges that apply to separate accounts investing
in the Fund. If these charges were taken into account, performance would be
lower. The graphs assume that all dividends and capital gains distributions were
reinvested in additional shares.
The Fund's performance is compared to the performance of the S&P 500
Index, an unmanaged index of equity securities that is a measure of the general
domestic stock market. Index performance reflects the reinvestment of income but
does not consider the effect of transaction costs, and none of the data in the
graphs show the effect of taxes. The Fund's performance reflects the effects of
the Fund's business and operating expenses. While index comparisons may be
useful to provide a benchmark for the Fund's performance, it must be noted that
the Fund's investments are not limited to the investments in the index.
1. The Fund's performance is compared to the 4.91% return for the S&P 500 Index
for the one-year period ended 12/31/05.
4 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA
NON-SERVICE SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Capital Appreciation Fund/VA (Non-Service)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Capital
Appreciation Fund/VA
Date (Non-Service) S&P 500 Index
12/31/1995 10,000 10,000
03/31/1996 10,696 10,537
06/30/1996 11,137 11,009
09/30/1996 11,858 11,349
12/31/1996 12,520 12,295
03/31/1997 12,399 12,625
06/30/1997 14,375 14,827
09/30/1997 16,233 15,937
12/31/1997 15,861 16,395
03/31/1998 17,882 18,680
06/30/1998 18,563 19,300
09/30/1998 15,516 17,385
12/31/1998 19,668 21,084
03/31/1999 20,957 22,134
06/30/1999 22,779 23,691
09/30/1999 21,684 22,215
12/31/1999 27,860 25,518
03/31/2000 31,927 26,103
06/30/2000 30,485 25,409
09/30/2000 30,324 25,163
12/31/2000 27,796 23,196
03/31/2001 24,918 20,447
06/30/2001 26,440 21,643
09/30/2001 21,032 18,468
12/31/2001 24,301 20,441
03/31/2002 23,596 20,497
06/30/2002 19,637 17,753
09/30/2002 16,519 14,687
12/31/2002 17,774 15,925
03/31/2003 17,190 15,423
06/30/2003 19,974 17,796
09/30/2003 20,852 18,267
12/31/2003 23,274 20,490
03/31/2004 23,495 20,837
06/30/2004 23,825 21,195
09/30/2004 22,917 20,799
12/31/2004 24,888 22,718
03/31/2005 24,208 22,230
06/30/2005 24,323 22,535
09/30/2005 25,213 23,347
12/31/2005 26,157 23,833
AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/05
1-Year 5.10% 5-Year -1.21% 10-Year 10.09%
SERVICE SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Capital Appreciation Fund/VA (Service)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Capital
Appreciation Fund/VA
Date (Service) S&P 500 Index
09/18/2001 10,000 10,000
09/30/2001 10,000 10,000
12/31/2001 11,551 11,068
03/31/2002 11,209 11,099
06/30/2002 9,311 9,613
09/30/2002 7,825 7,953
12/31/2002 8,422 8,623
03/31/2003 8,131 8,352
06/30/2003 9,448 9,637
09/30/2003 9,859 9,892
12/31/2003 11,007 11,095
03/31/2004 11,102 11,283
06/30/2004 11,252 11,477
09/30/2004 10,815 11,262
12/31/2004 11,735 12,302
03/31/2005 11,407 12,038
06/30/2005 11,459 12,202
09/30/2005 11,868 12,642
12/31/2005 12,305 12,905
AVERAGE ANNUAL TOTAL RETURNS OF SERVICE SHARES OF THE FUND AT 12/31/05
1-Year 4.87% 5-Year N/A Since Inception (9/18/01) 4.96%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS.
THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE
PERFORMANCE QUOTED. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH END,
CALL US AT 1.800.981.2871. THE FUND'S TOTAL RETURNS SHOULD NOT BE EXPECTED TO BE
THE SAME AS THE RETURNS OF OTHER FUNDS, WHETHER OR NOT BOTH FUNDS HAVE THE SAME
PORTFOLIO MANAGERS AND/OR SIMILAR NAMES. THE FUND'S TOTAL RETURNS DO NOT INCLUDE
THE CHARGES ASSOCIATED WITH THE SEPARATE ACCOUNT PRODUCTS THAT OFFER THIS FUND.
SUCH PERFORMANCE WOULD HAVE BEEN LOWER IF SUCH CHARGES WERE TAKEN INTO ACCOUNT.
5 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA
FUND EXPENSES
- --------------------------------------------------------------------------------
FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1)
transaction costs, which may include redemption fees, if any; and (2) ongoing
costs, including management fees; distribution and service fees; and other Fund
expenses. These examples are intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning
of the period and held for the entire 6-month period ended December 31, 2005.
ACTUAL EXPENSES. The "actual" lines of the table provide information about
actual account values and actual expenses. You may use the information on this
line for the class of shares you hold, together with the amount you invested, to
estimate the expense that you paid over the period. Simply divide your account
value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00
= 8.60), then multiply the result by the number in the "actual" line under the
heading entitled "Expenses Paid During Period" to estimate the expenses you paid
on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The "hypothetical" lines of the
table provide information about hypothetical account values and hypothetical
expenses based on the Fund's actual expense ratio for each class of shares, and
an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of investing
in the Fund and other funds. To do so, compare this 5% hypothetical example for
the class of shares you hold with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any charges associated with the separate
accounts that offer this Fund. Therefore, the "hypothetical" lines of the table
are useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these separate
account charges were included, your costs would have been higher.
- --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
(7/1/05 ) (12/31/05) DECEMBER 31, 2005
- --------------------------------------------------------------------------------
Non-Service shares Actual $1,000.00 $1,075.40 $3.46
- --------------------------------------------------------------------------------
Non-Service shares Hypothetical 1,000.00 1,021.88 3.37
- --------------------------------------------------------------------------------
Service shares Actual 1,000.00 1,073.90 4.77
- --------------------------------------------------------------------------------
Service shares Hypothetical 1,000.00 1,020.62 4.65
Hypothetical assumes 5% annual return before expenses.
Expenses are equal to the Fund's annualized expense ratio for that class,
multiplied by the average account value over the period, multiplied by 184/365
(to reflect the one-half year period). Those annualized expense ratios based on
the 6-month period ended December 31, 2005 are as follows:
CLASS EXPENSE RATIOS
- -------------------------------------
Non-Service shares 0.66%
- -------------------------------------
Service shares 0.91
- --------------------------------------------------------------------------------
6 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA
STATEMENT OF INVESTMENTS December 31, 2005
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
COMMON STOCKS--97.8%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--14.3%
- --------------------------------------------------------------------------------
AUTOMOBILES--0.5%
Toyota Motor Corp. 184,800 $ 9,668,452
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--2.0%
Carnival Corp. 566,700 30,301,449
- --------------------------------------------------------------------------------
Starbucks Corp. 1 354,000 10,623,540
-----------
40,924,989
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES--0.7%
Toll Brothers, Inc. 1 399,500 13,838,680
- --------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL--1.7%
eBay, Inc. 1 832,600 36,009,950
- --------------------------------------------------------------------------------
MEDIA--3.4%
Comcast Corp., Cl. A Special,
Non-Vtg. 1 984,400 25,289,236
- --------------------------------------------------------------------------------
Time Warner, Inc. 1,030,000 17,963,200
- --------------------------------------------------------------------------------
Walt Disney Co. (The) 615,000 14,741,550
- --------------------------------------------------------------------------------
XM Satellite Radio Holdings, Inc.,
Cl. A 1 432,000 11,784,960
-----------
69,778,946
- --------------------------------------------------------------------------------
MULTILINE RETAIL--1.9%
J.C. Penney Co., Inc. (Holding Co.) 207,200 11,520,320
- --------------------------------------------------------------------------------
Kohl's Corp. 1 333,900 16,227,540
- --------------------------------------------------------------------------------
Target Corp. 190,300 10,460,791
-----------
38,208,651
- --------------------------------------------------------------------------------
SPECIALTY RETAIL--3.8%
Best Buy Co., Inc. 367,750 15,989,770
- --------------------------------------------------------------------------------
Lowe's Cos., Inc. 368,300 24,550,878
- --------------------------------------------------------------------------------
Michaels Stores, Inc. 306,400 10,837,368
- --------------------------------------------------------------------------------
Staples, Inc. 766,100 17,398,131
- --------------------------------------------------------------------------------
Williams-Sonoma, Inc. 1 187,200 8,077,680
-----------
76,853,827
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS--0.3%
Coach, Inc. 1 189,300 6,311,262
- --------------------------------------------------------------------------------
CONSUMER STAPLES--8.3%
- --------------------------------------------------------------------------------
BEVERAGES--1.1%
PepsiCo, Inc. 399,000 23,572,920
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--2.8%
Costco Wholesale Corp. 177,600 8,785,872
- --------------------------------------------------------------------------------
CVS Corp. 718,400 18,980,128
- --------------------------------------------------------------------------------
Sysco Corp. 408,700 12,690,135
- --------------------------------------------------------------------------------
Wal-Mart Stores, Inc. 359,100 16,805,880
-----------
57,262,015
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
FOOD PRODUCTS--2.0%
Cadbury Schweppes plc 1,825,680 $ 17,260,141
- --------------------------------------------------------------------------------
Nestle SA 76,972 23,020,430
------------
40,280,571
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS--2.4%
Procter & Gamble Co. (The) 511,400 29,599,832
- --------------------------------------------------------------------------------
Reckitt Benckiser plc 568,470 18,778,494
------------
48,378,326
- --------------------------------------------------------------------------------
ENERGY--6.7%
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--4.1%
Halliburton Co. 247,600 15,341,296
- --------------------------------------------------------------------------------
Schlumberger Ltd. 250,500 24,336,075
- --------------------------------------------------------------------------------
Smith International, Inc. 615,100 22,826,361
- --------------------------------------------------------------------------------
Transocean, Inc. 1 296,900 20,690,961
------------
83,194,693
- --------------------------------------------------------------------------------
OIL & GAS--2.6%
Apache Corp. 157,200 10,771,344
- --------------------------------------------------------------------------------
EOG Resources, Inc. 190,600 13,984,322
- --------------------------------------------------------------------------------
Kinder Morgan Management LLC 238,642 10,848,665
- --------------------------------------------------------------------------------
Occidental Petroleum Corp. 212,400 16,966,512
------------
52,570,843
- --------------------------------------------------------------------------------
FINANCIALS--9.4%
- --------------------------------------------------------------------------------
COMMERCIAL BANKS--0.5%
Bank of America Corp. 197,900 9,133,085
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--5.4%
American Express Co. 202,300 10,410,358
- --------------------------------------------------------------------------------
Chicago Mercantile Exchange (The) 46,300 17,014,787
- --------------------------------------------------------------------------------
Citigroup, Inc. 262,800 12,753,684
- --------------------------------------------------------------------------------
Franklin Resources, Inc. 130,800 12,296,508
- --------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The) 175,000 22,349,250
- --------------------------------------------------------------------------------
Legg Mason, Inc. 118,500 14,183,265
- --------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc. 55,500 7,113,435
- --------------------------------------------------------------------------------
Nomura Securities Co. Ltd. 479,700 9,192,538
- --------------------------------------------------------------------------------
T. Rowe Price Group, Inc. 60,800 4,379,424
------------
109,693,249
- --------------------------------------------------------------------------------
INSURANCE--3.5%
American International Group, Inc. 573,550 39,133,317
- --------------------------------------------------------------------------------
Hartford Financial Services
Group, Inc. (The) 155,600 13,364,484
- --------------------------------------------------------------------------------
Prudential Financial, Inc. 268,400 19,644,196
------------
72,141,997
7 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
HEALTH CARE--17.8%
- --------------------------------------------------------------------------------
BIOTECHNOLOGY--4.5%
Amgen, Inc. 1 486,100 $ 38,333,846
- --------------------------------------------------------------------------------
Genentech, Inc. 1 181,600 16,798,000
- --------------------------------------------------------------------------------
Genzyme Corp. (General Division) 1 241,000 17,057,980
- --------------------------------------------------------------------------------
Gilead Sciences, Inc. 1 139,200 7,326,096
- --------------------------------------------------------------------------------
MedImmune, Inc. 1 363,200 12,719,264
------------
92,235,186
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--4.4%
Fisher Scientific International, Inc. 222,100 13,739,106
- --------------------------------------------------------------------------------
Medtronic, Inc. 765,200 44,052,564
- --------------------------------------------------------------------------------
PerkinElmer, Inc. 497,700 11,725,812
- --------------------------------------------------------------------------------
Stryker Corp. 180,500 8,019,615
- --------------------------------------------------------------------------------
Varian Medical Systems, Inc. 1 228,300 11,492,622
------------
89,029,719
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--3.6%
Aetna, Inc. 153,100 14,438,861
- --------------------------------------------------------------------------------
Caremark Rx, Inc. 1 200,100 10,363,179
- --------------------------------------------------------------------------------
Medco Health Solutions, Inc. 1 181,900 10,150,020
- --------------------------------------------------------------------------------
Patterson Cos., Inc. 1 155,100 5,180,340
- --------------------------------------------------------------------------------
Quest Diagnostics, Inc. 187,900 9,673,092
- --------------------------------------------------------------------------------
UnitedHealth Group, Inc. 374,400 23,265,216
------------
73,070,708
- --------------------------------------------------------------------------------
PHARMACEUTICALS--5.3%
Eli Lilly & Co. 237,600 13,445,784
- --------------------------------------------------------------------------------
Novartis AG 572,143 30,064,666
- --------------------------------------------------------------------------------
Roche Holdings AG 156,478 23,494,623
- --------------------------------------------------------------------------------
Sanofi-Aventis SA 184,980 16,205,761
- --------------------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.,
Sponsored ADR 557,946 23,997,257
------------
107,208,091
- --------------------------------------------------------------------------------
INDUSTRIALS--8.7%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE--3.5%
Empresa Brasileira de Aeronautica
SA, ADR 473,700 18,521,670
- --------------------------------------------------------------------------------
General Dynamics Corp. 153,700 17,529,485
- --------------------------------------------------------------------------------
Lockheed Martin Corp. 278,100 17,695,503
- --------------------------------------------------------------------------------
United Technologies Corp. 336,100 18,791,351
------------
72,538,009
- --------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS--0.5%
Expeditors International of
Washington, Inc. 140,700 9,498,657
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--0.3%
Corporate Executive Board Co. 66,700 $ 5,982,990
- --------------------------------------------------------------------------------
DIVERSIFIED CONSUMER SERVICES--1.1%
Apollo Group, Inc., Cl. A 1 379,000 22,914,340
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--2.4%
General Electric Co. 1,376,700 48,253,335
- --------------------------------------------------------------------------------
MACHINERY--0.9%
Danaher Corp. 337,900 18,848,062
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--27.7%
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--6.6%
Cisco Systems, Inc. 1 3,496,300 59,856,656
- --------------------------------------------------------------------------------
Corning, Inc. 1 673,000 13,231,180
- --------------------------------------------------------------------------------
Motorola, Inc. 885,500 20,003,445
- --------------------------------------------------------------------------------
Nokia Corp., Sponsored ADR 572,200 10,471,260
- --------------------------------------------------------------------------------
QUALCOMM, Inc. 437,700 18,856,116
- --------------------------------------------------------------------------------
Telefonaktiebolaget LM Ericsson,
Sponsored ADR 335,700 11,548,080
------------
133,966,737
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--3.0%
Apple Computer, Inc. 1 179,400 12,897,066
- --------------------------------------------------------------------------------
Dell, Inc. 1 792,700 23,773,073
- --------------------------------------------------------------------------------
EMC Corp. 1 1,008,200 13,731,684
- --------------------------------------------------------------------------------
Network Appliance, Inc. 1 403,300 10,889,100
------------
61,290,923
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--3.8%
Google, Inc., Cl. A 1 77,900 32,317,594
- --------------------------------------------------------------------------------
VeriSign, Inc. 1 462,700 10,142,384
- --------------------------------------------------------------------------------
Yahoo!, Inc. 1 888,300 34,803,594
------------
77,263,572
- --------------------------------------------------------------------------------
IT SERVICES--2.7%
Automatic Data Processing, Inc. 607,400 27,873,586
- --------------------------------------------------------------------------------
Cognizant Technology
Solutions Corp. 1 323,100 16,268,085
- --------------------------------------------------------------------------------
First Data Corp. 249,700 10,739,597
------------
54,881,268
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--5.3%
Advanced Micro Devices, Inc. 1 477,800 14,620,680
- --------------------------------------------------------------------------------
Broadcom Corp., Cl. A 1 544,100 25,654,315
- --------------------------------------------------------------------------------
International Rectifier Corp. 1 215,700 6,880,830
- --------------------------------------------------------------------------------
Linear Technology Corp. 566,600 20,437,262
- --------------------------------------------------------------------------------
Marvell Technology Group Ltd. 170,600 9,568,954
- --------------------------------------------------------------------------------
Microchip Technology, Inc. 347,400 11,168,910
- --------------------------------------------------------------------------------
Texas Instruments, Inc. 580,300 18,610,221
------------
106,941,172
8 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA
VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------
SOFTWARE--6.3%
Adobe Systems, Inc. 609,400 $ 22,523,424
- ------------------------------------------------------------------------------------
Amdocs Ltd. 1 298,500 8,208,750
- ------------------------------------------------------------------------------------
Autodesk, Inc. 281,400 12,086,130
- ------------------------------------------------------------------------------------
Microsoft Corp. 2,201,400 57,566,610
- ------------------------------------------------------------------------------------
SAP AG, Sponsored ADR 629,800 28,385,086
--------------
128,770,000
- ------------------------------------------------------------------------------------
MATERIALS--3.1%
- ------------------------------------------------------------------------------------
CHEMICALS--3.1%
Monsanto Co. 417,800 32,392,034
- ------------------------------------------------------------------------------------
Praxair, Inc. 561,700 29,747,632
--------------
62,139,666
- ------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--1.8%
- ------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--1.8%
American Tower Corp. 1 532,500 14,430,750
- ------------------------------------------------------------------------------------
Sprint Nextel Corp. 922,900 21,558,944
--------------
35,989,694
--------------
Total Common Stocks
(Cost $1,706,243,571) 1,988,644,585
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--2.2%
- ------------------------------------------------------------------------------------
Undivided interest of 3.16% in joint repurchase
agreement (Principal Amount/Value $1,414,200,000,
with a maturity value of $1,414,844,247) with UBS
Warburg LLC, 4.10%, dated 12/30/05, to be repur-
chased at $44,704,356 on 1/3/06, collateralized
by Federal Home Loan Mortgage Corp., 5%,
1/1/35, with a value of $157,513,104 and
Federal National Mortgage Assn.,
5%--5.50%, 3/1/34--10/1/35, with
a value of $1,301,420,187
(Cost $44,684,000) $ 44,684,000 $ 44,684,000
- ------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $1,750,927,571) 100.0% 2,033,328,585
- ------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 0.0 805,373
--------------------------------
NET ASSETS 100.0% $2,034,133,958
================================
FOOTNOTE TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
9 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA
STATEMENT OF ASSETS AND LIABILITIES December 31, 2005
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
ASSETS
- ----------------------------------------------------------------------------------------------------------------------------------
Investments, at value (cost $1,750,927,571)--see accompanying statement of investments $ 2,033,328,585
- ----------------------------------------------------------------------------------------------------------------------------------
Cash 150,866
- ----------------------------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Shares of beneficial interest sold 2,167,616
Interest and dividends 1,499,017
Other 28,213
---------------
Total assets 2,037,174,297
- ----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
- ----------------------------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Shares of beneficial interest redeemed 1,458,014
Investments purchased 1,157,532
Distribution and service plan fees 226,032
Shareholder communications 115,525
Trustees' compensation 36,371
Transfer and shareholder servicing agent fees 1,829
Other 45,036
----------------
Total liabilities 3,040,339
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 2,034,133,958
================
- ----------------------------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 52,879
- ----------------------------------------------------------------------------------------------------------------------------------
Additional paid-in capital 2,062,730,165
- ----------------------------------------------------------------------------------------------------------------------------------
Accumulated net investment income 6,819,916
- ----------------------------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions (317,858,614)
- ----------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets and liabilities denominated in
foreign currencies 282,389,612
----------------
NET ASSETS $ 2,034,133,958
================
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- ----------------------------------------------------------------------------------------------------------------------------------
Non-Service Shares:
Net asset value, redemption price per share and offering price per share (based on net assets of $1,652,282,029
and 42,890,708 shares of beneficial interest outstanding) $38.52
- ----------------------------------------------------------------------------------------------------------------------------------
Service Shares:
Net asset value, redemption price per share and offering price per share (based on net assets of $381,851,929
and 9,988,083 shares of beneficial interest outstanding) $38.23
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
10 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA
STATEMENT OF OPERATIONS For the Year Ended December 31, 2005
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
INVESTMENT INCOME
- ----------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $300,038) $ 20,637,580
- ----------------------------------------------------------------------------------------
Interest 1,411,383
--------------
Total investment income 22,048,963
- ----------------------------------------------------------------------------------------
EXPENSES
- ----------------------------------------------------------------------------------------
Management fees 12,603,901
- ----------------------------------------------------------------------------------------
Distribution and service plan fees--Service shares 751,102
- ----------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service shares 11,133
Service shares 10,230
- ----------------------------------------------------------------------------------------
Shareholder communications:
Non-Service shares 103,635
Service shares 19,714
- ----------------------------------------------------------------------------------------
Trustees' compensation 33,689
- ----------------------------------------------------------------------------------------
Custodian fees and expenses 26,918
- ----------------------------------------------------------------------------------------
Administration service fees 1,500
- ----------------------------------------------------------------------------------------
Other 66,282
--------------
Total expenses 13,628,104
Less reduction to custodian expenses (11,459)
--------------
Net expenses 13,616,645
- ----------------------------------------------------------------------------------------
NET INVESTMENT INCOME 8,432,318
- ----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- ----------------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments (33,036,729)
Foreign currency transactions 18,373
--------------
Net realized loss (33,018,356)
- ----------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments 127,868,004
Translation of assets and liabilities denominated in foreign currencies (6,625,121)
--------------
Net change in unrealized appreciation 121,242,883
- ----------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 96,656,845
==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2005 2004
- --------------------------------------------------------------------------------------------------------------
OPERATIONS
- --------------------------------------------------------------------------------------------------------------
Net investment income $ 8,432,318 $ 18,471,549
- --------------------------------------------------------------------------------------------------------------
Net realized gain (loss) (33,018,356) 83,060,536
- --------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation 121,242,883 27,361,213
-----------------------------------
Net increase in net assets resulting from operations 96,656,845 128,893,298
- --------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Non-Service shares (15,541,862) (5,404,905)
Service shares (1,926,965) (357,596)
- --------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from beneficial interest
transactions:
Non-Service shares (181,635,386) (53,964,830)
Service shares 117,658,602 114,818,206
- --------------------------------------------------------------------------------------------------------------
NET ASSETS
- --------------------------------------------------------------------------------------------------------------
Total increase 15,211,234 183,984,173
- --------------------------------------------------------------------------------------------------------------
Beginning of period 2,018,922,724 1,834,938,551
-----------------------------------
End of period (including accumulated net investment income of $6,819,916
and $17,399,802, respectively) $ 2,034,133,958 $ 2,018,922,724
===================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
12 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 2001
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 36.99 $ 34.70 $ 26.62 $ 36.58 $ 46.63
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .18 1 .35 1,2 .12 .11 .18
Net realized and unrealized gain (loss) 1.68 2.05 8.07 (9.89) (5.86)
---------------------------------------------------------------------------------------
Total from investment operations 1.86 2.40 8.19 (9.78) (5.68)
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to
shareholders:
Dividends from net investment income (.33) (.11) (.11) (.18) (.27)
Distributions from net realized gain -- -- -- -- (4.10)
---------------------------------------------------------------------------------------
Total dividends and/or distributions to
shareholders (.33) (.11) (.11) (.18) (4.37)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 38.52 $ 36.99 $ 34.70 $ 26.62 $ 36.58
=======================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 5.10% 6.93% 30.94% (26.86)% (12.58)%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $1,652,282 $1,770,273 $1,715,240 $1,338,769 $1,975,345
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $1,658,910 $1,708,511 $1,468,297 $1,630,430 $2,000,314
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 0.47% 0.99% 2 0.39% 0.35% 0.51%
Total expenses 0.66% 5 0.66% 5 0.67% 5 0.66% 5 0.68% 5
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 70% 44% 48% 32% 45%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Net investment income per share and the net investment income ratio include
$.16 and 0.43%, respectively, resulting from a special dividend from Microsoft
Corp. in November 2004.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Total returns are not annualized for
periods less than one full year. Total return information does not reflect
expenses that apply at the separate account level or to related insurance
products. Inclusion of these charges would reduce the total return figures for
all periods shown. Returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
4. Annualized for periods of less than one full year.
5. Reduction to custodian expenses less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
13 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SERVICE SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 2001 1
- --------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 36.73 $ 34.53 $ 26.53 $ 36.56 $ 31.66
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .08 2 .29 2,3 .08 .20 -- 4
Net realized and unrealized gain (loss) 1.69 1.99 8.02 (10.05) 4.90
------------------------------------------------------------------------------
Total from investment operations 1.77 2.28 8.10 (9.85) 4.90
- --------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to
shareholders:
Dividends from net investment income (.27) (.08) (.10) (.18) --
Distributions from net realized gain -- -- -- -- --
------------------------------------------------------------------------------
Total dividends and/or distributions to
shareholders (.27) (.08) (.10) (.18) --
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 38.23 $ 36.73 $ 34.53 $ 26.53 $ 36.56
==============================================================================
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 5 4.87% 6.62% 30.69% (27.09)% 15.51%
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $381,852 $248,649 $119,699 $ 18,260 $ 90
- --------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $301,780 $184,273 $ 48,178 $ 6,263 $ 16
- --------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 6
Net investment income 0.20% 0.85% 3 0.14% 0.26% 0.11%
Total expenses 0.91% 7 0.91% 7 0.94% 7 0.81% 7,8 0.81% 7
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 70% 44% 48% 32% 45%
1. For the period from September 18, 2001 (inception of offering) to December
31, 2001.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Net investment income per share and the net investment income ratio include
$.16 and 0.43%, respectively, resulting from a special dividend from Microsoft
Corp. in November 2004.
4. Less than $0.005 per share.
5. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Total returns are not annualized for
periods less than one full year. Total return information does not reflect
expenses that apply at the separate account level or to related insurance
products. Inclusion of these charges would reduce the total return figures for
all periods shown. Returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
6. Annualized for periods of less than one full year.
7. Reduction to custodian expenses less than 0.01%.
8. Voluntary waiver of transfer agent fees less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Capital Appreciation Fund/VA (the Fund) is a separate series of
Oppenheimer Variable Account Funds, an open-end management investment company
registered under the Investment Company Act of 1940, as amended. The Fund's
investment objective is to seek capital appreciation by investing in securities
of well-known, established companies. The Fund's investment advisor is
OppenheimerFunds, Inc. (the Manager).
The Fund offers two classes of shares. Both classes are sold at their
offering price, which is the net asset value per share, to separate investment
accounts of participating insurance companies as an underlying investment for
variable life insurance policies, variable annuity contracts or other investment
products. The class of shares designated as Service shares is subject to a
distribution and service plan. Both classes of shares have identical rights and
voting privileges with respect to the Fund in general and exclusive voting
rights on matters that affect that class alone. Earnings, net assets and net
asset value per share may differ due to each class having its own expenses, such
as transfer and shareholder servicing agent fees and shareholder communications,
directly attributable to that class.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for business. Securities may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. Securities listed or traded on National
Stock Exchanges or other domestic exchanges are valued based on the last sale
price of the security traded on that exchange prior to the time when the Fund's
assets are valued. Securities traded on NASDAQ are valued based on the closing
price provided by NASDAQ prior to the time when the Fund's assets are valued. In
the absence of a sale, the security is valued at the last sale price on the
prior trading day, if it is within the spread of the closing "bid" and "asked"
prices, and if not, at the closing bid price. Securities traded on foreign
exchanges are valued based on the last sale price on the principal exchange on
which the security is traded, in the country that is identified by the portfolio
pricing service, prior to the time when the Fund's assets are valued. In the
absence of a sale, the security is valued at the official closing price on the
principal exchange. Corporate, government and municipal debt instruments having
a remaining maturity in excess of sixty days and all mortgage-backed securities
will be valued at the mean between the "bid" and "asked" prices. Futures
contracts traded on a commodities or futures exchange will be valued at the
final settlement price or official closing price on the principal exchange as
reported by such principal exchange at its trading session ending at, or most
recently prior to, the time when the Fund's assets are valued. Securities
(including restricted securities) for which market quotations are not readily
available are valued at their fair value. Foreign and domestic securities whose
values have been materially affected by what the Manager identifies as a
significant event occurring before the Fund's assets are valued but after the
close of their respective exchanges will be fair valued. Fair value is
determined in good faith using consistently applied procedures under the
supervision of the Board of Trustees. Short-term "money market type" debt
securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in
U.S. dollars. The values of securities denominated in foreign currencies and
amounts related to the purchase and sale of foreign securities and foreign
investment income are translated into U.S. dollars as of the close of The New
York Stock Exchange (the Exchange), normally 4:00 P.M. Eastern time, on each day
the Exchange is open for business. Foreign exchange rates may be valued
primarily using dealer supplied valuations or a portfolio pricing service
authorized by the Board of Trustees.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
values of assets and liabilities, including investments in securities at fiscal
period end, resulting from changes in exchange rates.
15 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated funds
advised by the Manager, may transfer uninvested cash balances into joint trading
accounts on a daily basis. These balances are invested in one or more repurchase
agreements. Securities pledged as collateral for repurchase agreements are held
by a custodian bank until the agreements mature. Each agreement requires that
the market value of the collateral be sufficient to cover payments of interest
and principal. In the event of default by the other party to the agreement,
retention of the collateral may be subject to legal proceedings.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders.
The tax components of capital shown in the table below represent distribution
requirements the Fund must satisfy under the income tax regulations, losses the
Fund may be able to offset against income and gains realized in future years and
unrealized appreciation or depreciation of securities and other investments for
federal income tax purposes.
NET UNREALIZED
APPRECIATION
BASED ON COST OF
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED SECURITIES AND OTHER
NET INVESTMENT LONG-TERM LOSS INVESTMENTS FOR FEDERAL
INCOME GAIN CARRYFORWARD 1,2,3 INCOME TAX PURPOSES
- ------------------------------------------------------------------------------
$6,847,723 $-- $311,768,028 $277,481,674
1. As of December 31, 2005, the Fund had $311,768,028 of net capital loss
carryforwards available to offset future realized capital gains, if any, and
thereby reduce future taxable gain distributions. As of December 31, 2005,
details of the capital loss carryforwards were as follows:
EXPIRING
----------------------------
2010 $ 83,313,825
2011 193,776,365
2013 34,677,838
------------
Total $311,768,028
============
2. During the fiscal year ended December 31, 2005, the Fund did not utilize any
capital loss carryforward.
3. During the fiscal year ended December 31, 2004, the Fund utilized $83,521,467
of capital loss carryforward to offset capital gains realized in that fiscal
year.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Fund. Accordingly, the
following amounts have been reclassified for December 31, 2005. Net assets of
the Fund were unaffected by the reclassifications.
REDUCTION TO REDUCTION TO
ACCUMULATED ACCUMULATED NET
NET INVESTMENT REALIZED LOSS
INCOME ON INVESTMENTS
----------------------------------------
$221,093 $221,093
16| OPPENHEIMER CAPITAL APPRECIATION FUND/ VA
The tax character of distributions paid during the years ended December 31, 2005
and December 31, 2004 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2005 DECEMBER 31, 2004
--------------------------------------------------------------------------
Distributions paid from:
Ordinary income $17,468,827 $5,762,501
The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for
federal income tax purposes as of December 31, 2005 are noted below. The primary
difference between book and tax appreciation or depreciation of securities and
other investments, if applicable, is attributable to the tax deferral of losses
or tax realization of financial statement unrealized gain or loss.
Federal tax cost of securities $ 1,755,835,509
================
Gross unrealized appreciation $ 320,276,404
Gross unrealized depreciation (42,794,730)
----------------
Net unrealized appreciation $ 277,481,674
================
During the year ending December 31, 2005, the Fund recorded a decrease to cost
of investments, resulting in an increase to net unrealized appreciation of
$1,182,607, and a decrease to accumulated net investment income in the amount of
$1,322,284, and a decrease to accumulated net realized loss of $139,677 to
adjust for the recharacterization of certain stock dividends received in prior
years.
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred
compensation plan for independent trustees that enables trustees to elect to
defer receipt of all or a portion of the annual compensation they are entitled
to receive from the Fund. For purposes of determining the amount owed to the
Trustee under the plan, deferred amounts are treated as though equal dollar
amounts had been invested in shares of the Fund or in other Oppenheimer funds
selected by the Trustee. The Fund purchases shares of the funds selected for
deferral by the Trustee in amounts equal to his or her deemed investment,
resulting in a Fund asset equal to the deferred compensation liability. Such
assets are included as a component of "Other" within the asset section of the
Statement of Assets and Liabilities. Deferral of trustees' fees under the plan
will not affect the net assets of the Fund, and will not materially affect the
Fund's assets, liabilities or net investment income per share. Amounts will be
deferred until distributed in accordance to the Plan.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date. Income and capital gain distributions, if
any, are declared and paid annually.
- --------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and amortization
of premium, is accrued as earned.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. Custodian Fees and Expenses in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts to the extent they are not
offset by positive cash balances maintained by the Fund. The Reduction to
Custodian Expenses line item, if applicable, represents earnings on cash
balances maintained by the Fund during the period. Such interest expense and
other custodian fees may be paid with these earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
17 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
OTHER. The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
YEAR ENDED DECEMBER 31, 2005 YEAR ENDED DECEMBER 31, 2004
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------
NON-SERVICE SHARES
Sold 4,329,144 $ 158,705,810 5,578,990 $ 194,357,727
Dividends and/or distributions reinvested 429,927 15,541,862 155,940 5,404,905
Redeemed (9,732,224) (355,883,058) (7,294,682) (253,727,462)
-----------------------------------------------------------
Net decrease (4,973,153) $(181,635,386) (1,559,752) $ (53,964,830)
===========================================================
- -----------------------------------------------------------------------------------------------------------
SERVICE SHARES
Sold 4,094,952 $ 149,465,324 3,992,696 $ 138,774,693
Dividends and/or distributions reinvested 53,616 1,926,965 10,365 357,596
Redeemed (929,573) (33,733,687) (700,538) (24,314,083)
-----------------------------------------------------------
Net increase 3,218,995 $ 117,658,602 3,302,523 $ 114,818,206
===========================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended December 31, 2005, were as
follows:
PURCHASES SALES
-----------------------------------------------------------
Investment securities $1,332,467,118 $1,392,912,865
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee at an
annual rate of 0.75% of the first $200 million of average annual net assets,
0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the
next $200 million and 0.60% of average annual net assets over $800 million.
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the year ended December 31, 2005, the Fund paid
$21,307 to OFS for services to the Fund.
Additionally, funds offered in variable annuity separate accounts are
subject to minimum fees of $10,000 per class, for class level assets of $10
million or more. Each class is subject to the minimum fee in the event that the
per account fee does not equal or exceed the applicable minimum fee.
18 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN FOR SERVICE SHARES. The Fund has adopted a
Distribution and Service Plan for Service shares to pay OppenheimerFunds
Distributor, Inc. (the Distributor), for distribution related services, personal
service and account maintenance for the Fund's Service shares. Under the plan,
payments are made periodically at an annual rate of up to 0.25% of the average
annual net assets of Service shares of the Fund. The Distributor currently uses
all of those fees to compensate sponsor(s) of the insurance product that offers
Fund shares, for providing personal service and maintenance of accounts of their
variable contract owners that hold Service shares. The impact of the service
plan is to increase operating expenses of the Service shares, which results in
lower performance compared to the Fund's shares that are not subject to a
service fee. Fees incurred by the Fund under the plan are detailed in the
Statement of Operations.
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit
transfer and shareholder servicing agent fees for all classes to 0.35% of
average annual net assets per class. This undertaking may be amended or
withdrawn at any time.
- --------------------------------------------------------------------------------
5. FOREIGN CURRENCY CONTRACTS
A foreign currency contract is a commitment to purchase or sell a foreign
currency at a future date, at a negotiated rate. The Fund may enter into foreign
currency contracts to settle specific purchases or sales of securities
denominated in a foreign currency and for protection from adverse exchange rate
fluctuation. Risks to the Fund include the potential inability of the
counterparty to meet the terms of the contract.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using prevailing foreign currency exchange rates.
Unrealized appreciation and depreciation on foreign currency contracts are
reported in the Statement of Assets and Liabilities as a receivable or payable
and in the Statement of Operations with the change in unrealized appreciation or
depreciation.
The Fund may realize a gain or loss upon the closing or settlement of the
foreign transaction. Contracts closed or settled with the same broker are
recorded as net realized gains or losses. Such realized gains and losses are
reported with all other foreign currency gains and losses in the Statement of
Operations.
As of December 31, 2005, the Fund had no outstanding foreign currency
contracts.
- --------------------------------------------------------------------------------
6. LITIGATION
A consolidated amended complaint has been filed as putative derivative and class
actions against the Manager, OFS and the Distributor, as well as 51 of the
Oppenheimer funds (as "Nominal Defendants") excluding the Fund, 30 present and
former Directors or Trustees and 8 present and former officers of the funds.
This complaint, initially filed in the U.S. District Court for the Southern
District of New York on January 10, 2005 and amended on March 4, 2005,
consolidates into a single action and amends six individual previously-filed
putative derivative and class action complaints. Like those prior complaints,
the complaint alleges that the Manager charged excessive fees for distribution
and other costs, improperly used assets of the funds in the form of directed
brokerage commissions and 12b-1 fees to pay brokers to promote sales of the
funds, and failed to properly disclose the use of assets of the funds to make
those payments in violation of the Investment Company Act of 1940 and the
Investment Advisers Act of 1940. Also, like those prior complaints, the
complaint further alleges that by permitting and/or participating in those
actions, the Directors/Trustees and the Officers breached their fiduciary duties
to shareholders of the funds under the Investment Company Act of 1940 and at
common law. The complaint seeks unspecified compensatory and punitive damages,
rescission of the funds' investment advisory agreements, an accounting of all
fees paid, and an award of attorneys' fees and litigation expenses.
The defendants believe that the allegations contained in the Complaints
are without merit and that they have meritorious defenses against the claims
asserted. The defendants intend to defend these lawsuits vigorously and to
contest any claimed liability. The defendants believe that it is premature to
render any opinion as to the likelihood of an outcome unfavorable to them and
that no estimate can yet be made with any degree of certainty as to the amount
or range of any potential loss.
19 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER CAPITAL APPRECIATION
FUND/VA:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer Capital Appreciation Fund/VA, a series of Oppenheimer Variable
Account Funds, including the statement of investments, as of December 31, 2005,
and the related statement of operations for the year then ended, the statements
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the periods presented.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
The Fund is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audit includes consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of December 31, 2005, by correspondence with the
custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer Capital Appreciation Fund/VA as of December 31, 2005, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for each
of the five years in the periods presented, in conformity with accounting
principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
February 13, 2006
20 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2006, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2005. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
Dividends, if any, paid by the Fund during the fiscal year ended December
31, 2005 which are not designated as capital gain distributions should be
multiplied by 100% to arrive at the amount eligible for the corporate
dividend-received deduction.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Fund to the Internal Revenue Service. Because of
the complexity of the federal regulations which may affect your individual tax
return and the many variations in state and local tax regulations, we recommend
that you consult your tax advisor for specific guidance.
21 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file Form N-PX, with its complete proxy voting record for the 12 months ended
June 30th, no later than August 31st of each year. The Fund's voting record is
available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at
www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC
for the first quarter and the third quarter of each fiscal year on Form N-Q. The
Fund's Form N-Q filings are available on the SEC's website at
http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public
Reference Room in Washington D.C. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
22 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew the Fund's
investment advisory agreement (the "Agreement"). The Investment Company Act of
1940, as amended, requires that the Board request and evaluate, and that the
Manager provide, such information as may be reasonably necessary to evaluate the
terms of the Agreement. The Board employs an independent consultant to prepare a
report that provides information, including comparative information, that the
Board requests for that purpose. In addition, the Board receives information
throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager, including an analysis of the
cost of providing services, (v) whether economies of scale are realized as the
Fund grows and whether fee levels reflect these economies of scale for Fund
investors and (vi) other benefits to the Manager from its relationship with the
Fund. Outlined below is a summary of the principal information considered by the
Board as well as the Board's conclusions.
NATURE, QUALITY, AND EXTENT OF SERVICES. The Board considered information
on the nature and extent of the services provided to the Fund and information
regarding the Manager's key personnel that provide such services. The Manager's
duties include providing the Fund with the services of the portfolio managers
and the Manager's investment team, who provide research, analysis and other
advisory services in regard to the Fund's investments; securities trading
services; oversight of third party service providers; monitoring compliance with
applicable Fund policies and procedures and adherence to the Fund's investment
restrictions. The Manager is responsible for providing certain administrative
services to the Fund as well. Those services include providing and supervising
all administrative and clerical personnel that are necessary in order to provide
effective corporate administration for the Fund; compiling and maintaining
records with respect to the Fund's operations; preparing and filing reports
required by the Securities and Exchange Commission; preparing periodic reports
regarding the operations of the Fund for its shareholders; preparing proxy
materials for shareholder meetings; and preparing the registration statements
required by Federal and state securities laws for the sale of the Fund's shares.
The Manager also provides the Fund with office space, facilities and equipment.
The Board also considered the quality of the services provided and the
quality of the Manager's resources that are available to the Fund. The Board
took account of the fact that the Manager has had over forty years of experience
as an investment adviser and that its assets under management rank it among the
top mutual fund managers in the United States. The Board evaluated the Manager's
administrative, accounting, legal and compliance services, and information the
Board has received regarding the experience and professional qualifications of
the Manager's key personnel and the size and functions of its staff providing
investment management services to the Fund. The Board also considered compliance
reports from the Fund's Chief Compliance Officer. In its evaluation of the
quality of the portfolio management services provided, the Board considered the
experience of William L. Wilby and Marc Baylin and the Manager's Growth Equity
and Global Equity investment teams and analysts. Messrs. Wilby and Baylin have
had over 23 and 15 years of experience, respectively, managing equity
investments. The Board members also considered the totality of their experiences
with the Manager, as directors or trustees of the Fund and other funds advised
by the Manager. In light of the foregoing, the Board concluded that the Fund
benefits from the services provided under the Agreement as a result of the
Manager's experience, reputation, personnel, operations, and resources.
INVESTMENT PERFORMANCE OF THE MANAGER AND THE FUND. During the year, the
Manager provided information on the performance of the Fund and the Manager at
each Board meeting, including comparative performance informa-
23 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited/Continued
- --------------------------------------------------------------------------------
tion. The Board also reviewed information, prepared by the Manager and by the
independent consultant, comparing the Fund's historical performance to relevant
market indices and to the performance of other large-cap core funds (including
both funds advised by the Manager and funds advised by other investment
advisers). The Board noted that the Fund's three-year and ten-year performance
were both better than its peer group median, although its one-year and five-year
performance were below its peer group median.
COSTS OF SERVICES AND PROFITS REALIZED BY THE MANAGER. The Board
considered information regarding the Manager's costs in serving as the Fund's
investment adviser, including the costs associated with the personnel and
systems necessary to manage the Fund, and information regarding the Manager's
profitability from its relationship with the Fund. The Board reviewed the fees
paid to the Manager and the other expenses borne by the Fund. The Board also
evaluated the comparability of the fees charged and the services provided to the
Fund to the fees and services for other clients or accounts advised by the
Manager. The independent consultant provided comparative data in regard to the
fees and expenses of the Fund, other large-cap core funds and other funds with
comparable asset levels and distribution features. The Board noted that the
Fund's contractual and actual management fees are lower than its peer group
average but higher than its peer group median and that its total expenses are
lower than both its peer group average and median. In light of this, the Board
concluded that the management fee was reasonable.
ECONOMIES OF SCALE. The Board considered whether the Manager may realize
economies of scale in managing and supporting the Fund, whether those economies
of scale benefit the Fund's shareholders and the current level of Fund assets in
relation to the Fund's management fee breakpoints, which are intended to share
with shareholders economies of scale that may exist as the Fund grows.
OTHER BENEFITS TO THE MANAGER. In addition to considering the profits
realized by the Manager, the Board considered information that was provided
regarding the direct and indirect benefits the Manager receives as a result of
its relationship with the Fund, including compensation paid to the Manager's
affiliates and research provided to the Manager in connection with permissible
brokerage arrangements (soft dollar arrangements). The Board also considered the
nature and quality of services provided by affiliates of the Manager, which it
reviews at other times during the year in connection with the renewal of the
Fund's service agreements. The Board considered that the Manager must be able to
pay and retain experienced professional personnel at competitive rates to
provide services to the Fund and that maintaining the financial viability of the
Manager is important in order for the Manager to continue to provide significant
services to the Fund and its shareholders.
CONCLUSIONS. These factors were also considered by the independent
Trustees meeting separately from the full Board, assisted by experienced counsel
to the Fund and to the independent Trustees. Fund counsel and the independent
Trustees' counsel are both independent of the Manager within the meaning and
intent of the Securities and Exchange Commission Rules.
Based on its review of the information it received and its evaluations
described above, the Board, including a majority of the independent Trustees,
decided to continue the advisory agreement for another year. In arriving at this
decision, the Board did not single out any factor or factors as being more
important than others, but considered all of the factors together. The Board
judged the terms and conditions of the advisory agreement, including the
management fee, in light of all of the surrounding circumstances.
24 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS HELD; NUMBER OF
THE FUNDS, LENGTH OF SERVICE, PORTFOLIOS IN THE FUNDS COMPLEX CURRENTLY OVERSEEN
AGE
INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL, COLORADO
TRUSTEES 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER RESIGNATION, RETIREMENT,
DEATH OR REMOVAL.
WILLIAM L. ARMSTRONG, Chairman of the following private mortgage banking companies: Cherry Creek Mortgage Company (since
Chairman of the Board of 1991), Centennial State Mortgage Company (since 1994), and The El Paso Mortgage Company (since 1993);
Trustees (since 2003), Chairman of the following private companies: Ambassador Media Corporation (since 1984) and Broadway
Trustee (since 1999) Ventures (since 1984); Director of the following: Helmerich & Payne, Inc. (oil and gas
Age: 68 drilling/production company) (since 1992), Campus Crusade for Christ (since 1991) and The Lynde and
Harry Bradley Foundation, Inc. (non-profit organization) (since 2002); former Chairman of the
following: Transland Financial Services, Inc. (private mortgage banking company) (1997-2003),
Great Frontier Insurance (insurance agency) (1995-2000), Frontier Real Estate, Inc. (residential
real estate brokerage) (1994-2000) and Frontier Title (title insurance agency) (1995-2000); former
Director of the following: UNUMProvident (insurance company) (1991-2004), Storage Technology
Corporation (computer equipment company) (1991-2003) and International Family Entertainment
(television channel) (1992-1997); U.S. Senator (January 1979-January 1991). Oversees 38 portfolios
in the OppenheimerFunds complex.
ROBERT G. AVIS, Director and President of A.G. Edwards Capital, Inc. (General Partner of private equity funds)
Trustee (since 1993) (until February 2001); Chairman, President and Chief Executive Officer of A.G. Edwards Capital, Inc.
Age: 74 (until March 2000); Director of A.G. Edwards & Sons, Inc. (brokerage company) (until 2000) and A.G.
Edwards Trust Company (investment adviser) (until 2000); Vice Chairman and Director of A.G.
Edwards, Inc. (until March 1999); Vice Chairman of A.G. Edwards & Sons, Inc. (until March 1999);
Chairman of A.G. Edwards Trust Company (until March 1999) and A.G.E. Asset Management (investment
adviser) (until March 1999). Oversees 38 portfolios in the OppenheimerFunds complex.
GEORGE C. BOWEN, Assistant Secretary and Director of Centennial Asset Management Corporation (December 1991-April
Trustee (since 1999) 1999); President, Treasurer and Director of Centennial Capital Corporation (June 1989-April 1999);
Age: 69 Chief Executive Officer and Director of MultiSource Services, Inc. (March 1996-April 1999); Mr.
Bowen held several positions with the Manager and with subsidiary or affiliated companies of the
Manager (September 1987-April 1999). Oversees 38 portfolios in the OppenheimerFunds complex.
EDWARD L. CAMERON, Member of The Life Guard of Mount Vernon (George Washington historical site) (since June 2000);
Trustee (since 1999) Director of Genetic ID, Inc. (biotech company) (March 2001-May 2002); Partner at
Age: 67 PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price Waterhouse
LLP Global Investment Management Industry Services Group (July 1994-June 1998). Oversees 38
portfolios in the OppenheimerFunds complex.
JON S. FOSSEL, Director of UNUMProvident (insurance company) (since June 2002); Director of Northwestern Energy
Trustee (since 1990) Corp. (public utility corporation) (since November 2004); Director of P.R. Pharmaceuticals (October
Age: 64 1999-October 2003); Director of Rocky Mountain Elk Foundation (non-profit organization) (February
1998-February 2003); Chairman and Director (until October 1996) and President and Chief Executive
Officer (until October 1995) of the Manager; President, Chief Executive Officer and Director of the
following: Oppenheimer Acquisition Corp. ("OAC") (parent holding company of the Manager),
Shareholders Services, Inc. and Shareholder Financial Services, Inc. (until October 1995). Oversees
38 portfolios in the OppenheimerFunds complex.
SAM FREEDMAN, Director of Colorado Uplift (charitable organization) (since September 1984). Mr. Freedman held
Trustee (since 1996) several positions with the Manager and with subsidiary or affiliated companies of the Manager (until
Age: 65 October 1994). Oversees 38 portfolios in the OppenheimerFunds complex.
25 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
BEVERLY L. HAMILTON, Trustee of Monterey Institute for International Studies (educational organization) (since February
Trustee (since 2002) 2000); Director of The California Endowment (philanthropic organization) (since April 2002); Director
Age: 59 of Community Hospital of Monterey Peninsula (since February 2002); Vice Chair of American Funds'
Emerging Markets Growth Fund, Inc. (mutual fund) (since October 1991); President of ARCO Investment
Management Company (February 1991-April 2000); Member of the investment committees of The
Rockefeller Foundation and The University of Michigan; Advisor at Credit Suisse First Boston's
Sprout venture capital unit (venture capital fund) (1994-January 2005); Trustee of MassMutual
Institutional Funds (investment company) (1996-June 2004); Trustee of MML Series Investment Fund
(investment company) (April 1989-June 2004); Member of the investment committee of Hartford
Hospital (2000-2003); and Advisor to Unilever (Holland) pension fund (2000- 2003). Oversees 38
portfolios in the OppenheimerFunds complex.
ROBERT J. MALONE, Director of Jones International University (educational organization) (since August 2005); Chairman,
Trustee (since 2002) Chief Executive Officer and Director of Steele Street State Bank (commercial banking) (since August
Age: 61 2003); Director of Colorado UpLIFT (charitable organization) (since 1986); Trustee of the Gallagher
Family Foundation (non-profit organization) (since 2000); Former Chairman of U.S. Bank-Colorado
(subsidiary of U.S. Bancorp and formerly Colorado National Bank) (July 1996-April 1999); Director
of Commercial Assets, Inc. (real estate investment trust) (1993-2000); Director of Jones Knowledge,
Inc. (2001-July 2004); and Director of U.S. Exploration, Inc. (oil and gas exploration)
(1997-February 2004). Oversees 38 portfolios in the OppenheimerFunds complex.
F. WILLIAM MARSHALL, JR., Trustee of MassMutual Select Funds (formerly MassMutual Institutional Funds) (investment company)
Trustee (since 2000) (since 1996) and MML Series Investment Fund (investment company) (since 1996), Trustee and Chairman
Age: 63 of the Investment Committee (since 1994) of the Worcester Polytech Institute (private university);
President and Treasurer of the SIS Funds (private charitable fund) (since January 1999); Chairman
of SIS & Family Bank, F.S.B. (formerly SIS Bank) (commercial bank) (January 1999-July 1999); Member
of the Investment Committee of the Community Foundation of Western Massachusetts (1998-2003); and
Executive Vice President of Peoples Heritage Financial Group, Inc. (commercial bank) (January
1999-July 1999). Oversees 40 portfolios in the OppenheimerFunds complex.
- ----------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH FLOOR, NEW YORK,
AND OFFICER NEW YORK 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN INDEFINITE TERM, OR UNTIL HIS
RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN OFFICER FOR AN INDEFINITE TERM, OR UNTIL HIS
RESIGNATION, RETIREMENT, DEATH OR REMOVAL. MR. MURPHY IS AN INTERESTED TRUSTEE DUE TO HIS POSITIONS
WITH OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES.
JOHN V. MURPHY, Chairman, Chief Executive Officer and Director (since June 2001) and President (since September 2000)
President and Trustee (since of the Manager; President and Director or Trustee of other Oppenheimer funds; President and Director
2001) Age: 56 of OAC and of Oppenheimer Partnership Holdings, Inc. (holding company subsidiary of the Manager)
(since July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of the Manager)
(since November 2001); Chairman and Director of Shareholder Services, Inc. and of Shareholder
Financial Services, Inc. (transfer agent subsidiaries of the Manager) (since July 2001); President
and Director of OppenheimerFunds Legacy Program (charitable trust program established by the
Manager) (since July 2001); Director of the following investment advisory subsidiaries of the
Manager: OFI Institutional Asset Management, Inc., Centennial Asset Management Corporation, Trinity
Investment Management Corporation and Tremont Capital Management, Inc. (since November 2001),
HarbourView Asset Management Corporation and OFI Private Investments, Inc. (since July 2001);
President (since November 2001) and Director (since July 2001) of Oppenheimer Real Asset
Management, Inc.; Executive Vice President of Massachusetts Mutual Life Insurance Company (OAC's
parent company) (since February 1997); Director of DLB Acquisition Corporation (holding company
parent of Babson Capital Management LLC) (since June 1995); Member of the Investment Company
Institute's Board of Governors (since October 3, 2003); Chief Operating Officer of the Manager
(September 2000-June 2001); President and Trustee of MML Series Investment Fund and MassMutual
Select Funds (open-end investment companies) (November 1999-November 2001); Director of C.M. Life
Insurance Company (September 1999-August 2000); President, Chief Executive Officer and Director of
MML Bay State Life Insurance Company (September 1999-August 2000); Director of Emerald Isle Bancorp
and Hibernia Savings Bank (wholly-owned subsidiary of Emerald Isle Bancorp) (June 1989-June 1998).
Oversees 87 portfolios in the OppenheimerFunds complex.
26 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA
- ----------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS OF THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. BAYLIN, WILBY AND ZACK,
THE FUND TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, NEW YORK, NEW YORK 10281-1008, FOR MESSRS. VANDEHEY
AND WIXTED, 6803 S. TUCSON WAY, CENTENNIAL, COLORADO 80112-3924. EACH OFFICER SERVES FOR AN
INDEFINITE TERM OR UNTIL HIS OR HER RESIGNATION, RETIREMENT DEATH OR REMOVAL.
MARC L. BAYLIN, Vice President of the Manager and a member of the Growth Equity Investment Team. He was Managing
Vice President and Portfolio Director and Lead Portfolio Manager at JP Morgan Fleming Investment Management from June 2002 to
Manager (since 2005) August 2005 and was a Vice President of T. Rowe Price, where he was an analyst from June 1993 and
Age: 37 a portfolio manager from March 1999 to June 2002. A portfolio manager of other Oppenheimer funds.
WILLIAM L. WILBY. Senior Vice President of the Manager since July 1994 and Senior Investment Officer and Director of
Vice President and Portfolio Equities of the Manager since July 2004. Mr. Wilby was Director of International Equities of the
Manager (since 2005) Manager from May 2000 through July 2004 and Senior Vice President of HarbourView Asset Management
Age: 61 Corporation from May 1999 through November 2001. Before joining OppenheimerFunds in 1991, Mr. Wilby
was an International Strategist at Brown Brothers Harriman & Co., a Managing Director and Portfolio
Manager at AIG Global Investors, an International Pension Manager at Northern Trust Bank in Chicago
and an International Financial Economist at Northern Trust Bank and at the Federal Reserve Bank in
Chicago. A portfolio manager of other Oppenheimer funds.
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Vice President
Vice President and Chief of OppenheimerFunds Distributor, Inc., Centennial Asset Management Corporation and Shareholder
Compliance Officer Services, Inc. (since June 1983); Vice President and Director of Internal Audit of the Manager
(since 2004) (1997-February 2004). An officer of 87 portfolios in the OppenheimerFunds complex.
Age: 55
BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer of the following:
Treasurer and Principal HarbourView Asset Management Corporation, Shareholder Financial Services, Inc., Shareholder Services,
Financial and Accounting Inc., Oppenheimer Real Asset Management Corporation, and Oppenheimer Partnership Holdings, Inc.
Officer (since 1999) (since March 1999), OFI Private Investments, Inc. (since March 2000), OppenheimerFunds International
Age: 46 Ltd. and OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management, Inc. (since
November 2000), and OppenheimerFunds Legacy Program (since June 2003); Treasurer and Chief
Financial Officer of OFI Trust Company (trust company subsidiary of the Manager) (since May 2000);
Assistant Treasurer of the following: OAC (since March 1999), Centennial Asset Management
Corporation (March 1999-October 2003) and OppenheimerFunds Legacy Program (April 2000-June 2003);
Principal and Chief Operating Officer of Bankers Trust Company-Mutual Fund Services Division (March
1995-March 1999). An officer of 87 portfolios in the OppenheimerFunds complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March 2002) of the Manager;
Vice President and General Counsel and Director of the Distributor (since December 2001); General Counsel of Centennial
Secretary (since 2001) Asset Management Corporation (since December 2001); Senior Vice President and General Counsel of
Age: 57 HarbourView Asset Management Corporation (since December 2001); Secretary and General Counsel of
OAC (since November 2001); Assistant Secretary (since September 1997) and Director (since November
2001) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice President and Director
of Oppenheimer Partnership Holdings, Inc. (since December 2002); Director of Oppenheimer Real Asset
Management, Inc. (since November 2001); Senior Vice President, General Counsel and Director of
Shareholder Financial Services, Inc. and Shareholder Services, Inc. (since December 2001); Senior
Vice President, General Counsel and Director of OFI Private Investments, Inc. and OFI Trust Company
(since November 2001); Vice President of OppenheimerFunds Legacy Program (since June 2003); Senior
Vice President and General Counsel of OFI Institutional Asset Management, Inc. (since November
2001); Director of OppenheimerFunds (Asia) Limited (since December 2003); Senior Vice President
(May 1985-December 2003), Acting General Counsel (November 2001-February 2002) and Associate
General Counsel (May 1981-October 2001) of the Manager; Assistant Secretary of the following:
Shareholder Services, Inc. (May 1985-November 2001), Shareholder Financial Services, Inc. (November
1989-November 2001), and OppenheimerFunds International Ltd. (September 1997-November 2001). An
officer of 87 portfolios in the OppenheimerFunds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION
ABOUT THE FUND'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT CHARGE, UPON
REQUEST, BY CALLING 1.800.981.2871.
27 | OPPENHEIMER CAPITAL APPRECIATION FUND/ VA
OPPENHEIMER CORE BOND FUND/VA
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. We are pleased to report that
Oppenheimer Core Bond Fund/VA delivered a favorable, competitive yield and total
return for the 12-month period ended December 31, 2005, during which the Fund
outpaced the median of its peer group of similarly managed funds while slightly
outperforming its primary benchmark, the Citigroup Broad Investment Grade Bond
Index. 2 We attribute the Fund's positive fiscal-year results primarily to
active management of the portfolio's exposure to interest-rate risk, and
secondarily, to sector decisions and individual security selection among
corporate bonds and agency and mortgage-related securities.
Throughout the period, we generally kept the portfolio's duration, or
interest-rate sensitivity, significantly lower than that of our benchmark. Since
the year was underscored by substantial generally rising rates, this decision
proved to be the most prominent contributor to performance for the year. At the
same time, while maintaining our less-than-market exposure to interest-rate
risk, we made slight adjustments to our interest-rate positioning at various
points throughout the year so as to capitalize on interest-rate shifts and
movements in the yield curve as they occurred. As such, our flexible, active
management of the portfolio's duration, while maintaining an overall short
duration position, also substantially benefited returns.
Although our overall exposure to the mortgage sector did not support
performance as strongly as it did last year, successful security selection
within the mortgage category added to returns this year. For example, our
decision to invest in seasoned, older mortgage securities that were showing
reasonably good levels of prepayment activity helped performance, as these
mortgages managed to fare well amidst a generally struggling mortgage market.
Within the portfolio's exposure to the credit (corporate bond) sector, our
decision to underweight longer-term, BBB-rated credit securities added to
performance, since this segment of the investment grade corporate bond
market--generally considered to be among the riskiest types of credit securities
in that market--underperformed the corporate sector as a whole. Our
substantially underweighted exposure to these bonds supported the Fund's returns
for the year, as did our decision to underweight industrial bonds, which also
lagged. At the same time, the fact that we chose to overweight our exposure to
the financials sector, particularly to brokerage companies, definitively added
to returns, as this sector of the high-grade corporate market fared well amidst
positive earnings results throughout 2005.
Finally, our tactical allocation to high-yield bonds in general helped
buoy performance this year. On the negative side, security selection within the
high-yield, or "junk" allocation of the portfolio detracted from returns. Our
decision to own a few, select high-yield bonds issued by companies in the auto,
auto parts and homebuilding sectors cost us a few basis points of performance,
as some of the bonds in these sectors struggled.
Similarly, had we maintained the underweighted exposure to longer-maturity
industrial bonds that we established early in the period, we might have
preserved a few basis points of performance. Our decision to move to a neutral
exposure to these bonds later in the year hurt us when these types of corporate
bonds lagged the general market.
COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that follow show the
performance of a hypothetical $10,000 investment in each share class of the Fund
held until December 31, 2005. In the case of non-service shares, performance is
measured over a ten-year period. In the case of service shares, performance is
measured from inception of the class on May 1, 2002. Performance information
does not reflect charges that apply to separate accounts investing in the Fund.
If these charges were taken into account, performance would be lower. The graph
assumes that all dividends and capital gains distributions were reinvested in
additional shares.
Beginning April 29, 2005, the Fund changed its primary index from the
Lehman Brothers Credit Index to the Citigroup Broad Investment Grade Bond Index
because the Fund believes that the Citigroup Broad Investment Grade Bond Index
is a more appropriate benchmark reflecting the types of securities in which the
Fund invests. The Citigroup Broad Investment Grade Bond Index consists of
securities having a higher grade and a lower modified duration than the
securities in the Lehman Brothers Credit Index. The Citigroup Broad Investment
Grade Bond Index produced a total return of 2.57% for the 12 months ended
December 31, 2005.
2. The Citigroup Broad Investment Grade Bond Index consists of securities having
a higher grade and a lower modified duration than the securities in the Lehman
Brothers Credit Index. The Citigroup Broad Investment Grade Bond Index produced
a total return of 2.57% for the 12 months ended December 31, 2005.
5 | OPPENHEIMER CORE BOND FUND/VA
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
The Fund's performance is compared to the performance of its former
primary benchmark, the Lehman Brothers Credit Index, a broad-based, unmanaged
index of publicly-issued non-convertible investment grade corporate debt of U.S.
issuers, widely recognized as a measure of the U.S. fixed-rate corporate bond
market. Performance is also compared to its new primary benchmark, the Citigroup
Broad Investment Grade Bond Index, a market-capitalization weighted index that
includes fixed-rate Treasury, government-sponsored, corporate and mortgage
securities. The Fund has also added a secondary benchmark, the Lehman Brothers
Aggregate Bond Index, an unmanaged index of U.S. corporate and government bonds,
to which performance is compared. Index performance reflects the reinvestment of
income but does not consider the effect of transaction costs, and none of the
data in the graphs shows the effect of taxes. The Fund's performance reflects
the effects of the Fund's business and operating expenses. While index
comparisons may be useful to provide a benchmark for the Fund's performance, it
must be noted that the Fund's investments are not limited to the investments in
the index.
6 | OPPENHEIMER CORE BOND FUND/VA
NON-SERVICE SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Core Bond Fund/VA (Non-Service)
Lehman Brothers Credit Index
Citigroup Broad Investment Grade Bond Index
Lehman Brothers Aggregate Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Citigroup
Oppenheimer Lehman Broad
Core Bond Brothers Investment
Fund/VA Lehman Brothers Aggregate Grade
(Non-Service) Credit Index** Bond Index Bond Index
12/31/1995 10,000 10,000 10,000 10,000
03/31/1996 9,871 9,742 9,823 9,825
06/30/1996 9,967 9,785 9,879 9,874
09/30/1996 10,169 9,981 10,061 10,058
12/31/1996 10,480 10,328 10,363 10,362
03/31/1997 10,434 10,225 10,305 10,308
06/30/1997 10,782 10,646 10,684 10,680
09/30/1997 11,128 11,063 11,039 11,035
12/31/1997 11,449 11,385 11,364 11,360
03/31/1998 11,613 11,559 11,540 11,543
06/30/1998 11,901 11,857 11,810 11,810
09/30/1998 12,238 12,287 12,309 12,300
12/31/1998 12,228 12,361 12,351 12,350
03/31/1999 12,189 12,274 12,289 12,293
06/30/1999 12,022 12,082 12,181 12,179
09/30/1999 11,990 12,116 12,264 12,267
12/31/1999 12,043 12,120 12,249 12,248
03/31/2000 12,163 12,293 12,519 12,516
06/30/2000 12,277 12,444 12,737 12,728
09/30/2000 12,504 12,826 13,121 13,116
12/31/2000 12,777 13,258 13,673 13,667
03/31/2001 13,292 13,824 14,088 14,089
06/30/2001 13,464 13,971 14,168 14,161
09/30/2001 13,993 14,507 14,821 14,829
12/31/2001 13,772 14,637 14,828 14,832
03/31/2002 13,727 14,598 14,842 14,842
06/30/2002 14,098 15,020 15,390 15,364
09/30/2002 14,656 15,694 16,095 16,071
12/31/2002 15,014 16,177 16,348 16,328
03/31/2003 15,316 16,565 16,576 16,557
06/30/2003 15,793 17,360 16,991 16,982
09/30/2003 15,892 17,335 16,966 16,953
12/31/2003 16,032 17,421 17,019 17,014
03/31/2004 16,501 17,992 17,472 17,471
06/30/2004 16,133 17,376 17,045 17,045
09/30/2004 16,677 18,105 17,590 17,601
12/31/2004 16,913 18,335 17,758 17,776
03/31/2005 16,870 18,141 17,673 17,686
06/30/2005 17,319 18,789 18,204 18,239
09/30/2005 17,257 18,601 18,082 18,116
12/31/2005 17,350 18,693 18,189 18,232
AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/05
1-Year 2.59% 5-Year 6.31% 10-Year 5.66%
SERVICE SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Core Bond Fund/VA (Service)
Lehman Brothers Credit Index
Citigroup Broad Investment Grade Bond Index
Lehman Brothers Aggregate Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Citigroup
Oppenheimer Lehman Broad
Core Bond Brothers Investment
Fund/VA Lehman Brothers Aggregate Grade
(Service) Credit Index** Bond Index Bond Index
05/01/2002 10,000 10,000 10,000 10,000
06/30/2002 10,153 10,148 10,172 10,159
09/30/2002 10,554 10,604 10,638 10,627
12/31/2002 10,803 10,930 10,806 10,797
03/31/2003 11,017 11,192 10,956 10,948
06/30/2003 11,350 11,729 11,230 11,229
09/30/2003 11,411 11,712 11,214 11,210
12/31/2003 11,512 11,770 11,249 11,251
03/31/2004 11,839 12,156 11,548 11,553
06/30/2004 11,564 11,740 11,266 11,271
09/30/2004 11,955 12,232 11,626 11,638
12/31/2004 12,113 12,388 11,737 11,754
03/31/2005 12,074 12,257 11,681 11,695
06/30/2005 12,385 12,695 12,032 12,060
09/30/2005 12,341 12,567 11,951 11,979
12/31/2005 12,396 12,630 12,022 12,056
AVERAGE ANNUAL TOTAL RETURNS OF SERVICE SHARES OF THE FUND AT 12/31/05
1-Year 2.33% 5-Year N/A Since Inception (5/1/02) 6.03%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, CALL US AT 1.800.981.2871. THE FUND'S
TOTAL RETURNS SHOULD NOT BE EXPECTED TO BE THE SAME AS THE RETURNS OF OTHER
FUNDS, WHETHER OR NOT BOTH FUNDS HAVE THE SAME PORTFOLIO MANAGERS AND/OR SIMILAR
NAMES. THE FUND'S TOTAL RETURNS DO NOT INCLUDE THE CHARGES ASSOCIATED WITH THE
SEPARATE ACCOUNT PRODUCTS THAT OFFER THIS FUND. SUCH PERFORMANCE WOULD HAVE BEEN
LOWER IF SUCH CHARGES WERE TAKEN INTO ACCOUNT.
7 | OPPENHEIMER CORE BOND FUND/VA
FUND EXPENSES
- --------------------------------------------------------------------------------
FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1)
transaction costs, which may include redemption fees, if any; and (2) ongoing
costs, including management fees; distribution and service fees; and other Fund
expenses. These examples are intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning
of the period and held for the entire 6-month period ended December 31, 2005.
ACTUAL EXPENSES. The "actual" lines of the table provide information about
actual account values and actual expenses. You may use the information on this
line for the class of shares you hold, together with the amount you invested, to
estimate the expense that you paid over the period. Simply divide your account
value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00
= 8.60), then multiply the result by the number in the "actual" line under the
heading entitled "Expenses Paid During Period" to estimate the expenses you paid
on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the
table provide information about hypothetical account values and hypothetical
expenses based on the Fund's actual expense ratio, and an assumed rate of return
of 5% per year before expenses, which is not the Fund's actual return. The
hypothetical account values and expenses may not be used to estimate the actual
ending account balance or expenses you paid for the period. You may use this
information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any charges associated with the separate
accounts that offer this Fund. Therefore, the "hypothetical" lines of the table
are useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these separate
account charges were included, your costs would have been higher.
- --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
(7/1/05) (12/31/05) DECEMBER 31, 2005
- --------------------------------------------------------------------------------
Non-Service shares Actual $1,000.00 $1,001.80 $3.79
- --------------------------------------------------------------------------------
Non-Service shares Hypothetical 1,000.00 1,021.42 3.83
- --------------------------------------------------------------------------------
Service shares Actual 1,000.00 1,000.90 5.26
- --------------------------------------------------------------------------------
Service shares Hypothetical 1,000.00 1,019.96 5.31
Hypothetical assumes 5% annual return before expenses.
Expenses are equal to the Fund's annualized expense ratio for that class,
multiplied by the average account value over the period, multiplied by 184/365
(to reflect the one-half year period). Those annualized expense ratios based on
the 6-month period ended December 31, 2005 are as follows:
CLASS EXPENSE RATIOS
- ------------------------------------
Non-Service shares 0.75%
- ------------------------------------
Service shares 1.04
- -------------------------------------------------------------------------------
8 | OPPENHEIMER CORE BOND FUND/VA
STATEMENT OF INVESTMENTS December 31, 2005
- -------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--11.5%
- -------------------------------------------------------------------------------
Ace Securities Corp., Home Equity
Loan Pass-Through Certificates,
Series 2002-HE7, Cl. A2B, 4.559%,
11/25/35 1 $ 960,000 $ 960,593
- -------------------------------------------------------------------------------
Aesop Funding II LLC, Automobile
Asset-Backed Certificates, Series
2005-1A, Cl. A2, 4.43%, 4/20/08 1 640,000 640,457
- -------------------------------------------------------------------------------
Capital Auto Receivables Asset
Trust, Automobile Mtg.-Backed
Nts., Series 2004-2, Cl. A3, 3.58%,
1/15/09 2,250,000 2,208,735
- -------------------------------------------------------------------------------
Centex Home Equity Co. LLC, Home
Equity Loan Asset-Backed Certificates:
Series 2004-D, Cl. AF1, 2.98%, 4/25/20 196,979 196,425
Series 2005-B, Cl. AF1, 4.02%, 3/26/35 389,902 387,895
Series 2005-C, Cl. AF1, 4.196%,
6/25/35 1,177,416 1,171,206
Series 2005-D, Cl. AF1, 5.04%,
10/25/35 2,092,608 2,087,090
Series 2005-D, Cl. AV2, 4.649%,
10/25/35 1 1,920,000 1,921,186
- -------------------------------------------------------------------------------
Chase Manhattan Auto Owner
Trust, Automobile Loan Pass-
Through Certificates, Series 2005-A,
Cl. A2, 3.72%, 12/15/07 2,070,000 2,061,116
- -------------------------------------------------------------------------------
CIT Equipment Collateral,
Equipment Receivable-Backed
Nts., Series 2004-DFS, Cl. A2,
2.66%, 11/20/06 905,022 902,437
- -------------------------------------------------------------------------------
Citibank Credit Card Issuance Trust,
Credit Card Receivable Nts., Series
2003-C4, Cl. C4, 5%, 6/10/15 310,000 304,300
- -------------------------------------------------------------------------------
Citigroup Mortgage Loan Trust, Inc.,
CMO, Series 2005-WF2, Cl. AF2,
4.922%, 8/25/35 1 2,675,498 2,667,100
- -------------------------------------------------------------------------------
Consumer Credit Reference Index
Securities Program, Credit Card
Asset-Backed Certificates, Series
2002-B, Cl. FX, 10.421%, 3/22/07 2 1,520,000 1,518,672
- -------------------------------------------------------------------------------
Countrywide Asset-Backed
Certificates, Inc., Home Equity
Asset-Backed Certificates:
Series 2002-4, Cl. A1, 4.749%,
2/25/33 1 35,747 35,817
Series 2005-7, Cl. AF1B, 4.317%,
11/25/35 1 1,416,692 1,409,308
Series 2005-16, Cl. 2AF2, 5.382%,
5/25/36 1 670,000 670,000
Series 2005-17, Cl. 1AF1, 4.58%,
12/27/35 1 1,390,000 1,389,956
Series 2005-17, Cl. 1AF2, 5.363%,
12/27/35 1 440,000 440,108
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
- -------------------------------------------------------------------------------
DaimlerChrysler Auto Trust,
Automobile Loan Pass-Through
Certificates:
Series 2004-B, Cl. A2, 2.48%, 2/8/07 $ 16,377 $ 16,379
Series 2004-C, Cl. A2, 2.62%, 6/8/07 1,118,755 1,115,993
- -------------------------------------------------------------------------------
Equity One ABS, Inc., Home Equity
Asset-Backed Security, Series 2004-3,
Cl. AF2, 3.80%, 7/25/34 1 410,000 408,373
- -------------------------------------------------------------------------------
First Franklin Mortgage Loan
Asset-Backed Certificates, Home
Equity Receivables, Series 2005-FF10,
Cl. A3, 4.589%, 11/25/35 1 2,840,000 2,841,754
- -------------------------------------------------------------------------------
Ford Credit Auto Owner Trust,
Automobile Loan Pass-Through
Certificates:
Series 2005-A, Cl. A3, 3.48%,
11/17/08 1,630,000 1,610,414
Series 2005-B, Cl. A2, 3.78%, 9/15/07 1,398,528 1,395,617
- -------------------------------------------------------------------------------
Honda Auto Receivables Owner
Trust, Automobile Receivable
Obligations:
Series 2005-1, Cl. A2, 3.21%, 5/21/07 661,288 659,480
Series 2005-3, Cl. A2, 3.73%,
10/18/07 1,930,000 1,920,780
- -------------------------------------------------------------------------------
Household Home Equity Loan
Trust, Home Equity Loan Pass-
Through Certificates, Series 2005-3,
Cl. A1, 4.63%, 1/20/35 1 1,408,058 1,409,063
- -------------------------------------------------------------------------------
Lehman XS Trust, Home Equity
Mtg. Pass-Through Certificates:
Series 2005-4, Cl. 2A1B, 5.17%,
10/25/35 1,503,137 1,504,079
Series 2005-10, Cl. 2-A3B, 5.55%,
12/25/06 1,260,000 1,259,803
- -------------------------------------------------------------------------------
Litigation Settlement Monetized
Fee Trust, Asset-Backed Certificates,
Series 2001-1A, Cl. A1, 8.33%, 4/25/31 3 3,490,311 3,547,552
- -------------------------------------------------------------------------------
NC Finance Trust, CMO, Series
1999-I, Cl. ECFD, 1.079%, 1/25/29 3 3,370,016 775,104
- -------------------------------------------------------------------------------
Nissan Auto Lease Trust, Automobile
Lease Obligations, Series 2004-A,
Cl. A2, 2.55%, 1/15/07 148,836 148,799
- -------------------------------------------------------------------------------
Onyx Acceptance Owner Trust,
Automobile Receivable Obligations,
Series 2005-B, Cl. A2, 4.03%, 4/15/08 1,530,000 1,525,297
9 | OPPENHEIMER CORE BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- -------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
- -------------------------------------------------------------------------------
Popular ABS Mortgage Pass-Through
Trust, Home Equity Pass-Through
Certificates:
Series 2004-5, Cl. A F2, 3.735%,
11/10/34 1 $ 620,000 $ 612,579
Series 2005-1, Cl. A F2, 3.914%,
5/25/35 1 450,000 443,802
Series 2005-2, Cl. A F2, 4.415%,
4/25/35 1 730,000 722,848
Series 2005-6, Cl. A3, 5.68%, 1/25/36 1 690,000 690,000
- -------------------------------------------------------------------------------
Residential Asset Mortgage Products,
Inc., Home Equity Asset-Backed
Pass-Through Certificates, Series
2004-RS7, Cl. AI3, 4.45%, 7/25/28 1,500,000 1,492,463
- -------------------------------------------------------------------------------
Structured Asset Securities Corp.,
Home Equity Obligations, Series
2003-25XS, Cl. A4, 4.51%, 8/25/33 525,831 524,202
- -------------------------------------------------------------------------------
Tobacco Settlement Authority,
Asset-Backed Securities, Series
2001-A, 6.79%, 6/1/10 1,850,000 1,933,047
- -------------------------------------------------------------------------------
USAA Auto Owner Trust,
Automobile Loan Asset-Backed Nts.:
Series 2004-2, Cl. A2, 2.41%, 2/15/07 55,329 55,311
Series 2004-3, Cl. A2, 2.79%, 6/15/07 500,061 499,264
- -------------------------------------------------------------------------------
Volkswagen Auto Lease Trust,
Automobile Lease Asset-Backed
Securities, Series 2004-A, Cl. A2,
2.47%, 1/22/07 529,394 528,519
- -------------------------------------------------------------------------------
Wachovia Auto Owner Trust,
Automobile Receivable Nts.,
Series 2004-B, Cl. A2, 2.40%, 5/21/07 259,729 259,367
- -------------------------------------------------------------------------------
Wells Fargo Home Equity Trust,
Home Equity Asset-Backed
Certificates, Series 2004-2, Cl. AI1B,
2.94%, 9/25/18 1 1,073,354 1,065,784
- -------------------------------------------------------------------------------
Whole Auto Loan Trust, Automobile
Loan Receivable Certificates, Series
2004-1, Cl. A2A, 2.59%, 5/15/07 796,141 793,206
--------------
Total Asset- Backed Securities (Cost $53,331,919) 50,731,280
- -------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS--77.2%
- -------------------------------------------------------------------------------
GOVERNMENT AGENCY--62.7%
- -------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED--62.5%
Fannie Mae Whole Loan, CMO
Pass-Through Certificates, Trust
2004-W9, Cl.2A2, 7%, 2/25/44 853,587 894,398
- -------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.:
4.50%, 5/1/19 9,598,286 9,355,646
5%, 1/1/36 4 7,318,000 7,084,739
6%, 7/1/17-10/1/34 19,338,376 19,623,228
6.50%, 4/1/18-4/1/34 1,963,830 2,019,044
7%, 5/1/29-3/1/35 11,515,978 12,004,652
8%, 4/1/16 1,063,272 1,132,967
9%, 8/1/22-5/1/25 281,955 305,568
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal Home Loan Mortgage Corp.,
CMO Gtd. Real Estate Mtg. Investment
Conduit Multiclass Pass-Through
Certificates:
Series 2326, Cl. ZP, 6.50%, 6/15/31 $ 690,083 $ 711,000
Series 2456, Cl. BD, 6%, 3/15/30 249,232 249,745
Series 2500, Cl. FD, 4.869%, 3/15/32 1 518,687 524,395
Series 2526, Cl. FE, 4.769%, 6/15/29 1 757,376 762,833
Series 2551, Cl. FD, 4.769%, 1/15/33 1 588,334 593,826
- -------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
CMO Pass-Through Participation
Certificates, Series 151, Cl. F, 9%,
5/15/21 50,585 50,508
- -------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
Gtd. Real Estate Mtg. Investment
Conduit Multiclass Pass-Through
Certificates, Series 2195, Cl. LH,
6.50%, 10/15/29 1,936,267 1,968,182
- -------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
Interest-Only Stripped Mtg.-Backed
Security:
Series 176, Cl. IO, 13.547%, 6/1/26 5 862,295 183,548
Series 183, Cl. IO, 11.169%, 4/1/27 5 1,306,024 271,694
Series 184, Cl. IO, 16.779%, 12/1/26 5 1,426,958 282,169
Series 192, Cl. IO, 15.506%, 2/1/28 5 337,869 69,063
Series 200, Cl. IO, 14.082%, 1/1/29 5 401,100 87,197
Series 206, Cl. IO, (8.658)%, 12/1/29 5 898,542 190,628
Series 2003-118, Cl. S, 20.029%,
12/25/33 5 4,452,581 486,405
Series 2130, Cl. SC, 7.80%, 3/15/29 5 939,101 70,028
Series 2796, Cl. SD, 12.317%, 7/15/26 5 1,481,155 114,951
Series 2920, Cl. S, 14.307%, 1/15/35 5 5,657,021 273,464
Series 3000, Cl. SE, 20.785%, 7/15/25 5 5,984,358 218,706
- -------------------------------------------------------------------------------
Federal Home Loan Mortgage
Corp., Principal-Only Stripped
Mtg.-Backed Security, Series 176,
Cl. PO, 4.467%, 6/1/26 6 351,312 296,356
- -------------------------------------------------------------------------------
Federal National Mortgage Assn.:
4.50%, 3/1/19 427,430 417,013
5%, 6/1/18-7/1/18 5,567,591 5,517,766
5%, 1/1/36 4 28,720,000 27,831,461
5.50%, 3/1/33-1/1/34 17,241,161 17,120,113
5.50%, 1/1/21-1/1/36 4 93,165,000 92,483,494
6%, 7/1/17-11/1/32 19,010,848 19,379,393
6.50%, 3/1/11-11/1/31 3,498,859 3,606,370
6.50%, 1/1/36 4 20,425,000 20,954,784
7%, 11/1/17 2,325,321 2,417,771
7.50%, 1/1/08-1/1/26 49,399 51,519
8%, 5/1/17 12,783 13,636
8.50%, 7/1/32 119,264 129,141
10 | OPPENHEIMER CORE BOND FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal National Mortgage Assn.,
CMO Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates:
Trust 1989-17, Cl. E, 10.40%, 4/25/19 $ 96,174 $ 105,637
Trust 1993-87, Cl. Z, 6.50%, 6/25/23 1,933,860 1,995,888
Trust 1998-58, Cl. PC, 6.50%,
10/25/28 1,614,759 1,672,003
Trust 2001-70, Cl. LR, 6%, 9/25/30 546,873 552,117
Trust 2001-72, Cl. NH, 6%, 4/25/30 328,566 331,114
Trust 2001-74, Cl. PD, 6%, 5/25/30 131,646 131,977
Trust 2002-77, Cl. WF, 4.77%,
12/18/32 1 914,234 921,223
Trust 2003-28, Cl. KG, 5.50%,
4/25/23 3,964,000 4,050,604
Trust 2004-101, Cl. BG, 5%,
1/25/20 1,908,000 1,882,994
Trust 2005-100, Cl. BQ, 5.50%,
11/25/25 1,120,000 1,104,646
- -------------------------------------------------------------------------------
Federal National Mortgage Assn.,
CMO Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates,
Interest-Only Stripped Mtg.-Backed
Security:
Trust 2002-47, Cl. NS, 9.594%,
4/25/32 5 1,763,065 142,167
Trust 2002-51, Cl. S, 9.762%,
8/25/32 5 1,618,499 131,099
- -------------------------------------------------------------------------------
Federal National Mortgage Assn.,
Interest-Only Stripped Mtg.-Backed
Security:
Trust 222, Cl. 2, 13.902%, 6/1/23 5 2,764,925 655,930
Trust 240, Cl. 2, 15.709%, 9/1/23 5 3,274,430 681,880
Trust 252, Cl. 2, 7.505%, 11/1/23 5 2,163,710 477,796
Trust 273, Cl. 2, 14.694%, 8/1/26 5 645,636 133,261
Trust 303, Cl. IO, (5.151)%, 11/1/29 5 383,480 82,138
Trust 319, Cl. 2, 13.496%, 2/1/32 5 594,953 134,894
Trust 321, Cl. 2, 8.412%, 3/1/32 5 6,596,785 1,488,850
Trust 329, Cl. 2, 11.463%, 1/1/33 5 2,763,846 612,532
Trust 331, Cl. 9, (13.225)%, 2/1/33 5 1,566,593 355,447
Trust 333, Cl. 2, 11.720%, 3/1/33 5 6,731,416 1,508,393
Trust 334, Cl. 17, 2.277%, 2/1/33 5 1,078,978 239,090
Trust 338, Cl. 2, 10.275%, 6/1/33 5 5,492,556 1,227,440
Trust 346, Cl. 2, 10.433%, 12/1/33 5 5,543,938 1,229,327
Trust 350, Cl. 2, 12.244%, 2/1/34 5 5,883,199 1,304,704
Trust 2001-65, Cl. S, 21.164%,
11/25/31 5 2,657,880 245,981
Trust 2001-81, Cl. S, 11.605%,
1/25/32 5 687,447 59,856
Trust 2002-52, Cl. SD, 6.454%,
9/25/32 5 1,975,347 162,581
Trust 2002-77, Cl. SH, 12.545%,
12/18/32 5 835,935 78,739
Trust 2002-84, Cl. SA, 21.481%,
12/25/32 5 2,289,778 219,522
Trust 2003-4, Cl. S, 20.563%,
2/25/33 5 1,540,618 163,556
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal National Mortgage Assn.,
Interest-Only Stripped Mtg.-Backed
Security: Continued
Trust 2004-54, Cl. DS, 6.243%,
11/25/30 5 $ 1,394,541 $ 80,287
Trust 2005-6, Cl. SE, 13.927%,
2/25/35 5 3,887,194 202,238
Trust 2005-19, Cl. SA, 12.727%,
3/25/35 5 14,558,438 810,512
Trust 2005-40, Cl. SA, 13.682%,
5/25/35 5 3,310,799 176,407
Trust 2005-71, Cl. SA, 19.968%,
8/25/25 5 3,832,805 229,041
- -------------------------------------------------------------------------------
Federal National Mortgage Assn.,
Principal-Only Stripped Mtg.-Backed
Security, Trust 1993-184, Cl. M,
5.765%, 9/25/23 6 752,088 631,308
--------------
275,960,580
- -------------------------------------------------------------------------------
GNMA/GUARANTEED--0.2%
Government National Mortgage Assn.:
7%, 1/15/09-5/15/09 31,363 32,329
8.50%, 8/15/17-12/15/17 383,846 414,228
- -------------------------------------------------------------------------------
Government National Mortgage Assn.,
Interest-Only Stripped Mtg.-Backed
Security:
Series 2001-21, Cl. SB, 3.873%,
1/16/27 5 1,477,254 101,722
Series 2002-15, Cl. SM, 0.947%,
2/16/32 5 1,775,879 123,487
Series 2004-11, Cl. SM, (0.493)%,
1/17/30 5 1,252,161 52,809
--------------
724,575
- -------------------------------------------------------------------------------
NON-AGENCY--14.5%
- -------------------------------------------------------------------------------
COMMERCIAL--12.2%
Asset Securitization Corp., Commercial
Mtg. Pass-Through Certificates, Series
1996-MD6, Cl. A3, 7.408%, 11/13/29 1 1,200,000 1,245,687
- -------------------------------------------------------------------------------
Asset Securitization Corp., Interest-
Only Stripped Mtg.-Backed Security
Collateralized Mtg. Obligations,
Series 1997-D4, Cl. PS1, 4.501%,
4/14/29 5 40,459,738 1,158,666
- -------------------------------------------------------------------------------
Banc of America Commercial
Mortgage, Inc., Commercial Mtg.
Pass-Through Certificates:
Series 2004-6, Cl. A3, 4.512%,
12/10/42 1,720,000 1,666,468
Series 2005-2, Cl. A4, 4.783%,
7/10/43 1 2,550,000 2,503,629
Series 2005-3, Cl. A2, 4.501%,
7/10/43 2,100,000 2,050,396
11 | OPPENHEIMER CORE BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- -------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------
COMMERCIAL Continued
Banc of America Funding Corp.,
CMO Pass-Through Certificates,
Series 2004-2, Cl. 2A1, 6.50%,
7/20/32 $ 2,187,555 $ 2,189,929
- -------------------------------------------------------------------------------
Banc of America Mortgage Securities,
Inc., CMO Pass-Through Certificates:
Series 2004-8, Cl. 5A1, 6.50%,
5/25/32 1,643,675 1,669,358
Series 2004-E, Cl. 2A9, 3.712%,
6/25/34 1 45,685 45,670
Series 2005-E, Cl. 2A2, 4.983%,
6/25/35 1 458,430 456,349
- -------------------------------------------------------------------------------
Bear Stearns Commercial Mortgage
Securities, Inc., Commercial Mtg.
Obligations, Series 2005-PWR7,
Cl. A2, 4.945%, 2/11/41 860,000 850,543
- -------------------------------------------------------------------------------
Capital Lease Funding Securitization
LP, Interest-Only Corporate-Backed
Pass-Through Certificates, Series
1997-CTL1, 7.304%, 6/22/24 5 20,351,718 791,232
- -------------------------------------------------------------------------------
Citigroup/Deutsche Bank Commercial
Mortgage Trust, Commercial Mtg.
Obligations, Series 2005-CD1, Cl. A4,
5.225%, 7/15/44 7 2,260,000 2,284,968
- -------------------------------------------------------------------------------
Countrywide Alternative Loan
Trust, CMO:
Series 2004-J9, Cl. 1A1, 4.559%,
10/25/34 1 553,925 554,354
Series 2005-J3, Cl. 3A1, 6.50%,
9/25/34 3,316,795 3,358,718
- -------------------------------------------------------------------------------
First Chicago/Lennar Trust 1,
Commercial Mtg. Pass-Through
Certificates, Series 1997-CHL1,
Cl. D, 7.674%, 4/29/39 1,2 1,480,000 1,487,400
- -------------------------------------------------------------------------------
First Union National Bank/Lehman
Brothers/Bank of America Commercial
Mtg. Trust, Pass-Through Certificates,
Series 1998-C2, Cl. A2, 6.56%,
11/18/35 1,367,557 1,406,397
- -------------------------------------------------------------------------------
GE Capital Commercial Mortgage
Corp., Commercial Mtg. Obligations:
Series 2005-CA, Cl. A3, 4.578%,
6/10/48 730,000 710,551
Series 2005-C3, Cl. A2, 4.853%,
7/10/45 1,190,000 1,182,110
- -------------------------------------------------------------------------------
GMAC Commercial Mortgage
Securities, Inc., Commercial Mtg.
Pass-Through Certificates:
Series 1997-C1, Cl. A3, 6.869%,
7/15/29 843,466 862,676
Series 2004-C3, Cl. A4, 4.547%,
12/10/41 1,110,000 1,075,143
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------
COMMERCIAL Continued
Greenwich Capital Commercial
Funding Corp., Commercial Mtg.
Pass-Through Certificates:
Series 2005-G G3, Cl. A2, 4.305%,
8/10/42 $ 1,460,000 $ 1,422,596
Series 2005-G G5, Cl. A2, 5.117%,
4/10/37 7 1,290,000 1,293,938
- -------------------------------------------------------------------------------
GS Mortgage Securities Corp. II,
Commercial Mtg. Pass-Through
Certificates, Series 2004-C1, Cl. A1,
3.659%, 10/10/28 1,257,259 1,218,442
- -------------------------------------------------------------------------------
JPMorgan Chase Commercial
Mortgage Securities Corp.,
Commercial Mtg. Pass-Through
Certificates, Series 2005-LDP2,
Cl. A2, 4.575%, 7/15/42 510,000 499,909
- -------------------------------------------------------------------------------
LB-UBS Commercial Mortgage Trust,
Commercial Mtg. Pass-Through
Certificates, Series 2005-C5, Cl. A2,
4.885%, 9/15/30 1,430,000 1,420,635
- -------------------------------------------------------------------------------
Lehman Brothers Commercial
onduit Mortgage Trust, Interest-
Only Stripped Mtg.-Backed Security,
Series 1998-C1, Cl. IO, 5.665%,
2/18/30 5 16,854,496 435,867
- -------------------------------------------------------------------------------
Lehman Structured Securities Corp.,
CMO, Series 2002-GE1, Cl. A,
2.514%, 7/26/24 3 339,520 274,427
- -------------------------------------------------------------------------------
Mastr Alternative Loan Trust,
CMO Pass-Through Certificates:
Series 2004-6, Cl. 10A1, 6%, 7/25/34 2,443,554 2,456,958
Series 2004-9, Cl. A3, 4.70%, 8/25/34 1 2,885,183 2,872,025
- -------------------------------------------------------------------------------
Mastr Seasoned Securities Trust,
Mtg. Pass-Through Certificates,
Series 2004-2, Cl. A1, 6.50%, 8/25/32 3,678,870 3,714,509
- -------------------------------------------------------------------------------
Nomura Asset Securities Corp.,
Commercial Mtg. Pass-Through
Certificates, Series 1998-D6,
Cl. A1B, 6.59%, 3/15/30 7 1,680,000 1,737,372
- -------------------------------------------------------------------------------
Residential Accredit Loans, Inc.,
Mtg. Asset-Backed Pass-Through
Certificates, Series 2003-QS1,
Cl. A2, 5.75%, 1/25/33 1,309,331 1,311,856
- -------------------------------------------------------------------------------
Salomon Brothers Mortgage
ecurities VII, Inc., Interest-Only
Commercial Mtg. Pass-Through
Certificates, Series 1999-C1,
Cl. X, (2.668)%, 5/18/32 5 334,608,272 961,129
- -------------------------------------------------------------------------------
Wachovia Bank Commercial
Mortgage Trust, Commercial
Mtg. Obligations:
Series 2005-C17, Cl. A2, 4.782%,
3/15/42 2,520,000 2,492,202
Series 2005-C20, Cl. A5, 5.087%,
7/15/42 1 1,440,000 1,430,556
12 | OPPENHEIMER CORE BOND FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------
COMMERCIAL Continued
Washington Mutual Mortgage
Securities Corp., CMO Pass-Through
Certificates, Series 2005-AR5, Cl. A1,
4.681%, 5/25/35 1 $ 1,967,219 $ 1,965,806
- -------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed
Securities Trust, CMO, Series
2004-DD, Cl. 2A1, 4.522%, 1/25/35 1 962,332 959,389
--------------
54,017,860
- -------------------------------------------------------------------------------
OTHER--0.9%
JPMorgan Chase Commercial
Mortgage Securities Corp., Commercial
Mtg. Pass-Through Certificates, Series
2005-LDP4, Cl. A2, 4.79%, 10/15/42 1,720,000 1,698,107
- -------------------------------------------------------------------------------
Salomon Brothers Mortgage
Securities VI, Inc., Interest-Only
Stripped Mtg.-Backed Security,
Series 1987-3, Cl. B, 50.122%, 10/23/17 5 17,847 4,411
- -------------------------------------------------------------------------------
Salomon Brothers Mortgage
Securities VI, Inc., Principal-Only
Stripped Mtg.-Backed Security,
Series1987-3, Cl. A, 7.65%, 10/23/17 6 26,413 23,567
- -------------------------------------------------------------------------------
Washington Mutual Mortgage
Securities Corp., CMO Pass-Through
Certificates, Series 2005-AR8,
Cl. 2AB1, 4.629%, 7/25/45 1 2,258,633 2,258,280
--------------
3,984,365
- -------------------------------------------------------------------------------
RESIDENTIAL--1.4%
Countrywide Alternative Loan
Trust, CMO, Series 2005-J1, Cl. 3A1,
6.50%, 8/25/32 7 3,685,969 3,751,627
- -------------------------------------------------------------------------------
Structured Asset Securities Corp.,
CMO Pass-Through Certificates,
Series 2002-AL1, Cl. B2, 3.45%,
2/25/32 2,747,746 2,401,856
--------------
6,153,483
--------------
Total Mortgage-Backed Obligations
(Cost $343,148,390) 340,840,863
- -------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--7.2%
- -------------------------------------------------------------------------------
Federal Home Loan Mortgage
Corp. Unsec. Nts.:
4.125%, 7/12/10 9,283,000 9,061,554
6.625%, 9/15/09 4,775,000 5,077,320
- -------------------------------------------------------------------------------
Federal National Mortgage Assn.
Unsec. Nts.:
6%, 5/15/11 1,815,000 1,921,811
6.625%, 9/15/09 8 2,260,000 2,405,121
7.25%, 5/15/30 7 1,665,000 2,210,675
- -------------------------------------------------------------------------------
Tennessee Valley Authority Bonds:
4.65%, 6/15/35 3,555,000 3,374,150
Series A, 6.79%, 5/23/12 5,659,000 6,270,840
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS Continued
- -------------------------------------------------------------------------------
U.S. Treasury Bonds, 5.375%,
2/15/31 7 $ 141,000 $ 158,427
- -------------------------------------------------------------------------------
U.S. Treasury Nts.:
4.25%, 11/30/07 369,000 368,034
4.375%, 11/15/08-12/15/10 906,000 906,660
--------------
Total U.S. Government Obligations
(Cost $32,434,147) 31,754,592
- -------------------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS--0.5%
- -------------------------------------------------------------------------------
United Mexican States Nts., 7.50%,
1/14/12 (Cost $2,085,151) 2,070,000 2,313,225
- -------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES--34.3%
- -------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--10.0%
- -------------------------------------------------------------------------------
AUTO COMPONENTS--0.8%
Dana Corp., 6.50% Unsec. Nts.,
3/1/09 7 1,515,000 1,219,575
- -------------------------------------------------------------------------------
Lear Corp., 8.11% Sr. Unsec. Nts.,
Series B, 5/15/09 2,265,000 2,109,549
--------------
3,329,124
- -------------------------------------------------------------------------------
AUTOMOBILES--2.2%
DaimlerChrysler NA Holdings
Corp., 8% Nts., 6/15/10 1,940,000 2,123,654
- -------------------------------------------------------------------------------
Ford Motor Credit Co.:
5.80% Sr. Unsec. Nts., 1/12/09 2,670,000 2,330,691
7.375% Nts., 10/28/09 485,000 430,483
- -------------------------------------------------------------------------------
General Motors Acceptance Corp.:
6.15% Nts., 4/5/07 3,449,000 3,258,698
8% Bonds, 11/1/31 7 1,640,000 1,575,087
--------------
9,718,613
- -------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--1.4%
Harrah's Operating Co., Inc., 5.625%
Sr. Unsec. Bonds, 6/1/15 1,180,000 1,161,347
- -------------------------------------------------------------------------------
Hilton Hotels Corp., 8.25% Sr.
Unsec. Nts., 2/15/11 1,010,000 1,108,026
- -------------------------------------------------------------------------------
Starwood Hotels & Resorts
Worldwide, Inc., 7.375% Nts., 5/1/07 1,580,000 1,619,500
- -------------------------------------------------------------------------------
Yum! Brands, Inc., 8.50% Sr. Unsec.
Nts., 4/15/06 7 2,465,000 2,489,256
--------------
6,378,129
- -------------------------------------------------------------------------------
HOUSEHOLD DURABLES--1.3%
Beazer Homes USA, Inc., 6.875% Sr.
Unsec. Nts., 7/15/15 7 1,150,000 1,108,313
- -------------------------------------------------------------------------------
D.R. Horton, Inc., 6.125% Nts.,
1/15/14 1,035,000 1,036,847
- -------------------------------------------------------------------------------
K. Hovnanian Enterprises, Inc.,
6.50% Sr. Nts., 1/15/14 1,155,000 1,110,332
13 | OPPENHEIMER CORE BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- -------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------
HOUSEHOLD DURABLES Continued
KB Home, 5.75% Sr. Unsec. Unsub.
Nts., 2/1/14 $ 1,445,000 $ 1,369,672
- -------------------------------------------------------------------------------
Lennar Corp., 5.95% Sr. Unsec.
Nts., 3/1/13 7 1,130,000 1,138,986
--------------
5,764,150
- -------------------------------------------------------------------------------
MEDIA--2.8%
British Sky Broadcasting Group plc,
7.30% Unsec. Nts., 10/15/06 404,000 410,614
- -------------------------------------------------------------------------------
Chancellor Media CCU, 8% Sr.
Unsec. Nts., 11/1/08 2,145,000 2,281,896
- -------------------------------------------------------------------------------
Cox Communications, Inc., 4.625%
Unsec. Nts., 1/15/10 7 2,375,000 2,301,204
- -------------------------------------------------------------------------------
Liberty Media Corp., 5.70% Sr.
Unsec. Nts., 5/15/13 7 1,200,000 1,124,113
- -------------------------------------------------------------------------------
TCI Communications, Inc., 9.80%
Sr. Unsec. Debs., 2/1/12 2,210,000 2,669,282
- -------------------------------------------------------------------------------
Time Warner Entertainment Co. LP:
8.375% Sr. Nts., 7/15/33 535,000 633,850
10.15% Sr. Nts., 5/1/12 1,073,000 1,307,986
- -------------------------------------------------------------------------------
Univision Communications, Inc.,
3.50% Sr. Unsec. Nts., 10/15/07 1,860,000 1,805,097
--------------
12,534,042
- -------------------------------------------------------------------------------
MULTILINE RETAIL--1.1%
Federated Department Stores, Inc.,
6.625% Sr. Unsec. Nts., 9/1/08 1,455,000 1,508,819
- -------------------------------------------------------------------------------
J.C. Penney Co., Inc. (Holding Co.),
7.40% Nts., 4/1/37 2,060,000 2,311,761
- -------------------------------------------------------------------------------
May Department Stores Co., 7.90%
Unsec. Debs., 10/15/07 785,000 817,642
--------------
4,638,222
- -------------------------------------------------------------------------------
SPECIALTY RETAIL--0.4%
Gap, Inc. (The):
6.90% Nts., 9/15/07 1,315,000 1,344,202
9.55% Unsub. Nts., 12/15/08 1 466,000 518,199
--------------
1,862,401
- -------------------------------------------------------------------------------
CONSUMER STAPLES--3.1%
- -------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--1.7%
Albertson's, Inc., 8% Sr. Unsec. Debs.,
5/1/31 7 1,360,000 1,341,614
- -------------------------------------------------------------------------------
Delhaize America, Inc., 9% Unsub.
Debs., 4/15/31 1,500,000 1,770,927
- -------------------------------------------------------------------------------
Kroger Co. (The), 6.80% Sr. Unsec.
Nts., 4/1/11 2,520,000 2,645,771
- -------------------------------------------------------------------------------
Safeway, Inc., 7.50% Sr. Unsec. Nts.,
9/15/09 1,555,000 1,662,189
--------------
7,420,501
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------
FOOD PRODUCTS--1.4%
Archer Daniels Midland Co.,
5.375% Nts., 9/15/35 $ 1,175,000 $ 1,131,104
- -------------------------------------------------------------------------------
ConAgra Foods, Inc., 6% Nts.,
9/15/06 7 1,320,000 1,329,367
- -------------------------------------------------------------------------------
General Mills, Inc., 3.875% Nts.,
11/30/07 1,715,000 1,682,151
- -------------------------------------------------------------------------------
Kraft Foods, Inc., 5.25% Nts., 6/1/07 1,865,000 1,873,200
--------------
6,015,822
- -------------------------------------------------------------------------------
ENERGY--1.8%
- -------------------------------------------------------------------------------
OIL & GAS--1.8%
Kinder Morgan, Inc., 6.50% Sr.
Unsec. Nts., 9/1/12 1,265,000 1,341,932
- -------------------------------------------------------------------------------
Pemex Project Funding Master
Trust, 5.75% Unsec. Unsub. Nts.,
Series 12, 12/15/15 2,7 1,865,000 1,858,006
- -------------------------------------------------------------------------------
Petroleum Export Ltd. Cayman
SPV, 4.623% Sr. Nts., Cl. A1, 6/15/10 2 3,525,000 3,493,744
- -------------------------------------------------------------------------------
PF Export Receivables Master
Trust, 3.748% Sr. Nts., Series B, 6/1/13 2 1,371,222 1,302,928
--------------
7,996,610
- -------------------------------------------------------------------------------
FINANCIALS--9.6%
- -------------------------------------------------------------------------------
CAPITAL MARKETS--1.0%
Credit Suisse First Boston, Inc.
(USA), 5.50% Nts., 8/15/13 2,385,000 2,436,683
- -------------------------------------------------------------------------------
JPMorgan Chase Sub. Capital XV,
5.875% Nts., Series O, 3/15/35 7 1,695,000 1,691,069
--------------
4,127,752
- -------------------------------------------------------------------------------
COMMERCIAL BANKS--1.5%
Barclays Bank plc, 6.278%
Perpetual Bonds 9 1,860,000 1,872,815
- -------------------------------------------------------------------------------
HSBC Finance Corp., 4.75% Sr.
Unsec. Nts., 7/15/13 2,335,000 2,259,551
- -------------------------------------------------------------------------------
National City Bank, 6.20% Sub.
Nts., 12/15/11 178,000 188,577
- -------------------------------------------------------------------------------
Popular North America, Inc.,
5.20% Nts., 12/12/07 2,225,000 2,223,859
- -------------------------------------------------------------------------------
Socgen Real Estate LLC, 7.64%
Bonds 1,2,9 90,000 93,678
--------------
6,638,480
- -------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--2.5%
CIT Group, Inc.:
4.75% Sr. Nts., 8/15/08 310,000 309,007
7.75% Sr. Unsec. Unsub. Nts., 4/2/12 930,000 1,056,066
- -------------------------------------------------------------------------------
Citigroup, Inc., 6.625% Unsec. Sub.
Nts., 6/15/32 890,000 1,009,018
- -------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The),
5.70% Sr. Unsec. Nts., 9/1/12 3,190,000 3,286,003
14 | OPPENHEIMER CORE BOND FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES Continued
MBNA Corp., 7.50% Sr. Nts., Series F,
3/15/12 $ 1,745,000 $ 1,967,915
- -------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., 5% Sr.
Unsub. Nts., Series C, 2/3/14 2,325,000 2,299,825
- -------------------------------------------------------------------------------
Morgan Stanley, 6.60% Nts., 4/1/12 1,130,000 1,216,159
--------------
11,143,993
- -------------------------------------------------------------------------------
INSURANCE--2.4%
Allstate Financial Global Funding II,
4.25% Nts., 9/10/08 2 520,000 511,429
- -------------------------------------------------------------------------------
Marsh & McLennan Cos., Inc.,
5.875% Sr. Unsec. Bonds, 8/1/33 1,470,000 1,411,854
- -------------------------------------------------------------------------------
MetLife, Inc., 5.70% Sr. Unsec. Nts.,
6/15/35 7 1,170,000 1,178,520
- -------------------------------------------------------------------------------
Nationwide Financial Services, Inc.:
5.90% Nts., 7/1/12 990,000 1,033,527
6.25% Sr. Unsec. Nts., 11/15/11 105,000 110,649
- -------------------------------------------------------------------------------
Prudential Holdings LLC, 8.695%
Bonds, Series C, 12/18/23 2 1,885,000 2,395,070
- -------------------------------------------------------------------------------
Prudential Insurance Co. of
America, 8.30% Nts., 7/1/25 1,885,000 2,446,378
- -------------------------------------------------------------------------------
Travelers Property Casualty Corp.,
3.75% Sr. Unsec. Nts., 3/15/08 1,700,000 1,658,891
--------------
10,746,318
- -------------------------------------------------------------------------------
REAL ESTATE--1.9%
EOP Operating LP, 8.10% Unsec.
Nts., 8/1/10 1,700,000 1,879,421
- -------------------------------------------------------------------------------
iStar Financial, Inc.:
5.125% Sr. Unsec. Nts., Series B, 4/1/11 7 725,000 707,232
5.15% Sr. Unsec. Nts., 3/1/12 845,000 819,405
- -------------------------------------------------------------------------------
Liberty Property Trust, 5.65% Sr.
Nts., 8/15/14 1,185,000 1,202,160
- -------------------------------------------------------------------------------
Simon Property Group LP, 5.375%
Nts., 6/1/11 2 1,680,000 1,685,892
- -------------------------------------------------------------------------------
Vornado Realty LP, 5.625% Sr.
Unsec. Unsub. Nts., 6/15/07 2,225,000 2,241,334
--------------
8,535,444
- -------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE--0.3%
Countrywide Financial Corp., 4.50%
Nts., Series A, 6/15/10 1,265,000 1,229,130
- -------------------------------------------------------------------------------
HEALTH CARE--0.9%
- -------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--0.9%
Aetna, Inc., 7.375% Sr. Unsec. Nts.,
3/1/06 2,730,000 2,740,925
- -------------------------------------------------------------------------------
HCA, Inc., 7.125% Sr. Unsec. Nts.,
6/1/06 1,095,000 1,109,454
--------------
3,850,379
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------
INDUSTRIALS--1.6%
- -------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS--0.5%
FedEx Corp., 2.65% Unsec. Nts.,
4/1/07 $ 2,390,000 $ 2,325,489
- -------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--0.3%
Allied Waste North America, Inc.,
8.875% Sr. Nts., Series B, 4/1/08 7 1,070,000 1,134,200
- -------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--0.8%
Tyco International Group SA:
6.125% Unsec. Unsub. Nts., 11/1/08 1,875,000 1,915,183
6.125% Unsec. Unsub. Nts., 1/15/09 253,000 258,754
6.375% Sr. Unsec. Unsub. Nts.,
2/15/06 1,445,000 1,447,400
--------------
3,621,337
- -------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--2.5%
- -------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--2.1%
British Telecommunications plc,
8.875% Bonds, 12/15/30 1,015,000 1,362,026
- -------------------------------------------------------------------------------
Deutsche Telekom International
Finance BV, 8% Unsub. Nts., 6/15/10 1 1,405,000 1,594,440
- -------------------------------------------------------------------------------
France Telecom SA, 8.50% Sr. Unsec.
Nts., 3/1/31 1 350,000 468,411
- -------------------------------------------------------------------------------
SBC Communications, Inc., 5.30%
Nts., 11/15/10 1,680,000 1,686,878
- -------------------------------------------------------------------------------
Sprint Capital Corp., 8.75% Nts.,
3/15/32 1,455,000 1,936,749
- -------------------------------------------------------------------------------
Verizon Global Funding Corp.:
5.85% Nts., 9/15/35 1,155,000 1,116,873
7.25% Sr. Unsec. Unsub. Nts., 12/1/10 1,010,000 1,097,116
--------------
9,262,493
- -------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--0.4%
AT&T Wireless Services, Inc.,
8.125% Sr. Unsec. Nts., 5/1/12 1,545,000 1,787,387
- -------------------------------------------------------------------------------
UTILITIES--4.8%
- -------------------------------------------------------------------------------
ELECTRIC UTILITIES--3.2%
CenterPoint Energy, Inc., 7.25%
Sr. Nts., Series B, 9/1/10 7 1,250,000 1,342,251
- -------------------------------------------------------------------------------
Dominion Resources, Inc., 8.125%
Sr. Unsub. Nts., 6/15/10 1,650,000 1,835,663
- -------------------------------------------------------------------------------
DTE Energy Co., 6.45% Sr. Unsub.
Nts., 6/1/06 725,000 729,718
- -------------------------------------------------------------------------------
FirstEnergy Corp.:
5.50% Sr. Unsub. Nts., Series A,
11/15/06 995,000 998,784
7.375% Sr. Unsub. Nts., Series C,
11/15/31 1,160,000 1,373,070
- -------------------------------------------------------------------------------
IPALCO Enterprises, Inc., 8.375%
Sr. Sec. Nts., 11/14/08 1 1,180,000 1,241,950
- -------------------------------------------------------------------------------
MidAmerican Energy Holdings Co.,
5.875% Sr. Unsec. Nts., 10/1/12 1,955,000 2,021,065
15 | OPPENHEIMER CORE BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- -------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------
ELECTRIC UTILITIES Continued
Portland General Electric Co.,
8.125% First Mortgage Nts., 2/1/10 2 $ 1,040,000 $ 1,148,887
- -------------------------------------------------------------------------------
PSE&G Energy Holdings LLC,
7.75% Unsec. Nts., 4/16/07 1,575,000 1,638,000
- -------------------------------------------------------------------------------
PSE&G Power LLC, 6.875% Sr. Unsec.
Nts., 4/15/06 355,000 356,863
- -------------------------------------------------------------------------------
TXU Energy Co., 6.125% Nts.,
3/15/08 1,430,000 1,454,240
--------------
14,140,491
- -------------------------------------------------------------------------------
ENERGY TRADERS--0.4%
Constellation Energy Group, Inc.,
7.60% Unsec. Nts., 4/1/32 1,485,000 1,792,111
- -------------------------------------------------------------------------------
GAS UTILITIES--0.8%
NiSource Finance Corp., 7.875%
Sr. Unsec. Nts., 11/15/10 1,590,000 1,763,466
- -------------------------------------------------------------------------------
Sempra Energy, 7.95% Sr. Unsec.
Unsub. Nts., 3/1/10 1,645,000 1,808,595
--------------
3,572,061
- -------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER--0.4%
PSEG Funding Trust I, 5.381%
Nts., 11/16/07 1,835,000 1,838,608
--------------
Total Corporate Bonds and Notes
(Cost $151,735,498) 151,403,287
UNITS
- -------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- -------------------------------------------------------------------------------
Pathmark Stores, Inc. Wts.,
Exp. 9/19/10 10 (Cost $14,872) 5,408 1,514
- -------------------------------------------------------------------------------
Total Investments, at Value
(excluding Investments Purchased
with Cash Collateral from Securities
Loaned) (Cost $582,749,977) 577,044,761
PRINCIPAL
AMOUNT
- -------------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM
SECURITIES LOANED--5.2%
- -------------------------------------------------------------------------------
ASSET-BACKED FLOATING NOTE--0.5%
Trust Money Market Securities,
Series A-2, 4.44%, 1/17/06 11 $ 1,000,000 1,000,000
- -------------------------------------------------------------------------------
Whitehawk CDO Funding Corp.,
4.56%, 3/15/06 11 1,500,000 1,500,000
--------------
2,500,000
- -------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--4.1%
Undivided interest of 0.58% in joint repurchase agreement
(Principal Amount/Value $3,150,000,000, with a maturity
value of $3,151,501,500) with Nomura Securities, 4.29%,
dated 12/30/05, to be repurchased at $18,181,696 on
1/3/06, collateralized by U.S. Agency Mortgages,
3.34%--9.50%, 6/1/08--5/1/38, with
a value of $3,213,000,000 11 18,173,034 18,173,034
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------
MASTER FLOATING NOTE--0.6%
Bear Stearns, 4.37%, 1/3/06 11 $ 2,500,000 $ 2,500,000
--------------
Total Investments Purchased with
Cash Collateral from Securities
Loaned (Cost $23,173,034) 23,173,034
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $605,923,011) 135.9% 600,217,795
- -------------------------------------------------------------------------------
LIABILITIES IN EXCESS
OF OTHER ASSETS (35.9) (158,465,926)
-------------------------------
NET ASSETS 100.0% $ 441,751,869
===============================
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Represents the current interest rate for a variable or increasing rate
security.
2. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $15,495,706 or 3.51% of the Fund's net
assets as of December 31, 2005.
3. Illiquid security. The aggregate value of illiquid securities as of December
31, 2005 was $4,597,083, which represents 1.04% of the Fund's net assets. See
Note 7 of Notes to Financial Statements.
4. When-issued security or forward commitment to be delivered and settled after
December 31, 2005. See Note 1 of Notes to Financial Statements.
5. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline. Most other fixed income securities
increase in price when interest rates decline. The principal amount of the
underlying pool represents the notional amount on which current interest is
calculated. The price of these securities is typically more sensitive to changes
in prepayment rates than traditional mortgage-backed securities (for example,
GNMA pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future cash
flows. These securities amount to $18,710,844 or 4.24% of the Fund's net assets
as of December 31, 2005.
6. Principal-Only Strips represent the right to receive the monthly principal
payments on an underlying pool of mortgage loans. The value of these securities
generally increases as interest rates decline and prepayment rates rise. The
price of these securities is typically more volatile than that of coupon-bearing
bonds of the same maturity. Interest rates disclosed represent current yields
based upon the current cost basis and estimated timing of future cash flows.
These securities amount to $951,231 or 0.22% of the Fund's net assets as of
December 31, 2005.
7. Partial or fully-loaned security. See Note 8 of Notes to Financial
Statements.
8. All or a portion of the security is held in collateralized accounts to cover
initial margin requirements on open futures sales contracts. The aggregate
market value of such securities is $2,128,426. See Note 5 of Notes to Financial
Statements.
9. This bond has no contractual maturity date, is not redeemable and
contractually pays an indefinite stream of interest.
10. Non-income producing security.
11. The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned. See Note 8 of Notes to Financial
Statements.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
16 | OPPENHEIMER CORE BOND FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------------------------------------------
Investments, at value (including securities loaned of $25,149,060) (cost $605,923,011)
- --see accompanying statement of investments $ 600,217,795
- --------------------------------------------------------------------------------------------------------------------
Cash 722,988
- --------------------------------------------------------------------------------------------------------------------
Unrealized appreciation on swap contracts 25,959
- ---------------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold (including $14,452,259 sold on a when-issued basis or forward commitment) 16,007,959
Interest and principal paydowns 4,155,247
Shares of beneficial interest sold 1,282,173
Futures margins 25,370
Other 14,005
--------------
Total assets 622,451,496
- --------------------------------------------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------------------------------------------
Return of collateral for securities loaned 23,173,034
- --------------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased (including $155,052,777 purchased on a when-issued basis or forward commitment) 157,117,831
Shares of beneficial interest redeemed 277,131
Shareholder communications 51,132
Trustees' compensation 17,194
Distribution and service plan fees 6,366
Transfer and shareholder servicing agent fees 1,791
Other 55,148
--------------
Total liabilities 180,699,627
- ---------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 441,751,869
==============
- ---------------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 39,481
- ---------------------------------------------------------------------------------------------------------------------
Additional paid-in capital 458,186,060
- ---------------------------------------------------------------------------------------------------------------------
Accumulated net investment income 22,323,507
- ---------------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions (33,516,342)
- ---------------------------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments (5,280,837)
--------------
NET ASSETS $ 441,751,869
==============
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- ---------------------------------------------------------------------------------------------------------------------
Non-Service Shares:
Net asset value, redemption price per share and offering price per share (based
on net assets of $430,642,290
and 38,484,529 shares of beneficial interest outstanding) $ 11.19
- ---------------------------------------------------------------------------------------------------------------------
Service Shares:
Net asset value, redemption price per share and offering price per share (based
on net assets of $11,109,579
and 996,606 shares of beneficial interest outstanding) $ 11.15
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
17 | OPPENHEIMER CORE BOND FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 31, 2005
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- ---------------------------------------------------------------------------------------------------------------------
Interest $ 22,341,809
- ---------------------------------------------------------------------------------------------------------------------
Fee income 2,591,172
- ---------------------------------------------------------------------------------------------------------------------
Portfolio lending fees 68,983
--------------
Total investment income 25,001,964
- ---------------------------------------------------------------------------------------------------------------------
EXPENSES
- ---------------------------------------------------------------------------------------------------------------------
Management fees 3,446,635
- ---------------------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Service shares 17,979
- ---------------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service shares 10,405
Service shares 1,793
- ---------------------------------------------------------------------------------------------------------------------
Shareholder communications:
Non-Service shares 38,482
Service shares 602
- ---------------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 33,730
- ---------------------------------------------------------------------------------------------------------------------
Trustees' compensation 14,012
- ---------------------------------------------------------------------------------------------------------------------
Administration service fees 1,500
- ---------------------------------------------------------------------------------------------------------------------
Other 44,448
--------------
Total expenses 3,609,586
Less reduction to custodian expenses (10,329)
--------------
Net expenses 3,599,257
- ---------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 21,402,707
- ---------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- ---------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments (4,340,405)
Closing and expiration of futures contracts 4,102,914
Foreign currency transactions (996)
Swap contracts (242,059)
--------------
Net realized loss (480,546)
- ---------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments (8,719,957)
Futures contracts (315,772)
Swap contracts 43,620
--------------
Net change in unrealized depreciation (8,992,109)
- ---------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 11,930,052
==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
18 | OPPENHEIMER CORE BOND FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDER DECEMBER 31, 2005 2004
- ---------------------------------------------------------------------------------------------------------------------
OPERATIONS
- ---------------------------------------------------------------------------------------------------------------------
Net investment income $ 21,402,707 $ 21,186,973
- ---------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) (480,546) 15,136,520
- ---------------------------------------------------------------------------------------------------------------------
Net change in unrealized appeciation (depreciation) (8,992,109) (7,471,728)
-------------------------------
Net increase in net assets resulting from operations 11,930,052 28,851,765
- ---------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Non-Service shares (24,996,468) (27,226,980)
Service shares (231,902) (159,134)
- ---------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from beneficial interest transactions:
Non-Service shares (60,382,816) (115,482,453)
Service shares 7,684,268 (303,187)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------
Total decrease (65,996,866) (114,319,989)
- ---------------------------------------------------------------------------------------------------------------------
Beginning of period 507,748,735 622,068,724
-------------------------------
End of period (including accumulated net investment income
of $22,323,507 and $24,100,215, respectively) $ 441,751,869 $ 507,748,735
===============================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19 | OPPENHEIMER CORE BOND FUND/VA
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 2001
- --------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.50 $ 11.42 $ 11.31 $ 11.21 $ 11.25
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .51 1 .43 1 .51 .65 .81
Net realized and unrealized gain (loss) (.23) .18 .23 .27 .03
Payment from affiliate -- -- -- .01 --
---------------------------------------------------------------------
Total from investment operations .28 .61 .74 .93 .84
- --------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.59) (.53) (.63) (.83) (.88)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.19 $ 11.50 $ 11.42 $ 11.31 $ 11.21
=====================================================================
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN:
- --------------------------------------------------------------------------------------------------------------------------
Total return at net asset value 2 2.59% 5.49% 6.78% 9.02% 7.79%
Total return before payment from affiliate 3 N/A N/A N/A 8.93% N/A
- --------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 430,642 $ 504,244 $ 618,234 $ 724,787 $ 693,701
- --------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 466,033 $ 552,293 $ 691,931 $ 686,932 $ 638,820
- --------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income before payment from affiliate 4.56% 3.82% 4.03% 5.91% 3 7.93%
Net investment income after payment from affiliate N/A N/A N/A 6.07% N/A
Total expenses 0.76% 5 0.75% 5 0.73% 5 0.73% 5 0.77% 5
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 111% 6 95% 6 101% 157% 186%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Total returns are not annualized for
periods less than one full year. Total return information does not reflect
expenses that apply at the separate account level or to related insurance
products. Inclusion of these charges would reduce the total return figures for
all periods shown. Returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
3. The Manager voluntarily reimbursed the Class $1,107,704 from an error in the
calculation of the Fund's net asset value per share.
4. Annualized for periods of less than one full year.
5. Reduction to custodian expenses less than 0.01%.
6. The portfolio turnover rate excludes purchases and sales of To Be Announced
(TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
- -----------------------------------------------------------------------------------------
Year Ended December 31, 2005 $ 2,420,041,493 $ 2,423,498,913
Year Ended December 31, 2004 2,841,348,053 2,925,500,296
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20 | OPPENHEIMER CORE BOND FUND/VA
SERVICE SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 1
- ------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.47 $ 11.39 $ 11.30 $ 10.46
- ------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .47 2 .40 2 .43 .11
Net realized and unrealized gain (loss) (.22) .18 .28 .72
Payment from affiliate -- -- -- .01
-------------------------------------------------------------------
Total from investment operations .25 .58 .71 .84
- ------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.57) (.50) (.62) --
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.15 $ 11.47 $ 11.39 $ 11.30
===================================================================
- ------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN:
- ------------------------------------------------------------------------------------------------------------------------
Total return at net asset value 3 2.33% 5.22% 6.56% 8.03%
Total return before payment from affiliate 4 N/A N/A N/A 7.94%
- ------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 11,110 $ 3,505 $ 3,835 $ 2,435
- ------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 7,213 $ 3,002 $ 3,903 $ 834
- ------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 5
Net investment income before payment from affiliate 4.29% 3.55% 3.73% 4.37% 4
Net investment income after payment from affiliate N/A N/A N/A 5.04%
Total expenses 1.03% 6 0.99% 6 0.98% 6 0.98% 6,7
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 111% 8 95% 8 101% 157%
1. For the period from May 1, 2002 (inception of offering) to December 31, 2002.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Total returns are not annualized for
periods less than one full year. Total return information does not reflect
expenses that apply at the separate account level or to related insurance
products. Inclusion of these charges would reduce the total return figures for
all periods shown. Returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
4. The Manager voluntarily reimbursed the Class $3,723 from an error in the
calculation of the Fund's net asset value per share.
5. Annualized for periods of less than one full year.
6. Reduction to custodian expenses less than 0.01%.
7. Voluntary waiver of transfer agent fees less than 0.01%.
8. The portfolio turnover rate excludes purchases and sales of To Be Announced
(TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
- -----------------------------------------------------------------------------------------
Year Ended December 31, 2005 $ 2,420,041,493 $ 2,423,498,913
Year Ended December 31, 2004 2,841,348,053 2,925,500,296
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
21 | OPPENHEIMER CORE BOND FUND/VA
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Core Bond Fund/VA (the Fund), formerly Oppenheimer Bond Fund/VA, is
a separate series of Oppenheimer Variable Account Funds, an open-end management
investment company registered under the Investment Company Act of 1940, as
amended. The Fund's main investment objective is to seek a high level of current
income. As a secondary objective, the Fund seeks capital appreciation when
consistent with its primary objective. The Fund's investment advisor is
OppenheimerFunds, Inc. (the Manager).
The Fund offers two classes of shares. Both classes are sold at their
offering price, which is the net asset value per share, to separate investment
accounts of participating insurance companies as an underlying investment for
variable life insurance policies, variable annuity contracts or other investment
products. The class of shares designated as Service shares is subject to a
distribution and service plan. Both classes of shares have identical rights and
voting privileges with respect to the Fund in general and exclusive voting
rights on matters that affect that class alone. Earnings, net assets and net
asset value per share may differ due to each class having its own expenses, such
as transfer and shareholder servicing agent fees and shareholder communications,
directly attributable to that class.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for business. Securities may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. Securities listed or traded on National
Stock Exchanges or other domestic exchanges are valued based on the last sale
price of the security traded on that exchange prior to the time when the Fund's
assets are valued. Securities traded on NASDAQ are valued based on the closing
price provided by NASDAQ prior to the time when the Fund's assets are valued. In
the absence of a sale, the security is valued at the last sale price on the
prior trading day, if it is within the spread of the closing "bid" and "asked"
prices, and if not, at the closing bid price. Securities traded on foreign
exchanges are valued based on the last sale price on the principal exchange on
which the security is traded, in the country that is identified by the portfolio
pricing service, prior to the time when the Fund's assets are valued. In the
absence of a sale, the security is valued at the official closing price on the
principal exchange. Corporate, government and municipal debt instruments having
a remaining maturity in excess of sixty days and all mortgage-backed securities
will be valued at the mean between the "bid" and "asked" prices. Futures
contracts traded on a commodities or futures exchange will be valued at the
final settlement price or official closing price on the principal exchange as
reported by such principal exchange at its trading session ending at, or most
recently prior to, the time when the Fund's assets are valued. Securities
(including restricted securities) for which market quotations are not readily
available are valued at their fair value. Foreign and domestic securities whose
values have been materially affected by what the Manager identifies as a
significant event occurring before the Fund's assets are valued but after the
close of their respective exchanges will be fair valued. Fair value is
determined in good faith using consistently applied procedures under the
supervision of the Board of Trustees. Short-term "money market type" debt
securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).
- --------------------------------------------------------------------------------
SECURITIES ON A WHEN-ISSUED BASIS OR FORWARD COMMITMENT. Delivery and payment
for securities that have been purchased by the Fund on a when-issued basis or
forward commitment can take place up to ten days or more after the trade date.
Normally the settlement date occurs within six months after the trade date;
however, the Fund may, from time to time, purchase securities whose settlement
date extends six months or more beyond trade date. During this period, such
securities do not earn interest, are subject to market fluctuation and may
increase or decrease in value prior to their delivery. The Fund maintains
internally designated assets with a market value equal to or greater than the
amount of its purchase commitments. The purchase of securities on a when-issued
basis or forward commitment may increase the volatility of the Fund's net asset
value to the extent the Fund executes such transactions while remaining
substantially fully invested. The Fund may also sell securities that it
purchased on a when-issued basis or forward commitment prior to settlement of
the original purchase. As of December 31, 2005, the Fund had purchased
22 | OPPENHEIMER CORE BOND FUND/VA
$155,052,777 of securities issued on a when-issued basis or forward commitment
and sold $14,452,259 of securities issued on a when-issued basis or forward
commitment.
In connection with its ability to purchase or sell securities on a
when-issued basis, the Fund may enter into forward roll transactions with
respect to mortgage-related securities. Forward roll transactions require the
sale of securities for delivery in the current month, and a simultaneous
agreement with the same counterparty to repurchase similar (same type, coupon
and maturity) but not identical securities on a specified future date. The Fund
records the incremental difference between the forward purchase and sale of each
forward roll as realized gain (loss) on investments or as fee income in the case
of such transactions that have an associated fee in lieu of a difference in the
forward purchase and sale price.
Risks of entering into forward roll transactions include the potential
inability of the counterparty to meet the terms of the agreement; the potential
of the Fund to receive inferior securities at redelivery as compared to the
securities sold to the counterparty; counterparty credit risk; and the potential
pay down speed variance between the mortgage-related pools.
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated funds
advised by the Manager, may transfer uninvested cash balances into joint
trading accounts on a daily basis. These balances are invested in one or more
repurchase agreements. Securities pledged as collateral for repurchase
agreements are held by a custodian bank until the agreements mature. Each
agreement requires that the market value of the collateral be sufficient to
cover payments of interest and principal. In the event of default by the other
party to the agreement, retention of the collateral may be subject to legal
proceedings.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders.
The tax components of capital shown in the table below represent distribution
requirements the Fund must satisfy under the income tax regulations, losses the
Fund may be able to offset against income and gains realized in future years
and unrealized appreciation or depreciation of securities and other investments
for federal income tax purposes.
NET UNREALIZED
DEPRECIATION
BASED ON COST OF
SECURITIES AND
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED OTHER INVESTMENTS
NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME
INCOME GAIN CARRYFORWARD 1,2,3,4,5,6 TAX PURPOSES
-------------------------------------------------------------------------------
$22,361,485 $-- $33,004,426 $5,816,915
1. As of December 31, 2005, the Fund had $29,942,849 of net capital loss
carryforwards available to offset future realized capital gains, if any, and
thereby reduce future taxable gain distributions. As of December 31, 2005,
details of the capital loss carryforwards were as follows:
23 | OPPENHEIMER CORE BOND FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
EXPIRING
-------------------------
2010 $29,885,554
2013 57,295
-----------
Total $29,942,849
===========
2. As of December 31, 2005, the Fund had $3,056,554 of post-October losses
available to offset future realized capital gains, if any. Such losses, if
unutilized, will expire in 2014.
3. The Fund had $996 of post-October foreign currency losses which were
deferred.
4. The Fund had $4,027 of straddle losses which were deferred.
5. During the fiscal year ended December 31, 2005, the Fund did not utilize any
capital loss carryforward.
6. During the fiscal year ended December 31, 2004, the Fund utilized $9,566,561
of capital loss carryforward to offset capital gains realized in that fiscal
year.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Fund. Accordingly, the
following amounts have been reclassified for December 31, 2005. Net assets of
the Fund were unaffected by the reclassifications.
INCREASE TO
INCREASE TO ACCUMULATED NET
ACCUMULATED NET REALIZED LOSS
INVESTMENT INCOME ON INVESTMENTS
--------------------------------------------
$2,048,955 $2,048,955
The tax character of distributions paid during the years ended December 31, 2005
and December 31, 2004 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2005 DECEMBER 31, 2004
---------------------------------------------------------------------
Distributions paid from:
Ordinary income $ 25,228,370 $ 27,386,114
The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for
federal income tax purposes as of December 31, 2005 are noted below. The primary
difference between book and tax appreciation or depreciation of securities and
other investments, if applicable, is attributable to the tax deferral of losses
or tax realization of financial statement unrealized gain or loss.
Federal tax cost of securities $ 605,993,704
Federal tax cost of other investments (139,714,992)
---------------
Total federal tax cost $ 466,278,712
===============
Gross unrealized appreciation $ 4,688,316
Gross unrealized depreciation (10,505,231)
---------------
Net unrealized depreciation $ (5,816,915)
===============
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred
compensation plan for independent trustees that enables trustees to elect to
defer receipt of all or a portion of the annual compensation they are entitled
to receive from the Fund. For purposes of determining the amount owed to the
Trustee under the plan, deferred amounts are treated as though equal dollar
amounts had been invested in shares of the Fund or in other Oppenheimer funds
selected by the Trustee. The Fund purchases shares of the funds selected for
deferral by the Trustee in amounts equal to his or her deemed investment,
resulting in a Fund asset equal to the deferred compensation liability. Such
assets are included as a component of "Other" within the asset section of the
Statement of Assets
24 | OPPENHEIMER CORE BOND FUND/VA
and Liabilities. Deferral of trustees' fees under the plan will not affect the
net assets of the Fund, and will not materially affect the Fund's assets,
liabilities or net investment income per share. Amounts will be deferred until
distributed in accordance to the Plan.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date. Income and capital gain distributions, if
any, are declared and paid annually.
- --------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and amortization
of premium, is accrued as earned.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. Custodian Fees and Expenses in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts to the extent they are not
offset by positive cash balances maintained by the Fund. The Reduction to
Custodian Expenses line item, if applicable, represents earnings on cash
balances maintained by the Fund during the period. Such interest expense and
other custodian fees may be paid with these earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
YEAR ENDED DECEMBER 31, 2005 YEAR ENDED DECEMBER 31, 2004
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------
NON-SERVICE SHARES
Sold 1,220,400 $ 13,663,072 1,867,203 $ 21,055,436
Dividends and/or distributions reinvested 2,291,152 24,996,468 2,424,486 27,226,980
Redeemed (8,857,827) (99,042,356) (14,578,269) (163,764,869)
------------------------------------------------------------------
Net decrease (5,346,275) $ (60,382,816) (10,286,580) $ (115,482,453)
==================================================================
- ----------------------------------------------------------------------------------------------------------------
SERVICE SHARES
Sold 767,551 $ 8,537,370 132,217 $ 1,497,198
Dividends and/or distributions reinvested 21,295 231,902 14,183 159,134
Redeemed (97,717) (1,085,004) (177,573) (1,959,519)
------------------------------------------------------------------
Net increase (decrease) 691,129 $ 7,684,268 (31,173) $ (303,187)
==================================================================
25 | OPPENHEIMER CORE BOND FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended December 31, 2005, were as
follows:
PURCHASES SALES
- --------------------------------------------------------------------------------------
Investment securities $ 419,346,642 $ 401,609,165
U.S. government and government agency obligations 74,497,382 88,193,769
To Be Announced (TBA) mortgage-related securities 2,420,041,493 2,423,498,913
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee at an
annual rate of 0.75% of the first $200 million of average annual net assets,
0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the
next $200 million, 0.60% of the next $200 million and 0.50% of average annual
net assets over $1 billion.
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the year ended December 31, 2005, the Fund paid
$11,280 to OFS for services to the Fund.
- --------------------------------------------------------------------------------
Additionally, funds offered in variable annuity separate accounts are subject to
minimum fees of $10,000 per class, for class level assets of $10 million or
more. Each class is subject to the minimum fee in the event that the per account
fee does not equal or exceed the applicable minimum fee.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN FOR SERVICE SHARES. The Fund has adopted a
Distribution and Service Plan for Service shares to pay OppenheimerFunds
Distributor, Inc. (the Distributor), for distribution related services, personal
service and account maintenance for the Fund's Service shares. Under the plan,
payments are made periodically at an annual rate of up to 0.25% of the average
annual net assets of Service shares of the Fund. The Distributor currently uses
all of those fees to compensate sponsor(s) of the insurance product that offers
Fund shares, for providing personal service and maintenance of accounts of their
variable contract owners that hold Service shares. The impact of the service
plan is to increase operating expenses of the Service shares, which results in
lower performance compared to the Fund's shares that are not subject to a
service fee. Fees incurred by the Fund under the plan are detailed in the
Statement of Operations.
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit
transfer and shareholder servicing agent fees for all classes to 0.35% of
average annual net assets per class. This undertaking may be amended or
withdrawn at any time.
- --------------------------------------------------------------------------------
5. FUTURES CONTRACTS
A futures contract is a commitment to buy or sell a specific amount of a
commodity or financial instrument at a negotiated price on a stipulated future
date. Futures contracts are traded on a commodity exchange. The Fund may buy and
sell futures contracts that relate to broadly based securities indices
(financial futures) or debt securities (interest rate futures) in order to gain
exposure to or protection from changes in market value of stocks and bonds or
interest rates. The Fund may also buy or write put or call options on these
futures contracts.
The Fund generally sells futures contracts as a hedge against increases in
interest rates and decreases in market value of portfolio securities. The Fund
may also purchase futures contracts to gain exposure to market changes as it may
be more efficient or cost effective than actually buying securities.
26 | OPPENHEIMER CORE BOND FUND/VA
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities (initial margin) in an amount equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Fund each day. The variation margin payments are equal
to the daily changes in the contract value and are recorded as unrealized gains
and losses. The Fund recognizes a realized gain or loss when the contract is
closed or has expired.
Cash held by the broker to cover initial margin requirements on open
futures contracts is noted in the Statement of Assets and Liabilities.
Securities held in collateralized accounts to cover initial margin requirements
on open futures contracts are noted in the Statement of Investments. The
Statement of Assets and Liabilities reflects a receivable and/or payable for the
daily mark to market for variation margin. Realized gains and losses are
reported in the Statement of Operations as the closing and expiration of futures
contracts. The net change in unrealized appreciation and depreciation is
reported in the Statement of Operations.
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market and that a change in the value
of the contract or option may not correlate with changes in the value of the
underlying securities.
As of December 31, 2005, the Fund had outstanding futures contracts as follows:
UNREALIZED
EXPIRATION NUMBER OF VALUATION AS OF APPRECIATION
CONTRACT DESCRIPTION DATES CONTRACTS DECEMBER 31, 2005 (DEPRECIATION)
- --------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
U.S. Long Bonds 3/22/06 372 $ 42,477,750 $ 735,655
U.S. Treasury Nts., 5 yr. 3/22/06 135 14,356,406 33,949
--------------
769,604
--------------
CONTRACTS TO SELL
Euro-Bundesobligation, 10 yr. 3/8/06 39 5,625,582 (42,124)
U.S. Treasury Nts., 2 yr. 3/31/06 701 143,836,438 (8,594)
U.S. Treasury Nts., 10 yr. 3/22/06 431 47,154,094 (319,787)
--------------
(370,505)
--------------
$ 399,099
==============
- --------------------------------------------------------------------------------
6. TOTAL RETURN SWAP CONTRACTS
The Fund may enter into a total return swap transaction to maintain a total
return on a particular investment, or portion of its portfolio, or for other
non-speculative purposes. Because the principal amount is not exchanged, it
represents neither an asset nor a liability to either counterparty, and is
referred to as notional. The unrealized gain (loss) related to the valuation of
such contracts as well as the amount due to (owed by) the Fund at termination
or settlement is combined and separately disclosed as an asset (liability) on
the Statement of Assets and Liabilities. The Fund also records any periodic
payments received from (paid to) the counterparty under such contracts as
realized gain (loss) on the Statement of Operations. Total return swaps are
subject to risks (if the counterparty fails to meet its obligations).
As of December 31, 2005, the Fund had entered into the following total return
swap agreements:
SWAP NOTIONAL TERMINATION UNREALIZED
COUNTERPARTY SWAP DESCRIPTION AMOUNT DATE APPRECIATION
- ------------------------------------------------------------------------------------------------------------------------
Received or paid monthly. If the sum of the Lehman
Brothers CMBS Index Payer Payment Amount and the
Floating Rate Payer Payment Amount is positive, the
Counterparty will pay such amount to the Fund. If the
sums are negative, then
Goldman Sachs the Fund shall pay the absolute value of such amount to
Group, Inc. (The) the Counterparty. $9,190,000 6/1/06 $25,959
Abbreviations are as follows:
CMBS Commercial Mortgage Backed Securities
27 | OPPENHEIMER CORE BOND FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7. ILLIQUID SECURITIES
As of December 31, 2005, investments in securities included issues that are
illiquid. A security may be considered illiquid if it lacks a readily available
market or if its valuation has not changed for a certain period of time. The
Fund will not invest more than 15% of its net assets (determined at the time of
purchase and reviewed periodically) in illiquid securities. Securities that are
illiquid are marked with the applicable footnote on the Statement of
Investments.
- --------------------------------------------------------------------------------
8. SECURITIES LENDING
The Fund lends portfolio securities from time to time in order to earn
additional income. In return, the Fund receives collateral in the form of U.S.
Treasury obligations or cash, against the loaned securities and maintains
collateral in an amount not less than 100% of the market value of the loaned
securities during the period of the loan. The market value of the loaned
securities is determined at the close of business of the funds and any
additional required collateral is delivered to the Fund on the next business
day. If the borrower defaults on its obligation to return the securities loaned
because of insolvency or other reasons, the Fund could experience delays and
cost in recovering the securities loaned or in gaining access to the collateral.
Cash collateral is invested in cash equivalents. The Fund retains a portion of
the interest earned from the collateral. The Fund continues to receive the
economic benefit of interest or dividends paid on the securities loaned in the
form of a substitute payment received from the borrower. As of December 31,
2005, the Fund had on loan securities valued at $25,149,060. Collateral of
$25,551,864 was received for the loans, of which $23,173,034 was received in
cash and subsequently invested in approved instruments.
- --------------------------------------------------------------------------------
9. LITIGATION
A consolidated amended complaint has been filed as putative derivative and class
actions against the Manager, OFS and the Distributor, as well as 51 of the
Oppenheimer funds (as "Nominal Defendants") excluding the Fund, 30 present and
former Directors or Trustees and 8 present and former officers of the funds.
This complaint, initially filed in the U.S. District Court for the Southern
District of New York on January 10, 2005 and amended on March 4, 2005,
consolidates into a single action and amends six individual previously-filed
putative derivative and class action complaints. Like those prior complaints,
the complaint alleges that the Manager charged excessive fees for distribution
and other costs, improperly used assets of the funds in the form of directed
brokerage commissions and 12b-1 fees to pay brokers to promote sales of the
funds, and failed to properly disclose the use of assets of the funds to make
those payments in violation of the Investment Company Act of 1940 and the
Investment Advisers Act of 1940. Also, like those prior complaints, the
complaint further alleges that by permitting and/or participating in those
actions, the Directors/Trustees and the Officers breached their fiduciary duties
to shareholders of the funds under the Investment Company Act of 1940 and at
common law. The complaint seeks unspecified compensatory and punitive damages,
rescission of the funds' investment advisory agreements, an accounting of all
fees paid, and an award of attorneys' fees and litigation expenses.
The defendants believe that the allegations contained in the Complaints
are without merit and that they have meritorious defenses against the claims
asserted. The defendants intend to defend these lawsuits vigorously and to
contest any claimed liability. The defendants believe that it is premature to
render any opinion as to the likelihood of an outcome unfavorable to them and
that no estimate can yet be made with any degree of certainty as to the amount
or range of any potential loss.
28 | OPPENHEIMER CORE BOND FUND/VA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER CORE BOND FUND/VA:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer Core Bond Fund/VA, formerly Oppenheimer Bond Fund/VA, a series of
Oppenheimer Variable Account Funds, including the statement of investments, as
of December 31, 2005, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the periods presented. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
The Fund is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audit includes consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of December 31, 2005, by correspondence with the
custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer Core Bond Fund/VA as of December 31, 2005, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the periods presented, in conformity with accounting
principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
February 13, 2006
29 | OPPENHEIMER CORE BOND FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2006, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2005. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Fund to the Internal Revenue Service. Because of
the complexity of the federal regulations which may affect your individual tax
return and the many variations in state and local tax regulations, we recommend
that you consult your tax advisor for specific guidance.
30 | OPPENHEIMER CORE BOND FUND/VA
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file Form N-PX, with its complete proxy voting record for the 12 months ended
June 30th, no later than August 31st of each year. The Fund's voting record is
available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at
www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC
for the first quarter and the third quarter of each fiscal year on Form N-Q. The
Fund's Form N-Q filings are available on the SEC's website at
http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public
Reference Room in Washington D.C. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
31 | OPPENHEIMER CORE BOND FUND/VA
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew the Fund's
investment advisory agreement (the "Agreement"). The Investment Company Act of
1940, as amended, requires that the Board request and evaluate, and that the
Manager provide, such information as may be reasonably necessary to evaluate the
terms of the Agreement. The Board employs an independent consultant to prepare a
report that provides information, including comparative information, that the
Board requests for that purpose. In addition, the Board receives information
throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager, including an analysis of the
cost of providing services, (v) whether economies of scale are realized as the
Fund grows and whether fee levels reflect these economies of scale for Fund
investors and (vi) other benefits to the Manager from its relationship with the
Fund. Outlined below is a summary of the principal information considered by the
Board as well as the Board's conclusions.
NATURE, QUALITY, AND EXTENT OF SERVICES. The Board considered information
on the nature and extent of the services provided to the Fund and information
regarding the Manager's key personnel that provide such services. The Manager's
duties include providing the Fund with the services of the portfolio managers
and the Manager's investment team, who provide research, analysis and other
advisory services in regard to the Fund's investments; securities trading
services; oversight of third party service providers; monitoring compliance with
applicable Fund policies and procedures and adherence to the Fund's investment
restrictions. The Manager is responsible for providing certain administrative
services to the Fund as well. Those services include providing and supervising
all administrative and clerical personnel that are necessary in order to provide
effective corporate administration for the Fund; compiling and maintaining
records with respect to the Fund's operations; preparing and filing reports
required by the Securities and Exchange Commission; preparing periodic reports
regarding the operations of the Fund for its shareholders; preparing proxy
materials for shareholder meetings; and preparing the registration statements
required by Federal and state securities laws for the sale of the Fund's shares.
The Manager also provides the Fund with office space, facilities and equipment.
The Board also considered the quality of the services provided and the
quality of the Manager's resources that are available to the Fund. The Board
took account of the fact that the Manager has had over forty years of experience
as an investment adviser and that its assets under management rank it among the
top mutual fund managers in the United States. The Board evaluated the Manager's
administrative, accounting, legal and compliance services, and information the
Board has received regarding the experience and professional qualifications of
the Manager's key personnel and the size and functions of its staff providing
investment management services to the Fund. The Board also considered compliance
reports from the Fund's Chief Compliance Officer. In its evaluation of the
quality of the portfolio management services provided, the Board considered the
experience of the Fund's portfolio managers and the Manager's fixed-income
investment team and analysts. The Fund has been managed by a portfolio
management team comprised of Angelo Manioudakis, Benjamin Gord, Charles Moon,
Geoffrey Caan and Antulio N. Bomfim. Messrs. Manioudakis, Gord and Moon have
been portfolio managers of the Fund since April 2002 and Messrs Caan and Bomfim
have been portfolio managers of the Fund since 2003. Messrs. Manioudakis, Gord,
Caan, Moon and Bomfim have each had between 11 and 15 years of experience
managing fixed-income investments. The Board members also considered the
totality of their experiences with the Manager, as directors or trustees of the
Fund and other funds
32 | OPPENHEIMER CORE BOND FUND/VA
advised by the Manager. In light of the foregoing, the Board concluded that the
Fund benefits from the services provided under the Agreement as a result of the
Manager's experience, reputation, personnel, operations, and resources.
INVESTMENT PERFORMANCE OF THE MANAGER AND THE FUND. During the year, the
Manager provided information on the performance of the Fund and the Manager at
each Board meeting, including comparative performance information. The Board
also reviewed information, prepared by the Manager and by the independent
consultant, comparing the Fund's historical performance to relevant market
indices and to the performance of other A-rated corporate debt funds (including
both funds advised by the Manager and funds advised by other investment
advisers). The Board noted that the Fund's one-year, three-year, five-year and
ten-year performance were all better than its peer group median.
COSTS OF SERVICES AND PROFITS REALIZED BY THE MANAGER. The Board
considered information regarding the Manager's costs in serving as the Fund's
investment adviser, including the costs associated with the personnel and
systems necessary to manage the Fund, and information regarding the Manager's
profitability from its relationship with the Fund. The Board reviewed the fees
paid to the Manager and the other expenses borne by the Fund. The Board also
evaluated the comparability of the fees charged and the services provided to the
Fund to the fees and services for other clients or accounts advised by the
Manager. The independent consultant provided comparative data in regard to the
fees and expenses of the Fund, other A-rated corporate debt and BBB-rated
corporate debt funds and other funds with comparable asset levels and
distribution features. The Board noted that the Fund's contractual and actual
management fees are higher than its peer group average and median and that its
total expenses are equal to its peer group median but higher than its peer group
average. The Board concluded that, given the Fund's strong performance, the
management fee was reasonable.
ECONOMIES OF SCALE. The Board considered whether the Manager may realize
economies of scale in managing and supporting the Fund, whether those economies
of scale benefit the Fund's shareholders and the current level of Fund assets in
relation to the Fund's management fee breakpoints, which are intended to share
with shareholders economies of scale that may exist as the Fund grows.
OTHER BENEFITS TO THE MANAGER. In addition to considering the profits
realized by the Manager, the Board considered information that was provided
regarding the direct and indirect benefits the Manager receives as a result of
its relationship with the Fund, including compensation paid to the Manager's
affiliates. The Board also considered the nature and quality of services
provided by affiliates of the Manager, which it reviews at other times during
the year in connection with the renewal of the Fund's service agreements. The
Board considered that the Manager must be able to pay and retain experienced
professional personnel at competitive rates to provide services to the Fund and
that maintaining the financial viability of the Manager is important in order
for the Manager to continue to provide significant services to the Fund and its
shareholders.
CONCLUSIONS. These factors were also considered by the independent
Trustees meeting separately from the full Board, assisted by experienced counsel
to the Fund and to the independent Trustees. Fund counsel and the independent
Trustees' counsel are both independent of the Manager within the meaning and
intent of the Securities and Exchange Commission Rules.
Based on its review of the information it received and its evaluations
described above, the Board, including a majority of the independent Trustees,
decided to continue the advisory agreement for another year. In arriving at this
decision, the Board did not single out any factor or factors as being more
important than others, but considered all of the factors together. The Board
judged the terms and conditions of the advisory agreement, including the
management fee, in light of all of the surrounding circumstances.
33 | OPPENHEIMER CORE BOND FUND/VA
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
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NAME, POSITION(S) HELD WITH THE PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS
FUNDS, LENGTH OF SERVICE, AGE HELD; NUMBER OF PORTFOLIOS IN THE FUNDS COMPLEX CURRENTLY OVERSEEN
INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL,
TRUSTEES COLORADO 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER
RESIGNATION, RETIREMENT, DEATH OR REMOVAL.
WILLIAM L. ARMSTRONG, Chairman of the following private mortgage banking companies: Cherry Creek Mortgage
Chairman of the Board Company (since 1991), Centennial State Mortgage Company (since 1994), and The El Paso
of Trustees (since 2003); Mortgage Company (since 1993); Chairman of the following private companies:
Trustee (since 1999) Ambassador Media Corporation (since 1984) and Broadway Ventures (since 1984);
Age: 68 Director of the following: Helmerich & Payne, Inc. (oil and gas drilling/production
company) (since 1992), Campus Crusade for Christ (since 1991) and The Lynde and
Harry Bradley Foundation, Inc. (non-profit organization) (since 2002); former
Chairman of the following: Transland Financial Services, Inc. (private mortgage
banking company) (1997-2003), Great Frontier Insurance (insurance agency)
(1995-2000), Frontier Real Estate, Inc. (residential real estate brokerage)
(1994-2000) and Frontier Title (title insurance agency) (1995-2000); former Director
of the following: UNUMProvident (insurance company) (1991-2004), Storage Technology
Corporation (computer equipment company) (1991-2003) and International Family
Entertainment (television channel) (1992-1997); U.S. Senator (January 1979-January
1991). Oversees 38 portfolios in the OppenheimerFunds complex.
ROBERT G. AVIS, Director and President of A.G. Edwards Capital, Inc. (General Partner of private
Trustee (since 1993) equity funds) (until February 2001); Chairman, President and Chief Executive Officer
Age: 74 of A.G. Edwards Capital, Inc. (until March 2000); Director of A.G. Edwards & Sons,
Inc. (brokerage company) (until 2000) and A.G. Edwards Trust Company (investment
adviser) (until 2000); Vice Chairman and Director of A.G. Edwards, Inc. (until March
1999); Vice Chairman of A.G. Edwards & Sons, Inc. (until March 1999); Chairman of
A.G. Edwards Trust Company (until March 1999) and A.G.E. Asset Management (investment
adviser) (until March 1999). Oversees 38 portfolios in the OppenheimerFunds complex.
GEORGE C. BOWEN, Assistant Secretary and Director of Centennial Asset Management Corporation (December
Trustee (since 1999) 1991-April 1999); President, Treasurer and Director of Centennial Capital Corporation
Age: 69 (June 1989-April 1999); Chief Executive Officer and Director of MultiSource Services,
Inc. (March 1996-April 1999); Mr. Bowen held several positions with the Manager and
with subsidiary or affiliated companies of the Manager (September 1987-April 1999).
Oversees 38 portfolios in the OppenheimerFunds complex.
EDWARD L. CAMERON, Member of The Life Guard of Mount Vernon (George Washington historical site) (since
Trustee (since 1999) June 2000); Director of Genetic ID, Inc. (biotech company) (March 2001-May 2002);
Age: 67 Partner at PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999);
Chairman of Price Waterhouse LLP Global Investment Management Industry Services Group
(July 1994-June 1998). Oversees 38 portfolios in the OppenheimerFunds complex.
JON S. FOSSEL, Director of UNUMProvident (insurance company) (since June 2002); Director of
Trustee (since 1990) Northwestern Energy Corp. (public utility corporation) (since November 2004);
Age: 64 Director of P.R. Pharmaceuticals (October 1999-October 2003); Director of Rocky
Mountain Elk Foundation (non-profit organization) (February 1998-February 2003);
Chairman and Director (until October 1996) and President and Chief Executive Officer
(until October 1995) of the Manager; President, Chief Executive Officer and Director
of the following: Oppenheimer Acquisition Corp. ("OAC") (parent holding company of
the Manager), Shareholders Services, Inc. and Shareholder Financial Services, Inc.
(until October 1995). Oversees 38 portfolios in the OppenheimerFunds complex.
SAM FREEDMAN, Director of Colorado Uplift (charitable organization) (since September 1984). Mr.
Trustee (since 1996) Freedman held several positions with the Manager and with subsidiary or affiliated
Age: 65 companies of the Manager (until October 1994). Oversees 38 portfolios in the
OppenheimerFunds complex.
BEVERLY L. HAMILTON, Trustee of Monterey Institute for International Studies (educational organization)
Trustee (since 2002) (since February 2000); Director of The California Endowment (philanthropic
Age: 59 organization) (since April 2002); Director of Community Hospital of Monterey
Peninsula (since February 2002); Vice Chair of American Funds' Emerging Markets
Growth Fund, Inc. (mutual fund) (since October 1991); President of ARCO Investment
Management Company (February 1991-April 2000); Member of the investment committees of
The Rockefeller Foundation and The University of Michigan; Advisor at Credit Suisse
First Boston's Sprout venture capital unit (venture capital fund) (1994-January
2005); Trustee of MassMutual Institutional Funds (investment company) (1996-June
2004);
34 | OPPENHEIMER CORE BOND FUND/VA
BEVERLY L. HAMILTON, Trustee of MML Series Investment Fund (investment company) (April 1989-June 2004);
Continued Member of the investment committee of Hartford Hospital (2000-2003); and Advisor to
Unilever (Holland) pension fund (2000-2003). Oversees 38 portfolios in the
OppenheimerFunds complex.
ROBERT J. MALONE, Director of Jones International University (educational organization) (since August
Trustee (since 2002) 2005); Chairman, Chief Executive Officer and Director of Steele Street State Bank
Age: 61 (commercial banking) (since August 2003); Director of Colorado UpLIFT (charitable
organization) (since 1986); Trustee of the Gallagher Family Foundation (non-profit
organization) (since 2000); Former Chairman of U.S. Bank-Colorado (subsidiary of U.S.
Bancorp and formerly Colorado National Bank) (July 1996-April 1999); Director of
Commercial Assets, Inc. (real estate investment trust) (1993-2000); Director of
Jones Knowledge, Inc. (2001-July 2004); and Director of U.S. Exploration, Inc. (oil
and gas exploration) (1997-February 2004). Oversees 38 portfolios in the
OppenheimerFunds complex.
F. WILLIAM MARSHALL, JR., Trustee of MassMutual Select Funds (formerly MassMutual Institutional Funds)
Trustee (since 2000) (investment company) (since 1996) and MML Series Investment Fund (investment company)
Age: 63 (since 1996), Trustee and Chairman of the Investment Committee (since 1994) of the
Worcester Polytech Institute (private university); President and Treasurer of the SIS
Funds (private charitable fund) (since January 1999); Chairman of SIS & Family Bank,
F.S.B. (formerly SIS Bank) (commercial bank) (January 1999-July 1999); Member of the
Investment Committee of the Community Foundation of Western Massachusetts
(1998-2003); and Executive Vice President of Peoples Heritage Financial Group, Inc.
(commercial bank) (January 1999-July 1999). Oversees 40 portfolios in the
OppenheimerFunds complex.
- ------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH
AND OFFICER FLOOR, NEW YORK, NEW YORK 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN
INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN
OFFICER FOR AN INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR
REMOVAL. MR. MURPHY IS AN INTERESTED TRUSTEE DUE TO HIS POSITIONS WITH
OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES.
JOHN V. MURPHY, Chairman, Chief Executive Officer and Director (since June 2001) and President (since
President and Trustee September 2000) of the Manager; President and Director or Trustee of other
(since 2001) Oppenheimer funds; President and Director of OAC and of Oppenheimer Partnership
Age: 56 Holdings, Inc. (holding company subsidiary of the Manager) (since July 2001);
Director of OppenheimerFunds Distributor, Inc. (subsidiary of the Manager) (since
November 2001); Chairman and Director of Shareholder Services, Inc. and of
Shareholder Financial Services, Inc. (transfer agent subsidiaries of the Manager)
(since July 2001); President and Director of OppenheimerFunds Legacy Program
(charitable trust program established by the Manager) (since July 2001); Director of
the following investment advisory subsidiaries of the Manager: OFI Institutional
Asset Management, Inc., Centennial Asset Management Corporation, Trinity Investment
Management Corporation and Tremont Capital Management, Inc. (since November 2001),
HarbourView Asset Management Corporation and OFI Private Investments, Inc. (since
July 2001); President (since November 2001) and Director (since July 2001) of
Oppenheimer Real Asset Management, Inc.; Executive Vice President of Massachusetts
Mutual Life Insurance Company (OAC's parent company) (since February 1997); Director
of DLB Acquisition Corporation (holding company parent of Babson Capital Management
LLC) (since June 1995); Member of the Investment Company Institute's Board of
Governors (since October 3, 2003); Chief Operating Officer of the Manager (September
2000-June 2001); President and Trustee of MML Series Investment Fund and MassMutual
Select Funds (open-end investment companies) (November 1999-November 2001); Director
of C.M. Life Insurance Company (September 1999-August 2000); President, Chief
Executive Officer and Director of MML Bay State Life Insurance Company (September
1999-August 2000); Director of Emerald Isle Bancorp and Hibernia Savings Bank
(wholly-owned subsidiary of Emerald Isle Bancorp) (June 1989-June 1998). Oversees 87
portfolios in the OppenheimerFunds complex.
35 | OPPENHEIMER CORE BOND FUND/VA
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS
OF THE FUND MANIOUDAKIS AND ZACK, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, NEW YORK, NEW
YORK 10281-1008, FOR MESSRS. VANDEHEY AND WIXTED, 6803 S. TUCSON WAY, CENTENNIAL,
COLORADO 80112-3924. EACH OFFICER SERVES FOR AN INDEFINITE TERM OR UNTIL HIS OR HER
RESIGNATION, RETIREMENT DEATH OR REMOVAL.
ANGELO MANIOUDAKIS, Senior Vice President of the Manager (since April 2002), of HarbourView Asset
Vice President and Management Corporation (since April, 2002 and of OFI Institutional Asset Management,
Portfolio Manager Inc. (since June 2002); Executive Director and portfolio manager for Miller, Anderson
(since 2002) & Sherrerd, a division of Morgan Stanley Investment Management (August 1993-April
Age: 39 2002). An officer of 14 portfolios in the OppenheimerFunds complex.
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March 2004);
Vice President and Vice President of OppenheimerFunds Distributor, Inc., Centennial Asset Management
Chief Compliance Officer Corporation and Shareholder Services, Inc. (since June 1983); Vice President and
(since 2004) Director of Internal Audit of the Manager (1997-February 2004). An officer of 87
Age: 55 portfolios in the OppenheimerFunds complex.
BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer of
Treasurer and the following: HarbourView Asset Management Corporation, Shareholder Financial
Principal Financial Services, Inc., Shareholder Services, Inc., Oppenheimer Real Asset Management
and Accounting Officer Corporation, and Oppenheimer Partnership Holdings, Inc. (since March 1999), OFI
(since 1999) Private Investments, Inc. (since March 2000), OppenheimerFunds International Ltd. and
Age: 46 OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management, Inc.
(since November 2000), and OppenheimerFunds Legacy Program (since June 2003);
Treasurer and Chief Financial Officer of OFI Trust Company (trust company subsidiary
of the Manager) (since May 2000); Assistant Treasurer of the following: OAC (since
March 1999), Centennial Asset Management Corporation (March 1999-October 2003) and
OppenheimerFunds Legacy Program (April 2000-June 2003); Principal and Chief Operating
Officer of Bankers Trust Company-Mutual Fund Services Division (March 1995-March
1999). An officer of 87 portfolios in the OppenheimerFunds complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March 2002)
Vice President and Secretary of the Manager; General Counsel and Director of the Distributor (since December
(since 2001) 2001); General Counsel of Centennial Asset Management Corporation (since December
Age: 57 2001); Senior Vice President and General Counsel of HarbourView Asset Management
Corporation (since December 2001); Secretary and General Counsel of OAC (since
November 2001); Assistant Secretary (since September 1997) and Director (since
November 2001) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice
President and Director of Oppenheimer Partnership Holdings, Inc. (since December
2002); Director of Oppenheimer Real Asset Management, Inc. (since November 2001);
Senior Vice President, General Counsel and Director of Shareholder Financial
Services, Inc. and Shareholder Services, Inc. (since December 2001); Senior Vice
President, General Counsel and Director of OFI Private Investments, Inc. and OFI
Trust Company (since November 2001); Vice President of OppenheimerFunds Legacy
Program (since June 2003); Senior Vice President and General Counsel of OFI
Institutional Asset Management, Inc. (since November 2001); Director of
OppenheimerFunds (Asia) Limited (since December 2003); Senior Vice President (May
1985-December 2003), Acting General Counsel (November 2001-February 2002) and
Associate General Counsel (May 1981-October 2001) of the Manager; Assistant Secretary
of the following: Shareholder Services, Inc. (May 1985-November 2001), Shareholder
Financial Services, Inc. (November 1989-November 2001), and OppenheimerFunds
International Ltd. (September 1997-November 2001). An officer of 87 portfolios in the
OppenheimerFunds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION
ABOUT THE FUND'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT CHARGE, UPON
REQUEST, BY CALLING 1.800.981.2871.
36 | OPPENHEIMER CORE BOND FUND/VA
OPPENHEIMER GLOBAL SECURITIES FUND/VA
FUND PERFORMANCE DISCUSSION
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MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. We are pleased with the Fund's
performance during the reporting period and attribute our higher return than the
MSCI World Index to the success of our individual stock selection strategy.
It is important to bear in mind that a discussion of the stocks that added
to or detracted from performance is merely meant to illustrate our investment
approach rather than suggest any attempt to make a country, sector or thematic
bet. With that logic in mind, the Fund actually benefited from quite a few of
its holdings, mostly for company-specific reasons. Hyundai Heavy Industries, the
world's largest shipbuilder, was one of the Fund's best performing stocks. A
long-term holding for us, we bought the stock on the belief that the average
tanker age was high and the move toward double-hulled tankers would create a
demand for new ship construction. The stock was very reasonably priced due to
some concerns over the company's ownership of non-core businesses, among other
things. Those issues have now been resolved and the stock more than doubled
during the reporting period.
Another winner for the Fund was Advanced Micro Devices (AMD), whose new
dual core processor chip achieved significant traction in the server market
ahead of Intel's competitive offering. The market's skepticism of AMD's
competitive position turned to acceptance over the period helping the stock's
rise.
Otherwise, two of the Fund's energy stocks--Husky Energy, Inc. and
Transocean, Inc.--an oil reserves company and driller, respectively, helped fuel
performance due to the rising price of oil and natural gas.
On balance, a few of the Fund's stocks hindered returns during the
reporting period, including JDS Uniphase Corp., an optical components company.
We had bought this stock in previous years believing that there was a
significant opportunity for a turnaround and that the risk was reflected in its
stock price. However, the turnaround never really materialized and we have since
sold the stock. Another negative contributor was Vodafone. As one of our largest
holdings, Vodafone has yet to deliver performance in line with our expectations.
A slow market in Europe coupled with greater than expected expenditure in Japan
and a realized tax charge all contributed to lower-than-expected results. A
lengthening of the sales cycle in video conferencing technology led to earnings
disappointments at Tandberg, one of our poorest performers. We continue to
believe the technology has merit, which will allow for adoption in the coming
year. Our holdings in International Game Technology, the world's largest
manufacturer of casino gaming machines, also disappointed. The company's
earnings growth did not meet investors' expectations and consequently, its stock
price fell. However, we believe the long-term prospects remain strong, the
company is a leader in its industry and its stock is reasonably priced.
Therefore, we added modestly to the stock position.
COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that follow show the
performance of a hypothetical $10,000 investment in each share class of the Fund
held until December 31, 2005. In the case of non-service shares, performance is
measured over a ten-year period. In the case of service shares, performance is
measured from inception of the class on July 13, 2000. In the case of Class 3
shares, performance is measured from inception of the class on May 1, 2003. In
the case of Class 4 shares, performance is measured from inception of the class
on May 3, 2004. Performance information does not reflect charges that apply to
separate accounts investing in the Fund. If these charges were taken into
account, performance would be lower. The graphs assume that all dividends and
capital gains distributions were reinvested in additional shares.
The Fund's performance is compared to the performance of the Morgan
Stanley Capital International World Index, an unmanaged index of equity
securities listed on stock exchanges of 20 foreign countries and the U.S. Index
performance reflects the reinvestment of income but does not consider the effect
of transaction costs, and none of the data in the graphs show the effect of
taxes. The Fund's performance reflects the effects of the Fund's business and
operating expenses. While index comparisons may be useful to provide a benchmark
for the Fund's performance, it must be noted that the Fund's investments are not
limited to the investments in the index.
5 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
FUND PERFORMANCE DISCUSSION
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NON-SERVICE SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Global Securities Fund/VA (Non-Service)
Morgan Stanley Capital International World Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Global Morgan Stanley
Securities Fund/VA Capital International
(Non-Service) World Index
12/31/1995 10,000 10,000
03/31/1996 10,380 10,419
06/30/1996 10,827 10,733
09/30/1996 11,173 10,889
12/31/1996 11,780 11,400
03/31/1997 12,377 11,445
06/30/1997 13,679 13,181
09/30/1997 14,772 13,570
12/31/1997 14,422 13,249
03/31/1998 15,874 15,161
06/30/1998 16,180 15,483
09/30/1998 13,652 13,640
12/31/1998 16,456 16,535
03/31/1999 17,032 17,139
06/30/1999 18,726 17,972
09/30/1999 19,046 17,720
12/31/1999 26,079 20,725
03/31/2000 29,846 20,952
06/30/2000 28,870 20,224
09/30/2000 28,400 19,222
12/31/2000 27,406 18,047
03/31/2001 23,305 15,742
06/30/2001 25,110 16,178
09/30/2001 20,624 13,865
12/31/2001 24,108 15,066
03/31/2002 24,573 15,159
06/30/2002 22,377 13,770
09/30/2002 18,273 11,250
12/31/2002 18,772 12,122
03/31/2003 17,352 11,522
06/30/2003 20,970 13,510
09/30/2003 22,972 14,177
12/31/2003 26,847 16,214
03/31/2004 28,024 16,655
06/30/2004 27,742 16,829
09/30/2004 27,514 16,677
12/31/2004 31,992 18,686
03/31/2005 30,938 18,499
06/30/2005 31,891 18,611
09/30/2005 34,947 19,929
12/31/2005 36,569 20,559
AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/05
1-Year 14.31% 5-Year 5.94% 10-Year 13.84%
SERVICE SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Global Securities Fund/VA (Service)
Morgan Stanley Capital International World Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Global Morgan Stanley
Securities Fund/VA Capital International
(Service) World Index
07/13/2000 10,000 10,000
09/30/2000 9,620 9,505
12/31/2000 9,280 8,924
03/31/2001 7,889 7,784
06/30/2001 8,498 8,000
09/30/2001 6,977 6,855
12/31/2001 8,151 7,449
03/31/2002 8,308 7,496
06/30/2002 7,560 6,808
09/30/2002 6,166 5,563
12/31/2002 6,328 5,994
03/31/2003 5,842 5,697
06/30/2003 7,062 6,680
09/30/2003 7,736 7,010
12/31/2003 9,040 8,017
03/31/2004 9,431 8,235
06/30/2004 9,332 8,321
09/30/2004 9,248 8,246
12/31/2004 10,746 9,239
03/31/2005 10,387 9,147
06/30/2005 10,701 9,202
09/30/2005 11,721 9,854
12/31/2005 12,257 10,166
AVERAGE ANNUAL TOTAL RETURNS OF SERVICE SHARES OF THE FUND AT 12/31/05
1-Year 14.06% 5-Year 5.72% Since Inception (7/13/00) 3.79%
6 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
CLASS 3 SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Global Securities Fund/VA (Class 3)
Morgan Stanley Capital International World Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Global Morgan Stanley
Securities Fund/VA Capital International
(Class 3) World Index
05/01/2003 10,000 10,000
06/30/2003 11,225 10,763
09/30/2003 12,291 11,295
12/31/2003 14,353 12,918
03/31/2004 14,979 13,269
06/30/2004 14,835 13,408
09/30/2004 14,714 13,287
12/31/2004 17,108 14,888
03/31/2005 16,547 14,739
06/30/2005 17,054 14,828
09/30/2005 18,693 15,878
12/31/2005 19,561 16,380
AVERAGE ANNUAL TOTAL RETURNS OF CLASS 3 SHARES OF THE FUND AT 12/31/05
1-Year 14.34% 5-Year N/A Since Inception (5/1/03) 28.61%
CLASS 4 SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Global Securities Fund/VA (Class 4)
Morgan Stanley Capital International World Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Global Morgan Stanley
Securities Fund/VA Capital International
(Class 4) World Index
05/03/2004 10,000 10,000
06/30/2004 10,115 10,310
09/30/2004 10,024 10,216
12/31/2004 11,647 11,448
03/31/2005 11,259 11,333
06/30/2005 11,596 11,402
09/30/2005 12,702 12,209
12/31/2005 13,278 12,595
AVERAGE ANNUAL TOTAL RETURNS OF CLASS 4 SHARES OF THE FUND AT 12/31/05
1-Year 14.05% 5-Year N/A Since Inception (5/3/04) 18.61%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, CALL US AT 1.800.981.2871. THE FUND'S
TOTAL RETURNS SHOULD NOT BE EXPECTED TO BE THE SAME AS THE RETURNS OF OTHER
FUNDS, WHETHER OR NOT BOTH FUNDS HAVE THE SAME PORTFOLIO MANAGERS AND/OR SIMILAR
NAMES. THE FUND'S TOTAL RETURNS DO NOT INCLUDE THE CHARGES ASSOCIATED WITH THE
SEPARATE ACCOUNT PRODUCTS THAT OFFER THIS FUND. SUCH PERFORMANCE WOULD HAVE BEEN
LOWER IF SUCH CHARGES WERE TAKEN INTO ACCOUNT.
7 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
FUND EXPENSES
- --------------------------------------------------------------------------------
FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1)
transaction costs, which may include redemption fees, if any; and (2) ongoing
costs, including management fees; distribution and service fees; and other Fund
expenses. These examples are intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning
of the period and held for the entire 6-month period ended December 31, 2005.
ACTUAL EXPENSES. The "actual" lines of the table provide information about
actual account values and actual expenses. You may use the information on this
line for the class of shares you hold, together with the amount you invested, to
estimate the expense that you paid over the period. Simply divide your account
value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00
= 8.60), then multiply the result by the number in the "actual" line under the
heading entitled "Expenses Paid During Period" to estimate the expenses you paid
on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the
table provide information about hypothetical account values and hypothetical
expenses based on the Fund's actual expense ratio, and an assumed rate of return
of 5% per year before expenses, which is not the Fund's actual return. The
hypothetical account values and expenses may not be used to estimate the actual
ending account balance or expenses you paid for the period. You may use this
information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any charges associated with the separate
accounts that offer this Fund. Therefore, the "hypothetical" lines of the table
are useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these separate
account charges were included, your costs would have been higher.
- --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
(7/1/05) (12/31/05) DECEMBER 31, 2005
- --------------------------------------------------------------------------------
Non-Service shares Actual $1,000.00 $1,146.70 $3.58
- --------------------------------------------------------------------------------
Non-Service shares Hypothetical 1,000.00 1,021.88 3.37
- --------------------------------------------------------------------------------
Service shares Actual 1,000.00 1,145.40 4.93
- --------------------------------------------------------------------------------
Service shares Hypothetical 1,000.00 1,020.62 4.65
- --------------------------------------------------------------------------------
Class 3 shares Actual 1,000.00 1,147.00 3.63
- --------------------------------------------------------------------------------
Class 3 shares Hypothetical 1,000.00 1,021.83 3.42
- --------------------------------------------------------------------------------
Class 4 shares Actual 1,000.00 1,145.50 5.04
- --------------------------------------------------------------------------------
Class 4 shares Hypothetical 1,000.00 1,020.52 4.75
Hypothetical assumes 5% annual return before expenses.
Expenses are equal to the Fund's annualized expense ratio for that class,
multiplied by the average account value over the period, multiplied by 184/365
(to reflect the one-half year period). Those annualized expense ratios based on
the 6-month period ended December 31, 2005 are as follows:
CLASS EXPENSE RATIOS
- ----------------------------------------
Non-Service shares 0.66%
- ----------------------------------------
Service shares 0.91
- ----------------------------------------
Class 3 shares 0.67
- ----------------------------------------
Class 4 shares 0.93
- --------------------------------------------------------------------------------
8 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
STATEMENT OF INVESTMENTS December 31, 2005
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
COMMON STOCKS--97.8%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--17.9%
- --------------------------------------------------------------------------------
AUTOMOBILES--1.9%
Bayerische Motoren Werke AG 407,295 $ 17,841,187
- --------------------------------------------------------------------------------
Porsche AG, Preference 18,742 13,444,041
- --------------------------------------------------------------------------------
Toyota Motor Corp. 548,000 28,670,517
--------------
59,955,745
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--2.0%
Carnival Corp. 520,300 27,820,441
- --------------------------------------------------------------------------------
International Game Technology 622,600 19,163,628
- --------------------------------------------------------------------------------
Starbucks Corp. 1 490,600 14,722,906
--------------
61,706,975
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES--2.5%
Koninklijke (Royal) Philips
Electronics NV 1,232,900 38,315,111
- --------------------------------------------------------------------------------
Sony Corp. 950,300 38,838,733
--------------
77,153,844
- --------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL--2.0%
Amazon.com, Inc. 1 231,500 10,915,225
- --------------------------------------------------------------------------------
eBay, Inc. 1 938,300 40,581,475
- --------------------------------------------------------------------------------
GUS plc 575,348 10,215,562
--------------
61,712,262
- --------------------------------------------------------------------------------
MEDIA--4.9%
Grupo Televisa SA, Sponsored
GDR 354,499 28,537,170
- --------------------------------------------------------------------------------
JC Decaux SA 1 408,864 9,535,820
- --------------------------------------------------------------------------------
Pearson plc 1,410,238 16,680,808
- --------------------------------------------------------------------------------
Singapore Press Holdings Ltd. 4,779,840 12,361,779
- --------------------------------------------------------------------------------
Sirius Satellite Radio, Inc. 1,2 3,978,082 26,653,149
- --------------------------------------------------------------------------------
Television Broadcasts Ltd. 2,489,832 13,230,037
- --------------------------------------------------------------------------------
Walt Disney Co. (The) 750,000 17,977,500
- --------------------------------------------------------------------------------
WPP Group plc 886,660 9,595,326
- --------------------------------------------------------------------------------
Zee Telefilms Ltd. 4,932,200 17,198,848
--------------
151,770,437
- --------------------------------------------------------------------------------
SPECIALTY RETAIL--2.7%
Gap, Inc. (The) 429,100 7,569,324
- --------------------------------------------------------------------------------
Hennes & Mauritz AB, B Shares 1,430,200 48,606,457
- --------------------------------------------------------------------------------
Industria de Diseno Textil SA 648,800 21,161,448
- --------------------------------------------------------------------------------
Tiffany & Co. 200,100 7,661,829
--------------
84,999,058
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS--1.9%
Burberry Group plc 1 1,299,628 9,609,193
- --------------------------------------------------------------------------------
Coach, Inc. 1 484,100 16,139,894
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS Continued
LVMH Moet Hennessey Louis Vuitton 398,690 $ 35,424,112
--------------
61,173,199
- --------------------------------------------------------------------------------
CONSUMER STAPLES--7.2%
- --------------------------------------------------------------------------------
BEVERAGES--1.5%
Companhia de Bebidas das Americas,
ADR, Preference 463,515 17,636,746
- --------------------------------------------------------------------------------
Diageo plc 104,630 1,516,625
- --------------------------------------------------------------------------------
Fomento Economico Mexicano
SA de CV, UBD 2,353,700 17,045,370
- --------------------------------------------------------------------------------
Grupo Modelo SA de CV,
Series C 3,279,000 11,873,172
--------------
48,071,913
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--0.3%
Tesco plc 1,693,350 9,657,890
- --------------------------------------------------------------------------------
FOOD PRODUCTS--1.0%
Cadbury Schweppes plc 3,387,574 32,026,425
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS--3.3%
Hindustan Lever Ltd. 5,321,600 23,328,939
- --------------------------------------------------------------------------------
Kao Corp. 433,000 11,601,984
- --------------------------------------------------------------------------------
Procter & Gamble Co. (The) 216,152 12,510,878
- --------------------------------------------------------------------------------
Reckitt Benckiser plc 1,661,338 54,879,634
--------------
102,321,435
- --------------------------------------------------------------------------------
PERSONAL PRODUCTS--0.8%
Avon Products, Inc. 277,200 7,914,060
- --------------------------------------------------------------------------------
Shiseido Co. Ltd. 825,000 15,341,694
--------------
23,255,754
- --------------------------------------------------------------------------------
TOBACCO--0.3%
Altria Group, Inc. 110,400 8,249,088
- --------------------------------------------------------------------------------
ENERGY--7.8%
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--3.5%
GlobalSantaFe Corp. 624,400 30,064,860
- --------------------------------------------------------------------------------
Technip SA 574,600 34,854,690
- --------------------------------------------------------------------------------
Transocean, Inc. 1 620,700 43,256,583
--------------
108,176,133
- --------------------------------------------------------------------------------
OIL & GAS--4.3%
BP plc, ADR 425,969 27,355,729
- --------------------------------------------------------------------------------
Burlington Resources, Inc. 363,100 31,299,220
- --------------------------------------------------------------------------------
Chevron Corp. 345,444 19,610,856
- --------------------------------------------------------------------------------
Husky Energy, Inc. 778,415 39,508,353
- --------------------------------------------------------------------------------
Neste Oil Oyj 1 105,900 2,993,941
- --------------------------------------------------------------------------------
Total SA, B Shares 55,560 13,957,915
--------------
134,726,014
9 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
FINANCIALS--15.7%
- --------------------------------------------------------------------------------
CAPITAL MARKETS--2.4%
3i Group plc 916,975 $ 13,370,547
- --------------------------------------------------------------------------------
Credit Suisse Group 663,473 33,828,767
- --------------------------------------------------------------------------------
Northern Trust Corp. 568,300 29,449,306
--------------
76,648,620
- --------------------------------------------------------------------------------
COMMERCIAL BANKS--5.0%
Anglo Irish Bank Corp. 861,454 13,074,740
- --------------------------------------------------------------------------------
Australia & New Zealand
Banking Group Ltd. 391,050 6,865,958
- --------------------------------------------------------------------------------
HSBC Holdings plc 1,851,329 29,726,704
- --------------------------------------------------------------------------------
ICICI Bank Ltd., Sponsored ADR 432,350 12,451,680
- --------------------------------------------------------------------------------
Resona Holdings, Inc. 1 4,959 19,869,059
- --------------------------------------------------------------------------------
Royal Bank of Scotland Group
plc (The) 1,498,487 45,246,197
- --------------------------------------------------------------------------------
Societe Generale, Cl. A 229,670 28,250,930
--------------
155,485,268
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--3.9%
American Express Co. 476,600 24,525,836
- --------------------------------------------------------------------------------
Citigroup, Inc. 171,266 8,311,539
- --------------------------------------------------------------------------------
Credit Saison Co. Ltd. 395,100 19,671,275
- --------------------------------------------------------------------------------
Investor AB, B Shares 646,652 11,314,070
- --------------------------------------------------------------------------------
JPMorgan Chase & Co. 633,263 25,134,208
- --------------------------------------------------------------------------------
Morgan Stanley 579,700 32,892,178
--------------
121,849,106
- --------------------------------------------------------------------------------
INSURANCE--4.4%
ACE Ltd. 388,071 20,738,514
- --------------------------------------------------------------------------------
Allianz AG 233,811 35,417,521
- --------------------------------------------------------------------------------
Berkshire Hathaway, Inc., Cl. B 1 5,920 17,378,160
- --------------------------------------------------------------------------------
Everest Re Group Ltd. 104,800 10,516,680
- --------------------------------------------------------------------------------
Manulife Financial Corp. 279,713 16,427,379
- --------------------------------------------------------------------------------
Prudential plc 2,504,680 23,701,013
- --------------------------------------------------------------------------------
XL Capital Ltd., Cl. A 183,500 12,364,230
--------------
136,543,497
- --------------------------------------------------------------------------------
HEALTH CARE--12.7%
- --------------------------------------------------------------------------------
BIOTECHNOLOGY--3.6%
Affymetrix, Inc. 1 322,800 15,413,700
- --------------------------------------------------------------------------------
Amgen, Inc. 1 376,500 29,690,790
- --------------------------------------------------------------------------------
Amylin Pharmaceuticals, Inc. 1 131,100 5,233,512
- --------------------------------------------------------------------------------
Genentech, Inc. 1 186,300 17,232,750
- --------------------------------------------------------------------------------
Gilead Sciences, Inc. 1 452,060 23,791,918
- --------------------------------------------------------------------------------
ImClone Systems, Inc. 1 195,300 6,687,072
- --------------------------------------------------------------------------------
Wyeth 305,500 14,074,385
--------------
112,124,127
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--2.0%
Biomet, Inc. 310,100 $ 11,340,357
- --------------------------------------------------------------------------------
Boston Scientific Corp. 1 634,500 15,538,905
- --------------------------------------------------------------------------------
Essilor International SA 54,752 4,420,764
- --------------------------------------------------------------------------------
Medtronic, Inc. 120,500 6,937,185
- --------------------------------------------------------------------------------
Nektar Therapeutics 1,2 314,361 4,139,506
- --------------------------------------------------------------------------------
Smith & Nephew plc 2,197,537 20,246,392
--------------
62,623,109
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--1.4%
Express Scripts, Inc. 1 238,300 19,969,540
- --------------------------------------------------------------------------------
Quest Diagnostics, Inc. 447,000 23,011,560
--------------
42,981,100
- --------------------------------------------------------------------------------
PHARMACEUTICALS--5.7%
Chugai Pharmaceutical Co. Ltd. 622,100 13,410,150
- --------------------------------------------------------------------------------
Novartis AG 331,768 17,433,568
- --------------------------------------------------------------------------------
Novo Nordisk AS, Cl. B 139,600 7,852,777
- --------------------------------------------------------------------------------
Pfizer, Inc. 541,619 12,630,555
- --------------------------------------------------------------------------------
Roche Holdings AG 254,589 38,225,646
- --------------------------------------------------------------------------------
Sanofi-Aventis SA 567,994 49,760,920
- --------------------------------------------------------------------------------
Shionogi & Co. Ltd. 1,585,000 22,323,187
- --------------------------------------------------------------------------------
Takeda Pharmaceutical Co. Ltd. 215,700 11,668,851
- --------------------------------------------------------------------------------
Theravance, Inc. 1 271,000 6,102,920
--------------
179,408,574
- --------------------------------------------------------------------------------
INDUSTRIALS--8.4%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE--4.2%
Boeing Co. 284,900 20,011,376
- --------------------------------------------------------------------------------
Empresa Brasileira de Aeronautica SA,
ADR 784,434 30,671,369
- --------------------------------------------------------------------------------
European Aeronautic Defence &
Space Co. 857,190 32,372,833
- --------------------------------------------------------------------------------
Lockheed Martin Corp. 222,900 14,183,127
- --------------------------------------------------------------------------------
Northrop Grumman Corp. 248,200 14,919,302
- --------------------------------------------------------------------------------
Raytheon Co. 474,400 19,047,160
--------------
131,205,167
- --------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING--0.3%
JGC Corp. 407,000 7,824,727
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--0.6%
Emerson Electric Co. 264,200 19,735,740
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--2.2%
3M Co. 316,000 24,490,000
- --------------------------------------------------------------------------------
Hutchison Whampoa Ltd. 1,175,000 11,191,342
- --------------------------------------------------------------------------------
Siemens AG 390,010 33,415,445
--------------
69,096,787
10 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
MACHINERY--0.8%
Fanuc Ltd. 104,500 $ 8,950,015
- --------------------------------------------------------------------------------
Hyundai Heavy Industries Co. Ltd. 231,590 17,561,772
--------------
26,511,787
- --------------------------------------------------------------------------------
TRANSPORTATION INFRASTRUCTURE--0.3%
Macquarie Airports 3,801,284 8,790,500
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--21.7%
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--5.4%
Cisco Systems, Inc. 1 923,000 15,801,760
- --------------------------------------------------------------------------------
Corning, Inc. 1 1,825,800 35,895,228
- --------------------------------------------------------------------------------
Juniper Networks, Inc. 1 352,300 7,856,290
- --------------------------------------------------------------------------------
QUALCOMM, Inc. 566,200 24,391,896
- --------------------------------------------------------------------------------
Telefonaktiebolaget LM Ericsson,
B Shares 24,038,000 82,602,731
--------------
166,547,905
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--1.1%
International Business Machines
Corp. 273,417 22,474,877
- --------------------------------------------------------------------------------
Sun Microsystems, Inc. 1 2,588,100 10,844,139
--------------
33,319,016
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--2.6%
Hoya Corp. 552,900 19,992,143
- --------------------------------------------------------------------------------
Keyence Corp. 55,100 15,819,128
- --------------------------------------------------------------------------------
Murata Manufacturing Co. Ltd. 416,900 26,981,275
- --------------------------------------------------------------------------------
Nidec Corp. 138,200 11,890,814
- --------------------------------------------------------------------------------
Tandberg ASA 1,153,550 7,033,373
--------------
81,716,733
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--0.3%
Yahoo Japan Corp. 6,384 9,689,541
- --------------------------------------------------------------------------------
IT SERVICES--1.3%
Infosys Technologies Ltd. 599,358 39,918,348
- --------------------------------------------------------------------------------
OFFICE ELECTRONICS--0.3%
Canon, Inc. 172,700 10,155,232
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--5.3%
Advanced Micro Devices, Inc. 1 1,936,300 59,250,780
- --------------------------------------------------------------------------------
Altera Corp. 1 735,800 13,634,374
- --------------------------------------------------------------------------------
Cree, Inc. 1 573,300 14,470,092
- --------------------------------------------------------------------------------
International Rectifier Corp. 1 429,200 13,691,480
- --------------------------------------------------------------------------------
Samsung Electronics Co. 61,710 39,750,965
- --------------------------------------------------------------------------------
Silicon Laboratories, Inc. 1 124,900 4,578,834
- --------------------------------------------------------------------------------
Taiwan Semiconductor
Manufacturing Co. Ltd. 10,658,194 20,177,949
--------------
165,554,474
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
SOFTWARE--5.4%
Adobe Systems, Inc. 526,400 $ 19,455,744
- --------------------------------------------------------------------------------
Cadence Design Systems, Inc. 1 562,370 9,515,300
- --------------------------------------------------------------------------------
Enix Corp. 433,600 12,209,455
- --------------------------------------------------------------------------------
Intuit, Inc. 1 458,600 24,443,380
- --------------------------------------------------------------------------------
Microsoft Corp. 1,595,200 41,714,480
- --------------------------------------------------------------------------------
Nintendo Co. Ltd. 91,100 11,073,570
- --------------------------------------------------------------------------------
Novell, Inc. 1 2,193,226 19,366,186
- --------------------------------------------------------------------------------
SAP AG 173,160 31,402,381
--------------
169,180,496
- --------------------------------------------------------------------------------
MATERIALS--0.2%
- --------------------------------------------------------------------------------
CHEMICALS--0.2%
Syngenta AG 1 47,067 5,856,287
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--5.0%
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--0.5%
Tele Norte Leste Participacoes SA,
Preference 913,784 16,217,780
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--4.5%
KDDI Corp. 6,323 36,457,710
- --------------------------------------------------------------------------------
SK Telecom Co. Ltd., ADR 1,277,460 25,919,663
- --------------------------------------------------------------------------------
Vodafone Group plc 34,955,950 75,477,379
--------------
137,854,752
- --------------------------------------------------------------------------------
UTILITIES--1.2%
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES--0.7%
Energias de Portugal SA 2,905,006 8,941,974
- --------------------------------------------------------------------------------
Fortum Oyj 754,800 14,154,678
--------------
23,096,652
- --------------------------------------------------------------------------------
GAS UTILITIES--0.5%
Hong Kong & China Gas Co. Ltd. 6,593,000 14,072,617
--------------
Total Common Stocks (Cost $2,137,087,963) 3,048,964,114
11 | OPuPENHEIMER GLOBAL SECURITIES FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--1.8%
- --------------------------------------------------------------------------------
Undivided interest of 96.91% in joint
repurchase agreement (Principal Amount/Value
$59,548,000, with a maturity value of
$59,570,297) with DB Alex Brown LLC, 3.37%,
dated 12/30/05, to be repurchased at
$57,727,608 on 1/3/06, collateralized by U.S.
Treasury Bills, 6/1/06 with a value of
$60,758,966 (Cost $57,706,000) $ 57,706,000 $ 57,706,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $2,194,793,963) 99.6% 3,106,670,114
- --------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 0.4 11,694,656
-------------------------------
NET ASSETS 100.0% $3,118,364,770
===============================
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
2. Illiquid or restricted security. The aggregate value of illiquid or
restricted securities as of December 31, 2005 was $30,792,655, which represents
0.99% of the Fund's net assets, all of which is considered restricted. See Note
6 of Notes to Financial Statements.
- --------------------------------------------------------------------------------
GEOGRAPHIC HOLDINGS UNAUDITED
- --------------------------------------------------------------------------------
DISTRIBUTION OF INVESTMENTS REPRESENTING GEOGRAPHIC HOLDINGS, AS A PERCENTAGE OF
TOTAL INVESTMENTS AT VALUE, IS AS FOLLOWS:
GEOGRAPHIC HOLDINGS VALUE PERCENT
- -------------------------------------------------------------------------------
United States $ 1,199,074,343 38.6%
United Kingdom 379,305,424 12.2
Japan 352,439,060 11.3
France 208,577,984 6.7
Sweden 142,523,258 4.6
Germany 131,520,575 4.2
Switzerland 95,344,268 3.1
India 92,897,815 3.0
Korea, Republic of South 83,232,400 2.7
Brazil 64,525,895 2.1
Mexico 57,455,712 1.8
Canada 55,935,732 1.8
Hong Kong 38,493,996 1.2
The Netherlands 38,315,111 1.2
Cayman Islands 33,102,744 1.1
Spain 21,161,448 0.7
Taiwan 20,177,949 0.7
Finland 17,148,619 0.6
Australia 15,656,458 0.5
Ireland 13,074,740 0.4
Singapore 12,361,779 0.4
Bermuda 10,516,680 0.3
Portugal 8,941,974 0.3
Denmark 7,852,777 0.3
Norway 7,033,373 0.2
------------------------------------
Total $ 3,106,670,114 100.0%
====================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
12 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 31, 2005
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
ASSETS
- ---------------------------------------------------------------------------------------------------------
Investments, at value (cost $2,194,793,963)--see accompanying statement of
investments $ 3,106,670,114
- ---------------------------------------------------------------------------------------------------------
Cash--foreign currencies (cost $693,347) 693,237
- ---------------------------------------------------------------------------------------------------------
Receivables and other assets:
Shares of beneficial interest sold 6,385,447
Interest and dividends 5,656,310
Investments sold 2,483,759
Other 50,677
-----------------
Total assets 3,121,939,544
- ---------------------------------------------------------------------------------------------------------
LIABILITIES
- ---------------------------------------------------------------------------------------------------------
Bank overdraft 180,503
- ---------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Shares of beneficial interest redeemed 1,315,170
Investments purchased 1,229,851
Distribution and service plan fees 367,674
Custodian fees 188,091
Shareholder communications 176,693
Trustees' compensation 62,814
Foreign capital gains tax 4,533
Transfer and shareholder servicing agent fees 3,610
Other 45,835
-----------------
Total liabilities 3,574,774
- ---------------------------------------------------------------------------------------------------------
NET ASSETS $ 3,118,364,770
=================
- ---------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- ---------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 93,488
- ---------------------------------------------------------------------------------------------------------
Additional paid-in capital 2,014,105,270
- ---------------------------------------------------------------------------------------------------------
Accumulated net investment income 20,023,318
- ---------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 172,276,512
- ---------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets and liabilities
denominated in foreign currencies 911,866,182
-----------------
NET ASSETS $ 3,118,364,770
=================
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- ---------------------------------------------------------------------------------------------------------
Non-Service Shares:
Net asset value, redemption price per share and offering price per share (based
on net assets of $2,124,413,211 and 63,633,976 shares of beneficial interest
outstanding) $ 33.38
- ---------------------------------------------------------------------------------------------------------
Service Shares:
Net asset value, redemption price per share and offering price per share (based
on net assets of $557,283,442 and 16,807,481 shares of beneficial interest outstanding) $ 33.16
- ---------------------------------------------------------------------------------------------------------
Class 3 Shares:
Net asset value, redemption price per share and offering price per share (based
on net assets of $346,064,145 and 10,313,922 shares of beneficial interest outstanding) $ 33.55
- ---------------------------------------------------------------------------------------------------------
Class 4 Shares:
Net asset value, redemption price per share and offering price per share (based
on net assets of $90,603,972 and 2,733,015 shares of beneficial interest outstanding) $ 33.15
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
13 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 31, 2005
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- ---------------------------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $3,943,319) $ 49,026,437
- ---------------------------------------------------------------------------------------------------------
Interest (net of foreign withholding taxes of $141) 1,253,928
-----------------
Total investment income 50,280,365
- ---------------------------------------------------------------------------------------------------------
EXPENSES
- ---------------------------------------------------------------------------------------------------------
Management fees 18,210,907
- ---------------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Service shares 1,031,019
Class 4 shares 153,083
- ---------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service shares 11,310
Service shares 10,288
Class 3 shares 10,210
Class 4 shares 10,066
- ---------------------------------------------------------------------------------------------------------
Shareholder communications:
Non-Service shares 177,283
Service shares 36,646
Class 3 shares 25,501
Class 4 shares 5,586
- ---------------------------------------------------------------------------------------------------------
Custodian fees and expenses 651,268
- ---------------------------------------------------------------------------------------------------------
Trustees' compensation 58,004
- ---------------------------------------------------------------------------------------------------------
Administration service fees 1,500
- ---------------------------------------------------------------------------------------------------------
Other 110,324
-----------------
Total expenses 20,502,995
Less reduction to custodian expenses (5,511)
-----------------
Net expenses 20,497,484
- ---------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 29,782,881
- ---------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- ---------------------------------------------------------------------------------------------------------
Net realized gain on:
Investments 290,648,764
Foreign currency transactions 46,614,542
-----------------
Net realized gain 337,263,306
- ---------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments (net of foreign capital gains tax of $4,533) 167,289,009
Translation of assets and liabilities denominated in foreign currencies (180,202,791)
-----------------
Net change in unrealized appreciation (12,913,782)
- ---------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 354,132,405
=================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2005 2004
- -------------------------------------------------------------------------------------------------------------------
OPERATIONS
- -------------------------------------------------------------------------------------------------------------------
Net investment income $ 29,782,881 $ 28,751,119
- -------------------------------------------------------------------------------------------------------------------
Net realized gain 337,263,306 179,086,396
- -------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (12,913,782) 331,047,849
-----------------------------------
Net increase in net assets resulting from operations 354,132,405 538,885,364
- -------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Non-Service shares (25,791,077) (30,456,227)
Service shares (3,177,917) (2,439,240)
Class 3 shares (2,857,511) (2,221,201)
Class 4 shares (420,976) --
- -------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from beneficial interest
transactions:
Non-Service shares (607,707,602) (177,302,804)
Service shares 152,495,021 130,991,549
Class 3 shares 40,656,196 80,796,251
Class 4 shares 43,339,023 32,377,319
- -------------------------------------------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------------------------------------------
Total increase (decrease) (49,332,438) 570,631,011
- -------------------------------------------------------------------------------------------------------------------
Beginning of period 3,167,697,208 2,597,066,197
-----------------------------------
End of period (including accumulated net investment income of $20,023,318 and
$13,762,145, respectively) $ 3,118,364,770 $ 3,167,697,208
===================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
15 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 2001
- ----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 29.51 $ 25.08 $ 17.70 $ 22.84 $ 30.33
- ----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .32 1 .26 1 .19 .16 .17
Net realized and unrealized gain (loss) 3.85 4.49 7.34 (5.19) (3.85)
---------------------------------------------------------------------
Total from investment operations 4.17 4.75 7.53 (5.03) (3.68)
- ----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.30) (.32) (.15) (.11) (.19)
Distributions from net realized gain -- -- -- -- (3.62)
---------------------------------------------------------------------
Total dividends and/or distributions to shareholders (.30) (.32) (.15) (.11) (3.81)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 33.38 $ 29.51 $ 25.08 $ 17.70 $ 22.84
=====================================================================
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 14.31% 19.16% 43.02% (22.13)% (12.04)%
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $2,124,413 $2,518,867 $2,280,752 $1,549,993 $1,905,890
- ----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $2,123,523 $2,451,188 $1,751,226 $1,776,289 $1,918,335
- ----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 1.08% 1.01% 0.99% 0.80% 0.70%
Total expenses 0.67% 4 0.66% 4 0.67% 4 0.67% 4 0.70% 4
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 35% 30% 34% 34% 39%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Total returns are not annualized for
periods less than one full year. Total return information does not reflect
expenses that apply at the separate account level or to related insurance
products. Inclusion of these charges would reduce the total return figures for
all periods shown. Returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
16 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
SERVICE SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 2001
- ----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 29.33 $ 24.96 $ 17.61 $ 22.78 $ 30.30
- ----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .24 1 .20 1 .12 .12 .21
Net realized and unrealized gain (loss) 3.84 4.46 7.36 (5.19) (3.92)
---------------------------------------------------------------------
Total from investment operations 4.08 4.66 7.48 (5.07) (3.71)
- ----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.25) (.29) (.13) (.10) (.19)
Distributions from net realized gain -- -- -- -- (3.62)
---------------------------------------------------------------------
Total dividends and/or distributions to shareholders (.25) (.29) (.13) (.10) (3.81)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 33.16 $ 29.33 $ 24.96 $ 17.61 $ 22.78
=====================================================================
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 14.06% 18.88% 42.86% (22.37)% (12.17)%
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 557,284 $ 346,403 $ 168,739 $ 52,830 $ 20,467
- ----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 413,849 $ 247,490 $ 91,800 $ 34,847 $ 8,502
- ----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 0.79% 0.77% 0.68% 0.51% 0.44%
Total expenses 0.92% 4 0.91% 4 0.93% 4 0.90% 4 0.85% 4
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 35% 30% 34% 34% 39%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Total returns are not annualized for
periods less than one full year. Total return information does not reflect
expenses that apply at the separate account level or to related insurance
products. Inclusion of these charges would reduce the total return figures for
all periods shown. Returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
17 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS 3 SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 1
- ------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 29.65 $ 25.19 $ 17.55
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .32 2 .26 2 .07
Net realized and unrealized gain 3.88 4.52 7.57
--------------------------------------
Total from investment operations 4.20 4.78 7.64
- ------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.30) (.32) --
Distributions from net realized gain -- -- --
--------------------------------------
Total dividends and/or distributions to shareholders (.30) (.32) --
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 33.55 $29.65 $ 25.19
======================================
- ------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 14.34% 19.19% 43.53%
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $346,064 $265,044 $147,576
- ------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $296,252 $199,388 $ 80,579
- ------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 1.06% 1.00% 0.73%
Total expenses 0.67% 5 0.66% 5 0.68% 5
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 35% 30% 34%
1. For the period from May 1, 2003 (inception of offering) to December 31, 2003.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Total returns are not annualized for
periods less than one full year. Total return information does not reflect
expenses that apply at the separate account level or to related insurance
products. Inclusion of these charges would reduce the total return figures for
all periods shown. Returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
4. Annualized for periods of less than one full year.
5. Reduction to custodian expenses less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
18 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
CLASS 4 SHARES PERIOD ENDED DECEMBER 31, 2005 2004 1
- ---------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ---------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 29.35 $ 25.21
- ---------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .24 2 .09 2
Net realized and unrealized gain 3.84 4.05
-----------------------
Total from investment operations 4.08 4.14
- ---------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.28) --
Distributions from net realized gain -- --
-----------------------
Total dividends and/or distributions to shareholders (.28) --
- ---------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 33.15 $ 29.35
=======================
- ---------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 14.05% 16.42%
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 90,604 $ 37,384
- ---------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 61,380 $ 19,774
- ---------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 0.79% 0.53%
Total expenses 0.93% 5 0.94% 5
- ---------------------------------------------------------------------------------------------------------
Portfolio turnover rate 0.35% 30%
1. For the period from May 3, 2004 (inception of offering) to December 31, 2004.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Total returns are not annualized for
periods less than one full year. Total return information does not reflect
expenses that apply at the separate account level or to related insurance
products. Inclusion of these charges would reduce the total return figures for
all periods shown. Returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
4. Annualized for periods of less than one full year.
5. Reduction to custodian expenses less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Global Securities Fund/VA (the Fund) is a separate series of
Oppenheimer Variable Account Funds, an open-end management investment company
registered under the Investment Company Act of 1940, as amended. The Fund's
investment objective is to seek long-term capital appreciation by investing a
substantial portion of its assets in securities of foreign issuers,
"growth-type" companies, cyclical industries and special situations that are
considered to have appreciation possibilities. The Fund's investment advisor is
OppenheimerFunds, Inc. (the Manager).
The Fund offers Non-Service, Service, Class 3 and Class 4 shares. All
classes are sold at their offering price, which is the net asset value per
share, to separate investment accounts of participating insurance companies as
an underlying investment for variable life insurance policies, variable annuity
contracts or other investment products. All classes of shares have identical
rights and voting privileges with respect to the Fund in general and exclusive
voting rights on matters that affect that class alone. Earnings, net assets and
net asset value per share may differ due to each class having its own expenses,
such as transfer and shareholder servicing agent fees and shareholder
communications, directly attributable to that class. The classes of shares
designated as Service shares and Class 4 shares are subject to a distribution
and service plan. The Fund assesses a 1% fee on the proceeds of Class 3 and
Class 4 shares that are redeemed (either by selling or exchanging to another
Oppenheimer fund or other investment option offered through your variable life
insurance or variable annuity contract) within 60 days of their purchase. The
fee, which is retained by the Fund, is accounted for as an addition to paid-in
capital.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for business. Securities may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. Securities listed or traded on National
Stock Exchanges or other domestic exchanges are valued based on the last sale
price of the security traded on that exchange prior to the time when the Fund's
assets are valued. Securities traded on NASDAQ are valued based on the closing
price provided by NASDAQ prior to the time when the Fund's assets are valued. In
the absence of a sale, the security is valued at the last sale price on the
prior trading day, if it is within the spread of the closing "bid" and "asked"
prices, and if not, at the closing bid price. Securities traded on foreign
exchanges are valued based on the last sale price on the principal exchange on
which the security is traded, in the country that is identified by the portfolio
pricing service, prior to the time when the Fund's assets are valued. In the
absence of a sale, the security is valued at the official closing price on the
principal exchange. Corporate, government and municipal debt instruments having
a remaining maturity in excess of sixty days and all mortgage-backed securities
will be valued at the mean between the "bid" and "asked" prices. Futures
contracts traded on a commodities or futures exchange will be valued at the
final settlement price or official closing price on the principal exchange as
reported by such principal exchange at its trading session ending at, or most
recently prior to, the time when the Fund's assets are valued. Securities
(including restricted securities) for which market quotations are not readily
available are valued at their fair value. Foreign and domestic securities whose
values have been materially affected by what the Manager identifies as a
significant event occurring before the Fund's assets are valued but after the
close of their respective exchanges will be fair valued. Fair value is
determined in good faith using consistently applied procedures under the
supervision of the Board of Trustees. Short-term "money market type" debt
securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in
U.S. dollars. The values of securities denominated in foreign currencies and
amounts related to the purchase and sale of foreign securities and foreign
investment income are translated into U.S. dollars as of the close of The New
York Stock Exchange (the Exchange), normally 4:00 P.M. Eastern time, on each day
the Exchange is open for business. Foreign exchange rates may be valued
primarily using dealer supplied valuations or a portfolio pricing service
authorized by the Board of Trustees.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes
20 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
recorded on the Fund's books and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized foreign exchange gains and losses
arise from changes in the values of assets and liabilities, including
investments in securities at fiscal period end, resulting from changes in
exchange rates.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated funds
advised by the Manager, may transfer uninvested cash balances into joint trading
accounts on a daily basis. These balances are invested in one or more repurchase
agreements. Securities pledged as collateral for repurchase agreements are held
by a custodian bank until the agreements mature. Each agreement requires that
the market value of the collateral be sufficient to cover payments of interest
and principal. In the event of default by the other party to the agreement,
retention of the collateral may be subject to legal proceedings.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders.
The tax components of capital shown in the table below represent distribution
requirements the Fund must satisfy under the income tax regulations, losses the
Fund may be able to offset against income and gains realized in future years and
unrealized appreciation or depreciation of securities and other investments for
federal income tax purposes.
NET UNREALIZED
APPRECIATION
BASED ON COST OF
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED SECURITIES AND OTHER
NET INVESTMENT LONG-TERM LOSS INVESTMENTS FOR FEDERAL
INCOME GAIN CARRYFORWARD 1,2,3 INCOMETAX PURPOSES
----------------------------------------------------------------------------
$32,535,312 $176,426,744 $221,596 $895,474,132
1. The Fund had $221,596 of post-October foreign currency losses which were
deferred.
2. During the fiscal year ended December 31, 2005, the Fund utilized
$130,358,556 of capital loss carryforward to offset capital gains realized in
that fiscal year.
3. During the fiscal year ended December 31, 2004, the Fund utilized
$170,421,832 of capital loss carryforward to offset capital gains realized in
that fiscal year.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Fund. Accordingly, the
following amounts have been reclassified for December 31, 2005. Net assets of
the Fund were unaffected by the reclassifications.
REDUCTION TO
INCREASE TO ACCUMULATED NET
INCREASE TO ACCUMULATED NET REALIZED GAIN
PAID-IN CAPITAL INVESTMENT INCOME ON INVESTMENTS 4
-------------------------------------------------------------------------
$23,806,559 $8,725,773 $32,532,332
4. $23,806,559, all of which was long-term capital gain, was distributed in
connection with Fund share redemptions.
21 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
The tax character of distributions paid during the years ended December 31, 2005
and December 31, 2004 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2005 DECEMBER 31, 2004
--------------------------------------------------------------------
Distributions paid from:
Ordinary income $32,247,481 $35,116,668
The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for
federal income tax purposes as of December 31, 2005 are noted below. The primary
difference between book and tax appreciation or depreciation of securities and
other investments, if applicable, is attributable to the tax deferral of losses
or tax realization of financial statement unrealized gain or loss.
Federal tax cost of securities $2,211,186,013
Federal tax cost of other investments 692,459
---------------
Total federal tax cost $2,211,878,472
===============
Gross unrealized appreciation $ 926,555,047
Gross unrealized depreciation (31,080,915)
---------------
Net unrealized appreciation $ 895,474,132
===============
Certain foreign countries impose a tax on capital gains which is accrued by the
Fund based on unrealized appreciation, if any, on affected securities. The tax
is paid when the gain is realized.
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred
compensation plan for independent trustees that enables trustees to elect to
defer receipt of all or a portion of the annual compensation they are entitled
to receive from the Fund. For purposes of determining the amount owed to the
Trustee under the plan, deferred amounts are treated as though equal dollar
amounts had been invested in shares of the Fund or in other Oppenheimer funds
selected by the Trustee. The Fund purchases shares of the funds selected for
deferral by the Trustee in amounts equal to his or her deemed investment,
resulting in a Fund asset equal to the deferred compensation liability. Such
assets are included as a component of "Other" within the asset section of the
Statement of Assets and Liabilities. Deferral of trustees' fees under the plan
will not affect the net assets of the Fund, and will not materially affect the
Fund's assets, liabilities or net investment income per share. Amounts will be
deferred until distributed in accordance to the Plan.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date. Income and capital gain distributions, if
any, are declared and paid annually.
- --------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and amortization
of premium, is accrued as earned.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. Custodian Fees and Expenses in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts to the extent they are not
offset by positive cash balances maintained by the Fund. The Reduction to
Custodian Expenses line item, if applicable, represents earnings on cash
balances maintained by the Fund during the period. Such interest expense and
other custodian fees may be paid with these earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
22 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
YEAR ENDED DECEMBER 31, 2005 YEAR ENDED DECEMBER 31, 2004 1
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------
NON-SERVICE SHARES
Sold 8,706,521 $ 257,431,509 23,590,376 $ 610,109,742
Dividends and/or distributions reinvested 895,835 25,791,077 1,203,327 30,456,227
Redeemed (31,323,712) (890,930,188) (30,383,126) (817,868,773)
-------------------------------------------------------------------
Net decrease (21,721,356) $(607,707,602) (5,589,423) $ (177,302,804)
===================================================================
- -----------------------------------------------------------------------------------------------------------------
SERVICE SHARES
Sold 6,930,473 $ 208,836,898 6,516,321 $ 168,136,666
Dividends and/or distributions reinvested 110,922 3,177,917 96,757 2,439,240
Redeemed (2,043,354) (59,519,794) (1,562,747) (39,584,357)
-------------------------------------------------------------------
Net increase 4,998,041 $ 152,495,021 5,050,331 $ 130,991,549
===================================================================
- -----------------------------------------------------------------------------------------------------------------
CLASS 3 SHARES
Sold 2,056,580 $ 61,404,566 3,286,454 $ 85,761,974
Dividends and/or distributions reinvested 98,739 2,857,511 87,346 2,221,201
Redeemed (779,132) (23,605,881) 2 (293,439) (7,186,924) 3
-------------------------------------------------------------------
Net increase 1,376,187 $ 40,656,196 3,080,361 $ 80,796,251
===================================================================
- -----------------------------------------------------------------------------------------------------------------
CLASS 4 SHARES
Sold 1,634,734 $ 48,519,848 1,345,840 $ 34,232,416
Dividends and/or distributions reinvested 14,694 420,976 -- --
Redeemed (189,923) (5,601,801) 2 (72,330) (1,855,097) 3
-------------------------------------------------------------------
Net increase 1,459,505 $ 43,339,023 1,273,510 $ 32,377,319
===================================================================
1. For the year ended December 31, 2004, for Non-Service, Service and Class 3
shares and for the period from May 3, 2004 (inception of offering) to December
31, 2004, for Class 4 shares.
2. Net of redemption fees of $29,707 and $6,752 for Class 3 and Class 4 shares,
respectively.
3. Net of redemption fees of $34,168 and $5,752 for Class 3 and Class 4 shares,
respectively.
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended December 31, 2005, were as
follows:
PURCHASES SALES
------------------------------------------------------------------------
Investment securities $996,540,059 $1,278,598,882
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee at an
annual rate of 0.75% of the first $200 million of average annual net assets,
0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the
next $200 million and 0.60% of average annual net assets over $800 million.
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.
23 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the year ended December 31, 2005, the Fund paid
$41,719 to OFS for services to the Fund.
Additionally, funds offered in variable annuity separate accounts are
subject to minimum fees of $10,000 per class, for class level assets of $10
million or more. Each class is subject to the minimum fee in the event that the
per account fee does not equal or exceed the applicable minimum fee.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN FOR SERVICE AND CLASS 4 SHARES. The Fund has
adopted a Distribution and Service Plan for Service share class and Class 4
shares to pay OppenheimerFunds Distributor, Inc. (the Distributor), for
distribution related services and personal service and account maintenance for
the Fund's Service class and Class 4 shares. Under the plan, payments are made
periodically at an annual rate of up to 0.25% of the average annual net assets
of Service share class and Class 4 shares of the Fund. The Distributor currently
uses all of those fees to compensate sponsor(s) of the insurance product that
offers Fund shares, for providing personal service and maintenance of accounts
of their variable contract owners that hold Service class and Class 4 shares.
The impact of the service plan is to increase operating expenses of the Service
class and Class 4 shares, which results in lower performance compared to the
Fund's shares that are not subject to a service fee. Fees incurred by the Fund
under the plan are detailed in the Statement of Operations.
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit
transfer and shareholder servicing agent fees for all classes to 0.35% of
average annual net assets per class. This undertaking may be amended or
withdrawn at any time.
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5. FOREIGN CURRENCY CONTRACTS
A foreign currency contract is a commitment to purchase or sell a foreign
currency at a future date, at a negotiated rate. The Fund may enter into foreign
currency contracts to settle specific purchases or sales of securities
denominated in a foreign currency and for protection from adverse exchange rate
fluctuation. Risks to the Fund include the potential inability of the
counterparty to meet the terms of the contract.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using prevailing foreign currency exchange rates.
Unrealized appreciation and depreciation on foreign currency contracts are
reported in the Statement of Assets and Liabilities as a receivable or payable
and in the Statement of Operations with the change in unrealized appreciation or
depreciation.
The Fund may realize a gain or loss upon the closing or settlement of the
foreign transaction. Contracts closed or settled with the same broker are
recorded as net realized gains or losses. Such realized gains and losses are
reported with all other foreign currency gains and losses in the Statement of
Operations.
As of December 31, 2005, the Fund had no outstanding foreign currency
contracts.
- --------------------------------------------------------------------------------
6. ILLIQUID OR RESTRICTED SECURITIES
As of December 31, 2005, investments in securities included issues that are
illiquid or restricted. Restricted securities are purchased in private placement
transactions, are not registered under the Securities Act of 1933, may have
contractual restrictions on resale, and are valued under methods approved by the
Board of Trustees as reflecting fair value. A security may also be considered
illiquid if it lacks a readily available market or if its valuation has not
changed for a certain period of time. The Fund will not invest more than 15% of
its net assets (determined at the time of purchase and reviewed periodically) in
illiquid or restricted securities. Certain restricted securities, eligible for
resale to qualified institutional investors, are not subject to that limitation.
Securities that are illiquid or restricted are marked with the applicable
footnote on the Statement of Investments. Information concerning restricted
securities is as follows:
ACQUISITION VALUATION AS OF UNREALIZED
SECURITY DATES COST DECEMBER 31, 2005 APPRECIATION
- --------------------------------------------------------------------------------------------------------------
Nektar Therapeutics 6/25/03 $ 3,568,000 $ 4,139,506 $ 571,506
Sirius Satellite Radio, Inc. 3/5/03 3,647,166 26,653,149 23,005,983
-------------------------------------------------
$ 7,215,166 $ 30,792,655 $ 23,577,489
=================================================
24 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
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7. LITIGATION
A consolidated amended complaint has been filed as putative derivative and class
actions against the Manager, OFS and the Distributor, as well as 51 of the
Oppenheimer funds (as "Nominal Defendants") excluding the Fund, 30 present and
former Directors or Trustees and 8 present and former officers of the funds.
This complaint, initially filed in the U.S. District Court for the Southern
District of New York on January 10, 2005 and amended on March 4, 2005,
consolidates into a single action and amends six individual previously-filed
putative derivative and class action complaints. Like those prior complaints,
the complaint alleges that the Manager charged excessive fees for distribution
and other costs, improperly used assets of the funds in the form of directed
brokerage commissions and 12b-1 fees to pay brokers to promote sales of the
funds, and failed to properly disclose the use of assets of the funds to make
those payments in violation of the Investment Company Act of 1940 and the
Investment Advisers Act of 1940. Also, like those prior complaints, the
complaint further alleges that by permitting and/or participating in those
actions, the Directors/Trustees and the Officers breached their fiduciary duties
to shareholders of the funds under the Investment Company Act of 1940 and at
common law. The complaint seeks unspecified compensatory and punitive damages,
rescission of the funds' investment advisory agreements, an accounting of all
fees paid, and an award of attorneys' fees and litigation expenses.
The defendants believe that the allegations contained in the Complaints
are without merit and that they have meritorious defenses against the claims
asserted. The defendants intend to defend these lawsuits vigorously and to
contest any claimed liability. The defendants believe that it is premature to
render any opinion as to the likelihood of an outcome unfavorable to them and
that no estimate can yet be made with any degree of certainty as to the amount
or range of any potential loss.
25 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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- --------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER GLOBAL SECURITIES
FUND/VA:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer Global Securities Fund/VA, a series of Oppenheimer Variable Account
Funds, including the statement of investments, as of December 31, 2005, and the
related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the periods presented.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
The Fund is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audit includes consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of December 31, 2005, by correspondence with the
custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer Global Securities Fund/VA as of December 31, 2005, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for each
of the five years in the periods presented, in conformity with accounting
principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
February 13, 2006
26 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2006, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2005. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
Dividends, if any, paid by the Fund during the fiscal year ended December
31, 2005 which are not designated as capital gain distributions should be
multiplied by 23.36% to arrive at the amount eligible for the corporate
dividend-received deduction.
The Fund has elected the application of Section 853 of the Internal
Revenue Code to permit shareholders to take a federal income tax credit or
deduction, at their option, on a per share basis for an aggregate amount of
$3,516,631 of foreign income taxes paid by the Fund during the fiscal year ended
December 31, 2005. A separate notice will be mailed to each shareholder, which
will reflect the proportionate share of such foreign taxes which must be treated
by shareholders as gross income for federal income tax purposes.
Gross income of $31,844,141 was derived from sources within foreign
countries or possessions of the United States.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Fund to the Internal Revenue Service. Because of
the complexity of the federal regulations which may affect your individual tax
return and the many variations in state and local tax regulations, we recommend
that you consult your tax advisor for specific guidance.
27 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file Form N-PX, with its complete proxy voting record for the 12 months ended
June 30th, no later than August 31st of each year. The Fund's voting record is
available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at
www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC
for the first quarter and the third quarter of each fiscal year on Form N-Q. The
Fund's Form N-Q filings are available on the SEC's website at
http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public
Reference Room in Washington D.C. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
28 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew the Fund's
investment advisory agreement (the "Agreement"). The Investment Company Act of
1940, as amended, requires that the Board request and evaluate, and that the
Manager provide, such information as may be reasonably necessary to evaluate
the terms of the Agreement. The Board employs an independent consultant to
prepare a report that provides information, including comparative information,
that the Board requests for that purpose. In addition, the Board receives
information throughout the year regarding Fund services, fees, expenses and
performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager, including an analysis of the
cost of providing services, (v) whether economies of scale are realized as the
Fund grows and whether fee levels reflect these economies of scale for Fund
investors and (vi) other benefits to the Manager from its relationship with the
Fund. Outlined below is a summary of the principal information considered by the
Board as well as the Board's conclusions.
NATURE, QUALITY, AND EXTENT OF SERVICES. The Board considered information
on the nature and extent of the services provided to the Fund and information
regarding the Manager's key personnel that provide such services. The Manager's
duties include providing the Fund with the services of the portfolio manager and
the Manager's investment team, who provide research, analysis and other advisory
services in regard to the Fund's investments; securities trading services;
oversight of third party service providers; monitoring compliance with
applicable Fund policies and procedures and adherence to the Fund's investment
restrictions. The Manager is responsible for providing certain administrative
services to the Fund as well. Those services include providing and supervising
all administrative and clerical personnel that are necessary in order to provide
effective corporate administration for the Fund; compiling and maintaining
records with respect to the Fund's operations; preparing and filing reports
required by the Securities and Exchange Commission; preparing periodic reports
regarding the operations of the Fund for its shareholders; preparing proxy
materials for shareholder meetings; and preparing the registration statements
required by Federal and state securities laws for the sale of the Fund's shares.
The Manager also provides the Fund with office space, facilities and equipment.
The Board also considered the quality of the services provided and the
quality of the Manager's resources that are available to the Fund. The Board
took account of the fact that the Manager has had over forty years of experience
as an investment adviser and that its assets under management rank it among the
top mutual fund managers in the United States. The Board evaluated the Manager's
administrative, accounting, legal and compliance services, and information the
Board has received regarding the experience and professional qualifications of
the Manager's key personnel and the size and functions of its staff providing
investment management services to the Fund. The Board also considered compliance
reports from the Fund's Chief Compliance Officer. In its evaluation of the
quality of the portfolio management services provided, the Board considered the
experience of Rajeev Bhaman and the Manager's global investment team and
analysts. Mr. Bhaman has had over 16 years of experience managing global
investments. The Board members also considered the totality of their experiences
with the Manager, as directors or trustees of the Fund and other funds advised
by the Manager. In light of the foregoing, the Board concluded that the Fund
benefits from the services provided under the Agreement as a result of the
Manager's experience, reputation, personnel, operations, and resources.
29 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited/Continued
- --------------------------------------------------------------------------------
INVESTMENT PERFORMANCE OF THE MANAGER AND THE FUND. During the year, the
Manager provided information on the performance of the Fund and the Manager at
each Board meeting, including comparative performance information. The Board
also reviewed information, prepared by the Manager and by the independent
consultant, comparing the Fund's historical performance to relevant market
indices and to the performance of other global large-cap growth and global
multi-cap growth funds (including both funds advised by the Manager and funds
advised by other investment advisers). The Board noted that the Fund's one-year,
three-year, five-year and ten-year performance were all better than its peer
group median.
COSTS OF SERVICES AND PROFITS REALIZED BY THE MANAGER. The Board
considered information regarding the Manager's costs in serving as the Fund's
investment adviser, including the costs associated with the personnel and
systems necessary to manage the Fund, and information regarding the Manager's
profitability from its relationship with the Fund. The Board reviewed the fees
paid to the Manager and the other expenses borne by the Fund. The Board also
evaluated the comparability of the fees charged and the services provided to the
Fund to the fees and services for other clients or accounts advised by the
Manager. The independent consultant provided comparative data in regard to the
fees and expenses of the Fund, other global large-cap growth, global large-cap
core and global multi-cap growth funds and other funds with comparable asset
levels and distribution features. The Board noted that the Fund's contractual
and actual management fees and total expenses are all lower than its peer group
median and average. In light of this, and the Fund's strong performance, the
Board concluded that the management fee was reasonable.
ECONOMIES OF SCALE. The Board considered whether the Manager may realize
economies of scale in managing and supporting the Fund, whether those economies
of scale benefit the Fund's shareholders and the current level of Fund assets in
relation to the Fund's management fee breakpoints, which are intended to share
with shareholders economies of scale that may exist as the Fund grows.
OTHER BENEFITS TO THE MANAGER. In addition to considering the profits
realized by the Manager, the Board considered information that was provided
regarding the direct and indirect benefits the Manager receives as a result of
its relationship with the Fund, including compensation paid to the Manager's
affiliates and research provided to the Manager in connection with permissible
brokerage arrangements (soft dollar arrangements). The Board also considered the
nature and quality of services provided by affiliates of the Manager, which it
reviews at other times during the year in connection with the renewal of the
Fund's service agreements. The Board considered that the Manager must be able to
pay and retain experienced professional personnel at competitive rates to
provide services to the Fund and that maintaining the financial viability of the
Manager is important in order for the Manager to continue to provide significant
services to the Fund and its shareholders.
CONCLUSIONS. These factors were also considered by the independent
Trustees meeting separately from the full Board, assisted by experienced counsel
to the Fund and to the independent Trustees. Fund counsel and the independent
Trustees' counsel are both independent of the Manager within the meaning and
intent of the Securities and Exchange Commission Rules.
Based on its review of the information it received and its evaluations
described above, the Board, including a majority of the independent Trustees,
decided to continue the advisory agreement for another year. In arriving at this
decision, the Board did not single out any factor or factors as being more
important than others, but considered all of the factors together. The Board
judged the terms and conditions of the advisory agreement, including the
management fee, in light of all of the surrounding circumstances.
30 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
TRUSTEES AND OFFICERS Unaudited
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- ------------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) HELD WITH THE PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS
FUNDS, LENGTH OF SERVICE, AGE HELD; NUMBER OF PORTFOLIOS IN THE FUNDS COMPLEX CURRENTLY OVERSEEN
INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL,
TRUSTEES COLORADO 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER
RESIGNATION, RETIREMENT, DEATH OR REMOVAL.
WILLIAM L. ARMSTRONG, Chairman of the following private mortgage banking companies: Cherry Creek Mortgage
Chairman of the Board of Company (since 1991), Centennial State Mortgage Company (since 1994), and The El Paso
Trustees (since 2003), and Mortgage Company (since 1993); Chairman of the following private companies:
Trustee (since 1999) Ambassador Media Corporation (since 1984) and Broadway Ventures (since 1984);
Age: 68 Director of the following: Helmerich & Payne, Inc. (oil and gas drilling/production
company) (since 1992), Campus Crusade for Christ (since 1991) and The Lynde and Harry
Bradley Foundation, Inc. (non-profit organization) (since 2002); former Chairman of
the following: Transland Financial Services, Inc. (private mortgage banking company)
(1997-2003), Great Frontier Insurance (insurance agency) (1995-2000), Frontier Real
Estate, Inc. (residential real estate brokerage) (1994-2000) and Frontier Title
(title insurance agency) (1995-2000); former Director of the following: UNUMProvident
(insurance company) (1991-2004), Storage Technology Corporation (computer equipment
company) (1991-2003) and International Family Entertainment (television channel)
(1992-1997); U.S. Senator (January 1979-January 1991). Oversees 38 portfolios in the
OppenheimerFunds complex.
ROBERT G. AVIS, Director and President of A.G. Edwards Capital, Inc. (General Partner of private
Trustee (since 1993) equity funds) (until February 2001); Chairman, President and Chief Executive Officer
Age: 74 of A.G. Edwards Capital, Inc. (until March 2000); Director of A.G. Edwards & Sons,
Inc. (brokerage company) (until 2000) and A.G. Edwards Trust Company (investment
adviser) (until 2000); Vice Chairman and Director of A.G. Edwards, Inc. (until March
1999); Vice Chairman of A.G. Edwards & Sons, Inc. (until March 1999); Chairman of
A.G. Edwards Trust Company (until March 1999) and A.G.E. Asset Management (investment
adviser) (until March 1999). Oversees 38 portfolios in the OppenheimerFunds complex.
GEORGE C. BOWEN, Assistant Secretary and Director of Centennial Asset Management Corporation (December
Trustee (since 1999) 1991-April 1999); President, Treasurer and Director of Centennial Capital Corporation
Age: 69 (June 1989-April 1999); Chief Executive Officer and Director of MultiSource Services,
Inc. (March 1996-April 1999); Mr. Bowen held several positions with the Manager and
with subsidiary or affiliated companies of the Manager (September 1987-April 1999).
Oversees 38 portfolios in the OppenheimerFunds complex.
EDWARD L. CAMERON, Member of The Life Guard of Mount Vernon (George Washington historical site) (since
Trustee (since 1999) June 2000); Director of Genetic ID, Inc. (biotech company) (March 2001-May 2002);
Age: 67 Partner at PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999);
Chairman of Price Waterhouse LLP Global Investment Management Industry Services Group
(July 1994-June 1998). Oversees 38 portfolios in the OppenheimerFunds complex.
JON S. FOSSEL, Director of UNUMProvident (insurance company) (since June 2002); Director of
Trustee (since 1990) Northwestern Energy Corp. (public utility corporation) (since November 2004);
Age: 64 Director of P.R. Pharmaceuticals (October 1999-October 2003); Director of Rocky
Mountain Elk Foundation (non-profit organization) (February 1998-February 2003);
Chairman and Director (until October 1996) and President and Chief Executive Officer
(until October 1995) of the Manager; President, Chief Executive Officer and Director
of the following: Oppenheimer Acquisition Corp. ("OAC") (parent holding company of
the Manager), Shareholders Services, Inc. and Shareholder Financial Services, Inc.
(until October 1995). Oversees 38 portfolios in the OppenheimerFunds complex.
SAM FREEDMAN, Director of Colorado Uplift (charitable organization) (since September 1984). Mr.
Trustee (since 1996) Freedman held several positions with the Manager and with subsidiary or affiliated
Age: 65 companies of the Manager (until October 1994). Oversees 38 portfolios in the
OppenheimerFunds complex.
31 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
TRUSTEES AND OFFICERS Unaudited / Continued
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BEVERLY L. HAMILTON, Trustee of Monterey Institute for International Studies (educational organization)
Trustee (since 2002) (since February 2000); Director of The California Endowment (philanthropic
Age: 59 organization) (since April 2002); Director of Community Hospital of Monterey
Peninsula (since February 2002); Vice Chair of American Funds' Emerging Markets
Growth Fund, Inc. (mutual fund) (since October 1991); President of ARCO Investment
Management Company (February 1991-April 2000); Member of the investment committees of
The Rockefeller Foundation and The University of Michigan; Advisor at Credit Suisse
First Boston's Sprout venture capital unit (venture capital fund) (1994-January
2005); Trustee of MassMutual Institutional Funds (investment company) (1996-June
2004); Trustee of MML Series Investment Fund (investment company) (April 1989-June
2004); Member of the investment committee of Hartford Hospital (2000-2003); and
Advisor to Unilever (Holland) pension fund (2000-2003). Oversees 38 portfolios in
the OppenheimerFunds complex.
ROBERT J. MALONE, Director of Jones International University (educational organization) (since August
Trustee (since 2002) 2005); Chairman, Chief Executive Officer and Director of Steele Street State Bank
Age: 61 (commercial banking) (since August 2003); Director of Colorado UpLIFT (charitable
organization) (since 1986); Trustee of the Gallagher Family Foundation (non-profit
organization) (since 2000); Former Chairman of U.S. Bank-Colorado (subsidiary of U.S.
Bancorp and formerly Colorado National Bank) (July 1996-April 1999); Director of
Commercial Assets, Inc. (real estate investment trust) (1993-2000); Director of Jones
Knowledge, Inc. (2001-July 2004); and Director of U.S. Exploration, Inc. (oil and gas
exploration) (1997-February 2004). Oversees 38 portfolios in the OppenheimerFunds
complex.
F. WILLIAM MARSHALL, JR., Trustee of MassMutual Select Funds (formerly MassMutual Institutional Funds)
Trustee (since 2000) (investment company) (since 1996) and MML Series Investment Fund (investment company)
Age: 63 (since 1996), Trustee and Chairman of the Investment Committee (since 1994) of the
Worcester Polytech Institute (private university); President and Treasurer of the SIS
Funds (private charitable fund) (since January 1999); Chairman of SIS & Family Bank,
F.S.B. (formerly SIS Bank) (commercial bank) (January 1999-July 1999); Member of the
Investment Committee of the Community Foundation of Western Massachusetts
(1998-2003); and Executive Vice President of Peoples Heritage Financial Group, Inc.
(commercial bank) (January 1999-July 1999). Oversees 40 portfolios in the
OppenheimerFunds complex.
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INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH
AND OFFICER FLOOR, NEW YORK, NEW YORK 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN
INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN
OFFICER FOR AN INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR
REMOVAL. MR. MURPHY IS AN INTERESTED TRUSTEE DUE TO HIS POSITIONS WITH
OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES.
JOHN V. MURPHY, Chairman, Chief Executive Officer and Director (since June 2001) and President (since
President and Trustee September 2000) of the Manager; President and Director or Trustee of other
(since 2001) Oppenheimer funds; President and Director of OAC and of Oppenheimer Partnership
Age: 56 Holdings, Inc. (holding company subsidiary of the Manager) (since July 2001);
Director of OppenheimerFunds Distributor, Inc. (subsidiary of the Manager) (since
November 2001); Chairman and Director of Shareholder Services, Inc. and of
Shareholder Financial Services, Inc. (transfer agent subsidiaries of the Manager)
(since July 2001); President and Director of OppenheimerFunds Legacy Program
(charitable trust program established by the Manager) (since July 2001); Director of
the following investment advisory subsidiaries of the Manager: OFI Institutional
Asset Management, Inc., Centennial Asset Management Corporation, Trinity Investment
Management Corporation and Tremont Capital Management, Inc. (since November 2001),
HarbourView Asset Management Corporation and OFI Private Investments, Inc. (since
July 2001); President (since November 2001) and Director (since July 2001) of
Oppenheimer Real Asset Management, Inc.; Executive Vice President of Massachusetts
Mutual Life Insurance Company (OAC's parent company) (since February 1997); Director
of DLB Acquisition Corporation (holding company parent of Babson Capital Management
LLC) (since June 1995); Member of the Investment Company Institute's Board of
Governors (since October 3, 2003); Chief Operating Officer of the Manager (September
2000-June 2001); President and Trustee of MML Series Investment Fund and MassMutual
Select Funds (open-end investment companies) (November 1999-November 2001); Director
of C.M. Life Insurance Company (September 1999-August 2000); President, Chief
Executive Officer and Director of MML Bay State Life Insurance Company (September
1999-August 2000); Director of Emerald Isle Bancorp and Hibernia Savings Bank
(wholly-owned subsidiary of Emerald Isle Bancorp) (June 1989-June 1998). Oversees 87
portfolios in the OppenheimerFunds complex.
32 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
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OTHER OFFICERS OF THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. BHAMAN
THE FUND AND ZACK, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, NEW YORK, NEW YORK
10281-1008, FOR MESSRS. VANDEHEY AND WIXTED, 6803 S. TUCSON WAY, CENTENNIAL, COLORADO
80112-3924. EACH OFFICER SERVES FOR AN INDEFINITE TERM OR UNTIL HIS OR HER
RESIGNATION, RETIREMENT DEATH OR REMOVAL.
RAJEEV BHAMAN, Vice President of the Manager since January 1997; Assistant Vice President of the
Vice President and Manager (March 1996-January 1997). An officer of 2 portfolios in the
Portfolio Manager OppenheimerFunds complex.
(since 2004)
Age: 42
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March 2004);
Vice President and Vice President of OppenheimerFunds Distributor, Inc., Centennial Asset Management
Chief Compliance Officer Corporation and Shareholder Services, Inc. (since June 1983); Vice President and
(since 2004) Director of Internal Audit of the Manager (1997-February 2004). An officer of 87
Age: 55 portfolios in the OppenheimerFunds complex.
BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer of
Treasurer and Principal the following: HarbourView Asset Management Corporation, Shareholder Financial
Financial and Accounting Services, Inc., Shareholder Services, Inc., Oppenheimer Real Asset Management
Officer (since 1999) Corporation, and Oppenheimer Partnership Holdings, Inc. (since March 1999), OFI
Age: 46 Private Investments, Inc. (since March 2000), OppenheimerFunds International Ltd. and
OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management, Inc.
(since November 2000), and OppenheimerFunds Legacy Program (since June 2003);
Treasurer and Chief Financial Officer of OFI Trust Company (trust company subsidiary
of the Manager) (since May 2000); Assistant Treasurer of the following: OAC (since
March 1999), Centennial Asset Management Corporation (March 1999-October 2003) and
OppenheimerFunds Legacy Program (April 2000-June 2003); Principal and Chief Operating
Officer of Bankers Trust Company-Mutual Fund Services Division (March 1995-March
1999). An officer of 87 portfolios in the OppenheimerFunds complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March 2002)
Vice President and of the Manager; General Counsel and Director of the Distributor (since December
Secretary (since 2001) 2001); General Counsel of Centennial Asset Management Corporation (since December
Age: 57 2001); Senior Vice President and General Counsel of HarbourView Asset Management
Corporation (since December 2001); Secretary and General Counsel of OAC (since
November 2001); Assistant Secretary (since September 1997) and Director (since
November 2001) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice
President and Director of Oppenheimer Partnership Holdings, Inc. (since December
2002); Director of Oppenheimer Real Asset Management, Inc. (since November 2001);
Senior Vice President, General Counsel and Director of Shareholder Financial
Services, Inc. and Shareholder Services, Inc. (since December 2001); Senior Vice
President, General Counsel and Director of OFI Private Investments, Inc. and OFI
Trust Company (since November 2001); Vice President of OppenheimerFunds Legacy
Program (since June 2003); Senior Vice President and General Counsel of OFI
Institutional Asset Management, Inc. (since November 2001); Director of
OppenheimerFunds (Asia) Limited (since December 2003); Senior Vice President (May
1985-December 2003), Acting General Counsel (November 2001-February 2002) and
Associate General Counsel (May 1981-October 2001) of the Manager; Assistant Secretary
of the following: Shareholder Services, Inc. (May 1985-November 2001), Shareholder
Financial Services, Inc. (November 1989-November 2001), and OppenheimerFunds
International Ltd. (September 1997-November 2001). An officer of 87 portfolios in the
OppenheimerFunds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION
ABOUT THE FUND'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT CHARGE, UPON
REQUEST, BY CALLING 1.800.981.2871.
33 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
OPPENHEIMER HIGH INCOME FUND/VA
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. Oppenheimer High Income Fund/VA
produced modest total returns and underperformed its benchmark, the Merrill
Lynch High Yield Master Index, for the 12-month reporting period ended December
31, 2005, which returned 2.83%. We attribute the Fund's lagging relative
performance to its focus on corporate bonds with higher credit ratings during a
period that benefited more aggressively positioned investors.
Prior to the reporting period as the economy strengthened, lower-rated
credit appeared to reach fuller valuations. In response, we increased the Fund's
emphasis on higher-rated credits, shifting our focus from "triple-C" rated bonds
to those with "double-B" ratings. In addition, to guard against the potentially
adverse effects of higher interest rates, we generally preferred shorter-term,
higher-coupon securities. While these strategies may have prevented the Fund
from participating more fully in the market rally near year-end 2004, they
nonetheless protected the Fund from heightened volatility in the spring of 2005.
The Fund received positive contributions to performance from its
relatively heavy investments in the telecommunications sector, which benefited
from a surge in mergers-and-acquisitions activity. The Fund's investments in
multiple acquisition targets contributed positively to its performance. In
addition, the Fund also enjoyed attractive returns from its relatively heavy
exposure to the gaming and leisure industry and basic materials sectors,
including chemical producers and steel makers. In the utilities area,
electricity producer Dynegy Holdings, Inc., was a notably positive contributor
to the Fund.
Although the Fund's relative performance benefited from its relatively
light holdings of bonds from airlines and automobile companies, even a small
amount of exposure to these troubled areas held back absolute returns. In
addition, holdings that detracted from the Fund's performance included movie
theater operators, which suffered from weak box-office sales.
COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that follow show the
performance of a hypothetical $10,000 investment in each share class of the Fund
held until December 31, 2005. In the case of non-service shares, performance is
measured over a ten-year period. In the case of service shares, performance is
measured from inception of the class on September 18, 2001. Performance
information does not reflect charges that apply to separate accounts investing
in the Fund. If these charges were taken into account, performance would be
lower. The graph assumes that all dividends and capital gains distributions were
reinvested in additional shares.
The Fund's performance is compared to the performance of the Merrill Lynch
High Yield Master Index, an unmanaged index of U.S. corporate and government
bonds that is a measure of the performance of the high-yield corporate bond
market. Index performance reflects the reinvestment of income but does not
consider the effect of transaction costs, and none of the data in the graphs
shows the effect of taxes. The Fund's performance reflects the effects of the
Fund's business and operating expenses. While index comparisons may be useful to
provide a benchmark for the Fund's performance, it must be noted that the Fund's
investments are not limited to the investments in the index.
4 | OPPENHEIMER HIGH INCOME FUND/VA
NON-SERVICE SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer High Income Fund/VA (Non-Service)
Merrill Lynch High Yield Master Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Oppenheimer High Income Merrill Lynch High
Fund/VA (Non-Service) Yield Master Index
12/31/1995 10,000 10,000
03/31/1996 10,368 10,146
06/30/1996 10,630 10,285
09/30/1996 11,079 10,686
12/31/1996 11,526 11,106
03/31/1997 11,572 11,223
06/30/1997 12,070 11,755
09/30/1997 12,734 12,216
12/31/1997 12,933 12,531
03/31/1998 13,444 12,880
06/30/1998 13,550 13,096
09/30/1998 12,584 12,627
12/31/1998 12,973 12,990
03/31/1999 13,428 13,130
06/30/1999 13,466 13,218
09/30/1999 13,314 13,053
12/31/1999 13,529 13,194
03/31/2000 13,346 12,956
06/30/2000 13,444 13,037
09/30/2000 13,613 13,214
12/31/2000 13,023 12,694
03/31/2001 13,575 13,482
06/30/2001 13,279 13,311
09/30/2001 12,518 12,774
12/31/2001 13,279 13,481
03/31/2002 13,358 13,745
06/30/2002 12,806 12,901
09/30/2002 12,340 12,494
12/31/2002 12,961 13,327
03/31/2003 13,659 14,247
06/30/2003 14,872 15,625
09/30/2003 15,264 16,020
12/31/2003 16,067 16,956
03/31/2004 16,314 17,334
06/30/2004 16,333 17,182
09/30/2004 16,891 17,979
12/31/2004 17,507 18,781
03/31/2005 17,254 18,511
06/30/2005 17,594 19,010
09/30/2005 17,743 19,182
12/31/2005 17,912 19,313
AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/05
1-Year 2.31% 5-Year 6.58% 10-Year 6.00%
SERVICE SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer High Income Fund/VA (Service)
Merrill Lynch High Yield Master Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Oppenheimer High Income Merrill Lynch High
Fund/VA (Service) Yield Master Index
09/18/2001 10,000 10,000
09/30/2001 9,583 10,000
12/31/2001 10,167 10,554
03/31/2002 10,225 10,761
06/30/2002 9,789 10,100
09/30/2002 9,432 9,781
12/31/2002 9,895 10,433
03/31/2003 10,436 11,153
06/30/2003 11,350 12,232
09/30/2003 11,649 12,541
12/31/2003 12,249 13,274
03/31/2004 12,437 13,570
06/30/2004 12,437 13,451
09/30/2004 12,862 14,075
12/31/2004 13,319 14,703
03/31/2005 13,116 14,492
06/30/2005 13,359 14,882
09/30/2005 13,472 15,017
12/31/2005 13,586 15,119
AVERAGE ANNUAL TOTAL RETURNS OF SERVICE SHARES OF THE FUND AT 12/31/05
1-Year 2.01% 5-Year N/A Since Inception (9/18/01) 7.41%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, CALL US AT 1.800.981.2871. THE FUND'S
TOTAL RETURNS SHOULD NOT BE EXPECTED TO BE THE SAME AS THE RETURNS OF OTHER
FUNDS, WHETHER OR NOT BOTH FUNDS HAVE THE SAME PORTFOLIO MANAGERS AND/OR SIMILAR
NAMES. THE FUND'S TOTAL RETURNS DO NOT INCLUDE THE CHARGES ASSOCIATED WITH THE
SEPARATE ACCOUNT PRODUCTS THAT OFFER THIS FUND. SUCH PERFORMANCE WOULD HAVE BEEN
LOWER IF SUCH CHARGES WERE TAKEN INTO ACCOUNT.
5 | OPPENHEIMER HIGH INCOME FUND/VA
FUND EXPENSES
- --------------------------------------------------------------------------------
FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1)
transaction costs, which may include redemption fees, if any; and (2) ongoing
costs, including management fees; distribution and service fees; and other Fund
expenses. These examples are intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning
of the period and held for the entire 6-month period ended December 31, 2005.
ACTUAL EXPENSES. The "actual" lines of the table provide information about
actual account values and actual expenses. You may use the information on this
line for the class of shares you hold, together with the amount you invested, to
estimate the expense that you paid over the period. Simply divide your account
value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00
= 8.60), then multiply the result by the number in the "actual" line under the
heading entitled "Expenses Paid During Period" to estimate the expenses you paid
on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the
table provide information about hypothetical account values and hypothetical
expenses based on the Fund's actual expense ratio, and an assumed rate of return
of 5% per year before expenses, which is not the Fund's actual return. The
hypothetical account values and expenses may not be used to estimate the actual
ending account balance or expenses you paid for the period. You may use this
information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any charges associated with the separate
accounts that offer this Fund. Therefore, the "hypothetical" lines of the table
are useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these separate
account charges were included, your costs would have been higher.
- --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
(7/1/05) (12/31/05) DECEMBER 31, 2005
- --------------------------------------------------------------------------------
Non-Service shares Actual $ 1,000.00 $ 1,018.10 $ 3.82
- --------------------------------------------------------------------------------
Non-Service shares Hypothetical 1,000.00 1,021.42 3.83
- --------------------------------------------------------------------------------
Service shares Actual 1,000.00 1,017.00 5.10
- --------------------------------------------------------------------------------
Service shares Hypothetical 1,000.00 1,020.16 5.10
Hypothetical assumes 5% annual return before expenses.
Expenses are equal to the Fund's annualized expense ratio for that class,
multiplied by the average account value over the period, multiplied by 184/365
(to reflect the one-half year period). Those annualized expense ratio based on
the 6-month period ended December 31, 2005 are as follows:
CLASS EXPENSE RATIOS
- ------------------------------------
Non-Service shares 0.75%
- ------------------------------------
Service shares 1.00
- --------------------------------------------------------------------------------
6 | OPPENHEIMER HIGH INCOME FUND/VA
STATEMENT OF INVESTMENTS December 31, 2005
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--0.1%
- ------------------------------------------------------------------------------
Norse CBO Ltd., Collateralized Bond
Obligations, Series 1A, Cl. C2, 9.342%
Sub. Bonds, 8/13/10 1 (Cost $764,379) $ 764,379 $ 703,229
- ------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES--86.4%
- ------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--30.3%
- ------------------------------------------------------------------------------
AUTO COMPONENTS--1.9%
Collins & Aikman Floorcoverings, Inc.,
9.75% Sr. Sub. Nts., Series B, 2/15/10 800,000 708,000
- ------------------------------------------------------------------------------
Dana Corp., 10.125% Nts., 3/15/10 500,000 430,000
- ------------------------------------------------------------------------------
Dura Operating Corp.:
8.625% Sr. Nts., Series B, 4/15/12 1,592,000 1,321,360
9% Sr. Unsec. Sub. Nts., Series D, 5/1/09 300,000 171,000
- ------------------------------------------------------------------------------
Eagle-Picher, Inc., 9.75% Sr. Nts., 9/1/13 2 200,000 153,000
- ------------------------------------------------------------------------------
Goodyear Tire & Rubber Co. (The):
7.857% Nts., 8/15/11 1,950,000 1,911,000
9% Sr. Nts., 7/1/15 3 845,000 836,550
- ------------------------------------------------------------------------------
Keystone Automotive Operations, Inc.,
9.75% Sr. Unsec. Sub. Nts., 11/1/13 200,000 174,000
- ------------------------------------------------------------------------------
Stoneridge, Inc., 11.50% Sr. Nts., 5/1/12 900,000 920,250
- ------------------------------------------------------------------------------
Tenneco Automotive, Inc.:
8.625% Sr. Unsec. Sub. Nts., 11/15/14 1,050,000 997,500
10.25% Sr. Sec. Nts., Series B, 7/15/13 900,000 987,750
- ------------------------------------------------------------------------------
United Components, Inc.,
9.375% Sr. Sub. Nts., 6/15/13 400,000 400,000
- ------------------------------------------------------------------------------
Visteon Corp.:
7% Sr. Unsec. Nts., 3/10/14 700,000 544,250
8.25% Sr. Unsec. Nts., 8/1/10 600,000 513,000
------------
10,067,660
- ------------------------------------------------------------------------------
AUTOMOBILES--2.7%
Ford Motor Co., 7.45% Bonds, 7/16/31 1,300,000 890,500
- ------------------------------------------------------------------------------
Ford Motor Credit Co.:
5.625% Nts., 10/1/08 3,700,000 3,248,548
5.80% Sr. Unsec. Nts., 1/12/09 1,200,000 1,047,502
7.25% Nts., 10/25/11 400,000 345,933
7.375% Nts., 10/28/09 1,900,000 1,686,427
- ------------------------------------------------------------------------------
General Motors Acceptance Corp.:
5.125% Nts., 5/9/08 2,100,000 1,870,483
5.85% Sr. Unsec. Unsub. Nts., 1/14/09 2,013,000 1,802,086
6.875% Nts., 9/15/11 100,000 91,299
7.25% Nts., 3/2/11 500,000 460,048
8% Bonds, 11/1/31 1,600,000 1,536,670
- ------------------------------------------------------------------------------
General Motors Corp.,
8.375% Sr. Unsec. Debs., 7/15/33 500,000 332,500
- ------------------------------------------------------------------------------
Hertz Corp.:
8.875% Sr. Nts., 1/1/14 3 790,000 808,763
10.50% Sr. Sub. Nts., 1/1/16 3 670,000 693,450
------------
14,814,209
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------
DISTRIBUTORS--0.2%
SGS International, Inc.,
12% Sr. Sub. Nts., 12/15/13 3 $ 895,000 $ 900,945
- ------------------------------------------------------------------------------
DIVERSIFIED CONSUMER SERVICES--0.2%
Alderwoods Group, Inc.,
7.75% Sr. Nts., 9/15/12 1,150,000 1,196,000
- ------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--8.9%
Apcoa, Inc.,
9.25% Sr. Unsec. Sub. Nts., 3/15/08 1 940,000 925,900
- ------------------------------------------------------------------------------
Aztar Corp.,
9% Sr. Unsec. Sub. Nts., 8/15/11 450,000 478,688
- ------------------------------------------------------------------------------
Boyd Gaming Corp.,
8.75% Sr. Sub. Nts., 4/15/12 1,200,000 1,293,000
- ------------------------------------------------------------------------------
CCM Merger, Inc.,
8% Unsec. Nts., 8/1/13 3 1,840,000 1,775,600
- ------------------------------------------------------------------------------
Domino's, Inc.,
8.25% Sr. Unsec. Sub. Nts., 7/1/11 875,000 918,750
- ------------------------------------------------------------------------------
Gaylord Entertainment Co.,
8% Sr. Nts., 11/15/13 700,000 736,750
- ------------------------------------------------------------------------------
Greektown Holdings, Inc.,
10.75% Sr. Nts., 12/1/13 3 1,435,000 1,431,413
- ------------------------------------------------------------------------------
Intrawest Corp.,
7.50% Sr. Unsec. Nts., 10/15/13 1 917,000 933,048
- ------------------------------------------------------------------------------
Isle of Capri Casinos, Inc.:
7% Sr. Unsec. Sub. Nts., 3/1/14 2,700,000 2,646,000
9% Sr. Sub. Nts., 3/15/12 600,000 637,500
- ------------------------------------------------------------------------------
Kerzner International Ltd.,
6.75% Sr. Sub. Nts., 10/1/15 3 970,000 948,175
- ------------------------------------------------------------------------------
Mandalay Resort Group:
9.375% Sr. Sub. Nts., 2/15/10 41,000 45,100
10.25% Sr. Unsec. Sub. Nts., Series B,
8/1/07 800,000 857,000
- ------------------------------------------------------------------------------
MGM Mirage, Inc.:
8.375% Sr. Unsec. Sub. Nts., 2/1/11 3,600,000 3,870,000
9.75% Sr. Unsec. Sub. Nts., 6/1/07 800,000 847,000
- ------------------------------------------------------------------------------
Mohegan Tribal Gaming Authority:
6.125% Sr. Unsec. Sub. Nts., 2/15/13 440,000 434,500
6.375% Sr. Sub. Nts., 7/15/09 800,000 809,000
6.875% Sr. Unsec. Sub. Nts., 2/15/15 915,000 926,438
8% Sr. Sub. Nts., 4/1/12 1,700,000 1,797,750
- ------------------------------------------------------------------------------
NCL Corp., 10.625% Sr. Unsub. Nts.,
7/15/14 600,000 622,500
- ------------------------------------------------------------------------------
Park Place Entertainment Corp.:
7.875% Sr. Sub. Nts., 3/15/10 1,500,000 1,620,000
9.375% Sr. Unsec. Sub. Nts., 2/15/07 1 1,500,000 1,565,625
- ------------------------------------------------------------------------------
Penn National Gaming, Inc.:
6.75% Sr. Unsec. Sub. Nts., 3/1/15 445,000 439,438
6.875% Sr. Sub. Nts., 12/1/11 850,000 862,750
8.875% Sr. Sub. Nts., 3/15/10 600,000 633,000
- ------------------------------------------------------------------------------
Pinnacle Entertainment, Inc.,
8.25% Sr. Unsec. Sub. Nts., 3/15/12 2,750,000 2,856,563
7 | OPPENHEIMER HIGH INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
- ------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE Continued
Six Flags, Inc.:
8.875% Sr. Unsec. Nts., 2/1/10 $ 400,000 $ 392,000
9.625% Sr. Nts., 6/1/14 157,000 153,468
9.75% Sr. Nts., 4/15/13 1,950,000 1,923,188
- ------------------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide,
Inc., 7.875% Sr. Nts., 5/1/12 1,500,000 1,661,250
- ------------------------------------------------------------------------------
Station Casinos, Inc.:
6.50% Sr. Unsec. Sub. Nts., 2/1/14 3,800,000 3,857,000
6.875% Sr. Unsec. Sub. Nts., 3/1/16 480,000 493,200
- ------------------------------------------------------------------------------
Trump Entertainment Resorts, Inc.,
8.50% Sec. Nts., 6/1/15 4 3,200,000 3,136,000
- ------------------------------------------------------------------------------
Universal City Development Partners
Ltd., 11.75% Sr. Nts., 4/1/10 1,000,000 1,126,250
- ------------------------------------------------------------------------------
Vail Resorts, Inc.,
6.75% Sr. Sub. Nts., 2/15/14 1,100,000 1,105,500
- ------------------------------------------------------------------------------
Wynn Las Vegas LLC/Wynn Las Vegas
Capital Corp., 6.625% Nts., 12/1/14 3,600,000 3,519,000
------------
48,278,344
- ------------------------------------------------------------------------------
HOUSEHOLD DURABLES--1.5%
Beazer Homes USA, Inc.,
8.375% Sr. Nts., 4/15/12 500,000 522,500
- ------------------------------------------------------------------------------
D.R. Horton, Inc.,
9.75% Sr. Sub. Nts., 9/15/10 300,000 340,651
- ------------------------------------------------------------------------------
K. Hovnanian Enterprises, Inc.:
7.75% Sr. Unsec. Sub. Nts., 5/15/13 900,000 892,904
8.875% Sr. Sub. Nts., 4/1/12 800,000 835,290
- ------------------------------------------------------------------------------
KB Home:
8.625% Sr. Sub. Nts., 12/15/08 150,000 160,076
9.50% Sr. Unsec. Sub. Nts., 2/15/11 350,000 369,922
- ------------------------------------------------------------------------------
Meritage Homes Corp.,
6.25% Sr. Unsec. Nts., 3/15/15 330,000 301,950
- ------------------------------------------------------------------------------
Sealy Mattress Co.,
8.25% Sr. Sub. Nts., 6/15/14 960,000 993,600
- ------------------------------------------------------------------------------
Standard Pacific Corp.:
7.75% Sr. Nts., 3/15/13 650,000 639,438
9.25% Sr. Sub. Nts., 4/15/12 700,000 723,625
- ------------------------------------------------------------------------------
Toll Corp.,
8.25% Sr. Sub. Nts., 12/1/11 500,000 529,375
- ------------------------------------------------------------------------------
WCI Communities, Inc.,
9.125% Sr. Sub. Nts., 5/1/12 800,000 800,000
- ------------------------------------------------------------------------------
William Lyon Homes, Inc.,
10.75% Sr. Nts., 4/1/13 800,000 830,000
------------
7,939,331
- ------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS--0.2%
Leslie's Poolmart, Inc.,
7.75% Sr. Unsec. Nts., 2/1/13 445,000 448,338
- ------------------------------------------------------------------------------
Rexnord Corp.,
10.125% Sr. Unsec. Sub. Nts., 12/15/12 700,000 756,000
------------
1,204,338
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------
MEDIA--11.4%
Adelphia Communications Corp.:
7.875% Sr. Unsec. Nts., 5/1/09 2 $ 360,000 $ 199,800
8.125% Sr. Nts., Series B, 7/15/03 2 575,000 327,750
8.375% Sr. Nts., Series B, 2/1/08 2 1,000,000 570,000
10.25% Sr. Unsec. Sub. Nts., 6/15/11 2 1,000,000 605,000
10.875% Sr. Unsec. Nts., 10/1/10 2 1,000,000 565,000
- ------------------------------------------------------------------------------
Allbritton Communications Co.,
7.75% Sr. Unsec. Sub. Nts., 12/15/12 700,000 707,000
- ------------------------------------------------------------------------------
AMC Entertainment, Inc.:
8% Sr. Unsec. Sub. Nts., 3/1/14 1,050,000 955,500
9.50% Sr. Unsec. Sub. Nts., 2/1/11 792,000 783,090
- ------------------------------------------------------------------------------
American Media Operations, Inc.:
8.875% Sr. Unsec. Sub. Nts., 1/15/11 900,000 769,500
10.25% Sr. Unsec. Sub. Nts., Series B,
5/1/09 1,200,000 1,101,000
- ------------------------------------------------------------------------------
Block Communications, Inc.,
8.25% Sr. Nts., 12/15/15 3 625,000 621,875
- ------------------------------------------------------------------------------
Carmike Cinemas, Inc.,
7.50% Sr. Sub. Nts., 2/15/14 850,000 800,063
- ------------------------------------------------------------------------------
CBD Media LLC/CBD Finance, Inc.,
8.625% Sr. Sub. Nts., 6/1/11 200,000 205,000
- ------------------------------------------------------------------------------
Charter Communications Holdings I
LLC, 0%/11.75% Sr. Unsec. Unsub.
Nts., 5/15/14 3,5 800,000 448,000
- ------------------------------------------------------------------------------
Charter Communications Holdings II
LLC, 10.25% Sr. Unsec. Nts., 9/15/10 700,000 700,000
- ------------------------------------------------------------------------------
Charter Communications Holdings
LLC/Charter Communications Holdings
Capital Corp., 8.375% Sr. Nts.,
Second Lien, 4/30/14 3 5,950,000 5,950,000
- ------------------------------------------------------------------------------
Cinemark USA, Inc.,
9% Sr. Unsec. Sub. Nts., 2/1/13 400,000 425,000
- ------------------------------------------------------------------------------
Cinemark, Inc.,
0%/9.75% Sr. Unsec. Disc. Nts., 3/15/14 5 1,800,000 1,341,000
- ------------------------------------------------------------------------------
Corus Entertainment, Inc.,
8.75% Sr. Sub. Nts., 3/1/12 800,000 870,000
- ------------------------------------------------------------------------------
CSC Holdings, Inc.:
7.625% Sr. Unsec. Debs., 7/15/18 1,500,000 1,432,500
7.625% Sr. Unsec. Unsub. Nts., Series B,
4/1/11 1,700,000 1,700,000
- ------------------------------------------------------------------------------
Dex Media East LLC/Dex Media East
Finance Co., 9.875% Sr. Unsec. Nts.,
11/15/09 800,000 869,000
- ------------------------------------------------------------------------------
Dex Media West LLC/Dex Media West
Finance Co.:
8.50% Sr. Nts., 8/15/10 700,000 736,750
9.875% Sr. Sub. Nts., 8/15/13 1,172,000 1,306,780
- ------------------------------------------------------------------------------
Dex Media, Inc.:
0%/9% Unsec. Disc. Nts., 11/15/13 5 500,000 400,000
0%/9% Unsec. Disc. Nts., 11/15/13 5 500,000 400,000
8% Unsec. Nts., 11/15/13 6,450,000 6,611,250
8 | OPPENHEIMER HIGH INCOME FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------
MEDIA Continued
EchoStar DBS Corp.:
6.625% Sr. Unsec. Nts., 10/1/14 $ 500,000 $ 481,875
9.125% Sr. Nts., 1/15/09 1,895,000 1,987,381
- ------------------------------------------------------------------------------
Emmis Operating Co.,
6.875% Sr. Unsec. Sub. Nts., 5/15/12 1,200,000 1,198,500
- ------------------------------------------------------------------------------
Granite Broadcasting Corp.,
9.75% Sr. Sec. Nts., 12/1/10 1,057,000 977,725
- ------------------------------------------------------------------------------
Gray Television, Inc.,
9.25% Sr. Sub. Nts., 12/15/11 500,000 536,250
- ------------------------------------------------------------------------------
Lamar Media Corp.:
6.625% Sr. Unsec. Sub. Nts., 8/15/15 1,872,000 1,888,380
7.25% Sr. Unsec. Sub. Nts., 1/1/13 200,000 208,500
- ------------------------------------------------------------------------------
Lin Television Corp.,
6.50% Sr. Sub. Nts., 5/15/13 785,000 756,544
- ------------------------------------------------------------------------------
LodgeNet Entertainment Corp.,
9.50% Sr. Sub. Debs., 6/15/13 400,000 437,000
- ------------------------------------------------------------------------------
Marquee Holdings, Inc.,
0%/12% Sr. Disc. Nts., 8/15/14 5 800,000 514,000
- ------------------------------------------------------------------------------
Mediacom Broadband LLC,
8.50% Sr. Nts., 10/15/15 3 580,000 540,125
- ------------------------------------------------------------------------------
Mediacom LLC/Mediacom Capital Corp.,
9.50% Sr. Unsec. Nts., 1/15/13 1,257,000 1,233,431
- ------------------------------------------------------------------------------
MediaNews Group, Inc.:
6.375% Sr. Sub. Nts., 4/1/14 1,400,000 1,298,500
6.875% Sr. Unsec. Sub. Nts., 10/1/13 800,000 769,000
- ------------------------------------------------------------------------------
News America Holdings, Inc.,
8.875% Sr. Debs., 4/26/23 625,000 779,367
- ------------------------------------------------------------------------------
Paxson Communications Corp.,
10.777% Sr. Sec. Nts., 1/15/13 3,6 1,345,000 1,299,606
- ------------------------------------------------------------------------------
PRIMEDIA, Inc.:
8% Sr. Nts., 5/15/13 1,100,000 936,375
8.875% Sr. Unsec. Nts., 5/15/11 1,157,000 1,073,118
- ------------------------------------------------------------------------------
R.H. Donnelley Corp.,
6.875% Sr. Nts., 1/15/13 2,700,000 2,500,875
- ------------------------------------------------------------------------------
R.H. Donnelley Financial Corp. I,
10.875% Sr. Sub. Nts., 12/15/12 3 1,000,000 1,132,500
- ------------------------------------------------------------------------------
Radio One, Inc., 8.875% Sr. Unsec.
Sub. Nts., Series B, 7/1/11 800,000 848,000
- ------------------------------------------------------------------------------
Rainbow National Services LLC,
8.75% Sr. Nts., 9/1/12 3 900,000 963,000
- ------------------------------------------------------------------------------
Sinclair Broadcast Group, Inc.,
8% Sr. Unsec. Sub. Nts., 3/15/12 4,200,000 4,347,000
- ------------------------------------------------------------------------------
Vertis, Inc.:
9.75% Sr. Sec. Nts., 4/1/09 1,400,000 1,457,750
10.875% Sr. Unsec. Nts., Series B, 6/15/09 600,000 594,000
- ------------------------------------------------------------------------------
WMG Holdings Corp.,
0%/9.50% Sr. Disc. Nts., 12/15/14 5 2,365,000 1,667,325
------------
61,826,985
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------
MULTILINE RETAIL--0.9%
Neiman Marcus Group, Inc.:
9% Sr. Nts., 10/15/15 3 $ 2,845,000 $ 2,923,238
10.375% Sr. Sub. Nts., 10/15/15 3 1,725,000 1,761,656
- ------------------------------------------------------------------------------
Saks, Inc., 8.25% Sr. Unsec. Nts., 11/15/08 185,000 193,325
------------
4,878,219
- ------------------------------------------------------------------------------
SPECIALTY RETAIL--0.8%
Asbury Automotive Group, Inc.,
9% Sr. Sub. Nts., 6/15/12 600,000 603,000
- ------------------------------------------------------------------------------
Atlantic Broadband Finance LLC,
9.375% Sr. Unsec. Sub. Nts., 1/15/14 500,000 448,750
- ------------------------------------------------------------------------------
AutoNation, Inc.,
9% Sr. Unsec. Nts., 8/1/08 900,000 970,875
- ------------------------------------------------------------------------------
Boise Cascade LLC,
7.125% Sr. Unsec. Sub. Nts., 10/15/14 950,000 890,625
- ------------------------------------------------------------------------------
Petco Animal Supplies, Inc.,
10.75% Sr. Sub. Nts., 11/1/11 750,000 815,625
- ------------------------------------------------------------------------------
Rent-A-Center, Inc., 7.50%
Sr. Unsec. Sub. Nts., Series B, 5/1/10 350,000 336,000
------------
4,064,875
- ------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS--1.6%
Invista, Inc., 9.25% Sr. Nts., 5/1/12 3 2,575,000 2,761,688
- ------------------------------------------------------------------------------
Levi Strauss & Co.:
7% Unsec. Nts., 11/1/06 800,000 804,000
8.804% Sr. Unsec. Unsub. Nts., 4/1/12 6 1,400,000 1,417,500
9.75% Sr. Unsec. Unsub. Nts., 1/15/15 1,755,000 1,833,975
- ------------------------------------------------------------------------------
Oxford Industries, Inc.,
8.875% Sr. Nts., 6/1/11 1 500,000 511,875
- ------------------------------------------------------------------------------
Quiksilver, Inc., 6.875% Sr. Nts., 4/15/15 3 975,000 943,313
- ------------------------------------------------------------------------------
Russell Corp., 9.25% Sr. Nts., 5/1/10 600,000 611,250
------------
8,883,601
- ------------------------------------------------------------------------------
CONSUMER STAPLES--3.2%
- ------------------------------------------------------------------------------
BEVERAGES--0.1%
Constellation Brands, Inc., 8.125%
Sr. Sub. Nts., 1/15/12 500,000 522,500
- ------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--0.5%
Jean Coutu Group (PJC), Inc. (The),
8.50% Sr. Sub. Nts., 8/1/14 1,200,000 1,104,000
- ------------------------------------------------------------------------------
Real Time Data Co.,
11% Disc. Nts., 5/31/09 1,2 476,601 --
- ------------------------------------------------------------------------------
Rite Aid Corp.:
8.125% Sr. Sec. Nts., 5/1/10 900,000 920,250
9.50% Sr. Sec. Nts., 2/15/11 450,000 477,000
------------
2,501,250
- ------------------------------------------------------------------------------
FOOD PRODUCTS--1.9%
American Seafoods Group LLC,
10.125% Sr. Sub. Nts., 4/15/10 500,000 526,875
9 | OPPENHEIMER HIGH INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
- ------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------
FOOD PRODUCTS Continued
Del Monte Corp.:
6.75% Sr. Unsec. Sub. Nts., 2/15/15 $ 350,000 $ 343,000
8.625% Sr. Sub. Nts., 12/15/12 1,000,000 1,067,500
- ------------------------------------------------------------------------------
Doane Pet Care Co.:
10.625% Sr. Sub. Nts., 11/15/15 3 875,000 916,563
10.75% Sr. Nts., 3/1/10 1,700,000 1,857,250
- ------------------------------------------------------------------------------
Dole Food Co., Inc.:
8.625% Sr. Nts., 5/1/09 687,000 707,610
8.875% Sr. Unsec. Nts., 3/15/11 146,000 150,380
- ------------------------------------------------------------------------------
Hines Nurseries, Inc.,
10.25% Sr. Unsec. Sub. Nts., 10/1/11 600,000 591,000
- ------------------------------------------------------------------------------
Smithfield Foods, Inc.:
7.625% Sr. Unsec. Sub. Nts., 2/15/08 925,000 959,688
8% Sr. Nts., Series B, 10/15/09 900,000 954,000
- ------------------------------------------------------------------------------
Swift & Co., 10.125% Sr. Nts., 10/1/09 1,000,000 1,037,500
- ------------------------------------------------------------------------------
United Biscuits Finance plc,
10.625% Sr. Sub. Nts., 4/15/11 [EUR] 1,000,000 1,266,767
------------
10,378,133
- ------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS--0.6%
Church & Dwight Co., Inc.,
6% Sr. Unsec. Sub. Nts., 12/15/12 900,000 891,000
- ------------------------------------------------------------------------------
Playtex Products, Inc.:
8% Sr. Sec. Nts., 3/1/11 1,000,000 1,070,000
9.375% Sr. Unsec. Sub. Nts., 6/1/11 1,400,000 1,473,500
------------
3,434,500
- ------------------------------------------------------------------------------
PERSONAL PRODUCTS--0.1%
Elizabeth Arden, Inc.,
7.75% Sr. Unsec. Sub. Nts., 1/15/14 300,000 304,500
- ------------------------------------------------------------------------------
ENERGY--7.8%
- ------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--0.5%
Dresser, Inc.,
9.375% Sr. Sub. Nts., 4/15/11 400,000 423,000
- ------------------------------------------------------------------------------
Hanover Compressor Co.,
8.625% Sr. Unsec. Sub. Nts., 12/15/10 700,000 743,750
- ------------------------------------------------------------------------------
Hanover Equipment Trust,
8.50% Sr. Sec. Nts., Series A, 9/1/08 221,000 230,116
- ------------------------------------------------------------------------------
Petroleum Helicopters, Inc.,
9.375% Sr. Nts., 5/1/09 600,000 635,250
- ------------------------------------------------------------------------------
Universal Compression, Inc.,
7.25% Sr. Unsec. Sub. Nts., 5/15/10 800,000 816,000
------------
2,848,116
- ------------------------------------------------------------------------------
OIL & GAS--7.3%
Arch Western Finance LLC,
6.75% Sr. Nts., 7/1/13 900,000 921,375
- ------------------------------------------------------------------------------
Atlas Pipeline Partners LP,
8.125% Sr. Nts., 12/15/15 3 450,000 456,188
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------
OIL & GAS Continued
Chesapeake Energy Corp.:
6.375% Sr. Unsec. Nts., 6/15/15 $ 550,000 $ 552,750
6.875% Sr. Unsec. Nts., 1/15/16 420,000 432,600
- ------------------------------------------------------------------------------
Clayton Williams Energy, Inc.,
7.75% Sr. Unsec. Nts., 8/1/13 390,000 376,350
- ------------------------------------------------------------------------------
Compton Petroleum Corp.,
7.625% Sr. Nts., 12/1/13 3 670,000 688,425
- ------------------------------------------------------------------------------
Delta Petroleum Corp.,
7% Sr. Unsec. Nts., 4/1/15 265,000 245,788
- ------------------------------------------------------------------------------
El Paso Corp.,
7.875% Sr. Unsec. Nts., 6/15/12 3,207,000 3,319,245
- ------------------------------------------------------------------------------
El Paso Energy Corp.,
7.625% Nts., 7/15/11 350,000 357,875
- ------------------------------------------------------------------------------
El Paso Production Holding Co.,
7.75% Sr. Unsec. Nts., 6/1/13 3,000,000 3,127,500
- ------------------------------------------------------------------------------
Forest Oil Corp., 7.75% Sr. Nts., 5/1/14 1,000,000 1,042,500
- ------------------------------------------------------------------------------
Foundation PA Coal Co.,
7.25% Sr. Unsec. Nts., 8/1/14 850,000 882,938
- ------------------------------------------------------------------------------
Frontier Oil Corp.,
6.625% Sr. Unsec. Nts., 10/1/11 450,000 461,250
- ------------------------------------------------------------------------------
Massey Energy Co.,
6.625% Sr. Nts., 11/15/10 400,000 408,500
- ------------------------------------------------------------------------------
Newfield Exploration Co.:
6.625% Sr. Unsec. Sub. Nts., 9/1/14 1,300,000 1,329,250
8.375% Sr. Sub. Nts., 8/15/12 600,000 645,000
- ------------------------------------------------------------------------------
Pacific Energy Partners LP/Pacific Energy
Finance Corp., 6.25% Sr. Nts., 9/15/15 3 195,000 193,050
- ------------------------------------------------------------------------------
Peabody Energy Corp.,
6.875% Sr. Unsec. Nts., Series B, 3/15/13 1,200,000 1,254,000
- ------------------------------------------------------------------------------
Plains Exploration & Production Co.,
7.125% Sr. Nts., 6/15/14 600,000 624,000
- ------------------------------------------------------------------------------
Premcor Refining Group, Inc.,
9.50% Sr. Nts., 2/1/13 1,000,000 1,115,174
- ------------------------------------------------------------------------------
Range Resources Corp.:
6.375% Sr. Sub. Nts., 3/15/15 445,000 438,325
7.375% Sr. Sub. Nts., 7/15/13 400,000 416,000
- ------------------------------------------------------------------------------
Southern Natural Gas Co.:
7.35% Nts., 2/15/31 2,100,000 2,164,901
8% Sr. Unsub. Nts., 3/1/32 900,000 991,362
8.875% Sr. Nts., 3/15/10 700,000 751,601
- ------------------------------------------------------------------------------
Stone Energy Corp.:
6.75% Sr. Unsec. Sub. Nts., 12/15/14 860,000 819,150
8.25% Sr. Unsec. Sub. Nts., 12/15/11 1,600,000 1,660,000
- ------------------------------------------------------------------------------
Targa Resources, Inc.,
8.50% Sr. Nts., 11/1/13 3 950,000 978,500
- ------------------------------------------------------------------------------
Teekay Shipping Corp.,
8.875% Sr. Nts., 7/15/11 575,000 652,625
- ------------------------------------------------------------------------------
Tennessee Gas Pipeline Co.,
7.50% Bonds, 4/1/17 4,415,000 4,749,706
10 | OPPENHEIMER HIGH INCOME FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------
OIL & GAS Continued
Tesoro Corp.:
6.25% Sr. Nts., 11/1/12 3 $ 715,000 $ 722,150
6.625% Sr. Nts., 11/1/15 3 715,000 725,725
- ------------------------------------------------------------------------------
Transcontinental Gas Pipe Line Corp.,
8.875% Sr. Unsub. Nts., Series B, 7/15/12 200,000 230,000
- ------------------------------------------------------------------------------
Whiting Petroleum Corp.,
7.25% Sr. Sub. Nts., 5/1/12 800,000 814,000
- ------------------------------------------------------------------------------
Williams Cos., Inc. (The):
7.125% Nts., 9/1/11 550,000 574,063
7.625% Nts., 7/15/19 900,000 969,750
8.75% Unsec. Nts., 3/15/32 2,400,000 2,796,000
- ------------------------------------------------------------------------------
Williams Holdings of Delaware, Inc.,
6.50% Nts., 12/1/08 1 300,000 306,000
------------
39,193,616
- ------------------------------------------------------------------------------
FINANCIALS--3.7%
- ------------------------------------------------------------------------------
CAPITAL MARKETS--0.9%
Berry Plastics Corp.,
10.75% Sr. Sub. Nts., 7/15/12 1,900,000 2,052,000
- ------------------------------------------------------------------------------
Charter Communications Holdings I
LLC, 11% Sr. Sec. Nts., 10/1/15 3 1,000,000 845,000
- ------------------------------------------------------------------------------
DeCrane Aircraft Holdings, Inc., 12%
Sr. Unsec. Sub. Nts., Series B, 9/30/08 1 1,550,000 860,250
- ------------------------------------------------------------------------------
E*TRADE Financial Corp.:
7.375% Sr. Nts., 9/15/13 3 291,000 296,093
8% Sr. Nts., 6/15/11 3 825,000 862,125
------------
4,915,468
- ------------------------------------------------------------------------------
COMMERCIAL BANKS--0.2%
Bank Plus Corp., 12% Sr. Nts., 7/18/07 1 517,000 572,578
- ------------------------------------------------------------------------------
Western Financial Bank,
9.625% Unsec. Sub. Debs., 5/15/12 400,000 450,000
------------
1,022,578
- ------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--1.6%
Affinia Group, Inc.,
9% Sr. Unsec. Sub. Nts., 11/30/14 450,000 357,750
- ------------------------------------------------------------------------------
Crystal US Holdings 3 LLC/Crystal US
Sub 3 Corp.:
0%/10.50% Sr. Unsec. Disc. Nts.,
Series B, 10/1/14 5 1,600,000 1,172,000
9.625% Sr. Sub. Nts., 6/15/14 1,560,000 1,743,300
- ------------------------------------------------------------------------------
Global Cash Access LLC/Global Cash
Finance Corp., 8.75% Sr. Sub. Nts., 3/15/12 373,000 398,644
- ------------------------------------------------------------------------------
JSG Funding plc,
7.75% Sr. Unsec. Sub. Nts., 4/1/15 865,000 722,275
- ------------------------------------------------------------------------------
Nell AF Sarl, 8.375% Sr. Nts., 8/15/15 3 3,540,000 3,522,300
- ------------------------------------------------------------------------------
Universal City Florida:
8.375% Sr. Unsec. Nts., 5/1/10 270,000 265,275
9% Sr. Unsec. Nts., 5/1/10 6 270,000 272,700
------------
8,454,244
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------
REAL ESTATE--1.0%
American Casino & Entertainment
Properties LLC, 7.85% Sr. Sec. Nts.,
2/1/12 $ 1,300,000 $ 1,339,000
- ------------------------------------------------------------------------------
Felcor Lodging LP, 9% Sr. Nts., 6/1/11 837,000 920,700
- ------------------------------------------------------------------------------
HMH Properties, Inc.,
7.875% Sr. Nts., Series B, 8/1/08 196,000 199,185
- ------------------------------------------------------------------------------
Host Marriott LP,
6.375% Sr. Nts., Series O, 3/15/15 1,025,000 1,027,563
- ------------------------------------------------------------------------------
MeriStar Hospitality Corp.:
9.125% Sr. Unsec. Nts., 1/15/11 457,000 500,415
10.50% Sr. Unsec. Nts., 6/15/09 350,000 370,563
- ------------------------------------------------------------------------------
Trustreet Properties, Inc.,
7.50% Sr. Unsec. Nts., 4/1/15 1,145,000 1,150,725
------------
5,508,151
- ------------------------------------------------------------------------------
HEALTH CARE--6.2%
- ------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--0.4%
Inverness Medical Innovations, Inc.,
8.75% Sr. Sub. Nts., 2/15/12 600,000 612,000
- ------------------------------------------------------------------------------
Sybron Dental Specialties, Inc.,
8.125% Sr. Sub. Nts., 6/15/12 1 700,000 738,500
- ------------------------------------------------------------------------------
Universal Hospital Services, Inc.,
10.125% Sr. Unsec. Nts., 11/1/11 800,000 832,000
------------
2,182,500
- ------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--5.7%
AmeriPath, Inc.,
10.50% Sr. Unsec. Sub. Nts., 4/1/13 700,000 745,500
- ------------------------------------------------------------------------------
Beverly Enterprises, Inc.,
7.875% Sr. Sub. Nts., 6/15/14 600,000 645,000
- ------------------------------------------------------------------------------
Community Health Systems, Inc.,
6.50% Sr. Unsec. Sub. Nts., 12/15/12 900,000 880,875
- ------------------------------------------------------------------------------
DaVita, Inc.:
6.625% Sr. Unsec. Nts., 3/15/13 890,000 910,025
7.25% Sr. Unsec. Sub. Nts., 3/15/15 1,910,000 1,943,425
- ------------------------------------------------------------------------------
Extendicare Health Services, Inc.:
6.875% Sr. Sub. Nts., 5/1/14 600,000 589,500
9.50% Sr. Unsec. Sub. Nts., 7/1/10 500,000 533,125
- ------------------------------------------------------------------------------
Fresenius Medical Care Capital Trust II,
7.875% Nts., 2/1/08 1,600,000 1,656,000
- ------------------------------------------------------------------------------
Genesis HealthCare Corp.,
8% Sr. Sub. Nts., 10/15/13 400,000 423,000
- ------------------------------------------------------------------------------
HCA, Inc.:
6.30% Sr. Unsec. Nts., 10/1/12 1,400,000 1,413,990
6.375% Nts., 1/15/15 1,500,000 1,523,751
8.75% Sr. Nts., 9/1/10 2,800,000 3,110,792
- ------------------------------------------------------------------------------
HealthSouth Corp.:
7.625% Nts., 6/1/12 1,700,000 1,734,000
8.375% Unsec. Nts., 10/1/11 700,000 715,750
10.75% Sr. Unsec. Sub. Nts., 10/1/08 357,000 358,785
11 | OPPENHEIMER HIGH INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
- ------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES Continued
Medquest, Inc., 11.875% Sr. Unsec. Sub.
Nts., Series B, 8/15/12 $ 900,000 $ 873,000
- ------------------------------------------------------------------------------
National Nephrology Assn.,
9% Sr. Sub. Nts., 11/1/11 3 200,000 222,500
- ------------------------------------------------------------------------------
NDCHealth Corp.,
10.50% Sr. Unsec. Sub. Nts., 12/1/12 600,000 688,500
- ------------------------------------------------------------------------------
Omnicare, Inc.:
6.75% Sr. Sub. Nts., 12/15/13 185,000 188,006
6.875% Sr. Sub. Nts., 12/15/15 285,000 290,700
- ------------------------------------------------------------------------------
PacifiCare Health Systems, Inc.,
10.75% Sr. Unsec. Unsub. Nts., 6/1/09 714,000 765,765
- ------------------------------------------------------------------------------
Psychiatric Solutions, Inc.,
7.75% Sr. Unsec. Sub. Nts., 7/15/15 485,000 503,188
- ------------------------------------------------------------------------------
Quintiles Transnational Corp.,
10% Sr. Sub. Nts., 10/1/13 600,000 672,000
- ------------------------------------------------------------------------------
Rotech Healthcare, Inc.,
9.50% Sr. Unsec. Sub. Nts., 4/1/12 600,000 633,000
- ------------------------------------------------------------------------------
Select Medical Corp.,
7.625% Sr. Unsec. Sub. Nts., 2/1/15 1,575,000 1,523,813
- ------------------------------------------------------------------------------
Tenet Healthcare Corp.:
6.375% Sr. Nts., 12/1/11 1,574,000 1,444,145
7.375% Nts., 2/1/13 57,000 52,868
9.875% Sr. Nts., 7/1/14 2,300,000 2,340,250
- ------------------------------------------------------------------------------
Triad Hospitals, Inc.,
7% Sr. Sub. Nts., 11/15/13 920,000 926,900
- ------------------------------------------------------------------------------
US Oncology, Inc.:
9% Sr. Unsec. Nts., 8/15/12 650,000 698,750
10.75% Sr. Unsec. Sub. Nts., 8/15/14 650,000 724,750
- ------------------------------------------------------------------------------
Vanguard Health Holding Co. I LLC,
0%/11.25% Sr. Disc. Nts., 10/1/15 5 1,060,000 779,100
------------
30,510,753
- ------------------------------------------------------------------------------
PHARMACEUTICALS--0.1%
Valeant Pharmaceuticals International,
Inc., 7% Sr. Nts., 12/15/11 1 800,000 790,000
- ------------------------------------------------------------------------------
INDUSTRIALS--6.0%
- ------------------------------------------------------------------------------
AEROSPACE & DEFENSE--1.4%
Alliant Techsystems, Inc.,
8.50% Sr. Unsec. Sub. Nts., 5/15/11 1 900,000 949,500
- ------------------------------------------------------------------------------
BE Aerospace, Inc.:
8% Sr. Unsec. Sub. Nts., Series B, 3/1/08 300,000 301,500
8.875% Sr. Unsec. Sub. Nts., 5/1/11 57,000 60,135
- ------------------------------------------------------------------------------
L-3 Communications Corp.:
5.875% Sr. Sub. Nts., 1/15/15 684,000 666,900
6.125% Sr. Unsec. Sub. Nts., 1/15/14 1,100,000 1,094,500
6.375% Sr. Sub. Nts., 10/15/15 3 1,280,000 1,283,200
7.625% Sr. Sub. Nts., 6/15/12 500,000 528,750
- ------------------------------------------------------------------------------
TD Funding Corp.,
8.375% Sr. Sub. Nts., 7/15/11 1,200,000 1,269,000
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------
AEROSPACE & DEFENSE Continued
TRW Automotive, Inc.:
9.375% Sr. Nts., 2/15/13 $ 580,000 $ 630,750
11% Sr. Sub. Nts., 2/15/13 454,000 511,885
------------
7,296,120
- ------------------------------------------------------------------------------
AIRLINES--0.1%
AMR Corp., 9% Debs., 8/1/12 700,000 610,750
- ------------------------------------------------------------------------------
ATA Holdings Corp.,
13% Sr. Unsec. Nts., 2/1/09 2 1,575,000 70,875
------------
681,625
- ------------------------------------------------------------------------------
BUILDING PRODUCTS--0.4%
Associated Materials, Inc.,
9.75% Sr. Sub. Nts., 4/15/12 700,000 679,000
- ------------------------------------------------------------------------------
Goodman Global Holding Co., Inc.,
7.875% Sr. Sub. Nts., 12/15/12 3 560,000 523,600
- ------------------------------------------------------------------------------
Jacuzzi Brands, Inc.,
9.625% Sr. Sec. Nts., 7/1/10 544,000 580,720
- ------------------------------------------------------------------------------
Nortek, Inc.,
8.50% Sr. Unsec. Unsub. Nts., 9/1/14 600,000 582,000
------------
2,365,320
- ------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--1.6%
Allied Waste North America, Inc.:
7.25% Sr. Nts., 3/15/15 225,000 228,375
7.375% Sr. Sec. Nts., Series B, 4/15/14 2,250,000 2,199,375
8.875% Sr. Nts., Series B, 4/1/08 1,900,000 2,014,000
9.25% Sr. Sec. Debs., Series B, 9/1/12 283,000 307,763
- ------------------------------------------------------------------------------
American Pad & Paper Co.,
13% Sr. Sub. Nts., Series B, 11/15/05 1,2 200,000 --
- ------------------------------------------------------------------------------
Cenveo Corp.,
7.875% Sr. Sub. Nts., 12/1/13 1,600,000 1,552,000
- ------------------------------------------------------------------------------
Comforce Operating, Inc.,
12% Sr. Nts., Series B, 12/1/07 1 350,000 350,438
- ------------------------------------------------------------------------------
Corrections Corp. of America:
6.25% Sr. Unsec. Sub. Nts., 3/15/13 890,000 885,550
7.50% Sr. Nts., 5/1/11 500,000 520,000
- ------------------------------------------------------------------------------
Mail-Well I Corp.,
9.625% Sr. Nts., 3/15/12 600,000 651,000
------------
8,708,501
- ------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--0.3%
Belden & Blake Corp.,
8.75% Sec. Nts., 7/15/12 650,000 666,250
- ------------------------------------------------------------------------------
Dayton Superior Corp.,
13% Sr. Unsec. Sub. Nts., 6/15/09 100,000 76,000
- ------------------------------------------------------------------------------
General Cable Corp.,
9.50% Sr. Nts., 11/15/10 1 500,000 532,500
12 | OPPENHEIMER HIGH INCOME FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT Continued
UCAR Finance, Inc.,
10.25% Sr. Nts., 2/15/12 $ 400,000 $ 424,500
------------
1,699,250
- ------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--0.1%
Great Lakes Dredge & Dock Co.,
7.75% Sr. Unsec. Sub. Nts., 12/15/13 250,000 226,563
- ------------------------------------------------------------------------------
MACHINERY--1.0%
Douglas Dynamics LLC,
7.75% Sr. Nts., 1/15/12 3 600,000 582,000
- ------------------------------------------------------------------------------
Greenbrier Cos., Inc.,
8.375% Sr. Unsec. Nts., 5/15/15 740,000 758,500
- ------------------------------------------------------------------------------
Manitowoc Co., Inc. (The):
7.125% Sr. Nts., 11/1/13 150,000 154,875
10.50% Sr. Sub. Nts., 8/1/12 520,000 579,800
- ------------------------------------------------------------------------------
Milacron Escrow Corp.,
11.50% Sr. Sec. Nts., 5/15/11 1,700,000 1,462,000
- ------------------------------------------------------------------------------
Navistar International Corp.,
7.50% Sr. Nts., 6/15/11 200,000 191,500
- ------------------------------------------------------------------------------
NMHG Holding Co.,
10% Sr. Nts., 5/15/09 600,000 642,000
- ------------------------------------------------------------------------------
Trinity Industries, Inc.,
6.50% Sr. Nts., 3/15/14 1,000,000 990,000
------------
5,360,675
- ------------------------------------------------------------------------------
MARINE--0.0%
Navigator Gas Transport plc, 10.50%
First Priority Ship Mtg. Nts., 6/30/07 1,2 191,000 216,785
- ------------------------------------------------------------------------------
WPO Shipholding Co. LLC,
12% Sr. Sec. Nts., 7/15/05 1,2 700,000 3,920
------------
220,705
- ------------------------------------------------------------------------------
ROAD & RAIL--0.5%
Kansas City Southern Railway Co. (The),
7.50% Sr. Nts., 6/15/09 500,000 518,750
- ------------------------------------------------------------------------------
Stena AB:
7% Sr. Unsec. Nts., 12/1/16 150,000 138,000
7.50% Sr. Unsec. Nts., 11/1/13 928,000 895,520
9.625% Sr. Nts., 12/1/12 1,100,000 1,200,375
------------
2,752,645
- ------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS--0.5%
United Rentals, Inc.,
7% Sr. Sub. Nts., 2/15/14 3,100,000 2,914,000
- ------------------------------------------------------------------------------
TRANSPORTATION INFRASTRUCTURE--0.1%
Horizon Lines LLC, 9% Nts., 11/1/12 473,000 500,198
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--4.0%
- ------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--0.7%
Lucent Technologies, Inc.,
6.45% Unsec. Debs., 3/15/29 $ 4,500,000 $ 3,881,250
- ------------------------------------------------------------------------------
Orion Network Systems, Inc.,
12.50% Sr. Unsub. Disc. Nts., 1/15/07 2 1,150,000 11,500
------------
3,892,750
- ------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--0.2%
Seagate Technology Hdd Holdings,
8% Sr. Nts., 5/15/09 700,000 738,500
- ------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--1.0%
Flextronics International Ltd.,
6.25% Sr. Sub. Nts., 11/15/14 2,700,000 2,676,375
- ------------------------------------------------------------------------------
Loews Cineplex Entertainment Corp.,
9% Sr. Unsec. Sub. Nts., 8/1/14 875,000 888,125
- ------------------------------------------------------------------------------
Sanmina-SCI Corp.,
6.75% Unsec. Sub. Nts., 3/1/13 920,000 879,750
- ------------------------------------------------------------------------------
Sensus Metering System, Inc.,
8.625% Sr. Unsec. Sub. Nts., 12/15/13 1,000,000 890,000
------------
5,334,250
- ------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--0.0%
Exodus Communications, Inc.,
10.75% Sr. Nts., 12/15/09 1,2 [EUR] 846,550 2,506
- ------------------------------------------------------------------------------
NorthPoint Communications Group, Inc.,
12.875% Nts., 2/15/10 1,2 240,208 --
- ------------------------------------------------------------------------------
PSINet, Inc., 10.50%
Sr. Unsec. Nts., 12/1/06 1,2 [EUR] 1,000,000 --
------------
2,506
- ------------------------------------------------------------------------------
IT SERVICES--1.3%
DI Finance/DynCorp International
LLC, 9.50% Sr. Unsec. Sub. Nts.,
Series B, 2/15/13 1,300,000 1,358,500
- ------------------------------------------------------------------------------
Iron Mountain, Inc.,
8.625% Sr. Unsec. Sub. Nts., 4/1/13 1,000,000 1,047,500
- ------------------------------------------------------------------------------
SunGard Data Systems, Inc.:
9.125% Sr. Unsec. Nts., 8/15/13 3 2,130,000 2,215,200
10.25% Sr. Sub. Nts., 8/15/15 3 2,390,000 2,401,950
------------
7,023,150
- ------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--0.8%
Advanced Micro Devices, Inc.,
7.75% Sr. Unsec. Nts., 11/1/12 3,050,000 3,095,750
- ------------------------------------------------------------------------------
Amkor Technology, Inc.,
9.25% Sr. Unsec. Sub. Nts., 2/15/08 1,431,000 1,395,225
------------
4,490,975
13 | OPPENHEIMER HIGH INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
- ------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------
MATERIALS--10.9%
- ------------------------------------------------------------------------------
CHEMICALS--3.4%
ClimaChem, Inc.,
10.75% Sr. Unsec. Nts.,
Series B, 12/1/07 1 $ 250,000 $ 200,000
- ------------------------------------------------------------------------------
Crompton Corp., 9.875%
Sr. Nts., 8/1/12 800,000 917,000
- ------------------------------------------------------------------------------
Equistar Chemicals LP/Equistar
Funding Corp.:
8.75% Sr. Unsec. Nts., 2/15/09 400,000 423,000
10.125% Sr. Unsec. Nts., 9/1/08 57,000 62,130
10.625% Sr. Unsec. Nts., 5/1/11 1,400,000 1,547,000
- ------------------------------------------------------------------------------
Huntsman Corp./ICI Chemical Co. plc:
10.125% Sr. Unsec. Sub. Nts.,
7/1/09 [EUR] 62,000 76,200
10.125% Sr. Unsec. Sub. Nts., 7/1/09 1,645,000 1,706,688
- ------------------------------------------------------------------------------
Huntsman International LLC:
7.375% Sr. Sub. Nts., 1/1/15 3 2,200,000 2,134,000
9.875% Sr. Nts., 3/1/09 2,000,000 2,120,000
- ------------------------------------------------------------------------------
Huntsman LLC:
11.50% Sr. Unsec. Nts., 7/15/12 6 332,000 377,650
11.625% Sr. Unsec. Nts., 10/15/10 37,000 42,319
- ------------------------------------------------------------------------------
IMC Global, Inc.:
10.875% Sr. Unsec. Nts., 8/1/13 57,000 65,764
10.875% Sr. Unsec. Nts., Series B, 6/1/08 11,000 12,238
- ------------------------------------------------------------------------------
Innophos, Inc.,
9.625% Sr. Sub. Nts., 8/15/14 3,6 1,000,000 1,012,500
- ------------------------------------------------------------------------------
ISP Chemco, Inc.,
10.25% Sr. Unsec. Sub. Nts., 7/1/11 500,000 535,000
- ------------------------------------------------------------------------------
ISP Holdings, Inc.,
10.625% Sr. Sec. Nts., 12/15/09 300,000 316,500
- ------------------------------------------------------------------------------
KI Holdings, Inc., 0%/9.875% Sr. Unsec.
Sub. Disc. Nts., 11/15/14 5 750,000 495,000
- ------------------------------------------------------------------------------
Lyondell Chemical Co.:
9.50% Sec. Nts., 12/15/08 1 34,000 35,785
9.50% Sr. Sec. Nts., 12/15/08 1 59,000 62,171
9.625% Sr. Sec. Nts., Series A, 5/1/07 1,000,000 1,048,750
10.50% Sr. Sec. Nts., 6/1/13 800,000 913,000
11.125% Sr. Sec. Nts., 7/15/12 300,000 337,125
- ------------------------------------------------------------------------------
Millennium America, Inc.,
9.25% Sr. Unsec. Sub. Nts., 6/15/08 711,000 770,546
- ------------------------------------------------------------------------------
Resolution Performance Products LLC:
8% Sr. Sec. Nts., 12/15/09 450,000 461,250
13.50% Sr. Unsec. Sub. Nts., 11/15/10 300,000 318,750
- ------------------------------------------------------------------------------
Rhodia SA,
10.25% Sr. Unsec. Nts., 6/1/10 390,000 429,000
- ------------------------------------------------------------------------------
Rockwood Specialties Group, Inc.:
7.50% Sr. Sub. Nts., 11/15/14 400,000 400,500
10.625% Sr. Unsec. Sub. Nts., 5/15/11 291,000 320,464
- ------------------------------------------------------------------------------
Sterling Chemicals, Inc.,
10% Sr. Sec. Nts., 12/19/07 1,7 173,321 167,255
- ------------------------------------------------------------------------------
Tronox Worldwide LLC/Tronox
Finance Corp., 9.50% Sr. Nts., 12/1/12 3 955,000 978,875
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------
CHEMICALS Continued
Westlake Chemical Corp.,
8.75% Sr. Nts., 7/15/11 $ 260,000 $ 279,500
------------
18,565,960
- ------------------------------------------------------------------------------
CONSTRUCTION MATERIALS--0.2%
NTK Holdings, Inc.,
0%/10.75% Sr. Disc. Nts., 3/1/14 5 1,420,000 894,600
- ------------------------------------------------------------------------------
CONTAINERS & PACKAGING--3.1%
Crown Americas, Inc.,
7.75% Sr. Nts., 11/15/15 3 760,000 790,400
- ------------------------------------------------------------------------------
Graham Packaging Co., Inc.:
8.50% Sr. Unsec. Nts., 10/15/12 350,000 346,500
9.875% Sr. Unsec. Sub. Nts., 10/15/14 600,000 588,000
- ------------------------------------------------------------------------------
Graphic Packaging International Corp.:
8.50% Sr. Nts., 8/15/11 1,000,000 1,007,500
9.50% Sr. Sub. Nts., 8/15/13 700,000 672,000
- ------------------------------------------------------------------------------
Jefferson Smurfit Corp.:
7.50% Sr. Unsec. Unsub. Nts., 6/1/13 350,000 323,750
8.25% Sr. Unsec. Nts., 10/1/12 1,950,000 1,881,750
- ------------------------------------------------------------------------------
MDP Acquisitions plc,
9.625% Sr. Nts., 10/1/12 800,000 804,000
- ------------------------------------------------------------------------------
Owens-Brockway Glass Container, Inc.:
7.75% Sr. Sec. Nts., 5/15/11 500,000 524,375
8.25% Sr. Unsec. Nts., 5/15/13 557,000 577,888
8.75% Sr. Sec. Nts., 11/15/12 1,350,000 1,458,000
8.875% Sr. Sec. Nts., 2/15/09 300,000 314,625
- ------------------------------------------------------------------------------
Pliant Corp.:
11.125% Sr. Sec. Nts., 9/1/09 2 600,000 537,000
11.625% Sr. Sec. Nts., 6/15/09 2,7 540,268 575,385
- ------------------------------------------------------------------------------
Solo Cup Co.,
8.50% Sr. Sub. Nts., 2/15/14 1,050,000 924,000
- ------------------------------------------------------------------------------
Stone Container Corp.:
8.375% Sr. Nts., 7/1/12 750,000 729,375
9.25% Sr. Unsec. Nts., 2/1/08 1,000,000 1,030,000
9.75% Sr. Unsec. Nts., 2/1/11 1,000,000 1,015,000
- ------------------------------------------------------------------------------
Stone Container Finance Co. of Canada II,
7.375% Sr. Unsec. Nts., 7/15/14 300,000 274,500
- ------------------------------------------------------------------------------
Tekni-Plex, Inc.,
10.875% Sr. Sec. Nts., 8/15/12 3 290,000 317,550
- ------------------------------------------------------------------------------
TriMas Corp.,
9.875% Sr. Unsec. Sub. Nts., 6/15/12 2,300,000 1,909,000
------------
16,600,598
- ------------------------------------------------------------------------------
METALS & MINING--2.8%
AK Steel Corp.:
7.75% Sr. Unsec. Nts., 6/15/12 3,007,000 2,728,853
7.875% Sr. Unsec. Nts., 2/15/09 300,000 286,500
- ------------------------------------------------------------------------------
Century Aluminum Co.,
7.50% Sr. Unsec. Nts., 8/15/14 1,000,000 990,000
- ------------------------------------------------------------------------------
Gibraltar Industries, Inc.,
8% Sr. Sub. Nts., 12/1/15 1 575,000 579,313
- ------------------------------------------------------------------------------
IMCO Recycling, Inc.,
10.375% Sr. Sec. Nts., 10/15/10 700,000 768,250
14 | OPPENHEIMER HIGH INCOME FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------
METALS & MINING Continued
IPSCO, Inc., 8.75% Sr. Nts., 6/1/13 $ 300,000 $ 330,000
- ------------------------------------------------------------------------------
Ispat Inland ULC,
9.75% Sr. Sec. Nts., 4/1/14 1,364,000 1,551,550
- ------------------------------------------------------------------------------
Jorgensen (Earle M.) Co.,
9.75% Sr. Sec. Nts., 6/1/12 800,000 860,000
- ------------------------------------------------------------------------------
Kaiser Aluminum & Chemical Corp.,
10.875% Sr. Nts., Series B, 10/15/06 2 1,000,000 1,015,000
- ------------------------------------------------------------------------------
Koppers Industry, Inc.,
9.875% Sr. Sec. Nts., 10/15/13 900,000 981,000
- ------------------------------------------------------------------------------
Northwest Pipeline Corp.,
8.125% Sr. Nts., 3/1/10 200,000 213,000
- ------------------------------------------------------------------------------
Novelis, Inc., 7.25% Sr. Nts., 2/15/15 3,6 2,215,000 2,076,563
- ------------------------------------------------------------------------------
Oregon Steel Mills, Inc.,
10% Sr. Nts., 7/15/09 1,300,000 1,397,500
- ------------------------------------------------------------------------------
Steel Dynamics, Inc.,
9.50% Sr. Nts., 3/15/09 400,000 423,000
- ------------------------------------------------------------------------------
United States Steel Corp.:
9.75% Sr. Nts., 5/15/10 505,000 551,713
10.75% Sr. Nts., 8/1/08 389,000 431,790
------------
15,184,032
- ------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS--1.4%
Abitibi-Consolidated, Inc.,
8.55% Nts., 8/1/10 300,000 305,250
- ------------------------------------------------------------------------------
Appleton Papers, Inc.,
8.125% Sr. Nts., 6/15/11 600,000 586,500
- ------------------------------------------------------------------------------
Buckeye Technologies, Inc.,
8.50% Sr. Nts., 10/1/13 350,000 351,750
- ------------------------------------------------------------------------------
Georgia-Pacific Corp.:
7.75% Sr. Unsec. Nts., 11/15/29 2,000,000 1,835,000
8.125% Sr. Unsec. Nts., 5/15/11 1,300,000 1,308,125
- ------------------------------------------------------------------------------
Inland Fiber Group LLC,
9.625% Sr. Unsec. Nts., 11/15/07 1,2 1,700,000 892,500
- ------------------------------------------------------------------------------
JSG Holding plc,
11.50% Sr. Nts., 10/1/15 3,7 [EUR] 291,088 318,771
- ------------------------------------------------------------------------------
Mercer International, Inc.,
9.25% Sr. Nts., 2/15/13 620,000 525,450
- ------------------------------------------------------------------------------
Norske Skog Canada Ltd.,
7.375% Sr. Unsec. Nts., 3/1/14 600,000 528,000
- ------------------------------------------------------------------------------
Tembec Industries, Inc.:
7.75% Sr. Nts., 3/15/12 700,000 378,000
8.50% Sr. Unsec. Nts., 2/1/11 149,000 83,440
- ------------------------------------------------------------------------------
Western Forest Products, Inc.,
15% Sec. Nts., 7/28/09 3,7 432,430 464,862
------------
7,577,648
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--9.8%
- ------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--3.2%
American Tower Corp.,
7.125% Sr. Unsec. Nts., 10/15/12 $ 500,000 $ 517,500
- ------------------------------------------------------------------------------
Intelsat Bermuda Ltd.,
8.625% Sr. Nts., 1/15/15 3 2,580,000 2,618,700
- ------------------------------------------------------------------------------
MCI, Inc., 7.688% Sr. Unsec. Nts., 5/1/09 6 600,000 621,000
- ------------------------------------------------------------------------------
PanAmSat Corp.,
9% Sr. Unsec. Nts., 8/15/14 1,300,000 1,368,250
- ------------------------------------------------------------------------------
PanAmSat Holding Corp., 0%/10.375%
Sr. Unsec. Disc. Nts., 11/1/14 5 750,000 528,750
- ------------------------------------------------------------------------------
Qwest Capital Funding, Inc.:
7.25% Unsec. Unsub. Nts., 2/15/11 900,000 915,750
7.90% Unsec. Nts., 8/15/10 2,357,000 2,451,280
- ------------------------------------------------------------------------------
Qwest Communications International, Inc.:
3.50% Cv. Sr. Unsec. Bonds, 11/15/25 635,000 738,981
7.25% Sr. Unsec. Sub. Nts., 2/15/11 6 600,000 615,000
- ------------------------------------------------------------------------------
Qwest Corp.,
8.875% Unsec. Unsub. Nts., 3/15/12 6 3,200,000 3,624,000
- ------------------------------------------------------------------------------
Teligent, Inc., 11.50% Sr. Nts., 12/1/07 1,2 400,000 --
- ------------------------------------------------------------------------------
Time Warner Telecom Holdings, Inc.,
9.25% Sr. Unsec. Unsub. Nts., 2/15/14 1,850,000 1,961,000
- ------------------------------------------------------------------------------
Time Warner Telecom, Inc.,
10.125% Sr. Unsec. Sub. Nts., 2/1/11 1,100,000 1,157,750
- ------------------------------------------------------------------------------
Valor Telecommunications Enterprises LLC,
7.75% Sr. Unsec. Sub. Nts., 2/15/15 445,000 467,250
- ------------------------------------------------------------------------------
Winstar Communications, Inc.,
12.75% Sr. Nts., 4/15/10 1,2 1,000,000 15,000
------------
17,600,211
- ------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--6.6%
Alamosa Delaware, Inc.:
8.50% Sr. Nts., 1/31/12 500,000 543,125
11% Sr. Unsec. Nts., 7/31/10 57,000 64,553
12.50% Sr. Unsec. Nts., 2/1/11 100,000 108,500
- ------------------------------------------------------------------------------
American Cellular Corp.,
10% Sr. Nts., Series B, 8/1/11 2,110,000 2,299,900
- ------------------------------------------------------------------------------
American Tower Corp.,
7.50% Sr. Nts., 5/1/12 1,650,000 1,732,500
- ------------------------------------------------------------------------------
American Tower Escrow Corp.,
12.25% Sr. Sub. Disc. Nts., 8/1/08 8 1,400,000 1,102,500
- ------------------------------------------------------------------------------
AT&T Corp.:
9.05% Sr. Unsec. Nts., 11/15/11 6 1,576,000 1,746,418
9.75% Sr. Nts., 11/15/31 6 1,500,000 1,889,774
- ------------------------------------------------------------------------------
CellNet Data Systems, Inc.,
Sr. Unsec. Disc. Nts., 10/1/07 1,2 1,834,000 --
- ------------------------------------------------------------------------------
Centennial Cellular Operating Co.
LLC/Centennial Communications Corp.,
10.125% Sr. Nts., 6/15/13 1,700,000 1,857,250
15 | OPPENHEIMER HIGH INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
- ------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES Continued
Dobson Cellular Systems, Inc.,
8.375% Sr. Sec. Nts., 11/1/11 $ 470,000 $ 501,138
- ------------------------------------------------------------------------------
Dobson Communications Corp.:
8.40% Sr. Nts., 10/15/12 3,6 290,000 290,000
8.875% Sr. Nts., 10/1/13 369,000 369,923
- ------------------------------------------------------------------------------
IWO Holdings, Inc.,
7.90% Sr. Sec. Nts., 1/15/12 6 220,000 229,350
- ------------------------------------------------------------------------------
Loral Skynet Corp.,
14% Sr. Sec. Nts., 10/15/15 7 198,000 239,580
- ------------------------------------------------------------------------------
Nextel Communications, Inc.,
7.375% Sr. Nts., Series D, 8/1/15 7,490,000 7,910,504
- ------------------------------------------------------------------------------
Nextel Partners, Inc.,
8.125% Sr. Nts., 7/1/11 700,000 751,625
- ------------------------------------------------------------------------------
Rogers Wireless, Inc.:
6.375% Sec. Nts., 3/1/14 2,100,000 2,115,750
7.50% Sec. Nts., 3/15/15 900,000 976,500
8% Sr. Sub. Nts., 12/15/12 600,000 638,250
- ------------------------------------------------------------------------------
Rural Cellular Corp.:
9.75% Sr. Sub. Nts., 1/15/10 1,957,000 1,986,355
9.875% Sr. Nts., 2/1/10 2,600,000 2,756,000
- ------------------------------------------------------------------------------
SBA Communications Corp.,
8.50% Sr. Unsec. Nts., Cl. A, 12/1/12 909,000 1,013,535
- ------------------------------------------------------------------------------
SBA Telecommunications, Inc./SBA
Communications Corp.,
0%/9.75% Sr. Disc. Nts., 12/15/11 5 1,540,000 1,436,050
- ------------------------------------------------------------------------------
Triton PCS, Inc.,
8.50% Sr. Unsec. Nts., 6/1/13 1,222,000 1,142,570
- ------------------------------------------------------------------------------
UbiquiTel Operating Co.,
9.875% Sr. Nts., 3/1/11 1,100,000 1,223,750
- ------------------------------------------------------------------------------
US Unwired, Inc.,
10% Sr. Sec. Nts., 6/15/12 500,000 565,000
------------
35,490,400
- ------------------------------------------------------------------------------
UTILITIES--4.5%
- ------------------------------------------------------------------------------
ELECTRIC UTILITIES--2.9%
AES Corp. (The),
8.75% Sr. Sec. Nts., 5/15/13 3 1,150,000 1,257,813
- ------------------------------------------------------------------------------
Calpine Corp., Sr. Sec. Nts., 7/15/07 2,3 1,393,915 1,139,526
- ------------------------------------------------------------------------------
CMS Energy Corp.:
7.50% Sr. Nts., 1/15/09 357,000 369,495
7.75% Sr. Nts., 8/1/10 400,000 421,500
- ------------------------------------------------------------------------------
ESI Tractebel Acquisition Corp.,
7.99% Sec. Bonds, Series B, 12/30/11 842,000 887,929
- ------------------------------------------------------------------------------
FPL Energy National Wind Power LLC:
5.608% Nts., 3/10/24 3 522,925 522,459
6.125% Nts., 3/25/19 3 301,909 296,069
- ------------------------------------------------------------------------------
Midwest Generation LLC,
8.75% Sr. Sec. Nts., 5/1/34 3,900,000 4,314,375
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------
ELECTRIC UTILITIES Continued
Mirant Americas Generation LLC,
8.30% Sr. Unsec. Nts., 5/1/11 2 $ 200,000 $ 254,000
- ------------------------------------------------------------------------------
MSW Energy Holdings II LLC/MSW
Energy Finance Co. II, Inc.,
7.375% Sr. Sec. Nts., Series B, 9/1/10 700,000 722,750
- ------------------------------------------------------------------------------
MSW Energy Holdings LLC/MSW
Energy Finance Co., Inc.,
8.50% Sr. Sec. Nts., 9/1/10 400,000 428,000
- ------------------------------------------------------------------------------
NRG Energy, Inc.,
8% Sr. Sec. Nts., 12/15/13 380,000 425,600
- ------------------------------------------------------------------------------
Reliant Energy, Inc.,
6.75% Sr. Sec. Nts., 12/15/14 500,000 438,750
- ------------------------------------------------------------------------------
Reliant Resources, Inc.:
9.25% Sr. Sec. Nts., 7/15/10 657,000 660,285
9.50% Sr. Sec. Nts., 7/15/13 700,000 705,250
- ------------------------------------------------------------------------------
Sierra Pacific Resources,
6.75% Sr. Nts., 8/15/17 3 2,081,000 2,081,000
- ------------------------------------------------------------------------------
Texas Genco LLC,
6.875% Sr. Nts., 12/15/14 3 594,000 645,975
------------
15,570,776
- ------------------------------------------------------------------------------
ENERGY TRADERS--0.1%
Mirant North America LLC,
7.375% Sr. Nts., 12/31/13 3 360,000 365,850
- ------------------------------------------------------------------------------
GAS UTILITIES--0.1%
SEMCO Energy, Inc.,
7.125% Sr. Nts., 5/15/08 400,000 408,477
- ------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER--1.4%
AES Red Oak LLC:
8.54% Sr. Sec. Bonds, Series A,
11/30/19 1,9 1,007,001 1,112,736
9.20% Sr. Sec. Bonds, Series B, 11/30/29 1 500,000 565,000
- ------------------------------------------------------------------------------
Dynegy Holdings, Inc.:
6.875% Sr. Unsec. Unsub. Nts., 4/1/11 901,000 891,990
8.75% Sr. Nts., 2/15/12 424,000 460,040
10.125% Sr. Sec. Nts., 7/15/13 3 3,100,000 3,518,500
- ------------------------------------------------------------------------------
Mirant Mid-Atlantic LLC,
8.625% Sec. Pass-Through Certificates,
Series A, 6/30/12 2 771,107 833,044
- ------------------------------------------------------------------------------
NorthWestern Corp.,
5.875% Sr. Sec. Nts., 11/1/14 580,000 583,990
------------
7,965,300
------------
Total Corporate Bonds and Notes
(Cost $468,466,952) 467,052,401
16 | OPPENHEIMER HIGH INCOME FUND/VA
VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------
PREFERRED STOCKS--0.8%
- ------------------------------------------------------------------------------
AmeriKing, Inc., 13% Cum. Sr.
Exchangeable, Non-Vtg. 1,10 13,764 $ --
- ------------------------------------------------------------------------------
Dobson Communications Corp., 6%
Cv., Series F (converts into Dobson
Communications Corp., Cl. A common
stock), Non-Vtg. 3 885 151,335
- ------------------------------------------------------------------------------
e.spire Communications, Inc., 12.75%
Jr. Redeemable, Non-Vtg. 1,10 498 50
- ------------------------------------------------------------------------------
Eagle-Picher Holdings, Inc., 11.75% Cum.
Exchangeable, Series B, Non-Vtg. 1,10 8,000 10,000
- ------------------------------------------------------------------------------
ICG Holdings, Inc., 14.25% Exchangeable,
Non-Vtg. 1,10 342 --
- ------------------------------------------------------------------------------
Loral Skynet Corp., 12% Cum., Series A,
Non Vtg. 1,10 1,634 305,967
- ------------------------------------------------------------------------------
McLeodUSA, Inc., 2.50% Cv., Series A 1,10 3,258 130
- ------------------------------------------------------------------------------
Pacific & Atlantic Holdings, Inc., 7.50%
Cum. Cv., Series A 1,7 23,546 --
- ------------------------------------------------------------------------------
Paxson Communications Corp.:
14.25% Cum. Jr. Exchangeable,
Non-Vtg. 1,7 212 1,844,930
14.25% Cum. Jr. Exchangeable,
Non-Vtg. 1,10 1 8,286
- ------------------------------------------------------------------------------
PTV, Inc., 10% Cum., Series A,
Non-Vtg. 1,10 22 46
- ------------------------------------------------------------------------------
Rural Cellular Corp., 11.375% Cum.,
Series B, Non-Vtg. 7 245 282,363
- ------------------------------------------------------------------------------
Sovereign Real Estate Investment Trust,
12% Non-Cum., Series A 1 10,000 1,442,500
------------
Total Preferred Stocks (Cost $4,928,964) 4,045,607
- ------------------------------------------------------------------------------
COMMON STOCKS--2.9%
- ------------------------------------------------------------------------------
Allegheny Technologies, Inc. 3,310 119,425
- ------------------------------------------------------------------------------
Amerada Hess Corp. 895 113,504
- ------------------------------------------------------------------------------
Aon Corp. 3,068 110,295
- ------------------------------------------------------------------------------
Apache Corp. 1,649 112,989
- ------------------------------------------------------------------------------
Apple Computer, Inc. 10 1,549 111,358
- ------------------------------------------------------------------------------
Ashland, Inc. 1,962 113,600
- ------------------------------------------------------------------------------
Avaya, Inc. 10 10,011 106,817
- ------------------------------------------------------------------------------
Broadwing Corp. 10 494 2,989
- ------------------------------------------------------------------------------
Burlington Northern Santa Fe Corp. 1,689 119,615
- ------------------------------------------------------------------------------
Burlington Resources, Inc. 1,510 130,162
- ------------------------------------------------------------------------------
Cebridge Connections Holding LLC 1,10 2,645 --
- ------------------------------------------------------------------------------
Centex Corp. 1,521 108,736
- ------------------------------------------------------------------------------
Charles River Laboratories
International, Inc. 10 8,360 354,213
- ------------------------------------------------------------------------------
Chesapeake Energy Corp. 42,000 1,332,660
- ------------------------------------------------------------------------------
Chubb Corp. 1,157 112,981
VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------
COMMON STOCKS Continued
- ------------------------------------------------------------------------------
CIGNA Corp. 976 $ 109,019
- ------------------------------------------------------------------------------
Citigroup, Inc. 359 17,422
- ------------------------------------------------------------------------------
Compuware Corp. 10 12,250 109,883
- ------------------------------------------------------------------------------
ConocoPhillips 1,800 104,724
- ------------------------------------------------------------------------------
Covad Communications Group, Inc. 10 20,660 20,247
- ------------------------------------------------------------------------------
Coventry Health Care, Inc. 10 1,893 107,825
- ------------------------------------------------------------------------------
Cummins, Inc. 1,250 112,163
- ------------------------------------------------------------------------------
D.R. Horton, Inc. 3,083 110,156
- ------------------------------------------------------------------------------
Devon Energy Corp. 1,800 112,572
- ------------------------------------------------------------------------------
Dobson Communications Corp., Cl. A 10 43,391 325,433
- ------------------------------------------------------------------------------
Dow Chemical Co. (The) 13,000 569,660
- ------------------------------------------------------------------------------
E*TRADE Financial Corp. 10 5,617 117,171
- ------------------------------------------------------------------------------
Eastman Chemical Co. 2,014 103,902
- ------------------------------------------------------------------------------
Edison International, Inc. 2,458 107,193
- ------------------------------------------------------------------------------
EOG Resources, Inc. 1,496 109,762
- ------------------------------------------------------------------------------
Express Scripts, Inc. 10 1,283 107,515
- ------------------------------------------------------------------------------
Globix Corp. 10 11,467 15,480
- ------------------------------------------------------------------------------
Goodyear Tire & Rubber Co. (The) 10 6,580 114,360
- ------------------------------------------------------------------------------
Gulfstream Holding, Inc. 1,10 56 --
- ------------------------------------------------------------------------------
Halliburton Co. 1,711 106,014
- ------------------------------------------------------------------------------
Hartford Financial Services Group, Inc.
(The) 1,274 109,424
- ------------------------------------------------------------------------------
Horizon Natural Resources Co. 1,10 20,000 --
- ------------------------------------------------------------------------------
Huntsman Corp. 1,10 19,570 320,146
- ------------------------------------------------------------------------------
ICO Global Communication
Holdings Ltd. 10 42,107 263,590
- ------------------------------------------------------------------------------
iPCS, Inc. 10 10,189 491,619
- ------------------------------------------------------------------------------
KB Home 1,580 114,803
- ------------------------------------------------------------------------------
Leap Wireless International, Inc. 10 1,913 72,464
- ------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc. 882 113,046
- ------------------------------------------------------------------------------
Lennar Corp., Cl. A 1,902 116,060
- ------------------------------------------------------------------------------
Liberty Global, Inc., Series A 8,343 187,718
- ------------------------------------------------------------------------------
Liberty Global, Inc., Series C 10 8,343 176,872
- ------------------------------------------------------------------------------
Loews Corp. 1,148 108,888
- ------------------------------------------------------------------------------
Loral Space & Communications Ltd. 10 12,388 349,961
- ------------------------------------------------------------------------------
Louisiana-Pacific Corp. 4,064 111,638
- ------------------------------------------------------------------------------
Magellan Health Services, Inc. 10 10,104 317,771
- ------------------------------------------------------------------------------
Manitowoc Co., Inc. (The) 1,039 52,179
- ------------------------------------------------------------------------------
Marathon Oil Corp. 1,844 112,429
- ------------------------------------------------------------------------------
MCI, Inc. 1,629 32,140
- ------------------------------------------------------------------------------
Motorola, Inc. 4,759 107,506
- ------------------------------------------------------------------------------
National Semiconductor Corp. 3,993 103,738
- ------------------------------------------------------------------------------
Nordstrom, Inc. 3,063 114,556
- ------------------------------------------------------------------------------
Norfolk Southern Corp. 2,545 114,092
- ------------------------------------------------------------------------------
Novell, Inc. 10 13,337 117,766
17 | OPPENHEIMER HIGH INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
- ------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------
COMMON STOCKS Continued
- ------------------------------------------------------------------------------
NTL, Inc. 10 18,902 $ 1,286,848
- ------------------------------------------------------------------------------
Nucor Corp. 1,648 109,955
- ------------------------------------------------------------------------------
NVIDIA Corp. 10 3,078 112,532
- ------------------------------------------------------------------------------
Occidental Petroleum Corp. 1,371 109,515
- ------------------------------------------------------------------------------
Office Depot, Inc. 10 3,751 117,781
- ------------------------------------------------------------------------------
Orbital Sciences Corp. 10 2,235 28,697
- ------------------------------------------------------------------------------
Phelps Dodge Corp. 804 115,671
- ------------------------------------------------------------------------------
Pioneer Cos., Inc. 10 10,688 320,319
- ------------------------------------------------------------------------------
Polymer Group, Inc., Cl. A 10 24,040 576,720
- ------------------------------------------------------------------------------
Prandium, Inc. 1,10 62,829 628
- ------------------------------------------------------------------------------
Prudential Financial, Inc. 1,465 107,223
- ------------------------------------------------------------------------------
Pulte Homes, Inc. 2,650 104,304
- ------------------------------------------------------------------------------
Reebok International Ltd. 1,944 113,199
- ------------------------------------------------------------------------------
Rowan Cos., Inc. 3,001 106,956
- ------------------------------------------------------------------------------
Sterling Chemicals, Inc. 1,10 396 4,950
- ------------------------------------------------------------------------------
Sunoco, Inc. 1,354 106,127
- ------------------------------------------------------------------------------
Teco Energy, Inc. 20,000 343,600
- ------------------------------------------------------------------------------
Telewest Global, Inc. 10 76,326 1,818,085
- ------------------------------------------------------------------------------
Telus Corp. 1,079 43,441
- ------------------------------------------------------------------------------
TVMAX Holdings, Inc. 1,10 7,500 7,500
- ------------------------------------------------------------------------------
United States Steel Corp. 2,336 112,292
- ------------------------------------------------------------------------------
UnumProvident Corp. 5,019 114,182
- ------------------------------------------------------------------------------
Valero Energy Corp. 2,212 114,139
- ------------------------------------------------------------------------------
Viatel Holding (Bermuda) Ltd. 1,10 2,701 88
- ------------------------------------------------------------------------------
Western Forest Products, Inc. 10 85,047 133,886
- ------------------------------------------------------------------------------
Williams Cos., Inc. (The) 20,000 463,400
- ------------------------------------------------------------------------------
WRC Media Corp. 1,10 1,353 27
- ------------------------------------------------------------------------------
XO Communications, Inc. 10 2,646 4,816
------------
Total Common Stocks
(Cost $15,081,636) 15,515,132
UNITS
- ------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.1%
- ------------------------------------------------------------------------------
American Tower Corp. Wts.,
Exp. 8/1/08 3,10 1,400 535,870
- ------------------------------------------------------------------------------
ASAT Finance LLC Wts., Exp. 11/1/06 10 500 --
- ------------------------------------------------------------------------------
COLO.com, Inc. Wts., Exp. 3/15/10 1,10 600 --
- ------------------------------------------------------------------------------
Concentric Network Corp. Wts.,
Exp. 12/15/07 1,10 750 --
- ------------------------------------------------------------------------------
DeCrane Aircraft Holdings, Inc. Wts.,
Exp. 9/30/08 1,10 1,750 --
- ------------------------------------------------------------------------------
Diva Systems Corp. Wts., Exp. 3/1/08 1,10 1,500 --
- ------------------------------------------------------------------------------
ICO Global Communication Holdings
Ltd. Wts.:
Exp. 5/16/06 1,10 10,561 158
Exp. 5/16/06 1,10 16 --
VALUE
UNITS SEE NOTE 1
- ------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES Continued
- ------------------------------------------------------------------------------
Imperial Credit Industries, Inc. Wts.,
Exp. 1/31/08 1,10 5,148 $ --
- ------------------------------------------------------------------------------
iPCS, Inc. Wts., Exp. 6/15/10 1,10 750 --
- ------------------------------------------------------------------------------
Long Distance International, Inc.
Wts., Exp. 4/13/08 3,10 800 --
- ------------------------------------------------------------------------------
Loral Space & Communications Ltd.
Wts., Exp. 1/15/07 1,10 800 --
- ------------------------------------------------------------------------------
McLeodUSA, Inc. Wts., Exp. 4/16/07 10 7,220 43
- ------------------------------------------------------------------------------
Ntelos, Inc. Wts., Exp. 8/15/10 1,10 1,000 --
- ------------------------------------------------------------------------------
Pathmark Stores, Inc. Wts.,
Exp. 9/19/10 10 20,000 5,600
- ------------------------------------------------------------------------------
Sterling Chemicals, Inc. Wts.,
Exp. 12/19/08 10 647 65
- ------------------------------------------------------------------------------
XO Communications, Inc., Cl. A
Wts., Exp. 1/16/10 10 5,300 795
- ------------------------------------------------------------------------------
XO Communications, Inc., Cl. B
Wts., Exp. 1/16/10 10 3,975 398
- ------------------------------------------------------------------------------
XO Communications, Inc., Cl. C Wts.,
Exp. 1/16/10 10 3,975 358
------------
Total Rights, Warrants and Certificates
(Cost $86,502) 543,287
PRINCIPAL
AMOUNT
- ------------------------------------------------------------------------------
STRUCTURED NOTES--3.4%
- ------------------------------------------------------------------------------
Dow Jones CDX High Yield Index
Pass-Through Certificates:
Series 3-4, 10.50%, 12/29/09 1,11 $ 1,450,000 1,421,000
Series 5-T3, 8.25%, 12/29/10 1,11 12,000,000 12,030,000
- ------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc., High
Yield Targeted Return Index Securities,
Series 2005-1, 7.651%, 6/15/15 1,11 4,478,309 4,667,652
------------
Total Structured Notes
(Cost $18,068,921) 18,118,652
- ------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--3.8%
- ------------------------------------------------------------------------------
Undivided interest of 1.46% in joint repurchase
agreement (Principal Amount/Value $1,414,200,000,
with a maturity value of $1,414,844,247) with UBS
Warburg LLC, 4.10%, dated 12/30/05, to be repur-
chased at $20,613,386 on 1/3/06, collateralized
by Federal Home Loan Mortgage Corp., 5%,
1/1/35, with a value of $157,513,104 and
Federal National Mortgage Assn., 5%--5.50%,
3/1/34--10/1/35, with a value of
$1,301,420,187
(Cost $20,604,000) 20,604,000 20,604,000
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $528,001,354) 97.5% 526,582,308
- ------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 2.5 13,760,204
--------------------------
NET ASSETS 100.0% $540,342,512
==========================
18 | OPPENHEIMER HIGH INCOME FUND/VA
FOOTNOTES TO STATEMENT OF INVESTMENTS
Principal amount is reported in U.S. Dollars, except for those denoted in the
following currency:
EUR Euro
1. Illiquid or restricted security. The aggregate value of illiquid or
restricted securities as of December 31, 2005 was $35,656,472, which represents
6.60% of the Fund's net assets, of which $320,774 is considered restricted. See
Note 7 of Notes to Financial Statements.
2. Issue is in default. Non-income producing. See Note 1 of Notes to Financial
Statements.
3. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $65,691,084 or 12.16% of the Fund's net
assets as of December 31, 2005.
4. Received as the result of issuer reorganization.
5. Denotes a step bond: a zero coupon bond that converts to a fixed or variable
interest rate at a designated future date.
6. Represents the current interest rate for a variable or increasing rate
security.
7. Interest or dividend is paid-in-kind.
8. Zero coupon bond reflects effective yield on the date of purchase.
9. All or a portion of the security is held in collateralized accounts to cover
initial margin requirements on open futures sales contracts. The aggregate
market value of such securities is $1,027,650. See Note 6 of Notes to Financial
Statements.
10. Non-income producing security.
11. Interest rate represents a weighted average rate comprised of the interest
rates of the underlying securities.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19 | OPPENHEIMER HIGH INCOME FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 31, 2005
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
ASSETS
- ---------------------------------------------------------------------------------------------------------------
Investments, at value (cost $528,001,354)--see accompanying statement of investments $ 526,582,308
- ---------------------------------------------------------------------------------------------------------------
Cash 3,092,534
- ---------------------------------------------------------------------------------------------------------------
Cash used for collateral on futures 700,000
- ---------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest, dividends and principal paydowns 10,012,330
Shares of beneficial interest sold 437,725
Other 12,853
--------------
Total assets 540,837,750
- ---------------------------------------------------------------------------------------------------------------
LIABILITIES
- ---------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Shares of beneficial interest redeemed 301,469
Distribution and service plan fees 92,666
Shareholder communications 52,489
Legal, auditing and other professional fees 21,182
Trustees' compensation 16,620
Transfer and shareholder servicing agent fees 1,777
Futures margins 776
Other 8,259
--------------
Total liabilities 495,238
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS $ 540,342,512
==============
- ---------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- ---------------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 64,129
- ---------------------------------------------------------------------------------------------------------------
Additional paid-in capital 608,542,721
- ---------------------------------------------------------------------------------------------------------------
Accumulated net investment income 38,892,209
- ---------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions (105,687,479)
- ---------------------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments and translation of assets and liabilities
denominated in foreign currencies (1,469,068)
--------------
NET ASSETS $ 540,342,512
==============
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- ---------------------------------------------------------------------------------------------------------------
Non-Service Shares:
Net asset value, redemption price per share and offering price per share
(based on net assets of $384,726,106 and 45,583,621 shares of beneficial interest outstanding) $ 8.44
- ---------------------------------------------------------------------------------------------------------------
Service Shares:
Net asset value, redemption price per share and offering price per share
(based on net assets of $155,616,406 and 18,545,426 shares of beneficial interest outstanding) $ 8.39
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20 | OPPENHEIMER HIGH INCOME FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 31, 2005
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- ---------------------------------------------------------------------------------------------------------------
Interest $ 43,816,440
- ---------------------------------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $117) 332,760
- ---------------------------------------------------------------------------------------------------------------
Portfolio lending fees 50
--------------
Total investment income 44,149,250
- ---------------------------------------------------------------------------------------------------------------
EXPENSES
- ---------------------------------------------------------------------------------------------------------------
Management fees 4,222,535
- ---------------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Service shares 352,904
- ---------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service shares 10,583
Service shares 10,202
- ---------------------------------------------------------------------------------------------------------------
Shareholder communications:
Non-Service shares 53,828
Service shares 17,661
- ---------------------------------------------------------------------------------------------------------------
Trustees' compensation 15,659
- ---------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 12,554
- ---------------------------------------------------------------------------------------------------------------
Administration service fees 1,500
- ---------------------------------------------------------------------------------------------------------------
Other 48,023
--------------
Total expenses 4,745,449
Less reduction to custodian expenses (12,554)
--------------
Net expenses 4,732,895
- ---------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 39,416,355
- ---------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- ---------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments 5,084,552
Closing and expiration of futures contracts (302,824)
Foreign currency transactions (17,921)
Swap contracts 29,533
--------------
Net realized gain 4,793,340
- ---------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments (31,141,023)
Translation of assets and liabilities denominated in foreign currencies (546,869)
Futures contracts (131,935)
Swap contracts 90,514
--------------
Net change in unrealized depreciation (31,729,313)
- ---------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 12,480,382
==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
21 | OPPENHEIMER HIGH INCOME FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2005 2004
- ---------------------------------------------------------------------------------------------------------------
OPERATIONS
- ---------------------------------------------------------------------------------------------------------------
Net investment income $ 39,416,355 $ 38,670,671
- ---------------------------------------------------------------------------------------------------------------
Net realized gain (loss) 4,793,340 (682,850)
- ---------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) (31,729,313) 10,279,974
-------------------------------
Net increase in net assets resulting from operations 12,480,382 48,267,795
- ---------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Non-Service shares (29,392,362) (29,416,204)
Service shares (8,541,230) (5,469,874)
- ---------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from beneficial interest
transactions:
Non-Service shares (74,783,236) (10,547,360)
Service shares 27,161,237 54,117,983
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS
- ---------------------------------------------------------------------------------------------------------------
Total increase (decrease) (73,075,209) 56,952,340
- ---------------------------------------------------------------------------------------------------------------
Beginning of period 613,417,721 556,465,381
-------------------------------
End of period (including accumulated net investment income of $38,892,209
and $37,454,171, respectively) $ 540,342,512 $ 613,417,721
===============================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22 | OPPENHEIMER HIGH INCOME FUND/VA
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 2001
- ------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.80 $ 8.61 $ 7.51 $ 8.54 $ 9.27
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .57 1 .58 1 .60 .58 .84
Net realized and unrealized gain (loss) (.37) .15 1.09 (.76) (.62)
---------------------------------------------------------------------
Total from investment operations .20 .73 1.69 (.18) .22
- ------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.56) (.54) (.59) (.85) (.95)
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 8.44 $ 8.80 $ 8.61 $ 7.51 $ 8.54
=====================================================================
- ------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 2.31% 8.97% 23.96% (2.40)% 1.97%
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 384,726 $ 479,405 $ 480,112 $ 345,670 $ 344,788
- ------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 444,477 $ 460,877 $ 396,858 $ 335,894 $ 347,723
- ------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 6.79% 6.91% 8.31% 8.29% 9.94%
Total expenses 0.75% 4 0.75% 4 0.76% 4 0.77% 4 0.79% 4
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 64% 51% 48% 75% 46%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Total returns are not annualized for
periods less than one full year. Total return information does not reflect
expenses that apply at the separate account level or to related insurance
products. Inclusion of these charges would reduce the total return figures for
all periods shown. Returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23 | OPPENHEIMER HIGH INCOME FUND/VA
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SERVICE SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 2001 1
- ------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.76 $ 8.58 $ 7.49 $ 8.54 $ 8.40
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .55 2 .56 2 .61 .88 .20
Net realized and unrealized gain (loss) (.38) .15 1.06 (1.08) (.06)
---------------------------------------------------------------------
Total from investment operations .17 .71 1.67 (.20) .14
- ------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.54) (.53) (.58) (.85) --
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 8.39 $ 8.76 $ 8.58 $ 7.49 $ 8.54
=====================================================================
- ------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 2.01% 8.73% 23.79% (2.67)% 1.67%
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 155,617 $ 134,013 $ 76,354 $ 17,705 $ 3
- ------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 141,287 $ 101,464 $ 41,246 $ 5,602 $ 2
- ------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 6.54% 6.63% 7.84% 8.91% 12.51%
Total expenses 1.00% 5 1.01% 5 1.04% 5 1.02% 5,6 0.96% 5
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 64% 51% 48% 75% 46%
1. For the period from September 18, 2001 (inception of offering) to December
31, 2001.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Total returns are not annualized for
periods less than one full year. Total return information does not reflect
expenses that apply at the separate account level or to related insurance
products. Inclusion of these charges would reduce the total return figures for
all periods shown. Returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
4. Annualized for periods of less than one full year.
5. Reduction to custodian expenses less than 0.01%.
6. Voluntary waiver of transfer agent fees less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24 | OPPENHEIMER HIGH INCOME FUND/VA
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer High Income Fund/VA (the Fund) is a separate series of Oppenheimer
Variable Account Funds, an open-end management investment company registered
under the Investment Company Act of 1940, as amended. The Fund's investment
objective is to seek a high level of current income from investments in
high-yield fixed-income securities. The Fund's investment advisor is
OppenheimerFunds, Inc. (the Manager).
The Fund offers two classes of shares. Both classes are sold at their
offering price, which is the net asset value per share, to separate investment
accounts of participating insurance companies as an underlying investment for
variable life insurance policies, variable annuity contracts or other investment
products. The class of shares designated as Service shares is subject to a
distribution and service plan. Both classes of shares have identical rights and
voting privileges with respect to the Fund in general and exclusive voting
rights on matters that affect that class alone. Earnings, net assets and net
asset value per share may differ due to each class having its own expenses, such
as transfer and shareholder servicing agent fees and shareholder communications,
directly attributable to that class.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for business. Securities may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. Securities listed or traded on National
Stock Exchanges or other domestic exchanges are valued based on the last sale
price of the security traded on that exchange prior to the time when the Fund's
assets are valued. Securities traded on NASDAQ are valued based on the closing
price provided by NASDAQ prior to the time when the Fund's assets are valued. In
the absence of a sale, the security is valued at the last sale price on the
prior trading day, if it is within the spread of the closing "bid" and "asked"
prices, and if not, at the closing bid price. Securities traded on foreign
exchanges are valued based on the last sale price on the principal exchange on
which the security is traded, in the country that is identified by the portfolio
pricing service, prior to the time when the Fund's assets are valued. In the
absence of a sale, the security is valued at the official closing price on the
principal exchange. Corporate, government and municipal debt instruments having
a remaining maturity in excess of sixty days and all mortgage-backed securities
will be valued at the mean between the "bid" and "asked" prices. Futures
contracts traded on a commodities or futures exchange will be valued at the
final settlement price or official closing price on the principal exchange as
reported by such principal exchange at its trading session ending at, or most
recently prior to, the time when the Fund's assets are valued. Securities
(including restricted securities) for which market quotations are not readily
available are valued at their fair value. Foreign and domestic securities whose
values have been materially affected by what the Manager identifies as a
significant event occurring before the Fund's assets are valued but after the
close of their respective exchanges will be fair valued. Fair value is
determined in good faith using consistently applied procedures under the
supervision of the Board of Trustees. Short-term "money market type" debt
securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).
- --------------------------------------------------------------------------------
STRUCTURED NOTES. The Fund invests in structured notes whose market values,
interest rates and/or redemption prices are linked to the performance of
underlying foreign currencies, interest rate spreads, stock market indices,
prices of individual securities, commodities or other financial instruments or
the occurrence of other specific events. The structured notes are often
leveraged, increasing the volatility of each note's market value relative to the
change in the underlying linked financial element or event. Fluctuations in
value of these securities are recorded as unrealized gains and losses in the
accompanying Statement of Operations. The Fund records a realized gain or loss
when a structured note is sold or matures. As of December 31, 2005, the market
value of these securities comprised 3.4% of the Fund's net assets and resulted
in unrealized cumulative gains of $49,731.
25 | OPPENHEIMER HIGH INCOME FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
SECURITY CREDIT RISK. The Fund invests in high-yield securities, which may be
subject to a greater degree of credit risk, market fluctuations and loss of
income and principal, and may be more sensitive to economic conditions than
lower-yielding, higher-rated fixed-income securities. The Fund may acquire
securities in default, and is not obligated to dispose of securities whose
issuers subsequently default. As of December 31, 2005, securities with an
aggregate market value of $7,987,591, representing 1.48% of the Fund's net
assets, were in default.
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in
U.S. dollars. The values of securities denominated in foreign currencies and
amounts related to the purchase and sale of foreign securities and foreign
investment income are translated into U.S. dollars as of the close of The New
York Stock Exchange (the Exchange), normally 4:00 P.M. Eastern time, on each day
the Exchange is open for business. Foreign exchange rates may be valued
primarily using dealer supplied valuations or a portfolio pricing service
authorized by the Board of Trustees.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
values of assets and liabilities, including investments in securities at fiscal
period end, resulting from changes in exchange rates.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated funds
advised by the Manager, may transfer uninvested cash balances into joint trading
accounts on a daily basis. These balances are invested in one or more repurchase
agreements. Securities pledged as collateral for repurchase agreements are held
by a custodian bank until the agreements mature. Each agreement requires that
the market value of the collateral be sufficient to cover payments of interest
and principal. In the event of default by the other party to the agreement,
retention of the collateral may be subject to legal proceedings.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders.
The tax components of capital shown in the following table represent
distribution requirements the Fund must satisfy under the income tax
regulations, losses the Fund may be able to offset against income and gains
realized in future years and unrealized appreciation or depreciation of
securities and other investments for federal income tax purposes.
26 | OPPENHEIMER HIGH INCOME FUND/VA
NET UNREALIZED
DEPRECIATION BASED
ON COST OF SECURITIES
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED AND OTHER INVESTMENTS
NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME
INCOME GAIN CARRYFORWARD 1,2,3,4 TAX PURPOSES
-------------------------------------------------------------------------------
$39,644,253 $ -- $104,343,697 $2,952,821
1. As of December 31, 2005, the Fund had $104,165,081 of net capital loss
carryforwards available to offset future realized capital gains, if any, and
thereby reduce future taxable gain distributions. As of December 31, 2005,
details of the capital loss carryforwards were as follows:
EXPIRING
-------------------------
2006 $ 243,089
2007 4,933,260
2008 11,572,833
2009 22,696,701
2010 56,061,391
2011 8,529,303
2012 128,504
-------------
Total $ 104,165,081
=============
2. As of December 31, 2005, the Fund had $178,616 of post-October losses
available to offset future realized capital gains, if any. Such losses, if
unutilized, will expire in 2014.
3. During the fiscal year ended December 31, 2005, the Fund utilized $3,158,488
of capital loss carryforward to offset capital gains realized in that fiscal
year.
4. During the fiscal year ended December 31, 2004, the Fund did not utilize any
capital loss carryforward.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Fund. Accordingly, the
following amounts have been reclassified for December 31, 2005. Net assets of
the Fund were unaffected by the reclassifications.
REDUCTION TO
REDUCTION TO ACCUMULATED NET
ACCUMULATED NET REALIZED LOSS ON
INVESTMENT INCOME INVESTMENTS
-----------------------------------------------
$44,725 $44,725
The tax character of distributions paid during the years ended December 31, 2005
and December 31, 2004 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2005 DECEMBER 31, 2004
------------------------------------------------------------------------
Distributions paid from:
Ordinary income $37,933,592 $34,886,078
The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for
federal income tax purposes as of December 31, 2005 are noted below. The primary
difference between book and tax appreciation or depreciation of securities and
other investments, if applicable, is attributable to the tax deferral of losses
or tax realization of financial statement unrealized gain or loss.
Federal tax cost of securities $ 529,534,792
Federal tax cost of other investments (223,325)
---------------
Total federal tax cost $ 529,311,467
===============
Gross unrealized appreciation $ 19,107,542
Gross unrealized depreciation (22,060,363)
---------------
Net unrealized depreciation $ (2,952,821)
===============
27 | OPPENHEIMER HIGH INCOME FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred
compensation plan for independent trustees that enables trustees to elect to
defer receipt of all or a portion of the annual compensation they are entitled
to receive from the Fund. For purposes of determining the amount owed to the
Trustee under the plan, deferred amounts are treated as though equal dollar
amounts had been invested in shares of the Fund or in other Oppenheimer funds
selected by the Trustee. The Fund purchases shares of the funds selected for
deferral by the Trustee in amounts equal to his or her deemed investment,
resulting in a Fund asset equal to the deferred compensation liability. Such
assets are included as a component of "Other" within the asset section of the
Statement of Assets and Liabilities. Deferral of trustees' fees under the plan
will not affect the net assets of the Fund, and will not materially affect the
Fund's assets, liabilities or net investment income per share. Amounts will be
deferred until distributed in accordance to the Plan.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date. Income and capital gain distributions, if
any, are declared and paid annually.
- --------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and amortization
of premium, is accrued as earned.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. Custodian Fees and Expenses in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts to the extent they are not
offset by positive cash balances maintained by the Fund. The Reduction to
Custodian Expenses line item, if applicable, represents earnings on cash
balances maintained by the Fund during the period. Such interest expense and
other custodian fees may be paid with these earnings. At December 31, 2005, the
Fund had $13,062 of such earnings on cash balances available to offset future
custodian fees or interest expenses incurred during the next fiscal year.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
28 | OPPENHEIMER HIGH INCOME FUND/VA
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
YEAR ENDED DECEMBER 31, 2005 YEAR ENDED DECEMBER 31, 2004
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------------
NON-SERVICE SHARES
Sold 10,721,772 $ 89,596,389 23,243,919 $ 196,620,675
Dividends and/or distributions reinvested 3,524,264 29,392,362 3,591,722 29,416,204
Redeemed (23,117,209) (193,771,987) (28,128,136) (236,584,239)
------------------------------------------------------------------
Net decrease (8,871,173) $ (74,783,236) (1,292,495) $ (10,547,360)
==================================================================
- ---------------------------------------------------------------------------------------------------------------------
SERVICE SHARES
Sold 9,211,332 $ 76,634,515 12,247,468 $ 103,415,502
Dividends and/or distributions reinvested 1,027,826 8,541,230 669,507 5,469,874
Redeemed (6,989,741) (58,014,508) (6,517,361) (54,767,393)
------------------------------------------------------------------
Net increase 3,249,417 $ 27,161,237 6,399,614 $ 54,117,983
==================================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended December 31, 2005, were as
follows:
PURCHASES SALES
---------------------------------------------------------------------
Investment securities $ 324,215,324 $ 332,390,593
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee at an
annual rate of 0.75% of the first $200 million of average annual net assets,
0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the
next $200 million, 0.60% of the next $200 million and 0.50% of average annual
net assets over $1 billion.
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the year ended December 31, 2005, the Fund paid
$20,741 to OFS for services to the Fund.
Additionally, funds offered in variable annuity separate accounts are
subject to minimum fees of $10,000 per class, for class level assets of $10
million or more. Each class is subject to the minimum fee in the event that the
per account fee does not equal or exceed the applicable minimum fee.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN FOR SERVICE SHARES. The Fund has adopted a
Distribution and Service Plan for Service shares to pay OppenheimerFunds
Distributor, Inc. (the Distributor), for distribution related services, personal
service and account maintenance for the Fund's Service shares. Under the plan,
payments are made periodically at an annual rate of up to 0.25% of the average
annual net assets of Service shares of the Fund. The Distributor currently uses
all of those fees to compensate sponsor(s) of the insurance product that offers
Fund shares, for providing personal service and maintenance of accounts of their
variable contract owners that hold Service shares. The impact of the service
plan is to increase operating expenses of the Service shares, which results in
lower performance compared to the Fund's shares that are not subject to a
service fee. Fees incurred by the Fund under the plan are detailed in the
Statement of Operations.
29 | OPPENHEIMER HIGH INCOME FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit
transfer and shareholder servicing agent fees for all classes to 0.35% of
average annual net assets per class. This undertaking may be amended or
withdrawn at any time.
- --------------------------------------------------------------------------------
5. FOREIGN CURRENCY CONTRACTS
A foreign currency contract is a commitment to purchase or sell a foreign
currency at a future date, at a negotiated rate. The Fund may enter into foreign
currency contracts to settle specific purchases or sales of securities
denominated in a foreign currency and for protection from adverse exchange rate
fluctuation. Risks to the Fund include the potential inability of the
counterparty to meet the terms of the contract.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using prevailing foreign currency exchange rates.
Unrealized appreciation and depreciation on foreign currency contracts are
reported in the Statement of Assets and Liabilities as a receivable or payable
and in the Statement of Operations with the change in unrealized appreciation or
depreciation.
The Fund may realize a gain or loss upon the closing or settlement of the
foreign transaction. Contracts closed or settled with the same broker are
recorded as net realized gains or losses. Such realized gains and losses are
reported with all other foreign currency gains and losses in the Statement of
Operations.
As of December 31, 2005, the Fund had no outstanding foreign currency
contracts.
- --------------------------------------------------------------------------------
6. FUTURES CONTRACTS
A futures contract is a commitment to buy or sell a specific amount of a
commodity or financial instrument at a negotiated price on a stipulated future
date. Futures contracts are traded on a commodity exchange. The Fund may buy and
sell futures contracts that relate to broadly based securities indices
(financial futures) or debt securities (interest rate futures) in order to gain
exposure to or protection from changes in market value of stocks and bonds or
interest rates. The Fund may also buy or write put or call options on these
futures contracts.
The Fund generally sells futures contracts as a hedge against increases in
interest rates and decreases in market value of portfolio securities. The Fund
may also purchase futures contracts to gain exposure to market changes as it may
be more efficient or cost effective than actually buying securities.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities (initial margin) in an amount equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Fund each day. The variation margin payments are equal
to the daily changes in the contract value and are recorded as unrealized gains
and losses. The Fund recognizes a realized gain or loss when the contract is
closed or has expired.
Cash held by the broker to cover initial margin requirements on open
futures contracts is noted in the Statement of Assets and Liabilities.
Securities held in collateralized accounts to cover initial margin requirements
on open futures contracts are noted in the Statement of Investments. The
Statement of Assets and Liabilities reflects a receivable and/or payable for the
daily mark to market for variation margin. Realized gains and losses are
reported in the Statement of Operations as the closing and expiration of futures
contracts. The net change in unrealized appreciation and depreciation is
reported in the Statement of Operations.
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market and that a change in the value
of the contract or option may not correlate with changes in the value of the
underlying securities.
30 | OPPENHEIMER HIGH INCOME FUND/VA
As of December 31, 2005, the Fund had outstanding futures contracts as follows:
UNREALIZED
EXPIRATION NUMBER OF VALUATION AS OF APPRECIATION
CONTRACT DESCRIPTION DATES CONTRACTS DECEMBER 31, 2005 (DEPRECIATION)
- --------------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
NASDAQ 100 Index 3/16/06 100 $ 1,659,000 $ (58,300)
Standard & Poor's E-Mini 3/17/06 50 3,136,875 (36,125)
---------------
(94,425)
---------------
CONTRACTS TO SELL
Standard & Poor's 500 Index 3/16/06 250 (5,019,200) 44,740
---------------
$ (49,685)
===============
- --------------------------------------------------------------------------------
7. ILLIQUID OR RESTRICTED SECURITIES
As of December 31, 2005, investments in securities included issues that are
illiquid or restricted. Restricted securities are purchased in private placement
transactions, are not registered under the Securities Act of 1933, may have
contractual restrictions on resale, and are valued under methods approved by the
Board of Trustees as reflecting fair value. A security may also be considered
illiquid if it lacks a readily available market or if its valuation has not
changed for a certain period of time. The Fund will not invest more than 15% of
its net assets (determined at the time of purchase and reviewed periodically) in
illiquid or restricted securities. Certain restricted securities, eligible for
resale to qualified institutional investors, are not subject to that limitation.
Securities that are illiquid or restricted are marked with the applicable
footnote on the Statement of Investments. Information concerning restricted
securities is as follows:
UNREALIZED
ACQUISITION VALUATION AS OF APPRECIATION
SECURITY DATES COST DECEMBER 31, 2005 (DEPRECIATION)
- --------------------------------------------------------------------------------------------------
Huntsman Corp. 7/15/05 $ 132,250 $ 320,146 $ 187,896
Prandium, Inc. 3/19/99-7/19/02 738,000 628 (737,372)
--------------------------------------------------
$ 870,250 $ 320,774 $ (549,476)
==================================================
- --------------------------------------------------------------------------------
8. SECURITIES LENDING
The Fund lends portfolio securities from time to time in order to earn
additional income. In return, the Fund receives collateral in the form of U.S.
Treasury obligations or cash, against the loaned securities and maintains
collateral in an amount not less than 100% of the market value of the loaned
securities during the period of the loan. The market value of the loaned
securities is determined at the close of business of the funds and any
additional required collateral is delivered to the Fund on the next business
day. If the borrower defaults on its obligation to return the securities loaned
because of insolvency or other reasons, the Fund could experience delays and
cost in recovering the securities loaned or in gaining access to the collateral.
Cash collateral is invested in cash equivalents. The Fund retains a portion of
the interest earned from the collateral. The Fund continues to receive the
economic benefit of interest or dividends paid on the securities loaned in the
form of a substitute payment received from the borrower. As of December 31,
2005, the Fund had no securities on loan.
31 | OPPENHEIMER HIGH INCOME FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9. LITIGATION
A consolidated amended complaint has been filed as putative derivative and class
actions against the Manager, OFS and the Distributor, as well as 51 of the
Oppenheimer funds (as "Nominal Defendants") excluding the Fund, 30 present and
former Directors or Trustees and 8 present and former officers of the funds.
This complaint, initially filed in the U.S. District Court for the Southern
District of New York on January 10, 2005 and amended on March 4, 2005,
consolidates into a single action and amends six individual previously-filed
putative derivative and class action complaints. Like those prior complaints,
the complaint alleges that the Manager charged excessive fees for distribution
and other costs, improperly used assets of the funds in the form of directed
brokerage commissions and 12b-1 fees to pay brokers to promote sales of the
funds, and failed to properly disclose the use of assets of the funds to make
those payments in violation of the Investment Company Act of 1940 and the
Investment Advisers Act of 1940. Also, like those prior complaints, the
complaint further alleges that by permitting and/or participating in those
actions, the Directors/Trustees and the Officers breached their fiduciary
duties to shareholders of the funds under the Investment Company Act of 1940 and
at common law. The complaint seeks unspecified compensatory and punitive
damages, rescission of the funds' investment advisory agreements, an accounting
of all fees paid, and an award of attorneys' fees and litigation expenses.
The defendants believe that the allegations contained in the Complaints
are without merit and that they have meritorious defenses against the claims
asserted. The defendants intend to defend these lawsuits vigorously and to
contest any claimed liability. The defendants believe that it is premature to
render any opinion as to the likelihood of an outcome unfavorable to them and
that no estimate can yet be made with any degree of certainty as to the amount
or range of any potential loss.
32 | OPPENHEIMER HIGH INCOME FUND/VA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER HIGH INCOME FUND/VA:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer High Income Fund/VA, a series of Oppenheimer Variable Account Funds,
including the statement of investments, as of December 31, 2005, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the periods presented. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
The Fund is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audit includes consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of December 31, 2005, by correspondence with the
custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer High Income Fund/VA as of December 31, 2005, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the periods presented, in conformity with accounting
principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
February 13, 2006
33 | OPPENHEIMER HIGH INCOME FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2006, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2005. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
Dividends, if any, paid by the Fund during the fiscal year ended December
31, 2005 which are not designated as capital gain distributions should be
multiplied by 0.35% to arrive at the amount eligible for the corporate
dividend-received deduction.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Fund to the Internal Revenue Service. Because of
the complexity of the federal regulations which may affect your individual tax
return and the many variations in state and local tax regulations, we recommend
that you consult your tax advisor for specific guidance.
34 | OPPENHEIMER HIGH INCOME FUND/VA
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file Form N-PX, with its complete proxy voting record for the 12 months ended
June 30th, no later than August 31st of each year. The Fund's voting record is
available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at
www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC
for the first quarter and the third quarter of each fiscal year on Form N-Q. The
Fund's Form N-Q filings are available on the SEC's website at
http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public
Reference Room in Washington D.C. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
35 | OPPENHEIMER HIGH INCOME FUND/VA
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew the Fund's
investment advisory agreement (the "Agreement"). The Investment Company Act of
1940, as amended, requires that the Board request and evaluate, and that the
Manager provide, such information as may be reasonably necessary to evaluate the
terms of the Agreement. The Board employs an independent consultant to prepare a
report that provides information, including comparative information, that the
Board requests for that purpose. In addition, the Board receives information
throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager, including an analysis of the
cost of providing services, (v) whether economies of scale are realized as the
Fund grows and whether fee levels reflect these economies of scale for Fund
investors and (vi) other benefits to the Manager from its relationship with the
Fund. Outlined below is a summary of the principal information considered by the
Board as well as the Board's conclusions.
NATURE, QUALITY, AND EXTENT OF SERVICES. The Board considered information
on the nature and extent of the services provided to the Fund and information
regarding the Manager's key personnel that provide such services. The Manager's
duties include providing the Fund with the services of the portfolio manager and
the Manager's investment team, who provide research, analysis and other advisory
services in regard to the Fund's investments; securities trading services;
oversight of third party service providers; monitoring compliance with
applicable Fund policies and procedures and adherence to the Fund's investment
restrictions. The Manager is responsible for providing certain administrative
services to the Fund as well. Those services include providing and supervising
all administrative and clerical personnel that are necessary in order to provide
effective corporate administration for the Fund; compiling and maintaining
records with respect to the Fund's operations; preparing and filing reports
required by the Securities and Exchange Commission; preparing periodic reports
regarding the operations of the Fund for its shareholders; preparing proxy
materials for shareholder meetings; and preparing the registration statements
required by Federal and state securities laws for the sale of the Fund's shares.
The Manager also provides the Fund with office space, facilities and equipment.
The Board also considered the quality of the services provided and the
quality of the Manager's resources that are available to the Fund. The Board
took account of the fact that the Manager has had over forty years of experience
as an investment adviser and that its assets under management rank it among the
top mutual fund managers in the United States. The Board evaluated the Manager's
administrative, accounting, legal and compliance services, and information the
Board has received regarding the experience and professional qualifications of
the Manager's key personnel and the size and functions of its staff providing
investment management services to the Fund. The Board also considered compliance
reports from the Fund's Chief Compliance Officer. In its evaluation of the
quality of the portfolio management services provided, the Board considered the
experience of Dimitrios Kourkoulakos and the Manager's high yield investment
team and analysts. Mr. Kourkoulakos has had over 11 years of experience managing
fixed income investments. The Board members also considered the totality of
their experiences with the Manager, as directors or trustees of the Fund and
other funds advised by the Manager. In light of the foregoing, the Board
concluded that the Fund benefits from the services provided under the Agreement
as a result of the Manager's experience, reputation, personnel, operations, and
resources.
INVESTMENT PERFORMANCE OF THE MANAGER AND THE FUND. During the year, the
Manager provided information on the performance of the Fund and the Manager at
each Board meeting, including comparative performance information. The Board
also reviewed information, prepared by the Manager and by the independent
consultant, comparing the Fund's historical performance to relevant market
indices and to the performance of other high current yield funds (including both
funds advised by the Manager and funds advised by other investment advisers).
The Board noted that the Fund's ten-year performance was better than its peer
group median. However its one-year, three-year, and five-year performance were
below its peer group median.
36 | OPPENHEIMER HIGH INCOME FUND/VA
COSTS OF SERVICES AND PROFITS REALIZED BY THE MANAGER. The Board
considered information regarding the Manager's costs in serving as the Fund's
investment adviser, including the costs associated with the personnel and
systems necessary to manage the Fund, and information regarding the Manager's
profitability from its relationship with the Fund. The Board reviewed the fees
paid to the Manager and the other expenses borne by the Fund. The Board also
evaluated the comparability of the fees charged and the services provided to the
Fund to the fees and services for other clients or accounts advised by the
Manager. The independent consultant provided comparative data in regard to the
fees and expenses of the Fund, other high current yield funds and other funds
with comparable asset levels and distribution features. The Board noted that the
Fund's contractual management fees are higher than its peer group median and
average and its actual management fees are equal to its peer group median but
higher than its peer group average, however, its total expenses are lower than
both its peer group median and average. In light of this, the Board concluded
that the management fee was reasonable.
ECONOMIES OF SCALE. The Board considered whether the Manager may realize
economies of scale in managing and supporting the Fund, whether those economies
of scale benefit the Fund's shareholders and the current level of Fund assets in
relation to the Fund's management fee breakpoints, which are intended to share
with shareholders economies of scale that may exist as the Fund grows.
OTHER BENEFITS TO THE MANAGER. In addition to considering the profits
realized by the Manager, the Board considered information that was provided
regarding the direct and indirect benefits the Manager receives as a result of
its relationship with the Fund, including compensation paid to the Manager's
affiliates. The Board also considered the nature and quality of services
provided by affiliates of the Manager, which it reviews at other times during
the year in connection with the renewal of the Fund's service agreements. The
Board considered that the Manager must be able to pay and retain experienced
professional personnel at competitive rates to provide services to the Fund and
that maintaining the financial viability of the Manager is important in order
for the Manager to continue to provide significant services to the Fund and its
shareholders.
CONCLUSIONS. These factors were also considered by the independent
Trustees meeting separately from the full Board, assisted by experienced counsel
to the Fund and to the independent Trustees. Fund counsel and the independent
Trustees' counsel are both independent of the Manager within the meaning and
intent of the Securities and Exchange Commission Rules.
Based on its review of the information it received and its evaluations
described above, the Board, including a majority of the independent Trustees,
decided to continue the advisory agreement for another year. In arriving at this
decision, the Board did not single out any factor or factors as being more
important than others, but considered all of the factors together. The Board
judged the terms and conditions of the advisory agreement, including the
management fee, in light of all of the surrounding circumstances.
37 | OPPENHEIMER HIGH INCOME FUND/VA
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS HELD BY
THE FUNDS, LENGTH OF SERVICE, TRUSTEE; NUMBER OF PORTFOLIOS IN THE FUNDS COMPLEX CURRENTLY OVERSEEN BY TRUSTEE
AGE
INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL, CO
TRUSTEES 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, UNTIL HIS OR HER RESIGNATION,
RETIREMENT, DEATH OR REMOVAL.
WILLIAM L. ARMSTRONG, Chairman of the following private mortgage banking companies: Cherry Creek Mortgage Company
Chairman of the Board of (since 1991), Centennial State Mortgage Company (since 1994), and The El Paso Mortgage
Trustees (since 2003), Company (since 1993); Chairman of the following private companies: Ambassador Media
Trustee (since 1999) Corporation (since 1984) and Broadway Ventures (since 1984); Director of the following:
Age: 68 Helmerich & Payne, Inc. (oil and gas drilling/production company) (since 1992), Campus
Crusade for Christ (since 1991) and The Lynde and Harry Bradley Foundation, Inc.
(non-profit organization) (since 2002); former Chairman of the following: Transland
Financial Services, Inc. (private mortgage banking company) (1997-2003), Great Frontier
Insurance (insurance agency) (1995-2000), Frontier Real Estate, Inc. (residential real
estate brokerage) (1994-2000) and Frontier Title (title insurance agency) (1995-2000);
former Director of the following: UNUMProvident (insurance company) (1991-2004), Storage
Technology Corporation (computer equipment company) (1991-2003) and International Family
Entertainment (television channel) (1992-1997); U.S. Senator (January 1979-January 1991).
Oversees 38 portfolios in the OppenheimerFunds complex.
ROBERT G. AVIS, Director and President of A.G. Edwards Capital, Inc. (General Partner of private equity
Trustee (since 1993) funds) (until February 2001); Chairman, President and Chief Executive Officer of A.G.
Age: 74 Edwards Capital, Inc. (until March 2000); Director of A.G. Edwards & Sons, Inc. (brokerage
company) (until 2000) and A.G. Edwards Trust Company (investment adviser) (until 2000);
Vice Chairman and Director of A.G. Edwards, Inc. (until March 1999); Vice Chairman of A.G.
Edwards & Sons, Inc. (until March 1999); Chairman of A.G. Edwards Trust Company (until
March 1999) and A.G.E. Asset Management (investment adviser) (until March 1999). Oversees
38 portfolios in the OppenheimerFunds complex.
GEORGE C. BOWEN, Assistant Secretary and Director of Centennial Asset Management Corporation (December
Trustee (since 1999) 1991-April 1999); President, Treasurer and Director of Centennial Capital Corporation (June
Age: 69 1989-April 1999); Chief Executive Officer and Director of MultiSource Services, Inc. (March
1996-April 1999); Mr. Bowen held several positions with the Manager and with subsidiary or
affiliated companies of the Manager (September 1987-April 1999). Oversees 38 portfolios in
the OppenheimerFunds complex.
EDWARD L. CAMERON, Member of The Life Guard of Mount Vernon (George Washington historical site) (since June
Trustee (since 1999) 2000); Director of Genetic ID, Inc. (biotech company) (March 2001-May 2002); Partner at
Age: 67 PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price
Waterhouse LLP Global Investment Management Industry Services Group (July 1994-June 1998).
Oversees 38 portfolios in the OppenheimerFunds complex.
JON S. FOSSEL, Director of UNUMProvident (insurance company) (since June 2002); Director of Northwestern
Trustee (since 1990) Energy Corp. (public utility corporation) (since November 2004); Director of P.R.
Age: 64 Pharmaceuticals (October 1999-October 2003); Director of Rocky Mountain Elk Foundation
(non-profit organization) (February 1998-February 2003); Chairman and Director (until
October 1996) and President and Chief Executive Officer (until October 1995) of the
Manager; President, Chief Executive Officer and Director of the following: Oppenheimer
Acquisition Corp. ("OAC") (parent holding company of the Manager), Shareholders Services,
Inc. and Shareholder Financial Services, Inc. (until October 1995). Oversees 38 portfolios
in the OppenheimerFunds complex.
SAM FREEDMAN, Director of Colorado Uplift (charitable organization) (since September 1984). Mr. Freedman
Trustee (since 1996) held several positions with the Manager and with subsidiary or affiliated companies of the
Age: 65 Manager (until October 1994). Oversees 38 portfolios in the OppenheimerFunds complex.
38 | OPPENHEIMER HIGH INCOME FUND/VA
BEVERLY L. HAMILTON, Trustee of Monterey Institute for International Studies (educational organization) (since
Trustee (since 2002) February 2000); Director of The California Endowment (philanthropic organization) (since
Age: 59 April 2002); Director of Community Hospital of Monterey Peninsula (since February 2002);
Vice Chair of American Funds' Emerging Markets Growth Fund, Inc. (mutual fund) (since
October 1991); President of ARCO Investment Management Company (February 1991-April 2000);
Member of the investment committees of The Rockefeller Foundation and The University of
Michigan; Advisor at Credit Suisse First Boston's Sprout venture capital unit (venture
capital fund) (1994-January 2005); Trustee of MassMutual Institutional Funds (investment
company) (1996-June 2004); Trustee of MML Series Investment Fund (investment company)
(April 1989-June 2004); Member of the investment committee of Hartford Hospital
(2000-2003); and Advisor to Unilever (Holland) pension fund (2000-2003). Oversees 38
portfolios in the OppenheimerFunds complex.
ROBERT J. MALONE, Director of Jones International University (educational organization) (since August 2005);
Trustee (since 2002) Chairman, Chief Executive Officer and Director of Steele Street State Bank (commercial
Age: 61 banking) (since August 2003); Director of Colorado UpLIFT (charitable organization) (since
1986); Trustee of the Gallagher Family Foundation (non- profit organization) (since 2000);
Former Chairman of U.S. Bank-Colorado (subsidiary of U.S. Bancorp and formerly Colorado
National Bank) (July 1996-April 1999); Director of Commercial Assets, Inc. (real estate
investment trust) (1993-2000); Director of Jones Knowledge, Inc. (2001-July 2004); and
Director of U.S. Exploration, Inc. (oil and gas exploration) (1997-February 2004). Oversees
38 portfolios in the OppenheimerFunds complex.
F. WILLIAM MARSHALL, JR., Trustee of MassMutual Select Funds (formerly MassMutual Institutional Funds) (investment
Trustee (since 2000) company) (since 1996) and MML Series Investment Fund (investment company) (since 1996),
Age: 63 Trustee and Chairman of the Investment Committee (since 1994) of the Worcester Polytech
Institute (private university); President and Treasurer of the SIS Funds (private
charitable fund) (since January 1999); Chairman of SIS & Family Bank, F.S.B. (formerly SIS
Bank) (commercial bank) (January 1999-July 1999); Member of the Investment Committee of the
Community Foundation of Western Massachusetts (1998-2003); and Executive Vice President of
Peoples Heritage Financial Group, Inc. (commercial bank) (January 1999-July 1999). Oversees
40 portfolios in the OppenheimerFunds complex.
- ---------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH FLOOR,
AND OFFICER NEW YORK, NEW YORK 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN INDEFINITE TERM, OR
UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN OFFICER FOR AN INDEFINITE
TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL. MR. MURPHY IS AN INTERESTED
TRUSTEE DUE TO HIS POSITIONS WITH OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES.
JOHN V. MURPHY, Chairman, Chief Executive Officer and Director (since June 2001) and President (since
President and Trustee September 2000) of the Manager; President and Director or Trustee of other Oppenheimer
(since 2001) funds; President and Director of OAC and of Oppenheimer Partnership Holdings, Inc. (holding
Age: 56 company subsidiary of the Manager) (since July 2001); Director of OppenheimerFunds
Distributor, Inc. (subsidiary of the Manager) (since November 2001); Chairman and Director
of Shareholder Services, Inc. and of Shareholder Financial Services, Inc. (transfer agent
subsidiaries of the Manager) (since July 2001); President and Director of OppenheimerFunds
Legacy Program (charitable trust program established by the Manager) (since July 2001);
Director of the following investment advisory subsidiaries of the Manager: OFI
Institutional Asset Management, Inc., Centennial Asset Management Corporation, Trinity
Investment Management Corporation and Tremont Capital Management, Inc. (since November
2001), HarbourView Asset Management Corporation and OFI Private Investments, Inc. (since
July 2001); President (since November 2001) and Director (since July 2001) of Oppenheimer
Real Asset Management, Inc.; Executive Vice President of Massachusetts Mutual Life
Insurance Company (OAC's parent company) (since February 1997); Director of DLB Acquisition
Corporation (holding company parent of Babson Capital Management LLC) (since June 1995);
Member of the Investment Company Institute's Board of Governors (since October 3, 2003);
Chief Operating Officer of the Manager (September 2000-June 2001); President and Trustee of
MML Series Investment Fund and MassMutual Select Funds (open-end investment companies)
(November 1999-November 2001); Director of C.M. Life Insurance Company (September
1999-August 2000); President, Chief Executive Officer and Director of MML Bay State Life
Insurance Company (September 1999-August 2000); Director of Emerald Isle Bancorp and
Hibernia Savings Bank (wholly-owned subsidiary of Emerald Isle Bancorp) (June 1989-June
1998). Oversees 87 portfolios in the OppenheimerFunds complex.
39 | OPPENHEIMER HIGH INCOME FUND/VA
TRUSTEES AND OFFICERS Unaudited/Continued
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS OF THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. KOURKOULAKOS
THE FUND AND ZACK, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, NEW YORK, NEW YORK 10281-1008,
FOR MESSRS. VANDEHEY AND WIXTED, 6803 S. TUCSON WAY, CENTENNIAL, COLORADO 80112-3924.
EACH OFFICER SERVES FOR AN INDEFINITE TERM OR UNTIL HIS OR HER RESIGNATION, RETIREMENT
DEATH OR REMOVAL.
DIMITRIOS KOURKOULAKOS, Vice President of the Manager since December 2001; High Yield Analyst (1998-2001) and a
Vice President and Securities Analyst (1995-1998) of the Manager. An officer of 3 portfolios in the
Portfolio Manager OppenheimerFunds complex.
(since 2002)
Age: 39
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March 2004);
Vice President and Chief Vice President of OppenheimerFunds Distributor, Inc., Centennial Asset Management
Compliance Officer Corporation and Shareholder Services, Inc. (since June 1983); Vice President and Director
(since 2004) of Internal Audit of the Manager (1997-February 2004). An officer of 87 portfolios in the
Age: 55 OppenheimerFunds complex.
BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer of the
Treasurer and Principal following: HarbourView Asset Management Corporation, Shareholder Financial Services, Inc.,
Financial and Accounting Shareholder Services, Inc., Oppenheimer Real Asset Management Corporation, and Oppenheimer
Officer (since 1999) Partnership Holdings, Inc. (since March 1999), OFI Private Investments, Inc. (since March
Age: 46 2000), OppenheimerFunds International Ltd. and OppenheimerFunds plc (since May 2000), OFI
Institutional Asset Management, Inc. (since November 2000), and OppenheimerFunds Legacy
Program (since June 2003); Treasurer and Chief Financial Officer of OFI Trust Company
(trust company subsidiary of the Manager) (since May 2000); Assistant Treasurer of the
following: OAC (since March 1999), Centennial Asset Management Corporation (March
1999-October 2003) and OppenheimerFunds Legacy Program (April 2000-June 2003); Principal
and Chief Operating Officer of Bankers Trust Company-Mutual Fund Services Division (March
1995-March 1999). An officer of 87 portfolios in the OppenheimerFunds complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March 2002) of the
Vice President and Manager; General Counsel and Director of the Distributor (since December 2001); General
Secretary (since 2001) Counsel of Centennial Asset Management Corporation (since December 2001); Senior Vice
Age: 57 President and General Counsel of HarbourView Asset Management Corporation (since December
2001); Secretary and General Counsel of OAC (since November 2001); Assistant Secretary
(since September 1997) and Director (since November 2001) of OppenheimerFunds International
Ltd. and OppenheimerFunds plc; Vice President and Director of Oppenheimer Partnership
Holdings, Inc. (since December 2002); Director of Oppenheimer Real Asset Management, Inc.
(since November 2001); Senior Vice President, General Counsel and Director of Shareholder
Financial Services, Inc. and Shareholder Services, Inc. (since December 2001); Senior Vice
President, General Counsel and Director of OFI Private Investments, Inc. and OFI Trust
Company (since November 2001); Vice President of OppenheimerFunds Legacy Program (since
June 2003); Senior Vice President and General Counsel of OFI Institutional Asset
Management, Inc. (since November 2001); Director of OppenheimerFunds (Asia) Limited (since
December 2003); Senior Vice President (May 1985-December 2003), Acting General Counsel
(November 2001-February 2002) and Associate General Counsel (May 1981-October 2001) of the
Manager; Assistant Secretary of the following: Shareholder Services, Inc. (May
1985-November 2001), Shareholder Financial Services, Inc. (November 1989-November 2001),
and OppenheimerFunds International Ltd. (September 1997-November 2001). An officer of 87
portfolios in the OppenheimerFunds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION
ABOUT THE FUND'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT CHARGE, UPON
REQUEST, BY CALLING 1.800.981.2871.
40 | OPPENHEIMER HIGH INCOME FUND/VA
OPPENHEIMER MAIN STREET FUND/ VA
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. We are pleased with the Fund's
performance during 2005, particularly because our security selection models
helped the Fund identify many of the better-performing stocks within each of the
S&P 500 Index's industry groups.
The Fund's overweighted position and security selection strategy in the
energy sector proved to be particularly rewarding. In addition to identifying
winners among U.S.-based energy companies, the Fund received strong
contributions from several Canadian energy firms. The Fund's relative
performance also benefited from its relatively light exposure to consumer
discretionary companies, which provided relatively disappointing results.
On the other hand, the Fund's slightly overweighted exposure to
information technology stocks detracted modestly from performance, due primarily
to poor returns from some of the sector's larger companies. The Fund's holdings
of very large telecommunications companies also held back returns.
Finally, the Fund benefited during 2005 from our efforts to achieve a
better balance across capitalization ranges. Early in the year, we reduced the
Fund's emphasis on mega-cap stocks in favor of large-cap stocks, which helped it
avoid the full brunt of relative weakness among the market's largest companies.
During the second half of 2005 we began to see some significant changes in
the ratings assigned by our statistical models to individual stocks. We
attribute the shifts to seasonal factors, in which more growth-oriented,
economically sensitive stocks historically have tended to fare better than
value-oriented shares during the fourth and first quarters of the year. As a
result, information technology companies replaced financial and energy stocks as
the Fund's most overweighted market sector. Nonetheless, the Fund is still
overweighted in energy and it is now overweighted in healthcare. All other
sectors are underweighted relative to its benchmark, the S&P 500 Index,
including the financial sector, which was the most overweighted sector in
mid-2005.
Although we do not make investment decisions based on a macroeconomic
outlook, we are encouraged by signs that larger-cap stocks may finally be
returning to favor. Regardless of the market's direction in 2006, however, we
intend to continue to employ our quantitative models when constructing a broadly
diversified, fully invested stock portfolio. Indeed, we believe that the
consistency of our disciplined approach is central to what makes Oppenheimer
Main Street Fund/VA part of THE RIGHT WAY TO INVEST.
COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that follow show the
performance of a hypothetical $10,000 investment in each share class of the Fund
held until December 31, 2005. In the case of non-service shares, performance is
measured over a ten-year period. In the case of service shares, performance is
measured from inception of the class on July 13, 2000. Performance information
does not reflect charges that apply to separate accounts investing in the Fund.
If these charges were taken into account, performance would be lower. The graphs
assume that all dividends and capital gains distributions were reinvested in
additional shares.
The Fund's performance is compared to the performance of the S&P 500
Index, a broad-based index of equity securities widely regarded as a general
measurement of the performance of the U.S. equity securities market. Index
performance reflects the reinvestment of income but does not consider the effect
of transaction costs, and none of the data in the graphs shows the effect of
taxes. The Fund's performance reflects the effects of the Fund's business and
operating expenses. While index comparisons may be useful to provide a benchmark
for the Fund's performance, it must be noted that the Fund's investments are not
limited to the investments in the index.
4 | OPPENHEIMER MAIN STREET FUND/VA
NON-SERVICE SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Main Street Fund(R)/VA (Non-Service)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Main Street
Fund(R)/VA
Date (Service) S&P 500 Index
12/31/1995 10,000 10,000
03/31/1996 10,685 10,537
06/30/1996 11,881 11,009
09/30/1996 12,380 11,349
12/31/1996 13,251 12,295
03/31/1997 13,378 12,625
06/30/1997 15,089 14,827
09/30/1997 17,093 15,937
12/31/1997 17,555 16,395
03/31/1998 19,753 18,680
06/30/1998 19,852 19,300
09/30/1998 15,410 17,385
12/31/1998 18,380 21,084
03/31/1999 19,091 22,134
06/30/1999 21,071 23,691
09/30/1999 20,018 22,215
12/31/1999 22,370 25,518
03/31/2000 23,056 26,103
06/30/2000 22,413 25,409
09/30/2000 22,644 25,163
12/31/2000 20,407 23,196
03/31/2001 18,372 20,447
06/30/2001 19,193 21,643
09/30/2001 17,002 18,468
12/31/2001 18,334 20,441
03/31/2002 18,678 20,497
06/30/2002 17,045 17,753
09/30/2002 14,256 14,687
12/31/2002 14,888 15,925
03/31/2003 14,395 15,423
06/30/2003 16,429 17,796
09/30/2003 16,900 18,267
12/31/2003 18,865 20,490
03/31/2004 19,243 20,837
06/30/2004 19,352 21,195
09/30/2004 18,975 20,799
12/31/2004 20,650 22,718
03/31/2005 20,257 22,230
06/30/2005 20,548 22,535
09/30/2005 21,402 23,347
12/31/2005 21,884 23,833
AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/05
1-Year 5.98% 5-Year 1.41% 10-Year 8.15%
SERVICE SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Main Street Fund(R)/VA (Service)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Main Street
Fund(R)/VA
Date (Service) S&P 500 Index
07/13/2000 10,000 10,000
09/30/2000 9,813 9,903
12/31/2000 8,839 9,129
03/31/2001 7,952 8,047
06/30/2001 8,308 8,518
09/30/2001 7,353 7,268
12/31/2001 7,931 8,045
03/31/2002 8,075 8,067
06/30/2002 7,364 6,987
09/30/2002 6,151 5,780
12/31/2002 6,425 6,267
03/31/2003 6,197 6,070
06/30/2003 7,077 7,004
09/30/2003 7,277 7,189
12/31/2003 8,123 8,064
03/31/2004 8,280 8,201
06/30/2004 8,322 8,342
09/30/2004 8,155 8,186
12/31/2004 8,866 8,941
03/31/2005 8,695 8,749
06/30/2005 8,816 8,869
09/30/2005 9,176 9,188
12/31/2005 9,375 9,380
AVERAGE ANNUAL TOTAL RETURNS OF SERVICE SHARES OF THE FUND AT 12/31/05
1-Year 5.74% 5-Year 1.19% Since Inception (7/13/00) -1.17%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, CALL US AT 1.800.981.2871. THE FUND'S
TOTAL RETURNS SHOULD NOT BE EXPECTED TO BE THE SAME AS THE RETURNS OF OTHER
FUNDS, WHETHER OR NOT BOTH FUNDS HAVE THE SAME PORTFOLIO MANAGERS AND/OR SIMILAR
NAMES. THE FUND'S TOTAL RETURNS DO NOT INCLUDE THE CHARGES ASSOCIATED WITH THE
SEPARATE ACCOUNT PRODUCTS THAT OFFER THIS FUND. SUCH PERFORMANCE WOULD HAVE BEEN
LOWER IF SUCH CHARGES WERE TAKEN INTO ACCOUNT.
5 | OPPENHEIMER MAIN STREET FUND/VA
FUND EXPENSES
- --------------------------------------------------------------------------------
FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1)
transaction costs, which may include redemption fees, if any; and (2) ongoing
costs, including management fees; distribution and service fees; and other Fund
expenses. These examples are intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning
of the period and held for the entire 6-month period ended December 31, 2005.
ACTUAL EXPENSES. The "actual" lines of the table provide information about
actual account values and actual expenses. You may use the information on this
line for the class of shares you hold, together with the amount you invested, to
estimate the expense that you paid over the period. Simply divide your account
value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00
= 8.60), then multiply the result by the number in the "actual" line under the
heading entitled "Expenses Paid During Period" to estimate the expenses you paid
on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the
table provide information about hypothetical account values and hypothetical
expenses based on the Fund's actual expense ratio for each class of shares, and
an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of investing
in the Fund and other funds. To do so, compare this 5% hypothetical example for
the class of shares you hold with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any charges associated with the separate
accounts that offer this Fund. Therefore, the "hypothetical" lines of the table
are useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these separate
account charges were included, your costs would have been higher.
- --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
(7/1/05) (12/31/05) DECEMBER 31, 2005
- --------------------------------------------------------------------------------
Non-Service shares Actual $1,000.00 $1,065.00 $3.49
- --------------------------------------------------------------------------------
Non-Service shares Hypothetical 1,000.00 1,021.83 3.42
- --------------------------------------------------------------------------------
Service shares Actual 1,000.00 1,063.40 4.80
- --------------------------------------------------------------------------------
Service shares Hypothetical 1,000.00 1,020.57 4.70
Hypothetical assumes 5% annual return before expenses.
Expenses are equal to the Fund's annualized expense ratio for that class,
multiplied by the average account value over the period, multiplied by 184/365
(to reflect the one-half year period). Those annualized expense ratios based on
the 6-month period ended December 31, 2005 are as follows:
CLASS EXPENSE RATIOS
- ----------------------------------
Non-Service shares 0.67%
- ----------------------------------
Service shares 0.92
- --------------------------------------------------------------------------------
6 |OPPENHEIMER MAIN STREET FUND/VA
STATEMENT OF INVESTMENTS December 31, 2004
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
COMMON STOCKS--99.5%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--10.4%
- --------------------------------------------------------------------------------
AUTO COMPONENTS--0.3%
Dana Corp. 34,800 $ 249,864
- --------------------------------------------------------------------------------
Goodyear Tire & Rubber Co. (The) 1,2 46,000 799,480
- --------------------------------------------------------------------------------
Johnson Controls, Inc. 41,700 3,040,347
- --------------------------------------------------------------------------------
Lear Corp. 2 2,300 65,458
- --------------------------------------------------------------------------------
TRW Automotive Holdings Corp. 1,2 8,900 234,515
- --------------------------------------------------------------------------------
Visteon Corp. 1,2 30,800 192,808
-----------
4,582,472
- --------------------------------------------------------------------------------
AUTOMOBILES--0.5%
Ford Motor Co. 2 650,315 5,020,432
- --------------------------------------------------------------------------------
Harley-Davidson, Inc. 2 77,600 3,995,624
-----------
9,016,056
- --------------------------------------------------------------------------------
DISTRIBUTORS--0.0%
Genuine Parts Co. 4,700 206,424
- --------------------------------------------------------------------------------
DIVERSIFIED CONSUMER SERVICES--0.1%
Career Education Corp. 1 19,100 644,052
- --------------------------------------------------------------------------------
Weight Watchers International, Inc. 1,2 9,000 444,870
-----------
1,088,922
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--0.6%
Choice Hotels International, Inc. 2 5,800 242,208
- --------------------------------------------------------------------------------
CKE Restaurants, Inc. 2 1,600 21,616
- --------------------------------------------------------------------------------
International Game Technology 21,700 667,926
- --------------------------------------------------------------------------------
McDonald's Corp. 157,250 5,302,470
- --------------------------------------------------------------------------------
Six Flags, Inc. 1,2 7,300 56,283
- --------------------------------------------------------------------------------
Yum! Brands, Inc. 73,300 3,436,304
-----------
9,726,807
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES--0.2%
American Greetings Corp., Cl. A 2 11,700 257,049
- --------------------------------------------------------------------------------
Beazer Homes USA, Inc. 2 11,800 859,512
- --------------------------------------------------------------------------------
D.R. Horton, Inc. 44,000 1,572,120
- --------------------------------------------------------------------------------
Lennar Corp., Cl. A 9,600 585,792
- --------------------------------------------------------------------------------
MDC Holdings, Inc. 2 4,200 260,316
- --------------------------------------------------------------------------------
Whirlpool Corp. 900 75,384
-----------
3,610,173
- --------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL--0.2%
eBay, Inc. 1 95,700 4,139,025
- --------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS--0.0%
Hasbro, Inc. 33,400 674,012
- --------------------------------------------------------------------------------
MEDIA--3.7%
Cablevision Systems Corp.,
New York Group, Cl. A 1 22,100 518,687
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
MEDIA Continued
- --------------------------------------------------------------------------------
CCE Spinco, Inc. 1 16,937 $ 221,875
- --------------------------------------------------------------------------------
Clear Channel Communications, Inc. 135,500 4,261,475
- --------------------------------------------------------------------------------
Comcast Corp., Cl. A 1 249,315 6,472,217
- --------------------------------------------------------------------------------
Gannett Co., Inc. 88,000 5,330,160
- --------------------------------------------------------------------------------
Liberty Media Corp., Cl. A 1 378,100 2,975,647
- --------------------------------------------------------------------------------
McGraw-Hill Cos., Inc. (The) 56,800 2,932,584
- --------------------------------------------------------------------------------
News Corp., Inc., Cl. A 369,300 5,742,615
- --------------------------------------------------------------------------------
Omnicom Group, Inc. 49,400 4,205,422
- --------------------------------------------------------------------------------
R.H. Donnelley Corp. 1,2 4,000 246,480
- --------------------------------------------------------------------------------
Time Warner, Inc. 866,500 15,111,760
- --------------------------------------------------------------------------------
Tribune Co. 2 18,300 553,758
- --------------------------------------------------------------------------------
Viacom, Inc., Cl. B 283,946 9,256,640
- --------------------------------------------------------------------------------
Walt Disney Co. (The) 209,700 5,026,509
-----------
62,855,829
- --------------------------------------------------------------------------------
MULTILINE RETAIL--1.6%
Dollar General Corp. 24,400 465,308
- --------------------------------------------------------------------------------
Dollar Tree Stores, Inc. 1,2 27,500 658,350
- --------------------------------------------------------------------------------
Federated Department Stores, Inc. 94,900 6,294,717
- --------------------------------------------------------------------------------
J.C. Penney Co., Inc. (Holding Co.) 98,300 5,465,480
- --------------------------------------------------------------------------------
Kohl's Corp. 1 27,800 1,351,080
- --------------------------------------------------------------------------------
Nordstrom, Inc. 121,600 4,547,840
- --------------------------------------------------------------------------------
Saks, Inc. 1,2 33,100 558,066
- --------------------------------------------------------------------------------
Sears Holdings Corp. 1,2 10,200 1,178,406
- --------------------------------------------------------------------------------
Target Corp. 130,600 7,179,082
-----------
27,698,329
- --------------------------------------------------------------------------------
SPECIALTY RETAIL--2.9%
American Eagle Outfitters, Inc. 2 31,100 714,678
- --------------------------------------------------------------------------------
AnnTaylor Stores Corp. 1,2 8,800 303,776
- --------------------------------------------------------------------------------
AutoNation, Inc. 1,2 39,700 862,681
- --------------------------------------------------------------------------------
Barnes & Noble, Inc. 2 18,100 772,327
- --------------------------------------------------------------------------------
Bed Bath & Beyond, Inc. 1 53,700 1,941,255
- --------------------------------------------------------------------------------
Best Buy Co., Inc. 110,600 4,808,888
- --------------------------------------------------------------------------------
Building Materials Holding Corp. 2 3,700 252,377
- --------------------------------------------------------------------------------
Chico's FAS, Inc. 1,2 12,900 566,697
- --------------------------------------------------------------------------------
Children's Place Retail Stores, Inc. 1 6,100 301,462
- --------------------------------------------------------------------------------
Circuit City Stores, Inc./Circuit
City Group 34,000 768,060
- --------------------------------------------------------------------------------
Claire's Stores, Inc. 2 15,600 455,832
- --------------------------------------------------------------------------------
GameStop Corp., Cl. A 1,2 4,727 150,413
- --------------------------------------------------------------------------------
Gap, Inc. (The) 254,000 4,480,560
- --------------------------------------------------------------------------------
Home Depot, Inc. 357,800 14,483,744
- --------------------------------------------------------------------------------
Lowe's Cos., Inc. 112,400 7,492,584
- --------------------------------------------------------------------------------
Men's Wearhouse, Inc. (The) 1,2 13,500 397,440
- --------------------------------------------------------------------------------
Office Depot, Inc. 1 31,900 1,001,660
7 | OPPENHEIMER MAIN STREET FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
SPECIALTY RETAIL Continued
OfficeMax, Inc. 2 21,300 $ 540,168
- --------------------------------------------------------------------------------
Payless ShoeSource, Inc. 1,2 1,100 27,610
- --------------------------------------------------------------------------------
Sports Authority, Inc. (The) 1,2 8,100 252,153
- --------------------------------------------------------------------------------
Staples, Inc. 290,050 6,587,036
- --------------------------------------------------------------------------------
Talbots, Inc. (The) 2 8,300 230,906
- --------------------------------------------------------------------------------
Tiffany & Co. 2,800 107,212
- --------------------------------------------------------------------------------
TJX Cos., Inc. (The) 87,300 2,027,979
- --------------------------------------------------------------------------------
Too, Inc. 1,2 8,800 248,248
- --------------------------------------------------------------------------------
Zale Corp. 1,2 5,400 135,810
-----------
49,911,556
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS--0.3%
Coach, Inc. 1 127,800 4,260,852
- --------------------------------------------------------------------------------
Jones Apparel Group, Inc. 11,600 356,352
- --------------------------------------------------------------------------------
Liz Claiborne, Inc. 6,400 229,248
- --------------------------------------------------------------------------------
Phillips/Van Heusen Corp. 2 4,400 142,560
- --------------------------------------------------------------------------------
Timberland Co., Cl. A 1,2 21,900 712,845
- --------------------------------------------------------------------------------
VF Corp. 1,300 71,942
-----------
5,773,799
- --------------------------------------------------------------------------------
CONSUMER STAPLES--7.3%
- --------------------------------------------------------------------------------
BEVERAGES--1.1%
Brown-Forman Corp., Cl. B 200 13,864
- --------------------------------------------------------------------------------
Coca-Cola Co. (The) 215,100 8,670,681
- --------------------------------------------------------------------------------
Pepsi Bottling Group, Inc. (The) 39,700 1,135,817
- --------------------------------------------------------------------------------
PepsiCo, Inc. 154,950 9,154,446
-----------
18,974,808
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--1.9%
Albertson's, Inc. 24,900 531,615
- --------------------------------------------------------------------------------
Costco Wholesale Corp. 32,200 1,592,934
- --------------------------------------------------------------------------------
Kroger Co. (The) 1 252,800 4,772,864
- --------------------------------------------------------------------------------
Performance Food Group Co. 1,2 2,100 59,577
- --------------------------------------------------------------------------------
Rite Aid Corp. 1,2 71,200 247,776
- --------------------------------------------------------------------------------
Safeway, Inc. 237,100 5,609,786
- --------------------------------------------------------------------------------
SUPERVALU, Inc. 2 21,100 685,328
- --------------------------------------------------------------------------------
Sysco Corp. 34,000 1,055,700
- --------------------------------------------------------------------------------
Wal-Mart Stores, Inc. 294,600 13,787,280
- --------------------------------------------------------------------------------
Walgreen Co. 33,700 1,491,562
- --------------------------------------------------------------------------------
Whole Foods Market, Inc. 36,900 2,855,691
-----------
32,690,113
- --------------------------------------------------------------------------------
FOOD PRODUCTS--0.8%
- --------------------------------------------------------------------------------
Archer-Daniels-Midland Co. 173,900 4,288,374
- --------------------------------------------------------------------------------
Campbell Soup Co. 39,000 1,161,030
- --------------------------------------------------------------------------------
Chiquita Brands International, Inc. 2 1,300 26,013
- --------------------------------------------------------------------------------
Dean Foods Co. 1,2 16,100 606,326
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
FOOD PRODUCTS Continued
Del Monte Foods Co. 1 8,800 $ 91,784
- --------------------------------------------------------------------------------
General Mills, Inc. 59,500 2,934,540
- --------------------------------------------------------------------------------
Heinz (H.J.) Co. 25,100 846,372
- --------------------------------------------------------------------------------
Pilgrim's Pride Corp., Cl. B 2 19,800 656,568
- --------------------------------------------------------------------------------
Sara Lee Corp. 104,200 1,969,380
- --------------------------------------------------------------------------------
Tyson Foods, Inc., Cl. A 2 22,400 383,040
-----------
12,963,427
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS--1.6%
Energizer Holdings, Inc. 1,2 8,500 423,215
- --------------------------------------------------------------------------------
Kimberly-Clark Corp. 15,700 936,505
- --------------------------------------------------------------------------------
Procter & Gamble Co. (The) 460,815 26,671,972
-----------
28,031,692
- --------------------------------------------------------------------------------
PERSONAL PRODUCTS--0.2%
Avon Products, Inc. 135,300 3,862,815
- --------------------------------------------------------------------------------
Tobacco--1.7%
Altria Group, Inc. 318,500 23,798,320
- --------------------------------------------------------------------------------
Loews Corp./Carolina Group 8,100 356,319
- --------------------------------------------------------------------------------
Reynolds American, Inc. 2 52,600 5,014,358
-----------
29,168,997
- --------------------------------------------------------------------------------
ENERGY--11.1%
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--0.5%
Grey Wolf, Inc. 1 39,400 304,562
- --------------------------------------------------------------------------------
Halliburton Co. 32,900 2,038,484
- --------------------------------------------------------------------------------
Helmerich & Payne, Inc. 2 3,800 235,258
- --------------------------------------------------------------------------------
Lone Star Technologies, Inc. 1 6,000 309,960
- --------------------------------------------------------------------------------
NS Group, Inc. 1,2 6,700 280,127
- --------------------------------------------------------------------------------
Precision Drilling Trust 15,200 501,850
- --------------------------------------------------------------------------------
Pride International, Inc. 1 13,200 405,900
- --------------------------------------------------------------------------------
Transocean, Inc. 1 62,800 4,376,532
- --------------------------------------------------------------------------------
Universal Compression
Holdings, Inc. 1,2 6,400 263,168
- --------------------------------------------------------------------------------
Veritas DGC, Inc. 1,2 8,300 294,567
-----------
9,010,408
- --------------------------------------------------------------------------------
OIL & GAS--10.6%
Amerada Hess Corp. 2 24,000 3,043,680
- --------------------------------------------------------------------------------
Anadarko Petroleum Corp. 65,900 6,244,025
- --------------------------------------------------------------------------------
Apache Corp. 75,200 5,152,704
- --------------------------------------------------------------------------------
Burlington Resources, Inc. 98,200 8,464,840
- --------------------------------------------------------------------------------
Canadian Natural Resources Ltd. 54,800 2,716,783
- --------------------------------------------------------------------------------
Chevron Corp. 433,526 24,611,271
- --------------------------------------------------------------------------------
Comstock Resources, Inc. 1,2 9,000 274,590
- --------------------------------------------------------------------------------
ConocoPhillips 311,542 18,125,514
- --------------------------------------------------------------------------------
Devon Energy Corp. 91,100 5,697,394
8 | OPPENHEIMER MAIN STREET FUND/VA
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
OIL & GAS Continued
EOG Resources, Inc. 32,500 $ 2,384,525
- --------------------------------------------------------------------------------
Exxon Mobil Corp. 1,049,816 58,968,165
- --------------------------------------------------------------------------------
General Maritime Corp. 2 4,700 174,088
- --------------------------------------------------------------------------------
Giant Industries, Inc. 1,2 4,300 223,428
- --------------------------------------------------------------------------------
KCS Energy, Inc. 1,2 11,300 273,686
- --------------------------------------------------------------------------------
Kerr-McGee Corp. 38,223 3,472,942
- --------------------------------------------------------------------------------
Marathon Oil Corp. 123,000 7,499,310
- --------------------------------------------------------------------------------
Occidental Petroleum Corp. 94,600 7,556,648
- --------------------------------------------------------------------------------
OMI Corp. 2 8,600 156,090
- --------------------------------------------------------------------------------
Overseas Shipholding Group, Inc. 2 12,900 650,031
- --------------------------------------------------------------------------------
Paramount Resources Ltd., Cl. A 1 149,900 3,984,610
- --------------------------------------------------------------------------------
Remington Oil & Gas Corp. 1,2 7,200 262,800
- --------------------------------------------------------------------------------
Sunoco, Inc. 70,300 5,510,114
- --------------------------------------------------------------------------------
Swift Energy Co. 1,2 7,300 329,011
- --------------------------------------------------------------------------------
Talisman Energy, Inc. 49,800 2,638,978
- --------------------------------------------------------------------------------
Tesoro Corp. 2 14,400 886,320
- --------------------------------------------------------------------------------
Trilogy Energy Trust 46,400 949,994
- --------------------------------------------------------------------------------
Valero Energy Corp. 138,610 7,152,276
- --------------------------------------------------------------------------------
Vintage Petroleum, Inc. 10,300 549,299
- --------------------------------------------------------------------------------
Whiting Petroleum Corp. 1,2 7,100 284,000
- --------------------------------------------------------------------------------
XTO Energy, Inc. 71,700 3,150,498
------------
181,387,614
- --------------------------------------------------------------------------------
FINANCIALS--20.1%
- --------------------------------------------------------------------------------
CAPITAL MARKETS--0.4%
Ameriprise Financial, Inc. 26,400 1,082,400
- --------------------------------------------------------------------------------
Bank of New York Co., Inc. (The) 70,200 2,235,870
- --------------------------------------------------------------------------------
Mellon Financial Corp. 51,700 1,770,725
- --------------------------------------------------------------------------------
Northern Trust Corp. 24,200 1,254,044
------------
6,343,039
- --------------------------------------------------------------------------------
COMMERCIAL BANKS--5.3%
Astoria Financial Corp. 2 22,450 660,030
- --------------------------------------------------------------------------------
Bank of America Corp. 633,102 29,217,657
- --------------------------------------------------------------------------------
BB&T Corp. 2 34,700 1,454,277
- --------------------------------------------------------------------------------
Comerica, Inc. 34,500 1,958,220
- --------------------------------------------------------------------------------
Downey Financial Corp. 2 500 34,195
- --------------------------------------------------------------------------------
Golden West Financial Corp. 31,600 2,085,600
- --------------------------------------------------------------------------------
KeyCorp 83,900 2,762,827
- --------------------------------------------------------------------------------
M&T Bank Corp. 2 18,100 1,973,805
- --------------------------------------------------------------------------------
National City Corp. 57,700 1,936,989
- --------------------------------------------------------------------------------
PNC Financial Services Group, Inc. 2 23,600 1,459,188
- --------------------------------------------------------------------------------
Regions Financial Corp. 2 32,805 1,120,619
- --------------------------------------------------------------------------------
SunTrust Banks, Inc. 18,300 1,331,508
- --------------------------------------------------------------------------------
TCF Financial Corp. 2 400 10,856
- --------------------------------------------------------------------------------
U.S. Bancorp 360,370 10,771,459
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
COMMERCIAL BANKS Continued
UnionBanCal Corp. 27,300 $ 1,876,056
- --------------------------------------------------------------------------------
Wachovia Corp. 268,600 14,198,196
- --------------------------------------------------------------------------------
Washington Mutual, Inc. 170,529 7,418,012
- --------------------------------------------------------------------------------
Wells Fargo & Co. 184,000 11,560,720
------------
91,830,214
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--8.7%
American Express Co. 121,200 6,236,952
- --------------------------------------------------------------------------------
AmeriCredit Corp. 1,2 40,500 1,038,015
- --------------------------------------------------------------------------------
Ameritrade Holding Corp. 27,800 667,200
- --------------------------------------------------------------------------------
Capital One Financial Corp. 78,977 6,823,613
- --------------------------------------------------------------------------------
Chicago Mercantile Exchange (The) 10,400 3,821,896
- --------------------------------------------------------------------------------
CIT Group, Inc. 66,600 3,448,548
- --------------------------------------------------------------------------------
Citigroup, Inc. 800,888 38,867,095
- --------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The) 96,000 12,260,160
- --------------------------------------------------------------------------------
Janus Capital Group, Inc. 2 20,500 381,915
- --------------------------------------------------------------------------------
JPMorgan Chase & Co. 576,644 22,887,000
- --------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc. 75,000 9,612,750
- --------------------------------------------------------------------------------
MBNA Corp. 175,300 4,759,395
- --------------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 186,800 12,651,964
- --------------------------------------------------------------------------------
Moody's Corp. 51,400 3,156,988
- --------------------------------------------------------------------------------
Morgan Stanley 263,300 14,939,642
- --------------------------------------------------------------------------------
Schwab (Charles) Corp. 296,900 4,355,523
- --------------------------------------------------------------------------------
State Street Corp. 55,600 3,082,464
------------
148,991,120
- --------------------------------------------------------------------------------
INSURANCE--4.4%
- --------------------------------------------------------------------------------
AFLAC, Inc. 26,200 1,216,204
- --------------------------------------------------------------------------------
Allstate Corp. 97,600 5,277,232
- --------------------------------------------------------------------------------
American International Group, Inc. 328,340 22,402,638
- --------------------------------------------------------------------------------
AmerUs Group Co. 2 12,100 685,707
- --------------------------------------------------------------------------------
Aon Corp. 110,200 3,961,690
- --------------------------------------------------------------------------------
Arch Capital Group Ltd. 1 2,100 114,975
- --------------------------------------------------------------------------------
Chubb Corp. 38,600 3,769,290
- --------------------------------------------------------------------------------
Everest Re Group Ltd. 3,300 331,155
- --------------------------------------------------------------------------------
Fidelity National Financial, Inc. 23,159 852,020
- --------------------------------------------------------------------------------
Fidelity National Title Group,
Inc., Cl. A 2 5,190 126,377
- --------------------------------------------------------------------------------
Hartford Financial Services
Group, Inc. (The) 74,100 6,364,449
- --------------------------------------------------------------------------------
Jefferson-Pilot Corp. 400 22,772
- --------------------------------------------------------------------------------
LandAmerica Financial Group, Inc. 2 2,600 162,240
- --------------------------------------------------------------------------------
Lincoln National Corp. 5,200 275,756
- --------------------------------------------------------------------------------
Loews Corp. 21,400 2,029,790
- --------------------------------------------------------------------------------
MBIA, Inc. 2 16,400 986,624
- --------------------------------------------------------------------------------
MetLife, Inc. 130,000 6,370,000
- --------------------------------------------------------------------------------
Principal Financial Group, Inc. (The) 123,500 5,857,605
9 | OPPENHEIMER MAIN STREET FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
INSURANCE Continued
Progressive Corp. 17,200 $ 2,008,616
- --------------------------------------------------------------------------------
Prudential Financial, Inc. 85,400 6,250,426
- --------------------------------------------------------------------------------
Safeco Corp. 300 16,950
- --------------------------------------------------------------------------------
St. Paul Travelers Cos., Inc. (The) 157,100 7,017,657
- --------------------------------------------------------------------------------
StanCorp Financial Group, Inc. 2 9,800 489,510
------------
76,589,683
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE--1.3%
Accredited Home Lenders
Holding Co. 1,2 6,400 317,312
- --------------------------------------------------------------------------------
Countrywide Financial Corp. 140,498 4,803,627
- --------------------------------------------------------------------------------
Fannie Mae 183,800 8,971,278
- --------------------------------------------------------------------------------
Freddie Mac 79,800 5,214,930
- --------------------------------------------------------------------------------
Fremont General Corp. 2 2,700 62,721
- --------------------------------------------------------------------------------
MGIC Investment Corp. 2 13,700 901,734
- --------------------------------------------------------------------------------
PMI Group, Inc. (The) 2 10,400 427,128
- --------------------------------------------------------------------------------
Radian Group, Inc. 2 16,100 943,299
------------
21,642,029
- --------------------------------------------------------------------------------
HEALTH CARE--14.4%
- --------------------------------------------------------------------------------
BIOTECHNOLOGY--2.3%
Abgenix, Inc. 1,2 18,800 404,388
- --------------------------------------------------------------------------------
Alkermes, Inc. 1,2 16,600 317,392
- --------------------------------------------------------------------------------
Amgen, Inc. 1,2 219,800 17,333,428
- --------------------------------------------------------------------------------
Applera Corp./Applied
Biosystems Group 2 35,100 932,256
- --------------------------------------------------------------------------------
Genentech, Inc. 1 37,300 3,450,250
- --------------------------------------------------------------------------------
Genzyme Corp. (General Division) 1 9,100 644,098
- --------------------------------------------------------------------------------
Gilead Sciences, Inc. 1 63,600 3,347,268
- --------------------------------------------------------------------------------
Sepracor, Inc. 1,2 2,200 113,520
- --------------------------------------------------------------------------------
Techne Corp. 1,2 6,300 353,745
- --------------------------------------------------------------------------------
Wyeth 260,200 11,987,414
------------
38,883,759
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--1.2%
Baxter International, Inc. 89,400 3,365,910
- --------------------------------------------------------------------------------
Becton, Dickinson & Co. 63,100 3,791,048
- --------------------------------------------------------------------------------
Boston Scientific Corp. 1 47,800 1,170,622
- --------------------------------------------------------------------------------
Guidant Corp. 32,800 2,123,800
- --------------------------------------------------------------------------------
Kinetic Concepts, Inc. 1 7,000 278,320
- --------------------------------------------------------------------------------
Medtronic, Inc. 129,700 7,466,829
- --------------------------------------------------------------------------------
Mentor Corp. 2 12,900 594,432
- --------------------------------------------------------------------------------
Millipore Corp. 1,2 5,200 343,408
- --------------------------------------------------------------------------------
PerkinElmer, Inc. 5,400 127,224
- --------------------------------------------------------------------------------
Stryker Corp. 7,300 324,339
- --------------------------------------------------------------------------------
Waters Corp. 1 10,000 378,000
- --------------------------------------------------------------------------------
Zimmer Holdings, Inc. 1 2,000 134,880
------------
20,098,812
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--5.0%
Aetna, Inc. 41,600 $ 3,923,296
- --------------------------------------------------------------------------------
American Healthways, Inc. 1,2 6,300 285,075
- --------------------------------------------------------------------------------
AmerisourceBergen Corp. 26,600 1,101,240
- --------------------------------------------------------------------------------
Beverly Enterprises, Inc. 1,2 7,200 84,024
- --------------------------------------------------------------------------------
Cardinal Health, Inc. 110,600 7,603,750
- --------------------------------------------------------------------------------
Caremark Rx, Inc. 1 150,400 7,789,216
- --------------------------------------------------------------------------------
CIGNA Corp. 55,700 6,221,690
- --------------------------------------------------------------------------------
Coventry Health Care, Inc. 1 13,550 771,808
- --------------------------------------------------------------------------------
Express Scripts, Inc. 1 52,800 4,424,640
- --------------------------------------------------------------------------------
Genesis HealthCare Corp. 1,2 5,100 186,252
- --------------------------------------------------------------------------------
HCA, Inc. 134,000 6,767,000
- --------------------------------------------------------------------------------
Health Net, Inc. 1 15,800 814,490
- --------------------------------------------------------------------------------
Humana, Inc. 1 24,900 1,352,817
- --------------------------------------------------------------------------------
IMS Health, Inc. 5,100 127,092
- --------------------------------------------------------------------------------
Manor Care, Inc. 2 8,300 330,091
- --------------------------------------------------------------------------------
McKesson Corp. 127,400 6,572,566
- --------------------------------------------------------------------------------
Medco Health Solutions, Inc. 1 121,181 6,761,900
- --------------------------------------------------------------------------------
Pediatrix Medical Group, Inc. 1,2 7,300 646,561
- --------------------------------------------------------------------------------
Quest Diagnostics, Inc. 69,900 3,598,452
- --------------------------------------------------------------------------------
Schein (Henry), Inc. 1,2 15,300 667,692
- --------------------------------------------------------------------------------
Sierra Health Services, Inc. 1,2 9,000 719,640
- --------------------------------------------------------------------------------
UnitedHealth Group, Inc. 212,748 13,220,161
- --------------------------------------------------------------------------------
WellCare Health Plans, Inc. 1,2 6,000 245,100
- --------------------------------------------------------------------------------
WellPoint, Inc. 1 150,712 12,025,310
------------
86,239,863
- --------------------------------------------------------------------------------
PHARMACEUTICALS--5.9%
Abbott Laboratories 184,600 7,278,778
- --------------------------------------------------------------------------------
Allergan, Inc. 2 36,500 3,940,540
- --------------------------------------------------------------------------------
Alpharma, Inc., Cl. A 2 15,300 436,203
- --------------------------------------------------------------------------------
Andrx Corp. 1,2 10,900 179,523
- --------------------------------------------------------------------------------
Barr Pharmaceuticals, Inc. 1 19,900 1,239,571
- --------------------------------------------------------------------------------
Bristol-Myers Squibb Co. 146,400 3,364,272
- --------------------------------------------------------------------------------
Eli Lilly & Co. 81,600 4,617,744
- --------------------------------------------------------------------------------
Endo Pharmaceuticals
Holdings, Inc. 1,2 8,300 251,158
- --------------------------------------------------------------------------------
Forest Laboratories, Inc. 1 110,000 4,474,800
- --------------------------------------------------------------------------------
Johnson & Johnson 484,606 29,124,821
- --------------------------------------------------------------------------------
King Pharmaceuticals, Inc. 1 51,500 87 1,380
- --------------------------------------------------------------------------------
Kos Pharmaceuticals, Inc. 1,2 14,000 724,220
- --------------------------------------------------------------------------------
Medicis Pharmaceutical Corp., Cl. A 2 3,000 96,150
- --------------------------------------------------------------------------------
Merck & Co., Inc. 429,100 13,649,671
- --------------------------------------------------------------------------------
Pfizer, Inc. 1,340,800 31,267,456
- --------------------------------------------------------------------------------
Watson Pharmaceuticals, Inc. 1 21,100 685,961
------------
102,202,248
10 | OPPENHEIMER MAIN STREET FUND/VA
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
INDUSTRIALS--10.2%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE--3.0%
Alliant Techsystems, Inc. 1,2 8,600 $ 655,062
- --------------------------------------------------------------------------------
BE Aerospace, Inc. 1,2 11,300 248,600
- --------------------------------------------------------------------------------
Boeing Co. 142,500 10,009,200
- --------------------------------------------------------------------------------
General Dynamics Corp. 41,900 4,778,695
- --------------------------------------------------------------------------------
Honeywell International, Inc. 179,200 6,675,200
- --------------------------------------------------------------------------------
Lockheed Martin Corp. 104,600 6,655,698
- --------------------------------------------------------------------------------
Northrop Grumman Corp. 125,900 7,567,849
- --------------------------------------------------------------------------------
Precision Castparts Corp. 2 24,300 1,258,983
- --------------------------------------------------------------------------------
Raytheon Co. 176,400 7,082,460
- --------------------------------------------------------------------------------
United Technologies Corp. 118,000 6,597,380
------------
51,529,127
- --------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS--0.0%
United Parcel Service, Inc., Cl. B 10,300 774,045
- --------------------------------------------------------------------------------
AIRLINES--0.1%
Alaska Air Group, Inc. 1,2 10,100 360,772
- --------------------------------------------------------------------------------
AMR Corp. 1,2 43,600 969,228
- --------------------------------------------------------------------------------
Continental Airlines, Inc., Cl. B 1,2 17,600 374,880
------------
1,704,880
- --------------------------------------------------------------------------------
BUILDING PRODUCTS--0.3%
American Standard Cos., Inc. 25,500 1,018,725
- --------------------------------------------------------------------------------
Masco Corp. 109,000 3,290,710
- --------------------------------------------------------------------------------
USG Corp. 1,2 14,600 949,000
------------
5,258,435
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--0.7%
Administaff, Inc. 2 5,300 222,865
- --------------------------------------------------------------------------------
Cendant Corp. 350,400 6,044,400
- --------------------------------------------------------------------------------
Corporate Executive Board Co. 1,600 143,520
- --------------------------------------------------------------------------------
Dun & Bradstreet Corp. 1,2 6,100 408,456
- --------------------------------------------------------------------------------
Manpower, Inc. 2 14,200 660,300
- --------------------------------------------------------------------------------
PHH Corp. 1,2 2,180 61,084
- --------------------------------------------------------------------------------
Pitney Bowes, Inc. 45,900 1,939,275
- --------------------------------------------------------------------------------
Robert Half International, Inc. 2 16,900 640,341
- --------------------------------------------------------------------------------
Waste Management, Inc. 43,700 1,326,295
------------
11,446,536
- --------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING--0.1%
Quanta Services, Inc. 1,2 21,300 280,521
- --------------------------------------------------------------------------------
URS Corp. 1,2 23,200 872,552
------------
1,153,073
- --------------------------------------------------------------------------------
DIVERSIFIED CONSUMER SERVICES--0.1%
Apollo Group, Inc., Cl. A 1 43,600 2,636,056
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--0.4%
Emerson Electric Co. 30,300 $ 2,263,410
- --------------------------------------------------------------------------------
Rockwell Automation, Inc. 76,800 4,543,488
- --------------------------------------------------------------------------------
Roper Industries, Inc. 2 11,400 450,414
------------
7,257,312
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--3.6%
3M Co. 36,800 2,852,000
- --------------------------------------------------------------------------------
General Electric Co. 1,494,700 52,389,235
- --------------------------------------------------------------------------------
Teleflex, Inc. 1,800 116,964
- --------------------------------------------------------------------------------
Tyco International Ltd. 236,000 6,810,960
------------
62,169,159
- --------------------------------------------------------------------------------
MACHINERY--1.2%
Caterpillar, Inc. 88,000 5,083,760
- --------------------------------------------------------------------------------
Danaher Corp. 27,600 1,539,528
- --------------------------------------------------------------------------------
Flowserve Corp. 1,2 16,700 660,652
- --------------------------------------------------------------------------------
Illinois Tool Works, Inc. 60,700 5,340,993
- --------------------------------------------------------------------------------
Ingersoll-Rand Co. Ltd., Cl. A 98,800 3,988,556
- --------------------------------------------------------------------------------
ITT Industries, Inc. 11,900 1,223,558
- --------------------------------------------------------------------------------
JLG Industries, Inc. 2 3,000 136,980
- --------------------------------------------------------------------------------
Parker-Hannifin Corp. 2 8,500 560,660
- --------------------------------------------------------------------------------
SPX Corp. 2 16,800 768,936
- --------------------------------------------------------------------------------
Terex Corp. 1 12,800 760,320
------------
20,063,943
- --------------------------------------------------------------------------------
ROAD & RAIL--0.7%
Burlington Northern Santa Fe Corp. 79,500 5,630,190
- --------------------------------------------------------------------------------
CSX Corp. 2,200 111,694
- --------------------------------------------------------------------------------
Landstar System, Inc. 2 9,300 388,182
- --------------------------------------------------------------------------------
Norfolk Southern Corp. 103,300 4,630,939
- --------------------------------------------------------------------------------
Union Pacific Corp. 12,000 966,120
------------
11,727,125
- --------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS--0.0%
United Rentals, Inc. 1,2 12,600 294,714
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--19.8%
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--3.2%
ADC Telecommunications, Inc. 1,2 2,100 46,914
- --------------------------------------------------------------------------------
ADTRAN, Inc. 2 19,500 579,930
- --------------------------------------------------------------------------------
Avaya, Inc. 1 56,500 602,855
- --------------------------------------------------------------------------------
Brocade Communications
Systems, Inc. 1,2 106,600 433,862
- --------------------------------------------------------------------------------
Cisco Systems, Inc. 1 1,275,300 21,833,136
- --------------------------------------------------------------------------------
Corning, Inc. 1 321,600 6,322,656
- --------------------------------------------------------------------------------
Emulex Corp. 1,2 15,800 312,682
- --------------------------------------------------------------------------------
Harris Corp. 2 2,600 111,826
- --------------------------------------------------------------------------------
Juniper Networks, Inc. 1,2 116,700 2,602,410
11 | OPPENHEIMER MAIN STREET FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT Continued
Lucent Technologies, Inc. 1 788,700 $ 2,097,942
- --------------------------------------------------------------------------------
Motorola, Inc. 384,000 8,674,560
- --------------------------------------------------------------------------------
Polycom, Inc. 1 9,600 146,880
- --------------------------------------------------------------------------------
QLogic Corp. 1 20,300 659,953
- --------------------------------------------------------------------------------
QUALCOMM, Inc. 215,900 9,300,972
- --------------------------------------------------------------------------------
Scientific-Atlanta, Inc. 22,500 969,075
------------
54,695,653
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--4.9%
Apple Computer, Inc. 1 139,100 9,999,899
- --------------------------------------------------------------------------------
Dell, Inc. 1 627,400 18,815,726
- --------------------------------------------------------------------------------
EMC Corp. 1 656,800 8,945,616
- --------------------------------------------------------------------------------
Hewlett-Packard Co. 640,800 18,346,104
- --------------------------------------------------------------------------------
International Business
- --------------------------------------------------------------------------------
Machines Corp. 276,300 22,711,860
- --------------------------------------------------------------------------------
Lexmark International, Inc., Cl. A 1 21,100 945,913
- --------------------------------------------------------------------------------
NCR Corp. 1 29,100 987,654
- --------------------------------------------------------------------------------
Network Appliance, Inc. 1 49,600 1,339,200
- --------------------------------------------------------------------------------
Palm, Inc. 1,2 9,900 314,820
- --------------------------------------------------------------------------------
Sun Microsystems, Inc. 1 230,500 965,795
- --------------------------------------------------------------------------------
Western Digital Corp. 1 72,100 1,341,781
------------
84,714,368
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--0.6%
Agilent Technologies, Inc. 1 158,000 5,259,820
- --------------------------------------------------------------------------------
Arrow Electronics, Inc. 1,2 24,700 791,141
- --------------------------------------------------------------------------------
Avnet, Inc. 1 33,100 792,414
- --------------------------------------------------------------------------------
CDW Corp. 2 8,300 477,831
- --------------------------------------------------------------------------------
Jabil Circuit, Inc. 1 26,800 994,012
- --------------------------------------------------------------------------------
Komag, Inc. 1,2 10,600 367,396
- --------------------------------------------------------------------------------
Mettler-Toledo International, Inc. 1,2 1,800 99,360
- --------------------------------------------------------------------------------
Sanmina-SCI Corp. 1 189,600 807,696
- --------------------------------------------------------------------------------
Solectron Corp. 1,2 243,900 892,674
- --------------------------------------------------------------------------------
Tech Data Corp. 1 6,100 242,048
- --------------------------------------------------------------------------------
UNOVA, Inc. 1,2 7,600 256,880
------------
10,981,272
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--0.7%
Check Point Software
Technologies Ltd. 1,2 27,800 558,780
- --------------------------------------------------------------------------------
Digital River, Inc. 1,2 9,400 279,556
- --------------------------------------------------------------------------------
EarthLink, Inc. 1,2 49,500 549,945
- --------------------------------------------------------------------------------
Google, Inc., Cl. A 1 13,700 5,683,582
- --------------------------------------------------------------------------------
Internet Security Systems, Inc. 1,2 17,700 370,815
- --------------------------------------------------------------------------------
MicroStrategy, Inc., Cl. A 1,2 3,600 297,864
- --------------------------------------------------------------------------------
United Online, Inc. 2 40,100 570,222
- --------------------------------------------------------------------------------
Websense, Inc. 1,2 5,000 328,200
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES Continued
Yahoo!, Inc. 1 63,400 $ 2,484,012
------------
11,122,976
- --------------------------------------------------------------------------------
IT SERVICES--0.8%
CACI International, Inc., Cl. A 1,2 7,400 424,612
- --------------------------------------------------------------------------------
Ceridian Corp. 1,2 20,400 506,940
- --------------------------------------------------------------------------------
CheckFree Corp. 1 11,500 527,850
- --------------------------------------------------------------------------------
Computer Sciences Corp. 1 20,600 1,043,184
- --------------------------------------------------------------------------------
CSG Systems International, Inc. 1,2 1,300 29,016
- --------------------------------------------------------------------------------
Electronic Data Systems Corp. 41,500 997,660
- --------------------------------------------------------------------------------
First Data Corp. 200,900 8,640,709
- --------------------------------------------------------------------------------
Fiserv, Inc. 1,2 22,400 969,248
- --------------------------------------------------------------------------------
Global Payments, Inc. 2 10,800 503,388
- --------------------------------------------------------------------------------
Sabre Holdings Corp. 2 32,400 781,164
------------
14,423,771
- --------------------------------------------------------------------------------
OFFICE ELECTRONICS--0.3%
Xerox Corp. 1 340,300 4,985,395
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--4.8%
Analog Devices, Inc. 161,300 5,785,831
- --------------------------------------------------------------------------------
Applied Materials, Inc. 461,600 8,281,104
- --------------------------------------------------------------------------------
Broadcom Corp., Cl. A 1 128,600 6,063,490
- --------------------------------------------------------------------------------
Cymer, Inc. 1,2 8,200 291,182
- --------------------------------------------------------------------------------
Fairchild Semiconductor
- --------------------------------------------------------------------------------
International, Inc., Cl. A 1,2 42,600 720,366
- --------------------------------------------------------------------------------
Freescale Semiconductor, Inc., Cl. B 1 160,443 4,038,350
- --------------------------------------------------------------------------------
Genesis Microchip, Inc. 1,2 6,600 119,394
- --------------------------------------------------------------------------------
Intel Corp. 1,279,100 31,926,336
- --------------------------------------------------------------------------------
Intersil Corp., Cl. A 2 32,100 798,648
- --------------------------------------------------------------------------------
KLA-Tencor Corp. 56,800 2,801,944
- --------------------------------------------------------------------------------
Lam Research Corp. 1,2 23,700 845,616
- --------------------------------------------------------------------------------
LSI Logic Corp. 1 94,600 756,800
- --------------------------------------------------------------------------------
Micrel, Inc. 1,2 14,600 169,360
- --------------------------------------------------------------------------------
Microchip Technology, Inc. 30,000 964,500
- --------------------------------------------------------------------------------
Microsemi Corp. 1,2 9,200 254,472
- --------------------------------------------------------------------------------
National Semiconductor Corp. 42,700 1,109,346
- --------------------------------------------------------------------------------
Novellus Systems, Inc. 1 31,600 762,192
- --------------------------------------------------------------------------------
NVIDIA Corp. 1 27,400 1,001,744
- --------------------------------------------------------------------------------
OmniVision Technologies, Inc. 1,2 18,000 359,280
- --------------------------------------------------------------------------------
Texas Instruments, Inc. 487,300 15,627,711
- --------------------------------------------------------------------------------
Zoran Corp. 1 4,900 79,429
------------
82,757,095
- --------------------------------------------------------------------------------
SOFTWARE--4.5%
Adobe Systems, Inc. 52,200 1,929,312
- --------------------------------------------------------------------------------
Autodesk, Inc. 2 112,300 4,823,285
12 | OPPENHEIMER MAIN STREET FUND/VA
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
SOFTWARE Continued
BEA Systems, Inc. 1 82,300 $ 773,620
- --------------------------------------------------------------------------------
BMC Software, Inc. 1 40,700 833,943
- --------------------------------------------------------------------------------
Cadence Design Systems, Inc. 1 49,500 837,540
- --------------------------------------------------------------------------------
Citrix Systems, Inc. 1 20,100 578,478
- --------------------------------------------------------------------------------
Cognos, Inc. 1,2 5,200 180,492
- --------------------------------------------------------------------------------
Computer Associates
International, Inc. 2 153,000 4,313,070
- --------------------------------------------------------------------------------
Compuware Corp. 1 90,800 814,476
- --------------------------------------------------------------------------------
Fair Isaac Corp. 2 16,400 724,388
- --------------------------------------------------------------------------------
Hyperion Solutions Corp. 1,2 20,700 741,474
- --------------------------------------------------------------------------------
Intuit, Inc. 1 22,700 1,209,910
- --------------------------------------------------------------------------------
McAfee, Inc. 1,2 28,700 778,631
- --------------------------------------------------------------------------------
Microsoft Corp. 1,400,600 36,625,690
- --------------------------------------------------------------------------------
Novell, Inc. 1,2 95,500 843,265
- --------------------------------------------------------------------------------
Oracle Corp. 1 879,700 10,741,137
- --------------------------------------------------------------------------------
Parametric Technology Corp. 1 53,700 327,570
- --------------------------------------------------------------------------------
Red Hat, Inc. 1,2 32,900 896,196
- --------------------------------------------------------------------------------
Reynolds & Reynolds Co., Cl. A 2 1,800 50,526
- --------------------------------------------------------------------------------
Symantec Corp. 1 420,542 7,359,485
- --------------------------------------------------------------------------------
Synopsys, Inc. 1 52,400 1,051,144
- --------------------------------------------------------------------------------
Take-Two Interactive Software, Inc. 1,2 14,900 263,730
------------
76,697,362
- --------------------------------------------------------------------------------
MATERIALS--2.5%
- --------------------------------------------------------------------------------
CHEMICALS--1.3%
Agrium, Inc. 2 26,200 576,138
- --------------------------------------------------------------------------------
Dow Chemical Co. (The) 161,000 7,055,020
- --------------------------------------------------------------------------------
E.I. DuPont de Nemours & Co. 50,000 2,125,000
- --------------------------------------------------------------------------------
FMC Corp. 1,2 5,800 308,386
- --------------------------------------------------------------------------------
Lubrizol Corp. (The) 3,000 130,290
- --------------------------------------------------------------------------------
Lyondell Chemical Co. 31,500 750,330
- --------------------------------------------------------------------------------
Monsanto Co. 61,400 4,760,342
- --------------------------------------------------------------------------------
PPG Industries, Inc. 61,600 3,566,640
- --------------------------------------------------------------------------------
Rohm & Haas Co. 47,100 2,280,582
- --------------------------------------------------------------------------------
Scotts Miracle-Gro Co. (The), Cl. A 2 9,200 416,208
------------
21,968,936
- --------------------------------------------------------------------------------
CONSTRUCTION MATERIALS--0.0%
Texas Industries, Inc. 5,200 259,168
- --------------------------------------------------------------------------------
CONTAINERS & PACKAGING--0.1%
Owens-Illinois, Inc. 1,2 31,100 654,344
- --------------------------------------------------------------------------------
Sealed Air Corp. 1,2 10,500 589,785
------------
1,244,129
- --------------------------------------------------------------------------------
METALS & MINING--0.9%
AK Steel Holding Corp. 1,2 48,000 381,600
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
METALS & MINING Continued
Alcoa, Inc. 77,300 $ 2,285,761
- --------------------------------------------------------------------------------
Carpenter Technology Corp. 2 7,300 514,431
- --------------------------------------------------------------------------------
Commercial Metals Co. 2 7,700 289,058
- --------------------------------------------------------------------------------
Freeport-McMoRan
Copper & Gold, Inc., Cl. B 20,400 1,097,520
- --------------------------------------------------------------------------------
Nucor Corp. 66,900 4,463,568
- --------------------------------------------------------------------------------
Phelps Dodge Corp. 35,300 5,078,611
- --------------------------------------------------------------------------------
Quanex Corp. 2 7,100 354,787
- --------------------------------------------------------------------------------
Reliance Steel & Aluminum Co. 2 11,200 684,544
- --------------------------------------------------------------------------------
Steel Dynamics, Inc. 2 8,200 291,182
- --------------------------------------------------------------------------------
United States Steel Corp. 2 2,000 96,140
- --------------------------------------------------------------------------------
Worthington Industries, Inc. 2 11,900 228,599
------------
15,765,801
- --------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS--0.2%
International Paper Co. 37,300 1,253,653
- --------------------------------------------------------------------------------
Louisiana-Pacific Corp. 2 11,900 326,893
- --------------------------------------------------------------------------------
MeadWestvaco Corp. 23,500 658,705
- --------------------------------------------------------------------------------
Weyerhaeuser Co. 2 32,500 2,156,050
------------
4,395,301
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--2.9%
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--2.9%
American Tower Corp. 1 41,800 1,132,780
- --------------------------------------------------------------------------------
AT&T, Inc. 423,878 10,380,772
- --------------------------------------------------------------------------------
BellSouth Corp. 262,800 7,121,880
- --------------------------------------------------------------------------------
CenturyTel, Inc. 21,400 709,624
- --------------------------------------------------------------------------------
Crown Castle International Corp. 1 22,200 597,402
- --------------------------------------------------------------------------------
Qwest Communications
International, Inc. 1,2 140,000 791,000
- --------------------------------------------------------------------------------
Sprint Nextel Corp. 658,723 15,387,769
- --------------------------------------------------------------------------------
Verizon Communications, Inc. 471,356 14,197,243
------------
50,318,470
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--0.0%
Dobson Communications
Corp., Cl. A 1,2 36,800 276,000
- --------------------------------------------------------------------------------
UTILITIES--0.8%
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES--0.8%
AES Corp. (The) 1 54,700 865,901
- --------------------------------------------------------------------------------
Constellation Energy Group, Inc. 46,200 2,661,120
- --------------------------------------------------------------------------------
DPL, Inc. 5,600 145,656
- --------------------------------------------------------------------------------
Duke Energy Corp. 2 800 21,960
- --------------------------------------------------------------------------------
Entergy Corp. 7,000 480,550
- --------------------------------------------------------------------------------
FirstEnergy Corp. 12,100 592,779
- --------------------------------------------------------------------------------
PG&E Corp. 2 121,500 4,510,080
- --------------------------------------------------------------------------------
Pinnacle West Capital Corp. 700 28,945
13 | OPPENHEIMER MAIN STREET FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------------
ELECTRIC UTILITIES Continued
Progress Energy, Inc.,
Contingent Value Obligation 1,3 32,000 $ 2,080
- -------------------------------------------------------------------------------------
TXU Corp. 64,600 3,242,270
---------------
12,551,341
- -------------------------------------------------------------------------------------
GAS UTILITIES--0.0%
NiSource, Inc. 5,500 114,730
- -------------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER--0.0%
Energy East Corp. 2 1,600 36,480
- -------------------------------------------------------------------------------------
Sierra Pacific Resources 1 22,100 288,184
---------------
324,664
---------------
Total Common Stocks
(Cost $1,461,259,931) 1,711,804,882
- -------------------------------------------------------------------------------------
PREFERRED STOCKS--0.0%
- -------------------------------------------------------------------------------------
Wachovia Corp., Dividend Equalization
Preferred Shares 1,3 (Cost $0) 6,000 24
UNITS
- -------------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- -------------------------------------------------------------------------------------
Dime Bancorp, Inc. Wts., Exp. 1/2/10 1 31,900 4,147
- -------------------------------------------------------------------------------------
Lucent Technologies, Inc. Wts.,
Exp. 12/10/07 1 4,837 2,733
---------------
Total Rights, Warrants and
Certificates (Cost $0) 6,880
PRINCIPAL
AMOUNT
- -------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--0.6%
- -------------------------------------------------------------------------------------
Undivided interest of 0.70% in joint
repurchase agreement (Principal Amount/
Value $1,414,200,000, with a maturity value
of $1,414,844,247) with UBS Warburg LLC,
4.10%, dated 12/30/05, to be repurchased
at $9,918,516 on 1/3/06, collateralized by
Federal Home Loan Mortgage Corp.,
5%, 1/1/35, with a value of $157,513,104
and Federal National Mortgage Assn.,
5%--5.50%, 3/1/34--10/1/35, with a value
of $1,301,420,187
(Cost $9,914,000) $ 9,914,000 9,914,000
- -------------------------------------------------------------------------------------
Total Investments, at Value
(excluding Investments Purchased
with Cash Collateral from Securities
Loaned) (Cost $1,471,173,931) 1,721,725,786
- -------------------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED--4.5%
- -------------------------------------------------------------------------------------
ASSET BACKED FLOATING NOTE--0.3%
Countrywide Asset-Backed Certificates,
Series 2005-17, Cl. 4AV1, 4.49%,
1/25/06 4 2,000,000 2,000,000
- -------------------------------------------------------------------------------------
GSAA Home Equity Trust, Series
2005-15, Cl. 2A1, 4.47%, 1/25/06 4 2,000,000 2,000,000
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------------
ASSET BACKED FLOATING NOTE Continued
Trust Money Market Securities,
Series A-2, 4.44%, 1/17/06 4 $ 1,000,000 $ 1,000,000
----------------
5,000,000
- -------------------------------------------------------------------------------------
DOMESTIC FLOATING CERTIFICATE OF DEPOSIT--0.2%
Washington Mutual Bank, 4.36%,
1/20/06 4 3,499,911 3,499,911
- -------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--2.9%
- -------------------------------------------------------------------------------------
Undivided interest of 1.58% in joint repurchase
agreement (Principal Amount/Value $3,150,000,000,
with a maturity value of $3,151,501,500) with
Nomura Securities, 4.29%, dated 12/30/05, to
be repurchased at $49,767,611 on 1/3/06,
collateralized by U.S. Agency Mortgages,
3.34%--9.50%, 6/1/08--5/1/38,
with a value of $3,213,000,000 4 49,743,900 49,743,900
- -------------------------------------------------------------------------------------
MASTER FLOATING NOTE--0.4%
Bear Stearns, 4.37%, 1/3/06 4 3,500,000 3,500,000
- -------------------------------------------------------------------------------------
CDC Financial Products, Inc.,
4.35%, 1/3/06 4 3,000,000 3,000,000
- -------------------------------------------------------------------------------------
Citigroup Global Markets, Inc.,
4.32%, 1/3/06 4 1,000,000 1,000,000
---------------
7,500,000
- -------------------------------------------------------------------------------------
MEDIUM-TERM FLOATING NOTE--0.7%
Countrywide Financial Corp.,
4.59%, 3/21/06 4 3,999,766 3,999,766
- -------------------------------------------------------------------------------------
Goldman Sachs Group, Inc.,
4.41%, 1/3/06 4 4,000,000 4,000,000
- -------------------------------------------------------------------------------------
Landsbanki Islands, 4.45%, 1/17/06 4 4,000,000 4,000,000
----------------
11,999,766
----------------
Total Investments Purchased with Cash
Collateral from Securities Loaned
(Cost $77,743,577) 77,743,577
- -------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $1,548,917,508) 104.6% 1,799,469,363
- -------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF
OTHER ASSETS (4.6) (79,645,145)
--------------------------------
NET ASSETS 100.0% $ 1,719,824,218
================================
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
2. Partial or fully-loaned security. See Note 7 of Notes to Financial
Statements.
3. Illiquid security. The aggregate value of illiquid securities as of December
31, 2005 was $2,104, which represents less than 0.005% of the Fund's net assets.
See Note 6 of Notes to Financial Statements.
4. The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned. See Note 7 of Notes to Financial
Statements.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14 | OPPENHEIMER MAIN STREET FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 31, 2005
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
ASSETS
- -----------------------------------------------------------------------------------------------------------------------------
Investments, at value (including securities loaned of $75,611,592)
(cost $1,548,917,508)--see accompanying statement of investments $1,799,469,363
- -----------------------------------------------------------------------------------------------------------------------------
Cash 619,578
- -----------------------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 5,526,954
Interest and dividends 2,077,331
Shares of beneficial interest sold 1,991,260
Other 22,159
-------------
Total assets 1,809,706,645
- -----------------------------------------------------------------------------------------------------------------------------
LIABILITIES
- -----------------------------------------------------------------------------------------------------------------------------
Return of collateral for securities loaned 77,743,577
- -----------------------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 10,271,989
Shares of beneficial interest redeemed 1,353,384
Distribution and service plan fees 349,050
Shareholder communications 91,107
Trustees' compensation 28,761
Transfer and shareholder servicing agent fees 1,816
Other 42,743
--------------
Total liabilities 89,882,427
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSETS $1,719,824,218
==============
- -----------------------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 79,136
- -----------------------------------------------------------------------------------------------------------------------------
Additional paid-in capital 1,630,162,524
- -----------------------------------------------------------------------------------------------------------------------------
Accumulated net investment income 19,275,548
- -----------------------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions (180,244,882)
- -----------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets and liabilities denominated
in foreign currencies 250,551,892
---------------
Net Assets $1,719,824,218
===============
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- -----------------------------------------------------------------------------------------------------------------------------
Non-Service Shares:
Net asset value, redemption price per share and offering price per share (based on net assets
of $1,121,476,526 and 51,472,131 shares of beneficial interest outstanding) $21.79
- -----------------------------------------------------------------------------------------------------------------------------
Service Shares:
Net asset value, redemption price per share and offering price per share (based on net assets
of $598,347,692 and 27,663,565 shares of beneficial interest outstanding) $21.63
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
15 | OPPENHEIMER MAIN STREET FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 31, 2005
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
INVESTMENT INCOME
- ---------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $28,927) $ 30,595,396
- ---------------------------------------------------------------------------------------
Interest 421,243
- ---------------------------------------------------------------------------------------
Portfolio lending fees 195,845
-------------
Total investment income 31,212,484
- ---------------------------------------------------------------------------------------
EXPENSES
- ---------------------------------------------------------------------------------------
Management fees 10,549,666
- ---------------------------------------------------------------------------------------
Distribution and service plan fees--Service shares 1,122,003
- ---------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service shares 10,807
Service shares 10,342
- ---------------------------------------------------------------------------------------
Shareholder communications:
Non-Service shares 83,076
Service shares 35,071
- ---------------------------------------------------------------------------------------
Trustees' compensation 28,182
- ---------------------------------------------------------------------------------------
Custodian fees and expenses 19,075
- ---------------------------------------------------------------------------------------
Administration service fees 1,500
- ---------------------------------------------------------------------------------------
Other 75,698
-------------
Total expenses 11,935,420
Less reduction to custodian expenses (1,463)
-------------
Net expenses 11,933,957
- ---------------------------------------------------------------------------------------
NET INVESTMENT INCOME 19,278,527
- ---------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- ---------------------------------------------------------------------------------------
Net realized gain on:
Investments 45,928,240
Foreign currency transactions 320,762
-------------
Net realized gain 46,249,002
- ---------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments 29,526,879
Translation of assets and liabilities denominated in foreign currencies (248,415)
-------------
Net change in unrealized appreciation 29,278,464
- ---------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 94,805,993
=============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
16 | OPPENHEIMER MAIN STREET FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2005 2004
- ----------------------------------------------------------------------------------------------------------------------------
OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income $ 19,278,527 $ 20,357,629
- ----------------------------------------------------------------------------------------------------------------------------
Net realized gain 46,249,002 111,199,320
- ----------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation 29,278,464 4,618,002
-----------------------------------
Net increase in net assets resulting from operations 94,805,993 136,174,951
- ----------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ----------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Non-Service shares (16,043,833) (10,373,133)
Service shares (4,680,411) (1,403,577)
- ----------------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from beneficial interest transactions:
Non-Service shares (165,951,406) (73,484,963)
Service shares 199,901,024 179,202,879
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------------
Total increase 108,031,367 230,116,157
- ----------------------------------------------------------------------------------------------------------------------------
Beginning of period 1,611,792,851 1,381,676,694
-----------------------------------
End of period (including accumulated net investment income of $19,275,548
and $20,719,203, respectively) $ 1,719,824,218 $ 1,611,792,851
===================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
17 | OPPENHEIMER MAIN STREET FUND/VA
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 2001
- ----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 20.84 $ 19.20 $ 15.32 $ 18.99 $ 21.26
- ----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .26 1 .27 1 .18 .16 .13
Net realized and unrealized gain (loss) .97 1.53 3.86 (3.70) (2.29)
--------------------------------------------------------------------------
Total from investment operations 1.23 1.80 4.04 (3.54) (2.16)
- ----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.28) (.16) (.16) (.13) (.11)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 21.79 $ 20.84 $ 19.20 $ 15.32 $ 18.99
==========================================================================
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 5.98% 9.46% 26.72% (18.80)% (10.16)%
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $1,121,476 $1,238,948 $1,214,960 $ 890,740 $1,074,945
- ----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $1,156,299 $1,216,081 $1,003,396 $ 999,275 $1,028,913
- ----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 1.26% 1.39% 1.10% 0.94% 0.73%
Total expenses 0.67% 4 0.67% 4 0.70% 4 0.69% 4 0.73% 4
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 88% 82% 85% 98% 69%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Total returns are not annualized for
periods less than one full year. Total return information does not reflect
expenses that apply at the separate account level or to related insurance
products. Inclusion of these charges would reduce the total return figures for
all periods shown. Returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
18 | OPPENHEIMER MAIN STREET FUND/VA
SERVICE SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 2001
- -----------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 20.70 $ 19.10 $ 15.26 $ 18.95 $ 21.24
- -----------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .21 1 .25 1 .14 .13 .14
Net realized and unrealized gain (loss) .96 1.49 3.85 (3.70) (2.32)
---------------------------------------------------------------
Total investment operations 1.17 1.74 3.99 (3.57) (2.18)
- -----------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.24) (.14) (.15) (.12) (.11)
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 21.63 $ 20.70 $ 19.10 $ 15.26 $ 18.95
===============================================================
- -----------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 5.74% 9.15% 26.44% (18.99)% (10.27)%
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $598,348 $372,845 $166,717 $ 51,929 $ 21,545
- -----------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $462,272 $262,660 $ 98,210 $ 34,604 $ 10,306
- -----------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 1.02% 1.30% 0.83% 0.87% 0.66%
Total expenses 0.91% 4 0.92% 4 0.96% 4 0.84% 4 0.88% 4
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 88% 82% 85% 98% 69%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Total returns are not annualized for
periods less than one full year. Total return information does not reflect
expenses that apply at the separate account level or to related insurance
products. Inclusion of these charges would reduce the total return figures for
all periods shown. Returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19 | OPPENHEIMER MAIN STREET FUND/VA
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Main Street Fund/VA (the Fund), is a separate series of Oppenheimer
Variable Account Funds, an open-end management investment company registered
under the Investment Company Act of 1940, as amended. The Fund's objective is to
seek high total return (which includes growth in the value of its shares as well
as current income) from equity and debt securities. The Fund's investment
advisor is OppenheimerFunds, Inc. (the Manager).
The Fund offers two classes of shares. Both classes are sold at their
offering price, which is the net asset value per share, to separate investment
accounts of participating insurance companies as an underlying investment for
variable life insurance policies, variable annuity contracts or other investment
products. The class of shares designated as Service shares is subject to a
distribution and service plan. Both classes of shares have identical rights and
voting privileges with respect to the Fund in general and exclusive voting
rights on matters that affect that class alone. Earnings, net assets and net
asset value per share may differ due to each class having its own expenses, such
as transfer and shareholder servicing agent fees and shareholder communications,
directly attributable to that class.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for business. Securities may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. Securities listed or traded on National
Stock Exchanges or other domestic exchanges are valued based on the last sale
price of the security traded on that exchange prior to the time when the Fund's
assets are valued. Securities traded on NASDAQ are valued based on the closing
price provided by NASDAQ prior to the time when the Fund's assets are valued. In
the absence of a sale, the security is valued at the last sale price on the
prior trading day, if it is within the spread of the closing "bid" and "asked"
prices, and if not, at the closing bid price. Securities traded on foreign
exchanges are valued based on the last sale price on the principal exchange on
which the security is traded, in the country that is identified by the portfolio
pricing service, prior to the time when the Fund's assets are valued. In the
absence of a sale, the security is valued at the official closing price on the
principal exchange. Corporate, government and municipal debt instruments having
a remaining maturity in excess of sixty days and all mortgage-backed securities
will be valued at the mean between the "bid" and "asked" prices. Futures
contracts traded on a commodities or futures exchange will be valued at the
final settlement price or official closing price on the principal exchange as
reported by such principal exchange at its trading session ending at, or most
recently prior to, the time when the Fund's assets are valued. Securities
(including restricted securities) for which market quotations are not readily
available are valued at their fair value. Foreign and domestic securities whose
values have been materially affected by what the Manager identifies as a
significant event occurring before the Fund's assets are valued but after the
close of their respective exchanges will be fair valued. Fair value is
determined in good faith using consistently applied procedures under the
supervision of the Board of Trustees. Short-term "money market type" debt
securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in
U.S. dollars. The values of securities denominated in foreign currencies and
amounts related to the purchase and sale of foreign securities and foreign
investment income are translated into U.S. dollars as of the close of The New
York Stock Exchange (the Exchange), normally 4:00 P.M. Eastern time, on each day
the Exchange is open for business. Foreign exchange rates may be valued
primarily using dealer supplied valuations or a portfolio pricing service
authorized by the Board of Trustees.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
values of assets and liabilities, including investments in securities at fiscal
period end, resulting from changes in exchange rates.
20 | OPPENHEIMER MAIN STREET FUND/VA
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated funds
advised by the Manager, may transfer uninvested cash balances into joint trading
accounts on a daily basis. These balances are invested in one or more repurchase
agreements. Securities pledged as collateral for repurchase agreements are held
by a custodian bank until the agreements mature. Each agreement requires that
the market value of the collateral be sufficient to cover payments of interest
and principal. In the event of default by the other party to the agreement,
retention of the collateral may be subject to legal proceedings.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders.
The tax components of capital shown in the table below represent distribution
requirements the Fund must satisfy under the income tax regulations, losses the
Fund may be able to offset against income and gains realized in future years and
unrealized appreciation or depreciation of securities and other investments for
federal income tax purposes.
NET UNREALIZED
APPRECIATION
BASED ON COST OF
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED SECURITIES AND OTHER
NET INVESTMENT LONG-TERM LOSS INVESTMENTS FOR FEDERAL
INCOME GAIN CARRYFORWARD 1,2,3,4 INCOME TAX PURPOSES
- -------------------------------------------------------------------------------
$19,282,490 $-- $163,795,900 $234,117,529
1. As of December 31, 2005, the Fund had $163,795,249 of net capital loss
carryforwards available to offset future realized capital gains, if any, and
thereby reduce future taxable gain distributions. As of December 31, 2005,
details of the capital loss carryforwards were as follows:
EXPIRING
------------------------
2009 $ 10,477,990
2010 126,747,906
2011 26,569,353
------------
Total $163,795,249
============
2. The Fund had $651 of post-October foreign currency losses which were
deferred.
3. During the fiscal year ended December 31, 2005, the Fund utilized $44,990,386
of capital loss carryforward to offset capital gains realized in that fiscal
year.
4. During the fiscal year ended December 31, 2004, the Fund utilized
$114,232,007 of capital loss carryforward to offset capital gains realized in
that fiscal year.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Fund. Accordingly, the
following amounts have been reclassified for December 31, 2005. Net assets of
the Fund were unaffected by the reclassifications.
21 | OPPENHEIMER MAIN STREET FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
INCREASE TO INCREASE TO
ACCUMULATED ACCUMULATED NET
NET INVESTMENT REALIZED LOSS
INCOME ON INVESTMENTS
-------------------------------------------
$2,062 $2,062
The tax character of distributions paid during the years ended December 31, 2005
and December 31, 2004 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2005 DECEMBER 31, 2004
------------------------------------------------------------------------
Distributions paid from:
Ordinary income $20,724,244 $ 11,776,710
The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for
federal income tax purposes as of December 31, 2005 are noted below. The primary
difference between book and tax appreciation or depreciation of securities and
other investments, if applicable, is attributable to the tax deferral of losses
or tax realization of financial statement unrealized gain or loss.
Federal tax cost of securities $1,565,351,871
===============
Gross unrealized appreciation $ 257,812,745
Gross unrealized depreciation (23,695,216)
---------------
Net unrealized appreciation $ 234,117,529
===============
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred
compensation plan for independent trustees that enables trustees to elect to
defer receipt of all or a portion of the annual compensation they are entitled
to receive from the Fund. For purposes of determining the amount owed to the
Trustee under the plan, deferred amounts are treated as though equal dollar
amounts had been invested in shares of the Fund or in other Oppenheimer funds
selected by the Trustee. The Fund purchases shares of the funds selected for
deferral by the Trustee in amounts equal to his or her deemed investment,
resulting in a Fund asset equal to the deferred compensation liability. Such
assets are included as a component of "Other" within the asset section of the
Statement of Assets and Liabilities. Deferral of trustees' fees under the plan
will not affect the net assets of the Fund, and will not materially affect the
Fund's assets, liabilities or net investment income per share. Amounts will be
deferred until distributed in accordance to the Plan.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date. Income and capital gain distributions, if
any, are declared and paid annually.
- --------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and amortization
of premium, is accrued as earned.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. Custodian Fees and Expenses in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts to the extent they are not
offset by positive cash balances maintained by the Fund. The Reduction to
Custodian Expenses line item, if applicable, represents earnings on cash
balances maintained by the Fund during the period. Such interest expense and
other custodian fees may be paid with these earnings.
22 | OPPENHEIMER MAIN STREET FUND/VA
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
YEAR ENDED DECEMBER 31, 2005 YEAR ENDED DECEMBER 31, 2004
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------
NON-SERVICE SHARES
Sold 3,666,887 $ 75,624,029 11,955,294 $ 233,322,256
Dividends and/or distributions reinvested 783,008 16,043,833 536,356 10,373,133
Redeemed (12,430,546) (257,619,268) (16,312,427) (317,180,352)
----------------------------------------------------------------
Net decrease (7,980,651) $(165,951,406) (3,820,777) $ (73,484,963)
================================================================
- -------------------------------------------------------------------------------------------------------------
SERVICE SHARES
Sold 10,831,089 $ 224,276,509 10,163,617 $ 196,313,963
Dividends and/or distributions reinvested 229,657 4,680,411 72,875 1,403,577
Redeemed (1,404,971) (29,055,896) (955,303) (18,514,661)
----------------------------------------------------------------
Net increase 9,655,775 $ 199,901,024 9,281,189 $ 179,202,879
================================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended December 31, 2005, were as
follows:
PURCHASES SALES
-----------------------------------------------------------
Investment securities $1,451,659,870 $1,407,502,229
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee at an
annual rate of 0.75% of the first $200 million of average annual net assets,
0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the
next $200 million and 0.60% of average annual net assets over $800 million.
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the year ended December 31, 2005, the Fund paid
$21,081 to OFS for services to the Fund.
Additionally, funds offered in variable annuity separate accounts are
subject to minimum fees of $10,000 per class, for class level assets of $10
million or more. Each class is subject to the minimum fee in the event that the
per account fee does not equal or exceed the applicable minimum fee.
23 | OPPENHEIMER MAIN STREET FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
DISTRIBUTION AND SERVICE PLAN FOR SERVICE SHARES. The Fund has adopted a
Distribution and Service Plan for Service shares to pay OppenheimerFunds
Distributor, Inc. (the Distributor), for distribution related services, personal
service and account maintenance for the Fund's Service shares. Under the plan,
payments are made periodically at an annual rate of up to 0.25% of the average
annual net assets of Service shares of the Fund. The Distributor currently uses
all of those fees to compensate sponsor(s) of the insurance product that offers
Fund shares, for providing personal service and maintenance of accounts of their
variable contract owners that hold Service shares. The impact of the service
plan is to increase operating expenses of the Service shares, which results in
lower performance compared to the Fund's shares that are not subject to a
service fee. Fees incurred by the Fund under the plan are detailed in the
Statement of Operations.
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit
transfer and shareholder servicing agent fees for all classes to 0.35% of
average annual net assets per class. This undertaking may be amended or
withdrawn at any time.
- --------------------------------------------------------------------------------
5. FOREIGN CURRENCY CONTRACTS
A foreign currency contract is a commitment to purchase or sell a foreign
currency at a future date, at a negotiated rate. The Fund may enter into foreign
currency contracts to settle specific purchases or sales of securities
denominated in a foreign currency and for protection from adverse exchange rate
fluctuation. Risks to the Fund include the potential inability of the
counterparty to meet the terms of the contract.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using prevailing foreign currency exchange rates.
Unrealized appreciation and depreciation on foreign currency contracts are
reported in the Statement of Assets and Liabilities as a receivable or payable
and in the Statement of Operations with the change in unrealized appreciation or
depreciation.
The Fund may realize a gain or loss upon the closing or settlement of the
foreign transaction. Contracts closed or settled with the same broker are
recorded as net realized gains or losses. Such realized gains and losses are
reported with all other foreign currency gains and losses in the Statement of
Operations.
As of December 31, 2005, the Fund had no outstanding foreign currency
contracts.
- --------------------------------------------------------------------------------
6. ILLIQUID SECURITIES
As of December 31, 2005, investments in securities included issues that are
illiquid. A security may be considered illiquid if it lacks a readily available
market or if its valuation has not changed for a certain period of time. The
Fund will not invest more than 15% of its net assets (determined at the time of
purchase and reviewed periodically) in illiquid securities. Securities that are
illiquid are marked with the applicable footnote on the Statement of
Investments.
- --------------------------------------------------------------------------------
7. SECURITIES LENDING
The Fund lends portfolio securities from time to time in order to earn
additional income. In return, the Fund receives collateral in the form of U.S.
Treasury obligations or cash, against the loaned securities and maintains
collateral in an amount not less than 100% of the market value of the loaned
securities during the period of the loan. The market value of the loaned
securities is determined at the close of business of the funds and any
additional required collateral is delivered to the Fund on the next business
day. If the borrower defaults on its obligation to return the securities loaned
because of insolvency or other reasons, the Fund could experience delays and
cost in recovering the securities loaned or in gaining access to the collateral.
Cash collateral is invested in cash equivalents. The Fund retains a portion of
the interest earned from the collateral. The Fund continues to receive the
economic benefit of interest or dividends paid on the securities loaned in the
form of a substitute payment received from the borrower. As of December 31,
2005, the Fund had on loan securities valued at $75,611,592. Collateral of
$77,743,577 was received for the loans, all of which was received in cash and
subsequently invested in approved instruments.
24 | OPPENHEIMER MAIN STREET FUND/VA
- --------------------------------------------------------------------------------
8. LITIGATION
A consolidated amended complaint has been filed as putative derivative and class
actions against the Manager, OFS and the Distributor, as well as 51 of the
Oppenheimer funds (as "Nominal Defendants") excluding the Fund, 30 present and
former Directors or Trustees and 8 present and former officers of the funds.
This complaint, initially filed in the U.S. District Court for the Southern
District of New York on January 10, 2005 and amended on March 4, 2005,
consolidates into a single action and amends six individual previously-filed
putative derivative and class action complaints. Like those prior complaints,
the complaint alleges that the Manager charged excessive fees for distribution
and other costs, improperly used assets of the funds in the form of directed
brokerage commissions and 12b-1 fees to pay brokers to promote sales of the
funds, and failed to properly disclose the use of assets of the funds to make
those payments in violation of the Investment Company Act of 1940 and the
Investment Advisers Act of 1940. Also, like those prior complaints, the
complaint further alleges that by permitting and/or participating in those
actions, the Directors/Trustees and the Officers breached their fiduciary duties
to shareholders of the funds under the Investment Company Act of 1940 and at
common law. The complaint seeks unspecified compensatory and punitive damages,
rescission of the funds' investment advisory agreements, an accounting of all
fees paid, and an award of attorneys' fees and litigation expenses.
The defendants believe that the allegations contained in the Complaints
are without merit and that they have meritorious defenses against the claims
asserted. The defendants intend to defend these lawsuits vigorously and to
contest any claimed liability. The defendants believe that it is premature to
render any opinion as to the likelihood of an outcome unfavorable to them and
that no estimate can yet be made with any degree of certainty as to the amount
or range of any potential loss.
25 | OPPENHEIMER MAIN STREET FUND/VA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER MAIN STREET FUND/VA:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer Main Street Fund/VA, a series of Oppenheimer Variable Account Funds,
including the statement of investments, as of December 31, 2005, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the periods then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
The Fund is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audit includes consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of December 31, 2005, by correspondence with the
custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer Main Street Fund/VA as of December 31, 2005, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the periods then ended, in conformity with accounting
principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
February 13, 2006
26 | OPPENHEIMER MAIN STREET FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2006, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2005. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
Dividends, if any, paid by the Fund during the fiscal year ended December
31, 2005 which are not designated as capital gain distributions should be
multiplied by 100% to arrive at the amount eligible for the corporate
dividend-received deduction.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Fund to the Internal Revenue Service. Because of
the complexity of the federal regulations which may affect your individual tax
return and the many variations in state and local tax regulations, we recommend
that you consult your tax advisor for specific guidance.
27 | OPPENHEIMER MAIN STREET FUND/VA
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file Form N-PX, with its complete proxy voting record for the 12 months ended
June 30th, no later than August 31st of each year. The Fund's voting record is
available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at
www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC
for the first quarter and the third quarter of each fiscal year on Form N-Q. The
Fund's Form N-Q filings are available on the SEC's website at
http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public
Reference Room in Washington D.C. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
28 | OPPENHEIMER MAIN STREET FUND/VA
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew the Fund's
investment advisory agreement (the "Agreement"). The Investment Company Act of
1940, as amended, requires that the Board request and evaluate, and that the
Manager provide, such information as may be reasonably necessary to evaluate the
terms of the Agreement. The Board employs an independent consultant to prepare a
report that provides information, including comparative information, that the
Board requests for that purpose. In addition, the Board receives information
throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager, including an analysis of the
cost of providing services, (v) whether economies of scale are realized as the
Fund grows and whether fee levels reflect these economies of scale for Fund
investors and (vi) other benefits to the Manager from its relationship with the
Fund. Outlined below is a summary of the principal information considered by the
Board as well as the Board's conclusions.
NATURE, QUALITY, AND EXTENT OF SERVICES. The Board considered information
on the nature and extent of the services provided to the Fund and information
regarding the Manager's key personnel that provide such services. The Manager's
duties include providing the Fund with the services of the portfolio managers
and the Manager's investment team, who provide research, analysis and other
advisory services in regard to the Fund's investments; securities trading
services; oversight of third party service providers; monitoring compliance with
applicable Fund policies and procedures and adherence to the Fund's investment
restrictions. The Manager is responsible for providing certain administrative
services to the Fund as well. Those services include providing and supervising
all administrative and clerical personnel that are necessary in order to provide
effective corporate administration for the Fund; compiling and maintaining
records with respect to the Fund's operations; preparing and filing reports
required by the Securities and Exchange Commission; preparing periodic reports
regarding the operations of the Fund for its shareholders; preparing proxy
materials for shareholder meetings; and preparing the registration statements
required by Federal and state securities laws for the sale of the Fund's shares.
The Manager also provides the Fund with office space, facilities and equipment.
The Board also considered the quality of the services provided and the
quality of the Manager's resources that are available to the Fund. The Board
took account of the fact that the Manager has had over forty years of experience
as an investment adviser and that its assets under management rank it among the
top mutual fund managers in the United States. The Board evaluated the Manager's
administrative, accounting, legal and compliance services, and information the
Board has received regarding the experience and professional qualifications of
the Manager's key personnel and the size and functions of its staff providing
investment management services to the Fund. The Board also considered compliance
reports from the Fund's Chief Compliance Officer. In its evaluation of the
quality of the portfolio management services provided, the Board considered the
experience of Nikolaos D. Monoyios and Marc Reinganum and the Manager's Equity
Growth investment team and analysts. Messrs. Monoyios and Reinganum have had
over 28 and 26 years of experience, respectively, managing equity investments.
The Board members also considered the totality of their experiences with the
Manager, as directors or trustees of the Fund and other funds advised by the
Manager. In light of the foregoing, the Board concluded that the Fund benefits
from the services provided under the Agreement as a result of the Manager's
experience, reputation, personnel, operations, and resources.
INVESTMENT PERFORMANCE OF THE MANAGER AND THE FUND. During the year, the
Manager provided information on the performance of the Fund and the Manager at
each Board meeting, including comparative performance information. The Board
also reviewed information, prepared by the Manager and by the independent
consultant, comparing the Fund's historical performance to relevant market
indices and to the performance of other large-cap core funds (including both
funds advised by the Manager and funds advised by other investment advisers).
The Board noted that the Fund's one-year, three-year, five-year and ten-year
performance were all better than its peer group median.
29 | OPPENHEIMER MAIN STREET FUND/VA
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited/Continued
- --------------------------------------------------------------------------------
COSTS OF SERVICES AND PROFITS REALIZED BY THE MANAGER. The Board
considered information regarding the Manager's costs in serving as the Fund's
investment adviser, including the costs associated with the personnel and
systems necessary to manage the Fund, and information regarding the Manager's
profitability from its relationship with the Fund. The Board reviewed the fees
paid to the Manager and the other expenses borne by the Fund. The Board also
evaluated the comparability of the fees charged and the services provided to the
Fund to the fees and services for other clients or accounts advised by the
Manager. The independent consultant provided comparative data in regard to the
fees and expenses of the Fund, other large-cap core funds and other funds with
comparable asset levels and distribution features. The Board noted that the
Fund's contractual and actual management fees are lower than its peer group
median but higher than its peer group average and that its total expenses are
lower than both its peer group median and average. In light of this and the
Fund's strong performance, the Board concluded that the management fee was
reasonable.
ECONOMIES OF SCALE. The Board considered whether the Manager may realize
economies of scale in managing and supporting the Fund, whether those economies
of scale benefit the Fund's shareholders and the current level of Fund assets in
relation to the Fund's management fee breakpoints, which are intended to share
with shareholders economies of scale that may exist as the Fund grows.
OTHER BENEFITS TO THE MANAGER. In addition to considering the profits
realized by the Manager, the Board considered information that was provided
regarding the direct and indirect benefits the Manager receives as a result of
its relationship with the Fund, including compensation paid to the Manager's
affiliates and research provided to the Manager in connection with permissible
brokerage arrangements (soft dollar arrangements). The Board also considered the
nature and quality of services provided by affiliates of the Manager, which it
reviews at other times during the year in connection with the renewal of the
Fund's service agreements. The Board considered that the Manager must be able to
pay and retain experienced professional personnel at competitive rates to
provide services to the Fund and that maintaining the financial viability of the
Manager is important in order for the Manager to continue to provide significant
services to the Fund and its shareholders.
CONCLUSIONS. These factors were also considered by the independent
Trustees meeting separately from the full Board, assisted by experienced counsel
to the Fund and to the independent Trustees. Fund counsel and the independent
Trustees' counsel are both independent of the Manager within the meaning and
intent of the Securities and Exchange Commission Rules.
Based on its review of the information it received and its evaluations
described above, the Board, including a majority of the independent Trustees,
decided to continue the advisory agreement for another year. In arriving at this
decision, the Board did not single out any factor or factors as being more
important than others, but considered all of the factors together. The Board
judged the terms and conditions of the advisory agreement, including the
management fee, in light of all of the surrounding circumstances.
30 | OPPENHEIMER MAIN STREET FUND/VA
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS HELD;
THE FUNDS, LENGTH OF SERVICE, NUMBER OF PORTFOLIOS IN THE FUNDS COMPLEX CURRENTLY OVERSEEN
AGE
INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL, COLORADO
TRUSTEES 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER RESIGNATION,
RETIREMENT, DEATH OR REMOVAL.
WILLIAM L. ARMSTRONG, Chairman of the following private mortgage banking companies: Cherry Creek Mortgage Company
Chairman of the Board of (since 1991), Centennial State Mortgage Company (since 1994), and The El Paso Mortgage
Trustees (since 2003), Company (since 1993); Chairman of the following private companies: Ambassador Media
Trustee (since 1999) Corporation (since 1984) and Broadway Ventures (since 1984); Director of the following:
Age: 68 Helmerich & Payne, Inc. (oil and gas drilling/production company) (since 1992), Campus
Crusade for Christ (since 1991) and The Lynde and Harry Bradley Foundation, Inc. (non-profit
organization) (since 2002); former Chairman of the following: Transland Financial Services,
Inc. (private mortgage banking company) (1997-2003), Great Frontier Insurance (insurance
agency) (1995-2000), Frontier Real Estate, Inc. (residential real estate brokerage)
(1994-2000) and Frontier Title (title insurance agency) (1995-2000); former Director of
the following: UNUMProvident (insurance company) (1991-2004), Storage Technology Corporation
(computer equipment company) (1991-2003) and International Family Entertainment (television
channel) (1992-1997); U.S. Senator (January 1979-January 1991). Oversees 38 portfolios in
the OppenheimerFunds complex.
ROBERT G. AVIS, Director and President of A.G. Edwards Capital, Inc. (General Partner of private equity
Trustee (since 1995) funds) (until February 2001); Chairman, President and Chief Executive Officer of A.G.
Age: 74 Edwards Capital, Inc. (until March 2000); Director of A.G. Edwards & Sons, Inc. (brokerage
company) (until 2000) and A.G. Edwards Trust Company (investment adviser) (until 2000); Vice
Chairman and Director of A.G. Edwards, Inc. (until March 1999); Vice Chairman of A.G.
Edwards & Sons, Inc. (until March 1999); Chairman of A.G. Edwards Trust Company (until March
1999) and A.G.E. Asset Management (investment adviser) (until March 1999). Oversees 38
portfolios in the OppenheimerFunds complex.
GEORGE C. BOWEN, Assistant Secretary and Director of Centennial Asset Management Corporation (December
Trustee (since 1999) 1991-April 1999); President, Treasurer and Director of Centennial Capital Corporation (June
Age: 69 1989-April 1999); Chief Executive Officer and Director of MultiSource Services, Inc. (March
1996-April 1999); Mr. Bowen held several positions with the Manager and with subsidiary or
affiliated companies of the Manager (September 1987-April 1999). Oversees 38 portfolios in
the OppenheimerFunds complex.
EDWARD L. CAMERON, Member of The Life Guard of Mount Vernon (George Washington historical site) (since June
Trustee (since 1999) 2000); Director of Genetic ID, Inc. (biotech company) (March 2001-May 2002); Partner at
Age: 67 PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price
Waterhouse LLP Global Investment Management Industry Services Group (July 1994-June 1998).
Oversees 38 portfolios in the OppenheimerFunds complex.
JON S. FOSSEL, Director of UNUMProvident (insurance company) (since June 2002); Director of Northwestern
Trustee (since 1995) Energy Corp. (public utility corporation) (since November 2004); Director of P.R.
Age: 64 Pharmaceuticals (October 1999-October 2003); Director of Rocky Mountain Elk Foundation
(non-profit organization) (February 1998-February 2003); Chairman and Director (until
October 1996) and President and Chief Executive Officer (until October 1995) of the Manager;
President, Chief Executive Officer and Director of the following: Oppenheimer Acquisition
Corp. ("OAC") (parent holding company of the Manager), Shareholders Services, Inc. and
Shareholder Financial Services, Inc. (until October 1995). Oversees 38 portfolios in the
OppenheimerFunds complex.
SAM FREEDMAN, Director of Colorado Uplift (charitable organization) (since September 1984). Mr. Freedman
Trustee (since 1996) held several positions with the Manager and with subsidiary or affiliated companies of the
Age: 65 Manager (until October 1994). Oversees 38 portfolios in the OppenheimerFunds complex.
31 | OPPENHEIMER MAIN STREET FUND/VA
TRUSTEES AND OFFICERS Unaudited / Continued
- ---------------------------------------------------------------------------------------------------------------------------------
BEVERLY L. HAMILTON, Trustee of Monterey Institute for International Studies (educational organization) (since
Trustee (since 2002) February 2000); Director of The California Endowment (philanthropic organization) (since
Age: 59 April 2002); Director of Community Hospital of Monterey Peninsula (since February 2002);
Vice Chair of American Funds' Emerging Markets Growth Fund, Inc. (mutual fund) (since
October 1991); President of ARCO Investment Management Company (February 1991-April 2000);
Member of the investment committees of The Rockefeller Foundation and The University of
Michigan; Advisor at Credit Suisse First Boston's Sprout venture capital unit (venture
capital fund) (1994-January 2005); Trustee of MassMutual Institutional Funds (investment
company) (1996-June 2004); Trustee of MML Series Investment Fund (investment company) (April
1989-June 2004); Member of the investment committee of Hartford Hospital (2000-2003); and
Advisor to Unilever (Holland) pension fund (2000-2003). Oversees 38 portfolios in the
OppenheimerFunds complex.
ROBERT J. MALONE, Director of Jones International University (educational organization) (since August 2005);
Trustee (since 2002) Chairman, Chief Executive Officer and Director of Steele Street State Bank (commercial
Age: 61 banking) (since August 2003); Director of Colorado UpLIFT (charitable organization) (since
1986); Trustee of the Gallagher Family Foundation (non-profit organization) (since 2000);
Former Chairman of U.S. Bank-Colorado (subsidiary of U.S. Bancorp and formerly Colorado
National Bank) (July 1996-April 1999); Director of Commercial Assets, Inc. (real estate
investment trust) (1993-2000); Director of Jones Knowledge, Inc. (2001-July 2004); and
Director of U.S. Exploration, Inc. (oil and gas exploration) (1997-February 2004). Oversees
38 portfolios in the OppenheimerFunds complex.
F. WILLIAM MARSHALL, JR., Trustee of MassMutual Select Funds (formerly MassMutual Institutional Funds) (investment
Trustee (since 2000) company) (since 1996) and MML Series Investment Fund (investment company) (since 1996),
Age: 63 Trustee and Chairman of the Investment Committee (since 1994) of the Worcester Polytech
Institute (private university); President and Treasurer of the SIS Funds (private charitable
fund) (since January 1999); Chairman of SIS & Family Bank, F.S.B. (formerly SIS Bank)
(commercial bank) (January 1999-July 1999); Member of the Investment Committee of the
Community Foundation of Western Massachusetts (1998-2003); and Executive Vice President of
Peoples Heritage Financial Group, Inc. (commercial bank) (January 1999-July 1999). Oversees
40 portfolios in the OppenheimerFunds complex.
- ---------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH FLOOR, NEW
AND OFFICER YORK, NEW YORK 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN INDEFINITE TERM, OR UNTIL
HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN OFFICER FOR AN INDEFINITE TERM, OR
UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL. MR. MURPHY IS AN INTERESTED TRUSTEE DUE
TO HIS POSITIONS WITH OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES.
JOHN V. MURPHY, Chairman, Chief Executive Officer and Director (since June 2001) and President (since
President and Trustee September 2000) of the Manager; President and Director or Trustee of other Oppenheimer
(since 2001) funds; President and Director of OAC and of Oppenheimer Partnership Holdings, Inc. (holding
Age: 56 company subsidiary of the Manager) (since July 2001); Director of OppenheimerFunds
Distributor, Inc. (subsidiary of the Manager) (since November 2001); Chairman and Director
of Shareholder Services, Inc. and of Shareholder Financial Services, Inc. (transfer agent
subsidiaries of the Manager) (since July 2001); President and Director of OppenheimerFunds
Legacy Program (charitable trust program established by the Manager) (since July 2001);
Director of the following investment advisory subsidiaries of the Manager: OFI Institutional
Asset Management, Inc., Centennial Asset Management Corporation, Trinity Investment
Management Corporation and Tremont Capital Management, Inc. (since November 2001),
HarbourView Asset Management Corporation and OFI Private Investments, Inc. (since July
2001); President (since November 2001) and Director (since July 2001) of Oppenheimer Real
Asset Management, Inc.; Executive Vice President of Massachusetts Mutual Life Insurance
Company (OAC's parent company) (since February 1997); Director of DLB Acquisition
Corporation (holding company parent of Babson Capital Management LLC) (since June 1995);
Member of the Investment Company Institute's Board of Governors (since October 3, 2003);
Chief Operating Officer of the Manager (September 2000-June 2001); President and Trustee of
MML Series Investment Fund and MassMutual Select Funds (open-end investment companies)
(November 1999-November 2001); Director of C.M. Life Insurance Company (September 1999-
August 2000); President, Chief Executive Officer and Director of MML Bay State Life
Insurance Company (September 1999-August 2000); Director of Emerald Isle Bancorp and
Hibernia Savings Bank (wholly-owned subsidiary of Emerald Isle Bancorp) (June 1989-June
1998). Oversees 87 portfolios in the OppenheimerFunds complex.
32 | OPPENHEIMER MAIN STREET FUND/VA
- ---------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS OF THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. MONOYIOS,
THE FUND REINGANUM AND ZACK, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, NEW YORK, NEW YORK
10281-1008, FOR MESSRS. VANDEHEY AND WIXTED, 6803 S. TUCSON WAY, CENTENNIAL, COLORADO
80112-3924. EACH OFFICER SERVES FOR AN INDEFINITE TERM OR UNTIL HIS OR HER RESIGNATION,
RETIREMENT DEATH OR REMOVAL.
NIKOLAOS D. MONOYIOS, Senior Vice President of the Manager since October 2003; a Certified Financial Analyst.
Vice President and Portfolio Formerly Vice President of the Manager (April 1998-September 2003). An officer of 6
Manager (since 1999) portfolios in the OppenheimerFunds complex.
Age: 56
DR. MARC REINGANUM, Vice President of the Manager since September 2002; a Director of Quantitative Research and
Vice President and Portfolio Portfolio Strategist for Equities; the Mary Jo Vaughn Rauscher Chair in Financial
Manager (since 2003) Investments at Southern Methodist University since 1995. At Southern Methodist University he
Age: 52 also served as the Director of the Finance Institute, Chairman of the Finance Department,
President of the Faculty at the Cox School of Business and member of the Board of Trustee
Investment Committee. An officer of 3 portfolios in the OppenheimerFunds complex.
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Vice
Vice President and Chief President of OppenheimerFunds Distributor, Inc., Centennial Asset Management Corporation and
Compliance Officer Shareholder Services, Inc. (since June 1983); Vice President and Director of Internal Audit
(since 2004) of the Manager (1997-February 2004). An officer of 87 portfolios in the OppenheimerFunds
Age: 55 complex.
BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer of the
Treasurer and Principal Financial following: HarbourView Asset Management Corporation, Shareholder Financial Services, Inc.,
and Accounting Officer Shareholder Services, Inc., Oppenheimer Real Asset Management Corporation, and Oppenheimer
(since 1999) Partnership Holdings, Inc. (since March 1999), OFI Private Investments, Inc. (since March
Age: 46 2000), OppenheimerFunds International Ltd. and OppenheimerFunds plc (since May 2000), OFI
Institutional Asset Management, Inc. (since November 2000), and OppenheimerFunds Legacy
Program (since June 2003); Treasurer and Chief Financial Officer of OFI Trust Company (trust
company subsidiary of the Manager) (since May 2000); Assistant Treasurer of the following:
OAC (since March 1999), Centennial Asset Management Corporation (March 1999-October 2003)
and OppenheimerFunds Legacy Program (April 2000-June 2003); Principal and Chief Operating
Officer of Bankers Trust Company-Mutual Fund Services Division (March 1995-March 1999). An
officer of 87 portfolios in the OppenheimerFunds complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March 2002) of the
Vice President and Secretary Manager; General Counsel and Director of the Distributor (since December 2001); General
(since 2001) Counsel of Centennial Asset Management Corporation (since December 2001); Senior Vice
Age: 57 President and General Counsel of HarbourView Asset Management Corporation (since December
2001); Secretary and General Counsel of OAC (since November 2001); Assistant Secretary
(since September 1997) and Director (since November 2001) of OppenheimerFunds International
Ltd. and OppenheimerFunds plc; Vice President and Director of Oppenheimer Partnership
Holdings, Inc. (since December 2002); Director of Oppenheimer Real Asset Management, Inc.
(since November 2001); Senior Vice President, General Counsel and Director of Shareholder
Financial Services, Inc. and Shareholder Services, Inc. (since December 2001); Senior Vice
President, General Counsel and Director of OFI Private Investments, Inc. and OFI Trust
Company (since November 2001); Vice President of OppenheimerFunds Legacy Program (since June
2003); Senior Vice President and General Counsel of OFI Institutional Asset Management, Inc.
(since November 2001); Director of OppenheimerFunds (Asia) Limited (since December 2003);
Senior Vice President (May 1985-December 2003), Acting General Counsel (November
2001-February 2002) and Associate General Counsel (May 1981-October 2001) of the Manager;
Assistant Secretary of the following: Shareholder Services, Inc. (May 1985-November 2001),
Shareholder Financial Services, Inc. (November 1989-November 2001), and OppenheimerFunds
International Ltd. (September 1997-November 2001). An officer of 87 portfolios in the
OppenheimerFunds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION
ABOUT THE FUND'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT CHARGE, UPON
REQUEST, BY CALLING 1.800.981.2871.
33 | OPPENHEIMER MAIN STREET FUND/ VA
OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. Oppenheimer Main Street Small Cap
Fund/VA produced solid results and outperformed its benchmark, the Russell 2000
Index, for the 12-month period ended December 31, 2005. 1 We attribute most of
the Fund's outperformance to positive stock selection, particularly in the
healthcare sector, recommended by our investment model. The Fund also benefited
from emphasized positions, compared to its benchmark, in the energy, healthcare
and industrials sectors as well as its underweighting of financials.
Additionally, the Fund gained from its overweighting of midcap stocks, a group
that performed quite well during the period. By contrast, the Fund's
overweighting in consumer discretionary stocks detracted from relative
performance as this group overall underperformed for the period.
The period proved to be highly favorable for our model's investment
process. In selecting stocks for the portfolio, we rely on a proprietary
quantitative stock-selection model that favors companies with relatively
inexpensive valuations that are displaying positive momentum. During the period,
both energy and select healthcare companies embodied these qualities;
additionally, these two areas were also greatly rewarded by the market. Energy
companies benefited from rising commodity prices and both increasing cash flow
and growth opportunities, overall exhibiting positive momentum at a discounted
valuation. The same was true for healthcare service companies, in particular
HMO's, which experienced positive momentum and were relatively inexpensive. In
short, the factors that our models look for were the same factors that the
market rewarded, making it a positive situation for the Fund.
In terms of changes made to the portfolio, there have been several. Our
models have continued to detect a shift in outperformance of small caps to
larger cap stocks. As a result, we sold some of our micro-cap holdings and
reinvested the proceeds into mid-cap stocks.
Another change recommended by our model was to move a greater portion of
the portfolio into cyclical, or economically sensitive securities in order to
take advantage of the seasonal effect, a time in the market when more volatile
stocks tend to outperform, which usually occurs during the fourth to first
quarter of the year. Therefore, we added to the Fund's holdings in the
technology, consumer discretionary and energy sectors. Thus far, these
adjustments have added to results. Our model also recommended an underweighted
position within the financials, healthcare and utilities sectors.
Lastly, the Fund has grown rapidly over the period, and successfully
absorbed the in-flows while remaining fully invested.
COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that follow show the
performance of a hypothetical $10,000 investment in each share class of the Fund
held until December 31, 2005. In the case of non-service shares, performance is
measured from inception of the class on May 1, 1998. In the case of service
shares, performance is measured from inception of the class on July 16, 2001.
Performance information does not reflect charges that apply to separate accounts
investing in the Fund. If these charges were taken into account, performance
would be lower. The graphs assume that all dividends and capital gains
distributions were reinvested in additional shares.
The Fund's performance is compared to the performance of the Russell 2000
Index, an unmanaged index of equity securities of small capitalization companies
that is a measure of the small company market. Index performance reflects the
reinvestment of income but does not consider the effect of transaction costs,
and none of the data in the graphs shows the effect of taxes. The Fund's
performance reflects the effects of the Fund's business and operating expenses.
While index comparisons may be useful to provide a benchmark for the Fund's
performance, it must be noted that the Fund's investments are not limited to the
investments in the index.
1. The Fund's performance is compared to the 4.55% return for the Russell 2000
Index for the one-year period ended 12/31/05.
4 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
NON-SERVICE SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Main Street Small Cap Fund(R)/VA (Non-Service)
Russell 2000 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Main Street
Small Cap Fund(R)/VA Russell
(Non-Service) 2000 Index
05/01/1998 10,000 10,000
06/30/1998 9,560 9,481
09/30/1998 8,400 7,571
12/31/1998 9,600 8,806
03/31/1999 8,880 8,328
06/30/1999 9,310 9,624
09/30/1999 9,440 9,015
12/31/1999 14,070 10,678
03/31/2000 15,364 11,434
06/30/2000 13,178 11,002
09/30/2000 13,468 11,124
12/31/2000 11,490 10,355
03/31/2001 9,376 9,682
06/30/2001 11,334 11,065
09/30/2001 9,666 8,765
12/31/2001 11,448 10,613
03/31/2002 11,821 11,036
06/30/2002 11,490 10,114
09/30/2002 9,563 7,949
12/31/2002 9,645 8,439
03/31/2003 9,262 8,060
06/30/2003 11,200 9,948
09/30/2003 12,122 10,851
12/31/2003 13,924 12,427
03/31/2004 14,629 13,205
06/30/2004 14,681 13,267
09/30/2004 14,525 12,888
12/31/2004 16,628 14,704
03/31/2005 16,161 13,919
06/30/2005 16,703 14,520
09/30/2005 17,703 15,201
12/31/2005 18,278 15,374
AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/05
1-Year 9.92% 5-Year 9.73% Since Inception (5/1/98) 8.18%
SERVICE SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Main Street Small Cap Fund(R)/VA (Service)
Russell 2000 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Main Street
Small Cap Fund(R)/VA Russell
(Service) 2000 Index
07/16/2001 10,000 10,000
09/30/2001 8,784 8,374
12/31/2001 10,415 10,140
03/31/2002 10,763 10,544
06/30/2002 10,452 9,663
09/30/2002 8,690 7,595
12/31/2002 8,756 8,063
03/31/2003 8,417 7,701
06/30/2003 10,170 9,505
09/30/2003 10,999 10,368
12/31/2003 12,630 11,873
03/31/2004 13,261 12,617
06/30/2004 13,308 12,676
09/30/2004 13,157 12,314
12/31/2004 15,052 14,050
03/31/2005 14,626 13,299
06/30/2005 15,110 13,874
09/30/2005 16,001 14,525
12/31/2005 16,514 14,689
AVERAGE ANNUAL TOTAL RETURNS OF SERVICE SHARES OF THE FUND AT 12/31/05
1-Year 9.71% 5-Year N/A Since Inception (7/16/01) 11.91%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, CALL US AT 1.800.981.2871. THE FUND'S
TOTAL RETURNS SHOULD NOT BE EXPECTED TO BE THE SAME AS THE RETURNS OF OTHER
FUNDS, WHETHER OR NOT BOTH FUNDS HAVE THE SAME PORTFOLIO MANAGERS AND/OR SIMILAR
NAMES. THE FUND'S TOTAL RETURNS DO NOT INCLUDE THE CHARGES ASSOCIATED WITH THE
SEPARATE ACCOUNT PRODUCTS THAT OFFER THIS FUND. SUCH PERFORMANCE WOULD HAVE BEEN
LOWER IF SUCH CHARGES WERE TAKEN INTO ACCOUNT.
5 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
FUND EXPENSES
- --------------------------------------------------------------------------------
FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1)
transaction costs, which may include redemption fees, if any; and (2) ongoing
costs, including management fees; distribution and service fees; and other Fund
expenses. These examples are intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning
of the period and held for the entire 6-month period ended December 31, 2005.
ACTUAL EXPENSES. The "actual" lines of the table provide information about
actual account values and actual expenses. You may use the information on this
line for the class of shares you hold, together with the amount you invested, to
estimate the expense that you paid over the period. Simply divide your account
value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00
= 8.60), then multiply the result by the number in the "actual" line under the
heading entitled "Expenses Paid During Period" to estimate the expenses you paid
on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the
table provide information about hypothetical account values and hypothetical
expenses based on the Fund's actual expense ratio, and an assumed rate of return
of 5% per year before expenses, which is not the Fund's actual return. The
hypothetical account values and expenses may not be used to estimate the actual
ending account balance or expenses you paid for the period. You may use this
information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any charges associated with the separate
accounts that offer this Fund. Therefore, the "hypothetical" lines of the table
are useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these separate
account charges were included, your costs would have been higher.
- --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
(7/1/05) (12/31/05) DECEMBER 31, 2005
- --------------------------------------------------------------------------------
Non-Service shares Actual $1,000.00 $1,094.30 $4.28
- --------------------------------------------------------------------------------
Non-Service shares Hypothetical 1,000.00 1,021.12 4.13
- --------------------------------------------------------------------------------
Service shares Actual 1,000.00 1,092.90 5.50
- --------------------------------------------------------------------------------
Service shares Hypothetical 1,000.00 1,019.96 5.31
Hypothetical assumes 5% annual return before expenses.
Expenses are equal to the Fund's annualized expense ratio for that class,
multiplied by the average account value over the period, multiplied by 184/365
(to reflect the one-half year period). Those annualized expense ratios based on
the 6-month period ended December 31, 2005 are as follows:
CLASS EXPENSE RATIOS
- ----------------------------------------
Non-Service shares 0.81%
- ----------------------------------------
Service shares 1.04
- --------------------------------------------------------------------------------
6 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
STATEMENT OF INVESTMENTS December 31, 2005
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
COMMON STOCKS--99.1%
- -------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--18.4%
- -------------------------------------------------------------------------------
AUTO COMPONENTS--1.6%
Aftermarket Technology Corp. 1 11,200 $ 217,728
- -------------------------------------------------------------------------------
American Axle & Manufacturing
Holdings, Inc. 2 18,500 339,105
- -------------------------------------------------------------------------------
ArvinMeritor, Inc. 2 41,100 591,429
- -------------------------------------------------------------------------------
Autoliv, Inc. 5,300 240,726
- -------------------------------------------------------------------------------
Borg-Warner Automotive, Inc. 4,600 278,898
- -------------------------------------------------------------------------------
Dana Corp. 44,200 317,356
- -------------------------------------------------------------------------------
Drew Industries, Inc. 1,2 2,800 78,932
- -------------------------------------------------------------------------------
Goodyear Tire & Rubber Co. (The) 1,2 30,400 528,352
- -------------------------------------------------------------------------------
Lear Corp. 2 12,200 347,212
- -------------------------------------------------------------------------------
LKQ Corp. 1,2 600 20,772
- -------------------------------------------------------------------------------
Midas, Inc. 1,2 7,600 139,536
- -------------------------------------------------------------------------------
Modine Manufacturing Co. 23,200 756,088
- -------------------------------------------------------------------------------
Proliance International, Inc. 1,2 1,007 5,327
- -------------------------------------------------------------------------------
Sauer-Danfoss, Inc. 7,900 148,599
- -------------------------------------------------------------------------------
Shiloh Industries, Inc. 1 3,100 41,106
- -------------------------------------------------------------------------------
Spartan Motors, Inc. 100 1,029
- -------------------------------------------------------------------------------
Tenneco, Inc. 1 49,000 960,890
- -------------------------------------------------------------------------------
TRW Automotive Holdings Corp. 1 9,000 237,150
- -------------------------------------------------------------------------------
Visteon Corp. 1 75,300 471,378
--------------
5,721,613
- -------------------------------------------------------------------------------
AUTOMOBILES--0.1%
Fleetwood Enterprises, Inc. 1 3,500 43,225
- -------------------------------------------------------------------------------
Monaco Coach Corp. 2 3,900 51,870
- -------------------------------------------------------------------------------
Winnebago Industries, Inc. 2 2,700 89,856
--------------
184,951
- -------------------------------------------------------------------------------
DISTRIBUTORS--0.0%
Audiovox Corp., Cl. A 1 2,000 27,720
- -------------------------------------------------------------------------------
Jorgensen (Earle M.) Co. 1,2 8,900 82,147
--------------
109,867
- -------------------------------------------------------------------------------
DIVERSIFIED CONSUMER SERVICES--1.0%
Alderwoods Group, Inc. 1 8,900 141,243
- -------------------------------------------------------------------------------
Bright Horizons Family Solutions, Inc. 1,2 10,600 392,730
- -------------------------------------------------------------------------------
Career Education Corp. 1 10,800 364,176
- -------------------------------------------------------------------------------
CPI Corp. 300 5,613
- -------------------------------------------------------------------------------
Escala Group, Inc. 1,2 3,200 64,896
- -------------------------------------------------------------------------------
ITT Educational Services, Inc. 1 2,000 118,220
- -------------------------------------------------------------------------------
Jackson Hewitt Tax Service, Inc. 36,000 997,560
- -------------------------------------------------------------------------------
Matthews International Corp., Cl. A 200 7,282
- -------------------------------------------------------------------------------
Pre-Paid Legal Services, Inc. 2 7,300 278,933
- -------------------------------------------------------------------------------
Service Corp. International 50,700 414,726
- -------------------------------------------------------------------------------
ServiceMaster Co. (The) 16,600 198,370
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
DIVERSIFIED CONSUMER SERVICES Continued
Steiner Leisure Ltd. 1 8,100 $ 288,036
- -------------------------------------------------------------------------------
Stewart Enterprises, Inc. 2 28,900 156,349
- -------------------------------------------------------------------------------
Vertrue, Inc. 1 1,300 45,929
- -------------------------------------------------------------------------------
Weight Watchers International, Inc. 1 1,700 84,031
--------------
3,558,094
- -------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--2.3%
Ambassadors Group, Inc. 8,700 199,143
- -------------------------------------------------------------------------------
Ameristar Casinos, Inc. 21,300 483,510
- -------------------------------------------------------------------------------
Aztar Corp. 1,2 11,900 361,641
- -------------------------------------------------------------------------------
Bluegreen Corp. 1,2 19,900 314,420
- -------------------------------------------------------------------------------
Brinker International, Inc. 6,300 243,558
- -------------------------------------------------------------------------------
Caribou Coffee Co., Inc. 1 900 9,036
- -------------------------------------------------------------------------------
CBRL Group, Inc. 11,500 404,225
- -------------------------------------------------------------------------------
CEC Entertainment, Inc. 1 2,250 76,590
- -------------------------------------------------------------------------------
Checkers Drive-In Restaurants, Inc. 1 2,000 30,320
- -------------------------------------------------------------------------------
Choice Hotels International, Inc. 8,600 359,136
- -------------------------------------------------------------------------------
CKE Restaurants, Inc. 2 44,300 598,493
- -------------------------------------------------------------------------------
Ctrip.com International Ltd., ADR 1,600 92,400
- -------------------------------------------------------------------------------
Darden Restaurants, Inc. 11,300 439,344
- -------------------------------------------------------------------------------
Denny's Corp. 1,2 21,400 86,242
- -------------------------------------------------------------------------------
Domino's Pizza, Inc. 23,300 563,860
- -------------------------------------------------------------------------------
Dover Downs Gaming &
Entertainment, Inc. 6,600 93,390
- -------------------------------------------------------------------------------
IHOP Corp. 2 12,600 591,066
- -------------------------------------------------------------------------------
Jack in the Box, Inc. 1 20,800 726,544
- -------------------------------------------------------------------------------
Krispy Kreme Doughnuts, Inc. 1,2 11,500 66,010
- -------------------------------------------------------------------------------
La Quinta Corp. 1 33,600 374,304
- -------------------------------------------------------------------------------
Lone Star Steakhouse & Saloon, Inc. 5,400 128,196
- -------------------------------------------------------------------------------
Luby's, Inc. 1,2 16,500 219,450
- -------------------------------------------------------------------------------
McCormick & Schmick's Seafood
Restaurants, Inc. 1 8,700 196,707
- -------------------------------------------------------------------------------
Monarch Casino & Resort, Inc. 1,2 5,400 122,040
- -------------------------------------------------------------------------------
MTR Gaming Group, Inc. 1 8,900 92,649
- -------------------------------------------------------------------------------
Multimedia Games, Inc. 1,2 3,000 27,750
- -------------------------------------------------------------------------------
Navigant International, Inc. 1,2 4,300 46,655
- -------------------------------------------------------------------------------
O'Charley's, Inc. 1 7,800 120,978
- -------------------------------------------------------------------------------
Panera Bread Co., Cl. A 1 100 6,568
- -------------------------------------------------------------------------------
Papa John's International, Inc. 1 1,900 112,689
- -------------------------------------------------------------------------------
Six Flags, Inc. 1,2 33,100 255,201
- -------------------------------------------------------------------------------
Sunterra Corp. 1 14,600 207,612
- -------------------------------------------------------------------------------
Vail Resorts, Inc. 1,2 16,500 544,995
--------------
8,194,722
- -------------------------------------------------------------------------------
HOUSEHOLD DURABLES--1.6%
American Greetings Corp., Cl. A 2 31,900 700,843
- -------------------------------------------------------------------------------
Avatar Holdings, Inc. 1,2 300 16,476
7 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
HOUSEHOLD DURABLES Continued
Beazer Homes USA, Inc. 2 4,800 $ 349,632
- -------------------------------------------------------------------------------
Blount International, Inc. 1 7,800 124,254
- -------------------------------------------------------------------------------
Brookfield Homes Corp. 2 9,545 474,673
- -------------------------------------------------------------------------------
Champion Enterprises, Inc. 1,2 30,400 414,048
- -------------------------------------------------------------------------------
CSS Industries, Inc. 2 950 29,194
- -------------------------------------------------------------------------------
Ethan Allen Interiors, Inc. 2 8,200 299,546
- -------------------------------------------------------------------------------
Furniture Brands International, Inc. 2 30,700 685,531
- -------------------------------------------------------------------------------
Interface, Inc., Cl. A 1,2 27,300 224,406
- -------------------------------------------------------------------------------
Kimball International, Inc., Cl. B 4,800 51,024
- -------------------------------------------------------------------------------
La-Z-Boy, Inc. 2 29,100 394,596
- -------------------------------------------------------------------------------
MDC Holdings, Inc. 1,400 86,772
- -------------------------------------------------------------------------------
Mestek, Inc. 1 600 7,860
- -------------------------------------------------------------------------------
Movado Group, Inc. 1,600 29,280
- -------------------------------------------------------------------------------
Palm Harbor Homes, Inc. 1,2 2,000 37,600
- -------------------------------------------------------------------------------
Ryland Group, Inc. (The) 2,700 194,751
- -------------------------------------------------------------------------------
Snap-On, Inc. 2 7,600 285,456
- -------------------------------------------------------------------------------
Stanley Furniture Co., Inc. 10,200 236,436
- -------------------------------------------------------------------------------
Stanley Works (The) 5,000 240,200
- -------------------------------------------------------------------------------
Tupperware Brands Corp. 28,000 627,200
- -------------------------------------------------------------------------------
WCI Communities, Inc. 1,2 3,600 96,660
- -------------------------------------------------------------------------------
William Lyon Homes, Inc. 1 900 90,810
--------------
5,697,248
- -------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL--0.3%
Blue Nile, Inc. 1 7,900 318,449
- -------------------------------------------------------------------------------
Coldwater Creek, Inc. 1,2 1,800 54,954
- -------------------------------------------------------------------------------
Insight Enterprises, Inc. 1 20,300 398,083
- -------------------------------------------------------------------------------
PetMed Express, Inc. 1,2 8,300 117,611
- -------------------------------------------------------------------------------
Priceline.com, Inc. 1 3,400 75,888
- -------------------------------------------------------------------------------
Provide Commerce, Inc. 1,2 1,700 56,287
- -------------------------------------------------------------------------------
Sportsman's Guide, Inc. 1 2,200 52,470
- -------------------------------------------------------------------------------
Stamps.com, Inc. 1,2 3,200 73,472
- -------------------------------------------------------------------------------
ValueVision Media, Inc., Cl. A 1,2 3,800 47,880
--------------
1,195,094
- -------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS--0.5%
Arctic Cat, Inc. 2 500 10,030
- -------------------------------------------------------------------------------
Callaway Golf Co. 15,700 217,288
- -------------------------------------------------------------------------------
Hasbro, Inc. 21,700 437,906
- -------------------------------------------------------------------------------
JAKKS Pacific, Inc. 1,2 17,800 372,732
- -------------------------------------------------------------------------------
Marvel Entertainment, Inc. 1,2 9,300 152,334
- -------------------------------------------------------------------------------
Oakley, Inc. 2 25,800 379,002
- -------------------------------------------------------------------------------
RC2 Corp. 1 5,700 202,464
- -------------------------------------------------------------------------------
Steinway Musical Instruments, Inc. 1 4,800 122,448
--------------
1,894,204
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
MEDIA--2.1%
Arbitron, Inc. 2 8,000 $ 303,840
- -------------------------------------------------------------------------------
Belo Corp., Cl. A 9,700 207,677
- -------------------------------------------------------------------------------
Catalina Marketing Corp. 2 17,300 438,555
- -------------------------------------------------------------------------------
Charter Communications, Inc., Cl. A 1,2 169,400 206,668
- -------------------------------------------------------------------------------
Citadel Broadcasting Corp. 2 25,400 341,376
- -------------------------------------------------------------------------------
Cox Radio, Inc., Cl. A 1,2 8,600 121,088
- -------------------------------------------------------------------------------
Cumulus Media, Inc., Cl. A 1,2 19,200 238,272
- -------------------------------------------------------------------------------
Emmis Communications Corp., Cl. A 1,2 21,600 430,056
- -------------------------------------------------------------------------------
Entercom Communications Corp. 1 19,400 575,598
- -------------------------------------------------------------------------------
Entravision Communications Corp. 1 6,400 45,568
- -------------------------------------------------------------------------------
Focus Media Holding Ltd., ADR 1 5,800 195,866
- -------------------------------------------------------------------------------
Interactive Data Corp. 2,400 54,504
- -------------------------------------------------------------------------------
Interpublic Group of Cos., Inc. 1 8,500 82,025
- -------------------------------------------------------------------------------
Journal Communications, Inc. 2 12,400 172,980
- -------------------------------------------------------------------------------
Journal Register Co. 2 1,700 25,415
- -------------------------------------------------------------------------------
Liberty Corp. 2 2,800 131,068
- -------------------------------------------------------------------------------
Media General, Inc., Cl. A 7,400 375,180
- -------------------------------------------------------------------------------
Mediacom Communications Corp. 1,2 24,800 136,152
- -------------------------------------------------------------------------------
Meredith Corp. 5,800 303,572
- -------------------------------------------------------------------------------
Playboy Enterprises, Inc., Cl. B 1,2 9,300 129,177
- -------------------------------------------------------------------------------
PRIMEDIA, Inc. 1,2 9,600 15,456
- -------------------------------------------------------------------------------
R.H. Donnelley Corp. 1 6,700 412,854
- -------------------------------------------------------------------------------
Readers Digest Assn., Inc. (The), Cl. A,
Non-Vtg. 42,800 651,416
- -------------------------------------------------------------------------------
Scholastic Corp. 1,2 11,900 339,269
- -------------------------------------------------------------------------------
Sinclair Broadcast Group, Inc., Cl. A 2 40,100 368,920
- -------------------------------------------------------------------------------
TiVo, Inc. 1,2 60,500 309,760
- -------------------------------------------------------------------------------
Valassis Communications, Inc. 1 1,600 46,512
- -------------------------------------------------------------------------------
Westwood One, Inc. 17,900 291,770
- -------------------------------------------------------------------------------
Wiley (John) & Sons, Inc., Cl. A 10,600 413,824
- -------------------------------------------------------------------------------
World Wrestling Federation
Entertainment, Inc. 1,900 27,892
--------------
7,392,310
- -------------------------------------------------------------------------------
MULTILINE RETAIL--0.9%
99 Cents Only Stores 1,2 17,500 183,050
- -------------------------------------------------------------------------------
Big Lots, Inc. 1,2 22,100 265,421
- -------------------------------------------------------------------------------
Bon-Ton Stores, Inc. 3,000 57,390
- -------------------------------------------------------------------------------
Conn's, Inc. 1,2 1,200 44,244
- -------------------------------------------------------------------------------
Dillard's, Inc., Cl. A 12,500 310,250
- -------------------------------------------------------------------------------
Dollar Tree Stores, Inc. 1 20,000 478,800
- -------------------------------------------------------------------------------
Fred's, Inc. 2 6,900 112,263
- -------------------------------------------------------------------------------
Retail Ventures, Inc. 1,2 18,100 225,164
- -------------------------------------------------------------------------------
Saks, Inc. 1 12,300 207,378
- -------------------------------------------------------------------------------
Stage Stores, Inc. 29,050 865,109
- -------------------------------------------------------------------------------
Stein Mart, Inc. 22,700 412,005
--------------
3,161,074
8 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
SPECIALTY RETAIL--6.4%
Abercrombie & Fitch Co., Cl. A 1,400 $ 91,252
- -------------------------------------------------------------------------------
Advance Auto Parts, Inc. 1 5,800 252,068
- -------------------------------------------------------------------------------
Aeropostale, Inc. 1 13,100 344,530
- -------------------------------------------------------------------------------
American Eagle Outfitters, Inc. 14,800 340,104
- -------------------------------------------------------------------------------
Asbury Automotive Group, Inc. 1 5,900 97,114
- -------------------------------------------------------------------------------
AutoNation, Inc. 1 11,400 247,722
- -------------------------------------------------------------------------------
Barnes & Noble, Inc. 12,800 546,176
- -------------------------------------------------------------------------------
bebe stores, inc. 2 19,412 272,350
- -------------------------------------------------------------------------------
Blair Corp. 967 37,655
- -------------------------------------------------------------------------------
Borders Group, Inc. 6,800 147,356
- -------------------------------------------------------------------------------
Buckle, Inc. (The) 2 7,800 251,472
- -------------------------------------------------------------------------------
Building Materials Holding Corp. 2 10,400 709,384
- -------------------------------------------------------------------------------
Burlington Coat Factory Warehouse
Corp. 9,700 390,037
- -------------------------------------------------------------------------------
Casual Male Retail Group, Inc. 1,2 18,100 110,953
- -------------------------------------------------------------------------------
Cato Corp., Cl. A 17,750 380,738
- -------------------------------------------------------------------------------
Charlotte Russe Holding, Inc. 1,2 16,700 347,861
- -------------------------------------------------------------------------------
Charming Shoppes, Inc. 1,2 94,600 1,248,720
- -------------------------------------------------------------------------------
Children's Place Retail Stores, Inc. 1,2 19,000 938,980
- -------------------------------------------------------------------------------
Christopher & Banks Corp. 2 12,800 240,384
- -------------------------------------------------------------------------------
Circuit City Stores, Inc./Circuit City
Group 17,000 384,030
- -------------------------------------------------------------------------------
Citi Trends, Inc. 1,2 1,000 42,690
- -------------------------------------------------------------------------------
Claire's Stores, Inc. 15,200 444,144
- -------------------------------------------------------------------------------
CSK Auto Corp. 1 26,200 395,096
- -------------------------------------------------------------------------------
Deb Shops, Inc. 500 14,865
- -------------------------------------------------------------------------------
Finish Line, Inc. (The), Cl. A 10,400 181,168
- -------------------------------------------------------------------------------
GameStop Corp., Cl. A 1,2 9,633 306,522
- -------------------------------------------------------------------------------
Genesco, Inc. 1 23,100 896,049
- -------------------------------------------------------------------------------
Golf Galaxy, Inc. 1 300 5,745
- -------------------------------------------------------------------------------
Group 1 Automotive, Inc. 1,2 6,800 213,724
- -------------------------------------------------------------------------------
Guess?, Inc. 1 23,900 850,840
- -------------------------------------------------------------------------------
Gymboree Corp. 1,2 14,200 332,280
- -------------------------------------------------------------------------------
Hibbett Sporting Goods, Inc. 1,2 27,487 782,830
- -------------------------------------------------------------------------------
Jos. A. Banks Clothiers, Inc. 1 2,200 95,502
- -------------------------------------------------------------------------------
Linens `N Things, Inc. 1 7,900 210,140
- -------------------------------------------------------------------------------
Lithia Motors, Inc., Cl. A 7,100 223,224
- -------------------------------------------------------------------------------
Men's Wearhouse, Inc. (The) 1 28,850 849,344
- -------------------------------------------------------------------------------
NetFlix.com, Inc. 1,2 16,400 443,784
- -------------------------------------------------------------------------------
Office Depot, Inc. 1 2,900 91,060
- -------------------------------------------------------------------------------
OfficeMax, Inc. 17,600 446,336
- -------------------------------------------------------------------------------
Pacific Sunwear of California, Inc. 1 12,175 303,401
- -------------------------------------------------------------------------------
Pantry, Inc. (The) 1 19,600 921,004
- -------------------------------------------------------------------------------
Payless ShoeSource, Inc. 1 41,700 1,046,670
- -------------------------------------------------------------------------------
RadioShack Corp. 16,000 336,480
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
SPECIALTY RETAIL Continued
Rent-A-Center, Inc. 1 1,000 $ 18,860
- -------------------------------------------------------------------------------
Rent-Way, Inc. 1,2 10,300 65,817
- -------------------------------------------------------------------------------
Restoration Hardware, Inc. 1,2 4,100 24,682
- -------------------------------------------------------------------------------
Select Comfort Corp. 1,2 22,300 609,905
- -------------------------------------------------------------------------------
Shoe Carnival, Inc. 1 2,500 54,800
- -------------------------------------------------------------------------------
Sonic Automotive, Inc. 17,600 392,128
- -------------------------------------------------------------------------------
Sports Authority, Inc. (The) 1,2 27,400 852,962
- -------------------------------------------------------------------------------
Syms Corp. 800 11,552
- -------------------------------------------------------------------------------
Talbots, Inc. (The) 2 24,600 684,372
- -------------------------------------------------------------------------------
Tiffany & Co. 8,700 333,123
- -------------------------------------------------------------------------------
Too, Inc. 1 30,100 849,121
- -------------------------------------------------------------------------------
Trans World Entertainment Corp. 1,2 11,900 67,830
- -------------------------------------------------------------------------------
Tuesday Morning Corp. 2 14,300 299,156
- -------------------------------------------------------------------------------
United Auto Group, Inc. 2 25,800 985,560
- -------------------------------------------------------------------------------
West Marine, Inc. 1,2 2,800 39,144
- -------------------------------------------------------------------------------
Wet Seal, Inc., Cl. A 1,2 33,300 147,852
- -------------------------------------------------------------------------------
Wilsons The Leather Experts, Inc. 1,2 6,100 22,143
- -------------------------------------------------------------------------------
Zale Corp. 1 31,900 802,285
--------------
23,073,076
- -------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS--1.6%
Carter's, Inc. 1 2,500 147,125
- -------------------------------------------------------------------------------
Cherokee, Inc. 4,500 154,755
- -------------------------------------------------------------------------------
Columbia Sportswear Co. 1,2 4,200 200,466
- -------------------------------------------------------------------------------
Hartmarx Corp. 1 7,100 55,451
- -------------------------------------------------------------------------------
Iconix Brand Group, Inc. 1 9,500 96,805
- -------------------------------------------------------------------------------
Jones Apparel Group, Inc. 10,700 328,704
- -------------------------------------------------------------------------------
K-Swiss, Inc., Cl. A 19,400 629,336
- -------------------------------------------------------------------------------
Kellwood Co. 2 900 21,492
- -------------------------------------------------------------------------------
Kenneth Cole Productions, Inc., Cl. A 2 4,500 114,750
- -------------------------------------------------------------------------------
Liz Claiborne, Inc. 8,900 318,798
- -------------------------------------------------------------------------------
Oxford Industries, Inc. 400 21,880
- -------------------------------------------------------------------------------
Phillips/Van Heusen Corp. 18,100 586,440
- -------------------------------------------------------------------------------
Skechers U.S.A., Inc., Cl. A 1 13,800 211,416
- -------------------------------------------------------------------------------
Steven Madden Ltd. 10,200 298,146
- -------------------------------------------------------------------------------
Stride Rite Corp. 21,400 290,184
- -------------------------------------------------------------------------------
Timberland Co., Cl. A 1 8,900 289,695
- -------------------------------------------------------------------------------
Tommy Hilfiger Corp. 1 34,300 557,032
- -------------------------------------------------------------------------------
Under Armour, Inc., Cl. A 1,2 6,000 229,860
- -------------------------------------------------------------------------------
UniFirst Corp. 2,800 87,080
- -------------------------------------------------------------------------------
Warnaco Group, Inc. (The) 1 13,900 371,408
- -------------------------------------------------------------------------------
Wolverine World Wide, Inc. 39,850 895,031
--------------
5,905,854
9 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
CONSUMER STAPLES--3.0%
- -------------------------------------------------------------------------------
BEVERAGES--0.1%
Boston Beer Co., Inc., Cl. A 1 5,900 $ 147,500
- -------------------------------------------------------------------------------
National Beverage Corp. 1,200 11,724
- -------------------------------------------------------------------------------
PepsiAmericas, Inc. 8,900 207,014
--------------
366,238
- -------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--1.0%
Andersons, Inc. (The) 2 1,000 43,080
- -------------------------------------------------------------------------------
Arden Group, Inc., Cl. A 2 900 81,891
- -------------------------------------------------------------------------------
BJ's Wholesale Club, Inc. 1 6,700 198,052
- -------------------------------------------------------------------------------
Casey's General Stores, Inc. 2 23,400 580,320
- -------------------------------------------------------------------------------
Great Atlantic & Pacific Tea Co.,
Inc. (The) 1,2 8,900 282,842
- -------------------------------------------------------------------------------
Ingles Markets, Inc., Cl. A 1,200 18,780
- -------------------------------------------------------------------------------
Longs Drug Stores, Inc. 2 16,900 614,991
- -------------------------------------------------------------------------------
Nash Finch Co. 2 2,500 63,700
- -------------------------------------------------------------------------------
Pathmark Stores, Inc. 1 12,000 119,880
- -------------------------------------------------------------------------------
Performance Food Group Co. 1,2 23,300 661,021
- -------------------------------------------------------------------------------
Rite Aid Corp. 1,2 52,600 183,048
- -------------------------------------------------------------------------------
Ruddick Corp. 13,300 283,024
- -------------------------------------------------------------------------------
Spartan Stores, Inc. 1 5,600 58,352
- -------------------------------------------------------------------------------
SUPERVALU, Inc. 14,100 457,968
- -------------------------------------------------------------------------------
Weis Markets, Inc. 2 1,200 51,648
--------------
3,698,597
- -------------------------------------------------------------------------------
FOOD PRODUCTS--1.1%
Chiquita Brands International, Inc. 30,800 616,308
- -------------------------------------------------------------------------------
Darling International, Inc. 1,2 20,100 79,797
- -------------------------------------------------------------------------------
Del Monte Foods Co. 1 31,400 327,502
- -------------------------------------------------------------------------------
Flowers Foods, Inc. 28,700 790,972
- -------------------------------------------------------------------------------
Gold Kist Holdings, Inc. 1,2 17,000 254,150
- -------------------------------------------------------------------------------
Hain Celestial Group, Inc. 1 14,700 311,052
- -------------------------------------------------------------------------------
Hormel Foods Corp. 500 16,340
- -------------------------------------------------------------------------------
Imperial Sugar Co. 100 1,358
- -------------------------------------------------------------------------------
J&J Snack Foods Corp. 4,500 267,345
- -------------------------------------------------------------------------------
Lancaster Colony Corp. 3,300 122,265
- -------------------------------------------------------------------------------
Lance, Inc. 2 2,600 48,438
- -------------------------------------------------------------------------------
M&F Worldwide Corp. 1 2,600 42,432
- -------------------------------------------------------------------------------
McCormick & Co., Inc., Non-Vtg. 2,500 77,300
- -------------------------------------------------------------------------------
Pilgrim's Pride Corp., Cl. B 2 12,400 411,184
- -------------------------------------------------------------------------------
Premium Standard Farms, Inc. 4,100 61,336
- -------------------------------------------------------------------------------
Ralcorp Holdings, Inc. 1 3,800 151,658
- -------------------------------------------------------------------------------
Seaboard Corp. 2 200 302,200
--------------
3,881,637
- -------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS--0.4%
Chattem, Inc. 1,2 15,900 578,601
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS Continued
Church & Dwight Co., Inc. 1,900 $ 62,757
- -------------------------------------------------------------------------------
Energizer Holdings, Inc. 1 8,600 428,194
- -------------------------------------------------------------------------------
Playtex Products, Inc. 1,2 24,500 334,915
- -------------------------------------------------------------------------------
Spectrum Brands, Inc. 1 7,200 146,232
--------------
1,550,699
- -------------------------------------------------------------------------------
PERSONAL PRODUCTS--0.2%
Inter Parfums, Inc. 600 10,776
- -------------------------------------------------------------------------------
Mannatech, Inc. 2 4,700 64,907
- -------------------------------------------------------------------------------
Nature's Sunshine Products, Inc. 10,000 180,800
- -------------------------------------------------------------------------------
Parlux Fragrances, Inc. 1,2 9,800 299,194
- -------------------------------------------------------------------------------
USANA Health Sciences, Inc. 1,2 6,500 249,340
--------------
805,017
- -------------------------------------------------------------------------------
TOBACCO--0.2%
Loews Corp./Carolina Group 7,600 334,324
- -------------------------------------------------------------------------------
Vector Group Ltd. 2 15,935 289,539
--------------
623,863
- -------------------------------------------------------------------------------
ENERGY--8.0%
- -------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--3.0%
Atwood Oceanics, Inc. 1,2 2,100 163,863
- -------------------------------------------------------------------------------
CHC Helicopter Corp., Cl. A 1,400 32,891
- -------------------------------------------------------------------------------
Cooper Cameron Corp. 1 8,500 351,900
- -------------------------------------------------------------------------------
Ensign Energy Services, Inc. 13,600 548,937
- -------------------------------------------------------------------------------
Global Industries Ltd. 1 45,800 519,830
- -------------------------------------------------------------------------------
Grant Prideco, Inc. 1 3,200 141,184
- -------------------------------------------------------------------------------
Grey Wolf, Inc. 1 133,900 1,035,047
- -------------------------------------------------------------------------------
Gulf Island Fabrication, Inc. 2 900 21,879
- -------------------------------------------------------------------------------
Gulfmark Offshore, Inc. 1 1,800 53,316
- -------------------------------------------------------------------------------
Helmerich & Payne, Inc. 9,700 600,527
- -------------------------------------------------------------------------------
Hercules Offshore, Inc. 1 12,700 360,807
- -------------------------------------------------------------------------------
Hornbeck Offshore Services, Inc. 1,2 11,200 366,240
- -------------------------------------------------------------------------------
Hydril Co. 1 2,200 137,720
- -------------------------------------------------------------------------------
Lone Star Technologies, Inc. 1 21,300 1,100,358
- -------------------------------------------------------------------------------
Maverick Tube Corp. 1,2 10,900 434,474
- -------------------------------------------------------------------------------
NS Group, Inc. 1 23,000 961,630
- -------------------------------------------------------------------------------
Oceaneering International, Inc. 1 2,700 134,406
- -------------------------------------------------------------------------------
Offshore Logistics, Inc. 1 100 2,920
- -------------------------------------------------------------------------------
Oil States International, Inc. 1 11,800 373,824
- -------------------------------------------------------------------------------
Parker Drilling Co. 1 21,900 237,177
- -------------------------------------------------------------------------------
Prairie Schooner Petroleum Ltd. 1,3 1,200 24,259
- -------------------------------------------------------------------------------
Precision Drilling Trust 3,000 99,049
- -------------------------------------------------------------------------------
Pride International, Inc. 1 6,700 206,025
- -------------------------------------------------------------------------------
Technicoil Corp. 1 7,100 23,820
- -------------------------------------------------------------------------------
Technicoil Corp. 1 47,900 160,704
- -------------------------------------------------------------------------------
Tetra Technologies, Inc. 1,2 14,700 448,644
10 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES Continued
Trican Well Service Ltd. 1 12,300 $ 592,542
- -------------------------------------------------------------------------------
Universal Compression Holdings, Inc. 1 15,200 625,024
- -------------------------------------------------------------------------------
Veritas DGC, Inc. 1 29,100 1,032,759
--------------
10,791,756
- -------------------------------------------------------------------------------
OIL & GAS--5.0%
Alberta Clipper Energy, Inc. 1 7,887 26,122
- -------------------------------------------------------------------------------
Alon USA Energy, Inc. 1 2,200 43,230
- -------------------------------------------------------------------------------
Alpha Natural Resources, Inc. 1 2,700 51,867
- -------------------------------------------------------------------------------
Atlas America, Inc. 1 5,568 335,305
- -------------------------------------------------------------------------------
Atlas Energy Ltd. 1 92,200 380,713
- -------------------------------------------------------------------------------
ATP Oil & Gas Corp. 1,2 2,700 99,927
- -------------------------------------------------------------------------------
Basic Energy Services, Inc. 1 9,600 191,520
- -------------------------------------------------------------------------------
Berry Petroleum Co., Cl. A 2 1,700 97,240
- -------------------------------------------------------------------------------
Brigham Exploration Co. 1 12,100 143,506
- -------------------------------------------------------------------------------
Callon Petroleum Co. 1 16,900 298,285
- -------------------------------------------------------------------------------
Capital Energy Resources Ltd. 1 24,500 105,592
- -------------------------------------------------------------------------------
Chamaelo Exploration Ltd. 1 2,080 13,688
- -------------------------------------------------------------------------------
Clear Energy, Inc. 1 36,133 164,742
- -------------------------------------------------------------------------------
Comstock Resources, Inc. 1,2 28,100 857,331
- -------------------------------------------------------------------------------
Crew Energy, Inc. 1 2,666 42,887
- -------------------------------------------------------------------------------
Cyries Energy, Inc. 1 1,940 25,050
- -------------------------------------------------------------------------------
Delphi Energy Corp. 1 35,000 171,319
- -------------------------------------------------------------------------------
Duvernay Oil Corp. 1 4,500 171,220
- -------------------------------------------------------------------------------
Edge Petroleum Corp. 1,2 14,100 351,231
- -------------------------------------------------------------------------------
Ember Resources, Inc. 1 7,887 52,582
- -------------------------------------------------------------------------------
Ember Resources, Inc. 1 9,700 60,443
- -------------------------------------------------------------------------------
Energy Partners Ltd. 1 18,800 409,652
- -------------------------------------------------------------------------------
Find Energy Ltd. 1 4,200 33,493
- -------------------------------------------------------------------------------
Find Energy Ltd. 1 28,100 224,084
- -------------------------------------------------------------------------------
Forest Oil Corp. 1 8,000 364,560
- -------------------------------------------------------------------------------
Foundation Coal Holdings, Inc. 1,400 53,200
- -------------------------------------------------------------------------------
Frontier Oil Corp. 3,400 127,602
- -------------------------------------------------------------------------------
Galleon Energy, Inc., Cl. A 1 6,900 145,426
- -------------------------------------------------------------------------------
Galleon Energy, Inc., Subscription
Receipts 1 7,500 158,071
- -------------------------------------------------------------------------------
General Maritime Corp. 2 14,100 522,264
- -------------------------------------------------------------------------------
Giant Industries, Inc. 1 15,200 789,792
- -------------------------------------------------------------------------------
Highpine Oil & Gas Ltd. 1 1,700 30,272
- -------------------------------------------------------------------------------
Holly Corp. 4,100 241,367
- -------------------------------------------------------------------------------
Houston Exploration Co. 1 11,900 628,320
- -------------------------------------------------------------------------------
KCS Energy, Inc. 1,2 37,600 910,672
- -------------------------------------------------------------------------------
Mahalo Energy Ltd. 1,3 19,500 117,424
- -------------------------------------------------------------------------------
Maritrans, Inc. 7,700 200,354
- -------------------------------------------------------------------------------
Meridian Resource Corp. (The) 1 10,800 45,360
- -------------------------------------------------------------------------------
Midnight Oil Exploration Ltd. 1 45,050 171,294
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
OIL & GAS Continued
Mission Oil & Gas, Inc. 1 5,532 $ 35,264
- -------------------------------------------------------------------------------
Mission Oil & Gas, Inc. 1,4 6,400 40,797
- -------------------------------------------------------------------------------
OMI Corp. 2 27,100 491,865
- -------------------------------------------------------------------------------
Open Range Energy Corp. 1 910 3,718
- -------------------------------------------------------------------------------
Overseas Shipholding Group, Inc. 9,100 458,549
- -------------------------------------------------------------------------------
Paramount Resources Ltd., Cl. A 1 25,200 669,861
- -------------------------------------------------------------------------------
Penn Virginia Corp. 1,300 74,620
- -------------------------------------------------------------------------------
Petrohawk Energy Corp. 1 15,700 207,554
- -------------------------------------------------------------------------------
PetroQuest Energy, Inc. 1,2 42,700 353,556
- -------------------------------------------------------------------------------
Pogo Producing Co. 4,700 234,107
- -------------------------------------------------------------------------------
ProEx Energy Ltd. 1 1,940 27,370
- -------------------------------------------------------------------------------
ProspEx Resources Ltd. 1 33,020 99,419
- -------------------------------------------------------------------------------
Real Resources, Inc. 1 4,800 102,817
- -------------------------------------------------------------------------------
Remington Oil & Gas Corp. 1 26,300 959,950
- -------------------------------------------------------------------------------
Resource America, Inc., Cl. A 2,700 46,035
- -------------------------------------------------------------------------------
Sequoia Oil & Gas Trust 275 4,795
- -------------------------------------------------------------------------------
Sequoia Oil & Gas Trust 3,600 62,774
- -------------------------------------------------------------------------------
St. Mary Land & Exploration Co. 5,400 198,774
- -------------------------------------------------------------------------------
Stone Energy Corp. 1 12,500 569,125
- -------------------------------------------------------------------------------
Swift Energy Co. 1,2 23,100 1,041,117
- -------------------------------------------------------------------------------
Tesoro Corp. 8,800 541,640
- -------------------------------------------------------------------------------
Thunder Energy Trust 11,833 122,152
- -------------------------------------------------------------------------------
TransMontaigne, Inc. 1 10,800 71,280
- -------------------------------------------------------------------------------
Trilogy Energy Trust 9,400 192,456
- -------------------------------------------------------------------------------
True Energy Trust 8,750 156,566
- -------------------------------------------------------------------------------
Tusk Energy Corp. 1 26,300 114,481
- -------------------------------------------------------------------------------
Tusk Energy Corp. 1,4 21,300 92,716
- -------------------------------------------------------------------------------
USEC, Inc. 2 32,900 393,155
- -------------------------------------------------------------------------------
Vault Energy Trust 5,200 50,996
- -------------------------------------------------------------------------------
Vero Energy, Inc. 1 2,482 11,338
- -------------------------------------------------------------------------------
Vintage Petroleum, Inc. 15,500 826,615
- -------------------------------------------------------------------------------
W&T Offshore, Inc. 2 3,500 102,900
- -------------------------------------------------------------------------------
West Energy Ltd. 1 8,600 59,333
- -------------------------------------------------------------------------------
White Fire Energy Ltd. 1 275 639
- -------------------------------------------------------------------------------
White Fire Energy Ltd. 1 3,600 8,362
- -------------------------------------------------------------------------------
Whiting Petroleum Corp. 1,2 20,200 808,000
- -------------------------------------------------------------------------------
Williams (Clayton) Energy, Inc. 1 1,200 50,088
- -------------------------------------------------------------------------------
Zenas Energy Corp. 17,437 78,751
--------------
18,220,542
- -------------------------------------------------------------------------------
FINANCIALS--12.2%
- -------------------------------------------------------------------------------
CAPITAL MARKETS--0.2%
GAMCO Investors, Inc., Cl. A 2 3,500 152,355
- -------------------------------------------------------------------------------
Knight Capital Group, Inc., Cl. A 1,2 24,700 244,283
- -------------------------------------------------------------------------------
Stifel Financial Corp. 1,2 2,200 82,698
- -------------------------------------------------------------------------------
SWS Group, Inc. 2 8,000 167,520
--------------
646,856
11 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
COMMERCIAL BANKS--2.8%
Anchor BanCorp Wisconsin, Inc. 2 2,700 $ 81,918
- -------------------------------------------------------------------------------
Astoria Financial Corp. 17,350 510,090
- -------------------------------------------------------------------------------
BancorpSouth, Inc. 2 1,300 28,691
- -------------------------------------------------------------------------------
Bank of Hawaii Corp. 1,500 77,310
- -------------------------------------------------------------------------------
BankUnited Financial Corp., Cl. A 2,800 74,396
- -------------------------------------------------------------------------------
Berkshire Hills Bancorp, Inc. 2 600 20,100
- -------------------------------------------------------------------------------
Capital Corp. of the West 2 620 20,119
- -------------------------------------------------------------------------------
Capital Crossing Bank 1,2 100 3,340
- -------------------------------------------------------------------------------
Capitol Bancorp Ltd. 1,500 56,160
- -------------------------------------------------------------------------------
Center Financial Corp. 2 500 12,580
- -------------------------------------------------------------------------------
Central Pacific Financial Corp. 2 700 25,144
- -------------------------------------------------------------------------------
Chittenden Corp. 2 7,000 194,670
- -------------------------------------------------------------------------------
Citizens First Bancorp, Inc. 2,100 49,518
- -------------------------------------------------------------------------------
City Holding Co. 2 6,300 226,485
- -------------------------------------------------------------------------------
Columbia Banking System, Inc. 2 5,090 145,320
- -------------------------------------------------------------------------------
Commerce Bancshares, Inc. 2 3,360 175,123
- -------------------------------------------------------------------------------
Community Bank System, Inc. 2 21,100 475,805
- -------------------------------------------------------------------------------
Community Trust Bancorp, Inc. 2,415 74,261
- -------------------------------------------------------------------------------
Corus Bankshares, Inc. 2 11,700 658,359
- -------------------------------------------------------------------------------
Downey Financial Corp. 2 11,000 752,290
- -------------------------------------------------------------------------------
F.N.B. Corp. 2 2,600 45,136
- -------------------------------------------------------------------------------
First BanCorp 2 9,700 120,377
- -------------------------------------------------------------------------------
First Citizens BancShares, Inc., Cl. A 2 1,200 209,304
- -------------------------------------------------------------------------------
First Commonwealth Financial Corp. 2 24,300 314,199
- -------------------------------------------------------------------------------
First Defiance Financial Corp. 1,600 43,344
- -------------------------------------------------------------------------------
First Financial Holdings, Inc. 1,900 58,368
- -------------------------------------------------------------------------------
First Indiana Corp. 2 2,600 89,388
- -------------------------------------------------------------------------------
First Midwest Bancorp, Inc. 2 4,725 165,659
- -------------------------------------------------------------------------------
First Place Financial Corp. 2 6,600 158,730
- -------------------------------------------------------------------------------
First Republic Bank 3,700 136,937
- -------------------------------------------------------------------------------
First Security Group, Inc. 2 24,900 242,526
- -------------------------------------------------------------------------------
First South Bancorp, Inc. 2 400 14,128
- -------------------------------------------------------------------------------
FirstFed Financial Corp. 1,2 10,700 583,364
- -------------------------------------------------------------------------------
Flagstar Bancorp, Inc. 4,600 66,240
- -------------------------------------------------------------------------------
Greater Bay Bancorp 12,200 312,564
- -------------------------------------------------------------------------------
Greene County Bancshares, Inc. 2 2,400 65,664
- -------------------------------------------------------------------------------
Harbor Florida Bancshares, Inc. 2 4,900 181,545
- -------------------------------------------------------------------------------
Horizon Financial Corp. 2 200 4,368
- -------------------------------------------------------------------------------
Hudson United Bancorp 1,000 41,680
- -------------------------------------------------------------------------------
Independent Bank Corp. 7,950 216,479
- -------------------------------------------------------------------------------
ITLA Capital Corp. 1 1,100 53,735
- -------------------------------------------------------------------------------
MAF Bancorp, Inc. 2 6,400 264,832
- -------------------------------------------------------------------------------
MainSource Financial Group, Inc. 2 2,583 46,107
- -------------------------------------------------------------------------------
NASB Financial, Inc. 2 600 23,616
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
COMMERCIAL BANKS Continued
National Bankshares, Inc. 400 $ 18,800
- -------------------------------------------------------------------------------
Net.B@nk, Inc. 2,100 15,078
- -------------------------------------------------------------------------------
Pacific Capital Bancorp 2 16,610 590,984
- -------------------------------------------------------------------------------
PFF Bancorp, Inc. 10,010 305,505
- -------------------------------------------------------------------------------
Provident Bankshares Corp. 14,451 488,010
- -------------------------------------------------------------------------------
Provident Financial Holdings, Inc. 2 800 21,040
- -------------------------------------------------------------------------------
Provident Financial Services, Inc. 2,100 38,871
- -------------------------------------------------------------------------------
Republic Bancorp, Inc. 682 8,116
- -------------------------------------------------------------------------------
Republic Bancorp, Inc., Cl. A 3,338 71,600
- -------------------------------------------------------------------------------
Seacoast Banking Corp. of Florida 2 230 5,279
- -------------------------------------------------------------------------------
Southwest Bancorp, Inc. 2 600 12,000
- -------------------------------------------------------------------------------
State Bancorp, Inc. 994 16,640
- -------------------------------------------------------------------------------
Sterling Bancshares, Inc. 1,200 18,528
- -------------------------------------------------------------------------------
Sterling Financial Corp., Western US 9,775 244,180
- -------------------------------------------------------------------------------
Susquehanna Bancshares, Inc. 2 5,000 118,400
- -------------------------------------------------------------------------------
SVB Financial Group 1 1,600 74,944
- -------------------------------------------------------------------------------
Taylor Capital Group, Inc. 2,000 80,800
- -------------------------------------------------------------------------------
TCF Financial Corp. 6,200 168,268
- -------------------------------------------------------------------------------
TierOne Corp. 2 8,000 235,280
- -------------------------------------------------------------------------------
Union Bankshares Corp. 1,100 47,410
- -------------------------------------------------------------------------------
W. Holding Co., Inc. 9,500 78,185
- -------------------------------------------------------------------------------
WesBanco, Inc. 2 700 21,287
- -------------------------------------------------------------------------------
WSFS Financial Corp. 2 4,600 281,750
--------------
10,080,924
- -------------------------------------------------------------------------------
CONSUMER FINANCE--0.1%
ASTA Funding, Inc. 2 11,900 325,346
- -------------------------------------------------------------------------------
Nelnet, Inc., Cl. A 1,2 5,600 227,808
--------------
553,154
- -------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--1.3%
Ace Cash Express, Inc. 1,2 1,200 28,020
- -------------------------------------------------------------------------------
Advanta Corp., Cl. B 2 17,500 567,700
- -------------------------------------------------------------------------------
AmeriCredit Corp. 1 19,700 504,911
- -------------------------------------------------------------------------------
Apollo Investment Corp. 8,000 143,440
- -------------------------------------------------------------------------------
Asset Acceptance Capital Corp. 1 16,100 361,606
- -------------------------------------------------------------------------------
CompuCredit Corp. 1,2 5,600 215,488
- -------------------------------------------------------------------------------
Eaton Vance Corp. 2 7,100 194,256
- -------------------------------------------------------------------------------
Encore Capital Group, Inc. 1,2 8,500 147,475
- -------------------------------------------------------------------------------
Investment Technology Group, Inc. 1 1,900 67,336
- -------------------------------------------------------------------------------
Janus Capital Group, Inc. 21,400 398,682
- -------------------------------------------------------------------------------
Jefferies Group, Inc. 3,200 143,936
- -------------------------------------------------------------------------------
LaBranche & Co., Inc. 1,2 39,000 394,290
- -------------------------------------------------------------------------------
Lazard Ltd., Cl. A 3,400 108,460
- -------------------------------------------------------------------------------
Medallion Financial Corp. 3,800 42,788
12 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES Continued
Piper Jaffray Cos., Inc. 1,2 7,000 $ 282,800
- -------------------------------------------------------------------------------
Raymond James Financial, Inc. 4,100 154,447
- -------------------------------------------------------------------------------
Sanders Morris Harris Group, Inc. 2 2,700 44,253
- -------------------------------------------------------------------------------
SEI Investments Co. 1,200 44,400
- -------------------------------------------------------------------------------
Student Loan Corp. (The) 1,200 251,076
- -------------------------------------------------------------------------------
WFS Financial, Inc. 1 5,100 388,365
- -------------------------------------------------------------------------------
World Acceptance Corp. 1 1,800 51,300
--------------
4,535,029
- -------------------------------------------------------------------------------
INSURANCE--5.7%
21st Century Insurance Group 300 4,854
- -------------------------------------------------------------------------------
Affirmative Insurance Holdings, Inc. 4,300 62,737
- -------------------------------------------------------------------------------
Alfa Corp. 2 4,800 77,280
- -------------------------------------------------------------------------------
Alleghany Corp. 700 198,800
- -------------------------------------------------------------------------------
American Equity Investment Life
Holding Co. 21,900 285,795
- -------------------------------------------------------------------------------
American Physicians Capital, Inc. 1 7,000 320,530
- -------------------------------------------------------------------------------
AmerUs Group Co. 14,200 804,714
- -------------------------------------------------------------------------------
Arch Capital Group Ltd. 1 13,000 711,750
- -------------------------------------------------------------------------------
Argonaut Group, Inc. 1,2 18,200 596,414
- -------------------------------------------------------------------------------
Aspen Insurance Holdings Ltd. 8,700 205,929
- -------------------------------------------------------------------------------
Assurant, Inc. 5,100 221,799
- -------------------------------------------------------------------------------
Baldwin & Lyons, Inc., Cl. B, Non-Vtg. 2 300 7,290
- -------------------------------------------------------------------------------
Berkley (W.R.) Corp. 5,500 261,910
- -------------------------------------------------------------------------------
Bristol West Holdings, Inc. 2 16,500 313,995
- -------------------------------------------------------------------------------
Clark, Inc. 2 3,500 46,375
- -------------------------------------------------------------------------------
Commerce Group, Inc. (The) 4,100 234,848
- -------------------------------------------------------------------------------
Covanta Holding Corp. 1 6,500 97,890
- -------------------------------------------------------------------------------
Delphi Financial Group, Inc., Cl. A 2 16,500 759,165
- -------------------------------------------------------------------------------
Direct General Corp. 2 14,800 250,120
- -------------------------------------------------------------------------------
Donegal Group, Inc., Cl. A 2 6,301 146,435
- -------------------------------------------------------------------------------
Fidelity National Financial, Inc. 779 28,659
- -------------------------------------------------------------------------------
Fidelity National Title Group, Inc., Cl. A 136 3,312
- -------------------------------------------------------------------------------
FPIC Insurance Group, Inc. 1,2 8,700 301,890
- -------------------------------------------------------------------------------
Great American Financial Resources,
Inc. 2 3,000 59,520
- -------------------------------------------------------------------------------
Harleysville Group, Inc. 200 5,300
- -------------------------------------------------------------------------------
Hilb, Rogal & Hamilton Co. 2 6,800 261,868
- -------------------------------------------------------------------------------
Horace Mann Educators Corp. 34,300 650,328
- -------------------------------------------------------------------------------
Independence Holding Co. 2 640 12,512
- -------------------------------------------------------------------------------
Infinity Property & Casualty Corp. 21,800 811,178
- -------------------------------------------------------------------------------
James River Group, Inc. 1 1,500 29,775
- -------------------------------------------------------------------------------
LandAmerica Financial Group, Inc. 2 11,900 742,560
- -------------------------------------------------------------------------------
Mercury General Corp. 2,600 151,372
- -------------------------------------------------------------------------------
National Financial Partners Corp. 21,000 1,103,550
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
INSURANCE Continued
National Western Life Insurance Co.,
Cl. A 500 $ 103,455
- -------------------------------------------------------------------------------
Navigators Group, Inc. (The) 1 6,600 287,826
- -------------------------------------------------------------------------------
Odyssey Re Holdings Corp. 2 15,000 376,200
- -------------------------------------------------------------------------------
Ohio Casualty Corp. 39,200 1,110,144
- -------------------------------------------------------------------------------
Old Republic International Corp. 16,600 435,916
- -------------------------------------------------------------------------------
Phoenix Cos., Inc. (The) 2 64,300 877,052
- -------------------------------------------------------------------------------
Presidential Life Corp. 2 3,500 66,640
- -------------------------------------------------------------------------------
ProAssurance Corp. 1,2 8,400 408,576
- -------------------------------------------------------------------------------
ProCentury Corp. 2 10,400 111,800
- -------------------------------------------------------------------------------
Protective Life Corp. 6,700 293,259
- -------------------------------------------------------------------------------
Republic Cos. Group, Inc. 24,700 382,356
- -------------------------------------------------------------------------------
RLI Corp. 13,800 688,206
- -------------------------------------------------------------------------------
Safety Insurance Group, Inc. 2 8,800 355,256
- -------------------------------------------------------------------------------
Selective Insurance Group, Inc. 2 20,600 1,093,860
- -------------------------------------------------------------------------------
StanCorp Financial Group, Inc. 12,600 629,370
- -------------------------------------------------------------------------------
State Auto Financial Corp. 11,100 404,706
- -------------------------------------------------------------------------------
Stewart Information Services Corp. 2 10,900 530,503
- -------------------------------------------------------------------------------
UICI 11,900 422,569
- -------------------------------------------------------------------------------
United America Indemnity Ltd., Cl. A 1 1,206 22,142
- -------------------------------------------------------------------------------
United Fire & Casualty Co. 2 11,100 448,773
- -------------------------------------------------------------------------------
Unitrin, Inc. 8,800 396,440
- -------------------------------------------------------------------------------
Universal American Financial Corp. 1 28,100 423,748
- -------------------------------------------------------------------------------
Zenith National Insurance Corp. 19,000 876,280
--------------
20,515,531
- -------------------------------------------------------------------------------
REAL ESTATE--1.4%
Acadia Realty Trust 1,100 22,055
- -------------------------------------------------------------------------------
Agree Realty Corp. 2 4,600 132,940
- -------------------------------------------------------------------------------
Alexandria Real Estate Equities, Inc. 1,100 88,550
- -------------------------------------------------------------------------------
Amli Residential Properties Trust 800 30,440
- -------------------------------------------------------------------------------
Arden Realty, Inc. 2,500 112,075
- -------------------------------------------------------------------------------
Associated Estates Realty Corp. 2 2,500 22,600
- -------------------------------------------------------------------------------
Brandywine Realty Trust 6,000 167,460
- -------------------------------------------------------------------------------
Camden Property Trust 900 52,128
- -------------------------------------------------------------------------------
CarrAmerica Realty Corp. 2,500 86,575
- -------------------------------------------------------------------------------
CB Richard Ellis Group, Inc., Cl. A 1 2,800 164,780
- -------------------------------------------------------------------------------
CBL & Associates Properties, Inc. 3,400 134,334
- -------------------------------------------------------------------------------
CentraCore Properties Trust 1,600 42,992
- -------------------------------------------------------------------------------
Colonial Properties Trust 1,954 82,029
- -------------------------------------------------------------------------------
Consolidated-Tomoka Land Co. 700 49,630
- -------------------------------------------------------------------------------
Corporate Office Properties Trust 4,000 142,160
- -------------------------------------------------------------------------------
Entertainment Properties Trust 700 28,525
- -------------------------------------------------------------------------------
Equity Inns, Inc. 12,100 163,955
- -------------------------------------------------------------------------------
Federal Realty Investment Trust 1,700 103,105
- -------------------------------------------------------------------------------
First Industrial Realty Trust, Inc. 2 3,500 134,750
13 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
REAL ESTATE Continued
Friedman, Billings, Ramsey Group, Inc.,
Cl. A 2 2,300 $ 22,770
- -------------------------------------------------------------------------------
Glenborough Realty Trust, Inc. 800 14,480
- -------------------------------------------------------------------------------
Glimcher Realty Trust 2 2,100 51,072
- -------------------------------------------------------------------------------
Health Care REIT, Inc. 4,000 135,600
- -------------------------------------------------------------------------------
Healthcare Realty Trust, Inc. 4,000 133,080
- -------------------------------------------------------------------------------
Heritage Property Investment Trust 2 2,700 90,180
- -------------------------------------------------------------------------------
Highwoods Properties, Inc. 3,000 85,350
- -------------------------------------------------------------------------------
HouseValues, Inc. 1,2 2,700 35,181
- -------------------------------------------------------------------------------
HRPT Properties Trust 5,400 55,890
- -------------------------------------------------------------------------------
Jones Lang LaSalle, Inc. 5,600 281,960
- -------------------------------------------------------------------------------
Kilroy Realty Corp. 2,800 173,320
- -------------------------------------------------------------------------------
Lexington Corporate Properties Trust 7,500 159,750
- -------------------------------------------------------------------------------
LTC Properties, Inc. 2 1,300 27,339
- -------------------------------------------------------------------------------
Macerich Co. (The) 600 40,284
- -------------------------------------------------------------------------------
Mack-Cali Realty Corp. 1,500 64,800
- -------------------------------------------------------------------------------
Maguire Properties, Inc. 1,800 55,620
- -------------------------------------------------------------------------------
Mid-America Apartment Communities,
Inc. 3,000 145,500
- -------------------------------------------------------------------------------
Mills Corp. 1,900 79,686
- -------------------------------------------------------------------------------
Nationwide Health Properties, Inc. 2 5,000 107,000
- -------------------------------------------------------------------------------
Omega Healthcare Investors, Inc. 1,100 13,849
- -------------------------------------------------------------------------------
Pan Pacific Retail Properties, Inc. 1,700 113,713
- -------------------------------------------------------------------------------
Parkway Properties, Inc. 600 24,084
- -------------------------------------------------------------------------------
Pennsylvania Real Estate Investment
Trust 3,900 145,704
- -------------------------------------------------------------------------------
Prentiss Properties Trust 600 24,408
- -------------------------------------------------------------------------------
PS Business Parks, Inc. 500 24,600
- -------------------------------------------------------------------------------
RAIT Investment Trust 800 20,736
- -------------------------------------------------------------------------------
Ramco-Gershenson Properties Trust 2,100 55,965
- -------------------------------------------------------------------------------
Realty Income Corp. 2,000 43,240
- -------------------------------------------------------------------------------
Redwood Trust, Inc. 2 800 33,008
- -------------------------------------------------------------------------------
Regency Centers Corp. 800 47,160
- -------------------------------------------------------------------------------
Senior Housing Properties Trust 2 3,200 54,112
- -------------------------------------------------------------------------------
Simon Property Group, Inc. 158 12,108
- -------------------------------------------------------------------------------
SL Green Realty Corp. 1,500 114,585
- -------------------------------------------------------------------------------
Spirit Finance Corp. 12,400 140,740
- -------------------------------------------------------------------------------
Stratus Properties, Inc. 1 1,500 34,500
- -------------------------------------------------------------------------------
Tanger Factory Outlet Centers, Inc. 2 4,800 137,952
- -------------------------------------------------------------------------------
Town & Country Trust 2 900 30,429
- -------------------------------------------------------------------------------
Trammell Crow Co. 1,2 12,000 307,800
- -------------------------------------------------------------------------------
Trizec Properties, Inc. 2,000 45,840
- -------------------------------------------------------------------------------
United Capital Corp. 1 400 9,868
- -------------------------------------------------------------------------------
United Dominion Realty Trust, Inc. 2,400 56,256
- -------------------------------------------------------------------------------
Ventas, Inc. 2,500 80,050
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
REAL ESTATE Continued
Weingarten Realty Investors 1,900 $ 71,839
--------------
5,162,491
- -------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE--0.7%
Accredited Home Lenders Holding
Co. 1,2 10,500 520,590
- -------------------------------------------------------------------------------
Bank Mutual Corp. 2 8,936 94,722
- -------------------------------------------------------------------------------
Commercial Capital Bancorp, Inc. 2 10,600 181,472
- -------------------------------------------------------------------------------
Federal Agricultural Mortgage Corp.,
Non-Vtg. 2 3,700 110,741
- -------------------------------------------------------------------------------
Fremont General Corp. 2 21,800 506,414
- -------------------------------------------------------------------------------
KBNT Bancorp, Inc. 2,600 42,354
- -------------------------------------------------------------------------------
PMI Group, Inc. (The) 7,900 324,453
- -------------------------------------------------------------------------------
Radian Group, Inc. 9,900 580,041
--------------
2,360,787
- -------------------------------------------------------------------------------
HEALTH CARE--9.2%
- -------------------------------------------------------------------------------
BIOTECHNOLOGY--2.0%
Abgenix, Inc. 1 45,400 976,554
- -------------------------------------------------------------------------------
Acadia Pharmaceuticals, Inc. 1,2 2,900 28,565
- -------------------------------------------------------------------------------
Albany Molecular Research, Inc. 1,2 24,300 295,245
- -------------------------------------------------------------------------------
Alkermes, Inc. 1,2 61,900 1,183,528
- -------------------------------------------------------------------------------
Anadys Pharmaceuticals, Inc. 1 4,600 40,480
- -------------------------------------------------------------------------------
Applera Corp./Applied Biosystems
Group 23,400 621,504
- -------------------------------------------------------------------------------
Arena Pharmaceuticals, Inc. 1,2 18,000 255,960
- -------------------------------------------------------------------------------
ArQule, Inc. 1,2 13,800 84,456
- -------------------------------------------------------------------------------
Array BioPharma, Inc. 1,2 12,800 89,728
- -------------------------------------------------------------------------------
BioMarin Pharmaceutical, Inc. 1,2 16,800 181,104
- -------------------------------------------------------------------------------
Cotherix, Inc. 1,2 2,100 22,302
- -------------------------------------------------------------------------------
Cubist Pharmaceuticals, Inc. 1,2 23,600 501,500
- -------------------------------------------------------------------------------
CV Therapeutics, Inc. 1,2 3,100 76,663
- -------------------------------------------------------------------------------
deCODE genetics, Inc. 1,2 21,200 175,112
- -------------------------------------------------------------------------------
Durect Corp. 1 26,600 134,862
- -------------------------------------------------------------------------------
ICOS Corp. 1,2 3,800 104,994
- -------------------------------------------------------------------------------
Idenix Pharmaceuticals, Inc. 1,2 1,400 23,954
- -------------------------------------------------------------------------------
Illumina, Inc. 1,2 8,100 114,210
- -------------------------------------------------------------------------------
Kendle International, Inc. 1,2 4,200 108,108
- -------------------------------------------------------------------------------
Medarex, Inc. 1 1,700 23,545
- -------------------------------------------------------------------------------
Myogen, Inc. 1 5,800 174,928
- -------------------------------------------------------------------------------
Myriad Genetics, Inc. 1,2 8,500 176,800
- -------------------------------------------------------------------------------
NeoPharm, Inc. 1,2 5,800 62,582
- -------------------------------------------------------------------------------
Nuerocrine Biosciences, Inc. 1 1,000 62,730
- -------------------------------------------------------------------------------
Onyx Pharmaceuticals, Inc. 1 1,300 37,388
- -------------------------------------------------------------------------------
Pharmion Corp. 1,2 12,100 215,017
- -------------------------------------------------------------------------------
Progenics Pharmaceuticals, Inc. 1 4,600 115,046
- -------------------------------------------------------------------------------
Protein Design Labs, Inc. 1 1,300 36,946
- -------------------------------------------------------------------------------
Regeneron Pharmaceuticals, Inc. 1 11,400 181,830
14 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
BIOTECHNOLOGY Continued
Renovis, Inc. 1,2 8,000 $ 122,400
- -------------------------------------------------------------------------------
Sirna Therapeutics, Inc. 1 1,100 3,333
- -------------------------------------------------------------------------------
Techne Corp. 1 9,400 527,810
- -------------------------------------------------------------------------------
Telik, Inc. 1 1,500 25,485
- -------------------------------------------------------------------------------
Third Wave Technologies, Inc. 1 14,300 42,614
- -------------------------------------------------------------------------------
United Therapeutics Corp. 1,2 4,700 324,864
- -------------------------------------------------------------------------------
ViroPharma, Inc. 1 1,300 24,115
--------------
7,176,262
- -------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--2.0%
Anika Therapeutics, Inc. 1,2 6,100 71,309
- -------------------------------------------------------------------------------
Aspect Medical Systems, Inc. 1,2 8,400 288,540
- -------------------------------------------------------------------------------
Bausch & Lomb, Inc. 4,300 291,970
- -------------------------------------------------------------------------------
Bio-Rad Laboratories, Inc., Cl. A 1 3,700 242,128
- -------------------------------------------------------------------------------
Candela Corp. 1 1,900 27,436
- -------------------------------------------------------------------------------
Cutera, Inc. 1,2 6,500 171,340
- -------------------------------------------------------------------------------
Cynosure, Inc., Cl. A 1 9,900 207,801
- -------------------------------------------------------------------------------
Dade Behring Holdings, Inc. 1,500 61,335
- -------------------------------------------------------------------------------
DJ Orthopedics, Inc. 1 14,600 402,668
- -------------------------------------------------------------------------------
Edwards Lifesciences Corp. 1 900 37,449
- -------------------------------------------------------------------------------
Foxhollow Technologies, Inc. 1,2 1,300 38,727
- -------------------------------------------------------------------------------
Haemonetics Corp. 1,2 2,600 127,036
- -------------------------------------------------------------------------------
Hologic, Inc. 1,2 16,800 637,056
- -------------------------------------------------------------------------------
Hospira, Inc. 1 700 29,946
- -------------------------------------------------------------------------------
Idexx Laboratories, Inc. 1 3,300 237,534
- -------------------------------------------------------------------------------
Inamed Corp. 1 1,150 100,832
- -------------------------------------------------------------------------------
Integra LifeSciences Holdings Corp. 1 1,500 53,190
- -------------------------------------------------------------------------------
Kinetic Concepts, Inc. 1 4,800 190,848
- -------------------------------------------------------------------------------
Lifeline Systems, Inc. 1 1,900 69,464
- -------------------------------------------------------------------------------
Medical Action Industries, Inc. 1 500 10,220
- -------------------------------------------------------------------------------
Mentor Corp. 2 15,300 705,024
- -------------------------------------------------------------------------------
Meridian Bioscience, Inc. 2 6,300 126,882
- -------------------------------------------------------------------------------
Millipore Corp. 1 5,200 343,408
- -------------------------------------------------------------------------------
Molecular Devices Corp. 1 1,900 54,967
- -------------------------------------------------------------------------------
Natus Medical, Inc. 1 1,300 20,982
- -------------------------------------------------------------------------------
Neurometrix, Inc. 1 400 10,912
- -------------------------------------------------------------------------------
OraSure Technologies, Inc. 1,2 30,300 267,246
- -------------------------------------------------------------------------------
Palomar Medical Technologies, Inc. 1,2 2,500 87,600
- -------------------------------------------------------------------------------
PerkinElmer, Inc. 17,400 409,944
- -------------------------------------------------------------------------------
Somanetics Corp. 1,2 2,100 67,200
- -------------------------------------------------------------------------------
Syneron Medical Ltd. 1,2 1,200 38,100
- -------------------------------------------------------------------------------
Thermo Electron Corp. 1 9,000 271,170
- -------------------------------------------------------------------------------
Thoratec Corp. 1,2 27,400 566,906
- -------------------------------------------------------------------------------
Varian, Inc. 1 13,500 537,165
- -------------------------------------------------------------------------------
Ventana Medical Systems, Inc. 1 800 33,880
- -------------------------------------------------------------------------------
Viasys Healthcare, Inc. 1 1,900 48,830
- -------------------------------------------------------------------------------
Vital Signs, Inc. 1,200 51,384
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES Continued
Waters Corp. 1 5,800 $ 219,240
--------------
7,157,669
- -------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--3.7%
Allscripts Healthcare Solutions, Inc. 1 14,100 188,940
- -------------------------------------------------------------------------------
American Healthways, Inc. 1,2 19,800 895,950
- -------------------------------------------------------------------------------
American Retirement Corp. 1 1,000 25,130
- -------------------------------------------------------------------------------
AMERIGROUP Corp. 1 4,200 81,732
- -------------------------------------------------------------------------------
AMICAS, Inc. 1,2 17,900 88,784
- -------------------------------------------------------------------------------
AMN Healthcare Services, Inc. 1,2 19,000 375,820
- -------------------------------------------------------------------------------
Beverly Enterprises, Inc. 1,2 50,300 587,001
- -------------------------------------------------------------------------------
Cantel Medical Corp. 1,2 1,750 31,395
- -------------------------------------------------------------------------------
Cerner Corp. 1 900 81,819
- -------------------------------------------------------------------------------
Chemed Corp. 9,100 452,088
- -------------------------------------------------------------------------------
Computer Programs & Systems, Inc. 7,100 294,153
- -------------------------------------------------------------------------------
Cross Country Healthcare, Inc. 1,2 6,800 120,904
- -------------------------------------------------------------------------------
Genesis HealthCare Corp. 1,2 17,200 628,144
- -------------------------------------------------------------------------------
Health Net, Inc. 1 9,800 505,190
- -------------------------------------------------------------------------------
Humana, Inc. 1 7,000 380,310
- -------------------------------------------------------------------------------
IDX Systems Corp. 1 3,900 171,288
- -------------------------------------------------------------------------------
Kindred Healthcare, Inc. 1,2 12,100 311,696
- -------------------------------------------------------------------------------
LCA-Vision, Inc. 2 13,100 622,381
- -------------------------------------------------------------------------------
LHC Group, Inc. 1 6,100 106,323
- -------------------------------------------------------------------------------
Magellan Health Services, Inc. 1 12,400 389,980
- -------------------------------------------------------------------------------
Manor Care, Inc. 7,600 302,252
- -------------------------------------------------------------------------------
Matria Healthcare, Inc. 1,2 11,500 445,740
- -------------------------------------------------------------------------------
MedCath Corp. 1,2 9,700 179,935
- -------------------------------------------------------------------------------
Merge Technologies, Inc. 1,2 6,800 170,272
- -------------------------------------------------------------------------------
National HealthCare Corp. 2 1,500 56,070
- -------------------------------------------------------------------------------
National Medical Health Card Systems,
Inc. 1 400 10,880
- -------------------------------------------------------------------------------
NovaMed Eyecare, Inc. 1 2,900 18,935
- -------------------------------------------------------------------------------
Odyssey Healthcare, Inc. 1,2 22,100 411,944
- -------------------------------------------------------------------------------
Owens & Minor, Inc. 2 8,800 242,264
- -------------------------------------------------------------------------------
Parexel International Corp. 1 800 16,208
- -------------------------------------------------------------------------------
Pediatrix Medical Group, Inc. 1 13,300 1,177,981
- -------------------------------------------------------------------------------
Per-Se Technologies, Inc. 1,2 24,700 576,992
- -------------------------------------------------------------------------------
Phase Forward, Inc. 1,2 5,700 55,575
- -------------------------------------------------------------------------------
PRA International 1 2,400 67,560
- -------------------------------------------------------------------------------
Res-Care, Inc. 1 7,500 130,275
- -------------------------------------------------------------------------------
Rural/Metro Corp. 1,2 10,900 98,427
- -------------------------------------------------------------------------------
Schein (Henry), Inc. 1 9,200 401,488
- -------------------------------------------------------------------------------
Sierra Health Services, Inc. 1 5,700 455,772
- -------------------------------------------------------------------------------
Sunrise Senior Living, Inc. 1,2 2,200 74,162
- -------------------------------------------------------------------------------
Symbion, Inc. 1,2 400 9,200
- -------------------------------------------------------------------------------
Trizetto Group, Inc. 1 30,100 511,399
15 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES Continued
U.S. Physical Therapy, Inc. 1,2 6,300 $ 116,361
- -------------------------------------------------------------------------------
United Surgical Partners International,
Inc. 1,2 11,650 374,548
- -------------------------------------------------------------------------------
Universal Health Services, Inc., Cl. B 5,500 257,070
- -------------------------------------------------------------------------------
VCA Antech, Inc. 1 900 25,380
- -------------------------------------------------------------------------------
WebMD Health Corp., Cl. A 1,2 2,900 84,245
- -------------------------------------------------------------------------------
WellCare Health Plans, Inc. 1,2 13,100 535,135
- -------------------------------------------------------------------------------
WellPoint, Inc. 1 1,401 111,786
--------------
13,256,884
- -------------------------------------------------------------------------------
PHARMACEUTICALS--1.5%
Alpharma, Inc., Cl. A 34,300 977,893
- -------------------------------------------------------------------------------
Andrx Corp. 1 39,300 647,271
- -------------------------------------------------------------------------------
Angiotech Pharmaceuticals, Inc. 1 13,300 174,895
- -------------------------------------------------------------------------------
Barr Pharmaceuticals, Inc. 1 8,300 517,007
- -------------------------------------------------------------------------------
CNS, Inc. 2 12,400 271,684
- -------------------------------------------------------------------------------
DepoMed, Inc. 1 7,200 43,200
- -------------------------------------------------------------------------------
Encysive Pharmaceuticals, Inc. 1 13,600 107,304
- -------------------------------------------------------------------------------
Endo Pharmaceuticals Holdings, Inc. 1,2 13,900 420,614
- -------------------------------------------------------------------------------
Hi-Tech Pharmacal Co., Inc. 1 5,200 230,308
- -------------------------------------------------------------------------------
Keryx Biopharmaceuticals, Inc. 1,2 400 5,856
- -------------------------------------------------------------------------------
King Pharmaceuticals, Inc. 1 36,400 615,888
- -------------------------------------------------------------------------------
Kos Pharmaceuticals, Inc. 1,2 7,700 398,321
- -------------------------------------------------------------------------------
Medicis Pharmaceutical Corp., Cl. A 2 11,600 371,780
- -------------------------------------------------------------------------------
Salix Pharmaceuticals Ltd. 1 7,400 130,092
- -------------------------------------------------------------------------------
Watson Pharmaceuticals, Inc. 1 14,900 484,399
--------------
5,396,512
- -------------------------------------------------------------------------------
INDUSTRIALS--15.6%
- -------------------------------------------------------------------------------
AEROSPACE & DEFENSE--1.3%
AAR Corp. 1 18,700 447,865
- -------------------------------------------------------------------------------
Alliant Techsystems, Inc. 1 6,300 479,871
- -------------------------------------------------------------------------------
Armor Holdings, Inc. 1,2 8,200 349,730
- -------------------------------------------------------------------------------
Astronics Corp., Cl. B 1 650 6,500
- -------------------------------------------------------------------------------
Aviall, Inc. 1,2 3,800 109,440
- -------------------------------------------------------------------------------
BE Aerospace, Inc. 1 33,300 732,600
- -------------------------------------------------------------------------------
DRS Technologies, Inc. 16,200 833,004
- -------------------------------------------------------------------------------
ESCO Technologies, Inc. 1 8,200 364,818
- -------------------------------------------------------------------------------
HEICO Corp., Cl. A 30 616
- -------------------------------------------------------------------------------
Innovative Solutions & Support, Inc. 1,2 16,302 208,340
- -------------------------------------------------------------------------------
Kaman Corp., Cl. A 6,700 131,923
- -------------------------------------------------------------------------------
Moog, Inc., Cl. A 1 2,300 65,274
- -------------------------------------------------------------------------------
NCI, Inc., Cl. A 1 12,800 175,744
- -------------------------------------------------------------------------------
Precision Castparts Corp. 3,700 191,697
- -------------------------------------------------------------------------------
Teledyne Technologies, Inc. 1 20,200 587,820
- -------------------------------------------------------------------------------
Triumph Group, Inc. 1,2 4,800 175,728
--------------
4,860,970
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS--0.4%
ABX Air, Inc. 1 27,700 $ 216,891
- -------------------------------------------------------------------------------
Dynamex, Inc. 1 400 7,624
- -------------------------------------------------------------------------------
EGL, Inc. 1 15,100 567,307
- -------------------------------------------------------------------------------
Forward Air Corp. 11,150 408,648
- -------------------------------------------------------------------------------
Hub Group, Inc., Cl. A 1 10,400 367,640
--------------
1,568,110
- -------------------------------------------------------------------------------
AIRLINES--1.4%
Alaska Air Group, Inc. 1,2 28,600 1,021,592
- -------------------------------------------------------------------------------
AMR Corp. 1,2 36,800 818,064
- -------------------------------------------------------------------------------
Continental Airlines, Inc., Cl. B 1,2 54,400 1,158,720
- -------------------------------------------------------------------------------
ExpressJet Holdings, Inc. 1,2 31,200 252,408
- -------------------------------------------------------------------------------
Frontier Airlines, Inc. 1,2 19,400 179,256
- -------------------------------------------------------------------------------
Mesa Air Group, Inc. 1,2 41,800 437,228
- -------------------------------------------------------------------------------
Republic Airways Holdings, Inc. 1 9,200 139,840
- -------------------------------------------------------------------------------
SkyWest, Inc. 26,800 719,848
- -------------------------------------------------------------------------------
World Air Holdings, Inc. 1 17,400 167,388
--------------
4,894,344
- -------------------------------------------------------------------------------
BUILDING PRODUCTS--1.0%
Apogee Enterprises, Inc. 2 10,100 163,822
- -------------------------------------------------------------------------------
Builders FirstSource, Inc. 1,2 36,000 769,320
- -------------------------------------------------------------------------------
Crane Co. 13,400 472,618
- -------------------------------------------------------------------------------
Lennox International, Inc. 13,100 369,420
- -------------------------------------------------------------------------------
NCI Building Systems, Inc. 1,2 1,400 59,472
- -------------------------------------------------------------------------------
Universal Forest Products, Inc. 2 10,500 580,125
- -------------------------------------------------------------------------------
USG Corp. 1 13,500 877,500
- -------------------------------------------------------------------------------
Watsco, Inc. 2 4,300 257,183
--------------
3,549,460
- -------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--3.4%
Adesa, Inc. 2,200 53,724
- -------------------------------------------------------------------------------
Administaff, Inc. 20,500 862,025
- -------------------------------------------------------------------------------
American Reprographics Co. 1 900 22,869
- -------------------------------------------------------------------------------
Banta Corp. 11,200 557,760
- -------------------------------------------------------------------------------
Brady Corp., Cl. A 3,300 119,394
- -------------------------------------------------------------------------------
Central Parking Corp. 2 4,200 57,624
- -------------------------------------------------------------------------------
Cenveo, Inc. 1,2 18,500 243,460
- -------------------------------------------------------------------------------
Clean Harbors, Inc. 1 12,400 357,244
- -------------------------------------------------------------------------------
CompX International, Inc. 600 9,612
- -------------------------------------------------------------------------------
Consolidated Graphics, Inc. 1 3,300 156,222
- -------------------------------------------------------------------------------
Corporate Executive Board Co. 4,300 385,710
- -------------------------------------------------------------------------------
Deluxe Corp. 13,900 418,946
- -------------------------------------------------------------------------------
DiamondCluster International, Inc. 1 11,800 93,692
- -------------------------------------------------------------------------------
Dun & Bradstreet Corp. 1 5,500 368,280
- -------------------------------------------------------------------------------
Equifax, Inc. 1,900 72,238
- -------------------------------------------------------------------------------
Exponent, Inc. 1,2 5,400 153,252
16 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES Continued
Geo Group, Inc. (The) 1 2,600 $ 59,618
- -------------------------------------------------------------------------------
Global Cash Access, Inc. 1 2,900 42,311
- -------------------------------------------------------------------------------
Harland (John H.) Co. 6,300 236,880
- -------------------------------------------------------------------------------
Healthcare Services Group, Inc. 2 7,674 158,929
- -------------------------------------------------------------------------------
Heidrick & Struggles International, Inc. 1 2,200 70,510
- -------------------------------------------------------------------------------
HNI Corp. 8,500 466,905
- -------------------------------------------------------------------------------
IHS, Inc., Cl. A 1 9,000 184,680
- -------------------------------------------------------------------------------
Ikon Office Solutions, Inc. 24,600 256,086
- -------------------------------------------------------------------------------
Kforce, Inc. 1 1,700 18,972
- -------------------------------------------------------------------------------
Knoll, Inc. 8,800 150,568
- -------------------------------------------------------------------------------
Korn-Ferry International 1,2 20,300 379,407
- -------------------------------------------------------------------------------
Labor Ready, Inc. 1,2 32,200 670,404
- -------------------------------------------------------------------------------
Manpower, Inc. 7,600 353,400
- -------------------------------------------------------------------------------
McGrath Rentcorp 2 3,200 88,960
- -------------------------------------------------------------------------------
Miller (Herman), Inc. 13,500 380,565
- -------------------------------------------------------------------------------
PHH Corp. 1 36,400 1,019,928
- -------------------------------------------------------------------------------
Pico Holdings, Inc. 1,2 2,100 67,746
- -------------------------------------------------------------------------------
Portfolio Recovery Associates, Inc. 1,2 7,900 366,876
- -------------------------------------------------------------------------------
Republic Services, Inc. 2,700 101,385
- -------------------------------------------------------------------------------
Resources Connection, Inc. 1,2 14,900 388,294
- -------------------------------------------------------------------------------
Robert Half International, Inc. 2,200 83,358
- -------------------------------------------------------------------------------
Rollins, Inc. 5,400 106,434
- -------------------------------------------------------------------------------
Sirva, Inc. 1 30,000 240,000
- -------------------------------------------------------------------------------
SITEL Corp. 1 2,300 7,176
- -------------------------------------------------------------------------------
Sourcecorp, Inc. 1 1,400 33,572
- -------------------------------------------------------------------------------
Spherion Corp. 1,2 30,500 305,305
- -------------------------------------------------------------------------------
Standard Register Co. (The) 7,100 112,251
- -------------------------------------------------------------------------------
Steelcase, Inc., Cl. A 6,400 101,312
- -------------------------------------------------------------------------------
TeleTech Holdings, Inc. 1,2 43,800 527,790
- -------------------------------------------------------------------------------
Tetra Tech, Inc. 1,2 14,000 219,380
- -------------------------------------------------------------------------------
United Stationers, Inc. 1 15,300 742,050
- -------------------------------------------------------------------------------
Viad Corp. 2 6,700 196,511
- -------------------------------------------------------------------------------
Volt Information Sciences, Inc. 1,2 2,400 45,648
- -------------------------------------------------------------------------------
Waste Connections, Inc. 1 900 31,014
--------------
12,146,277
- -------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING--1.4%
Baker (Michael) Corp. 1,2 5,100 130,305
- -------------------------------------------------------------------------------
Comfort Systems USA, Inc. 2 12,200 112,240
- -------------------------------------------------------------------------------
EMCOR Group, Inc. 1 11,000 742,830
- -------------------------------------------------------------------------------
Granite Construction, Inc. 15,700 563,787
- -------------------------------------------------------------------------------
Insituform Technologies, Inc., Cl. A 1,2 2,300 44,551
- -------------------------------------------------------------------------------
McDermott International, Inc. 1 6,700 298,887
- -------------------------------------------------------------------------------
Perini Corp. 1,2 5,300 127,995
- -------------------------------------------------------------------------------
Quanta Services, Inc. 1,2 66,400 874,488
- -------------------------------------------------------------------------------
URS Corp. 1 23,400 880,074
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING Continued
Washington Group International, Inc. 10,700 $ 566,779
- -------------------------------------------------------------------------------
Williams Scotsman International, Inc. 1 35,600 616,236
--------------
4,958,172
- -------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--1.3%
Acuity Brands, Inc. 26,300 836,340
- -------------------------------------------------------------------------------
American Power Conversion Corp. 11,200 246,400
- -------------------------------------------------------------------------------
AMETEK, Inc. 400 17,016
- -------------------------------------------------------------------------------
Artesyn Technologies, Inc. 1,2 2,800 28,840
- -------------------------------------------------------------------------------
C&D Technologies, Inc. 2 6,500 49,530
- -------------------------------------------------------------------------------
General Cable Corp. 1 26,700 525,990
- -------------------------------------------------------------------------------
Genlyte Group, Inc. (The) 1,2 10,200 546,414
- -------------------------------------------------------------------------------
LaBarge, Inc. 1,2 9,300 133,641
- -------------------------------------------------------------------------------
LSI Industries, Inc. 10,800 169,128
- -------------------------------------------------------------------------------
Power-One, Inc. 1,2 15,400 92,708
- -------------------------------------------------------------------------------
Preformed Line Products Co. 2 700 29,953
- -------------------------------------------------------------------------------
Roper Industries, Inc. 9,600 379,296
- -------------------------------------------------------------------------------
Smith (A.O.) Corp. 2 6,300 221,130
- -------------------------------------------------------------------------------
Suntech Power Holdings Co. Ltd., ADR 1,2 19,800 539,550
- -------------------------------------------------------------------------------
Thomas & Betts Corp. 1 3,800 159,448
- -------------------------------------------------------------------------------
Vicor Corp. 2 7,400 116,994
- -------------------------------------------------------------------------------
Woodward Governor Co. 5,600 481,656
--------------
4,574,034
- -------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--0.1%
Raven Industries, Inc. 2 300 8,655
- -------------------------------------------------------------------------------
Teleflex, Inc. 6,600 428,868
--------------
437,523
- -------------------------------------------------------------------------------
MACHINERY--3.1%
Accuride Corp. 1 2,800 36,120
- -------------------------------------------------------------------------------
AGCO Corp. 1 34,500 571,665
- -------------------------------------------------------------------------------
Albany International Corp., Cl. A 25,800 932,928
- -------------------------------------------------------------------------------
Ampco-Pittsburgh Corp. 900 13,059
- -------------------------------------------------------------------------------
Astec Industries, Inc. 1 15,400 502,964
- -------------------------------------------------------------------------------
Barnes Group, Inc. 2 10,600 349,800
- -------------------------------------------------------------------------------
Briggs & Stratton Corp. 3,800 147,402
- -------------------------------------------------------------------------------
Bucyrus International, Inc., Cl. A 2 1,700 89,590
- -------------------------------------------------------------------------------
Cascade Corp. 2 3,400 159,494
- -------------------------------------------------------------------------------
CIRCOR International, Inc. 3,500 89,810
- -------------------------------------------------------------------------------
Columbus McKinnon Corp. 1 11,600 254,968
- -------------------------------------------------------------------------------
Commercial Vehicle Group, Inc. 1,2 3,700 69,486
- -------------------------------------------------------------------------------
Cummins, Inc. 3,800 340,974
- -------------------------------------------------------------------------------
Encore Wire Corp. 1 7,100 161,596
- -------------------------------------------------------------------------------
Esterline Technologies Corp. 1 13,100 487,189
- -------------------------------------------------------------------------------
Flowserve Corp. 1 28,000 1,107,680
17 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
MACHINERY Continued
Freightcar America, Inc. 4,700 $ 225,976
- -------------------------------------------------------------------------------
Idex Corp. 4,600 189,106
- -------------------------------------------------------------------------------
JLG Industries, Inc. 2 25,200 1,150,632
- -------------------------------------------------------------------------------
Kaydon Corp. 2 5,200 167,128
- -------------------------------------------------------------------------------
Lincoln Electric Holdings, Inc. 2,300 91,218
- -------------------------------------------------------------------------------
Manitowoc Co., Inc. (The) 6,500 326,430
- -------------------------------------------------------------------------------
Middleby Corp. (The) 1 100 8,650
- -------------------------------------------------------------------------------
Miller Industries, Inc. 1 3,300 66,957
- -------------------------------------------------------------------------------
Mueller Industries, Inc. 4,000 109,680
- -------------------------------------------------------------------------------
NACCO Industries, Inc., Cl. A 4,700 550,605
- -------------------------------------------------------------------------------
Navistar International Corp. 1 4,800 137,376
- -------------------------------------------------------------------------------
Nordson Corp. 4,200 170,142
- -------------------------------------------------------------------------------
Omega Flex, Inc. 1 300 5,217
- -------------------------------------------------------------------------------
RBC Bearings, Inc. 1,2 1,400 22,750
- -------------------------------------------------------------------------------
SPX Corp. 9,900 453,123
- -------------------------------------------------------------------------------
Stewart & Stevenson Services, Inc. 17,100 361,323
- -------------------------------------------------------------------------------
Sun Hydraulics Corp. 2 7,300 141,109
- -------------------------------------------------------------------------------
Tennant Co. 2,700 140,400
- -------------------------------------------------------------------------------
Terex Corp. 1 9,500 564,300
- -------------------------------------------------------------------------------
Titan International, Inc. 2 8,700 150,075
- -------------------------------------------------------------------------------
Toro Co. (The) 8,400 367,668
- -------------------------------------------------------------------------------
Valmont Industries, Inc. 1,200 40,152
- -------------------------------------------------------------------------------
Wabtec Corp. 18,100 486,890
--------------
11,241,632
- -------------------------------------------------------------------------------
MARINE--0.2%
American Commercial Lines, Inc. 1 5,400 163,566
- -------------------------------------------------------------------------------
Horizon Lines, Inc., Cl. A 23,400 283,842
- -------------------------------------------------------------------------------
Kirby Corp. 1 2,200 114,774
--------------
562,182
- -------------------------------------------------------------------------------
ROAD & RAIL--1.1%
Amerco, Inc. 6,200 446,710
- -------------------------------------------------------------------------------
Arkansas Best Corp. 2 22,000 960,960
- -------------------------------------------------------------------------------
Celadon Group, Inc. 1 8,300 239,040
- -------------------------------------------------------------------------------
Genesee & Wyoming, Inc., Cl. A 1,2 750 28,163
- -------------------------------------------------------------------------------
Laidlaw International, Inc. 13,200 306,636
- -------------------------------------------------------------------------------
Landstar System, Inc. 8,100 338,094
- -------------------------------------------------------------------------------
Mullen Group Income Fund 3,000 84,365
- -------------------------------------------------------------------------------
Pacer International, Inc. 33,300 867,798
- -------------------------------------------------------------------------------
RailAmerica, Inc. 1 7,900 86,821
- -------------------------------------------------------------------------------
SCS Transportation, Inc. 1 3,700 78,625
- -------------------------------------------------------------------------------
Swift Transportation Co., Inc. 1 19,300 391,790
- -------------------------------------------------------------------------------
Universal Truckload Services, Inc. 1 4,100 94,300
- -------------------------------------------------------------------------------
USA Truck, Inc. 1,2 4,900 142,737
--------------
4,066,039
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS--0.9%
Applied Industrial Technologies, Inc. 23,750 $ 800,138
- -------------------------------------------------------------------------------
GATX Corp. 6,000 216,480
- -------------------------------------------------------------------------------
MSC Industrial Direct Co., Inc., Cl. A 5,100 205,122
- -------------------------------------------------------------------------------
UAP Holding Corp. 16,500 336,930
- -------------------------------------------------------------------------------
United Rentals, Inc. 1,2 41,700 975,363
- -------------------------------------------------------------------------------
WESCO International, Inc. 1 16,800 717,864
--------------
3,251,897
- -------------------------------------------------------------------------------
TRANSPORTATION INFRASTRUCTURE--0.0%
Interpool, Inc. 200 3,776
- -------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--25.2%
- -------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--3.4%
ADC Telecommunications, Inc. 1 17,600 393,184
- -------------------------------------------------------------------------------
ADTRAN, Inc. 19,400 576,956
- -------------------------------------------------------------------------------
Anaren Microwave, Inc. 1 2,700 42,201
- -------------------------------------------------------------------------------
Andrew Corp. 1 15,400 165,242
- -------------------------------------------------------------------------------
Arris Group, Inc. 1 43,900 415,733
- -------------------------------------------------------------------------------
Avaya, Inc. 1 12,000 128,040
- -------------------------------------------------------------------------------
Avocent Corp. 1 15,500 421,445
- -------------------------------------------------------------------------------
Black Box Corp. 5,400 255,852
- -------------------------------------------------------------------------------
Blue Coat Systems, Inc. 1,2 1,800 82,296
- -------------------------------------------------------------------------------
Brocade Communications Systems, Inc. 1 164,900 671,143
- -------------------------------------------------------------------------------
Ciena Corp. 1 201,900 599,643
- -------------------------------------------------------------------------------
CommScope, Inc. 1 42,700 859,551
- -------------------------------------------------------------------------------
Comtech Telecommunications Corp. 1 11,000 335,940
- -------------------------------------------------------------------------------
Digi International, Inc. 1,2 12,600 132,174
- -------------------------------------------------------------------------------
Ditech Communications Corp. 1 18,900 157,815
- -------------------------------------------------------------------------------
Echelon Corp. 1 1,300 10,179
- -------------------------------------------------------------------------------
Emulex Corp. 1 54,500 1,078,555
- -------------------------------------------------------------------------------
Extreme Networks, Inc. 1 61,700 293,075
- -------------------------------------------------------------------------------
Foundry Networks, Inc. 1 43,200 596,592
- -------------------------------------------------------------------------------
Harmonic, Inc. 1 30,000 145,500
- -------------------------------------------------------------------------------
Inter-Tel, Inc. 2,900 56,753
- -------------------------------------------------------------------------------
MasTec, Inc. 1,2 18,900 197,883
- -------------------------------------------------------------------------------
Netgear, Inc. 1,2 34,500 664,125
- -------------------------------------------------------------------------------
Packeteer, Inc. 1,2 31,700 246,309
- -------------------------------------------------------------------------------
Performance Technologies, Inc. 1 9,200 75,348
- -------------------------------------------------------------------------------
Plantronics, Inc. 1,300 36,790
- -------------------------------------------------------------------------------
Polycom, Inc. 1 69,400 1,061,820
- -------------------------------------------------------------------------------
Powerwave Technologies, Inc. 1,2 24,000 301,680
- -------------------------------------------------------------------------------
QLogic Corp. 1 8,600 279,586
- -------------------------------------------------------------------------------
Redback Networks, Inc. 1 41,300 580,678
- -------------------------------------------------------------------------------
SafeNet, Inc. 1,2 200 6,444
- -------------------------------------------------------------------------------
SpectraLink Corp. 2,500 29,675
- -------------------------------------------------------------------------------
Superior Essex, Inc. 1 700 14,112
18 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT Continued
Sycamore Networks, Inc. 1,2 17,200 $ 74,304
- -------------------------------------------------------------------------------
Symmetricom, Inc. 1,2 31,000 262,570
- -------------------------------------------------------------------------------
Tekelec, Inc. 1,2 22,400 311,360
- -------------------------------------------------------------------------------
Tellabs, Inc. 1 36,400 396,760
- -------------------------------------------------------------------------------
Terayon Communication Systems, Inc. 1 41,500 95,865
- -------------------------------------------------------------------------------
ViaSat, Inc. 1 2,400 64,152
--------------
12,117,330
- -------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--1.7%
Advanced Digital Information Corp. 1 23,800 233,002
- -------------------------------------------------------------------------------
Dot Hill Systems Corp. 1 7,300 50,589
- -------------------------------------------------------------------------------
Electronics for Imaging, Inc. 1 14,500 385,845
- -------------------------------------------------------------------------------
Imation Corp. 25,000 1,151,750
- -------------------------------------------------------------------------------
Intergraph Corp. 1,2 22,200 1,105,782
- -------------------------------------------------------------------------------
M-Systems Flash Disk Pioneers Ltd. 1 8,200 271,584
- -------------------------------------------------------------------------------
Maxtor Corp. 1 65,600 455,264
- -------------------------------------------------------------------------------
NCR Corp. 1 4,300 145,942
- -------------------------------------------------------------------------------
Palm, Inc. 1,2 34,900 1,109,820
- -------------------------------------------------------------------------------
SimpleTech, Inc. 1 2,500 9,425
- -------------------------------------------------------------------------------
Synaptics, Inc. 1 4,000 98,880
- -------------------------------------------------------------------------------
Western Digital Corp. 1 55,100 1,025,411
--------------
6,043,294
- -------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--3.4%
Aeroflex, Inc. 1 5,000 53,750
- -------------------------------------------------------------------------------
Agilysys, Inc. 20,500 373,510
- -------------------------------------------------------------------------------
Anixter International, Inc. 6,500 254,280
- -------------------------------------------------------------------------------
Arrow Electronics, Inc. 1 15,800 506,074
- -------------------------------------------------------------------------------
Avnet, Inc. 1 20,900 500,346
- -------------------------------------------------------------------------------
Belden CDT, Inc. 2 8,900 217,427
- -------------------------------------------------------------------------------
Bell Microproducts, Inc. 1,2 20,100 153,765
- -------------------------------------------------------------------------------
Brightpoint, Inc. 1,2 26,250 727,913
- -------------------------------------------------------------------------------
CalAmp Corp. 1 2,000 20,980
- -------------------------------------------------------------------------------
CDW Corp. 7,000 402,990
- -------------------------------------------------------------------------------
Checkpoint Systems, Inc. 1 9,000 221,850
- -------------------------------------------------------------------------------
Coherent, Inc. 1 26,400 783,552
- -------------------------------------------------------------------------------
CTS Corp. 2,800 30,968
- -------------------------------------------------------------------------------
Electro Scientific Industries, Inc. 1,2 18,000 434,700
- -------------------------------------------------------------------------------
Fargo Electronics, Inc. 1 9,400 180,950
- -------------------------------------------------------------------------------
Hypercom Corp. 1 14,000 89,460
- -------------------------------------------------------------------------------
Itron, Inc. 1,2 9,900 396,396
- -------------------------------------------------------------------------------
Keithley Instruments, Inc. 6,500 90,870
- -------------------------------------------------------------------------------
Komag, Inc. 1,2 27,900 967,014
- -------------------------------------------------------------------------------
Mettler-Toledo International, Inc. 1 8,500 469,200
- -------------------------------------------------------------------------------
MTS Systems Corp. 8,300 287,512
- -------------------------------------------------------------------------------
Multi-Fineline Electronix, Inc. 1,2 2,400 115,608
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS Continued
National Instruments Corp. 9,100 $ 291,655
- -------------------------------------------------------------------------------
Newport Corp. 1 4,000 54,160
- -------------------------------------------------------------------------------
Park Electrochemical Corp. 14,100 366,318
- -------------------------------------------------------------------------------
PC Connection, Inc. 1 4,000 21,520
- -------------------------------------------------------------------------------
Plexus Corp. 1 41,000 932,340
- -------------------------------------------------------------------------------
RadiSys Corp. 1,2 13,700 237,558
- -------------------------------------------------------------------------------
Rofin-Sinar Technologies, Inc. 1 3,900 169,533
- -------------------------------------------------------------------------------
Sanmina-SCI Corp. 1 119,900 510,774
- -------------------------------------------------------------------------------
ScanSource, Inc. 1 300 16,404
- -------------------------------------------------------------------------------
Solectron Corp. 1 129,800 475,068
- -------------------------------------------------------------------------------
SunPower Corp., Cl. A 1,2 5,100 173,349
- -------------------------------------------------------------------------------
SYNNEX Corp. 1 1,000 15,110
- -------------------------------------------------------------------------------
Tech Data Corp. 1 13,000 515,840
- -------------------------------------------------------------------------------
Technitrol, Inc. 1,400 23,940
- -------------------------------------------------------------------------------
TTM Technologies, Inc. 1,2 500 4,700
- -------------------------------------------------------------------------------
UNOVA, Inc. 1,2 23,300 787,540
- -------------------------------------------------------------------------------
Zygo Corp. 1,2 18,400 270,296
--------------
12,145,220
- -------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--3.0%
24/7 Real Media, Inc. 1 21,000 154,140
- -------------------------------------------------------------------------------
Akamai Technologies, Inc. 1 9,300 185,349
- -------------------------------------------------------------------------------
AsiaInfo Holdings, Inc. 1,2 17,900 71,242
- -------------------------------------------------------------------------------
Bankrate, Inc. 1,2 5,800 171,216
- -------------------------------------------------------------------------------
Covansys Corp. 1 6,000 81,660
- -------------------------------------------------------------------------------
CyberSource Corp. 1 11,400 75,240
- -------------------------------------------------------------------------------
Digital Insight Corp. 1 26,500 848,530
- -------------------------------------------------------------------------------
Digital River, Inc. 1,2 21,900 651,306
- -------------------------------------------------------------------------------
EarthLink, Inc. 1 89,600 995,456
- -------------------------------------------------------------------------------
HomeStore.com, Inc. 1,2 67,700 345,270
- -------------------------------------------------------------------------------
InfoSpace, Inc. 1,2 30,700 792,674
- -------------------------------------------------------------------------------
Internet Security Systems, Inc. 1 41,700 873,615
- -------------------------------------------------------------------------------
iPass, Inc. 1,2 4,700 30,832
- -------------------------------------------------------------------------------
j2 Global Communications, Inc. 1 5,500 235,070
- -------------------------------------------------------------------------------
Keynote Systems, Inc. 1 900 11,565
- -------------------------------------------------------------------------------
MicroStrategy, Inc., Cl. A 1,2 12,700 1,050,798
- -------------------------------------------------------------------------------
Online Resources & Communications Corp. 1,2 9,000 99,450
- -------------------------------------------------------------------------------
Open Text Corp. 1,2 7,300 103,003
- -------------------------------------------------------------------------------
Openwave Systems, Inc. 1,2 16,300 284,761
- -------------------------------------------------------------------------------
RealNetworks, Inc. 1 24,900 193,224
- -------------------------------------------------------------------------------
Salesforce.com, Inc. 1,2 2,900 92,945
- -------------------------------------------------------------------------------
Selectica, Inc. 1 900 2,565
- -------------------------------------------------------------------------------
SonicWALL, Inc. 1,2 57,300 453,816
- -------------------------------------------------------------------------------
United Online, Inc. 61,900 880,218
- -------------------------------------------------------------------------------
ValueClick, Inc. 1,2 19,704 356,839
19 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES Continued
Vignette Corp. 1 20,800 $ 339,248
- -------------------------------------------------------------------------------
WebEx Communications, Inc. 1 4,700 101,661
- -------------------------------------------------------------------------------
webMethods, Inc. 1 31,000 239,010
- -------------------------------------------------------------------------------
Websense, Inc. 1,2 17,500 1,148,700
--------------
10,869,403
- -------------------------------------------------------------------------------
IT SERVICES--2.7%
Acxiom Corp. 12,900 296,700
- -------------------------------------------------------------------------------
Anteon International Corp. 1 300 16,305
- -------------------------------------------------------------------------------
Aquantive, Inc. 1,2 3,000 75,720
- -------------------------------------------------------------------------------
BearingPoint, Inc. 1 46,300 363,918
- -------------------------------------------------------------------------------
BISYS Group, Inc. (The) 1 32,300 452,523
- -------------------------------------------------------------------------------
CACI International, Inc., Cl. A 1 7,100 407,398
- -------------------------------------------------------------------------------
Ceridian Corp. 1 20,600 511,910
- -------------------------------------------------------------------------------
CheckFree Corp. 1 7,600 348,840
- -------------------------------------------------------------------------------
CIBER, Inc. 1,2 19,900 131,340
- -------------------------------------------------------------------------------
CSG Systems International, Inc. 1 48,300 1,078,056
- -------------------------------------------------------------------------------
Forrester Research, Inc. 1 9,000 168,750
- -------------------------------------------------------------------------------
Gevity HR, Inc. 2,800 72,016
- -------------------------------------------------------------------------------
Global Payments, Inc. 7,500 349,575
- -------------------------------------------------------------------------------
infoUSA, Inc. 19,900 217,507
- -------------------------------------------------------------------------------
Intrado, Inc. 1,2 16,700 384,434
- -------------------------------------------------------------------------------
Keane, Inc. 1,2 17,000 187,170
- -------------------------------------------------------------------------------
Lawson Software, Inc. 1,2 71,300 524,055
- -------------------------------------------------------------------------------
Manhattan Associates, Inc. 1 11,800 241,664
- -------------------------------------------------------------------------------
ManTech International Corp. 1 9,400 261,884
- -------------------------------------------------------------------------------
Maximus, Inc. 18,900 693,441
- -------------------------------------------------------------------------------
MoneyGram International, Inc. 4,900 127,792
- -------------------------------------------------------------------------------
MPS Group, Inc. 1 63,000 861,210
- -------------------------------------------------------------------------------
NAVTEQ Corp. 1 3,200 140,384
- -------------------------------------------------------------------------------
Perot Systems Corp., Cl. A 1,2 34,200 483,588
- -------------------------------------------------------------------------------
Sabre Holdings Corp. 21,800 525,598
- -------------------------------------------------------------------------------
SI International, Inc. 1 2,000 61,140
- -------------------------------------------------------------------------------
Startek, Inc. 2 2,400 43,200
- -------------------------------------------------------------------------------
Sykes Enterprises, Inc. 1 23,600 315,532
- -------------------------------------------------------------------------------
TNS, Inc. 1 4,000 76,720
- -------------------------------------------------------------------------------
Total System Services, Inc. 2,600 51,454
- -------------------------------------------------------------------------------
Tyler Technologies, Inc. 1 1,400 12,292
- -------------------------------------------------------------------------------
Unisys Corp. 1 18,000 104,940
- -------------------------------------------------------------------------------
VeriFone Holdings, Inc. 1 6,000 151,800
--------------
9,738,856
- -------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--5.2%
02Micro International Ltd., ADR 1 2,600 26,468
- -------------------------------------------------------------------------------
ADE Corp. 1,2 17,400 418,644
- -------------------------------------------------------------------------------
Advanced Energy Industries, Inc. 1 29,200 345,436
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT Continued
Asyst Technologies, Inc. 1 3,200 $ 18,304
- -------------------------------------------------------------------------------
ATMI, Inc. 1,2 10,600 296,482
- -------------------------------------------------------------------------------
Axcelis Technologies, Inc. 1 58,200 277,614
- -------------------------------------------------------------------------------
Brooks Automation, Inc. 1,2 23,454 293,879
- -------------------------------------------------------------------------------
Cirrus Logic, Inc. 1 44,900 299,932
- -------------------------------------------------------------------------------
Cohu, Inc. 16,500 377,355
- -------------------------------------------------------------------------------
Conexant Systems, Inc. 1 132,300 298,998
- -------------------------------------------------------------------------------
Cymer, Inc. 1,2 32,800 1,164,728
- -------------------------------------------------------------------------------
Diodes, Inc. 1,2 9,024 280,195
- -------------------------------------------------------------------------------
EMCORE Corp. 1,2 9,500 70,490
- -------------------------------------------------------------------------------
Entegris, Inc. 1 43,275 407,651
- -------------------------------------------------------------------------------
Exar Corp. 1 4,800 60,096
- -------------------------------------------------------------------------------
Fairchild Semiconductor International,
Inc., Cl. A 1 27,700 468,407
- -------------------------------------------------------------------------------
FEI Co. 1,2 6,700 128,439
- -------------------------------------------------------------------------------
Freescale Semiconductor, Inc., Cl. A 1 1,200 30,228
- -------------------------------------------------------------------------------
Genesis Microchip, Inc. 1,2 32,300 584,307
- -------------------------------------------------------------------------------
Hittite Microwave Corp. 1 5,200 120,328
- -------------------------------------------------------------------------------
Ikanos Communications, Inc. 1 12,000 176,880
- -------------------------------------------------------------------------------
Intersil Corp., Cl. A 23,100 574,728
- -------------------------------------------------------------------------------
Intevac, Inc. 1 5,000 66,000
- -------------------------------------------------------------------------------
IXYS Corp. 1 9,300 108,717
- -------------------------------------------------------------------------------
Kopin Corp. 1,2 54,100 289,435
- -------------------------------------------------------------------------------
Kulicke & Soffa Industries, Inc. 1,2 34,200 302,328
- -------------------------------------------------------------------------------
Lam Research Corp. 1 13,700 488,816
- -------------------------------------------------------------------------------
Lattice Semiconductor Corp. 1 15,000 64,800
- -------------------------------------------------------------------------------
LSI Logic Corp. 1 57,400 459,200
- -------------------------------------------------------------------------------
LTX Corp. 1 13,000 58,500
- -------------------------------------------------------------------------------
Mattson Technology, Inc. 1 9,400 94,564
- -------------------------------------------------------------------------------
Micrel, Inc. 1,2 74,400 863,040
- -------------------------------------------------------------------------------
Microsemi Corp. 1 35,400 979,164
- -------------------------------------------------------------------------------
Microtune, Inc. 1,2 6,100 25,437
- -------------------------------------------------------------------------------
MIPS Technologies, Inc., Cl. A 1,2 20,500 116,440
- -------------------------------------------------------------------------------
MKS Instruments, Inc. 1 13,800 246,882
- -------------------------------------------------------------------------------
Netlogic Microsystems, Inc. 1,2 12,000 326,880
- -------------------------------------------------------------------------------
Novellus Systems, Inc. 1 19,000 458,280
- -------------------------------------------------------------------------------
NVIDIA Corp. 1 11,500 420,440
- -------------------------------------------------------------------------------
OmniVision Technologies, Inc. 1,2 47,100 940,116
- -------------------------------------------------------------------------------
ON Semiconductor Corp. 1 109,900 607,747
- -------------------------------------------------------------------------------
PDF Solutions, Inc. 1,2 14,400 234,000
- -------------------------------------------------------------------------------
Photronics, Inc. 1,2 43,700 658,122
- -------------------------------------------------------------------------------
PortalPlayer, Inc. 1,2 9,400 266,208
- -------------------------------------------------------------------------------
Power Integrations, Inc. 1,2 3,800 90,478
- -------------------------------------------------------------------------------
Sigmatel, Inc. 1,2 18,100 237,110
- -------------------------------------------------------------------------------
Silicon Image, Inc. 1 46,400 419,920
20 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT Continued
Silicon Laboratories, Inc. 1 18,900 $ 692,874
- -------------------------------------------------------------------------------
SiRF Technology Holdings, Inc. 1,2 3,800 113,240
- -------------------------------------------------------------------------------
Skyworks Solutions, Inc. 1 59,200 301,328
- -------------------------------------------------------------------------------
Supertex, Inc. 1 7,100 314,175
- -------------------------------------------------------------------------------
Trident Microsystems, Inc. 1,2 7,400 133,200
- -------------------------------------------------------------------------------
TriQuint Semiconductor, Inc. 1 79,000 351,550
- -------------------------------------------------------------------------------
Ultra Clean Holdings, Inc. 1 1,300 9,373
- -------------------------------------------------------------------------------
Varian Semiconductor Equipment
- -------------------------------------------------------------------------------
Associates, Inc. 1 16,500 724,845
- -------------------------------------------------------------------------------
Veeco Instruments, Inc. 1,2 9,800 169,834
- -------------------------------------------------------------------------------
Zoran Corp. 1 31,600 512,236
--------------
18,864,868
- -------------------------------------------------------------------------------
SOFTWARE--5.8%
Activision, Inc. 1 15,077 207,158
- -------------------------------------------------------------------------------
Advent Software, Inc. 1 10,800 312,228
- -------------------------------------------------------------------------------
Altiris, Inc. 1,2 10,900 184,101
- -------------------------------------------------------------------------------
Ansoft Corp. 1 9,100 309,855
- -------------------------------------------------------------------------------
Ansys, Inc. 1 14,900 636,081
- -------------------------------------------------------------------------------
Aspen Technology, Inc. 1,2 27,400 215,090
- -------------------------------------------------------------------------------
BEA Systems, Inc. 1 51,100 480,340
- -------------------------------------------------------------------------------
Blackbaud, Inc. 24,089 411,440
- -------------------------------------------------------------------------------
BMC Software, Inc. 1 26,200 536,838
- -------------------------------------------------------------------------------
Borland Software Corp. 1 8,900 58,117
- -------------------------------------------------------------------------------
Bottomline Technologies, Inc. 1,2 18,000 198,360
- -------------------------------------------------------------------------------
Cadence Design Systems, Inc. 1 33,100 560,052
- -------------------------------------------------------------------------------
Captiva Software Corp. 1 4,600 102,350
- -------------------------------------------------------------------------------
Catapult Communications Corp. 1,2 9,600 141,984
- -------------------------------------------------------------------------------
CCC Information Services Group, Inc. 1 4,600 120,612
- -------------------------------------------------------------------------------
Citrix Systems, Inc. 1 16,400 471,992
- -------------------------------------------------------------------------------
Cognos, Inc. 1 1,900 65,949
- -------------------------------------------------------------------------------
Compuware Corp. 1 56,300 505,011
- -------------------------------------------------------------------------------
Concur Technologies, Inc. 1,2 4,800 61,872
- -------------------------------------------------------------------------------
Entrust Technologies, Inc. 1 36,800 178,112
- -------------------------------------------------------------------------------
Epicor Software Corp. 1 17,500 247,275
- -------------------------------------------------------------------------------
EPIQ Systems, Inc. 1,2 7,400 137,196
- -------------------------------------------------------------------------------
ePlus, inc. 1 1,100 15,215
- -------------------------------------------------------------------------------
Fair Isaac Corp. 10,500 463,785
- -------------------------------------------------------------------------------
FileNet Corp. 1 34,500 891,825
- -------------------------------------------------------------------------------
Hyperion Solutions Corp. 1 15,000 537,300
- -------------------------------------------------------------------------------
Informatica Corp. 1 57,800 693,600
- -------------------------------------------------------------------------------
InterVideo, Inc. 1 3,400 35,870
- -------------------------------------------------------------------------------
InterVoice-Brite, Inc. 1,2 18,200 144,872
- -------------------------------------------------------------------------------
JDA Software Group, Inc. 1 22,700 386,127
- -------------------------------------------------------------------------------
Macrovision Corp. 1 13,200 220,836
- -------------------------------------------------------------------------------
Magma Design Automation, Inc. 1,2 14,100 118,581
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
SOFTWARE Continued
MapInfo Corp. 1 2,400 $ 30,264
- -------------------------------------------------------------------------------
McAfee, Inc. 1 22,000 596,860
- -------------------------------------------------------------------------------
Micromuse, Inc. 1 51,400 508,346
- -------------------------------------------------------------------------------
MICROS Systems, Inc. 1 7,100 343,072
- -------------------------------------------------------------------------------
MRO Software, Inc. 1 19,400 272,376
- -------------------------------------------------------------------------------
MSC.Software Corp. 1,2 9,900 168,300
- -------------------------------------------------------------------------------
Net 1 UEPS Technologies, Inc. 1 2,100 60,585
- -------------------------------------------------------------------------------
NetIQ Corp. 1,2 7,600 93,404
- -------------------------------------------------------------------------------
Novell, Inc. 1,2 61,500 543,045
- -------------------------------------------------------------------------------
Nuance Communications, Inc. 1 5,700 43,491
- -------------------------------------------------------------------------------
Parametric Technology Corp. 1 179,500 1,094,950
- -------------------------------------------------------------------------------
Progress Software Corp. 1 18,900 536,382
- -------------------------------------------------------------------------------
Quest Software, Inc. 1 13,900 202,801
- -------------------------------------------------------------------------------
Radiant Systems, Inc. 1,2 13,700 166,592
- -------------------------------------------------------------------------------
Red Hat, Inc. 1 21,800 593,832
- -------------------------------------------------------------------------------
Reynolds & Reynolds Co., Cl. A 16,100 451,927
- -------------------------------------------------------------------------------
RSA Security, Inc. 1 45,600 512,088
- -------------------------------------------------------------------------------
SERENA Software, Inc. 1 16,300 382,072
- -------------------------------------------------------------------------------
SPSS, Inc. 1,2 5,700 176,301
- -------------------------------------------------------------------------------
Sybase, Inc. 1 23,300 509,338
- -------------------------------------------------------------------------------
Synopsys, Inc. 1 35,400 710,124
- -------------------------------------------------------------------------------
Take-Two Interactive Software, Inc. 1,2 40,600 718,620
- -------------------------------------------------------------------------------
THQ, Inc. 1 17,550 418,568
- -------------------------------------------------------------------------------
TIBCO Software, Inc. 1 22,800 170,316
- -------------------------------------------------------------------------------
Transaction Systems Architects, Inc.,
Cl. A 1 35,500 1,022,045
- -------------------------------------------------------------------------------
Ultimate Software Group, Inc. (The) 1,2 5,200 99,164
- -------------------------------------------------------------------------------
Verint Systems, Inc. 1 4,300 148,221
- -------------------------------------------------------------------------------
Wind River Systems, Inc. 1 38,600 570,122
- -------------------------------------------------------------------------------
Witness Systems, Inc. 1,2 3,500 68,845
--------------
20,862,075
- -------------------------------------------------------------------------------
MATERIALS--5.2%
- -------------------------------------------------------------------------------
CHEMICALS--1.3%
Agrium, Inc. 2 25,200 554,148
- -------------------------------------------------------------------------------
Celanese Corp., Series A 2,300 43,976
- -------------------------------------------------------------------------------
Compass Minerals International, Inc. 8,100 198,774
- -------------------------------------------------------------------------------
Engelhard Corp. 2,400 72,360
- -------------------------------------------------------------------------------
Ferro Corp. 3,800 71,288
- -------------------------------------------------------------------------------
FMC Corp. 1 11,500 611,455
- -------------------------------------------------------------------------------
Fuller (H.B.) Co. 21,100 676,677
- -------------------------------------------------------------------------------
Headwaters, Inc. 1,2 11,200 396,928
- -------------------------------------------------------------------------------
Lubrizol Corp. (The) 4,600 199,778
- -------------------------------------------------------------------------------
MacDermid, Inc. 1,000 27,900
- -------------------------------------------------------------------------------
Pioneer Cos., Inc. 1,2 8,700 260,739
- -------------------------------------------------------------------------------
PolyOne Corp. 1 24,900 160,107
21 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
CHEMICALS Continued
Rockwood Holdings, Inc. 1 1,500 $ 29,595
- -------------------------------------------------------------------------------
Schulman (A.), Inc. 800 17,216
- -------------------------------------------------------------------------------
Scotts Miracle-Gro Co. (The), Cl. A 8,700 393,588
- -------------------------------------------------------------------------------
Stepan Co. 1,700 45,713
- -------------------------------------------------------------------------------
Tronox, Inc., Cl. A 1,2 29,500 385,565
- -------------------------------------------------------------------------------
Valhi, Inc. 500 9,250
- -------------------------------------------------------------------------------
W.R. Grace & Co. 1,2 14,600 137,240
- -------------------------------------------------------------------------------
Wellman, Inc. 500 3,390
- -------------------------------------------------------------------------------
Westlake Chemical Corp. 2 9,600 276,576
--------------
4,572,263
- -------------------------------------------------------------------------------
CONSTRUCTION MATERIALS--0.2%
Eagle Materials, Inc. 2 600 73,416
- -------------------------------------------------------------------------------
Eagle Materials, Inc., Cl. B 2 100 11,777
- -------------------------------------------------------------------------------
Texas Industries, Inc. 2 14,000 697,760
- -------------------------------------------------------------------------------
U.S. Concrete, Inc. 1,600 15,168
--------------
798,121
- -------------------------------------------------------------------------------
CONTAINERS & PACKAGING--1.1%
AptarGroup, Inc. 1,300 67,860
- -------------------------------------------------------------------------------
Caraustar Industries, Inc. 2 12,500 108,625
- -------------------------------------------------------------------------------
Crown Holdings, Inc. 1 24,400 476,532
- -------------------------------------------------------------------------------
Greif, Inc., Cl. A 12,200 808,616
- -------------------------------------------------------------------------------
Longview Fibre Co. 15,200 316,312
- -------------------------------------------------------------------------------
Myers Industries, Inc. 1,000 14,580
- -------------------------------------------------------------------------------
Owens-Illinois, Inc. 1 17,100 359,784
- -------------------------------------------------------------------------------
Rock-Tenn Co., Cl. A 2 9,600 131,040
- -------------------------------------------------------------------------------
Sealed Air Corp. 1 8,900 499,913
- -------------------------------------------------------------------------------
Silgan Holdings, Inc. 25,200 910,224
- -------------------------------------------------------------------------------
Temple-Inland, Inc. 3,300 148,005
--------------
3,841,491
- -------------------------------------------------------------------------------
METALS & MINING--2.5%
AK Steel Holding Corp. 1,2 110,200 876,090
- -------------------------------------------------------------------------------
Aleris International, Inc. 1 12,400 399,776
- -------------------------------------------------------------------------------
Allegheny Technologies, Inc. 4,600 165,968
- -------------------------------------------------------------------------------
Amerigo Resources Ltd. 66,000 132,857
- -------------------------------------------------------------------------------
Brush Engineered Materials, Inc. 1 1,000 15,900
- -------------------------------------------------------------------------------
Carpenter Technology Corp. 2 17,100 1,205,037
- -------------------------------------------------------------------------------
Castle (A.M.) & Co. 1,2 4,900 107,016
- -------------------------------------------------------------------------------
Century Aluminum Co. 2 14,800 387,908
- -------------------------------------------------------------------------------
Commercial Metals Co. 9,900 371,646
- -------------------------------------------------------------------------------
Desert Sun Mining Corp. 1 15,700 38,627
- -------------------------------------------------------------------------------
Dynatec Corp. 1 73,900 76,923
- -------------------------------------------------------------------------------
FNX Mining Co., Inc. 1 3,100 36,242
- -------------------------------------------------------------------------------
Goldcorp, Inc. 2,425 54,030
- -------------------------------------------------------------------------------
HudBay Minerals, Inc. 1 26,100 132,246
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
METALS & MINING Continued
Inmet Mining Corp. 8,800 $ 223,321
- -------------------------------------------------------------------------------
LionOre Mining International Ltd. 1 24,300 103,475
- -------------------------------------------------------------------------------
Meridian Gold, Inc. 1 900 19,727
- -------------------------------------------------------------------------------
Metal Management, Inc. 14,300 332,618
- -------------------------------------------------------------------------------
Olympic Steel, Inc. 1 1,200 29,820
- -------------------------------------------------------------------------------
Quanex Corp. 2 18,750 936,938
- -------------------------------------------------------------------------------
Reliance Steel & Aluminum Co. 2 19,200 1,173,504
- -------------------------------------------------------------------------------
Ryerson Tull, Inc. 2 17,100 415,872
- -------------------------------------------------------------------------------
Steel Dynamics, Inc. 2 24,100 855,791
- -------------------------------------------------------------------------------
Steel Technologies, Inc. 2 2,700 75,573
- -------------------------------------------------------------------------------
Stillwater Mining Co. 1,2 20,900 241,813
- -------------------------------------------------------------------------------
United States Steel Corp. 3,900 187,473
- -------------------------------------------------------------------------------
Worthington Industries, Inc. 2 14,700 282,387
--------------
8,878,578
- -------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS--0.1%
Bowater, Inc. 6,900 211,968
- -------------------------------------------------------------------------------
Buckeye Technologies, Inc. 1 11,100 89,355
- -------------------------------------------------------------------------------
Louisiana-Pacific Corp. 10,500 288,435
--------------
589,758
- -------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--1.2%
- -------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--0.5%
Alaska Communications Systems
Group, Inc. 2 24,700 250,952
- -------------------------------------------------------------------------------
Broadwing Corp. 1,2 22,500 136,125
- -------------------------------------------------------------------------------
CenturyTel, Inc. 7,700 255,332
- -------------------------------------------------------------------------------
Citizens Communications Co. 10,700 130,861
- -------------------------------------------------------------------------------
Commonwealth Telephone Enterprises,
Inc. 4,800 162,096
- -------------------------------------------------------------------------------
CT Communications, Inc. 2,900 35,206
- -------------------------------------------------------------------------------
FairPoint Communications, Inc. 13,000 134,680
- -------------------------------------------------------------------------------
Golden Telecom, Inc. 2,900 75,284
- -------------------------------------------------------------------------------
Iowa Telecommunications Services, Inc. 4,900 75,901
- -------------------------------------------------------------------------------
North Pittsburgh Systems, Inc. 2 4,900 92,463
- -------------------------------------------------------------------------------
Shenandoah Telecommunications Co. 2 100 3,984
- -------------------------------------------------------------------------------
Talk America Holdings, Inc. 1 19,200 165,696
- -------------------------------------------------------------------------------
Time Warner Telecom, Inc., Cl. A 1,2 17,000 167,450
- -------------------------------------------------------------------------------
Valor Communications Group, Inc. 2 100 1,140
--------------
1,687,170
- -------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--0.7%
Centennial Communications Corp. 2 17,800 276,256
- -------------------------------------------------------------------------------
Cincinnati Bell, Inc. 1 74,800 262,548
- -------------------------------------------------------------------------------
Dobson Communications Corp., Cl. A 1,2 94,300 707,250
- -------------------------------------------------------------------------------
Linktone Ltd., ADR 1 3,400 35,360
- -------------------------------------------------------------------------------
SBA Communications Corp. 1,2 33,600 601,440
22 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES Continued
Syniverse Holdings, Inc. 1 2,800 $ 58,520
- -------------------------------------------------------------------------------
UbiquiTel, Inc. 2 62,900 622,081
- -------------------------------------------------------------------------------
Wireless Facilities, Inc. 1,2 3,000 15,300
--------------
2,578,755
- -------------------------------------------------------------------------------
UTILITIES--1.1%
- -------------------------------------------------------------------------------
ELECTRIC UTILITIES--0.5%
ALLETE, Inc. 2 2,300 101,200
- -------------------------------------------------------------------------------
Aquila, Inc. 1 21,200 76,320
- -------------------------------------------------------------------------------
Black Hills Corp. 1,800 62,298
- -------------------------------------------------------------------------------
Canadian Hydro Developers, Inc. 1 14,000 70,214
- -------------------------------------------------------------------------------
CenterPoint Energy, Inc. 2 8,400 107,940
- -------------------------------------------------------------------------------
CH Energy Group, Inc. 6,100 279,990
- -------------------------------------------------------------------------------
CMS Energy Corp. 1 12,200 177,022
- -------------------------------------------------------------------------------
DPL, Inc. 7,900 205,479
- -------------------------------------------------------------------------------
Green Mountain Power Corp. 900 25,893
- -------------------------------------------------------------------------------
Ormat Technologies, Inc. 2 17,800 465,292
- -------------------------------------------------------------------------------
Pinnacle West Capital Corp. 3,800 157,130
- -------------------------------------------------------------------------------
Reliant Energy, Inc. 1 9,000 92,880
--------------
1,821,658
- -------------------------------------------------------------------------------
GAS UTILITIES--0.2%
Chesapeake Utilities Corp. 2 100 3,080
- -------------------------------------------------------------------------------
ONEOK, Inc. 4,900 130,487
- -------------------------------------------------------------------------------
Peoples Energy Corp. 2 2,400 84,168
- -------------------------------------------------------------------------------
Southwest Gas Corp. 4,900 129,360
- -------------------------------------------------------------------------------
UGI Corp. 5,300 109,180
- -------------------------------------------------------------------------------
WGL Holdings, Inc. 6,100 183,366
--------------
639,641
- -------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER--0.4%
Avista Corp. 2 16,000 283,360
- -------------------------------------------------------------------------------
Dynegy, Inc. 1,2 35,800 173,272
- -------------------------------------------------------------------------------
Energy East Corp. 11,400 259,913
- -------------------------------------------------------------------------------
Sierra Pacific Resources 1 61,000 795,440
--------------
1,511,985
--------------
Total Common Stocks (Cost $307,256,727) 356,543,437
- -------------------------------------------------------------------------------
PREFERRED STOCKS--0.0%
- -------------------------------------------------------------------------------
Simon Property Group, Inc., 6% Cv.,
Non-Vtg. (Cost $3,213) 60 3,858
VALUE
UNITS SEE NOTE 1
- -------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.1%
- -------------------------------------------------------------------------------
Chamaelo Exploration Ltd. Rts., Exp.
1/16/06 1,3 55,500 $ 352,199
- -------------------------------------------------------------------------------
Redstar Oil & Gas, Inc. Wts., Exp.
3/15/05 1,4 35,955 84,949
--------------
Total Rights, Warrants and Certificates
(Cost $405,085) 437,148
PRINCIPAL
AMOUNT
- -------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES--0.0%
- -------------------------------------------------------------------------------
Mueller Industries, Inc., 6% Sub. Nts.,
11/1/14 2,4 (Cost $51,000) $ 51,000 49,215
- -------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--2.6%
- -------------------------------------------------------------------------------
Undivided interest of 0.65% in joint
repurchase agreement (Principal Amount/Value
$1,414,200,000, with a maturity value of
$1,414,844,247) with UBS Warburg LLC, 4.10%,
dated 12/30/05, to be repurchased at
$9,266,219 on 1/3/06, collateralized by
Federal Home Loan Mortgage Corp., 5%,
1/1/35, with a value of $157,513,104 and
Federal National Mortgage Assn., 5%--5.50%,
3/1/34--10/1/35, with a value of
$1,301,420,187 (Cost $9,262,000) 9,262,000 9,262,000
- -------------------------------------------------------------------------------
Total Investments, at Value (excluding
Investments Purchased with Cash Collateral
from Securities Loaned) (Cost $316,978,025) 366,295,658
- -------------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED--22.3%
- -------------------------------------------------------------------------------
ASSET BACKED FLOATING NOTE--2.3%
Countrywide Asset-Backed Certificates,
Series 2005-17, Cl. 4AV1, 4.49%, 1/25/06 5 2,000,000 2,000,000
- -------------------------------------------------------------------------------
GSAA Home Equity Trust, Series
2005-15, Cl. 2A1, 4.47%, 1/25/06 5 2,000,000 2,000,000
- -------------------------------------------------------------------------------
Structured Asset Investment Loan Trust,
Series 2005-11, Cl. A4, 4.47%, 1/25/06 5 2,000,745 2,000,745
- -------------------------------------------------------------------------------
Whitehawk CDO Funding Corp., 4.56%,
3/15/06 5 2,250,000 2,250,000
--------------
8,250,745
- -------------------------------------------------------------------------------
DOMESTIC FLOATING CERTIFICATE OF DEPOSIT--0.3%
Washington Mutual Bank, 4.36%,
1/20/06 5 999,974 999,974
- -------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--17.1%
Undivided interest of 1.95% in joint
repurchase agreement (Principal Amount/Value
$3,150,000,000, with a maturity value of
$3,151,501,500) with Nomura Securities,
4.29%, dated 12/30/05, to be repurchased at
$61,596,901 on 1/3/06, collateralized by
U.S. Agency Mortgages, 3.34%--9.50%,
6/1/08--5/1/38, with a value of
$3,213,000,000 5,6 61,567,554 61,567,554
23 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINICIPAL VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------
MASTER FLOATING NOTE--0.9%
Bear Stearns, 4.37%, 1/3/06 5 $ 250,000 $ 250,000
- -------------------------------------------------------------------------------
CDC Financial Products, Inc., 4.35%,
1/3/06 5 3,000,000 3,000,000
--------------
3,250,000
- -------------------------------------------------------------------------------
MEDIUM-TERM FLOATING NOTE--1.7%
Countrywide Financial Corp., 4.59%,
3/21/06 5 2,999,825 2,999,825
- -------------------------------------------------------------------------------
Goldman Sachs Group, Inc., 4.41%,
1/3/06 5 3,000,000 3,000,000
--------------
5,999,825
--------------
Total Investments Purchased with
Cash Collateral from Securities
Loaned (Cost $80,068,098) 80,068,098
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $397,046,123) 124.1% 446,363,756
- -------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (24.1) (86,675,844)
-------------------------------
NET ASSETS 100.0% $ 359,687,912
===============================
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
2. Partial or fully-loaned security. See Note 6 of Notes to Financial
Statements.
3. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $493,882 or 0.14% of the Fund's net assets
as of December 31, 2005.
4. Illiquid or restricted security. The aggregate value of illiquid or
restricted securities as of December 31, 2005 was $267,677, which represents
0.07% of the Fund's net assets, of which $133,513 is considered restricted. See
Note 5 of Notes to Financial Statements.
5. The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned. See Note 6 of Notes to Financial
Statements.
6. The Fund may have elements of risk due to concentrated investments. Such
concentrations may subject the Fund to additional risks.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 31, 2005
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
ASSETS
- ----------------------------------------------------------------------------------------------------------------------------------
Investments, at value (including cost and market value of $61,567,554 in
repurchase agreements) (including securities loaned of $77,660,389) (cost
$397,046,123)--see accompanying
statement of investments $ 446,363,756
- ----------------------------------------------------------------------------------------------------------------------------------
Cash 334,683
- ----------------------------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Shares of beneficial interest sold 1,836,407
Investments sold 939,183
Interest and dividends 217,557
Other 5,353
----------------
Total assets 449,696,939
- ----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
- ----------------------------------------------------------------------------------------------------------------------------------
Return of collateral for securities loaned 80,068,098
- ----------------------------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 9,584,302
Distribution and service plan fees 178,081
Shares of beneficial interest redeemed 118,186
Shareholder communications 16,006
Trustees' compensation 7,066
Transfer and shareholder servicing agent fees 1,809
Other 35,479
----------------
Total liabilities 90,009,027
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 359,687,912
================
- ----------------------------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 21,066
- ----------------------------------------------------------------------------------------------------------------------------------
Additional paid-in capital 297,586,172
- ----------------------------------------------------------------------------------------------------------------------------------
Accumulated net investment income 126,247
- ----------------------------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 12,636,776
- ----------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets and
liabilities denominated in foreign currencies 49,317,651
----------------
NET ASSETS $ 359,687,912
================
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- ----------------------------------------------------------------------------------------------------------------------------------
Non-Service Shares:
Net asset value, redemption price per share and offering price per share (based
on net assets of $44,819,794 and 2,608,321 shares of beneficial interest outstanding) $ 17.18
- ----------------------------------------------------------------------------------------------------------------------------------
Service Shares:
Net asset value, redemption price per share and offering price per share (based
on net assets of $314,868,118 and 18,458,009 shares of beneficial interest outstanding) $ 17.06
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 31, 2005
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $17,332) $ 2,344,581
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio lending fees 219,065
- ----------------------------------------------------------------------------------------------------------------------------------
Interest 177,279
----------------
Total investment income 2,740,925
- ----------------------------------------------------------------------------------------------------------------------------------
EXPENSES
- ----------------------------------------------------------------------------------------------------------------------------------
Management fees 1,936,534
- ----------------------------------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Service shares 550,413
- ----------------------------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service shares 10,153
Service shares 10,742
- ----------------------------------------------------------------------------------------------------------------------------------
Shareholder communications:
Non-Service shares 4,799
Service shares 28,803
- ----------------------------------------------------------------------------------------------------------------------------------
Trustees' compensation 7,761
- ----------------------------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 4,233
- ----------------------------------------------------------------------------------------------------------------------------------
Administration service fees 1,500
- ----------------------------------------------------------------------------------------------------------------------------------
Other 58,911
----------------
Total expenses 2,613,849
Less reduction to custodian expenses (986)
----------------
Net expenses 2,612,863
- ----------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 128,062
- ----------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized gain on:
Investments 13,508,109
Foreign currency transactions 84,502
----------------
Net realized gain 13,592,611
- ----------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation on:
Investments 14,085,958
Translation of assets and liabilities denominated in foreign currencies 39,133
----------------
Net change in unrealized appreciation 14,125,091
- ----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 27,845,764
================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2005 2004
- ----------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) $ 128,062 $ (134,635)
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized gain 13,592,611 9,579,604
- ----------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation 14,125,091 20,104,091
------------------------------------
Net increase in net assets resulting from operations 27,845,764 29,549,060
- ----------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Non-Service shares (1,015,976) --
Service shares (4,826,305) --
- ----------------------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from beneficial interest transactions:
Non-Service shares 3,420,313 5,097,638
Service shares 122,016,957 87,389,394
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------------------
Total increase 147,440,753 122,036,092
- ----------------------------------------------------------------------------------------------------------------------------------
Beginning of period 212,247,159 90,211,067
------------------------------------
End of period (including accumulated net investment income
(loss) of $126,247 and $(52,556), respectively) $ 359,687,912 $ 212,247,159
====================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 16.05 $ 13.44 $ 9.31 $ 11.05 $ 11.09
- ---------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .04 1 .01 1 (.03) (.01) -- 2
Net realized and unrealized gain (loss) 1.51 2.60 4.16 (1.73) (.04)
-------------------------------------------------------------------------
Total from investment operations 1.55 2.61 4.13 (1.74) (.04)
- ---------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Distributions from net realized gain (.42) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 17.18 $ 16.05 $ 13.44 $ 9.31 $ 11.05
=========================================================================
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 9.92% 19.42% 44.36% (15.75)% (0.36)%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 44,820 $ 38,636 $ 27,551 $ 19,577 $ 18,514
- ---------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 39,708 $ 30,871 $ 20,271 $ 20,505 $ 15,307
- ---------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income (loss) 0.23% 0.06% (0.30)% (0.09)% (0.01)%
Total expenses 0.81% 5 0.83% 5 1.01% 5 1.00% 5 1.05% 5
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 110% 147% 130% 121% 213%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Less than $0.005 per share.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Total returns are not annualized for
periods less than one full year. Total return information does not reflect
expenses that apply at the separate account level or to related insurance
products. Inclusion of these charges would reduce the total return figures for
all periods shown. Returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
4. Annualized for periods of less than one full year.
5. Reduction to custodian expenses less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
SERVICE SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 2001 1
- --------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.97 $ 13.40 $ 9.29 $ 11.05 $ 10.61
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) -- 2,3 (.02) 2 (.02) (.01) -- 3
Net realized and unrealized gain (loss) 1.51 2.59 4.13 (1.75) .44
------------------------------------------------------------------------
Total from investment operations 1.51 2.57 4.11 (1.76) .44
- --------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Distributions from net realized gain (.42) -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 17.06 $ 15.97 $ 13.40 $ 9.29 $ 11.05
========================================================================
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 4 9.71% 19.18% 44.24% (15.93)% 4.15%
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 314,868 $ 173,612 $ 62,660 $ 6,111 $ 108
- --------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 221,324 $ 112,279 $ 25,018 $ 2,228 $ 26
- --------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 5
Net investment income (loss) 0.02% (0.14)% (0.43)% (0.26)% (0.34)%
Total expenses 1.04% 1.06% 1.23% 1.21% 1.19%
Expenses after payments and waivers and
reduction to custodian expenses 1.04% 1.06% 1.23% 1.19% 1.19%
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 110% 147% 130% 121% 213%
1. For the period from July 16, 2001 (inception of offering) to December 31,
2001.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Less than $0.005 per share.
4. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Total returns are not annualized for
periods less than one full year. Total return information does not reflect
expenses that apply at the separate account level or to related insurance
products. Inclusion of these charges would reduce the total return figures for
all periods shown. Returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
5. Annualized for periods of less than one full year.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
29 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Main Street Small Cap Fund/VA (the Fund) is a separate series of
Oppenheimer Variable Account Funds, an open-end management investment company
registered under the Investment Company Act of 1940, as amended. The Fund's
investment objective is to seek capital appreciation. The Fund's investment
advisor is OppenheimerFunds, Inc. (the Manager).
The Fund offers two classes of shares. Both classes are sold at their
offering price, which is the net asset value per share, to separate investment
accounts of participating insurance companies as an underlying investment for
variable life insurance policies, variable annuity contracts or other investment
products. The class of shares designated as Service shares is subject to a
distribution and service plan. Both classes of shares have identical rights and
voting privileges with respect to the Fund in general and exclusive voting
rights on matters that affect that class alone. Earnings, net assets and net
asset value per share may differ due to each class having its own expenses, such
as transfer and shareholder servicing agent fees and shareholder communications,
directly attributable to that class.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for business. Securities may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. Securities listed or traded on National
Stock Exchanges or other domestic exchanges are valued based on the last sale
price of the security traded on that exchange prior to the time when the Fund's
assets are valued. Securities traded on NASDAQ are valued based on the closing
price provided by NASDAQ prior to the time when the Fund's assets are valued. In
the absence of a sale, the security is valued at the last sale price on the
prior trading day, if it is within the spread of the closing "bid" and "asked"
prices, and if not, at the closing bid price. Securities traded on foreign
exchanges are valued based on the last sale price on the principal exchange on
which the security is traded, in the country that is identified by the portfolio
pricing service, prior to the time when the Fund's assets are valued. In the
absence of a sale, the security is valued at the official closing price on the
principal exchange. Corporate, government and municipal debt instruments having
a remaining maturity in excess of sixty days and all mortgage-backed securities
will be valued at the mean between the "bid" and "asked" prices. Futures
contracts traded on a commodities or futures exchange will be valued at the
final settlement price or official closing price on the principal exchange as
reported by such principal exchange at its trading session ending at, or most
recently prior to, the time when the Fund's assets are valued. Securities
(including restricted securities) for which market quotations are not readily
available are valued at their fair value. Foreign and domestic securities whose
values have been materially affected by what the Manager identifies as a
significant event occurring before the Fund's assets are valued but after the
close of their respective exchanges will be fair valued. Fair value is
determined in good faith using consistently applied procedures under the
supervision of the Board of Trustees. Short-term "money market type" debt
securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in
U.S. dollars. The values of securities denominated in foreign currencies and
amounts related to the purchase and sale of foreign securities and foreign
investment income are translated into U.S. dollars as of the close of The New
York Stock Exchange (the Exchange), normally 4:00 P.M. Eastern time, on each day
the Exchange is open for business. Foreign exchange rates may be valued
primarily using dealer supplied valuations or a portfolio pricing service
authorized by the Board of Trustees.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
values of assets and liabilities, including investments in securities at fiscal
period end, resulting from changes in exchange rates.
30 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated funds
advised by the Manager, may transfer uninvested cash balances into joint trading
accounts on a daily basis. These balances are invested in one or more repurchase
agreements. Securities pledged as collateral for repurchase agreements are held
by a custodian bank until the agreements mature. Each agreement requires that
the market value of the collateral be sufficient to cover payments of interest
and principal. In the event of default by the other party to the agreement,
retention of the collateral may be subject to legal proceedings.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders.
The tax components of capital shown in the table below represent distribution
requirements the Fund must satisfy under the income tax regulations, losses the
Fund may be able to offset against income and gains realized in future years and
unrealized appreciation or depreciation of securities and other investments for
federal income tax purposes.
NET UNREALIZED
APPRECIATION
BASED ON COST OF
SECURITIES AND
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED OTHER INVESTMENTS
NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME
INCOME GAIN CARRYFORWARD 1,2,3 TAX PURPOSES
---------------------------------------------------------------------------
$ 845,412 $ 12,270,904 $2,735 $ 48,972,067
1. The Fund had $2,735 of post-October passive foreign investment company losses
which were deferred.
2. During the fiscal year ended December 31, 2005, the Fund did not utilize any
capital loss carryforward.
3. During the fiscal year ended December 31, 2004, the Fund utilized $3,233,886
of capital loss carryforward to offset capital gains realized in that fiscal
year.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Fund. Accordingly, the
following amounts have been reclassified for December 31, 2005. Net assets of
the Fund were unaffected by the reclassifications.
REDUCTION
INCREASE TO ACCUMULATED NET
INCREASE TO ACCUMULATED NET REALIZED GAIN
TO PAID-IN CAPITAL INVESTMENT INCOME ON INVESTMENTS 4
----------------------------------------------------------------
$ 802,069 $ 50,741 $ 852,810
4. $802,069, including $760,121 of long-term capital gain, was distributed in
connection with Fund share redemptions.
31 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
The tax character of distributions paid during the years ended December 31, 2005
and December 31, 2004 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2005 DECEMBER 31, 2004
--------------------------------------------------------------------
Distributions paid from:
Long-term capital gain $ 5,842,281 $ --
The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for
federal income tax purposes as of December 31, 2005 are noted below. The primary
difference between book and tax appreciation or depreciation of securities and
other investments, if applicable, is attributable to the tax deferral of losses
or tax realization of financial statement unrealized gain or loss.
Federal tax cost of securities $ 397,391,707
==============
Gross unrealized appreciation $ 54,693,243
Gross unrealized depreciation (5,721,176)
--------------
Net unrealized appreciation $ 48,972,067
==============
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred
compensation plan for independent trustees that enables trustees to elect to
defer receipt of all or a portion of the annual compensation they are entitled
to receive from the Fund. For purposes of determining the amount owed to the
Trustee under the plan, deferred amounts are treated as though equal dollar
amounts had been invested in shares of the Fund or in other Oppenheimer funds
selected by the Trustee. The Fund purchases shares of the funds selected for
deferral by the Trustee in amounts equal to his or her deemed investment,
resulting in a Fund asset equal to the deferred compensation liability. Such
assets are included as a component of "Other" within the asset section of the
Statement of Assets and Liabilities. Deferral of trustees' fees under the plan
will not affect the net assets of the Fund, and will not materially affect the
Fund's assets, liabilities or net investment income per share. Amounts will be
deferred until distributed in accordance to the Plan.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date. Income and capital gain distributions, if
any, are declared and paid annually.
- --------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and amortization
of premium, is accrued as earned.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. Custodian Fees and Expenses in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts to the extent they are not
offset by positive cash balances maintained by the Fund. The Reduction to
Custodian Expenses line item, if applicable, represents earnings on cash
balances maintained by the Fund during the period. Such interest expense and
other custodian fees may be paid with these earnings. At December 31, 2005, the
Fund had $109 of such earnings on cash balances available to offset future
custodian fees or interest expenses incurred during the next fiscal year.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
32 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
YEAR ENDED DECEMBER 31, 2005 YEAR ENDED DECEMBER 31, 2004
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------
NON-SERVICE SHARES
Sold 951,013 $ 15,158,198 989,664 $ 13,869,116
Dividends and/or distributions reinvested 65,759 1,015,976 -- --
Redeemed (815,388) (12,753,861) (632,898) (8,771,478)
--------------------------------------------------------------
Net increase 201,384 $ 3,420,313 356,766 $ 5,097,638
==============================================================
- -------------------------------------------------------------------------------------------------------------
SERVICE SHARES
Sold 9,011,249 $ 144,257,571 7,817,367 $ 110,026,860
Dividends and/or distributions reinvested 313,963 4,826,305 -- --
Redeemed (1,735,515) (27,066,919) (1,624,349) (22,637,466)
--------------------------------------------------------------
Net increase 7,589,697 $ 122,016,957 6,193,018 $ 87,389,394
==============================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended December 31, 2005, were as
follows:
PURCHASES SALES
----------------------------------------------------------------------
Investment securities $405,815,181 $285,544,711
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee at an
annual rate of 0.75% of the first $200 million of average annual net assets,
0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the
next $200 million and 0.60% of average annual net assets over $800 million.
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the year ended December 31, 2005, the Fund paid
$20,809 to OFS for services to the Fund.
Additionally, funds offered in variable annuity separate accounts are
subject to minimum fees of $10,000 per class, for class level assets of $10
million or more. Each class is subject to the minimum fee in the event that the
per account fee does not equal or exceed the applicable minimum fee.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN FOR SERVICE SHARES. The Fund has adopted a
Distribution and Service Plan for Service shares to pay OppenheimerFunds
Distributor, Inc. (the Distributor), for distribution related services, personal
service
33 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
and account maintenance for the Fund's Service shares. Under the plan, payments
are made periodically at an annual rate of up to 0.25% of the average annual net
assets of Service shares of the Fund. The Distributor currently uses all of
those fees to compensate sponsor(s) of the insurance product that offers Fund
shares, for providing personal service and maintenance of accounts of their
variable contract owners that hold Service shares. The impact of the service
plan is to increase operating expenses of the Service shares, which results in
lower performance compared to the Fund's shares that are not subject to a
service fee. Fees incurred by the Fund under the plan are detailed in the
Statement of Operations.
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit
transfer and shareholder servicing agent fees for all classes to 0.35% of
average annual net assets per class. This undertaking may be amended or
withdrawn at any time.
- --------------------------------------------------------------------------------
5. ILLIQUID OR RESTRICTED SECURITIES
As of December 31, 2005, investments in securities included issues that are
illiquid or restricted. Restricted securities are purchased in private placement
transactions, are not registered under the Securities Act of 1933, may have
contractual restrictions on resale, and are valued under methods approved by the
Board of Trustees as reflecting fair value. A security may also be considered
illiquid if it lacks a readily available market or if its valuation has not
changed for a certain period of time. The Fund will not invest more than 10% of
its net assets (determined at the time of purchase and reviewed periodically) in
illiquid or restricted securities. Certain restricted securities, eligible for
resale to qualified institutional investors, are not subject to that limitation.
Securities that are illiquid or restricted are marked with the applicable
footnote on the Statement of Investments. Information concerning restricted
securities is as follows:
ACQUISITION VALUATION AS OF UNREALIZED
SECURITY DATES COST DECEMBER 31, 2005 APPRECIATION
- -------------------------------------------------------------------------------------------
Mission Oil & Gas, Inc. 1/18/05 $ 34,507 $ 40,797 $ 6,290
Tusk Energy Corp. 11/15/04 38,148 92,716 54,568
----------------------------------------------
$ 72,655 $ 133,513 $ 60,858
==============================================
- --------------------------------------------------------------------------------
6. SECURITIES LENDING
The Fund lends portfolio securities from time to time in order to earn
additional income. In return, the Fund receives collateral in the form of U.S.
Treasury obligations or cash, against the loaned securities and maintains
collateral in an amount not less than 100% of the market value of the loaned
securities during the period of the loan. The market value of the loaned
securities is determined at the close of business of the funds and any
additional required collateral is delivered to the Fund on the next business
day. If the borrower defaults on its obligation to return the securities loaned
because of insolvency or other reasons, the Fund could experience delays and
cost in recovering the securities loaned or in gaining access to the collateral.
Cash collateral is invested in cash equivalents. The Fund retains a portion of
the interest earned from the collateral. The Fund continues to receive the
economic benefit of interest or dividends paid on the securities loaned in the
form of a substitute payment received from the borrower. As of December 31,
2005, the Fund had on loan securities valued at $77,660,389. Collateral of
$80,068,098 was received for the loans, all of which was received in cash and
subsequently invested in approved instruments.
- --------------------------------------------------------------------------------
7. LITIGATION
A consolidated amended complaint has been filed as putative derivative and class
actions against the Manager, OFS and the Distributor, as well as 51 of the
Oppenheimer funds (as "Nominal Defendants") excluding the Fund, 30 pre-
34 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
sent and former Directors or Trustees and 8 present and former officers of the
funds. This complaint, initially filed in the U.S. District Court for the
Southern District of New York on January 10, 2005 and amended on March 4, 2005,
consolidates into a single action and amends six individual previously-filed
putative derivative and class action complaints. Like those prior complaints,
the complaint alleges that the Manager charged excessive fees for distribution
and other costs, improperly used assets of the funds in the form of directed
brokerage commissions and 12b-1 fees to pay brokers to promote sales of the
funds, and failed to properly disclose the use of assets of the funds to make
those payments in violation of the Investment Company Act of 1940 and the
Investment Advisers Act of 1940. Also, like those prior complaints, the
complaint further alleges that by permitting and/or participating in those
actions, the Directors/Trustees and the Officers breached their fiduciary duties
to shareholders of the funds under the Investment Company Act of 1940 and at
common law. The complaint seeks unspecified compensatory and punitive damages,
rescission of the funds' investment advisory agreements, an accounting of all
fees paid, and an award of attorneys' fees and litigation expenses.
The defendants believe that the allegations contained in the Complaints
are without merit and that they have meritorious defenses against the claims
asserted. The defendants intend to defend these lawsuits vigorously and to
contest any claimed liability. The defendants believe that it is premature to
render any opinion as to the likelihood of an outcome unfavorable to them and
that no estimate can yet be made with any degree of certainty as to the amount
or range of any potential loss.
35 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER MAIN STREET SMALL CAP
FUND/VA:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer Main Street Small Cap Fund/VA, a series of Oppenheimer Variable
Account Funds, including the statement of investments, as of December 31, 2005,
and the related statement of operations for the year then ended, the statements
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the periods presented.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
The Fund is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audit includes consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of December 31, 2005, by correspondence with the
custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer Main Street Small Cap Fund/VA as of December 31, 2005, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the periods presented, in conformity with accounting
principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
February 13, 2006
36 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2006, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2005. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
Capital gain distributions of $0.4156 per share were paid to Non-Service
and Service shareholders, respectively, on March 14, 2005. Whether received in
stock or in cash, the capital gain distribution should be treated by
shareholders as a gain from the sale of the capital assets held for more than
one year (long-term capital gains).
Dividends, if any, paid by the Fund during the fiscal year ended December
31, 2005 which are not designated as capital gain distributions should be
multiplied by 100% to arrive at the amount eligible for the corporate
dividend-received deduction.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Fund to the Internal Revenue Service. Because of
the complexity of the federal regulations which may affect your individual tax
return and the many variations in state and local tax regulations, we recommend
that you consult your tax advisor for specific guidance.
37 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES; UPDATES TO STATEMENTS OF
INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file Form N-PX, with its complete proxy voting record for the 12 months ended
June 30th, no later than August 31st of each year. The Fund's voting record is
available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at
www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC
for the first quarter and the third quarter of each fiscal year on Form N-Q. The
Fund's Form N-Q filings are available on the SEC's website at
http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public
Reference Room in Washington D.C. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
38 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
BOARD APPROVAL OF THE FUND'S INVESTMENT ADVISORY AGREEMENT Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew the Fund's
investment advisory agreement (the "Agreement"). The Investment Company Act of
1940, as amended, requires that the Board request and evaluate, and that the
Manager provide, such information as may be reasonably necessary to evaluate the
terms of the Agreement. The Board employs an independent consultant to prepare a
report that provides information, including comparative information, that the
Board requests for that purpose. In addition, the Board receives information
throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager, including an analysis of the
cost of providing services, (v) whether economies of scale are realized as the
Fund grows and whether fee levels reflect these economies of scale for Fund
investors and (vi) other benefits to the Manager from its relationship with the
Fund. Outlined below is a summary of the principal information considered by the
Board as well as the Board's conclusions.
NATURE, QUALITY, AND EXTENT OF SERVICES. The Board considered information
on the nature and extent of the services provided to the Fund and information
regarding the Manager's key personnel that provide such services. The Manager's
duties include providing the Fund with the services of the portfolio managers
and the Manager's investment team, who provide research, analysis and other
advisory services in regard to the Fund's investments; securities trading
services; oversight of third party service providers; monitoring compliance with
applicable Fund policies and procedures and adherence to the Fund's investment
restrictions. The Manager is responsible for providing certain administrative
services to the Fund as well. Those services include providing and supervising
all administrative and clerical personnel that are necessary in order to provide
effective corporate administration for the Fund; compiling and maintaining
records with respect to the Fund's operations; preparing and filing reports
required by the Securities and Exchange Commission; preparing periodic reports
regarding the operations of the Fund for its shareholders; preparing proxy
materials for shareholder meetings; and preparing the registration statements
required by Federal and state securities laws for the sale of the Fund's shares.
The Manager also provides the Fund with office space, facilities and equipment.
The Board also considered the quality of the services provided and the
quality of the Manager's resources that are available to the Fund. The Board
took account of the fact that the Manager has had over forty years of experience
as an investment adviser and that its assets under management rank it among the
top mutual fund managers in the United States. The Board evaluated the Manager's
administrative, accounting, legal and compliance services, and information the
Board has received regarding the experience and professional qualifications of
the Manager's key personnel and the size and functions of its staff providing
investment management services to the Fund. The Board also considered compliance
reports from the Fund's Chief Compliance Officer. In its evaluation of the
quality of the portfolio management services provided, the Board considered the
experience of Nikolaos D. Monoyios and Mark Zavanelli and the Manager's Equity
Growth investment team and analysts. Messrs. Monoyios and Zavanelli have had
over 28 and 14 years of experience, respectively, managing equity investments.
The Board members also considered the totality of their experiences with the
Manager, as directors or trustees of the Fund and other funds advised by the
Manager. In light of the foregoing, the Board concluded that the Fund benefits
from the services provided under the Agreement as a result of the Manager's
experience, reputation, personnel, operations, and resources.
39 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited/Continued
- --------------------------------------------------------------------------------
INVESTMENT PERFORMANCE OF THE MANAGER AND THE FUND. During the year, the
Manager provided information on the performance of the Fund and the Manager at
each Board meeting, including comparative performance information. The Board
also reviewed information, prepared by the Manager and by the independent
consultant, comparing the Fund's historical performance to relevant market
indices and to the performance of other small-cap core funds (including both
funds advised by the Manager and funds advised by other investment advisers).
The Board noted that the Fund's one-year performance was better than its peer
group median and its three-year performance was at its peer group median.
However, its five-year performance was below its peer group median.
COSTS OF SERVICES AND PROFITS REALIZED BY THE MANAGER. The Board
considered information regarding the Manager's costs in serving as the Fund's
investment adviser, including the costs associated with the personnel and
systems necessary to manage the Fund, and information regarding the Manager's
profitability from its relationship with the Fund. The Board reviewed the fees
paid to the Manager and the other expenses borne by the Fund. The Board also
evaluated the comparability of the fees charged and the services provided to the
Fund to the fees and services for other clients or accounts advised by the
Manager. The independent consultant provided comparative data in regard to the
fees and expenses of the Fund, other small-cap core funds and other funds with
comparable asset levels and distribution features. The Board noted that the
Fund's contractual and actual management fees and total expenses are all lower
than its peer group median and average. In light of this and of the Fund's
strong recent performance record, the Board concluded that the management fee
was reasonable.
ECONOMIES OF SCALE. The Board considered whether the Manager may realize
economies of scale in managing and supporting the Fund, whether those economies
of scale benefit the Fund's shareholders and the current level of Fund assets in
relation to the Fund's management fee breakpoints, which are intended to share
with shareholders economies of scale that may exist as the Fund grows.
OTHER BENEFITS TO THE MANAGER. In addition to considering the profits
realized by the Manager, the Board considered information that was provided
regarding the direct and indirect benefits the Manager receives as a result of
its relationship with the Fund, including compensation paid to the Manager's
affiliates and research provided to the Manager in connection with permissible
brokerage arrangements (soft dollar arrangements). The Board also considered the
nature and quality of services provided by affiliates of the Manager, which it
reviews at other times during the year in connection with the renewal of the
Fund's service agreements. The Board considered that the Manager must be able to
pay and retain experienced professional personnel at competitive rates to
provide services to the Fund and that maintaining the financial viability of the
Manager is important in order for the Manager to continue to provide significant
services to the Fund and its shareholders.
CONCLUSIONS. These factors were also considered by the independent
Trustees meeting separately from the full Board, assisted by experienced counsel
to the Fund and to the independent Trustees. Fund counsel and the independent
Trustees' counsel are both independent of the Manager within the meaning and
intent of the Securities and Exchange Commission Rules.
Based on its review of the information it received and its evaluations
described above, the Board, including a majority of the independent Trustees,
decided to continue the advisory agreement for another year. In arriving at this
decision, the Board did not single out any factor or factors as being more
important than others, but considered all of the factors together. The Board
judged the terms and conditions of the advisory agreement, including the
management fee, in light of all of the surrounding circumstances.
40 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS
THE FUNDS, LENGTH OF SERVICE, HELD; NUMBER OF PORTFOLIOS IN THE FUNDS COMPLEX CURRENTLY OVERSEEN
AGE
INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL,
TRUSTEES COLORADO 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER
RESIGNATION, RETIREMENT, DEATH OR REMOVAL.
WILLIAM L. ARMSTRONG, Chairman of the following private mortgage banking companies: Cherry Creek Mortgage
Chairman of the Board of Company (since 1991), Centennial State Mortgage Company (since 1994), and The El Paso
Trustees (since 2003), Mortgage Company (since 1993); Chairman of the following private companies: Ambassador
Trustee (since 1999) Media Corporation (since 1984) and Broadway Ventures (since 1984); Director of the
Age: 68 following: Helmerich & Payne, Inc. (oil and gas drilling/production company) (since
1992), Campus Crusade for Christ (since 1991) and The Lynde and Harry Bradley
Foundation, Inc. (non-profit organization) (since 2002); former Chairman of the
following: Transland Financial Services, Inc. (private mortgage banking company)
(1997-2003), Great Frontier Insurance (insurance agency) (1995-2000), Frontier Real
Estate, Inc. (residential real estate brokerage) (1994-2000) and Frontier Title (title
insurance agency) (1995-2000); former Director of the following: UNUMProvident
(insurance company) (1991-2004), Storage Technology Corporation (computer equipment
company) (1991-2003) and International Family Entertainment (television channel)
(1992-1997); U.S. Senator (January 1979-January 1991). Oversees 38 portfolios in the
OppenheimerFunds complex.
ROBERT G. AVIS, Director and President of A.G. Edwards Capital, Inc. (General Partner of private
Trustee (since 1998) equity funds) (until February 2001); Chairman, President and Chief Executive Officer
Age: 74 of A.G. Edwards Capital, Inc. (until March 2000); Director of A.G. Edwards & Sons,
Inc. (brokerage company) (until 2000) and A.G. Edwards Trust Company (investment
adviser) (until 2000); Vice Chairman and Director of A.G. Edwards, Inc. (until March
1999); Vice Chairman of A.G. Edwards & Sons, Inc. (until March 1999); Chairman of A.G.
Edwards Trust Company (until March 1999) and A.G.E. Asset Management (investment
adviser) (until March 1999). Oversees 38 portfolios in the OppenheimerFunds complex.
GEORGE C. BOWEN, Assistant Secretary and Director of Centennial Asset Management Corporation (December
Trustee (since 1999) 1991-April 1999); President, Treasurer and Director of Centennial Capital Corporation
Age: 69 (June 1989-April 1999); Chief Executive Officer and Director of MultiSource Services,
Inc. (March 1996-April 1999); Mr. Bowen held several positions with the Manager and
with subsidiary or affiliated companies of the Manager (September 1987-April 1999).
Oversees 38 portfolios in the OppenheimerFunds complex.
EDWARD L. CAMERON, Member of The Life Guard of Mount Vernon (George Washington historical site) (since
Trustee (since 1999) June 2000); Director of Genetic ID, Inc. (biotech company) (March 2001-May 2002);
Age: 67 Partner at PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999);
Chairman of Price Waterhouse LLP Global Investment Management Industry Services Group
(July 1994-June 1998). Oversees 38 portfolios in the OppenheimerFunds complex.
JON S. FOSSEL, Director of UNUMProvident (insurance company) (since June 2002); Director of
Trustee (since 1998) Northwestern Energy Corp. (public utility corporation) (since November 2004); Director
Age: 64 of P.R. Pharmaceuticals (October 1999-October 2003); Director of Rocky Mountain Elk
Foundation (non-profit organization) (February 1998-February 2003); Chairman and
Director (until October 1996) and President and Chief Executive Officer (until October
1995) of the Manager; President, Chief Executive Officer and Director of the
following: Oppenheimer Acquisition Corp. ("OAC") (parent holding company of the
Manager), Shareholders Services, Inc. and Shareholder Financial Services, Inc. (until
October 1995). Oversees 38 portfolios in the OppenheimerFunds complex.
SAM FREEDMAN, Director of Colorado Uplift (charitable organization) (since September 1984). Mr.
Trustee (since 1998) Freedman held several positions with the Manager and with subsidiary or affiliated
Age: 65 companies of the Manager (until October 1994). Oversees 38 portfolios in the
OppenheimerFunds complex.
41 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
BEVERLY L. HAMILTON, Trustee of Monterey Institute for International Studies (educational
Trustee (since 2002) organization) (since February 2000); Director of The California Endowment
Age: 59 (philanthropic organization) (since April 2002); Director of Community
Hospital of Monterey Peninsula (since February 2002); Vice Chair of American
Funds' Emerging Markets Growth Fund, Inc. (mutual fund) (since October 1991);
President of ARCO Investment Management Company (February 1991-April 2000);
Member of the investment committees of The Rockefeller Foundation and The
University of Michigan; Advisor at Credit Suisse First Boston's Sprout venture
capital unit (venture capital fund) (1994- January 2005); Trustee of MassMutual
Institutional Funds (investment company) (1996-June 2004); Trustee of MML Series
Investment Fund (investment company) (April 1989-June 2004); Member of the
investment committee of Hartford Hospital (2000-2003); and Advisor to Unilever
(Holland) pension fund (2000- 2003). Oversees 38 portfolios in the
OppenheimerFunds complex.
ROBERT J. MALONE, Director of Jones International University (educational organization) (since
Trustee (since 2002) August 2005); Chairman, Chief Executive Officer and Director of Steele Street
Age: 61 State Bank (commercial banking) (since August 2003); Director of Colorado UpLIFT
(charitable organization) (since 1986); Trustee of the Gallagher Family
Foundation (non-profit organization) (since 2000); Former Chairman of U.S. Bank-
Colorado (subsidiary of U.S. Bancorp and formerly Colorado National Bank)
(July 1996-April 1999); Director of Commercial Assets, Inc.(real estate
investment trust)(1993-2000); Director of Jones Knowledge, Inc. (2001-July 2004);
and Director of U.S. Exploration, Inc. (oil and gas exploration) (1997-February
2004). Oversees 38 portfolios in the OppenheimerFunds complex.
F. WILLIAM MARSHALL, JR., Trustee of MassMutual Select Funds (formerly MassMutual Institutional Funds)
Trustee (since 2000) (investment company) (since 1996) and MML Series Investment Fund (investment
Age: 63 company) (since 1996), Trustee and Chairman of the Investment Committee
(since 1994) of the Worcester Polytech Institute (private university);
President and Treasurer of the SIS Funds (private charitable fund) (since
January 1999); Chairman of SIS & Family Bank, F.S.B. (formerly SIS Bank)
(commercial bank) (January 1999-July 1999); Member of the Investment Committee
of the Community Foundation of Western Massachusetts (1998-2003); and Executive
Vice President of Peoples Heritage Financial Group, Inc. (commercial bank)
(January 1999-July 1999). Oversees 38 portfolios in the OppenheimerFunds complex.
- -------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET,
AND OFFICER 11TH FLOOR, NEW YORK, NY 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN
INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND
AS AN OFFICER FOR AN INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT,
DEATH OR REMOVAL. MR. MURPHY IS AN INTERESTED TRUSTEE DUE TO HIS POSITIONS
WITH OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES.
JOHN V. MURPHY, Chairman, Chief Executive Officer and Director (since June 2001) and
President and Trustee President (since September 2000) of the Manager; President and Director or
(since 2001) Trustee of other Oppenheimer funds; President and Director of OAC and of
Age: 56 Oppenheimer Partnership Holdings, Inc. (holding company subsidiary of the
Manager) (since July 2001); Director of OppenheimerFunds Distributor, Inc.
(subsidiary of the Manager) (since November 2001); Chairman and Director of
Shareholder Services, Inc. and of Shareholder Financial Services, Inc. (transfer
agent subsidiaries of the Manager) (since July 2001); President and
Director of OppenheimerFunds Legacy Program (charitable trust program
established by the Manager) (since July 2001); Director of the following
investment advisory subsidiaries of the Manager: OFI Institutional Asset
Management, Inc., Centennial Asset Management Corporation, Trinity Investment
Management Corporation and Tremont Capital Management, Inc. (since November
2001), HarbourView Asset Management Corporation and OFI Private Investments,
Inc. (since July 2001); President (since November 2001) and Director (since
July 2001) of Oppenheimer Real Asset Management, Inc.; Executive Vice President
of Massachusetts Mutual Life Insurance Company (OAC's parent company) (since
February 1997); Director of DLB Acquisition Corporation (holding company parent
of Babson Capital Management LLC) (since June 1995); Member of the Investment Company
Institute's Board of Governors (since October 3, 2003); Chief Operating
Officer of the Manager (September 2000-June 2001); President and Trustee of
MML Series Investment Fund and MassMutual Select Funds (open-end investment
companies) (November 1999-November 2001); Director of C.M. Life Insurance
Company (September 1999-August 2000); President, Chief Executive Officer and
Director of MML Bay State Life Insurance Company (September 1999-August
2000); Director of Emerald Isle Bancorp and Hibernia Savings Bank
(wholly-owned subsidiary of Emerald Isle Bancorp) (June 1989-June 1998).
Oversees 66 portfolios as a trustee or director and 20 additional portfolios
as officer in the OppenheimerFunds complex.
42 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
- ---------------------------------------------------------------------------------------------------------------
OTHER OFFICERS OF THE ADDRESS OF THE OFFICERS IN THE CHART BELOW IS AS FOLLOWS: FOR MESSRS. MONOYIOS,
THE FUND ZACK AND ZAVANELLI, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH FLOOR,
NEW YORK, NY 10281-1008, FOR MESSRS. VANDEHEY AND WIXTED, 6803 S. TUCSON WAY,
CENTENNIAL, COLORADO 80112-3924. EACH OFFICER SERVES FOR AN INDEFINITE OR UNTIL HIS
OR HER RESIGNATION, RETIREMENT DEATH OR REMOVAL.
NIKOLAOS D.MONOYIOS, Senior Vice President of the Manager since October 2003; a Certified Financial Analyst.
Vice President and Formerly Vice President of the Manager (April 1998-September 2003).
Portfolio Manager An officer of 6 portfolios in the OppenheimerFunds complex.
(since 2003) Age: 56
MARK ZAVANELLI, Vice President of the Manager since November 2000; a Chartered Financial
Vice President and Analyst; an officer of 3 portfolios in the OppenheimerFunds complex. Prior
Portfolio Manager to joining the Manager in May 1998 he was President of Waterside Capital
(since 2001) Management, a registered investment advisor (August 1995 - April 1998).
Age: 35
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since
Vice President and March 2004); Vice President of OppenheimerFunds Distributor, Inc., Centennial
Chief Compliance Officer Asset Management Corporation and Shareholder Services, Inc. (since June 1983);
(since 2004) Vice President and Director of Internal Audit of the Manager (1997-February
Age: 55 2004). An officer of 87 portfolios in the OppenheimerFunds complex.
BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer of the
Treasurer and Principal following: HarbourView Asset Management Corporation, Shareholder Financial Services, Inc.,
Financial and Accounting Shareholder Services, Inc., Oppenheimer Real Asset Management Corporation, and Oppenheimer
Officer (since 1999) Partnership Holdings, Inc. (since March 1999), OFI Private Investments, Inc. (since March
Age: 46 2000), OppenheimerFunds International Ltd. and OppenheimerFunds plc (since May 2000), OFI
Institutional Asset Management, Inc. (since November 2000), and OppenheimerFunds Legacy
Program (since June 2003); Treasurer and Chief Financial Officer of OFI Trust Company
(trust company subsidiary of the Manager) (since May 2000); Assistant Treasurer of the
following: OAC (since March 1999), Centennial Asset Management Corporation (March
1999-October 2003) and OppenheimerFunds Legacy Program (April 2000-June 2003); Principal
and Chief Operating Officer of Bankers Trust Company-Mutual Fund Services Division (March
1995-March 1999). An officer of 87 portfolios in the OppenheimerFunds complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March 2002) of the
Vice President and Manager; General Counsel and Director of the Distributor (since December 2001); General
Secretary (since 2001) Counsel of Centennial Asset Management Corporation (since December 2001); Senior Vice
Age: 57 President and General Counsel of HarbourView Asset Management Corporation (since December
2001); Secretary and General Counsel of OAC (since November 2001); Assistant Secretary
(since September 1997) and Director (since November 2001) of OppenheimerFunds International
Ltd. and OppenheimerFunds plc; Vice President and Director of Oppenheimer Partnership
Holdings, Inc. (since December 2002); Director of Oppenheimer Real Asset Management, Inc.
(since November 2001); Senior Vice President, General Counsel and Director of Shareholder
Financial Services, Inc. and Shareholder Services, Inc. (since December 2001); Senior Vice
President, General Counsel and Director of OFI Private Investments, Inc. and OFI Trust
Company (since November 2001); Vice President of OppenheimerFunds Legacy Program (since
June 2003); Senior Vice President and General Counsel of OFI Institutional Asset
Management, Inc. (since November 2001); Director of OppenheimerFunds (Asia) Limited (since
December 2003); Senior Vice President (May 1985-December 2003), Acting General Counsel
(November 2001-February 2002) and Associate General Counsel (May 1981-October 2001) of the
Manager; Assistant Secretary of the following: Shareholder Services, Inc. (May
1985-November 2001), Shareholder Financial Services, Inc. (November 1989-November 2001),
and OppenheimerFunds International Ltd. (September 1997-November 2001). An officer of 87
portfolios in the OppenheimerFunds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION
ABOUT THE FUND'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT CHARGE, UPON
REQUEST, BY CALLING 1.800.981.2871.
43 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
OPPENHEIMER MONEY FUND/VA
FUND EXPENSES
- --------------------------------------------------------------------------------
FUND EXPENSES. As a shareholder of the Fund, you incur ongoing costs, including
management fees and other Fund expenses. These examples are intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning
of the period and held for the entire 6-month period ended December 31, 2005.
ACTUAL EXPENSES. The "actual" lines of the table provide information about
actual account values and actual expenses. You may use the information on this
line, together with the amount you invested, to estimate the expense that you
paid over the period. Simply divide your account value by $1,000.00 (for
example, an $8,600.00 account value divided by $1,000.00 = 8.60), then multiply
the result by the number in the "actual" line under the heading entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the
table provide information about hypothetical account values and hypothetical
expenses based on the Fund's actual expense ratio, and an assumed rate of return
of 5% per year before expenses, which is not the Fund's actual return. The
hypothetical account values and expenses may not be used to estimate the actual
ending account balance or expenses you paid for the period. You may use this
information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
- --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
(7/1/05) (12/31/05) DECEMBER 31, 2005
- --------------------------------------------------------------------------------
Actual $1,000.00 $1,016.90 $2.47
- --------------------------------------------------------------------------------
Hypothetical 1,000.00 1,022.76 2.48
Hypothetical assumes 5% annual return before expenses.
Expenses are equal to the Fund's annualized expense ratio, multiplied by the
average account value over the period, multiplied by 184/365 (to reflect the
one-half year period). The annualized expense ratio based on the 6-month period
ended December 31, 2005 is as follows:
EXPENSE RATIO
- -------------
0.49%
- --------------------------------------------------------------------------------
5 | OPPENHEIMER MONEY FUND/VA
STATEMENT OF INVESTMENTS December 31, 2005
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT--8.8%
- --------------------------------------------------------------------------------
Barclays Bank plc, New York,
4.32%, 2/17/06 $1,800,000 $ 1,800,000
- --------------------------------------------------------------------------------
Calyon, New York, 4.26%, 2/3/06 1,500,000 1,500,000
- --------------------------------------------------------------------------------
Citibank NA, 4.29%, 2/14/06 2,000,000 2,000,000
- --------------------------------------------------------------------------------
Fortis Bank SA/NV, New York,
4.16%, 1/9/06 1,000,000 1,000,000
- --------------------------------------------------------------------------------
HBOS Treasury Services, New York,
4.02%, 1/3/06 2,000,000 2,000,000
- --------------------------------------------------------------------------------
M & I Marshall & Ilsley Bank,
4.43%, 3/17/06 1,000,000 1,000,000
- --------------------------------------------------------------------------------
Royal Bank of Canada, New York
Branch, 4.27%, 1/31/06 2,000,000 2,000,000
- --------------------------------------------------------------------------------
Skandinaviska Enskilda Banken,
New York, 4.31%, 10/3/06 1 2,000,000 1,999,700
- --------------------------------------------------------------------------------
Toronto Dominion Bank, New York,
4.45%, 3/22/06 2,000,000 2,000,000
-------------
Total Certificates of Deposit (Cost $15,299,700) 15,299,700
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DIRECT BANK OBLIGATIONS--22.3%
- --------------------------------------------------------------------------------
AB SPINTAB, 4.16%, 1/31/06 3,200,000 3,188,880
- --------------------------------------------------------------------------------
DnB NOR Bank ASA:
4.20%, 1/19/06 1,000,000 997,900
4.36%, 2/16/06 1,300,000 1,292,758
- --------------------------------------------------------------------------------
Governor & Co. of the Bank of Ireland:
4%, 1/5/06 2 2,000,000 1,999,111
4.185%, 2/3/06 2 2,000,000 1,992,328
4.22%, 2/6/06 2 1,500,000 1,493,670
- --------------------------------------------------------------------------------
HBOS Treasury Services:
4.165%, 2/2/06 2,000,000 1,992,596
4.42%, 3/9/06 1,000,000 991,774
- --------------------------------------------------------------------------------
Nationwide Building Society:
4.26%, 2/17/06 2 1,500,000 1,491,658
4.38%, 3/9/06 2 2,000,000 1,983,697
- --------------------------------------------------------------------------------
Nordea North America, Inc.:
4.09%, 1/19/06 3,700,000 3,692,434
4.35%, 2/14/06 1,500,000 1,492,025
- --------------------------------------------------------------------------------
Royal Bank of Scotland plc,
4.18%, 1/17/06 1,000,000 998,144
- --------------------------------------------------------------------------------
Skandinaviska Enskilda Banken AB,
4.35%, 2/9/06 2 3,000,000 2,985,895
- --------------------------------------------------------------------------------
Societe Generale North America,
4.29%, 2/1/06 2,000,000 1,992,612
- --------------------------------------------------------------------------------
St. George Bank Ltd.:
4.11%, 1/4/06 2 2,000,000 1,999,315
4.395%, 3/13/06 2 2,000,000 1,982,664
- --------------------------------------------------------------------------------
Stadshypotek Delaware, Inc.,
4.28%, 2/21/06 2 2,000,000 1,987,873
- --------------------------------------------------------------------------------
Westpac Trust Securities NZ Ltd.:
4.15%, 1/31/06 3,000,000 2,989,625
4.40%, 3/21/06 2 1,000,000 990,301
-------------
Total Direct Bank Obligations (Cost $38,535,260) 38,535,260
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
LETTERS OF CREDIT--2.9%
- --------------------------------------------------------------------------------
Chase Manhattan Bank, guaranteeing
commercial paper of NATC
California LLC, 4.12%, 1/13/06
(Cost $4,993,133) $5,000,000 $ 4,993,133
- --------------------------------------------------------------------------------
SHORT-TERM NOTES--65.8%
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--22.9%
Barton Capital Corp.:
4.035%, 1/9/06 2 2,000,000 1,998,207
4.07%, 1/11/06 2 1,800,000 1,797,965
- --------------------------------------------------------------------------------
Cable Beach LP, 4.12%, 1/13/06 2 3,000,000 2,995,884
- --------------------------------------------------------------------------------
Chesham Finance LLC, 4.36%, 1/23/06 2,250,000 2,244,005
- --------------------------------------------------------------------------------
Crown Point Capital Co., 4.18%,
1/12/06 2 2,000,000 1,997,446
- --------------------------------------------------------------------------------
Eiffel Funding LLC, 4.23%, 1/24/06 2 1,500,000 1,495,946
- --------------------------------------------------------------------------------
FCAR Owner Trust I, 4.22%, 1/20/06 1,500,000 1,496,659
- --------------------------------------------------------------------------------
Gemini Securitization Corp.,
4.28%, 2/17/06 2 1,500,000 1,491,618
- --------------------------------------------------------------------------------
Gotham Funding Corp., 4.44%,
3/27/06 2 1,065,000 1,053,835
- --------------------------------------------------------------------------------
GOVCO, Inc., 4.09%, 1/18/06 2 3,250,000 3,243,735
- --------------------------------------------------------------------------------
Grampian Funding LLC, 4.39%,
3/28/06 2 1,000,000 989,608
- --------------------------------------------------------------------------------
Legacy Capital Co. LLC:
4.16%, 1/9/06 2,000,000 1,998,151
4.44%, 3/23/06 2,000,000 1,980,020
- --------------------------------------------------------------------------------
Lexington Parker Capital Co. LLC,
4.03%, 1/6/06 2 2,000,000 1,998,881
- --------------------------------------------------------------------------------
Neptune Funding Corp., 4.09%,
1/12/06 2 1,500,000 1,498,125
- --------------------------------------------------------------------------------
Old Line Funding Corp., 4.18%,
1/10/06 2 1,500,000 1,498,433
- --------------------------------------------------------------------------------
Perry Global Funding LLC, Series A,
4.06%, 1/9/06 2 2,000,000 1,998,198
- --------------------------------------------------------------------------------
Sheffield Receivables Corp.,
4.25%, 1/4/06 2 2,000,000 1,999,292
- --------------------------------------------------------------------------------
Solitaire Funding LLC, 4.25%, 2/10/06 2 1,500,000 1,492,917
- --------------------------------------------------------------------------------
Victory Receivables Corp., 4.31%,
1/20/06 2 1,910,000 1,905,655
- --------------------------------------------------------------------------------
Windmill Funding Corp., 4.22%,
1/4/06 2 1,500,000 1,499,473
- --------------------------------------------------------------------------------
Yorktown Capital LLC, 4.25%, 1/5/06 2 1,000,000 999,528
-------------
39,673,581
- --------------------------------------------------------------------------------
AUTOMOBILES--1.2%
Ande Chevrolet Olds, Inc., 4.54%,
1/1/06 1 2,000,000 2,000,000
- --------------------------------------------------------------------------------
CAPITAL MARKETS--8.8%
Banc of America Securities LLC,
4.26%, 1/2/06 1 5,000,000 5,000,000
6 | OPPENHEIMER MONEY FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
CAPITAL MARKETS Continued
Bear Stearns Cos., Inc.:
4.22%, 2/6/06 $2,000,000 $ 1,991,590
4.42%, 3/20/06 2,300,000 2,277,974
- --------------------------------------------------------------------------------
First Clearing LLC, 4.35%, 3/6/06 1 1,000,000 1,000,000
- --------------------------------------------------------------------------------
Lehman Brothers, Inc., 4.13%, 1/2/06 1 5,000,000 5,000,000
-------------
15,269,564
- --------------------------------------------------------------------------------
COMMERCIAL BANKS--2.0%
Bank of America Corp., 4.26%,
2/15/06 1,700,000 1,690,958
- --------------------------------------------------------------------------------
National City Credit Corp., 4.35%,
2/13/06 1,800,000 1,790,658
-------------
3,481,616
- --------------------------------------------------------------------------------
COMMERCIAL FINANCE--0.6%
Countrywide Financial Corp.,
4.30%, 1/5/06 1,000,000 999,522
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--2.3%
General Electric Capital Corp.,
4.01%, 1/5/06 2,000,000 1,999,109
- --------------------------------------------------------------------------------
HSBC Finance Corp., 4.04%, 1/10/06 2,000,000 1,997,980
-------------
3,997,089
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--1.3%
Alta Mira LLC, Series 2004,
4.48%, 2/1/06 1 2,250,000 2,250,000
- --------------------------------------------------------------------------------
INSURANCE--10.1%
ING America Insurance Holdings, Inc.:
4.01%, 1/6/06 2,000,000 1,998,886
4.39%, 3/13/06 1,000,000 991,342
- --------------------------------------------------------------------------------
Jackson National Life Global
Funding, 4.41%, 1/17/06 1,3 2,500,000 2,500,000
- --------------------------------------------------------------------------------
Metropolitan Life Global Funding I,
Series 2003-5, 4.43%, 1/17/06 1,3 4,000,000 4,000,000
- --------------------------------------------------------------------------------
Prudential Insurance Co. of
America, 4.32%, 1/1/06 1 3,000,000 3,000,000
- --------------------------------------------------------------------------------
Security Life of Denver Insurance
Co., 4.49%, 1/23/06 1 5,000,000 5,000,000
-------------
17,490,228
- --------------------------------------------------------------------------------
LEASING & FACTORING--1.1%
Toyota Motor Credit Corp.,
4.18%, 2/3/06 2,000,000 1,992,337
- --------------------------------------------------------------------------------
MUNICIPAL--0.4%
Hayward, CA Multifamily Housing
Revenue Bonds, Lord Tennyson
Apts., 4.71%, 1/3/06 1 710,000 710,000
- --------------------------------------------------------------------------------
PHARMACEUTICALS--0.6%
Pfizer Investment Capital plc,
4.25%, 1/19/06 2 1,000,000 997,875
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
SPECIAL PURPOSE FINANCIAL--14.5%
Blue Spice LLC, 4.41%, 3/13/06 2 $2,000,000 $ 1,982,625
- --------------------------------------------------------------------------------
Cooperative Assn. of Tractor Dealers,
Inc., Series A:
4.18%, 1/5/06 1,100,000 1,099,489
4.35%, 1/11/06 2,220,000 2,217,318
4.46%, 3/10/06 1,303,000 1,292,023
- --------------------------------------------------------------------------------
Cooperative Assn. of Tractor Dealers,
Inc., Series B:
4.07%, 1/5/06 1,000,000 999,548
4.48%, 3/28/06 1,010,000 999,191
- --------------------------------------------------------------------------------
K2 (USA) LLC, 4.37%, 3/6/06 1,000,000 992,231
- --------------------------------------------------------------------------------
LINKS Finance LLC, 3.13%, 1/10/06 2,000,000 1,999,422
- --------------------------------------------------------------------------------
Parkland (USA) LLC:
4.34%, 12/12/06 1,4 2,000,000 1,999,811
4.35%, 1/18/06 1,4 3,000,000 2,999,986
- --------------------------------------------------------------------------------
RACERS Trust, Series 2004-6-MM,
4.37%, 1/23/06 1 1,000,000 1,000,000
- --------------------------------------------------------------------------------
Sigma Finance, Inc.:
4.27%, 2/17/06 2 1,000,000 994,425
4.385%, 3/8/06 1,000,000 991,961
4.42%, 3/21/06 2,000,000 1,980,601
- --------------------------------------------------------------------------------
Union Hamilton Special Purpose
Funding LLC, 4.52%, 3/28/06 1 2,000,000 2,000,000
- --------------------------------------------------------------------------------
Wind Master Trust Nts., Series
2005-18A, 4.38%, 4/25/06 1,3 1,500,000 1,500,000
-------------
25,048,631
-------------
Total Short-Term Notes (Cost $113,910,443) 113,910,443
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $172,738,536) 99.8% 172,738,536
- --------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 0.2 422,982
----------------------------
NET ASSETS 100.0% $173,161,518
============================
FOOTNOTES TO STATEMENT OF INVESTMENTS
SHORT-TERM NOTES, DIRECT BANK OBLIGATIONS AND LETTERS OF CREDIT ARE GENERALLY
TRADED ON A DISCOUNT BASIS; THE INTEREST RATE SHOWN IS THE DISCOUNT RATE
RECEIVED BY THE FUND AT THE TIME OF PURCHASE. OTHER SECURITIES NORMALLY BEAR
INTEREST AT THE RATES SHOWN.
1. Represents the current interest rate for a variable or increasing rate
security.
2. Security issued in an exempt transaction without registration under the
Securities Act of 1933. Such securities amount to $54,836,183, or 31.67% of the
Fund's net assets, and have been determined to be liquid pursuant to guidelines
adopted by the Board of Trustees.
3. Illiquid security. The aggregate value of illiquid securities as of December
31, 2005 was $8,000,000, which represents 4.62% of the Fund's net assets. See
Note 4 of Notes to Financial Statements.
4. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $4,999,797 or 2.89% of the Fund's net
assets as of December 31, 2005.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
7 | OPPENHEIMER MONEY FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 31, 2005
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
ASSETS
- -----------------------------------------------------------------------------------------------------
Investments, at value (cost $172,738,536)--see accompanying statement of investments $172,738,536
- -----------------------------------------------------------------------------------------------------
Cash 136,013
- -----------------------------------------------------------------------------------------------------
Receivables and other assets:
Shares of beneficial interest sold 498,442
Interest 229,222
Other 4,619
-------------
Total assets 173,606,832
- -----------------------------------------------------------------------------------------------------
LIABILITIES
- -----------------------------------------------------------------------------------------------------
Payables and other liabilities:
Dividends 237,676
Shares of beneficial interest redeemed 169,959
Shareholder communications 15,112
Trustees' compensation 5,821
Transfer and shareholder servicing agent fees 869
Other 15,877
-------------
Total liabilities 445,314
- -----------------------------------------------------------------------------------------------------
NET ASSETS $173,161,518
=============
- -----------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- -----------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 173,129
- -----------------------------------------------------------------------------------------------------
Additional paid-in capital 172,982,457
- -----------------------------------------------------------------------------------------------------
Accumulated net investment income 98
- -----------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments 5,834
-------------
NET ASSETS--applicable to 173,129,498 shares of beneficial interest outstanding $173,161,518
=============
- -----------------------------------------------------------------------------------------------------
NET ASSET VALUE, REDEMPTION PRICE PER SHARE AND OFFERING PRICE PER SHARE $ 1.00
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
8 | OPPENHEIMER MONEY FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Interest $ 6,129,328
- --------------------------------------------------------------------------------
EXPENSES
- --------------------------------------------------------------------------------
Management fees 839,327
- --------------------------------------------------------------------------------
Shareholder communications 16,626
- --------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees 10,137
- --------------------------------------------------------------------------------
Trustees' compensation 5,244
- --------------------------------------------------------------------------------
Custodian fees and expenses 4,335
- --------------------------------------------------------------------------------
Administration service fees 1,500
- --------------------------------------------------------------------------------
Other 25,131
------------
Total expenses 902,300
Less reduction to custodian expenses (1,347)
------------
Net expenses 900,953
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 5,228,375
- --------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS 6,036
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 5,234,411
============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
9 | OPPENHEIMER MONEY FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2005 2004
- ------------------------------------------------------------------------------------------------------------
OPERATIONS
- ------------------------------------------------------------------------------------------------------------
Net investment income $ 5,228,375 $ 2,111,137
- ------------------------------------------------------------------------------------------------------------
Net realized gain 6,036 481
------------------------------
Net increase in net assets resulting from operations 5,234,411 2,111,618
- ------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------
Dividends from net investment income (5,228,277) (2,111,137)
- ------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- ------------------------------------------------------------------------------------------------------------
Net decrease in net assets resulting from beneficial interest transactions (23,347,439) (41,110,557)
- ------------------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------------
Total decrease (23,341,305) (41,110,076)
- ------------------------------------------------------------------------------------------------------------
Beginning of period 196,502,823 237,612,899
------------------------------
End of period (including accumulated net investment income
of $98 for the year ended December 31, 2005) $173,161,518 $196,502,823
==============================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
10 | OPPENHEIMER MONEY FUND/VA
FINANCIAL HIGHLIGHTS
YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 2001
- ------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------------------------------------------------------------
Income from investment operations--net investment
income and net realized gain .03 1 .01 1 .01 .01 .04
- ------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.03) (.01) (.01) (.01) (.04)
Dividends from net realized gain -- -- -- -- 2 --
- ------------------------------------------------------------------------------------------------------------------------------
Total dividends and/or distributions to shareholders (.03) (.01) (.01) (.01) (.04)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=======================================================================
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 3 2.86% 0.98% 0.79% 1.47% 3.85%
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $173,162 $196,503 $237,613 $379,969 $370,229
- ------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $186,453 $218,243 $316,096 $386,457 $288,106
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 2.80% 0.97% 0.80% 1.46% 3.59%
Total expenses 0.48% 5 0.48% 5 0.47% 5 0.47% 5 0.52% 5
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Less than $0.005 per share.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Total returns are not annualized for
periods less than one full year. Total return information does not reflect
expenses that apply at the separate account level or to related insurance
products. Inclusion of these charges would reduce the total return figures for
all periods shown. Returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
4. Annualized for periods of less than one full year.
5. Reduction to custodian expenses less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11 | OPPENHEIMER MONEY FUND/VA
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Money Fund/VA (the Fund) is a separate series of Oppenheimer
Variable Account Funds, an open-end management investment company registered
under the Investment Company Act of 1940, as amended. The Fund's investment
objective is to seek maximum current income from investments in "money market"
securities consistent with low capital risk and the maintenance of liquidity.
The Fund's investment advisor is OppenheimerFunds, Inc. (the Manager).
Shares of the Fund are only sold to separate investment accounts of
participating insurance companies as an underlying investment for variable life
insurance policies, variable annuity contracts or other investment products.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. Portfolio securities are valued on the basis of amortized
cost, which approximates market value.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income to shareholders.
The tax components of capital shown in the table below represent distribution
requirements the Fund must satisfy under the income tax regulations, losses the
Fund may be able to offset against income and gains realized in future years for
federal income tax purposes.
UNDISTRIBUTED NET UNDISTRIBUTED ACCUMULATED
INVESTMENT INCOME LONG-TERM GAINS LOSS CARRYFORWARD 1,2,3
--------------------------------------------------------------------
$295,366 $-- $115
1. As of December 31, 2005, the Fund had $115 of post-October losses available
to offset future realized capital gains, if any. Such losses, if unutilized,
will expire in 2014.
2. During the fiscal year ended December 31, 2005, the Fund utilized $202 of
capital loss carryforward to offset capital gains realized in that fiscal year.
3. During the fiscal year ended December 31, 2004, the Fund utilized $481 of
capital loss carryforward to offset capital gains realized in that fiscal year.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Fund.
The tax character of distributions paid during the years ended December 31, 2005
and December 31, 2004 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2005 DECEMBER 31, 2004
--------------------------------------------------------------------
Distributions paid from:
Ordinary income $5,228,277 $2,111,137
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred
compensation plan for independent trustees that enables trustees to elect to
defer receipt of all or a portion of the annual compensation they are entitled
to receive from the Fund. For purposes of determining the amount owed to the
Trustee under the plan, deferred amounts are treated as though equal dollar
amounts had been invested in shares of the Fund or in other Oppenheimer funds
selected by the Trustee. The Fund purchases shares of the funds selected for
deferral by the Trustee in amounts equal to his or her deemed investment,
resulting in a Fund asset equal to the deferred compensation liability. Such
assets are included as a component of "Other" within the asset section of the
Statement of Assets and Liabilities. Deferral of trustees' fees under the plan
will not affect the net assets of the Fund, and will not materially affect the
Fund's assets, liabilities or net investment income per share. Amounts will be
deferred until distributed in accordance to the Plan.
12 | OPPENHEIMER MONEY FUND/VA
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date. Income distributions, if any, are declared
daily and paid monthly. Capital gain distributions, if any, are declared and
paid annually but may be paid at other times to maintain the net asset value per
share at $1.00.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. Custodian Fees and Expenses in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts to the extent they are not
offset by positive cash balances maintained by the Fund. The Reduction to
Custodian Expenses line item, if applicable, represents earnings on cash
balances maintained by the Fund during the period. Such interest expense and
other custodian fees may be paid with these earnings. At December 31, 2005, the
Fund had $13 of such earnings on cash balances available to offset future
custodian fees or interest expenses incurred during the next fiscal year.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $0.001 par value shares of
beneficial interest. Transactions in shares of beneficial interest were as
follows:
YEAR ENDED DECEMBER 31, 2005 YEAR ENDED DECEMBER 31, 2004
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------
Sold 126,305,556 $ 126,305,556 135,559,970 $ 135,559,970
Dividends and/or distributions reinvested 5,103,537 5,103,537 2,042,069 2,042,069
Redeemed (154,754,850) (154,756,532) (178,712,596) (178,712,596)
-----------------------------------------------------------------
Net decrease (23,345,757) $ (23,347,439) (41,110,557) $ (41,110,557)
=================================================================
- --------------------------------------------------------------------------------
3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee at an
annual rate of 0.45% of the first $500 million of average annual net assets,
0.425% of the next $500 million, 0.40% of the next $500 million and 0.375% of
average annual net assets in excess of $1.5 billion.
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the year ended December 31, 2005, the Fund paid
$10,112 to OFS for services to the Fund.
Additionally, funds offered in variable annuity separate accounts are
subject to minimum fees of $10,000 for assets of $10 million or more. The Fund
is subject to the minimum fee in the event that the per account fee does not
equal or exceed the applicable minimum fee.
13 | OPPENHEIMER MONEY FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit
transfer and shareholder servicing agent fees for all classes to 0.35% of
average annual net assets of the Fund. This undertaking may be amended or
withdrawn at any time.
- --------------------------------------------------------------------------------
4. ILLIQUID SECURITIES
As of December 31, 2005, investments in securities included issues that are
illiquid. A security may be considered illiquid if it lacks a readily available
market or if its valuation has not changed for a certain period of time. The
Fund will not invest more than 10% of its net assets (determined at the time of
purchase and reviewed periodically) in illiquid securities. Securities that are
illiquid are marked with the applicable footnote on the Statement of
Investments.
- --------------------------------------------------------------------------------
5. LITIGATION
A consolidated amended complaint has been filed as putative derivative and class
actions against the Manager, OFS and the Distributor, as well as 51 of the
Oppenheimer funds (as "Nominal Defendants") excluding the Fund, 30 present and
former Directors or Trustees and 8 present and former officers of the funds.
This complaint, initially filed in the U.S. District Court for the Southern
District of New York on January 10, 2005 and amended on March 4, 2005,
consolidates into a single action and amends six individual previously-filed
putative derivative and class action complaints. Like those prior complaints,
the complaint alleges that the Manager charged excessive fees for distribution
and other costs, improperly used assets of the funds in the form of directed
brokerage commissions and 12b-1 fees to pay brokers to promote sales of the
funds, and failed to properly disclose the use of assets of the funds to make
those payments in violation of the Investment Company Act of 1940 and the
Investment Advisers Act of 1940. Also, like those prior complaints, the
complaint further alleges that by permitting and/or participating in those
actions, the Directors/Trustees and the Officers breached their fiduciary duties
to shareholders of the funds under the Investment Company Act of 1940 and at
common law. The complaint seeks unspecified compensatory and punitive damages,
rescission of the funds' investment advisory agreements, an accounting of all
fees paid, and an award of attorneys' fees and litigation expenses.
The defendants believe that the allegations contained in the Complaints
are without merit and that they have meritorious defenses against the claims
asserted. The defendants intend to defend these lawsuits vigorously and to
contest any claimed liability. The defendants believe that it is premature to
render any opinion as to the likelihood of an outcome unfavorable to them and
that no estimate can yet be made with any degree of certainty as to the amount
or range of any potential loss.
14 | OPPENHEIMER MONEY FUND/VA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER MONEY FUND/VA:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer Money Fund/VA, a series of Oppenheimer Variable Account Funds,
including the statement of investments, as of December 31, 2005, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the periods then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
The Fund is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audit includes consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of December 31, 2005, by correspondence with the
custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer Money Fund/VA as of December 31, 2005, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the five
years in the periods then ended, in conformity with accounting principles
generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
February 13, 2006
15 | OPPENHEIMER MONEY FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2006, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2005. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Fund to the Internal Revenue Service. Because of
the complexity of the federal regulations which may affect your individual tax
return and the many variations in state and local tax regulations, we recommend
that you consult your tax advisor for specific guidance.
16 | OPPENHEIMER MONEY FUND/VA
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file Form N-PX, with its complete proxy voting record for the 12 months ended
June 30th, no later than August 31st of each year. The Fund's voting record is
available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at
www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC
for the first quarter and the third quarter of each fiscal year on Form N-Q. The
Fund's Form N-Q filings are available on the SEC's website at
http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public
Reference Room in Washington D.C. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
17 | OPPENHEIMER MONEY FUND/VA
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew the Fund's
investment advisory agreement (the "Agreement"). The Investment Company Act of
1940, as amended, requires that the Board request and evaluate, and that the
Manager provide, such information as may be reasonably necessary to evaluate the
terms of the Agreement. The Board employs an independent consultant to prepare a
report that provides information, including comparative information, that the
Board requests for that purpose. In addition, the Board receives information
throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager, including an analysis of the
cost of providing services, (v) whether economies of scale are realized as the
Fund grows and whether fee levels reflect these economies of scale for Fund
investors and (vi) other benefits to the Manager from its relationship with the
Fund. Outlined below is a summary of the principal information considered by the
Board as well as the Board's conclusions.
NATURE, QUALITY, AND EXTENT OF SERVICES. The Board considered information
on the nature and extent of the services provided to the Fund and information
regarding the Manager's key personnel that provide such services. The Manager's
duties include providing the Fund with the services of the portfolio managers
and the Manager's investment team, who provide research, analysis and other
advisory services in regard to the Fund's investments; securities trading
services; oversight of third party service providers; monitoring compliance with
applicable Fund policies and procedures and adherence to the Fund's investment
restrictions. The Manager is responsible for providing certain administrative
services to the Fund as well. Those services include providing and supervising
all administrative and clerical personnel that are necessary in order to provide
effective corporate administration for the Fund; compiling and maintaining
records with respect to the Fund's operations; preparing and filing reports
required by the Securities and Exchange Commission; preparing periodic reports
regarding the operations of the Fund for its shareholders; preparing proxy
materials for shareholder meetings; and preparing the registration statements
required by Federal and state securities laws for the sale of the Fund's shares.
The Manager also provides the Fund with office space, facilities and equipment.
The Board also considered the quality of the services provided and the
quality of the Manager's resources that are available to the Fund. The Board
took account of the fact that the Manager has had over forty years of experience
as an investment adviser and that its assets under management rank it among the
top mutual fund managers in the United States. The Board evaluated the Manager's
administrative, accounting, legal and compliance services, and information the
Board has received regarding the experience and professional qualifications of
the Manager's key personnel and the size and functions of its staff providing
investment management services to the Fund. The Board also considered compliance
reports from the Fund's Chief Compliance Officer. In its evaluation of the
quality of the portfolio management services provided, the Board considered the
experience of Carol E. Wolf and Barry D. Weiss and the Manager's money market
investment team and analysts. Ms. Wolf and Mr. Weiss have had over 22 and six
years of experience, respectively, managing money market investments. The Board
members also considered the totality of their experiences with the Manager, as
directors or trustees of the Fund and other funds advised by the Manager. In
light of the foregoing, the Board concluded that the Fund benefits from the
services provided under the Agreement as a result of the Manager's experience,
reputation, personnel, operations, and resources.
18 | OPPENHEIMER MONEY FUND/VA
INVESTMENT PERFORMANCE OF THE MANAGER AND THE FUND. During the year, the
Manager provided information on the performance of the Fund and the Manager at
each Board meeting, including comparative performance information. The Board
also reviewed information, prepared by the Manager and by the independent
consultant, comparing the Fund's historical performance to relevant market
indices and to the performance of other money market funds (including both funds
advised by the Manager and funds advised by other investment advisers). The
Board noted that the Fund's one-year, three-year, five-year and ten-year
performance were all better than its peer group median.
COSTS OF SERVICES AND PROFITS REALIZED BY THE MANAGER. The Board
considered information regarding the Manager's costs in serving as the Fund's
investment adviser, including the costs associated with the personnel and
systems necessary to manage the Fund, and information regarding the Manager's
profitability from its relationship with the Fund. The Board reviewed the fees
paid to the Manager and the other expenses borne by the Fund. The Board also
evaluated the comparability of the fees charged and the services provided to the
Fund to the fees and services for other clients or accounts advised by the
Manager. The independent consultant provided comparative data in regard to the
fees and expenses of the Fund, other money market funds and other funds with
comparable asset levels and distribution features. The Board noted that the
Fund's contractual management fees are equal to its peer group median but higher
than its peer group average and its actual management fees are higher than its
peer group median and average, however, its total expenses are lower than both
its peer group median and average. In light of this and of the Fund's strong
performance, the Board concluded that the management fee was reasonable.
ECONOMIES OF SCALE. The Board considered whether the Manager may realize
economies of scale in managing and supporting the Fund, whether those economies
of scale benefit the Fund's shareholders and the current level of Fund assets in
relation to the Fund's management fee breakpoints, which are intended to share
with shareholders economies of scale that may exist as the Fund grows.
OTHER BENEFITS TO THE MANAGER. In addition to considering the profits
realized by the Manager, the Board considered information that was provided
regarding the direct and indirect benefits the Manager receives as a result of
its relationship with the Fund, including compensation paid to the Manager's
affiliates. The Board also considered the nature and quality of services
provided by affiliates of the Manager, which it reviews at other times during
the year in connection with the renewal of the Fund's service agreements. The
Board considered that the Manager must be able to pay and retain experienced
professional personnel at competitive rates to provide services to the Fund and
that maintaining the financial viability of the Manager is important in order
for the Manager to continue to provide significant services to the Fund and its
shareholders.
CONCLUSIONS. These factors were also considered by the independent
Trustees meeting separately from the full Board, assisted by experienced counsel
to the Fund and to the independent Trustees. Fund counsel and the independent
Trustees' counsel are both independent of the Manager within the meaning and
intent of the Securities and Exchange Commission Rules.
Based on its review of the information it received and its evaluations
described above, the Board, including a majority of the independent Trustees,
decided to continue the advisory agreement for another year. In arriving at this
decision, the Board did not single out any factor or factors as being more
important than others, but considered all of the factors together. The Board
judged the terms and conditions of the advisory agreement, including the
management fee, in light of all of the surrounding circumstances.
19 | OPPENHEIMER MONEY FUND/VA
TRUSTEES AND OFFICERS Unaudited
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NAME, POSITION(S) HELD PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS HELD;
WITH THE FUNDS, LENGTH NUMBER OF PORTFOLIOS IN THE FUNDS COMPLEX CURRENTLY OVERSEEN
OF SERVICE, AGE
INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL, COLORADO
TRUSTEES 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER RESIGNATION,
RETIREMENT, DEATH OR REMOVAL.
WILLIAM L. ARMSTRONG, Chairman of the following private mortgage banking companies: Cherry Creek Mortgage Company
Chairman of the Board (since 1991), Centennial State Mortgage Company (since 1994), and The El Paso Mortgage Company
of Trustees (since 2003); (since 1993); Chairman of the following private companies: Ambassador Media Corporation (since
Trustee (since 1999) 1984) and Broadway Ventures (since 1984); Director of the following: Helmerich & Payne, Inc.
Age: 68 (oil and gas drilling/production company) (since 1992), Campus Crusade for Christ (since 1991)
and The Lynde and Harry Bradley Foundation, Inc. (non-profit organization) (since 2002); former
Chairman of the following: Transland Financial Services, Inc. (private mortgage banking
company) (1997-2003), Great Frontier Insurance (insurance agency) (1995-2000), Frontier Real
Estate, Inc. (residential real estate brokerage) (1994-2000) and Frontier Title (title
insurance agency) (1995-2000); former Director of the following: UNUMProvident (insurance
company) (1991-2004), Storage Technology Corporation (computer equipment company) (1991-2003)
and International Family Entertainment (television channel) (1992-1997); U.S. Senator (January
1979-January 1991). Oversees 38 portfolios in the OppenheimerFunds complex.
ROBERT G. AVIS, Director and President of A.G. Edwards Capital, Inc. (General Partner of private equity funds)
Trustee (since 1995) (until February 2001); Chairman, President and Chief Executive Officer of A.G. Edwards Capital,
Age: 74 Inc. (until March 2000); Director of A.G. Edwards & Sons, Inc. (brokerage company) (until 2000)
and A.G. Edwards Trust Company (investment adviser) (until 2000); Vice Chairman and Director of
A.G. Edwards, Inc. (until March 1999); Vice Chairman of A.G. Edwards & Sons, Inc. (until March
1999); Chairman of A.G. Edwards Trust Company (until March 1999) and A.G.E. Asset Management
(investment adviser) (until March 1999). Oversees 38 portfolios in the OppenheimerFunds
complex.
GEORGE C. BOWEN, Assistant Secretary and Director of Centennial Asset Management Corporation (December
Trustee (since 1999) 1991-April 1999); President, Treasurer and Director of Centennial Capital Corporation (June
Age: 69 1989-April 1999); Chief Executive Officer and Director of MultiSource Services, Inc. (March
1996-April 1999); Mr. Bowen held several positions with the Manager and with subsidiary or
affiliated companies of the Manager (September 1987-April 1999). Oversees 38 portfolios in the
OppenheimerFunds complex.
EDWARD L. CAMERON, Member of The Life Guard of Mount Vernon (George Washington historical site) (since June 2000);
Trustee (since 1999) Director of Genetic ID, Inc. (biotech company) (March 2001-May 2002); Partner at
Age: 67 PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price
Waterhouse LLP Global Investment Management Industry Services Group (July 1994-June 1998).
Oversees 38 portfolios in the OppenheimerFunds complex.
JON S. FOSSEL, Director of UNUMProvident (insurance company) (since June 2002); Director of Northwestern
Trustee (since 1990) Energy Corp. (public utility corporation) (since November 2004); Director of P.R.
Age: 64 Pharmaceuticals (October 1999-October 2003); Director of Rocky Mountain Elk Foundation
(non-profit organization) (February 1998-February 2003); Chairman and Director (until October
1996) and President and Chief Executive Officer (until October 1995) of the Manager; President,
Chief Executive Officer and Director of the following: Oppenheimer Acquisition Corp. ("OAC")
(parent holding company of the Manager), Shareholders Services, Inc. and Shareholder Financial
Services, Inc. (until October 1995). Oversees 38 portfolios in the OppenheimerFunds complex.
SAM FREEDMAN, Director of Colorado Uplift (charitable organization) (since September 1984). Mr. Freedman held
Trustee (since 1996) several positions with the Manager and with subsidiary or affiliated companies of the Manager
Age: 65 (until October 1994). Oversees 38 portfolios in the OppenheimerFunds complex.
BEVERLY L. HAMILTON, Trustee of Monterey Institute for International Studies (educational organization) (since
Trustee (since 2002) February 2000); Director of The California Endowment (philanthropic organization) (since April
Age: 59 2002); Director of Community Hospital of Monterey Peninsula (since February 2002); Vice Chair
of American Funds' Emerging Markets Growth Fund, Inc. (mutual fund) (since October 1991);
President of ARCO Investment Management Company (February 1991-April 2000); Member of the
investment committees of The Rockefeller Foundation and The University of Michigan; Advisor at
Credit Suisse First Boston's Sprout venture capital unit (venture capital fund) (1994-January
2005); Trustee of MassMutual Institutional Funds (investment company) (1996-June 2004);
20 | OPPENHEIMER MONEY FUND/VA
BEVERLY L. HAMILTON, Trustee of MML Series Investment Fund (investment company) (April 1989-June 2004); Member of
Continued the investment committee of Hartford Hospital (2000-2003); and Advisor to Unilever (Holland)
pension fund (2000-2003). Oversees 38 portfolios in the OppenheimerFunds complex.
ROBERT J. MALONE, Director of Jones International University (educational organization) (since August 2005);
Trustee (since 2002) Chairman, Chief Executive Officer and Director of Steele Street State Bank (commercial banking)
Age: 61 (since August 2003); Director of Colorado UpLIFT (charitable organization) (since 1986);
Trustee of the Gallagher Family Foundation (nonprofit organization) (since 2000); Former
Chairman of U.S. Bank-Colorado (subsidiary of U.S. Bancorp and formerly Colorado National Bank)
(July 1996-April 1999); Director of Commercial Assets, Inc. (real estate investment trust)
(1993-2000); Director of Jones Knowledge, Inc. (2001-July 2004); and Director of U.S.
Exploration, Inc. (oil and gas exploration) (1997-February 2004). Oversees 38 portfolios in the
OppenheimerFunds complex.
F. WILLIAM MARSHALL, JR., Trustee of MassMutual Select Funds (formerly MassMutual Institutional Funds) (investment
Trustee (since 2000) company) (since 1996) and MML Series Investment Fund (investment company) (since 1996), Trustee
Age: 63 and Chairman of the Investment Committee (since 1994) of the Worcester Polytech Institute
(private university); President and Treasurer of the SIS Funds (private charitable fund) (since
January 1999); Chairman of SIS & Family Bank, F.S.B. (formerly SIS Bank) (commercial bank)
(January 1999-July 1999); Member of the Investment Committee of the Community Foundation of
Western Massachusetts (1998-2003); and Executive Vice President of Peoples Heritage Financial
Group, Inc. (commercial bank) (January 1999-July 1999). Oversees 40 portfolios in the
OppenheimerFunds complex.
- --------------------------------------------------------------------------------------------------------------------------------
THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH FLOOR, NEW
INTERESTED TRUSTEE YORK, NEW YORK 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN INDEFINITE TERM, OR UNTIL HIS
AND OFFICER RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN OFFICER FOR AN INDEFINITE TERM, OR UNTIL
HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL. MR. MURPHY IS AN INTERESTED TRUSTEE DUE TO HIS
POSITIONS WITH OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES.
JOHN V. MURPHY, Chairman, Chief Executive Officer and Director (since June 2001) and President (since September
President and Trustee 2000) of the Manager; President and Director or Trustee of other Oppenheimer funds; President
(since 2001) and Director of OAC and of Oppenheimer Partnership Holdings, Inc. (holding company subsidiary
Age: 56 of the Manager) (since July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary
of the Manager) (since November 2001); Chairman and Director of Shareholder Services, Inc. and
of Shareholder Financial Services, Inc. (transfer agent subsidiaries of the Manager) (since
July 2001); President and Director of OppenheimerFunds Legacy Program (charitable trust program
established by the Manager) (since July 2001); Director of the following investment advisory
subsidiaries of the Manager: OFI Institutional Asset Management, Inc., Centennial Asset
Management Corporation, Trinity Investment Management Corporation and Tremont Capital
Management, Inc. (since November 2001), HarbourView Asset Management Corporation and OFI
Private Investments, Inc. (since July 2001); President (since November 2001) and Director
(since July 2001) of Oppenheimer Real Asset Management, Inc.; Executive Vice President of
Massachusetts Mutual Life Insurance Company (OAC's parent company) (since February 1997);
Director of DLB Acquisition Corporation (holding company parent of Babson Capital Management
LLC) (since June 1995); Member of the Investment Company Institute's Board of Governors (since
October 3, 2003); Chief Operating Officer of the Manager (September 2000-June 2001); President
and Trustee of MML Series Investment Fund and MassMutual Select Funds (open-end investment
companies) (November 1999-November 2001); Director of C.M. Life Insurance Company (September
1999-August 2000); President, Chief Executive Officer and Director of MML Bay State Life
Insurance Company (September 1999-August 2000); Director of Emerald Isle Bancorp and Hibernia
Savings Bank (wholly-owned subsidiary of Emerald Isle Bancorp) (June 1989-June 1998). Oversees
87 portfolios in the OppenheimerFunds complex.
21 | OPPENHEIMER MONEY FUND/VA
TRUSTEES AND OFFICERS Unaudited/Continued
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OTHER OFFICERS THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MR. ZACK, TWO WORLD
OF THE FUND FINANCIAL CENTER, 225 LIBERTY STREET, NEW YORK, NEW YORK 10281-1008, FOR MESSRS. WEISS,
VANDEHEY, WIXTED AND MS. WOLF, 6803 S. TUCSON WAY, CENTENNIAL, COLORADO 80112-3924. EACH
OFFICER SERVES FOR AN INDEFINITE TERM OR UNTIL HIS OR HER RESIGNATION, RETIREMENT DEATH OR
REMOVAL.
BARRY D. WEISS, Vice President of the Manager (since July 2001) and of HarbourView Asset Management Corporation
Vice President and (since June 2003); an officer of 6 portfolios in the OppenheimerFunds complex. Formerly
Portfolio Manager Assistant Vice President and Senior Credit Analyst of the Manager (February 2000-June 2001).
(since 2001) Prior to joining the Manager in February 2000, he was Associate Director, Structured Finance,
Age: 41 Fitch IBCA Inc. (April 1998-February 2000).
CAROL E. WOLF, Senior Vice President of the Manager (since June 2000) and of HarbourView Asset Management
Vice President and Corporation (since June 2003); an officer of 6 portfolios in the OppenheimerFunds complex.
Portfolio Manager Formerly Vice President of the Manager (June 1990-June 2000).
(since 1998)
Age: 54
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Vice
Vice President and President of OppenheimerFunds Distributor, Inc., Centennial Asset Management Corporation and
Chief Compliance Officer Shareholder Services, Inc. (since June 1983); Vice President and Director of Internal Audit of
(since 2004) the Manager (1997-February 2004). An officer of 87 portfolios in the OppenheimerFunds complex.
Age: 55
BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer of the
Treasurer and following: HarbourView Asset Management Corporation, Shareholder Financial Services, Inc.,
Principal Financial Shareholder Services, Inc., Oppenheimer Real Asset Management Corporation, and Oppenheimer
and Accounting Officer Partnership Holdings, Inc. (since March 1999), OFI Private Investments, Inc. (since March
(since 1999) 2000), OppenheimerFunds International Ltd. and OppenheimerFunds plc (since May 2000), OFI
Age: 46 Institutional Asset Management, Inc. (since November 2000), and OppenheimerFunds Legacy Program
(since June 2003); Treasurer and Chief Financial Officer of OFI Trust Company (trust company
subsidiary of the Manager) (since May 2000); Assistant Treasurer of the following: OAC (since
March 1999), Centennial Asset Management Corporation (March 1999-October 2003) and
OppenheimerFunds Legacy Program (April 2000-June 2003); Principal and Chief Operating Officer
of Bankers Trust Company-Mutual Fund Services Division (March 1995-March 1999). An officer of
87 portfolios in the OppenheimerFunds complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March 2002) of the
Vice President and Secretary Manager; General Counsel and Director of the Distributor (since December 2001); General Counsel
(since 2001) of Centennial Asset Management Corporation (since December 2001); Senior Vice President and
Age: 57 General Counsel of HarbourView Asset Management Corporation (since December 2001); Secretary
and General Counsel of OAC (since November 2001); Assistant Secretary (since September 1997)
and Director (since November 2001) of OppenheimerFunds International Ltd. and OppenheimerFunds
plc; Vice President and Director of Oppenheimer Partnership Holdings, Inc. (since December
2002); Director of Oppenheimer Real Asset Management, Inc. (since November 2001); Senior Vice
President, General Counsel and Director of Shareholder Financial Services, Inc. and Shareholder
Services, Inc. (since December 2001); Senior Vice President, General Counsel and Director of
OFI Private Investments, Inc. and OFI Trust Company (since November 2001); Vice President of
OppenheimerFunds Legacy Program (since June 2003); Senior Vice President and General Counsel of
OFI Institutional Asset Management, Inc. (since November 2001); Director of OppenheimerFunds
(Asia) Limited (since December 2003); Senior Vice President (May 1985-December 2003), Acting
General Counsel (November 2001-February 2002) and Associate General Counsel (May 1981-October
2001) of the Manager; Assistant Secretary of the following: Shareholder Services, Inc. (May
1985-November 2001), Shareholder Financial Services, Inc. (November 1989-November 2001), and
OppenheimerFunds International Ltd. (September 1997-November 2001). An officer of 87 portfolios
in the OppenheimerFunds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION
ABOUT THE FUND'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT CHARGE, UPON
REQUEST, BY CALLING 1.800.981.2871.
22 | OPPENHEIMER MONEY FUND/VA
OPPENHEIMER STRATEGIC BOND FUND/VA
FUND PERFORMANCE DISCUSSION
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MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. During the spring of 2005, we
shifted the Fund's emphasis in its international portfolio from bonds of
developed nations to the emerging markets. We focused on unhedged positions in
countries where we expected fiscal improvements to attract more investment
capital. This strategy proved to be especially successful in Brazil, Mexico,
Turkey and oil producing nations, such as Russia, where favorable movements in
currency exchange rates relative to the U.S. dollar helped support returns.
Despite a mildly underweighted position, the Fund also achieved relatively
strong results through its investments in U.S. dollar-denominated bonds from the
emerging markets.
We maintained relatively light exposure to the high yield corporate bond
market due to historically narrow yield differences between high yield
securities and U.S. Treasuries. The Fund added value through our emphasis on
higher quality securities from issuers with strong cash flows, such as cell
tower operators and energy companies.
Finally, we maintained a generally neutral posture with regard to U.S.
government securities. We set the Fund's average duration in a range we
considered to be in line with industry averages, and we placed a modest emphasis
on mortgage-backed securities that we believed would be less sensitive to
prepayment risks. This strategy enabled the Fund to capture higher yields while
effectively managing the risks of higher short-term interest rates.
When the Fed raised interest rates in mid-December 2005, the language in
its accompanying statement indicated that it may be approaching the end of the
current credit-tightening cycle. While this could prove to be a positive
influence on U.S. government securities and high yield corporate bonds, rich
valuations and unexpected changes in the rate of economic growth could forestall
potential rallies.
In international markets, we have maintained the Fund's emphasis on
nations, such as Brazil and Turkey, where falling interest rates and lower
inflation may create further opportunities. In contrast, interest rates are
already low in Europe and Japan, leaving little room for further cuts.
As always, we intend to monitor economic and market developments, and to
adjust our strategies accordingly. Indeed, our ability to find opportunities and
manage risks across multiple market sectors is central to what makes Oppenheimer
Strategic Bond Fund/VA part of THE RIGHT WAY TO INVEST.
COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that follow show the
performance of a hypothetical $10,000 investment in each share class of the Fund
held until December 31, 2005. In the case of non-service shares, performance is
measured over a ten fiscal year period. In the case of service shares,
performance is measured from inception of the class on March 19, 2001.
Performance information does not reflect charges that apply to separate accounts
investing in the Fund. If these charges were taken into account, performance
would be lower. The graphs assume that all dividends and capital gains
distributions were reinvested in additional shares.
The Fund's performance is compared to the performance of the Lehman
Brothers Aggregate Bond Index, an unmanaged index of U.S. corporate and
government bonds, and to the Citigroup World Government Bond Index, an unmanaged
index of debt securities of major foreign governments. Index performance
reflects the reinvestment of income but does not consider the effect of
transaction costs, and none of the data in the graphs shows the effect of taxes.
The Fund's performance reflects the effects of the Fund's business and operating
expenses. While index comparisons may be useful to provide a benchmark for the
Fund's performance, it must be noted that the Fund's investments are not limited
to the investments in the index.
4 | OPPENHEIMER STRATEGIC BOND FUND/VA
NON-SERVICE SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Strategic Bond Fund/VA (Non-Service)
Lehman Brothers Aggregate Bond Index
Citigroup World Government Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Lehman Citigroup
Strategic Brothers World
Bond Fund/VA Aggregate Government
Date (Non-Service) Bond Index Bond Index
12/31/1995 10,000 10,000 10,000
03/31/1996 10,163 9,823 9,812
06/30/1996 10,414 9,879 9,852
09/30/1996 10,818 10,061 10,121
12/31/1996 11,207 10,363 10,362
03/31/1997 11,202 10,305 9,933
06/30/1997 11,651 10,684 10,235
09/30/1997 12,042 11,039 10,365
12/31/1997 12,183 11,364 10,386
03/31/1998 12,487 11,540 10,468
06/30/1998 12,585 11,810 10,676
09/30/1998 12,315 12,309 11,565
12/31/1998 12,536 12,351 11,976
03/31/1999 12,553 12,289 11,513
06/30/1999 12,553 12,181 11,117
09/30/1999 12,579 12,264 11,620
12/31/1999 12,890 12,249 11,465
03/31/2000 13,032 12,519 11,485
06/30/2000 13,117 12,737 11,468
09/30/2000 13,258 13,121 11,167
12/31/2000 13,230 13,673 11,647
03/31/2001 13,498 14,088 11,292
06/30/2001 13,390 14,168 11,116
09/30/2001 13,300 14,821 11,911
12/31/2001 13,871 14,828 11,532
03/31/2002 14,088 14,842 11,346
06/30/2002 14,153 15,390 12,668
09/30/2002 14,218 16,095 13,158
12/31/2002 14,903 16,348 13,780
03/31/2003 15,436 16,576 14,208
06/30/2003 16,377 16,991 14,759
09/30/2003 16,865 16,966 15,051
12/31/2003 17,596 17,019 15,834
03/31/2004 17,948 17,472 16,130
06/30/2004 17,618 17,045 15,593
09/30/2004 18,242 17,590 16,104
12/31/2004 19,123 17,758 17,473
03/31/2005 18,864 17,673 17,023
06/30/2005 19,440 18,204 16,779
09/30/2005 19,594 18,082 16,591
12/31/2005 19,633 18,189 16,272
AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/05
1-Year 2.67% 5-Year 8.21% 10-Year 6.98%
SERVICE SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Strategic Bond Fund/VA (Service)
Lehman Brothers Aggregate Bond Index
Citigroup World Government Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Lehman Citigroup
Strategic Brothers World
Bond Fund/VA Aggregate Government
Date (Service) Bond Index Bond Index
03/19/2001 10,000 10,000 10,000
03/31/2001 9,914 10,000 10,000
06/30/2001 9,871 10,056 9,843
09/30/2001 9,784 10,520 10,548
12/31/2001 10,194 10,525 10,212
03/31/2002 10,326 10,535 10,047
06/30/2002 10,373 10,924 11,218
09/30/2002 10,419 11,425 11,652
12/31/2002 10,910 11,604 12,203
03/31/2003 11,287 11,766 12,582
06/30/2003 11,960 12,060 13,070
09/30/2003 12,284 12,043 13,328
12/31/2003 12,782 12,081 14,022
03/31/2004 13,022 12,402 14,284
06/30/2004 12,786 12,099 13,808
09/30/2004 13,231 12,485 14,261
12/31/2004 13,860 12,605 15,473
03/31/2005 13,656 12,544 15,074
06/30/2005 14,067 12,922 14,859
09/30/2005 14,204 12,835 14,692
12/31/2005 14,204 12,911 14,410
AVERAGE ANNUAL TOTAL RETURNS OF SERVICE SHARES OF THE FUND AT 12/31/05
1-Year 2.48% 5-Year N/A Since Inception (3/19/01) 7.61%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, CALL US AT 1.800.981.2871. THE FUND'S
TOTAL RETURNS SHOULD NOT BE EXPECTED TO BE THE SAME AS THE RETURNS OF OTHER
FUNDS, WHETHER OR NOT BOTH FUNDS HAVE THE SAME PORTFOLIO MANAGERS AND/OR SIMILAR
NAMES. THE FUND'S TOTAL RETURNS DO NOT INCLUDE THE CHARGES ASSOCIATED WITH THE
SEPARATE ACCOUNT PRODUCTS THAT OFFER THIS FUND. SUCH PERFORMANCE WOULD HAVE BEEN
LOWER IF SUCH CHARGES WERE TAKEN INTO ACCOUNT.
5 | OPPENHEIMER STRATEGIC BOND FUND/VA
FUND EXPENSES
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FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1)
transaction costs, which may include redemption fees, if any; and (2) ongoing
costs, including management fees; distribution and service fees; and other Fund
expenses. These examples are intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning
of the period and held for the entire 6-month period ended December 31, 2005.
ACTUAL EXPENSES. The "actual" lines of the table provide information about
actual account values and actual expenses. You may use the information on this
line for the class of shares you hold, together with the amount you invested, to
estimate the expense that you paid over the period. Simply divide your account
value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00
= 8.60), then multiply the result by the number in the "actual" line under the
heading entitled "Expenses Paid During Period" to estimate the expenses you paid
on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the
table provide information about hypothetical account values and hypothetical
expenses based on the Fund's actual expense ratio, and an assumed rate of return
of 5% per year before expenses, which is not the Fund's actual return. The
hypothetical account values and expenses may not be used to estimate the actual
ending account balance or expenses you paid for the period. You may use this
information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any charges associated with the separate
accounts that offer this Fund. Therefore, the "hypothetical" lines of the table
are useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these separate
account charges were included, your costs would have been higher.
- --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
(7/1/05) (12/31/05) (12/31/05)
- --------------------------------------------------------------------------------
Non-Service shares Actual $1,000.00 $1,009.90 $3.55
- --------------------------------------------------------------------------------
Non-Service shares Hypothetical 1,000.00 1,021.68 3.57
- --------------------------------------------------------------------------------
Service shares Actual 1,000.00 1,009.70 4.82
- --------------------------------------------------------------------------------
Service shares Hypothetical 1,000.00 1,020.42 4.85
Hypothetical assumes 5% annual return before expenses.
Expenses are equal to the Fund's annualized expense ratio for that class,
multiplied by the average account value over the period, multiplied by 184/365
(to reflect the one-half year period). Those annualized expense ratios based on
the 6-month period ended December 31, 2005 are as follows:
CLASS EXPENSE RATIOS
- ------------------------------------
Non-Service shares 0.70%
- ------------------------------------
Service shares 0.95
- --------------------------------------------------------------------------------
6 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS December 31, 2005
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--2.1%
- -----------------------------------------------------------------------------------------
Ace Securities Corp., Home Equity
Loan Pass-Through Certificates,
Series 2002-HE7, Cl. A2B, 4.559%,
11/25/35 1 $ 420,000 $ 420,259
- -----------------------------------------------------------------------------------------
Aesop Funding II LLC, Automobile
Asset-Backed Certificates, Series
2005-1A, Cl. A2, 4.43%, 4/20/08 1 200,000 200,143
- -----------------------------------------------------------------------------------------
BMW Vehicle Owner Trust,
Automobile Loan Certificates,
Series 2005-A, Cl. A2, 3.66%,
12/26/07 1,445,116 1,440,681
- -----------------------------------------------------------------------------------------
Capital Auto Receivables Asset
Trust, Automobile Mtg.-Backed Nts.:
Series 2004-2, Cl. A3, 3.58%, 1/15/09 740,000 726,428
Series 2005-1, Cl. A2B, 3.73%, 7/16/07 281,460 281,096
- -----------------------------------------------------------------------------------------
Capital One Prime Auto Receivables
Trust, Automobile Loan Asset-
Backed Securities, Series 2005-1,
Cl. A2, 4.24%, 11/15/07 970,000 967,828
- -----------------------------------------------------------------------------------------
Centex Home Equity Co. LLC, Home
Equity Loan Asset-Backed Certificates:
Series 2004-D, Cl. AF1, 2.98%, 4/25/20 56,939 56,779
Series 2005-B, Cl. AF1, 4.02%, 3/26/35 124,969 124,325
Series 2005-C, Cl. AF1, 4.196%, 6/25/35 372,516 370,551
Series 2005-D, Cl. AF1, 5.04%, 10/25/35 1,316,900 1,313,427
- -----------------------------------------------------------------------------------------
Chase Manhattan Auto Owner Trust,
Automobile Loan Pass-Through
Certificates, Series 2005-A, Cl. A2,
3.72%, 12/15/07 650,000 647,210
- -----------------------------------------------------------------------------------------
CIT Equipment Collateral, Equipment
Receivable-Backed Nts., Series
2004-DFS, Cl. A2, 2.66%, 11/20/06 270,523 269,750
- -----------------------------------------------------------------------------------------
Consumer Credit Reference Index
Securities Program, Credit Card
Asset-Backed Certificates, Series
2002-B, Cl. FX, 10.421%, 3/22/07 2 500,000 499,563
- -----------------------------------------------------------------------------------------
Countrywide Asset-Backed
Certificates, Inc., Home Equity
Asset-Backed Certificates:
Series 2005-7, Cl. AF1B,
4.317%, 11/25/35 1 464,360 461,940
Series 2005-16, Cl. 2AF2,
5.382%, 5/25/36 1 300,000 300,000
Series 2005-17, Cl. 1AF1,
4.58%, 12/27/35 1 640,000 639,980
Series 2005-17, Cl. 1AF2,
5.363%, 12/27/35 1 200,000 200,049
- -----------------------------------------------------------------------------------------
DaimlerChrysler Auto Trust,
Automobile Loan Pass-Through
Certificates:
Series 2004-B, Cl. A2, 2.48%, 2/8/07 14,666 14,668
Series 2004-C, Cl. A2, 2.62%, 6/8/07 324,204 323,403
Series 2005-A, Cl. A2, 3.17%, 9/8/07 516,655 515,134
Series 2005-B, Cl. A2, 3.75%, 12/8/07 512,266 511,071
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
- -----------------------------------------------------------------------------------------
Embarcadero Aircraft
Securitization Trust, Airplane
Receivable Nts., Series 2000-A,
Cl. B, 8/15/25 3,4 $ 1,820,063 $ 18,201
- -----------------------------------------------------------------------------------------
Equity One ABS, Inc., Home Equity
Asset-Backed Security, Series
2004-3, Cl. AF2, 3.80%, 7/25/34 1 700,000 697,223
- -----------------------------------------------------------------------------------------
First Franklin Mortgage Loan
Asset-Backed Certificates, Home
Equity Receivables, Series 2005-FF10,
Cl. A3, 4.589%, 11/25/35 1 1,170,000 1,170,723
- -----------------------------------------------------------------------------------------
Ford Credit Auto Owner Trust,
Automobile Loan Pass-Through
Certificates:
Series 2005-A, Cl. A3,
3.48%, 11/17/08 550,000 543,391
Series 2005-B, Cl. A2,
3.78%, 9/15/07 466,176 465,206
- -----------------------------------------------------------------------------------------
GS Auto Loan Trust, Automobile
Loan Asset-Backed Securities,
Series 2005-1, Cl. A2, 4.32%, 5/15/08 1,840,000 1,835,166
- -----------------------------------------------------------------------------------------
Honda Auto Receivables Owner
Trust, Automobile Receivable
Obligations:
Series 2005-1, Cl. A2,
3.21%, 5/21/07 220,429 219,827
Series 2005-3, Cl. A2,
3.73%, 10/18/07 610,000 607,086
- -----------------------------------------------------------------------------------------
Household Home Equity Loan
Trust, Home Equity Loan Pass-
Through Certificates, Series 2005-3,
Cl. A1, 4.63%, 1/20/35 1 590,476 590,898
- -----------------------------------------------------------------------------------------
Lehman XS Trust, Home Equity
Mtg. Pass-Through Certificates:
Series 2005-2, Cl. 2A1B,
3.63%, 8/25/35 1 790,747 791,864
Series 2005-4, Cl. 2A1B,
5.17%, 10/25/35 585,054 585,420
Series 2005-10, Cl. 2-A3B,
5.55%, 12/25/06 570,000 569,911
- -----------------------------------------------------------------------------------------
NC Finance Trust, CMO, Series
1999-I, Cl. ECFD, 1.079%, 1/25/29 4 66,744 15,351
- -----------------------------------------------------------------------------------------
Nissan Auto Lease Trust,
Automobile Lease Obligations,
Series 2004-A, Cl. A2,
2.55%, 1/15/07 44,932 44,920
- -----------------------------------------------------------------------------------------
Nissan Auto Receivables Owner
Trust, Automobile Receivable Nts.:
Series 2003-B, Cl. A3,
1.51%, 8/15/07 23,101 23,013
Series 2005-C, Cl. A2, 3.99%, 1/15/08 1,160,000 1,155,327
- -----------------------------------------------------------------------------------------
Onyx Acceptance Owner Trust,
Automobile Receivable Obligations,
Series 2005-B, Cl. A2, 4.03%, 4/15/08 710,000 707,818
7 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
- -----------------------------------------------------------------------------------------
Popular ABS Mortgage Pass-
Through Trust, Home Equity Pass-
Through Certificates:
Series 2004-5, Cl. A F2,
3.735%, 11/10/34 1 $ 200,000 $ 197,606
Series 2005-1, Cl. A F2,
3.914%, 5/25/35 1 150,000 147,934
Series 2005-2, Cl. A F2,
4.415%, 4/25/35 1 240,000 237,649
Series 2005-6, Cl. A3,
5.68%, 1/25/36 1 320,000 320,000
- -----------------------------------------------------------------------------------------
Residential Asset Mortgage
Products, Inc., Home Equity Asset-
Backed Pass-Through Certificates,
Series 2004-RS7, Cl. AI3,
4.45%, 7/25/28 670,000 666,634
- -----------------------------------------------------------------------------------------
Structured Asset Securities Corp.,
CMO Pass-Through Certificates,
Series 2005-4XS, Cl. 3A1,
5.18%, 3/26/35 737,050 737,328
- -----------------------------------------------------------------------------------------
Structured Asset Securities Corp.,
Home Equity Obligations, Series
2003-25XS, Cl. A4, 4.51%, 8/25/33 217,585 216,911
- -----------------------------------------------------------------------------------------
USAA Auto Owner Trust,
Automobile Loan Asset-Backed Nts.:
Series 2004-2, Cl. A2, 2.41%, 2/15/07 14,868 14,863
Series 2004-3, Cl. A2, 2.79%, 6/15/07 159,110 158,857
- -----------------------------------------------------------------------------------------
Volkswagen Auto Lease Trust,
Automobile Lease Asset-Backed
Securities:
Series 2004-A, Cl. A2, 2.47%, 1/22/07 154,709 154,453
Series 2005-A, Cl. A2, 3.52%, 4/20/07 737,424 735,164
- -----------------------------------------------------------------------------------------
Wachovia Auto Owner Trust,
Automobile Receivable Nts.,
Series 2004-B, Cl. A2, 2.40%, 5/21/07 73,750 73,647
- -----------------------------------------------------------------------------------------
Wells Fargo Home Equity Trust,
Home Equity Asset-Backed
Certificates, Series 2004-2,
Cl. AI1B, 2.94%, 9/25/18 1 302,437 300,304
- -----------------------------------------------------------------------------------------
WFS Financial Owner Trust,
Automobile Receivable Obligations,
Series 2002-2, Cl. A4, 4.50%, 2/20/10 155,555 155,632
- -----------------------------------------------------------------------------------------
Whole Auto Loan Trust,
Automobile Loan Receivable
Certificates:
Series 2003-1, Cl. A3B,
1.99%, 5/15/07 84,646 84,225
Series 2004-1, Cl. A2A,
2.59%, 5/15/07 246,804 245,894
---------------
Total Asset-Backed Securities
(Cost $26,702,071) 24,772,731
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS--14.1%
- -----------------------------------------------------------------------------------------
Banc of America Commercial
Mortgage, Inc., Commercial Mtg.
Pass-Through Certificates:
Series 2004-6, Cl. A3,
4.512%, 12/10/42 $ 560,000 $ 542,571
Series 2005-2, Cl. A4,
4.783%, 7/10/43 1 820,000 805,089
Series 2005-3, Cl. A2,
4.501%, 7/10/43 690,000 673,701
- -----------------------------------------------------------------------------------------
Banc of America Funding Corp.,
CMO Pass-Through Certificates,
Series 2004-2, Cl. 2A1, 6.50%, 7/20/32 595,219 595,865
- -----------------------------------------------------------------------------------------
Banc of America Mortgage
Securities, Inc., CMO
Pass-Through Certificates:
Series 2004-8, Cl. 5A1,
6.50%, 5/25/32 477,693 485,157
Series 2004-E, Cl. 2A9,
3.712%, 6/25/34 1 11,340 11,337
Series 2005-E, Cl. 2A2,
4.983%, 6/25/35 1 136,290 135,671
- -----------------------------------------------------------------------------------------
Bear Stearns Commercial
Mortgage Securities, Inc.,
Commercial Mtg. Obligations,
Series 2005-PWR7, Cl. A2,
4.945%, 2/11/41 280,000 276,921
- -----------------------------------------------------------------------------------------
Citigroup/Deutsche Bank
Commercial Mortgage Trust,
Commercial Mtg. Obligations,
Series 2005-CD1, Cl. A4,
5.225%, 7/15/44 930,000 940,274
- -----------------------------------------------------------------------------------------
Countrywide Alternative
Loan Trust, CMO:
Series 2004-J9, Cl. 1A1,
4.559%, 10/25/34 1 169,529 169,660
Series 2005-J1, Cl. 3A1,
6.50%, 8/25/32 1,434,712 1,460,269
- -----------------------------------------------------------------------------------------
Countrywide Asset-Backed
Certificates, Inc., Home Equity
Asset-Backed Certificates, Series
2005-10, Cl. AF1, 4.539%, 2/25/36 1 1,241,633 1,242,450
- -----------------------------------------------------------------------------------------
Federal Home Loan
Mortgage Corp.:
4.50%, 5/1/19 992,147 967,066
5%, 1/1/36 5 3,491,000 3,379,724
6%, 5/1/18-10/1/34 5,717,933 5,806,064
6.50%, 4/1/18-6/1/35 3,287,397 3,372,460
7%, 3/1/31-10/1/31 791,334 824,690
11%, 11/1/14 48,835 52,223
8 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS Continued
- -----------------------------------------------------------------------------------------
Federal Home Loan Mortgage
Corp., CMO Gtd. Real Estate Mtg.
Investment Conduit Multiclass
Pass-Through Certificates:
Series 1669, Cl. G, 6.50%, 2/15/23 $ 4,079 $ 4,074
Series 2055, Cl. ZM, 6.50%, 5/15/28 255,274 262,027
Series 2080, Cl. Z, 6.50%, 8/15/28 159,031 163,009
Series 2106, Cl. FG, 4.819%, 12/15/28 1 3,588,508 3,623,468
Series 2116, Cl. ZA, 6%, 1/15/29 1,330,994 1,361,830
Series 2326, Cl. ZP, 6.50%, 6/15/31 273,842 282,143
Series 2368, Cl. PR, 6.50%, 10/15/31 1,046,247 1,079,512
Series 2387, Cl. PD, 6%, 4/15/30 194,660 196,511
Series 2456, Cl. BD, 6%, 3/15/30 78,387 78,549
Series 2500, Cl. FD, 4.869%, 3/15/32 1 87,115 88,074
Series 2526, Cl. FE, 4.769%, 6/15/29 1 115,553 116,386
Series 2551, Cl. FD, 4.769%, 1/15/33 1 89,701 90,539
Series 2583, Cl. KA, 5.50%, 3/15/22 453,262 454,127
- -----------------------------------------------------------------------------------------
Federal Home Loan Mortgage
Corp., CMO Pass-Through
Participation Certificates,
Series 151, Cl. F, 9%, 5/15/21 75,878 75,762
- -----------------------------------------------------------------------------------------
Federal Home Loan Mortgage
Corp., Gtd. Real Estate Mtg.
Investment Conduit Multiclass
Pass-Through Certificates:
Series 2195, Cl. LH, 6.50%, 10/15/29 1,547,983 1,573,498
Series 3017, Cl. CF, 4.669%, 8/15/25 1 868,463 865,809
- -----------------------------------------------------------------------------------------
Federal Home Loan Mortgage
Corp., Interest-Only Stripped
Mtg.-Backed Security:
Series 177, Cl. B, 13.58%, 7/1/26 6 307,824 65,587
Series 192, Cl. IO, 15.329%, 2/1/28 6 78,405 16,027
Series 200, Cl. IO, 13.915%, 1/1/29 6 93,375 20,299
Series 205, Cl. IO, 11.518%, 9/1/29 6 419,834 98,689
Series 208, Cl. IO, (16.354)%, 6/1/30 6 472,869 91,069
Series 2003-118, Cl. S,
20.029%, 12/25/33 6 1,799,083 196,534
Series 2074, Cl. S, 7.416%, 7/17/28 6 104,089 9,939
Series 2079, Cl. S, 7.334%, 7/17/28 6 164,142 16,214
Series 2526, Cl. SE, 10.353%, 6/15/29 6 216,034 14,800
Series 2920, Cl. S, 14.191%, 1/15/35 6 1,909,478 92,305
Series 3000, Cl. SE, 19.592%, 7/15/25 6 1,965,537 71,833
- -----------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
5%, 2/1/18-6/1/18 2,568,386 2,545,666
5%, 1/1/36 5 15,032,000 14,566,940
5.50%, 3/1/33-1/1/34 14,341,274 14,240,585
5.50%, 1/1/21-1/1/36 5 49,013,093 48,771,702
6%, 7/1/16-1/1/33 10,376,021 10,560,573
6.50%, 5/1/29-10/1/30 248,012 255,517
6.50%, 1/1/36 5 7,350,000 7,540,644
7%, 11/1/17 721,949 750,653
7.50%, 8/1/25-3/1/33 3,209,659 3,370,473
8.50%, 7/1/32 17,921 19,405
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS Continued
- -----------------------------------------------------------------------------------------
Federal National Mortgage Assn.,
CMO Gtd. Real Estate Mtg.
Investment Conduit
Pass-Through Certificates:
Trust 1998-63, Cl. PG, 6%, 3/25/27 $ 14,142 $ 14,108
Trust 2001-50, Cl. NE, 6%, 8/25/30 104,203 104,815
Trust 2001-51, Cl. OD,
6.50%, 10/25/31 762,132 784,955
Trust 2001-70, Cl. LR, 6%, 9/25/30 125,219 126,419
Trust 2001-72, Cl. NH, 6%, 4/25/30 74,674 75,253
Trust 2001-74, Cl. PD, 6%, 5/25/30 30,090 30,166
Trust 2002-77, Cl. WF,
4.77%, 12/18/32 1 139,323 140,388
Trust 2003-17, Cl. EQ, 5.50%, 3/25/23 1,265,000 1,274,603
Trust 2003-23, Cl. EQ, 5.50%, 4/25/23 890,000 896,486
Trust 2004-101, Cl. BG, 5%, 1/25/20 630,000 621,743
Trust 2005-67, Cl. BF,
4.729%, 8/25/35 1 1,588,672 1,592,711
Trust 2005-71, Cl. DB, 4.50%, 8/25/25 480,000 450,840
Trust 2005-100, Cl. BQ,
5.50%, 11/25/25 520,000 512,871
Trust 2005-109, Cl. AH,
5.50%, 12/25/25 2,160,000 2,149,399
- -----------------------------------------------------------------------------------------
Federal National Mortgage Assn.,
CMO Gtd. Real Estate Mtg.
Investment Conduit Pass-Through
Certificates, Interest-Only Stripped
Mtg.-Backed Security:
Trust 2002-38, Cl. SO,
8.585%, 4/25/32 6 597,505 34,900
Trust 2002-48, Cl. S,
10.408%, 7/25/32 6 179,349 15,334
Trust 2002-52, Cl. SL,
10.759%, 9/25/32 6 113,104 12,450
Trust 2002-56, Cl. SN,
11.83%, 7/25/32 6 246,449 21,135
Trust 2002-77, Cl. IS,
11.079%, 12/18/32 6 1,017,971 85,597
- -----------------------------------------------------------------------------------------
Federal National Mortgage Assn.,
CMO Gtd. Real Estate Mtg.
Investment Conduit Pass-Through
Certificates, Interest-Only Stripped
Mtg.-Backed Security, Trust
2002-28, Cl. SA, 10.896%, 4/25/32 6 112,560 9,565
- -----------------------------------------------------------------------------------------
Federal National Mortgage Assn.,
Interest-Only Stripped
Mtg.-Backed Security:
Trust 214, Cl. 2, 13.703%, 3/1/23 6 1,273,060 294,209
Trust 221, Cl. 2, 9.76%, 5/1/23 6 140,174 30,582
Trust 240, Cl. 2, 20.285%, 9/1/23 6 250,162 52,095
Trust 301, Cl. 2, 7.628%, 4/1/29 6 562,508 122,072
Trust 313, Cl. 2, (12.079)%, 6/1/31 6 605,902 134,905
Trust 319, Cl. 2, 13.317%, 2/1/32 6 182,184 41,307
Trust 321, Cl. 2, 13.248%, 3/1/32 6 814,006 183,716
Trust 324, Cl. 2, 6.975%, 6/1/32 6 1,409,509 312,154
Trust 329, Cl. 2, 10.882%, 1/1/33 6 4,044,873 896,438
Trust 333, Cl. 2, 12.952%, 3/1/33 6 2,086,301 467,503
9 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS Continued
- -----------------------------------------------------------------------------------------
Federal National Mortgage Assn.,
Interest-Only Stripped
Mtg.-Backed Security: Continued
Trust 338, Cl. 2, 10.604%, 6/1/33 6 $ 4,332,765 $ 968,258
Trust 346, Cl. 2, 12.156%, 12/1/33 6 5,189,940 1,150,831
Trust 350, Cl. 2, 12.194%, 2/1/34 6 2,226,315 493,725
Trust 2001-61, Cl. SH,
21.053%, 11/18/31 6 973,287 89,584
Trust 2001-63, Cl. SD,
10.177%, 12/18/31 6 215,770 17,915
Trust 2001-68, Cl. SC,
10.741%, 11/25/31 6 153,568 14,096
Trust 2001-81, Cl. S,
11.605%, 1/25/32 6 193,489 16,847
Trust 2002-9, Cl. MS,
10.333%, 3/25/32 6 238,820 20,878
Trust 2002-77, Cl. SH,
12.545%, 12/18/32 6 248,285 23,387
Trust 2003-4, Cl. S,
20.563%, 2/25/33 6 477,815 50,726
Trust 2005-40, Cl. SA,
13.682%, 5/25/35 6 5,583,134 297,482
Trust 2005-40, Cl. SB,
17.295%, 5/25/35 6 1,260,731 71,782
Trust 2005-71, Cl. SA,
19.968%, 8/25/25 6 1,265,880 75,647
- -----------------------------------------------------------------------------------------
First Union National Bank/Lehman
Brothers/Bank of America
Commercial Mtg. Trust, Pass-
Through Certificates, Series
1998-C2, Cl. A2, 6.56%, 11/18/35 326,040 335,300
- -----------------------------------------------------------------------------------------
Ford Credit Auto Owner Trust,
Automobile Loan Pass-Through
Certificates, Series 2005-C,
Cl. A2, 4.24%, 3/15/08 1,020,000 1,016,450
- -----------------------------------------------------------------------------------------
GE Capital Commercial Mortgage
Corp., Commercial Mtg. Obligations:
Series 2004-C3, Cl. A2,
4.433%, 7/10/39 390,000 383,404
Series 2005-C3, Cl. A2,
4.853%, 7/10/45 430,000 427,149
Series 2005-CA, Cl. A3,
4.578%, 6/10/48 220,000 214,139
- -----------------------------------------------------------------------------------------
GMAC Commercial Mortgage
Securities, Inc., Commercial Mtg.
Pass-Through Certificates:
Series 1997-C1, Cl. A3,
6.869%, 7/15/29 215,353 220,258
Series 1998-C1, Cl. F,
7.097%, 5/15/30 1 1,567,000 1,613,902
Series 2004-C3, Cl. A4,
4.547%, 12/10/41 360,000 348,695
- -----------------------------------------------------------------------------------------
Government National Mortgage Assn.:
4.125%, 11/20/25 1 13,375 13,509
7%, 3/15/28-7/15/28 667,869 702,103
7.50%, 2/15/27 87,134 91,823
8%, 11/15/25-5/15/26 134,933 144,662
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS Continued
- -----------------------------------------------------------------------------------------
Government National Mortgage
Assn., Interest-Only Stripped
Mtg.-Backed Security:
Series 1998-6, Cl. SA,
7.002%, 3/16/28 6 $ 198,268 $ 10,992
Series 1998-19, Cl. SB,
5.943%, 7/16/28 6 326,849 31,027
Series 2001-21, Cl. SB,
3.873%, 1/16/27 6 1,592,265 109,642
- -----------------------------------------------------------------------------------------
Greenwich Capital Commercial
Funding Corp., Commercial Mtg.
Pass-Through Certificates:
Series 2005-GG3, Cl. A2,
4.305%, 8/10/42 500,000 487,191
Series 2005-GG5, Cl. A2,
5.117%, 4/10/37 550,000 551,679
- -----------------------------------------------------------------------------------------
GS Mortgage Securities Corp. II,
Commercial Mtg. Pass-Through
Certificates:
Series 2004-C1, Cl. A1,
3.659%, 10/10/28 402,716 390,282
Series 2004-GG2, Cl. A3,
4.602%, 8/10/38 250,000 246,939
- -----------------------------------------------------------------------------------------
JP Morgan Chase Mortgage Trust,
CMO Pass-Through Certificates,
Series 2005-S2, Cl. 3A1,
6.754%, 9/25/32 1 2,751,748 2,802,021
- -----------------------------------------------------------------------------------------
JPMorgan Chase Commercial
Mortgage Securities Corp.,
Commercial Mtg. Pass-Through
Certificates:
Series 2005-LDP2, Cl. A2,
4.575%, 7/15/42 160,000 156,834
Series 2005-LDP4, Cl. A2,
4.79%, 10/15/42 670,000 661,472
- -----------------------------------------------------------------------------------------
LB-UBS Commercial Mortgage
Trust, Commercial Mtg.
Pass-Through Certificates, Series
2005-C5, Cl. A2, 4.885%, 9/15/30 520,000 516,594
- -----------------------------------------------------------------------------------------
Mastr Alternative Loan Trust,
CMO Pass-Through Certificates:
Series 2004-6, Cl. 10A1, 6%, 7/25/34 725,372 729,351
Series 2004-9, Cl. A3, 4.70%, 8/25/34 1 780,000 776,443
- -----------------------------------------------------------------------------------------
Morgan Stanley Capital I Trust,
Commercial Mtg. Pass-Through
Certificates:
Series 1996-C1, Cl. F,
7.346%, 2/15/28 1,2 162,744 162,487
Series 1997-XL1, Cl. G,
7.695%, 10/3/30 390,000 296,061
- -----------------------------------------------------------------------------------------
Nomura Asset Securities Corp.,
Commercial Mtg. Pass-Through
Certificates, Series 1998-D6,
Cl. A1B, 6.59%, 3/15/30 420,000 434,343
10 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS Continued
- -----------------------------------------------------------------------------------------
Prudential Mortgage Capital Co. II
LLC, Commercial Mtg. Pass-
Through Certificates, Series
PRU-HTG 2000-C1, Cl. A2,
7.306%, 10/6/15 $ 556,000 $ 608,266
- -----------------------------------------------------------------------------------------
Salomon Brothers Mortgage
Securities VII, Inc., Commercial
Mtg. Pass-Through Certificates,
Series 1996-C1, Cl. F,
8.301%, 1/20/28 1,4 1,000,000 820,000
- -----------------------------------------------------------------------------------------
Wachovia Bank Commercial
Mortgage Trust, Commercial
Mtg. Obligations:
Series 2005-C17, Cl. A2,
4.782%, 3/15/42 820,000 810,955
Series 2005-C20, Cl. A5,
5.087%, 7/15/42 1 520,000 516,590
- -----------------------------------------------------------------------------------------
Washington Mutual Mortgage
Securities Corp., CMO
Pass-Through Certificates:
Series 2005-AR5, Cl. A1,
4.681%, 5/25/35 1 606,505 606,069
Series 2005-AR8, Cl. 2AB1,
4.629%, 7/25/45 1 887,320 887,181
- -----------------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed
Securities Trust, CMO, Series
2004-DD, Cl. 2A1, 4.522%, 1/25/35 1 425,472 424,171
---------------
Total Mortgage-Backed Obligations
(Cost $169,696,773) 168,699,825
- -----------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--10.1%
- -----------------------------------------------------------------------------------------
Fannie Mae Unsec. Nts.,
3.58%, 1/31/07 7 3,482,000 3,311,716
- -----------------------------------------------------------------------------------------
Federal Home Loan Bank
Unsec. Bonds:
3.50%, 11/15/07 425,000 415,581
Series S906, 3.50%, 8/15/06 1,715,000 1,703,395
- -----------------------------------------------------------------------------------------
Federal Home Loan Mortgage
Corp. Unsec. Nts.:
2.75%, 8/15/06 280,000 276,845
3.625%, 9/15/06 8 3,459,000 3,434,676
4.125%, 7/12/10 4,376,000 4,271,611
5.50%, 9/15/11 9 3,350,000 3,471,669
- -----------------------------------------------------------------------------------------
Federal National Mortgage Assn.
Unsec. Nts.:
3.01%, 6/2/06 1,219,000 1,211,189
3.25%, 7/31/06 9 1,335,000 1,324,447
4%, 2/28/07 965,000 956,905
4.25%, 7/15/07 2,198,000 2,182,427
4.75%, 12/15/10 2,245,000 2,247,478
6%, 5/15/11 12,690,000 13,436,794
6.625%, 9/15/09 8 2,625,000 2,793,559
7.25%, 1/15/10-5/15/30 3,262,000 3,725,740
- -----------------------------------------------------------------------------------------
Resolution Funding Corp.
STRIPS, 5.16%, 1/15/21 7,9 5,667,000 2,777,907
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS Continued
- -----------------------------------------------------------------------------------------
Tennessee Valley Authority Bonds:
4.65%, 6/15/35 $ 455,000 $ 431,853
5.88%, 4/1/36 670,000 764,026
Series A, 6.79%, 5/23/12 8,412,000 9,321,489
- -----------------------------------------------------------------------------------------
U.S. Treasury Bills, 3.83%, 3/9/06 9 42,440,000 42,142,368
- -----------------------------------------------------------------------------------------
U.S. Treasury Bonds:
5.50%, 8/15/28 9,10 900,000 1,012,254
6.875%, 8/15/25 9 2,000,000 2,576,250
7.25%, 5/15/16 9,11 4,454,000 5,470,421
8.875%, 8/15/17 8,9 1,419,000 1,972,299
9.25%, 2/15/16 9 208,000 288,316
STRIPS, 4.20%, 2/15/11 7 900,000 722,406
STRIPS, 4.81%, 2/15/16 7,9 4,491,000 2,851,340
- -----------------------------------------------------------------------------------------
U.S. Treasury Nts.:
4.875%, 2/15/12 9 2,000,000 2,053,986
6.50%, 2/15/10 9 3,900,000 4,208,194
---------------
Total U.S. Government Obligations
(Cost $121,454,498) 121,357,141
- -----------------------------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS--24.5%
- -----------------------------------------------------------------------------------------
ARGENTINA--1.2%
Argentina (Republic of) Bonds:
1.20%, 12/31/38 1 [EUR] 1,390,000 537,704
1.33%, 12/31/38 1 1,485,000 493,763
2%, 9/30/14 4 [ARP] 1,802,000 592,939
4.005%, 8/3/12 1 11,769,625 10,298,769
5.83%, 12/31/33 4 [ARP] 2,416,338 703,501
- -----------------------------------------------------------------------------------------
Argentina (Republic of) Unsec.
Unsub. Bonds, 12/15/35 (linked
to Argentina Gross Domestic
Product) 4 [ARP] 6,934,172 113,225
- -----------------------------------------------------------------------------------------
Buenos Aires (Province of) Bonds,
Bonos de Consolidacion de
Deudas, Series PBA1, 4/1/07 3,4 [ARP] 33,261 14,149
- -----------------------------------------------------------------------------------------
Central Bank of Argentina Bonds,
2%, 2/4/18 4 [ARP] 2,380,800 1,154,470
---------------
13,908,520
- -----------------------------------------------------------------------------------------
AUSTRALIA--1.0%
Queensland Treasury Corp. Unsec.
Nts., Series 09G, 6%, 7/14/09 [AUD] 15,220,000 11,388,060
- -----------------------------------------------------------------------------------------
AUSTRIA--1.0%
Austria (Republic of) Nts., 3.80%,
10/20/13 2 [EUR] 10,140,000 12,482,751
- -----------------------------------------------------------------------------------------
BRAZIL--1.6%
Brazil (Federal Republic of) Bonds:
8%, 1/15/18 6,043,000 6,535,505
8.25%, 1/20/34 2,100,000 2,234,400
8.75%, 2/4/25 6,320,000 6,999,400
12.50%, 1/5/16 [BRR] 8,340,000 3,575,610
Series 15 yr., 5.25%, 4/15/09 1 10,295 10,282
- -----------------------------------------------------------------------------------------
Brazil (Federal Republic of) Nts.,
7.875%, 3/7/15 130,000 138,775
---------------
19,493,972
11 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------
BULGARIA--0.2%
Bulgaria (Republic of) Bonds:
8.25%, 1/15/15 $ 740,000 $ 895,400
8.25%, 1/15/15 2 710,000 859,100
---------------
1,754,500
- -----------------------------------------------------------------------------------------
COLOMBIA--1.0%
Colombia (Republic of) Bonds:
10.75%, 1/15/13 1,390,000 1,730,550
12%, 10/22/15 [COP] 8,993,000,000 4,656,584
- -----------------------------------------------------------------------------------------
Colombia (Republic of) Nts.:
8.25%, 12/22/14 933,000 1,040,295
11.75%, 3/1/10 [COP] 2,617,240,000 1,286,654
- -----------------------------------------------------------------------------------------
Colombia (Republic of) Unsec.
Bonds, 8.125%, 5/21/24 3,375,000 3,661,875
---------------
12,375,958
- -----------------------------------------------------------------------------------------
DOMINICAN REPUBLIC--0.1%
Dominican Republic Unsec. Unsub.
Bonds, Series REG S, 9.04%, 1/23/18 425,396 449,325
- -----------------------------------------------------------------------------------------
Dominican Republic Unsec. Unsub.
Nts., 9.50%, 9/27/11 2 838,000 888,280
---------------
1,337,605
- -----------------------------------------------------------------------------------------
EL SALVADOR--0.1%
El Salvador (Republic of) Bonds,
7.625%, 9/21/34 2 590,000 641,625
- -----------------------------------------------------------------------------------------
FRANCE--0.5%
France (Government of)
Obligations Assimilables du Tresor
Bonds, 5.50%, 10/25/10 [EUR] 4,260,000 5,588,974
- -----------------------------------------------------------------------------------------
GERMANY--1.6%
Germany (Republic of) Bonds:
Series 03, 3.75% 7/4/13 [EUR] 14,820,000 18,180,454
Series 99, 4%, 7/4/09 [EUR] 935,000 1,144,024
---------------
19,324,478
- -----------------------------------------------------------------------------------------
GUATEMALA--0.0%
Guatemala (Republic of) Nts.:
10.25%, 11/8/11 2 250,000 298,750
10.25%, 11/8/11 95,000 113,525
---------------
412,275
- -----------------------------------------------------------------------------------------
INDONESIA--0.2%
Indonesia (Republic of) Nts.:
6.75%, 3/10/14 2 120,000 120,000
7.25%, 4/20/15 2 200,000 206,250
- -----------------------------------------------------------------------------------------
Indonesia (Republic of) Unsec.
Nts., 8.50%, 10/12/35 4 2,370,000 2,579,271
---------------
2,905,521
- -----------------------------------------------------------------------------------------
ISRAEL--0.3%
Israel (State of) Bonds,
Series 2682, 7.50%, 3/31/14 [ILS] 16,093,000 3,788,455
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------
ITALY--0.4%
Italy (Republic of) Treasury Bonds,
Buoni del Tesoro Poliennali,
4.25%, 2/1/19 [EUR] 3,800,000 $ 4,799,318
- -----------------------------------------------------------------------------------------
JAPAN--4.6%
Japan (Government of) Bonds:
2 yr., Series 237, 0.20%,
10/15/07 [JPY] 4,154,000,000 35,204,124
10 yr., Series 239, 1.40%, 6/20/12 [JPY] 1,062,000,000 9,178,486
20 yr., Series 81, 2%, 9/20/25 [JPY] 1,223,000,000 10,414,192
---------------
54,796,802
- -----------------------------------------------------------------------------------------
MALAYSIA--0.3%
Johor Corp. Malaysia
(Government of) Bonds,
Series P3, 1%, 7/31/12 4 [MYR] 7,980,000 2,290,859
- -----------------------------------------------------------------------------------------
Malaysia (Government of) Bonds,
Series 2/05, 4.72%, 9/30/15 [MYR] 3,490,000 960,800
---------------
3,251,659
- -----------------------------------------------------------------------------------------
MEXICO--1.5%
United Mexican States Bonds:
7.50%, 4/8/33 863,000 1,023,950
8.30%, 8/15/31 400,000 515,000
Series B1, 8.99%, 4/12/06 7 [MXN] 7,940,000 728,098
Series M10, 10.50%, 7/14/11 1 [MXN] 55,490,000 5,985,869
Series M20, 8%, 12/7/23 1 [MXN] 20,056,000 1,782,301
Series M20, 10%, 12/5/24 1 [MXN] 14,345,000 1,528,241
Series MI10, 8%, 12/19/13 [MXN] 16,100,000 1,494,162
Series MI10, 9.50%, 12/18/14 1 [MXN] 20,590,800 2,088,220
- -----------------------------------------------------------------------------------------
United Mexican States Nts.,
7.50%, 1/14/12 1,132,000 1,265,010
- -----------------------------------------------------------------------------------------
United Mexican States Unsec.
Unsub. Nts., Series 6 BR,
6.75%, 6/6/06 [JPY] 135,000,000 1,175,033
---------------
17,585,884
- -----------------------------------------------------------------------------------------
NEW ZEALAND--0.9%
New Zealand (Government of)
Bonds, Series 70B, 6%, 7/15/08 [NZD] 15,210,000 10,397,940
- -----------------------------------------------------------------------------------------
NIGERIA--0.1%
Central Bank of Nigeria Gtd.
Bonds, Series WW, 6.25%, 11/15/20 960,000 964,800
- -----------------------------------------------------------------------------------------
Nigeria (Federal Republic of)
Promissory Nts., Series RC,
5.092%, 1/5/10 194,562 180,067
---------------
1,144,867
- -----------------------------------------------------------------------------------------
PANAMA--0.7%
Panama (Republic of) Bonds:
8.125%, 4/28/34 6,635,000 7,431,200
9.375%, 4/1/29 655,000 826,938
---------------
8,258,138
12 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------
PERU--1.3%
Peru (Republic of) Bonds:
7.35%, 7/21/25 $ 820,000 $ 811,800
7.84%, 8/12/20 [PEN] 19,410,000 5,450,812
8.375%, 5/3/16 290,000 319,725
9.91%, 5/5/15 [PEN] 6,840,000 2,247,116
Series 2, 9%, 1/31/12 [PEN] 1,340,000 425,617
Series 7, 8.60%, 8/12/17 [PEN] 3,450,000 1,034,849
Series 8-1, 12.25%, 8/10/11 [PEN] 1,427,000 514,739
- -----------------------------------------------------------------------------------------
Peru (Republic of) Past Due
Interest Bonds, Series 20 yr.,
5%, 3/7/17 1 1,427,620 1,352,670
- -----------------------------------------------------------------------------------------
Peru (Republic of) Sr. Nts.,
4.53%, 2/28/16 7 1,297,529 773,781
- -----------------------------------------------------------------------------------------
Peru (Republic of) Unsec. Unsub.
Bonds, 8.75%, 11/21/33 2,680,000 3,028,400
---------------
15,959,509
- -----------------------------------------------------------------------------------------
PHILIPPINES--0.2%
Philippines (Republic of) Bonds:
8%, 1/15/16 700,000 735,000
8.375%, 2/15/11 438,000 473,151
9.50%, 2/2/30 809,000 952,598
- -----------------------------------------------------------------------------------------
Philippines (Republic of) Nts.,
8.25%, 1/15/14 441,000 471,319
---------------
2,632,068
- -----------------------------------------------------------------------------------------
POLAND--0.1%
Poland (Republic of) Bonds:
Series DS1013, 5%, 10/24/13 [PLZ] 4,640,000 1,421,097
Series WS0922, 5.75%, 9/23/22 [PLZ] 1,000,000 324,839
---------------
1,745,936
- -----------------------------------------------------------------------------------------
RUSSIA--0.5%
Aries Vermoegensverwaltungs
GmbH Unsub. Nts.:
Series B, 7.75%, 10/25/09 2 [EUR] 700,000 949,658
Series C, 9.60%, 10/25/14 810,000 1,046,875
Ministry Finance of Russia Debs.,
Series VII, 3%, 5/14/11 1,170,000 1,043,535
- -----------------------------------------------------------------------------------------
Russian Federation Ministry of
Finance Unsec. Debs., Series V,
3%, 5/14/08 3,277,000 3,107,514
---------------
6,147,582
- -----------------------------------------------------------------------------------------
SOUTH AFRICA--0.7%
South Africa (Republic of) Bonds:
Series 153, 13%, 8/31/10 [ZAR] 13,100,000 2,527,939
Series R157, 13.50%, 9/15/15 [ZAR] 6,355,000 1,417,683
Series R186, 10.50%, 12/21/26 [ZAR] 17,528,000 3,791,047
Series R203, 8.25%, 9/15/17 [ZAR] 3,000,000 503,970
Series R204, 8%, 12/21/18 [ZAR] 3,175,000 526,146
---------------
8,766,785
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------
SPAIN--0.5%
Spain (Kingdom of) Bonds:
Bonos y Obligacion del Estado,
5.35%, 10/31/11 [EUR] 3,216,000 $ 4,251,557
Bonos y Obligacion del Estado,
5.75%, 7/30/32 [EUR] 903,000 1,458,958
---------------
5,710,515
- -----------------------------------------------------------------------------------------
THE NETHERLANDS--0.1%
Netherlands (Kingdom of the)
Bonds, 5.50%, 1/15/28 [EUR] 740,000 1,133,650
- -----------------------------------------------------------------------------------------
TURKEY--0.6%
Turkey (Republic of) Bonds,
8%, 2/14/34 955,000 1,056,469
- -----------------------------------------------------------------------------------------
Turkey (Republic of) Nts.,
7.25%, 3/15/15 5,901,000 6,240,308
---------------
7,296,777
- -----------------------------------------------------------------------------------------
UNITED KINGDOM--2.3%
United Kingdom Treasury Nts.,
4%, 3/7/09 [GBP] 16,185,000 27,692,966
- -----------------------------------------------------------------------------------------
URUGUAY--0.1%
Uruguay (Republic of) Unsec.
Bonds, 8%, 11/18/22 1,545,000 1,587,488
- -----------------------------------------------------------------------------------------
VENEZUELA--0.8%
Venezuela (Republic of) Bonds:
9.25%, 9/15/27 5,965,000 7,083,438
13.625%, 8/15/18 500,000 728,750
- -----------------------------------------------------------------------------------------
Venezuela (Republic of) Nts.,
7%, 3/16/15 [EUR] 1,097,000 1,373,409
---------------
9,185,597
---------------
Total Foreign Government
Obligations (Cost $289,884,310) 293,496,175
- -----------------------------------------------------------------------------------------
LOAN PARTICIPATIONS--0.2%
- -----------------------------------------------------------------------------------------
Algeria (Republic of) Loan
Participation Nts., 4.809%, 3/4/10 1,4 349,500 347,753
- -----------------------------------------------------------------------------------------
Deutsche Bank AG, Indonesia
(Republic of) Rupiah Loan
Participation Nts., 3.938%, 1/25/06 1 1,490,000 1,478,825
---------------
Total Loan Participations
(Cost $1,813,488) 1,826,578
- -----------------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES--26.9%
- -----------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--7.9%
- -----------------------------------------------------------------------------------------
AUTO COMPONENTS--0.4%
Collins & Aikman
Floorcoverings, Inc., 9.75%
Sr. Sub. Nts., Series B, 2/15/10 200,000 177,000
- -----------------------------------------------------------------------------------------
Dana Corp., 10.125% Nts., 3/15/10 200,000 172,000
13 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------
AUTO COMPONENTS Continued
Dura Operating Corp.:
8.625% Sr. Nts., Series B, 4/15/12 $ 200,000 $ 166,000
9% Sr. Unsec. Sub. Nts.,
Series D, 5/1/09 500,000 285,000
- -----------------------------------------------------------------------------------------
Eagle-Picher, Inc., 9.75% Sr. Nts.,
9/1/13 3 60,000 45,900
- -----------------------------------------------------------------------------------------
Goodyear Tire & Rubber Co. (The):
7.857% Nts., 8/15/11 825,000 808,500
9% Sr. Nts., 7/1/15 2 1,045,000 1,034,550
- -----------------------------------------------------------------------------------------
Stoneridge, Inc., 11.50% Sr. Nts.,
5/1/12 500,000 511,250
- -----------------------------------------------------------------------------------------
Tenneco Automotive, Inc.:
8.625% Sr. Unsec. Sub. Nts., 11/15/14 900,000 855,000
10.25% Sr. Sec. Nts., Series B, 7/15/13 150,000 164,625
- -----------------------------------------------------------------------------------------
United Components, Inc., 9.375%
Sr. Sub. Nts., 6/15/13 200,000 200,000
- -----------------------------------------------------------------------------------------
Visteon Corp.:
7% Sr. Unsec. Nts., 3/10/14 425,000 330,438
8.25% Sr. Unsec. Nts., 8/1/10 100,000 85,500
---------------
4,835,763
- -----------------------------------------------------------------------------------------
AUTOMOBILES--0.7%
Ford Motor Co., 7.45% Bonds,
7/16/31 800,000 548,000
- -----------------------------------------------------------------------------------------
Ford Motor Credit Co.:
5.625% Nts., 10/1/08 1,700,000 1,492,576
5.80% Sr. Unsec. Nts., 1/12/09 300,000 261,875
7.25% Nts., 10/25/11 400,000 345,933
7.375% Nts., 10/28/09 900,000 798,834
- -----------------------------------------------------------------------------------------
General Motors Acceptance Corp.:
5.125% Nts., 5/9/08 300,000 267,212
5.85% Sr. Unsec. Unsub. Nts.,
1/14/09 900,000 805,702
6.875% Nts., 9/15/11 300,000 273,896
7.25% Nts., 3/2/11 400,000 368,038
8% Bonds, 11/1/31 1,200,000 1,152,503
- -----------------------------------------------------------------------------------------
General Motors Corp., 8.375% Sr.
Unsec. Debs., 7/15/33 400,000 266,000
- -----------------------------------------------------------------------------------------
Hertz Corp.:
8.875% Sr. Nts., 1/1/14 2 1,160,000 1,187,550
10.50% Sr. Sub. Nts., 1/1/16 2 435,000 450,225
---------------
8,218,344
- -----------------------------------------------------------------------------------------
DISTRIBUTORS--0.0%
SGS International, Inc.,
12% Sr. Sub. Nts., 12/15/13 2 580,000 583,853
- -----------------------------------------------------------------------------------------
DIVERSIFIED CONSUMER SERVICES--0.1%
Alderwoods Group, Inc.,
7.75% Sr. Nts., 9/15/12 650,000 676,000
- -----------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--2.3%
Apcoa, Inc., 9.25% Sr. Unsec.
Sub. Nts., 3/15/08 4 100,000 98,500
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE Continued
Aztar Corp., 9% Sr. Unsec. Sub.
Nts., 8/15/11 $ 850,000 $ 904,188
- -----------------------------------------------------------------------------------------
Boyd Gaming Corp.,
8.75% Sr. Sub. Nts., 4/15/12 500,000 538,750
- -----------------------------------------------------------------------------------------
CCM Merger, Inc.,
8% Unsec. Nts., 8/1/13 2 1,040,000 1,003,600
- -----------------------------------------------------------------------------------------
Domino's, Inc., 8.25% Sr. Unsec.
Sub. Nts., 7/1/11 547,000 574,350
- -----------------------------------------------------------------------------------------
Gaylord Entertainment Co.,
8% Sr. Nts., 11/15/13 400,000 421,000
- -----------------------------------------------------------------------------------------
Greektown Holdings, Inc.,
10.75% Sr. Nts., 12/1/13 2 835,000 832,913
- -----------------------------------------------------------------------------------------
Intrawest Corp.,
7.50% Sr. Unsec. Nts., 10/15/13 4 625,000 635,938
- -----------------------------------------------------------------------------------------
Isle of Capri Casinos, Inc.:
7% Sr. Unsec. Sub. Nts., 3/1/14 2,100,000 2,058,000
9% Sr. Sub. Nts., 3/15/12 500,000 531,250
- -----------------------------------------------------------------------------------------
Kerzner International Ltd., 6.75%
Sr. Sub. Nts., 10/1/15 2 490,000 478,975
- -----------------------------------------------------------------------------------------
Mandalay Resort Group, 10.25%
Sr. Unsec. Sub. Nts., Series B, 8/1/07 650,000 696,313
- -----------------------------------------------------------------------------------------
MGM Mirage, Inc.:
8.375% Sr. Unsec. Sub. Nts., 2/1/11 1,800,000 1,935,000
9.75% Sr. Unsec. Sub. Nts., 6/1/07 350,000 370,563
- -----------------------------------------------------------------------------------------
Mohegan Tribal Gaming Authority:
6.125% Sr. Unsec. Sub. Nts., 2/15/13 225,000 222,188
6.375% Sr. Sub. Nts., 7/15/09 250,000 252,813
6.875% Sr. Unsec. Sub. Nts., 2/15/15 515,000 521,438
8% Sr. Sub. Nts., 4/1/12 1,000,000 1,057,500
- -----------------------------------------------------------------------------------------
NCL Corp.,
10.625% Sr. Unsub. Nts., 7/15/14 300,000 311,250
- -----------------------------------------------------------------------------------------
Park Place Entertainment Corp.:
7.875% Sr. Sub. Nts., 3/15/10 200,000 216,000
9.375% Sr. Unsec. Sub. Nts., 2/15/07 4 800,000 835,000
- -----------------------------------------------------------------------------------------
Penn National Gaming, Inc.:
6.75% Sr. Unsec. Sub. Nts., 3/1/15 230,000 227,125
6.875% Sr. Sub. Nts., 12/1/11 500,000 507,500
- -----------------------------------------------------------------------------------------
Pinnacle Entertainment, Inc.,
8.25% Sr. Unsec. Sub. Nts., 3/15/12 1,800,000 1,869,750
- -----------------------------------------------------------------------------------------
Premier Cruise Ltd.,
11% Sr. Nts., 3/15/08 2,3 250,000 --
- -----------------------------------------------------------------------------------------
Six Flags, Inc.:
8.875% Sr. Unsec. Nts., 2/1/10 874,000 856,520
9.625% Sr. Nts., 6/1/14 19,000 18,573
9.75% Sr. Nts., 4/15/13 700,000 690,375
- -----------------------------------------------------------------------------------------
Starwood Hotels & Resorts
Worldwide, Inc.,
7.875% Sr. Nts., 5/1/12 835,000 924,763
- -----------------------------------------------------------------------------------------
Station Casinos, Inc.:
6.50% Sr. Unsec. Sub. Nts., 2/1/14 2,203,000 2,236,045
6.875% Sr. Unsec. Sub. Nts., 3/1/16 235,000 241,463
- -----------------------------------------------------------------------------------------
Trump Entertainment Resorts, Inc.,
8.50% Sec. Nts., 6/1/15 12 2,650,000 2,597,000
14 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE Continued
Universal City Development
Partners Ltd., 11.75% Sr. Nts., 4/1/10 $ 500,000 $ 563,125
- -----------------------------------------------------------------------------------------
Vail Resorts, Inc., 6.75% Sr. Sub.
Nts., 2/15/14 600,000 603,000
- -----------------------------------------------------------------------------------------
Wynn Las Vegas LLC/Wynn
Las Vegas Capital Corp.,
6.625% Nts., 12/1/14 2,274,000 2,222,835
---------------
28,053,603
- -----------------------------------------------------------------------------------------
HOUSEHOLD DURABLES--0.3%
Beazer Homes USA, Inc., 8.375%
Sr. Nts., 4/15/12 400,000 418,000
- -----------------------------------------------------------------------------------------
D.R. Horton, Inc.:
9.375% Sr. Unsec. Sub. Nts., 3/15/11 400,000 422,864
9.75% Sr. Sub. Nts., 9/15/10 400,000 454,201
- -----------------------------------------------------------------------------------------
K. Hovnanian Enterprises, Inc.,
7.75% Sr. Unsec. Sub. Nts., 5/15/13 300,000 297,635
- -----------------------------------------------------------------------------------------
KB Home:
8.625% Sr. Sub. Nts., 12/15/08 250,000 266,793
9.50% Sr. Unsec. Sub. Nts., 2/15/11 400,000 422,768
- -----------------------------------------------------------------------------------------
Meritage Homes Corp., 6.25%
Sr. Unsec. Nts., 3/15/15 320,000 292,800
- -----------------------------------------------------------------------------------------
Sealy Mattress Co., 8.25%
Sr. Sub. Nts., 6/15/14 450,000 465,750
- -----------------------------------------------------------------------------------------
Standard Pacific Corp., 9.25%
Sr. Sub. Nts., 4/15/12 200,000 206,750
- -----------------------------------------------------------------------------------------
WCI Communities, Inc., 9.125%
Sr. Sub. Nts., 5/1/12 300,000 300,000
- -----------------------------------------------------------------------------------------
William Lyon Homes, Inc., 10.75%
Sr. Nts., 4/1/13 400,000 415,000
---------------
3,962,561
- -----------------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS--0.1%
Leslie's Poolmart, Inc., 7.75%
Sr. Unsec. Nts., 2/1/13 225,000 226,688
- -----------------------------------------------------------------------------------------
Rexnord Corp., 10.125%
Sr. Unsec. Sub. Nts., 12/15/12 350,000 378,000
---------------
604,688
- -----------------------------------------------------------------------------------------
MEDIA--3.1%
Adelphia Communications Corp.:
7.875% Sr. Unsec. Nts., 5/1/09 3 350,000 194,250
10.25% Sr. Unsec. Sub. Nts., 6/15/11 3 200,000 121,000
10.875% Sr. Unsec. Nts., 10/1/10 3 400,000 226,000
- -----------------------------------------------------------------------------------------
Allbritton Communications Co.,
7.75% Sr. Unsec. Sub. Nts., 12/15/12 700,000 707,000
- -----------------------------------------------------------------------------------------
AMC Entertainment, Inc.:
8% Sr. Unsec. Sub. Nts., 3/1/14 650,000 591,500
9.50% Sr. Unsec. Sub. Nts., 2/1/11 360,000 355,950
- -----------------------------------------------------------------------------------------
American Media Operations, Inc.:
8.875% Sr. Unsec. Sub. Nts., 1/15/11 150,000 128,250
10.25% Sr. Unsec. Sub. Nts.,
Series B, 5/1/09 700,000 642,250
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------
MEDIA Continued
Block Communications, Inc.,
8.25% Sr. Nts., 12/15/15 2 $ 405,000 $ 402,975
- -----------------------------------------------------------------------------------------
Cablevision Systems Corp.,
New York Group, 8% Sr. Unsec. Nts.,
Series B, 4/15/12 700,000 658,000
- -----------------------------------------------------------------------------------------
Carmike Cinemas, Inc.,
7.50% Sr. Sub. Nts., 2/15/14 500,000 470,625
- -----------------------------------------------------------------------------------------
Charter Communications
Holdings I LLC, 0%/11.75% Sr.
Unsec. Unsub. Nts., 5/15/14 2,13 875,000 490,000
- -----------------------------------------------------------------------------------------
Charter Communications
Holdings II LLC, 10.25% Sr. Unsec.
Nts., 9/15/10 500,000 500,000
- -----------------------------------------------------------------------------------------
Charter Communications Holdings
LLC/Charter Communications
Holdings Capital Corp., 8.375% Sr.
Nts., Second Lien, 4/30/14 2 3,703,000 3,703,000
- -----------------------------------------------------------------------------------------
Cinemark USA, Inc., 9% Sr. Unsec.
Sub. Nts., 2/1/13 400,000 425,000
- -----------------------------------------------------------------------------------------
Cinemark, Inc., 0%/9.75% Sr.
Unsec. Disc. Nts., 3/15/14 13 500,000 372,500
- -----------------------------------------------------------------------------------------
Corus Entertainment, Inc., 8.75%
Sr. Sub. Nts., 3/1/12 300,000 326,250
- -----------------------------------------------------------------------------------------
CSC Holdings, Inc.:
7.625% Sr. Unsec. Debs., 7/15/18 300,000 286,500
7.625% Sr. Unsec. Unsub. Nts.,
Series B, 4/1/11 1,106,000 1,106,000
- -----------------------------------------------------------------------------------------
Dex Media East LLC/Dex Media
East Finance Co., 9.875%
Sr. Unsec. Nts., 11/15/09 200,000 217,250
- -----------------------------------------------------------------------------------------
Dex Media West LLC/Dex Media
West Finance Co.:
8.50% Sr. Nts., 8/15/10 300,000 315,750
9.875% Sr. Sub. Nts., 8/15/13 586,000 653,390
- -----------------------------------------------------------------------------------------
Dex Media, Inc.:
0%/9% Unsec. Disc. Nts., 11/15/13 13 300,000 240,000
0%/9% Unsec. Disc. Nts., 11/15/13 13 400,000 320,000
8% Unsec. Nts., 11/15/13 4,775,000 4,894,375
- -----------------------------------------------------------------------------------------
EchoStar DBS Corp.:
6.625% Sr. Unsec. Nts., 10/1/14 927,000 893,396
9.125% Sr. Nts., 1/15/09 936,000 981,630
- -----------------------------------------------------------------------------------------
Emmis Operating Co., 6.875% Sr.
Unsec. Sub. Nts., 5/15/12 600,000 599,250
- -----------------------------------------------------------------------------------------
Granite Broadcasting Corp., 9.75%
Sr. Sec. Nts., 12/1/10 619,000 572,575
- -----------------------------------------------------------------------------------------
Lamar Media Corp., 6.625% Sr.
Unsec. Sub. Nts., 8/15/15 960,000 968,400
- -----------------------------------------------------------------------------------------
Lin Television Corp., 6.50% Sr. Sub.
Nts., 5/15/13 550,000 530,063
- -----------------------------------------------------------------------------------------
LodgeNet Entertainment Corp.,
9.50% Sr. Sub. Debs., 6/15/13 200,000 218,500
- -----------------------------------------------------------------------------------------
Mediacom Broadband LLC,
8.50% Sr. Nts., 10/15/15 2 280,000 260,750
15 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------
MEDIA Continued
Mediacom LLC/Mediacom Capital
Corp., 9.50% Sr. Unsec. Nts., 1/15/13 $ 969,000 $ 950,831
- -----------------------------------------------------------------------------------------
MediaNews Group, Inc.:
6.375% Sr. Sub. Nts., 4/1/14 800,000 742,000
6.875% Sr. Unsec. Sub. Nts., 10/1/13 700,000 672,875
- -----------------------------------------------------------------------------------------
News America Holdings, Inc.,
8.875% Sr. Debs., 4/26/23 625,000 779,367
- -----------------------------------------------------------------------------------------
Paxson Communications Corp.,
10.777% Sr. Sec. Nts., 1/15/13 1,2 875,000 845,469
- -----------------------------------------------------------------------------------------
PRIMEDIA, Inc.:
8% Sr. Nts., 5/15/13 900,000 766,125
8.875% Sr. Unsec. Nts., 5/15/11 319,000 295,873
- -----------------------------------------------------------------------------------------
R.H. Donnelley Corp., 6.875%
Sr. Nts., 1/15/13 1,000,000 926,250
- -----------------------------------------------------------------------------------------
R.H. Donnelley Financial Corp. I,
10.875% Sr. Sub. Nts., 12/15/12 2 400,000 453,000
- -----------------------------------------------------------------------------------------
Radio One, Inc., 8.875% Sr. Unsec.
Sub. Nts., Series B, 7/1/11 600,000 636,000
- -----------------------------------------------------------------------------------------
Rainbow National Services LLC,
8.75% Sr. Nts., 9/1/12 2 900,000 963,000
- -----------------------------------------------------------------------------------------
Shaw Communications, Inc.,
8.54% Debs., 9/30/27 [CAD] 340,000 314,372
- -----------------------------------------------------------------------------------------
Sinclair Broadcast Group, Inc.:
8% Sr. Unsec. Sub. Nts., 3/15/12 2,775,000 2,872,125
8.75% Sr. Sub. Nts., 12/15/11 300,000 317,250
- -----------------------------------------------------------------------------------------
Vertis, Inc.:
9.75% Sr. Sec. Nts., 4/1/09 700,000 728,875
10.875% Sr. Unsec. Nts.,
Series B, 6/15/09 300,000 297,000
- -----------------------------------------------------------------------------------------
WMG Holdings Corp., 0%/9.50%
Sr. Disc. Nts., 12/15/14 13 1,757,000 1,238,685
---------------
37,171,476
- -----------------------------------------------------------------------------------------
MULTILINE RETAIL--0.3%
Neiman Marcus Group, Inc.:
9% Sr. Nts., 10/15/15 2 2,320,000 2,383,800
10.375% Sr. Sub. Nts., 10/15/15 2 1,060,000 1,082,525
- -----------------------------------------------------------------------------------------
Saks, Inc., 8.25%
Sr. Unsec. Nts., 11/15/08 520,000 543,400
---------------
4,009,725
- -----------------------------------------------------------------------------------------
SPECIALTY RETAIL--0.2%
Asbury Automotive Group,
Inc., 9% Sr. Sub. Nts., 6/15/12 300,000 301,500
- -----------------------------------------------------------------------------------------
Atlantic Broadband Finance LLC,
9.375% Sr. Unsec. Sub. Nts., 1/15/14 250,000 224,375
- -----------------------------------------------------------------------------------------
AutoNation, Inc.,
9% Sr. Unsec. Nts., 8/1/08 500,000 539,375
- -----------------------------------------------------------------------------------------
Boise Cascade LLC, 7.125% Sr.
Unsec. Sub. Nts., 10/15/14 950,000 890,625
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------
SPECIALTY RETAIL Continued
Petco Animal Supplies, Inc.,
10.75% Sr. Sub. Nts., 11/1/11 $ 200,000 $ 217,500
- -----------------------------------------------------------------------------------------
Rent-A-Center, Inc., 7.50% Sr.
Unsec. Sub. Nts., Series B, 5/1/10 150,000 144,000
---------------
2,317,375
- -----------------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS--0.4%
Invista, Inc., 9.25% Sr. Nts., 5/1/12 2 1,067,000 1,144,358
- -----------------------------------------------------------------------------------------
Levi Strauss & Co.:
8.804% Sr. Unsec. Unsub. Nts., 4/1/12 1 940,000 951,750
9.75% Sr. Unsec. Unsub. Nts., 1/15/15 1,059,000 1,106,655
- -----------------------------------------------------------------------------------------
Oxford Industries, Inc.,
8.875% Sr. Nts., 6/1/11 4 250,000 255,938
- -----------------------------------------------------------------------------------------
Quiksilver, Inc.,
6.875% Sr. Nts., 4/15/15 2 610,000 590,175
- -----------------------------------------------------------------------------------------
Russell Corp., 9.25% Sr. Nts., 5/1/10 200,000 203,750
---------------
4,252,626
- -----------------------------------------------------------------------------------------
CONSUMER STAPLES--0.6%
- -----------------------------------------------------------------------------------------
BEVERAGES--0.0%
Constellation Brands, Inc., 8.125%
Sr. Sub. Nts., 1/15/12 300,000 313,500
- -----------------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--0.1%
Jean Coutu Group (PJC), Inc.
(The), 8.50% Sr. Sub. Nts., 8/1/14 600,000 552,000
- -----------------------------------------------------------------------------------------
Real Time Data Co.,
11% Disc. Nts., 5/31/09 3,4 142,981 --
- -----------------------------------------------------------------------------------------
Rite Aid Corp.:
8.125% Sr. Sec. Nts., 5/1/10 450,000 460,125
9.50% Sr. Sec. Nts., 2/15/11 200,000 212,000
---------------
1,224,125
- -----------------------------------------------------------------------------------------
FOOD PRODUCTS--0.3%
American Seafoods Group LLC,
10.125% Sr. Sub. Nts., 4/15/10 200,000 210,750
- -----------------------------------------------------------------------------------------
Del Monte Corp.:
6.75% Sr. Unsec. Sub. Nts., 2/15/15 180,000 176,400
8.625% Sr. Sub. Nts., 12/15/12 400,000 427,000
- -----------------------------------------------------------------------------------------
Doane Pet Care Co.:
10.625% Sr. Sub. Nts., 11/15/15 2 610,000 638,975
10.75% Sr. Nts., 3/1/10 610,000 666,425
- -----------------------------------------------------------------------------------------
Dole Food Co., Inc.:
8.625% Sr. Nts., 5/1/09 306,000 315,180
8.875% Sr. Unsec. Nts., 3/15/11 71,000 73,130
- -----------------------------------------------------------------------------------------
Hines Nurseries, Inc., 10.25%
Sr. Unsec. Sub. Nts., 10/1/11 200,000 197,000
- -----------------------------------------------------------------------------------------
Smithfield Foods, Inc., 7.625%
Sr. Unsec. Sub. Nts., 2/15/08 400,000 415,000
- -----------------------------------------------------------------------------------------
United Biscuits Finance plc,
10.75% Sr. Sub. Nts., 4/15/11 [GBP] 400,000 731,208
---------------
3,851,068
16 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS--0.2%
Church & Dwight Co., Inc.,
6% Sr. Unsec. Sub. Nts., 12/15/12 $ 350,000 $ 346,500
- -----------------------------------------------------------------------------------------
Playtex Products, Inc.:
8% Sr. Sec. Nts., 3/1/11 500,000 535,000
9.375% Sr. Unsec. Sub. Nts., 6/1/11 800,000 842,000
---------------
1,723,500
- -----------------------------------------------------------------------------------------
PERSONAL PRODUCTS--0.0%
Elizabeth Arden, Inc.,
7.75% Sr. Unsec. Sub. Nts., 1/15/14 175,000 177,625
- -----------------------------------------------------------------------------------------
ENERGY--3.5%
- -----------------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--0.1%
Dresser, Inc.,
9.375% Sr. Sub. Nts., 4/15/11 300,000 317,250
- -----------------------------------------------------------------------------------------
Hanover Compressor Co.,
8.625% Sr. Unsec. Sub. Nts., 12/15/10 300,000 318,750
- -----------------------------------------------------------------------------------------
Hanover Equipment Trust,
8.50% Sr. Sec. Nts., Series A, 9/1/08 221,000 230,116
- -----------------------------------------------------------------------------------------
Petroleum Helicopters, Inc.,
9.375% Sr. Nts., 5/1/09 200,000 211,750
- -----------------------------------------------------------------------------------------
Universal Compression, Inc.,
7.25% Sr. Unsec. Sub. Nts., 5/15/10 400,000 408,000
---------------
1,485,866
- -----------------------------------------------------------------------------------------
OIL & GAS--3.4%
Arch Western Finance LLC, 6.75%
Sr. Nts., 7/1/13 700,000 716,625
- -----------------------------------------------------------------------------------------
Atlas Pipeline Partners LP, 8.125%
Sr. Nts., 12/15/15 2 290,000 293,988
- -----------------------------------------------------------------------------------------
Chesapeake Energy Corp.:
6.375% Sr. Unsec. Nts., 6/15/15 250,000 251,250
6.875% Sr. Unsec. Nts., 1/15/16 1,322,000 1,361,660
- -----------------------------------------------------------------------------------------
Clayton Williams Energy, Inc.,
7.75% Sr. Unsec. Nts., 8/1/13 175,000 168,875
- -----------------------------------------------------------------------------------------
Compton Petroleum Corp.,
7.625% Sr. Nts., 12/1/13 2 385,000 395,588
- -----------------------------------------------------------------------------------------
Delta Petroleum Corp.,
7% Sr. Unsec. Nts., 4/1/15 140,000 129,850
- -----------------------------------------------------------------------------------------
El Paso Corp.,
7.875% Sr. Unsec. Nts., 6/15/12 2,784,000 2,881,440
- -----------------------------------------------------------------------------------------
El Paso Energy Corp.,
7.625% Nts., 7/15/11 200,000 204,500
- -----------------------------------------------------------------------------------------
El Paso Production Holding Co.,
7.75% Sr. Unsec. Nts., 6/1/13 1,319,000 1,375,058
- -----------------------------------------------------------------------------------------
Forest Oil Corp.,
7.75% Sr. Nts., 5/1/14 300,000 312,750
- -----------------------------------------------------------------------------------------
Foundation PA Coal Co.,
7.25% Sr. Unsec. Nts., 8/1/14 550,000 571,313
- -----------------------------------------------------------------------------------------
Frontier Oil Corp.,
6.625% Sr. Unsec. Nts., 10/1/11 200,000 205,000
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------
OIL & GAS Continued
Gazprom International SA,
7.201% Sr. Unsec. Bonds, 2/1/20 $ 9,074,000 $ 9,701,059
- -----------------------------------------------------------------------------------------
Massey Energy Co.:
6.625% Sr. Nts., 11/15/10 200,000 204,250
6.875% Sr. Nts., 12/15/13 2 285,000 288,919
- -----------------------------------------------------------------------------------------
Newfield Exploration Co.:
6.625% Sr. Unsec. Sub. Nts., 9/1/14 600,000 613,500
8.375% Sr. Sub. Nts., 8/15/12 500,000 537,500
- -----------------------------------------------------------------------------------------
Pacific Energy Partners LP/Pacific
Energy Finance Corp.,
6.25% Sr. Nts., 9/15/15 2 100,000 99,000
- -----------------------------------------------------------------------------------------
Peabody Energy Corp.,
6.875% Sr. Unsec. Nts.,
Series B, 3/15/13 700,000 731,500
- -----------------------------------------------------------------------------------------
Pemex Project Funding
Master Trust:
7.375% Unsec. Unsub. Nts., 12/15/14 740,000 823,990
8.50% Unsub. Nts., 2/15/08 420,000 447,825
9.125% Unsec. Unsub. Nts., 10/13/10 610,000 703,635
- -----------------------------------------------------------------------------------------
Petroleum Export Ltd. Cayman
SPV, 5.265% Sr. Nts., Cl. A3, 6/15/11 2 3,960,000 3,926,958
- -----------------------------------------------------------------------------------------
Plains Exploration & Production Co.,
7.125% Sr. Nts., 6/15/14 300,000 312,000
- -----------------------------------------------------------------------------------------
Premcor Refining Group, Inc.,
9.50% Sr. Nts., 2/1/13 835,000 931,170
- -----------------------------------------------------------------------------------------
Range Resources Corp.:
6.375% Sr. Sub. Nts., 3/15/15 230,000 226,550
7.375% Sr. Sub. Nts., 7/15/13 200,000 208,000
- -----------------------------------------------------------------------------------------
Southern Natural Gas Co.:
7.35% Nts., 2/15/31 500,000 515,453
8% Sr. Unsub. Nts., 3/1/32 300,000 330,454
- -----------------------------------------------------------------------------------------
Stone Energy Corp., 6.75% Sr.
Unsec. Sub. Nts., 12/15/14 1,020,000 971,550
- -----------------------------------------------------------------------------------------
Targa Resources, Inc.,
8.50% Sr. Nts., 11/1/13 2 525,000 540,750
- -----------------------------------------------------------------------------------------
Tengizchevroil LLP,
6.124% Nts., 11/15/14 2 2,123,000 2,169,706
- -----------------------------------------------------------------------------------------
Tennessee Gas Pipeline Co.,
7.50% Bonds, 4/1/17 1,567,000 1,685,796
- -----------------------------------------------------------------------------------------
Tesoro Corp.:
6.25% Sr. Nts., 11/1/12 2 405,000 409,050
6.625% Sr. Nts., 11/1/15 2 405,000 411,075
- -----------------------------------------------------------------------------------------
Titan Petrochemicals Group Ltd.,
8.50% Sr. Unsec. Nts., 3/18/12 2 846,000 816,390
- -----------------------------------------------------------------------------------------
Whiting Petroleum Corp.,
7.25% Sr. Sub. Nts., 5/1/12 500,000 508,750
- -----------------------------------------------------------------------------------------
Williams Cos., Inc. (The):
7.125% Nts., 9/1/11 500,000 521,875
7.625% Nts., 7/15/19 928,000 999,920
8.75% Unsec. Nts., 3/15/32 1,619,000 1,886,135
---------------
40,390,657
17 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------
FINANCIALS--2.0%
- -----------------------------------------------------------------------------------------
CAPITAL MARKETS--0.1%
Berry Plastics Corp., 10.75%
Sr. Sub. Nts., 7/15/12 $ 750,000 $ 810,000
- -----------------------------------------------------------------------------------------
E*TRADE Financial Corp.:
7.375% Sr. Nts., 9/15/13 2 646,000 657,305
8% Sr. Nts., 6/15/11 2 410,000 428,450
---------------
1,895,755
- -----------------------------------------------------------------------------------------
COMMERCIAL BANKS--1.2%
Banco BMG SA,
9.15% Nts., 1/15/16 4 2,310,000 2,277,660
- -----------------------------------------------------------------------------------------
Bank Plus Corp.,
12% Sr. Nts., 7/18/07 4 7,000 7,753
- -----------------------------------------------------------------------------------------
Bankunited Capital Trust,
10.25% Capital Securities, 12/31/26 4 100,000 109,250
- -----------------------------------------------------------------------------------------
Credit Suisse First Boston
International, Export-Import Bank
of Ukraine Loan Participation Nts.,
6.80% 10/4/12 450,000 443,581
- -----------------------------------------------------------------------------------------
Dresdner Bank AG (Ukreximbank),
8.75% Bonds, 2/10/10 760,000 789,450
- -----------------------------------------------------------------------------------------
HSBC Bank plc:
9.75% Sr. Unsec. Nts., 7/8/09 7 1,960,000 1,473,998
11.60% Sr. Unsec. Nts., 1/12/10 7 2,510,000 1,653,764
12.28% Sr. Unsec. Nts., 3/9/09 7 1,960,000 1,365,846
- -----------------------------------------------------------------------------------------
Inter-American Development Bank:
6.26% Nts., 12/8/09 1 [BRR] 920,000 367,374
8.81% Nts., 1/25/12 1 [COP] 1,148,642,859 534,518
- -----------------------------------------------------------------------------------------
Ongko International Finance Co.
BV, 10.50% Sec. Nts., 3/29/10 3,4 90,000 --
- -----------------------------------------------------------------------------------------
UBS Luxembourg SA,
6.23% Sub. Nts., 2/11/15 1 2,500,000 2,526,400
- -----------------------------------------------------------------------------------------
VTB Capital SA,
6.25% Bonds, 7/2/35 2 1,870,000 1,907,400
- -----------------------------------------------------------------------------------------
Western Financial Bank,
9.625% Unsec. Sub. Debs., 5/15/12 500,000 562,500
---------------
14,019,494
- -----------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--0.4%
Affinia Group, Inc.,
9% Sr. Unsec. Sub. Nts., 11/30/14 200,000 159,000
- -----------------------------------------------------------------------------------------
Argentine Beverages Financial Trust,
7.375% Bonds, 3/22/12 4 490,000 494,900
- -----------------------------------------------------------------------------------------
Cloverie plc, 8.741% Sec. Nts.,
Series 2005-93, 12/20/10 1,4 1,100,000 1,100,000
- -----------------------------------------------------------------------------------------
Crystal US Holdings 3 LLC/Crystal
US Sub 3 Corp.:
0%/10.50% Sr. Unsec. Disc. Nts.,
Series B, 10/1/14 13 570,000 417,525
9.625% Sr. Sub. Nts., 6/15/14 813,000 908,528
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES Continued
Global Cash Access LLC/Global
Cash Finance Corp.,
8.75% Sr. Sub. Nts., 3/15/12 $ 179,000 $ 191,306
- -----------------------------------------------------------------------------------------
JSG Funding plc, 7.75% Sr. Unsec.
Sub. Nts., 4/1/15 330,000 275,550
- -----------------------------------------------------------------------------------------
Nell AF Sarl, 8.375% Sr. Nts., 8/15/15 2 1,510,000 1,502,450
- -----------------------------------------------------------------------------------------
Universal City Florida:
8.375% Sr. Unsec. Nts., 5/1/10 130,000 127,725
9% Sr. Unsec. Nts., 5/1/10 1 130,000 131,300
---------------
5,308,284
- -----------------------------------------------------------------------------------------
REAL ESTATE--0.3%
American Casino & Entertainment
Properties LLC,
7.85% Sr. Sec. Nts., 2/1/12 500,000 515,000
- -----------------------------------------------------------------------------------------
Felcor Lodging LP, 9% Sr. Nts., 6/1/11 425,000 467,500
- -----------------------------------------------------------------------------------------
HMH Properties, Inc.,
7.875% Sr. Nts., Series B, 8/1/08 89,000 90,446
- -----------------------------------------------------------------------------------------
Host Marriott LP, 6.375% Sr. Nts.,
Series O, 3/15/15 530,000 531,325
- -----------------------------------------------------------------------------------------
MeriStar Hospitality Corp.,
9.125% Sr. Unsec. Nts., 1/15/11 946,000 1,035,870
- -----------------------------------------------------------------------------------------
Trustreet Properties, Inc.,
7.50% Sr. Unsec. Nts., 4/1/15 595,000 597,975
---------------
3,238,116
- -----------------------------------------------------------------------------------------
HEALTH CARE--1.7%
- -----------------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--0.1%
Inverness Medical Innovations, Inc.,
8.75% Sr. Sub. Nts., 2/15/12 350,000 357,000
- -----------------------------------------------------------------------------------------
Sybron Dental Specialties, Inc.,
8.125% Sr. Sub. Nts., 6/15/12 4 300,000 316,500
- -----------------------------------------------------------------------------------------
Universal Hospital Services, Inc.,
10.125% Sr. Unsec. Nts., 11/1/11 300,000 312,000
---------------
985,500
- -----------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--1.6%
AmeriPath, Inc.,
10.50% Sr. Unsec. Sub. Nts., 4/1/13 300,000 319,500
- -----------------------------------------------------------------------------------------
Beverly Enterprises, Inc.,
7.875% Sr. Sub. Nts., 6/15/14 300,000 322,500
- -----------------------------------------------------------------------------------------
Community Health Systems, Inc.,
6.50% Sr. Unsec. Sub. Nts., 12/15/12 400,000 391,500
- -----------------------------------------------------------------------------------------
DaVita, Inc.:
6.625% Sr. Unsec. Nts., 3/15/13 465,000 475,463
7.25% Sr. Unsec. Sub. Nts., 3/15/15 1,075,000 1,093,813
- -----------------------------------------------------------------------------------------
Extendicare Health Services, Inc.:
6.875% Sr. Sub. Nts., 5/1/14 300,000 294,750
9.50% Sr. Unsec. Sub. Nts., 7/1/10 300,000 319,875
- -----------------------------------------------------------------------------------------
Fresenius Medical Care Capital
Trust II, 7.875% Nts., 2/1/08 900,000 931,500
18 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES Continued
Fresenius Medical Care Capital
Trust III, 7.375% Nts., 2/1/08 [DEM] 25,000 $ 16,079
- -----------------------------------------------------------------------------------------
Fresenius Medical Care Capital
Trust IV, 7.875% Trust Preferred
Nts., 6/15/11 600,000 642,000
- -----------------------------------------------------------------------------------------
Genesis HealthCare Corp.,
8% Sr. Sub. Nts., 10/15/13 200,000 211,500
- -----------------------------------------------------------------------------------------
HCA, Inc.:
6.30% Sr. Unsec. Nts., 10/1/12 1,219,000 1,231,181
6.375% Nts., 1/15/15 1,871,000 1,900,625
8.75% Sr. Nts., 9/1/10 200,000 222,199
- -----------------------------------------------------------------------------------------
HealthSouth Corp.:
7.625% Nts., 6/1/12 2,017,000 2,057,340
10.75% Sr. Unsec. Sub. Nts., 10/1/08 19,000 19,095
- -----------------------------------------------------------------------------------------
Medquest, Inc., 11.875% Sr. Unsec.
Sub. Nts., Series B, 8/15/12 600,000 582,000
- -----------------------------------------------------------------------------------------
NDCHealth Corp.,
10.50% Sr. Unsec. Sub. Nts., 12/1/12 250,000 286,875
- -----------------------------------------------------------------------------------------
Omnicare, Inc.:
6.75% Sr. Sub. Nts., 12/15/13 230,000 233,738
6.875% Sr. Sub. Nts., 12/15/15 285,000 290,700
- -----------------------------------------------------------------------------------------
PacifiCare Health Systems, Inc.,
10.75% Sr. Unsec. Unsub. Nts., 6/1/09 585,000 627,413
- -----------------------------------------------------------------------------------------
Psychiatric Solutions, Inc.,
7.75% Sr. Unsec. Sub. Nts., 7/15/15 220,000 228,250
- -----------------------------------------------------------------------------------------
Quintiles Transnational Corp.,
10% Sr. Sub. Nts., 10/1/13 300,000 336,000
- -----------------------------------------------------------------------------------------
Select Medical Corp.,
7.625% Sr. Unsec. Sub. Nts., 2/1/15 1,050,000 1,015,875
- -----------------------------------------------------------------------------------------
Tenet Healthcare Corp.:
6.375% Sr. Nts., 12/1/11 1,482,000 1,359,735
7.375% Nts., 2/1/13 19,000 17,623
9.875% Sr. Nts., 7/1/14 1,682,000 1,711,435
- -----------------------------------------------------------------------------------------
Triad Hospitals, Inc.,
7% Sr. Sub. Nts., 11/15/13 925,000 931,938
- -----------------------------------------------------------------------------------------
US Oncology, Inc.:
9% Sr. Unsec. Nts., 8/15/12 300,000 322,500
10.75% Sr. Unsec. Sub. Nts., 8/15/14 300,000 334,500
- -----------------------------------------------------------------------------------------
Vanguard Health Holding Co. I LLC,
0%/11.25% Sr. Disc. Nts., 10/1/15 13 500,000 367,500
---------------
19,095,002
- -----------------------------------------------------------------------------------------
PHARMACEUTICALS--0.0%
Valeant Pharmaceuticals
International, Inc.,
7% Sr. Nts., 12/15/11 4 350,000 345,625
- -----------------------------------------------------------------------------------------
INDUSTRIALS--3.1%
- -----------------------------------------------------------------------------------------
AEROSPACE & DEFENSE--0.3%
Alliant Techsystems, Inc.,
8.50% Sr. Unsec. Sub. Nts., 5/15/11 4 300,000 316,500
- -----------------------------------------------------------------------------------------
BE Aerospace, Inc.:
8.50% Sr. Unsec. Nts., 10/1/10 200,000 214,500
8.875% Sr. Unsec. Sub. Nts., 5/1/11 219,000 231,045
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------
AEROSPACE & DEFENSE Continued
L-3 Communications Corp.:
5.875% Sr. Sub. Nts., 1/15/15 $ 583,000 $ 568,425
6.125% Sr. Unsec. Sub. Nts., 1/15/14 400,000 398,000
6.375% Sr. Sub. Nts., 10/15/15 2 515,000 516,288
- -----------------------------------------------------------------------------------------
TD Funding Corp.,
8.375% Sr. Sub. Nts., 7/15/11 500,000 528,750
- -----------------------------------------------------------------------------------------
TRW Automotive, Inc.:
9.375% Sr. Nts., 2/15/13 223,000 242,513
11% Sr. Sub. Nts., 2/15/13 194,000 218,735
---------------
3,234,756
- -----------------------------------------------------------------------------------------
AIRLINES--0.0%
AMR Corp., 9% Debs., 8/1/12 50,000 43,625
- -----------------------------------------------------------------------------------------
ATA Holdings Corp.,
13% Sr. Unsec. Nts., 2/1/09 3 735,000 33,075
---------------
76,700
- -----------------------------------------------------------------------------------------
BUILDING PRODUCTS--0.1%
Associated Materials, Inc.,
9.75% Sr. Sub. Nts., 4/15/12 200,000 194,000
- -----------------------------------------------------------------------------------------
Goodman Global Holding Co., Inc.,
7.875% Sr. Sub. Nts., 12/15/12 2 270,000 252,450
- -----------------------------------------------------------------------------------------
Jacuzzi Brands, Inc.,
9.625% Sr. Sec. Nts., 7/1/10 311,000 331,993
- -----------------------------------------------------------------------------------------
Nortek, Inc.,
8.50% Sr. Unsec. Unsub. Nts., 9/1/14 250,000 242,500
---------------
1,020,943
- -----------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--0.5%
Allied Waste North America, Inc.:
7.25% Sr. Nts., 3/15/15 180,000 182,700
7.375% Sr. Sec. Nts., Series B, 4/15/14 700,000 684,250
8.875% Sr. Nts., Series B, 4/1/08 1,900,000 2,014,000
9.25% Sr. Sec. Debs., Series B, 9/1/12 434,000 471,975
- -----------------------------------------------------------------------------------------
Cenveo Corp.,
7.875% Sr. Sub. Nts., 12/1/13 1,000,000 970,000
- -----------------------------------------------------------------------------------------
Corrections Corp. of America:
6.25% Sr. Unsec. Sub. Nts., 3/15/13 460,000 457,700
7.50% Sr. Nts., 5/1/11 200,000 208,000
- -----------------------------------------------------------------------------------------
Mail-Well I Corp.,
9.625% Sr. Nts., 3/15/12 400,000 434,000
---------------
5,422,625
- -----------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--0.1%
Belden & Blake Corp.,
8.75% Sec. Nts., 7/15/12 325,000 333,125
- -----------------------------------------------------------------------------------------
Dayton Superior Corp.,
13% Sr. Unsec. Sub. Nts., 6/15/09 200,000 152,000
- -----------------------------------------------------------------------------------------
Eletropaulo Metropolitana SA,
19.125% Nts., 6/28/10 4 [BRR] 1,115,000 507,837
- -----------------------------------------------------------------------------------------
General Cable Corp.,
9.50% Sr. Nts., 11/15/10 4 200,000 213,000
19 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT Continued
UCAR Finance, Inc.,
10.25% Sr. Nts., 2/15/12 $ 300,000 $ 318,375
---------------
1,524,337
- -----------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--0.0%
Great Lakes Dredge & Dock Co.,
7.75% Sr. Unsec. Sub. Nts., 12/15/13 120,000 108,750
- -----------------------------------------------------------------------------------------
MACHINERY--0.2%
Douglas Dynamics LLC,
7.75% Sr. Nts., 1/15/12 2 300,000 291,000
- -----------------------------------------------------------------------------------------
Greenbrier Cos., Inc.,
8.375% Sr. Unsec. Nts., 5/15/15 380,000 389,500
- -----------------------------------------------------------------------------------------
Manitowoc Co., Inc. (The),
10.50% Sr. Sub. Nts., 8/1/12 325,000 362,375
- -----------------------------------------------------------------------------------------
Milacron Escrow Corp.,
11.50% Sr. Sec. Nts., 5/15/11 700,000 602,000
- -----------------------------------------------------------------------------------------
Navistar International Corp.:
6.25% Sr. Unsec. Nts., 3/1/12 230,000 207,000
7.50% Sr. Nts., 6/15/11 400,000 383,000
- -----------------------------------------------------------------------------------------
NMHG Holding Co.,
10% Sr. Nts., 5/15/09 300,000 321,000
- -----------------------------------------------------------------------------------------
Trinity Industries, Inc.,
6.50% Sr. Nts., 3/15/14 300,000 297,000
---------------
2,852,875
- -----------------------------------------------------------------------------------------
MARINE--1.7%
Grupo TMM SA,
10.50% Sr. Sec. Nts., 8/1/07 14 20,000,000 19,751,360
- -----------------------------------------------------------------------------------------
Navigator Gas Transport plc,
10.50% First Priority Ship Mtg. Nts.,
6/30/07 3,4 43,000 48,805
- -----------------------------------------------------------------------------------------
WPO Shipholding Co. LLC,
12% Sr. Sec. Nts., 7/15/05 3,4 250,000 1,400
---------------
19,801,565
- -----------------------------------------------------------------------------------------
ROAD & RAIL--0.1%
Kansas City Southern Railway
Co. (The), 7.50% Sr. Nts., 6/15/09 400,000 415,000
- -----------------------------------------------------------------------------------------
Stena AB:
7% Sr. Unsec. Nts., 12/1/16 150,000 138,000
7.50% Sr. Unsec. Nts., 11/1/13 387,000 373,455
9.625% Sr. Nts., 12/1/12 750,000 818,438
---------------
1,744,893
- -----------------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS--0.1%
United Rentals, Inc.,
7% Sr. Sub. Nts., 2/15/14 1,400,000 1,316,000
- -----------------------------------------------------------------------------------------
TRANSPORTATION INFRASTRUCTURE--0.0%
Horizon Lines LLC, 9% Nts., 11/1/12 236,000 249,570
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--1.1%
- -----------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--0.2%
Lucent Technologies, Inc.,
6.45% Unsec. Debs., 3/15/29 $ 2,760,000 $ 2,380,500
- -----------------------------------------------------------------------------------------
Orion Network Systems, Inc.,
12.50% Sr. Unsub. Disc. Nts., 1/15/07 3 675,000 6,750
---------------
2,387,250
- -----------------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--0.0%
Seagate Technology Hdd Holdings,
8% Sr. Nts., 5/15/09 200,000 211,000
- -----------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--0.3%
Flextronics International Ltd.,
6.25% Sr. Sub. Nts., 11/15/14 2,021,000 2,003,316
- -----------------------------------------------------------------------------------------
Loews Cineplex Entertainment Corp.,
9% Sr. Unsec. Sub. Nts., 8/1/14 425,000 431,375
- -----------------------------------------------------------------------------------------
Sanmina-SCI Corp.,
6.75% Unsec. Sub. Nts., 3/1/13 520,000 497,250
- -----------------------------------------------------------------------------------------
Sensus Metering System, Inc.,
8.625% Sr. Unsec. Sub. Nts., 12/15/13 850,000 756,500
---------------
3,688,441
- -----------------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--0.0%
Exodus Communications, Inc.,
10.75% Sr. Nts., 12/15/09 3,4 [EUR] 338,620 1,002
- -----------------------------------------------------------------------------------------
NorthPoint Communications
Group, Inc., 12.875% Nts., 2/15/10 3,4 200,173 --
- -----------------------------------------------------------------------------------------
PSINet, Inc., 10.50% Sr. Unsec. Nts.,
12/1/06 3,4 [EUR] 100,000 --
---------------
1,002
- -----------------------------------------------------------------------------------------
IT SERVICES--0.4%
DI Finance/DynCorp International
LLC, 9.50% Sr. Unsec. Sub. Nts.,
Series B, 2/15/13 665,000 694,925
- -----------------------------------------------------------------------------------------
Iron Mountain, Inc.,
7.75% Sr. Sub. Nts., 1/15/15 400,000 405,000
- -----------------------------------------------------------------------------------------
SunGard Data Systems, Inc.:
9.125% Sr. Unsec. Nts., 8/15/13 2 2,035,000 2,116,400
10.25% Sr. Sub. Nts., 8/15/15 2 835,000 839,175
---------------
4,055,500
- -----------------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--0.2%
Advanced Micro Devices, Inc.,
7.75% Sr. Unsec. Nts., 11/1/12 1,475,000 1,497,125
- -----------------------------------------------------------------------------------------
Amkor Technology, Inc.,
9.25% Sr. Unsec. Sub. Nts., 2/15/08 887,000 864,825
---------------
2,361,950
20 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------
MATERIALS--3.3%
- -----------------------------------------------------------------------------------------
CHEMICALS--0.8%
Crompton Corp.,
9.875% Sr. Nts., 8/1/12 $ 350,000 $ 401,188
- -----------------------------------------------------------------------------------------
Equistar Chemicals LP/Equistar
Funding Corp.:
8.75% Sr. Unsec. Nts., 2/15/09 550,000 581,625
10.125% Sr. Unsec. Nts., 9/1/08 19,000 20,710
10.625% Sr. Unsec. Nts., 5/1/11 600,000 663,000
- -----------------------------------------------------------------------------------------
Huntsman Corp./ICI Chemical Co. plc:
10.125% Sr. Unsec. Sub. Nts.,
7/1/09 [EUR] 123,000 151,171
10.125% Sr. Unsec. Sub. Nts., 7/1/09 853,000 884,988
- -----------------------------------------------------------------------------------------
Huntsman International LLC:
7.375% Sr. Sub. Nts., 1/1/15 2 1,710,000 1,658,700
9.875% Sr. Nts., 3/1/09 850,000 901,000
- -----------------------------------------------------------------------------------------
Huntsman LLC:
11.50% Sr. Unsec. Nts., 7/15/12 1 198,000 225,225
11.625% Sr. Unsec. Nts., 10/15/10 13,000 14,869
- -----------------------------------------------------------------------------------------
IMC Global, Inc.,
10.875% Sr. Unsec. Nts., 8/1/13 19,000 21,921
- -----------------------------------------------------------------------------------------
Innophos, Inc.,
9.625% Sr. Sub. Nts., 8/15/14 1,2 550,000 556,875
- -----------------------------------------------------------------------------------------
ISP Holdings, Inc.,
10.625% Sr. Sec. Nts., 12/15/09 200,000 211,000
- -----------------------------------------------------------------------------------------
KI Holdings, Inc., 0%/9.875%
Sr. Unsec. Sub. Disc. Nts., 11/15/14 13 350,000 231,000
- -----------------------------------------------------------------------------------------
Lyondell Chemical Co.:
9.50% Sec. Nts., 12/15/08 4 11,000 11,578
9.625% Sr. Sec. Nts., Series A, 5/1/07 200,000 209,750
10.50% Sr. Sec. Nts., 6/1/13 600,000 684,750
- -----------------------------------------------------------------------------------------
Millennium America, Inc.,
9.25% Sr. Unsec. Sub. Nts., 6/15/08 100,000 108,375
- -----------------------------------------------------------------------------------------
Resolution Performance Products LLC:
8% Sr. Sec. Nts., 12/15/09 250,000 256,250
13.50% Sr. Unsec. Sub. Nts., 11/15/10 100,000 106,250
- -----------------------------------------------------------------------------------------
Rhodia SA,
10.25% Sr. Unsec. Nts., 6/1/10 430,000 473,000
- -----------------------------------------------------------------------------------------
Rockwood Specialties Group, Inc.,
7.50% Sr. Sub. Nts., 11/15/14 200,000 200,250
- -----------------------------------------------------------------------------------------
Sterling Chemicals, Inc.,
10% Sr. Sec. Nts., 12/19/07 4,14 72,217 69,689
- -----------------------------------------------------------------------------------------
Tronox Worldwide LLC/Tronox
Finance Corp.,
9.50% Sr. Nts., 12/1/12 2 555,000 568,875
- -----------------------------------------------------------------------------------------
Westlake Chemical Corp.,
8.75% Sr. Nts., 7/15/11 260,000 279,500
---------------
9,491,539
- -----------------------------------------------------------------------------------------
CONSTRUCTION MATERIALS--0.0%
NTK Holdings, Inc.,
0%/10.75% Sr. Disc. Nts., 3/1/14 13 725,000 456,750
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------
CONTAINERS & PACKAGING--1.0%
Crown Americas, Inc.,
7.75% Sr. Nts., 11/15/15 2 $ 935,000 $ 972,400
- -----------------------------------------------------------------------------------------
Graham Packaging Co., Inc.:
8.50% Sr. Unsec. Nts., 10/15/12 200,000 198,000
9.875% Sr. Unsec. Sub. Nts., 10/15/14 300,000 294,000
- -----------------------------------------------------------------------------------------
Graphic Packaging International Corp.:
8.50% Sr. Nts., 8/15/11 800,000 806,000
9.50% Sr. Sub. Nts., 8/15/13 350,000 336,000
- -----------------------------------------------------------------------------------------
Jefferson Smurfit Corp.:
7.50% Sr. Unsec. Unsub. Nts., 6/1/13 300,000 277,500
8.25% Sr. Unsec. Nts., 10/1/12 950,000 916,750
- -----------------------------------------------------------------------------------------
MDP Acquisitions plc,
9.625% Sr. Nts., 10/1/12 400,000 402,000
- -----------------------------------------------------------------------------------------
Owens-Brockway Glass Container, Inc.:
7.75% Sr. Sec. Nts., 5/15/11 450,000 471,938
8.25% Sr. Unsec. Nts., 5/15/13 419,000 434,713
8.75% Sr. Sec. Nts., 11/15/12 928,000 1,002,240
8.875% Sr. Sec. Nts., 2/15/09 200,000 209,750
- -----------------------------------------------------------------------------------------
Pliant Corp.,
11.625% Sr. Sec. Nts., 6/15/09 3,14 360,178 383,590
- -----------------------------------------------------------------------------------------
Solo Cup Co.,
8.50% Sr. Sub. Nts., 2/15/14 500,000 440,000
- -----------------------------------------------------------------------------------------
Stone Container Corp.:
8.375% Sr. Nts., 7/1/12 850,000 826,625
9.25% Sr. Unsec. Nts., 2/1/08 1,200,000 1,236,000
9.75% Sr. Unsec. Nts., 2/1/11 600,000 609,000
- -----------------------------------------------------------------------------------------
Stone Container Finance Co.
of Canada II,
7.375% Sr. Unsec. Nts., 7/15/14 300,000 274,500
- -----------------------------------------------------------------------------------------
Tekni-Plex, Inc.,
10.875% Sr. Sec. Nts., 8/15/12 2 125,000 136,875
- -----------------------------------------------------------------------------------------
TriMas Corp.,
9.875% Sr. Unsec. Sub. Nts., 6/15/12 1,300,000 1,079,000
---------------
11,306,881
- -----------------------------------------------------------------------------------------
METALS & MINING--1.3%
AK Steel Corp.:
7.75% Sr. Unsec. Nts., 6/15/12 1,219,000 1,106,243
7.875% Sr. Unsec. Nts., 2/15/09 500,000 477,500
- -----------------------------------------------------------------------------------------
Alrosa Finance SA,
8.875% Nts., 11/17/14 2 6,880,000 7,902,368
- -----------------------------------------------------------------------------------------
Century Aluminum Co.,
7.50% Sr. Unsec. Nts., 8/15/14 600,000 594,000
- -----------------------------------------------------------------------------------------
Gibraltar Industries, Inc.,
8% Sr. Sub. Nts., 12/1/15 4 335,000 337,513
- -----------------------------------------------------------------------------------------
IMCO Recycling, Inc.,
10.375% Sr. Sec. Nts., 10/15/10 300,000 329,250
- -----------------------------------------------------------------------------------------
International Utility Structures, Inc.,
13% Unsec. Sub. Nts., 2/1/08 3,4 71,000 --
- -----------------------------------------------------------------------------------------
Ispat Inland ULC,
9.75% Sr. Sec. Nts., 4/1/14 585,000 665,438
- -----------------------------------------------------------------------------------------
Jorgensen (Earle M.) Co.,
9.75% Sr. Sec. Nts., 6/1/12 500,000 537,500
21 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------
METALS & MINING Continued
Kaiser Aluminum & Chemical Corp.,
10.875% Sr. Nts., Series B, 10/15/06 3 $ 500,000 $ 507,500
- -----------------------------------------------------------------------------------------
Koppers Industry, Inc.,
9.875% Sr. Sec. Nts., 10/15/13 300,000 327,000
- -----------------------------------------------------------------------------------------
Novelis, Inc., 7.25% Sr. Nts., 2/15/15 1,2 1,575,000 1,476,563
- -----------------------------------------------------------------------------------------
Oregon Steel Mills, Inc.,
10% Sr. Nts., 7/15/09 400,000 430,000
- -----------------------------------------------------------------------------------------
Steel Dynamics, Inc.,
9.50% Sr. Nts., 3/15/09 200,000 211,500
- -----------------------------------------------------------------------------------------
United States Steel Corp.:
9.75% Sr. Nts., 5/15/10 336,000 367,080
10.75% Sr. Nts., 8/1/08 519,000 576,090
---------------
15,845,545
- -----------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS--0.2%
Abitibi-Consolidated, Inc.,
8.55% Nts., 8/1/10 200,000 203,500
- -----------------------------------------------------------------------------------------
Appleton Papers, Inc.,
8.125% Sr. Nts., 6/15/11 300,000 293,250
- -----------------------------------------------------------------------------------------
Buckeye Technologies, Inc.,
8.50% Sr. Nts., 10/1/13 100,000 100,500
- -----------------------------------------------------------------------------------------
Georgia-Pacific Corp.,
8.125% Sr. Unsec. Nts., 5/15/11 914,000 919,713
- -----------------------------------------------------------------------------------------
Inland Fiber Group LLC,
9.625% Sr. Unsec. Nts., 11/15/07 3,4 600,000 315,000
- -----------------------------------------------------------------------------------------
JSG Holding plc,
11.50% Sr. Nts., 10/1/15 2,14 [EUR] 150,934 165,288
- -----------------------------------------------------------------------------------------
Mercer International, Inc.,
9.25% Sr. Nts., 2/15/13 315,000 266,963
- -----------------------------------------------------------------------------------------
Norske Skog Canada Ltd.,
7.375% Sr. Unsec. Nts., 3/1/14 300,000 264,000
- -----------------------------------------------------------------------------------------
Tekni-Plex, Inc., 12.75% Sr. Unsec.
Sub. Nts., Series B, 6/15/10 200,000 110,000
- -----------------------------------------------------------------------------------------
Tembec Industries, Inc.,
8.50% Sr. Unsec. Nts., 2/1/11 19,000 10,640
- -----------------------------------------------------------------------------------------
Western Forest Products, Inc.,
15% Sec. Nts., 7/28/09 2,14 193,919 208,463
---------------
2,857,317
- -----------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--2.6%
- -----------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--1.0%
American Tower Corp.,
7.125% Sr. Unsec. Nts., 10/15/12 250,000 258,750
- -----------------------------------------------------------------------------------------
Intelsat Bermuda Ltd.,
8.625% Sr. Nts., 1/15/15 2 1,000,000 1,015,000
- -----------------------------------------------------------------------------------------
MCI, Inc.,
7.688% Sr. Unsec. Nts., 5/1/09 1 1,550,000 1,604,250
- -----------------------------------------------------------------------------------------
PanAmSat Corp.,
9% Sr. Unsec. Nts., 8/15/14 650,000 684,125
- -----------------------------------------------------------------------------------------
PanAmSat Holding Corp.,
0%/10.375% Sr. Unsec. Disc. Nts.,
11/1/14 13 225,000 158,625
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES Continued
Qwest Capital Funding, Inc.:
7.25% Unsec. Unsub. Nts., 2/15/11 $ 1,700,000 $ 1,729,750
7.90% Unsec. Nts., 8/15/10 1,519,000 1,579,760
- -----------------------------------------------------------------------------------------
Qwest Communications
International, Inc.:
3.50% Cv. Sr. Unsec. Bonds, 11/15/25 360,000 418,950
7.25% Sr. Unsec. Sub. Nts., 2/15/11 1 300,000 307,500
- -----------------------------------------------------------------------------------------
Qwest Corp., 8.875% Unsec.
Unsub. Nts., 3/15/12 1 800,000 906,000
- -----------------------------------------------------------------------------------------
Telefonica del Peru SA,
8% Sr. Unsec. Bonds, 4/11/16 4 [PEN] 3,290,100 947,175
- -----------------------------------------------------------------------------------------
Teligent, Inc.,
11.50% Sr. Nts., 12/1/07 3,4 500,000 --
- -----------------------------------------------------------------------------------------
Time Warner Telecom Holdings,
Inc., 9.25% Sr. Unsec. Unsub. Nts.,
2/15/14 1,100,000 1,166,000
- -----------------------------------------------------------------------------------------
Time Warner Telecom, Inc.,
10.125% Sr. Unsec. Sub. Nts., 2/1/11 450,000 473,625
- -----------------------------------------------------------------------------------------
Valor Telecommunications
Enterprises LLC,
7.75% Sr. Unsec. Sub. Nts., 2/15/15 225,000 236,250
- -----------------------------------------------------------------------------------------
Winstar Communications, Inc.,
12.75% Sr. Nts., 4/15/10 3,4 250,000 3,750
---------------
11,489,510
- -----------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--1.6%
Alamosa Delaware, Inc.:
8.50% Sr. Nts., 1/31/12 700,000 760,375
11% Sr. Unsec. Nts., 7/31/10 19,000 21,518
12.50% Sr. Unsec. Nts., 2/1/11 50,000 54,250
- -----------------------------------------------------------------------------------------
American Cellular Corp.,
10% Sr. Nts., Series B, 8/1/11 1,120,000 1,220,800
- -----------------------------------------------------------------------------------------
American Tower Corp.,
7.50% Sr. Nts., 5/1/12 400,000 420,000
- -----------------------------------------------------------------------------------------
American Tower Escrow Corp.,
12.25% Sr. Sub. Disc. Nts., 8/1/08 7 800,000 630,000
- -----------------------------------------------------------------------------------------
AT&T Corp.:
9.05% Sr. Unsec. Nts., 11/15/11 1 592,000 656,015
9.75% Sr. Nts., 11/15/31 1 1,300,000 1,637,804
- -----------------------------------------------------------------------------------------
CellNet Data Systems, Inc.,
Sr. Unsec. Disc. Nts., 10/1/07 3,4 400,000 --
- -----------------------------------------------------------------------------------------
Centennial Cellular Operating Co.
LLC/Centennial Communications
Corp., 10.125% Sr. Nts., 6/15/13 1,114,000 1,217,045
- -----------------------------------------------------------------------------------------
Dobson Cellular Systems, Inc.,
8.375% Sr. Sec. Nts., 11/1/11 280,000 298,550
- -----------------------------------------------------------------------------------------
Dobson Communications Corp.:
8.40% Sr. Nts., 10/15/12 1,2 145,000 145,000
8.875% Sr. Nts., 10/1/13 459,000 460,148
- -----------------------------------------------------------------------------------------
IWO Holdings, Inc.,
7.90% Sr. Sec. Nts., 1/15/12 1 110,000 114,675
- -----------------------------------------------------------------------------------------
Loral Skynet Corp.,
14% Sr. Sec. Nts., 10/15/15 14 116,000 140,360
22 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES Continued
Nextel Communications, Inc.,
7.375% Sr. Nts., Series D, 8/1/15 $ 3,378,000 $ 3,567,648
- -----------------------------------------------------------------------------------------
Nextel Partners, Inc.,
8.125% Sr. Nts., 7/1/11 500,000 536,875
- -----------------------------------------------------------------------------------------
Rogers Wireless, Inc.:
7.50% Sec. Nts., 3/15/15 882,000 956,970
8% Sr. Sub. Nts., 12/15/12 800,000 851,000
- -----------------------------------------------------------------------------------------
Rural Cellular Corp.:
9.75% Sr. Sub. Nts., 1/15/10 1,219,000 1,237,285
9.875% Sr. Nts., 2/1/10 1,400,000 1,484,000
- -----------------------------------------------------------------------------------------
SBA Communications Corp.,
8.50% Sr. Unsec. Nts., Cl. A, 12/1/12 552,000 615,480
- -----------------------------------------------------------------------------------------
SBA Telecommunications, Inc./SBA
Communications Corp.,
0%/9.75% Sr. Disc. Nts., 12/15/11 13 708,000 660,210
- -----------------------------------------------------------------------------------------
Triton PCS, Inc.,
8.50% Sr. Unsec. Nts., 6/1/13 574,000 536,690
- -----------------------------------------------------------------------------------------
UbiquiTel Operating Co.,
9.875% Sr. Nts., 3/1/11 600,000 667,500
- -----------------------------------------------------------------------------------------
US Unwired, Inc.,
10% Sr. Sec. Nts., 6/15/12 250,000 282,500
---------------
19,172,698
- -----------------------------------------------------------------------------------------
UTILITIES--1.1%
- -----------------------------------------------------------------------------------------
ELECTRIC UTILITIES--0.8%
AES Corp. (The),
8.75% Sr. Sec. Nts., 5/15/13 2 700,000 765,625
- -----------------------------------------------------------------------------------------
Calpine Corp., Sr. Sec. Nts., 7/15/07 2,3 597,253 488,254
- -----------------------------------------------------------------------------------------
CMS Energy Corp.:
7.50% Sr. Nts., 1/15/09 19,000 19,665
7.75% Sr. Nts., 8/1/10 200,000 210,750
8.50% Sr. Nts., 4/15/11 250,000 273,438
- -----------------------------------------------------------------------------------------
FPL Energy National Wind Power LLC:
5.608% Nts., 3/10/24 2 263,906 263,671
6.125% Nts., 3/25/19 2 155,824 152,810
- -----------------------------------------------------------------------------------------
Midwest Generation LLC,
8.75% Sr. Sec. Nts., 5/1/34 1,610,000 1,781,063
- -----------------------------------------------------------------------------------------
Mirant Americas Generation LLC,
7.625% Sr. Unsec. Nts., 5/1/06 3 200,000 245,000
- -----------------------------------------------------------------------------------------
MSW Energy Holdings II LLC/MSW
Energy Finance Co. II, Inc.,
7.375% Sr. Sec. Nts., Series B, 9/1/10 350,000 361,375
- -----------------------------------------------------------------------------------------
MSW Energy Holdings LLC/MSW
Energy Finance Co., Inc.,
8.50% Sr. Sec. Nts., 9/1/10 200,000 214,000
- -----------------------------------------------------------------------------------------
NRG Energy, Inc.,
8% Sr. Sec. Nts., 12/15/13 1,175,000 1,316,000
- -----------------------------------------------------------------------------------------
Reliant Energy, Inc.,
6.75% Sr. Sec. Nts., 12/15/14 400,000 351,000
- -----------------------------------------------------------------------------------------
Reliant Resources, Inc.:
9.25% Sr. Sec. Nts., 7/15/10 669,000 672,345
9.50% Sr. Sec. Nts., 7/15/13 900,000 906,750
- -----------------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------
ELECTRIC UTILITIES Continued
Sierra Pacific Resources,
6.75% Sr. Nts., 8/15/17 2 $ 577,000 $ 577,000
- -----------------------------------------------------------------------------------------
Texas Genco LLC,
6.875% Sr. Nts., 12/15/14 2 366,000 398,025
---------------
8,996,771
- -----------------------------------------------------------------------------------------
ENERGY TRADERS--0.0%
Mirant North America LLC,
7.375% Sr. Nts., 12/31/13 2 230,000 233,738
- -----------------------------------------------------------------------------------------
GAS UTILITIES--0.0%
SEMCO Energy, Inc.,
7.125% Sr. Nts., 5/15/08 150,000 153,190
- -----------------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER--0.3%
AES Red Oak LLC, 8.54%
Sr. Sec. Bonds, Series A, 11/30/19 4 549,273 606,947
- -----------------------------------------------------------------------------------------
Dynegy Holdings, Inc.:
6.875% Sr. Unsec. Unsub. Nts., 4/1/11 121,000 119,790
8.75% Sr. Nts., 2/15/12 292,000 316,820
10.125% Sr. Sec. Nts., 7/15/13 2 1,400,000 1,589,000
- -----------------------------------------------------------------------------------------
Mirant Mid-Atlantic LLC,
8.625% Sec. Pass-Through
Certificates, Series A, 6/30/12 3 415,211 448,562
- -----------------------------------------------------------------------------------------
NorthWestern Corp.,
5.875% Sr. Sec. Nts., 11/1/14 90,000 90,619
---------------
3,171,738
---------------
Total Corporate Bonds
and Notes (Cost $321,459,480) 321,973,965
---------------
SHARES
- -----------------------------------------------------------------------------------------
PREFERRED STOCKS--0.2%
- -----------------------------------------------------------------------------------------
AmeriKing, Inc., 13% Cum. Sr.
Exchangeable, Non-Vtg. 4,15 4,253 --
- -----------------------------------------------------------------------------------------
Dobson Communications Corp.,
6% Cv., Series F (converts into
Dobson Communications Corp.,
Cl. A common stock), Non-Vtg. 2 608 103,968
- -----------------------------------------------------------------------------------------
e.spire Communications, Inc.,
12.75% Jr. Redeemable, Non-Vtg. 4,15 216 22
- -----------------------------------------------------------------------------------------
Eagle-Picher Holdings, Inc.,
11.75% Cum. Exchangeable,
Series B, Non-Vtg. 4,15 5,000 6,250
- -----------------------------------------------------------------------------------------
ICG Holdings, Inc.,
14.25% Exchangeable, Non-Vtg. 4,15 151 --
- -----------------------------------------------------------------------------------------
Loral Skynet Corp.,
12% Cum., Series A, Non-Vtg. 4,15 959 179,573
- -----------------------------------------------------------------------------------------
Paxson Communications Corp.:
14.25% Cum. Jr. Exchangeable,
Non-Vtg. 4,14 115 1,000,788
14.25% Cum. Jr. Exchangeable,
Non-Vtg. 4,14,15 1 5,172
23 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------
PREFERRED STOCKS Continued
- -----------------------------------------------------------------------------------------
Pennsylvania Real Estate
Investment Trust, 11% 2,000 $ 111,800
- -----------------------------------------------------------------------------------------
PTV, Inc.,
10% Cum., Series A, Non-Vtg. 4,15 7 15
- -----------------------------------------------------------------------------------------
Rural Cellular Corp.,
11.375% Cum., Series B, Non-Vtg. 14 228 262,770
- -----------------------------------------------------------------------------------------
Sovereign Real Estate Investment
Trust, 12% Non-Cum., Series A 4 4,600 663,550
---------------
Total Preferred Stocks
(Cost $2,635,478) 2,333,908
- -----------------------------------------------------------------------------------------
COMMON STOCKS--2.6%
- -----------------------------------------------------------------------------------------
Aggreko plc 51,600 240,808
- -----------------------------------------------------------------------------------------
Allegheny Technologies, Inc. 6,700 241,736
- -----------------------------------------------------------------------------------------
Amada Co. Ltd. 28,000 248,121
- -----------------------------------------------------------------------------------------
Amerada Hess Corp. 1,800 228,276
- -----------------------------------------------------------------------------------------
Aon Corp. 6,200 222,890
- -----------------------------------------------------------------------------------------
Apache Corp. 3,300 226,116
- -----------------------------------------------------------------------------------------
Apple Computer, Inc. 15 3,100 222,859
- -----------------------------------------------------------------------------------------
Arcelor 9,550 236,865
- -----------------------------------------------------------------------------------------
Ashland, Inc. 4,000 231,600
- -----------------------------------------------------------------------------------------
Avaya, Inc. 15 20,300 216,601
- -----------------------------------------------------------------------------------------
Aviva plc 19,300 234,098
- -----------------------------------------------------------------------------------------
Axa SA 7,600 245,274
- -----------------------------------------------------------------------------------------
Barratt Developments plc 14,640 248,353
- -----------------------------------------------------------------------------------------
Beverly Hills Bancorp, Inc. 6,273 65,051
- -----------------------------------------------------------------------------------------
BNP Paribas SA 2,900 234,666
- -----------------------------------------------------------------------------------------
BPB plc 17,110 227,405
- -----------------------------------------------------------------------------------------
British American Tobacco plc 10,460 233,952
- -----------------------------------------------------------------------------------------
Broadwing Corp. 15 739 4,471
- -----------------------------------------------------------------------------------------
Burlington Northern
Santa Fe Corp. 3,400 240,788
- -----------------------------------------------------------------------------------------
Burlington Resources, Inc. 3,100 267,220
- -----------------------------------------------------------------------------------------
Cebridge Connections
Holding LLC 4,15 529 --
- -----------------------------------------------------------------------------------------
Centex Corp. 3,100 221,619
- -----------------------------------------------------------------------------------------
Charles River Laboratories
International, Inc. 15 2,660 112,704
- -----------------------------------------------------------------------------------------
Chesapeake Energy Corp. 91 2,887
- -----------------------------------------------------------------------------------------
Chubb Corp. 2,300 224,595
- -----------------------------------------------------------------------------------------
CIGNA Corp. 2,000 223,400
- -----------------------------------------------------------------------------------------
Citigroup, Inc. 55 2,669
- -----------------------------------------------------------------------------------------
Compuware Corp. 15 24,800 222,456
- -----------------------------------------------------------------------------------------
ConocoPhillips 3,700 215,266
- -----------------------------------------------------------------------------------------
Conseco, Inc. 15 13,986 324,056
- -----------------------------------------------------------------------------------------
Covad Communications
Group, Inc. 15 16,528 16,197
- -----------------------------------------------------------------------------------------
Coventry Health Care, Inc. 15 3,900 222,144
- -----------------------------------------------------------------------------------------
VALUE
SHRARES SEE NOTE 1
- -----------------------------------------------------------------------------------------
COMMON STOCKS Continued
- -----------------------------------------------------------------------------------------
Criimi MAE, Inc. 15 62,047 $ 1,228,531
- -----------------------------------------------------------------------------------------
Cummins, Inc. 2,500 224,325
- -----------------------------------------------------------------------------------------
D.R. Horton, Inc. 6,200 221,526
- -----------------------------------------------------------------------------------------
Daido Steel Co. Ltd. 31,000 292,387
- -----------------------------------------------------------------------------------------
Deutsche Boerse AG 2,309 236,239
- -----------------------------------------------------------------------------------------
Deutsche Telekom AG 13,706 228,144
- -----------------------------------------------------------------------------------------
Devon Energy Corp. 3,700 231,398
- -----------------------------------------------------------------------------------------
Dobson Communications
Corp., Cl. A 15 24,300 182,250
- -----------------------------------------------------------------------------------------
E*TRADE Financial Corp. 15 11,400 237,804
- -----------------------------------------------------------------------------------------
E.ON AG 2,392 247,676
- -----------------------------------------------------------------------------------------
Eastman Chemical Co. 4,100 211,519
- -----------------------------------------------------------------------------------------
Edison International, Inc. 5,000 218,050
- -----------------------------------------------------------------------------------------
Energy Select Sector SPDR Fund 18,500 930,735
- -----------------------------------------------------------------------------------------
EOG Resources, Inc. 3,000 220,110
- -----------------------------------------------------------------------------------------
Equinix, Inc. 15 1,887 76,914
- -----------------------------------------------------------------------------------------
Express Scripts, Inc. 15 2,600 217,880
- -----------------------------------------------------------------------------------------
Financial Select Sector SPDR Fund 29,400 931,098
- -----------------------------------------------------------------------------------------
Friends Provident plc 69,430 226,365
- -----------------------------------------------------------------------------------------
Gecina SA 2,030 233,121
- -----------------------------------------------------------------------------------------
Geotek Communications, Inc.,
Series B, Escrow Shares 4,12,15 210 --
- -----------------------------------------------------------------------------------------
Globix Corp. 15 6,880 9,288
- -----------------------------------------------------------------------------------------
Goodyear Tire & Rubber Co. (The) 15 13,300 231,154
- -----------------------------------------------------------------------------------------
Halliburton Co. 3,500 216,860
- -----------------------------------------------------------------------------------------
Hanson plc 22,240 244,505
- -----------------------------------------------------------------------------------------
Hartford Financial Services
Group, Inc. (The) 2,600 223,314
- -----------------------------------------------------------------------------------------
Hochtief AG 5,620 251,968
- -----------------------------------------------------------------------------------------
Horizon Natural Resources Co. 4,15 6,667 --
- -----------------------------------------------------------------------------------------
Huntsman Corp. 4,15 5,871 96,044
- -----------------------------------------------------------------------------------------
ICO Global Communication
Holdings Ltd. 15 6,016 37,660
- -----------------------------------------------------------------------------------------
iPCS, Inc. 15 8,733 421,367
- -----------------------------------------------------------------------------------------
IVG Immobilien AG 11,785 248,210
- -----------------------------------------------------------------------------------------
KB Home 3,200 232,512
- -----------------------------------------------------------------------------------------
Keisei Electric Railway Co. Ltd. 34,035 233,759
- -----------------------------------------------------------------------------------------
Kubota Corp. 29,000 245,249
- -----------------------------------------------------------------------------------------
Leap Wireless International, Inc. 15 1,714 64,926
- -----------------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc. 1,800 230,706
- -----------------------------------------------------------------------------------------
Lennar Corp., Cl. A 3,900 237,978
- -----------------------------------------------------------------------------------------
Liberty Global, Inc., Series A 3,368 75,780
- -----------------------------------------------------------------------------------------
Liberty Global, Inc., Series C 15 3,368 71,402
- -----------------------------------------------------------------------------------------
Lloyds TSB Group plc 28,020 235,497
- -----------------------------------------------------------------------------------------
Loews Corp. 2,300 218,155
- -----------------------------------------------------------------------------------------
Loral Space
& Communications Ltd. 15 7,271 205,406
24 | OPPENHEIMER STRATEGIC BOND FUND/VA
VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------
COMMON STOCKS Continued
- -----------------------------------------------------------------------------------------
Louisiana-Pacific Corp. 8,200 $ 225,254
- -----------------------------------------------------------------------------------------
MAN AG 4,587 244,808
- -----------------------------------------------------------------------------------------
Marathon Oil Corp. 3,791 231,137
- -----------------------------------------------------------------------------------------
Matsui Securities Co. Ltd. 23,100 319,488
- -----------------------------------------------------------------------------------------
MCI, Inc. 1,629 32,140
- -----------------------------------------------------------------------------------------
Motorola, Inc. 9,700 219,123
- -----------------------------------------------------------------------------------------
National Semiconductor Corp. 8,100 210,438
- -----------------------------------------------------------------------------------------
Nikon Corp. 15,000 235,750
- -----------------------------------------------------------------------------------------
Nippon Mining Holdings, Inc. 35,000 250,407
- -----------------------------------------------------------------------------------------
Nippon Steel Corp. 67,311 237,288
- -----------------------------------------------------------------------------------------
Nordstrom, Inc. 6,200 231,880
- -----------------------------------------------------------------------------------------
Norfolk Southern Corp. 5,200 233,116
- -----------------------------------------------------------------------------------------
Novell, Inc. 15 27,000 238,410
- -----------------------------------------------------------------------------------------
NTL, Inc. 15 7,842 533,883
- -----------------------------------------------------------------------------------------
Nucor Corp. 3,300 220,176
- -----------------------------------------------------------------------------------------
NVIDIA Corp. 15 6,200 226,672
- -----------------------------------------------------------------------------------------
Occidental Petroleum Corp. 2,800 223,664
- -----------------------------------------------------------------------------------------
Office Depot, Inc. 15 7,600 238,640
- -----------------------------------------------------------------------------------------
OKI Electric Industry Co. 69,000 254,903
- -----------------------------------------------------------------------------------------
Orbital Sciences Corp. 15 745 9,566
- -----------------------------------------------------------------------------------------
PagesJaunes Groupe SA 9,360 243,677
- -----------------------------------------------------------------------------------------
Peninsular & Oriental Steam
Navigation Co. 29,920 239,883
- -----------------------------------------------------------------------------------------
Persimmon plc 12,000 259,725
- -----------------------------------------------------------------------------------------
Phelps Dodge Corp. 1,600 230,192
- -----------------------------------------------------------------------------------------
Pilkington plc 88,770 227,564
- -----------------------------------------------------------------------------------------
Pioneer Cos., Inc. 15 7,312 219,141
- -----------------------------------------------------------------------------------------
Prandium, Inc. 4,15 24,165 242
- -----------------------------------------------------------------------------------------
Premier Holdings Ltd. 4 18,514 --
- -----------------------------------------------------------------------------------------
Prudential Financial, Inc. 3,000 219,570
- -----------------------------------------------------------------------------------------
Pulte Homes, Inc. 5,320 209,395
- -----------------------------------------------------------------------------------------
Reebok International Ltd. 3,900 227,097
- -----------------------------------------------------------------------------------------
Resolution plc 20,640 230,111
- -----------------------------------------------------------------------------------------
Rolls-Royce Group plc, B Shares 1,041,412 1,837
- -----------------------------------------------------------------------------------------
Rowan Cos., Inc. 6,100 217,404
- -----------------------------------------------------------------------------------------
RWE AG, Non-Vtg., Preference 3,759 241,916
- -----------------------------------------------------------------------------------------
Shionogi & Co. Ltd. 19,000 267,597
- -----------------------------------------------------------------------------------------
Societe Generale, Cl. A 1,920 236,173
- -----------------------------------------------------------------------------------------
Sodexho Alliance SA 5,730 236,073
- -----------------------------------------------------------------------------------------
Star Gas Partners LP 15 187 348
- -----------------------------------------------------------------------------------------
Sterling Chemicals, Inc. 4,15 716 8,950
- -----------------------------------------------------------------------------------------
Suedzucker AG 10,314 241,772
- -----------------------------------------------------------------------------------------
Suez SA 8,010 249,403
- -----------------------------------------------------------------------------------------
Sumitomo Metal Industries 66,000 251,473
- -----------------------------------------------------------------------------------------
Sunoco, Inc. 2,800 219,464
- -----------------------------------------------------------------------------------------
Taylor Woodrow plc 38,960 255,050
VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------
COMMON STOCKS Continued
- -----------------------------------------------------------------------------------------
Technip SA 4,030 $ 244,456
- -----------------------------------------------------------------------------------------
Telewest Global, Inc. 15 31,828 758,143
- -----------------------------------------------------------------------------------------
Telus Corp. 269 10,830
- -----------------------------------------------------------------------------------------
ThyssenKrupp AG 11,322 236,447
- -----------------------------------------------------------------------------------------
Tokyo Electron Ltd. 3,758 234,842
- -----------------------------------------------------------------------------------------
Tokyo Steel Manufacturing Co. Ltd. 17,563 253,476
- -----------------------------------------------------------------------------------------
TonenGeneral Sekiyu K.K. 21,000 225,785
- -----------------------------------------------------------------------------------------
Tosoh Corp. 51,000 225,311
- -----------------------------------------------------------------------------------------
TUI AG 11,813 241,107
- -----------------------------------------------------------------------------------------
TVMAX Holdings, Inc. 4,15 1,000 1,000
- -----------------------------------------------------------------------------------------
Unibail 1,830 243,518
- -----------------------------------------------------------------------------------------
United States Steel Corp. 4,700 225,929
- -----------------------------------------------------------------------------------------
United Utilities plc 20,480 236,431
- -----------------------------------------------------------------------------------------
UnumProvident Corp. 10,180 231,595
- -----------------------------------------------------------------------------------------
Utilities Select Sector SPDR Fund 30,000 941,700
- -----------------------------------------------------------------------------------------
Valero Energy Corp. 4,400 227,040
- -----------------------------------------------------------------------------------------
Viatel Holding (Bermuda) Ltd. 4,15 2,251 73
- -----------------------------------------------------------------------------------------
Western Forest Products, Inc. 15 38,252 60,219
- -----------------------------------------------------------------------------------------
WRC Media Corp. 4,15 1,082 22
- -----------------------------------------------------------------------------------------
XO Communications, Inc. 15 1,100 2,002
---------------
Total Common Stocks
(Cost $26,567,281) 30,683,681
UNITS
- -----------------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- -----------------------------------------------------------------------------------------
American Tower Corp. Wts.,
Exp. 8/1/08 2,15 800 306,212
- -----------------------------------------------------------------------------------------
ASAT Finance LLC Wts.,
Exp. 11/1/06 15 250 --
- -----------------------------------------------------------------------------------------
COLO.com, Inc. Wts., Exp. 3/15/10 4,15 400 --
- -----------------------------------------------------------------------------------------
Concentric Network Corp. Wts.,
Exp. 12/15/07 4,15 100 --
- -----------------------------------------------------------------------------------------
HF Holdings, Inc. Wts.,
Exp. 9/27/09 4,15 530 --
- -----------------------------------------------------------------------------------------
ICO Global Communication
Holdings Ltd. Wts.:
Exp. 5/16/06 4,15 1,509 23
Exp. 5/16/06 4,15 2 --
- -----------------------------------------------------------------------------------------
Imperial Credit Industries, Inc. Wts.,
Exp. 1/31/08 4,15 2,135 --
- -----------------------------------------------------------------------------------------
iPCS, Inc. Wts., Exp. 6/15/10 4,15 300 --
- -----------------------------------------------------------------------------------------
Long Distance International, Inc.
Wts., Exp. 4/13/08 2,15 200 --
- -----------------------------------------------------------------------------------------
Loral Space & Communications
Ltd. Wts., Exp. 1/15/07 4,15 150 --
- -----------------------------------------------------------------------------------------
Ntelos, Inc. Wts., Exp. 8/15/10 4,15 450 --
- -----------------------------------------------------------------------------------------
Pathmark Stores, Inc. Wts.,
Exp. 9/19/10 15 5,710 1,599
25 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
UNITS SEE NOTE 1
- -----------------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES Continued
- -----------------------------------------------------------------------------------------
PLD Telekom, Inc. Wts.,
Exp. 6/1/06 4,15 300 $ 3
- -----------------------------------------------------------------------------------------
Sterling Chemicals, Inc. Wts.,
Exp. 12/19/08 15 1,165 117
- -----------------------------------------------------------------------------------------
Venezuela (Republic of) Oil Linked
Payment Obligation Wts.,
Exp. 4/15/20 4,15 2,300 66,700
- -----------------------------------------------------------------------------------------
Verado Holdings, Inc., Cl. B Wts.,
Exp. 4/15/08 15 175 119
- -----------------------------------------------------------------------------------------
XO Communications, Inc., Cl. A Wts.,
Exp. 1/16/10 15 2,204 331
- -----------------------------------------------------------------------------------------
XO Communications, Inc., Cl. B Wts.,
Exp. 1/16/10 15 1,653 165
- -----------------------------------------------------------------------------------------
XO Communications, Inc., Cl. C Wts.,
Exp. 1/16/10 15 1,653 149
---------------
Total Rights, Warrants
and Certificates (Cost $35,300) 375,418
PRINCIPAL
AMOUNT
- -----------------------------------------------------------------------------------------
STRUCTURED NOTES--14.9%
- -----------------------------------------------------------------------------------------
Aiolos Ltd., Catastrophe Linked Nts.,
11.938%, 4/8/09 1,4 [EUR] 400,000 472,137
- -----------------------------------------------------------------------------------------
Aon Capital Markets/Helix 04 Ltd.
Catastrophe Linked Nts.,
9.927%, 6/30/09 1 600,000 595,596
- -----------------------------------------------------------------------------------------
Arbor I Ltd. Catastrophe
Linked Nts.:
19.991%, 6/15/06 1,4 100,000 100,285
Series IV, 18.491%, 3/15/06 1 250,000 248,925
- -----------------------------------------------------------------------------------------
Atlantic & Western Re Ltd.,
Catastrophe Linked Nts., Series B,
14.30%, 11/15/10 1,4 1,050,000 1,050,000
- -----------------------------------------------------------------------------------------
Barclays Capital, Russia
(Government of) Credit Linked
Nts., 5.16%, 8/18/08 7 [RUR] 270,000,000 8,067,665
- -----------------------------------------------------------------------------------------
Cascadia Ltd., 7.582% Nts., 6/13/08 1,4 500,000 498,500
- -----------------------------------------------------------------------------------------
Champlain Ltd., Catastrophe
Linked Nts., Series A,
17.296%, 1/7/09 1 940,000 940,000
- -----------------------------------------------------------------------------------------
Citigroup Global Markets
Holdings, Inc.:
Argentina (Republic of) Unsec.
Credit Linked Nts.,
4%, 4/16/10 17 [ARP] 3,850,000 2,591,432
Brazil (Federal Republic of) Credit
Linked Nts., 16.69%, 7/3/07 7 [BRR] 4,660,000 1,593,444
Brazil (Federal Republic of) Unsec.
Credit Linked Nts.,
10%, 1/5/10 [BRR] 2,927,000 1,119,515
Brazil (Federal Republic of) Unsec.
Credit Linked Nts.,
10%, 1/5/10 [BRR] 4,619,000 1,766,669
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------
STRUCTURED NOTES Continued
- -----------------------------------------------------------------------------------------
Citigroup Global Markets
Holdings, Inc.: Continued
Brazil (Federal Republic of) Unsec.
Credit Linked Nts.,
14.81%, 1/5/10 7 [BRR] 2,480,096 $ 595,454
Brazil (Federal Republic of) Unsec.
Credit Linked Nts.,
15.43%, 1/2/09 7 [BRR] 2,231,957 616,038
Brazil (Federal Republic of) Unsec.
Credit Linked Nts.,
15.73%, 1/3/08 7 [BRR] 1,948,615 620,443
Colombia (Republic of) Credit
Linked Bonds, 11%, 7/24/20 [COP] 1,060,000,000 533,825
Colombia (Republic of) Credit
Linked Nts., Series II,
15%, 4/27/12 [COP] 552,359,546 339,972
Colombia (Republic of) Unsec.
Credit Linked Nts., 15%, 3/15/07
(linked to Colombian
Treasury Bills) [COP] 3,860,150,000 2,057,081
Colombia (Republic of) Unsec.
Credit Linked Nts.,
15%, 4/27/12 [COP] 1,800,000,000 1,107,884
Colombia (Republic of) Unsec.
Credit Linked Nts.,
15%, 4/27/12 [COP] 1,200,000,000 738,589
Colombia (Republic of) Unsec.
Credit Linked Nts.,
15%, 4/27/12 [COP] 1,034,000,000 636,418
Colombia (Republic of) Unsec.
Credit Linked Nts.,
15%, 4/27/12 [COP] 927,000,000 570,560
Dominican Republic Credit Linked
Nts., 14.11%, 7/10/06 (linked to
Dominican Republic Treasury
Bills) 7 [DOP] 23,200,000 625,614
Dominican Republic Credit Linked
Nts., 15.64%, 5/2/06 (linked to
Dominican Republic Treasury
Bills) 7 [DOP] 19,490,000 541,566
Dominican Republic Credit Linked
Nts., 17%, 3/12/07 [DOP] 21,900,000 656,872
Dominican Republic Credit Linked
Nts., 17.06%, 11/6/06 (linked to
Dominican Republic Treasury
Bills) 7 [DOP] 59,600,000 1,521,740
Dominican Republic Credit Linked
Nts., 19.69%, 3/31/06 (linked to
Dominican Republic Treasury
Bills) 7 [DOP] 17,740,000 498,787
Dominican Republic Credit Linked
Nts., 22.41%, 3/10/06 (linked to
Dominican Republic Treasury
Bills) 7 [DOP] 22,703,730 644,991
Dominican Republic Unsec. Credit
Linked Nts., 14.67%, 5/15/06
(linked to Dominican Republic
Treasury Bills) 7 [DOP] 16,070,000 443,893
26 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------
STRUCTURED NOTES Continued
- -----------------------------------------------------------------------------------
Citigroup Global Markets
Holdings, Inc.: Continued
Dominican Republic Unsec. Credit
Linked Nts., 16.18%, 4/24/06
(linked to Dominican Republic
Treasury Bills) 7 [DOP] 6,560,000 $ 182,822
Dominican Republic Unsec. Credit
Linked Nts., 23.07%, 3/3/06
(linked to Dominican Republic
Treasury Bills) 7 [DOP] 42,662,900 1,215,961
Egypt (The Arab Republic of)
Unsec. Credit Linked Nts.,
8.21%, 9/19/06 (linked to
Egyptian Treasury Bills) 7 [EGP] 5,000,000 818,488
Egypt (The Arab Republic of)
Unsec. Credit Linked Nts.,
8.36%, 2/9/06 (linked to
Egyptian Treasury Bills) 7 [EGP] 5,773,000 996,593
Egypt (The Arab Republic of)
Unsec. Credit Linked Nts.,
8.76%, 1/12/06 (linked to
Egyptian Treasury Bills) 7 [EGP] 4,530,000 787,279
Egypt (The Arab Republic of)
Unsec. Credit Linked Nts.,
9.21%, 2/2/06 (linked to
Egyptian Treasury Bills) 7 [EGP] 5,400,000 933,764
Russian Federation Credit Linked
Nts., 5.315%, 1/20/11 5 10,000,000 9,962,600
Ukraine Hryvnia Unsec. Credit
Linked Nts., 11.94%, 1/4/10 [UAH] 880,000 204,367
- -----------------------------------------------------------------------------------
Credit Suisse First Boston Corp.
(Cayman), Turkey (Republic of)
Credit Linked Nts., Series EMG 7,
15%, 2/10/10 [TRY] 3,014,000 2,564,299
- -----------------------------------------------------------------------------------
Credit Suisse First Boston
International:
OAO Gazprom Credit Linked Nts.,
8.11%, 1/21/07 [RUR] 28,065,000 1,025,944
South African Rand Interest
Bearing Linked Nts.,
Series FBi 43, 4.59%, 5/23/22 1 825,000 800,333
Ukraine (Republic of) Credit
Linked Nts., Series EMG 13,
11.94%, 12/30/09 [UAH] 2,195,000 505,609
- -----------------------------------------------------------------------------------
Credit Suisse First Boston, Inc.
(Nassau Branch):
Turkey (Republic of) Credit
Linked Nts., 20%, 10/18/07 352,000 396,567
Turkey (Republic of) Credit
Linked Nts., Series EM 880,
20%, 10/18/07 1,190,000 1,484,132
Turkey (Republic of) Credit
Linked Nts., Series EMG 19,
16.90%, 7/5/06 7 [TRY] 1,440,000 995,514
Turkey (Republic of) Credit
Linked Nts., Series EMG 4,
17.20%, 7/6/06 7 [TRY] 1,909,191 1,319,879
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------
STRUCTURED NOTES Continued
- -----------------------------------------------------------------------------------
Credit Suisse First Boston, Inc.
(Nassau Branch): Continued
Turkey (Republic of) Credit
Linked Nts., Series NAS 316,
22.66%, 2/23/06 7 $ 607,000 $ 816,373
Ukraine (Republic of) Credit
Linked Nts.,
11.94%, 12/30/09 [UAH] 5,650,000 1,301,453
Ukraine (Republic of) Credit
Linked Nts., Series EMG 11,
11.94%, 12/30/09 [UAH] 661,000 152,258
Ukraine (Republic of) Credit
Linked Nts., Series NPC 12,
11.94%, 12/30/09 [UAH] 4,170,000 960,541
- -----------------------------------------------------------------------------------
Deutsche Bank AG:
Argentina (Republic of) Credit
Linked Nts., 4%, 12/21/11 [ARP] 2,990,000 2,374,049
Brazil Real Credit Linked Nts.,
13.88%, 3/3/10 7 [BRR] 4,580,760 1,226,146
Campania Total Return Linked
Nts., 2.862%, 7/30/10 1 [EUR] 5,050,000 5,960,730
Campania Total Return Linked Nts.,
2.869%, 7/30/10 1 [EUR] 5,200,000 6,194,419
Egypt (The Arab Republic of)
Total Return Linked Nts.,
8.52%, 1/17/06 (linked to Egyptian
Treasury Bills) 7 [EGP] 4,280,000 742,749
Egypt (The Arab Republic of)
Total Return Linked Nts.,
8.78%, 12/12/06 (linked to
Egyptian Treasury Bills) 7 [EGP] 8,170,000 1,317,166
Egypt (The Arab Republic of)
Total Return Linked Nts.,
9.63%, 3/9/06 (linked to
Egyptian Treasury Bills) 7 [EGP] 2,120,000 363,397
European Investment Bank,
Russian Federation Credit
Linked Nts., 6.23%, 1/19/10 1 705,000 566,115
Indonesia (Republic of) Credit
Linked Nts., 9.50%, 6/22/15 820,000 647,308
Indonesia (Republic of) Credit
Linked Nts., Series III, 14.25%, 6/15/13 873,600 913,261
Moscow (City of) Credit Linked
Nts., 10%, 3/30/10 [RUR] 17,056,500 660,340
OAO Gazprom I Credit Nts.,
8.36%, 10/20/07 790,000 844,944
OAO Gazprom II Credit Nts.,
8.11%, 4/20/07 790,000 831,541
Romania (The State of) Credit
Linked Nts., 11.49%, 12/7/06 [RON] 788,640 260,726
Russian Federation Credit Linked
Nts., 12/2/09 7 [RUR] 19,221,000 700,884
Ukraine (Republic of) 5 yr. Credit
Linked Nts., 4.05%, 8/25/10 5 885,000 889,425
Ukraine (Republic of) 5.5 yr. Credit
Linked Nts., 4.05%, 2/25/11 5 885,000 889,425
Ukraine (Republic of) 6 yr. Credit
Linked Nts., 4.05%, 8/25/11 5 885,000 889,425
27 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------
STRUCTURED NOTES Continued
- -----------------------------------------------------------------------------------
Deutsche Bank AG: Continued:
Ukraine (Republic of) 6.5 yr. Credit
Linked Nts., 4.05%, 2/27/12 5 $ 885,000 $ 889,425
Ukraine (Republic of) 7 yr. Credit
Linked Nts., 4.05%, 8/28/12 5 885,000 889,425
Ukraine (Republic of) Credit
Linked Nts., 11.70%, 5/31/06 [UAH] 1,727,000 350,801
Ukraine (Republic of) Credit
Linked Nts., 11.94%, 12/30/09 [UAH] 269,000 63,650
Ukraine (Republic of) Credit
Linked Nts., 11.94%, 12/30/09 [UAH] 955,000 225,969
Ukraine (Republic of) Credit
Linked Nts., 5.592%, 5/16/07 [UAH] 2,390,000 472,317
Ukraine (Republic of) Credit
Linked Nts., Series A, 5.592%,
5/16/07 [UAH] 2,390,000 472,317
Videocon International Ltd.
Credit Linked Nts., 6.26%, 12/29/09 1,630,000 1,625,110
Volga Investments Ltd. Credit
Linked Nts., Series III, 6.01%, 4/2/08 10,000,000 10,142,000
- -----------------------------------------------------------------------------------
Dow Jones CDX High Yield Index
Pass-Through Certificates:
Series 4-T1, 8.25%, 6/29/10 4,16 15,872,080 16,050,641
Series 5-T1, 8.75%, 12/29/10 2,16 6,286,500 6,311,058
- -----------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The)/
Residential Reinsurance Ltd.,
Catastrophe Linked Nts., Series B,
12.86%, 6/6/08 1,4 800,000 748,000
- -----------------------------------------------------------------------------------
ING Bank NV, Ukraine
(Republic of) Credit Linked Nts.,
Series 725, 11.89%, 12/30/09 4 [UAH] 4,689,000 1,085,816
- -----------------------------------------------------------------------------------
JPMorgan Chase Bank:
Brazil (Federal Republic of)
Credit Linked Nts.,
12.08%, 1/2/15 7 [BRR] 3,693,700 476,044
Brazil (Federal Republic of) Credit
Linked Nts., 12.68%, 6/1/13 7 [BRR] 5,490,000 854,973
Brazil (Federal Republic of) Credit
Linked Nts., 15.33%, 1/2/15 7 [BRR] 10,948,600 1,411,055
Brazil (Federal Republic of) Credit
Linked Nts., 2.73%, 11/30/12 7 [ARP] 4,550,000 1,071,107
Brazil (Federal Republic of) Credit
Linked Nts., Series II,
13.55%, 1/2/15 7 [BRR] 8,035,000 1,035,550
Brazil (Federal Republic of) Credit
Linked Nts., Series III,
12.18%, 1/2/15 7 [BRR] 8,500,000 1,095,480
Colombia (Republic of) Credit
Linked Bonds,
10.19%, 1/5/16 5,7 [COP] 20,100,000,000 3,191,913
Colombia (Republic of) Credit
Linked Bonds, 13.50%, 8/3/20 [COP] 11,160,000,000 1,256,299
Peru (Republic of) Credit Linked
Nts., 8.12%, 9/2/15 7 [PEN] 3,470,000 403,488
Swaziland (Kingdom of) Credit
Linked Nts., 7.25%, 6/20/10 1,120,000 1,076,880
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------
STRUCTURED NOTES Continued
- -----------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc.,
High Yield Targeted Return Index
Securities, Series 2005-1,
7.651%, 6/15/15 4,16 $ 4,390,244 $ 4,575,863
- -----------------------------------------------------------------------------------
Lehman Brothers International:
Romania (The State of) Total
Return Linked Nts.,
7.90%, 2/8/10 (linked to
Romanian Treasury Bills) [RON] 821,400 288,395
Turkey (Republic of) Total Return
Linked Nts., 15%, 2/11/10 (linked
to Turkish Treasury Bills) [TRY] 1,635,000 1,398,437
Turkey (Republic of) Total Return
Linked Nts., 20%, 10/17/07 (linked
to Turkish Treasury Bills) 410,938 507,508
- -----------------------------------------------------------------------------------
Lehman Brothers Special
Financing, Inc.:
Romania (The State of) Total
Return Linked Nts.,
6.50%, 3/8/10 (linked to
Romanian Treasury Bills) [RON] 2,228,300 734,924
Romania (The State of) Total
Return Linked Nts.,
6.75%, 3/10/08 (linked to
Romanian Treasury Bills) [RON] 2,600,000 863,783
Romania (The State of) Total
Return Linked Nts.,
7.25%, 4/18/10 (linked to
Romanian Treasury Bills) [RON] 213,000 71,884
Romania (The State of) Total
Return Linked Nts.,
7.50%, 3/5/07 (linked to
Romanian Treasury Bills) [RON] 354,000 120,046
Romania (The State of) Total
Return Linked Nts.,
7.75%, 4/18/08 (linked to
Romanian Treasury Bills) [RON] 512,000 173,356
Romania (The State of) Total
Return Linked Nts.,
7.75%, 4/18/08 (linked to
Romanian Treasury Bills) [RON] 199,000 67,379
Romania (The State of) Total
Return Linked Nts.,
7.90%, 2/11/08 (linked to
Romanian Treasury Bills) [RON] 1,885,100 649,061
Turkey (Republic of) Total
Return Linked Nts.,
15%, 2/10/10 [TRY] 4,490,000 3,866,952
- -----------------------------------------------------------------------------------
Morgan Stanley Capital
Services, Inc.:
Brazil (Federal Republic of)
Sr. Sub. Linked Nts.,
15.45%, 1/2/14 [BRR] 3,400,000 1,361,425
Philippines (Republic of) Credit
Linked Nts., 8.619%, 9/20/15 1,230,000 1,264,231
Philippines (Republic of) Credit
Linked Nts., 8.652%, 9/20/15 1 10,300,000 11,061,582
28 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------
STRUCTURED NOTES Continued
- -----------------------------------------------------------------------------------
Morgan Stanley Capital
Services, Inc.: Continued
United Mexican States Credit
Linked Nts., 5.64%, 11/20/15 $ 2,000,000 $ 2,019,720
Venezuela (Republic of)
10 yr. Credit Linked Nts.,
7.85%, 11/20/15 1,885,000 1,931,880
Venezuela (Republic of) Credit
Linked Nts., 6.49%, 5/20/10 1,480,000 1,477,765
Venezuela (Republic of) Credit
Linked Nts., 7.382%, 5/20/10 1,900,000 2,043,013
- -----------------------------------------------------------------------------------
Redwood Capital VI Ltd.,
8.165% Nts., 1/9/07 1,4 250,000 245,488
- -----------------------------------------------------------------------------------
Swiss Re Capital Markets Corp./
Foundation RE Ltd. Catastrophe
Linked Nts., 8.45%, 11/24/08 1,2 500,000 501,263
- -----------------------------------------------------------------------------------
Swiss Re Capital Markets Corp./
Oak Capital Ltd. Catastrophe
Linked Nts., 9.241%, 6/15/07 1,4 250,000 247,738
- -----------------------------------------------------------------------------------
Swiss Re Capital Markets Corp./
Pioneer 2002 Ltd. Sec.
Catastrophe Linked Nts.:
Series 2002, Cl. A-A,
10.491%, 6/15/06 1,2 250,000 254,200
Series 2002-1, Cl. E-A,
8.741%, 6/15/06 1 500,000 500,950
Series 2003-II, Cl. A-A,
10.491%, 6/15/06 1,4 500,000 508,475
- -----------------------------------------------------------------------------------
Swiss Re Capital Markets Corp./
Redwood Capital V Catastrophe
Linked Nts., 8.265%, 1/9/07 1,4 1,250,000 1,228,750
- -----------------------------------------------------------------------------------
UBS AG:
Israel (State of) Credit Linked Nts.,
7.50%, 4/5/14 [ILS] 4,792,700 1,181,389
OAO Gazprom III Credit Nts.,
6.81%, 7/5/06 1,980,000 2,072,803
---------------
Total Structured Notes
(Cost $174,975,131) 177,908,299
DATE STRIKE CONTRACTS
- -----------------------------------------------------------------------------------
OPTIONS PURCHASED--0.0%
- -----------------------------------------------------------------------------------
Japanese Yen
Put 4,15 3/2/06 122.50JPY 2,223,000,000 28,588
- -----------------------------------------------------------------------------------
Mexican Neuvo
Peso Call 15 3/15/06 9.13MXN 61,205,000 93,706
- -----------------------------------------------------------------------------------
Mexican Nuevo
Peso Call 15 10/12/06 11.40MXN 12,312,000 14,695
- -----------------------------------------------------------------------------------
Mexican Nuevo
Peso Put 15 10/12/06 11.40MXN 12,312,000 60,473
---------------
Total Options Purchased (Cost $275,033) 197,462
NOTIONAL VALUE
DATE STRIKE AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------
SWAPTIONS PURCHASED--0.0%
- -----------------------------------------------------------------------------------
Australian Dollar
Call 15
(Cost $36,939) 2/9/06 5.67AUD $ 12,000,000 $ 15,820
PRINCIPAL
AMOUNT
- -----------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--10.5% 18
- -----------------------------------------------------------------------------------
Undivided interest of 8.86% in joint
repurchase agreement (Principal
Amount/Value $1,414,200,000, with
a maturity value of $1,414,844,247)
with UBS Warburg LLC, 4.10%, dated
12/30/05, to be repurchased at
$125,359,082 on 1/3/06, collateralized
by Federal Home Loan Mortgage Corp.,
5%, 1/1/35, with a value of $157,513,104
and Federal National Mortgage Assn.,
5%--5.50%, 3/1/34--10/1/35, with
a value of $1,301,420,187
(Cost $125,302,000) $ 125,302,000 125,302,000
- -----------------------------------------------------------------------------------
Total Investments, at Value (excluding
Investments Purchased with Cash
Collateral from Securities Loaned)
(Cost $1,260,837,782) 1,268,943,003
- -----------------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED--2.3%
- -----------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--2.3%
Undivided interest of 0.87% in joint
repurchase agreement (Principal
Amount/Value $3,150,000,000, with
a maturity value of $3,151,501,500)
with Nomura Securities, 4.29%, dated
12/30/05, to be repurchased at
$27,483,173 on 1/3/06, collateralized
by U.S. Agency Mortgages,
3.34%--9.50%, 6/1/08--5/1/38,
with a value of $3,213,000,000 19
(Cost $27,470,079) 27,470,079 27,470,079
- -----------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $1,288,307,861) 108.4% 1,296,413,082
- -----------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (8.4) (100,164,823)
---------------------------------
NET ASSETS 100.0% $ 1,196,248,259
=================================
29 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
FOOTNOTES TO STATEMENT OF INVESTMENTS
PRINCIPAL AMOUNT IS REPORTED IN U.S. DOLLARS, EXCEPT FOR THOSE DENOTED IN THE
FOLLOWING CURRENCIES:
ARP Argentine Peso
AUD Australian Dollar
BRR Brazilian Real
CAD Canadian Dollar
COP Colombian Peso
DEM German Mark
DOP Dominican Republic Peso
EGP Egyptian Pounds
EUR Euro
GBP British Pound Sterling
ILS Israeli Shekel
JPY Japanese Yen
MXN Mexican Nuevo Peso
MYR Malayasian Ringget
NZD New Zealand Dollar
PEN Peruvian New Sol
PLZ Polish Zloty
RON New Romanian Leu
RUR Russian Ruble
TRY New Turkish Lira
UAH Ukraine Hryvnia
ZAR South African Rand
1. Represents the current interest rate for a variable or increasing rate
security.
2. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $80,251,730 or 6.71% of the Fund's net
assets as of December 31, 2005.
3. Issue is in default. Non-income producing. See Note 1 of Notes to Financial
Statements.
4. Illiquid or restricted security. The aggregate value of illiquid or
restricted securities as of December 31, 2005 was $47,375,687, which represents
3.96% of the Fund's net assets, of which $96,286 is considered restricted. In
addition, the Fund has restricted currency of $371,241, which represents 0.03%
of the Fund's net assets. See Note 12 of Notes to Financial Statements.
5. When-issued security or forward commitment to be delivered and settled after
December 31, 2005. See Note 1 of Notes to Financial Statements.
6. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline. Most other fixed income securities
increase in price when interest rates decline. The principal amount of the
underlying pool represents the notional amount on which current interest is
calculated. The price of these securities is typically more sensitive to changes
in prepayment rates than traditional mortgage-backed securities (for example,
GNMA pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future cash
flows. These securities amount to $6,850,077 or 0.57% of the Fund's net assets
as of December 31, 2005.
7. Zero coupon bond reflects effective yield on the date of purchase.
8. All or a portion of the security is held in collateralized accounts to cover
initial margin requirements on open futures sales contracts. The aggregate
market value of such securities is $3,956,813. See Note 6 of Notes to Financial
Statements.
9. Partial or fully-loaned security. See Note 13 of Notes to Financial
Statements.
10. A sufficient amount of liquid assets has been designated to cover
outstanding written swaptions. See Note 11 of Notes to Financial Statements.
11. A sufficient amount of securities has been designated to cover outstanding
foreign currency contracts. See Note 5 of Notes to Financial Statements.
12. Received as the result of issuer reorganization.
13. Denotes a step bond: a zero coupon bond that converts to a fixed or variable
interest rate at a designated future date.
14. Interest or dividend is paid-in-kind.
15. Non-income producing security.
16. Interest rate represents a weighted average rate comprised of the interest
rates of the underlying securities.
17. Denotes an inflation indexed security: coupon and principal are indexed to
the consumer price index.
18. The Fund may have elements of risk due to concentrated investments. Such
concentrations may subject the Fund to additional risks.
19. The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned. See Note 13 of Notes to Financial
Statements.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
30 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------------------------------------------------------
Investments, at value (including cost and market value of $125,302,000 in repurchase agreements)
(including securities loaned of $66,657,680) (cost $1,288,307,861)--see accompanying statement of investments $ 1,296,413,082
- --------------------------------------------------------------------------------------------------------------------------------
Cash 3,035,063
- --------------------------------------------------------------------------------------------------------------------------------
Cash--foreign currencies (cost $358,193) 371,241
- --------------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation on foreign currency contracts 3,986,156
- --------------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation on swap contracts 2,788,117
- --------------------------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest, dividends and principal paydowns 12,978,868
Investments sold (including $9,779,621 sold on a when-issued basis or forward commitment) 9,795,720
Shares of beneficial interest sold 5,750,231
Other 17,044
----------------
Total assets 1,335,135,522
- --------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------------------------------------------------------
Swaptions written, at value (premiums received $36,900) 8,630
- --------------------------------------------------------------------------------------------------------------------------------
Return of collateral for securities loaned 27,470,079
- --------------------------------------------------------------------------------------------------------------------------------
Unrealized depreciation on foreign currency contracts 1,371,300
- --------------------------------------------------------------------------------------------------------------------------------
Unrealized depreciation on swap contracts 1,992,458
- --------------------------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased (including $95,060,388 purchased on a when-issued basis or forward commitment) 106,524,898
Closed foreign currency contracts 563,050
Distribution and service plan fees 362,732
Shares of beneficial interest redeemed 249,036
Futures margins 178,191
Shareholder communications 44,829
Trustees' compensation 20,457
Transfer and shareholder servicing agent fees 1,753
Other 99,850
----------------
Total liabilities 138,887,263
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 1,196,248,259
================
- --------------------------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- --------------------------------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 231,943
- --------------------------------------------------------------------------------------------------------------------------------
Additional paid-in capital 1,150,832,286
- --------------------------------------------------------------------------------------------------------------------------------
Accumulated net investment income 53,188,525
- --------------------------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions (20,030,738)
- --------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign
currencies 12,026,243
----------------
NET ASSETS $1,196,248,259
================
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- --------------------------------------------------------------------------------------------------------------------------------
Non-Service Shares:
Net asset value, redemption price per share and offering price per share
(based on net assets of $538,141,288 and 105,224,169 shares of beneficial interest outstanding) $ 5.11
- --------------------------------------------------------------------------------------------------------------------------------
Service Shares:
Net asset value, redemption price per share and offering price per share
(based on net assets of $658,106,971 and 126,719,264 shares of beneficial interest outstanding) $ 5.19
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
31 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 31, 2005
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
INVESTMENT INCOME
- ----------------------------------------------------------------------------------------
Interest $ 50,322,310
- ----------------------------------------------------------------------------------------
Fee income 937,626
- ----------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $22,009) 590,854
- ----------------------------------------------------------------------------------------
Portfolio lending fees 39,168
--------------
Total investment income 51,889,958
- ----------------------------------------------------------------------------------------
EXPENSES
- ----------------------------------------------------------------------------------------
Management fees 6,559,031
- ----------------------------------------------------------------------------------------
Distribution and service plan fees--Service shares 1,018,455
- ----------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service shares 10,290
Service shares 10,207
- ----------------------------------------------------------------------------------------
Shareholder communications:
Non-Service shares 52,041
Service shares 40,045
- ----------------------------------------------------------------------------------------
Custodian fees and expenses 108,800
- ----------------------------------------------------------------------------------------
Trustees' compensation 20,514
- ----------------------------------------------------------------------------------------
Administration service fees 1,500
- ----------------------------------------------------------------------------------------
Other 90,400
--------------
Total expenses 7,911,283
Less reduction to custodian expenses (53,565)
--------------
Net expenses 7,857,718
- ----------------------------------------------------------------------------------------
NET INVESTMENT INCOME 44,032,240
- ----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- ----------------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments 14,709,707
Closing and expiration of option contracts written 8,952
Closing and expiration of swaption contracts (266,649)
Closing and expiration of futures contracts (3,002,682)
Foreign currency transactions 6,837,067
Swap contracts (3,522,835)
--------------
Net realized gain 14,763,560
- ----------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments (11,011,988)
Translation of assets and liabilities denominated in foreign currencies (25,607,465)
Futures contracts 920,452
Option contracts 12,121
Swaption contracts 4,677
Swap contracts 2,254,162
--------------
Net change in unrealized appreciation (33,428,041)
- ----------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 25,367,759
==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
32 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2005 2004
- -------------------------------------------------------------------------------------------------------------------------
OPERATIONS
- -------------------------------------------------------------------------------------------------------------------------
Net investment income $ 44,032,240 $ 32,017,472
- -------------------------------------------------------------------------------------------------------------------------
Net realized gain 14,763,560 7,611,909
- -------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (33,428,041) 25,007,424
--------------------------------
Net increase in net assets resulting from operations 25,367,759 64,636,805
- -------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Non-Service shares (28,059,108) (29,467,620)
Service shares (12,131,395) (5,049,740)
- -------------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- -------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from beneficial interest transactions:
Non-Service shares (62,203,962) 23,501,705
Service shares 415,654,659 152,771,336
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------------------------------------------------
Total increase 338,627,953 206,392,486
- -------------------------------------------------------------------------------------------------------------------------
Beginning of period 857,620,306 651,227,820
--------------------------------
End of period (including accumulated net investment income of $53,188,525 and
$39,051,911, respectively) $ 1,196,248,259 $ 857,620,306
================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
33 | OPPENHEIMER STRATEGIC BOND FUND/VA
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 2001
- ----------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 5.21 $ 5.05 $ 4.57 $ 4.62 $ 4.69
- ----------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .25 1 .22 1 .22 .29 .41
Net realized and unrealized gain (loss) (.12) .20 .56 .03 (.19)
--------------------------------------------------------------
Total from investment operations .13 .42 .78 .32 .22
- ----------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.23) (.26) (.30) (.37) (.29)
- ----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.11 $ 5.21 $ 5.05 $ 4.57 $ 4.62
==============================================================
- ----------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 2.67% 8.67% 18.07% 7.44% 4.85%
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 538,141 $ 614,915 $ 571,445 $ 406,126 $ 351,686
- ----------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 550,201 $ 584,878 $ 472,213 $ 374,519 $ 330,711
- ----------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 4.91% 4.50% 5.61% 6.89% 8.78%
Total expenses 0.71% 0.74% 0.75% 0.79% 0.79%
Expenses after payments and waivers and
reduction to custodian expenses 0.71% 0.74% 0.75% 0.78% 0.79%
- ----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 98% 4 88% 4 117% 65% 104%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Total returns are not annualized for
periods less than one full year. Total return information does not reflect
expenses that apply at the separate account level or to related insurance
products. Inclusion of these charges would reduce the total return figures for
all periods shown. Returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
3. Annualized for periods of less than one full year.
4. The portfolio turnover rate excludes purchases and sales of To Be Announced
(TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
- --------------------------------------------------------------------------------
Year Ended December 31, 2005 $ 890,029,144 $ 873,786,459
Year Ended December 31, 2004 959,649,113 973,488,511
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
34 | OPPENHEIMER STRATEGIC BOND FUND/VA
SERVICE SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 2001 1
- ----------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 5.29 $ 5.13 $ 4.67 $ 4.73 $ 4.64
- ----------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .21 2 .19 2 .27 .03 .15
Net realized and unrealized gain (loss) (.08) .22 .49 .28 (.06)
--------------------------------------------------------------
Total from investment operations .13 .41 .76 .31 .09
- ----------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.23) (.25) (.30) (.37) --
- ----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.19 $ 5.29 $ 5.13 $ 4.67 $ 4.73
==============================================================
- ----------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 2.48% 8.43% 17.16% 7.03% 1.94%
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 658,107 $ 242,705 $ 79,782 $ 8,138 $ 4
- ----------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 408,515 $ 150,040 $ 34,744 $ 2,307 $ 2
- ----------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 4.20% 3.82% 4.57% 5.40% 8.17%
Total expenses 0.96% 0.99% 1.02% 1.06% 0.92%
Expenses after payments and waivers and
reduction to custodian expenses 0.96% 0.99% 1.02% 1.03% 0.92%
- ----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 98% 5 88% 5 117% 65% 104%
1. For the period from March 19, 2001 (inception of offering) to December 31,
2001.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Total returns are not annualized for
periods less than one full year. Total return information does not reflect
expenses that apply at the separate account level or to related insurance
products. Inclusion of these charges would reduce the total return figures for
all periods shown. Returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
4. Annualized for periods of less than one full year.
5. The portfolio turnover rate excludes purchases and sales of To Be Announced
(TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
- --------------------------------------------------------------------------------
Year Ended December 31, 2005 $ 890,029,144 $ 873,786,459
Year Ended December 31, 2004 959,649,113 973,488,511
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
35 | OPPENHEIMER STRATEGIC BOND FUND/VA
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Strategic Bond Fund/VA (the Fund) is a separate series of
Oppenheimer Variable Account Funds, an open-end management investment company
registered under the Investment Company Act of 1940, as amended. The Fund's
investment objective is to seek a high level of current income principally
derived from interest on debt securities. The Fund's investment advisor is
OppenheimerFunds, Inc. (the Manager).
The Fund offers two classes of shares. Both classes are sold at their
offering price, which is the net asset value per share, to separate investment
accounts of participating insurance companies as an underlying investment for
variable life insurance policies, variable annuity contracts or other investment
products. The class of shares designated as Service shares is subject to a
distribution and service plan. Both classes of shares have identical rights and
voting privileges with respect to the Fund in general and exclusive voting
rights on matters that affect that class alone. Earnings, net assets and net
asset value per share may differ due to each class having its own expenses, such
as transfer and shareholder servicing agent fees and shareholder communications,
directly attributable to that class.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for business. Securities may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. Securities listed or traded on National
Stock Exchanges or other domestic exchanges are valued based on the last sale
price of the security traded on that exchange prior to the time when the Fund's
assets are valued. Securities traded on NASDAQ are valued based on the closing
price provided by NASDAQ prior to the time when the Fund's assets are valued. In
the absence of a sale, the security is valued at the last sale price on the
prior trading day, if it is within the spread of the closing "bid" and "asked"
prices, and if not, at the closing bid price. Securities traded on foreign
exchanges are valued based on the last sale price on the principal exchange on
which the security is traded, in the country that is identified by the portfolio
pricing service, prior to the time when the Fund's assets are valued. In the
absence of a sale, the security is valued at the official closing price on the
principal exchange. Corporate, government and municipal debt instruments having
a remaining maturity in excess of sixty days and all mortgage-backed securities
will be valued at the mean between the "bid" and "asked" prices. Futures
contracts traded on a commodities or futures exchange will be valued at the
final settlement price or official closing price on the principal exchange as
reported by such principal exchange at its trading session ending at, or most
recently prior to, the time when the Fund's assets are valued. Securities
(including restricted securities) for which market quotations are not readily
available are valued at their fair value. Foreign and domestic securities whose
values have been materially affected by what the Manager identifies as a
significant event occurring before the Fund's assets are valued but after the
close of their respective exchanges will be fair valued. Fair value is
determined in good faith using consistently applied procedures under the
supervision of the Board of Trustees. Short-term "money market type" debt
securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).
- --------------------------------------------------------------------------------
STRUCTURED NOTES. The Fund invests in structured notes whose market values,
interest rates and/or redemption prices are linked to the performance of
underlying foreign currencies, interest rate spreads, stock market indices,
prices of individual securities, commodities or other financial instruments or
the occurrence of other specific events. The structured notes are often
leveraged, increasing the volatility of each note's market value relative to the
change in the underlying linked financial element or event. Fluctuations in
value of these securities are recorded as unrealized gains and losses in the
accompanying Statement of Operations. The Fund records a realized gain or loss
when a structured note is sold or matures. As of December 31, 2005, the market
value of these securities comprised 14.9% of the Fund's net assets and resulted
in unrealized cumulative gains of $2,933,168.
- --------------------------------------------------------------------------------
SECURITIES ON A WHEN-ISSUED BASIS OR FORWARD COMMITMENT. Delivery and payment
for securities that have been purchased by the Fund on a when-issued basis or
forward commitment can take place up to ten days or more after the trade date.
Normally the settlement date occurs within six months after the trade date;
however, the Fund may,
36 | OPPENHEIMER STRATEGIC BOND FUND/VA
from time to time, purchase securities whose settlement date extends six months
or more beyond trade date. During this period, such securities do not earn
interest, are subject to market fluctuation and may increase or decrease in
value prior to their delivery. The Fund maintains internally designated assets
with a market value equal to or greater than the amount of its purchase
commitments. The purchase of securities on a when-issued basis or forward
commitment may increase the volatility of the Fund's net asset value to the
extent the Fund executes such transactions while remaining substantially fully
invested. The Fund may also sell securities that it purchased on a when-issued
basis or forward commitment prior to settlement of the original purchase. As of
December 31, 2005, the Fund had purchased $95,060,388 of securities issued on a
when-issued basis or forward commitment and sold $9,779,621 of securities issued
on a when-issued basis or forward commitment.
In connection with its ability to purchase or sell securities on a
when-issued basis, the Fund may enter into forward roll transactions with
respect to mortgage-related securities. Forward roll transactions require the
sale of securities for delivery in the current month, and a simultaneous
agreement with the same counterparty to repurchase similar (same type, coupon
and maturity) but not identical securities on a specified future date. The Fund
records the incremental difference between the forward purchase and sale of each
forward roll as realized gain (loss) on investments or as fee income in the case
of such transactions that have an associated fee in lieu of a difference in the
forward purchase and sale price.
Risks of entering into forward roll transactions include the potential
inability of the counterparty to meet the terms of the agreement; the potential
of the Fund to receive inferior securities at redelivery as compared to the
securities sold to the counterparty; counterparty credit risk; and the potential
pay down speed variance between the mortgage-related pools.
- --------------------------------------------------------------------------------
SECURITY CREDIT RISK. The Fund invests in high-yield securities, which may be
subject to a greater degree of credit risk, market fluctuations and loss of
income and principal, and may be more sensitive to economic conditions than
lower-yielding, higher-rated fixed-income securities. The Fund may acquire
securities in default, and is not obligated to dispose of securities whose
issuers subsequently default. As of December 31, 2005, securities with an
aggregate market value of $3,102,188, representing 0.26% of the Fund's net
assets, were in default.
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in
U.S. dollars. The values of securities denominated in foreign currencies and
amounts related to the purchase and sale of foreign securities and foreign
investment income are translated into U.S. dollars as of the close of The New
York Stock Exchange (the Exchange), normally 4:00 P.M. Eastern time, on each day
the Exchange is open for business. Foreign exchange rates may be valued
primarily using dealer supplied valuations or a portfolio pricing service
authorized by the Board of Trustees.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
values of assets and liabilities, including investments in securities at fiscal
period end, resulting from changes in exchange rates.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated funds
advised by the Manager, may transfer uninvested cash balances into joint trading
accounts on a daily basis. These balances are invested in one or more repurchase
agreements. Securities pledged as collateral for repurchase agreements are held
by a custodian bank until the agreements mature. Each agreement requires that
the market value of the collateral be sufficient to cover payments of interest
and principal. In the event of default by the other party to the agreement,
retention of the collateral may be subject to legal proceedings.
37 | OPPENHEIMER STRATEGIC BOND FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders.
The tax components of capital shown in the table below represent distribution
requirements the Fund must satisfy under the income tax regulations, losses the
Fund may be able to offset against income and gains realized in future years and
unrealized appreciation or depreciation of securities and other investments for
federal income tax purposes.
NET UNREALIZED
APPRECIATION BASED
ON COST OF SECURITIES
UNDISTRIBUTED UNDISTRIBUTED AND OTHER INVESTMENTS
NET INVESTMENT LONG-TERM ACCUMULATED LOSS FOR FEDERAL INCOME
INCOME GAIN CARRYFORWARD 1,2,3,4,5 TAX PURPOSES
- ----------------------------------------------------------------------------------------
$ 55,828,861 $ -- $18,517,354 $8,288,247
1. As of December 31, 2005, the Fund had $17,223,723 of net capital loss
carryforwards available to offset future realized capital gains, if any, and
thereby reduce future taxable gain distributions. As of December 31, 2005,
details of the capital loss carryforwards were as follows:
EXPIRING
------------------------------
2007 $ 203,423
2008 253,735
2009 9,904,928
2010 6,861,637
--------------
Total $ 17,223,723
==============
2. As of December 31, 2005, the Fund had $878,699 of post-October losses
available to offset future realized capital gains, if any. Such losses, if
unutilized, will expire in 2014.
3. The Fund had $414,932 of straddle losses which were deferred.
4. During the fiscal year ended December 31, 2005, the Fund utilized $4,343,176
of capital loss carryforward to offset capital gains realized in that fiscal
year.
5. During the fiscal year ended December 31, 2004, the Fund utilized $1,200,449
of capital loss carryforward to offset capital gains realized in that fiscal
year.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Fund. Accordingly, the
following amounts have been reclassified for December 31, 2005. Net assets of
the Fund were unaffected by the reclassifications.
INCREASE TO INCREASE TO ACCUMULATED
ACCUMULATED NET NET REALIZED LOSS
INVESTMENT INCOME ON INVESTMENTS
-------------------------------------------
$10,294,877 $10,294,877
The tax character of distributions paid during the years ended December 31, 2005
and December 31, 2004 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2005 DECEMBER 31, 2004
--------------------------------------------------------------------
Distributions paid from:
Ordinary income $ 40,190,503 $ 34,517,360
38 | OPPENHEIMER STRATEGIC BOND FUND/VA
The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for
federal income tax purposes as of December 31, 2005 are noted below. The primary
difference between book and tax appreciation or depreciation of securities and
other investments, if applicable, is attributable to the tax deferral of losses
or tax realization of financial statement unrealized gain or loss.
Federal tax cost of securities $ 1,287,851,686
Federal tax cost of other investments (31,303,462)
-----------------
Total federal tax cost $ 1,256,548,224
=================
Gross unrealized appreciation $ 32,240,903
Gross unrealized depreciation (23,952,656)
-----------------
Net unrealized appreciation $ 8,288,247
=================
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred
compensation plan for independent trustees that enables trustees to elect to
defer receipt of all or a portion of the annual compensation they are entitled
to receive from the Fund. For purposes of determining the amount owed to the
Trustee under the plan, deferred amounts are treated as though equal dollar
amounts had been invested in shares of the Fund or in other Oppenheimer funds
selected by the Trustee. The Fund purchases shares of the funds selected for
deferral by the Trustee in amounts equal to his or her deemed investment,
resulting in a Fund asset equal to the deferred compensation liability. Such
assets are included as a component of "Other" within the asset section of the
Statement of Assets and Liabilities. Deferral of trustees' fees under the plan
will not affect the net assets of the Fund, and will not materially affect the
Fund's assets, liabilities or net investment income per share. Amounts will be
deferred until distributed in accordance to the Plan.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date. Income and capital gain distributions, if
any, are declared and paid annually.
- --------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and amortization
of premium, is accrued as earned.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. Custodian Fees and Expenses in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts to the extent they are not
offset by positive cash balances maintained by the Fund. The Reduction to
Custodian Expenses line item, if applicable, represents earnings on cash
balances maintained by the Fund during the period. Such interest expense and
other custodian fees may be paid with these earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
39 | OPPENHEIMER STRATEGIC BOND FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
YEAR ENDED DECEMBER 31, 2005 YEAR ENDED DECEMBER 31, 2004
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
NON-SERVICE SHARES
Sold 23,774,819 $ 120,696,837 24,003,073 $ 119,433,508
Dividends and/or distributions reinvested 5,623,068 28,059,108 6,088,351 29,467,620
Redeemed (42,307,482) (210,959,907) (25,208,632) (125,399,423)
-------------------------------------------------------------
Net increase (decrease) (12,909,595) $ (62,203,962) 4,882,792 $ 23,501,705
=============================================================
- ---------------------------------------------------------------------------------------------------------
SERVICE SHARES
Sold 80,659,335 $ 414,986,342 31,450,838 $ 158,302,695
Dividends and/or distributions reinvested 2,388,070 12,131,395 1,026,369 5,049,740
Redeemed (2,226,542) (11,463,078) (2,125,979) (10,581,099)
-------------------------------------------------------------
Net increase 80,820,863 $ 415,654,659 30,351,228 $ 152,771,336
=============================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended December 31, 2005, were as
follows:
PURCHASES SALES
- -----------------------------------------------------------------------------------------
Investment securities $ 760,393,218 $ 681,724,411
U.S. government and government agency obligations 238,376,693 52,518,620
To Be Announced (TBA) mortgage-related securities 890,029,144 873,786,459
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Trust which provides for a fee at an
annual rate of 0.75% of the first $200 million of average annual net assets,
0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the
next $200 million, 0.60% on the next $200 million and 0.50% of average annual
net assets over $1 billion.
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the year ended December 31, 2005, the Fund paid
$20,449 to OFS for services to the Fund.
Additionally, funds offered in variable annuity separate accounts are
subject to minimum fees of $10,000 per class, for class level assets of $10
million or more. Each class is subject to the minimum fee in the event that the
per account fee does not equal or exceed the applicable minimum fee.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN FOR SERVICE SHARES. The Fund has adopted a
Distribution and Service Plan for Service shares to pay OppenheimerFunds
Distributor, Inc. (the Distributor), for distribution related services, personal
service and account maintenance for the Fund's Service shares. Under the plan,
payments are made periodically at an annual rate of up to 0.25% of the average
annual net assets of Service shares of the Fund. The Distributor currently uses
all of those fees to compensate sponsor(s) of the insurance product that offers
Fund shares, for providing personal service and maintenance of accounts of their
variable contract owners that hold Service shares. The impact of the service
plan is to increase operating expenses of the Service shares, which results in
lower performance compared to the Fund's shares that are not subject to a
service fee. Fees incurred by the Fund under the plan are detailed in the
Statement of Operations.
40 | OPPENHEIMER STRATEGIC BOND FUND/VA
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit
transfer and shareholder servicing agent fees for all classes to 0.35% of
average annual net assets per class. This undertaking may be amended or
withdrawn at any time.
- --------------------------------------------------------------------------------
5. FOREIGN CURRENCY CONTRACTS
A foreign currency contract is a commitment to purchase or sell a foreign
currency at a future date, at a negotiated rate. The Fund may enter into foreign
currency contracts to settle specific purchases or sales of securities
denominated in a foreign currency and for protection from adverse exchange rate
fluctuation. Risks to the Fund include the potential inability of the
counterparty to meet the terms of the contract.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using prevailing foreign currency exchange rates.
Unrealized appreciation and depreciation on foreign currency contracts are
reported in the Statement of Assets and Liabilities as a receivable or payable
and in the Statement of Operations with the change in unrealized appreciation or
depreciation.
The Fund may realize a gain or loss upon the closing or settlement of the
foreign transaction. Contracts closed or settled with the same broker are
recorded as net realized gains or losses. Such realized gains and losses are
reported with all other foreign currency gains and losses in the Statement of
Operations.
As of December 31, 2005, the Fund had outstanding foreign currency contracts as
follows:
CONTRACT
EXPIRATION AMOUNT VALUATION AS OF UNREALIZED UNREALIZED
CONTRACT DESCRIPTION DATES (000S) DEC. 31, 2005 APPRECIATION DEPRECIATION
- --------------------------------------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
Argentine Peso [ARP] 1/5/06-2/2/06 16,875 ARP $ 5,537,498 $ -- $ 75,625
Brazilian Real [BRR] 1/17/06-1/5/10 41,189 BRR 18,998,814 1,172,694 152,194
British Pound Sterling [GBP] 3/9/06 600 GBP 1,032,215 -- 10,723
Canadian Dollar [CAD] 1/23/06 6,120 CAD 5,268,392 38,912 --
Chiliean Peso [CLP] 1/6/06 530,000 CLP 1,030,467 27,154 --
Colombian Peso [COP] 1/5/06 7,439,412 COP 3,253,389 -- 18,306
Euro [EUR] 1/17/06-2/14/06 37,000 EUR 43,876,406 10,306 174,681
Indonesian Rupiah [IDR] 4/3/06 29,080,000 IDR 2,927,018 -- 5,912
Indian Rupee [INR] 1/5/06 207,900 INR 4,618,721 122,996 --
Japanese Yen [JPY] 1/6/06 484,000 JPY 4,107,120 -- 134,215
Mexican Nuevo Peso [MXN] 1/17/06-4/25/06 81,140 MXN 7,584,773 120,083 --
Swedish Krone [SEK] 2/13/06 82,490 SEK 10,417,607 20,723 6,689
Swiss Franc [CHF] 2/2/06 6,800 CHF 5,192,699 -- 14,849
Thailand Baht [THB] 1/17/06 158,000 THB 3,849,981 -- 1,799
Turkish Lira [TRY] 1/17/06-2/1/08 12,284 TRY 10,613,182 423,589 1,755
----------------------------
1,936,457 596,748
----------------------------
CONTRACTS TO SELL
Australian Dollar [AUD] 3/6/06 9,920 AUD 7,257,953 75,134 --
Brazilian Real [BRR] 2/2/06 30,410 BRR 12,869,918 80,152 --
British Pound Sterling [GBP] 1/17/06-3/8/06 10,340 GBP 17,788,468 593,667 --
Canadian Dollar [CAD] 2/17/06 355 CAD 305,824 -- 8,005
Chinese Renminbi (Yuan) [CNY] 1/17/06 36,600 CNY 4,547,201 -- 391
Euro [EUR] 1/24/06-5/18/06 38,850 EUR 46,091,367 538,185 49,549
Japanese Yen [JPY] 1/10/06-4/5/06 7,558,000 JPY 64,342,685 491,826 438,432
New Zealand Dollar [NZD] 2/21/06 15,240 NZD 10,360,117 137,457 523
Swedish Krone [SEK] 1/17/06 36,600 SEK 4,613,051 60,741 --
Swiss Franc [CHF] 1/17/06 5,950 CHF 4,536,115 72,537 --
Taiwan Dollar [TWD] 1/17/06 151,600 TWD 4,627,822 -- 92,295
South African Rand [ZAR] 1/11/06-1/12/06 21,320 ZAR 3,366,318 -- 185,357
----------------------------
2,049,699 774,552
----------------------------
Total unrealized appreciation and depreciation $ 3,986,156 $ 1,371,300
============================
41 | OPPENHEIMER STRATEGIC BOND FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. FUTURES CONTRACTS
A futures contract is a commitment to buy or sell a specific amount of a
commodity or financial instrument at a negotiated price on a stipulated future
date. Futures contracts are traded on a commodity exchange. The Fund may buy and
sell futures contracts that relate to broadly based securities indices
(financial futures) or debt securities (interest rate futures) in order to gain
exposure to or protection from changes in market value of stocks and bonds or
interest rates. The Fund may also buy or write put or call options on these
futures contracts.
The Fund generally sells futures contracts as a hedge against increases in
interest rates and decreases in market value of portfolio securities. The Fund
may also purchase futures contracts to gain exposure to market changes as it may
be more efficient or cost effective than actually buying securities.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities (initial margin) in an amount equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Fund each day. The variation margin payments are equal
to the daily changes in the contract value and are recorded as unrealized gains
and losses. The Fund recognizes a realized gain or loss when the contract is
closed or has expired.
Cash held by the broker to cover initial margin requirements on open
futures contracts is noted in the Statement of Assets and Liabilities.
Securities held in collateralized accounts to cover initial margin requirements
on open futures contracts are noted in the Statement of Investments. The
Statement of Assets and Liabilities reflects a receivable and/or payable for the
daily mark to market for variation margin. Realized gains and losses are
reported in the Statement of Operations as the closing and expiration of futures
contracts. The net change in unrealized appreciation and depreciation is
reported in the Statement of Operations.
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market and that a change in the value
of the contract or option may not correlate with changes in the value of the
underlying securities.
As of December 31, 2005, the Fund had outstanding futures contracts as follows:
UNREALIZED
EXPIRATION NUMBER OF VALUATION AS OF APPRECIATION
CONTRACT DESCRIPTION DATES CONTRACTS DECEMBER 31, 2005 (DEPRECIATION)
- -----------------------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
Amsterdam Exchange Index 1/20/06 19 $ 1,966,200 $ 18,046
DAX Index 3/17/06 12 1,931,405 36,529
Euro-Bundesobligation, 10 yr. 3/8/06 90 12,982,111 88,871
FTSE 100 Index 3/17/06 4 386,491 5,892
Nikkei 225 Index 3/9/06 3 408,276 22,627
Standard & Poor's ASX 200 Index 3/16/06 22 1,905,951 52,759
Standard & Poor's/MIB Index, 10 yr. 3/17/06 9 1,906,987 38,454
U.S. Long Bonds 3/22/06 387 44,190,563 633,438
U.S. Treasury Nts., 2 yr. 3/31/06 200 41,037,500 34,878
U.S. Treasury Nts., 10 yr. 3/22/06 329 35,994,656 177,443
---------
1,108,937
---------
42 | OPPENHEIMER STRATEGIC BOND FUND/VA
UNREALIZED
EXPIRATION NUMBER OF VALUATION AS OF APPRECIATION
CONTRACT DESCRIPTION DATES CONTRACTS DECEMBER 31, 2005 (DEPRECIATION)
- ------------------------------------------------------------------------------------------------------------
CONTRACTS TO SELL
CAC-40 10 Index 1/20/06 38 $ 2,122,758 $ (11,191)
DAX Index 3/17/06 12 1,931,405 (37,701)
Euro-Bundesobligation, 10 yr. 3/8/06 22 3,173,405 (22,238)
FTSE 100 Index 3/17/06 41 3,961,530 (61,634)
Japan (Government of) Mini Bonds, 10 yr. 3/8/06 20 2,329,249 (7,971)
NASDAQ 100 E-Mini Index 3/17/06 112 3,716,160 2,043
Nikkei 225 Index 3/9/06 42 5,715,860 (193,395)
OMXS 30 Index 1/27/06 179 2,167,512 (45,452)
Standard & Poor's 500 Index 3/16/06 77 24,154,900 215,311
United Kingdom Long Gilt 3/29/06 3 590,730 (7,123)
U.S. Treasury Nts., 2 yr. 3/31/06 49 10,054,188 (6,066)
U.S. Treasury Nts., 5 yr. 3/22/06 222 23,608,313 (43,285)
U.S. Treasury Nts., 10 yr. 3/22/06 359 39,276,844 (179,572)
----------
(398,274)
----------
$ 710,663
==========
- --------------------------------------------------------------------------------
7. OPTION ACTIVITY
The Fund may buy and sell put and call options, or write put and covered call
options on portfolio securities in order to produce incremental earnings or
protect against changes in the value of portfolio securities.
The Fund generally purchases put options or writes covered call options to
hedge against adverse movements in the value of portfolio holdings. When an
option is written, the Fund receives a premium and becomes obligated to sell or
purchase the underlying security at a fixed price, upon exercise of the option.
Options are valued daily based upon the last sale price on the principal
exchange on which the option is traded and unrealized appreciation or
depreciation is recorded. The Fund will realize a gain or loss upon the
expiration or closing of the option transaction. When an option is exercised,
the proceeds on sales for a written call option, the purchase cost for a written
put option, or the cost of the security for a purchased put or call option is
adjusted by the amount of premium received or paid.
Securities designated to cover outstanding call options are noted in the
Statement of Investments where applicable. Contracts subject to call, expiration
date, exercise price, premium received and market value are detailed in a note
to the Statement of Investments. Options written are reported as a liability in
the Statement of Assets and Liabilities. Realized gains and losses are reported
in the Statement of Operations.
The risk in writing a call option is that the Fund gives up the
opportunity for profit if the market price of the security increases and the
option is exercised. The risk in writing a put option is that the Fund may incur
a loss if the market price of the security decreases and the option is
exercised. The risk in buying an option is that the Fund pays a premium whether
or not the option is exercised. The Fund also has the additional risk of not
being able to enter into a closing transaction if a liquid secondary market does
not exist.
Written option activity for the year ended December 31, 2005 was as follows:
CALL OPTIONS PUT OPTIONS
---------------------- -----------------------
PRINCIPAL/ PRINCIPAL/
NUMBER OF AMOUNT OF NUMBER OF AMOUNT OF
CONTRACTS PREMIUMS CONTRACTS PREMIUMS
- -----------------------------------------------------------------------------------------------------------
Options outstanding as of December 31, 2004 945 $ 2,661 2,325,000 $ 5,357
Options written 3,570 3,188 -- --
Options closed or expired (4,515) (5,849) (2,325,000) (5,357)
--------------------------------------------------
Options outstanding as of December 31, 2005 -- $ -- -- $ --
==================================================
43 | OPPENHEIMER STRATEGIC BOND FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8. CREDIT SWAP CONTRACTS
The Fund may enter into a credit default swap contract to seek to maintain a
total return on a particular investment or portion of its portfolio, or for
other non-speculative purposes. Credit default swap contracts are subject to
credit risks (for example if the counterparty fails to meet its obligations).
As a purchaser of a credit default swap contract, the Fund pays a periodic
interest fee on the notional amount to the counterparty. This interest fee is
accrued daily as a component of unrealized appreciation (depreciation) and is
recorded as realized loss upon payment. Upon occurrence of a specific credit
event with respect to the underlying referenced debt obligation, the Fund is
obligated to deliver that security to the counterparty in exchange for receipt
of the notional amount from the counterparty. The difference between the value
of the security delivered and the notional amount received is recorded as
realized gain. Information regarding such credit swaps as of December 31, 2005
is as follows:
NOTIONAL
AMOUNT ANNUAL
RECEIVED BY INTEREST UNREALIZED
THE FUND UPON RATE PAID APPRECIATION
COUNTERPARTY REFERENCED DEBT OBLIGATION CREDIT EVENT BY THE FUND (DEPRECIATION)
- ------------------------------------------------------------------------------------------------------------------------------
Citigroup Global Markets
Limited London, UK Republic of Hungary 4.50% Bond $ 2,300,000 0.40% $ 1,088
- ------------------------------------------------------------------------------------------------------------------------------
Deutsche Bank Philippine Government Bond 2,000,000 3.69 35,000
- ------------------------------------------------------------------------------------------------------------------------------
JPMorgan Chase New York, NY:
Kingdom of Jordan 6% Step-up Bond 250,000 2.00 (873)
Russian Federation 2.50% Step-up Bond 730,000 2.40 (77,615)
- ------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Special
Financing, Inc.:
Brazil 12.25% Global Bond 3,000,000 6.15 (497,594)
General Motors 7.125% Bond 700,000 5.45 35,000
General Motors 7.125% Bond 1,300,000 4.40 71,500
- ------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital
Services, Inc.:
Republic of Colombia 10.375% Bond 1,080,000 3.70 (109,602)
Turkey Government 11.875% International Bond 1,560,000 3.22 (134,409)
Ukrainian Government Bond 346,000 1.65 (1,946)
- ------------------------------------------------------------------------------------------------------------------------------
UBS AG, London Branch Federal Republic of Brazil 12.25% Bond 900,000 4.50 (93,368)
---------------
$ (772,819)
===============
As a seller of a credit default swap contract, the Fund receives a periodic
interest fee on the notional amount from the counterparty. This interest fee is
accrued daily as a component of unrealized appreciation (depreciation) and is
recorded as realized gain upon receipt. Upon occurrence of a specific credit
event with respect to the underlying referenced debt obligation, the Fund
receives that security from the counterparty in exchange for payment of the
notional amount to the counterparty. The difference between the value of the
security received and the notional amount paid is recorded as realized loss.
Information regarding such credit swaps as of December 31, 2005 is as follows:
NOTIONAL ANNUAL
AMOUNT PAID INTEREST RATE UNREALIZED
BY THE FUND RECEIVED BY APPRECIATION
COUNTERPARTY REFERENCED DEBT OBLIGATION UPON CREDIT EVENT THE FUND (DEPRECIATION)
- ------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Special
Financing, Inc.:
General Motors 7.125% Bond $ 700,000 9.80% $ (78,015)
General Motors 7.125% Bond 1,300,000 5.55 (282,815)
- ------------------------------------------------------------------------------------------------------------------------------
UBS AG, London Branch Federal Republic of Brazil 12.25% Bond 3,055,000 3.80 239,903
---------------
$ (120,927)
===============
44 | OPPENHEIMER STRATEGIC BOND FUND/VA
- --------------------------------------------------------------------------------
9.INTEREST RATE SWAP CONTRACTS
The Fund may enter into an interest rate swap transaction to maintain a total
return or yield spread on a particular investment, or portion of its portfolio,
or for other non-speculative purposes. Interest rate swaps involve the exchange
of commitments to pay or receive interest, e.g., an exchange of floating rate
payments for fixed rate payments. The coupon payments are based on an agreed
upon principal amount and a specified index. Because the principal amount is not
exchanged, it represents neither an asset nor a liability to either
counterparty, and is referred to as notional. The unrealized gain (loss) related
to the valuation of such contracts as well as the amount due to (owed by) the
Fund at termination or settlement is combined and separately disclosed as an
asset (liability) on the Statement of Assets and Liabilities. The Fund also
records any periodic payments received from (paid to) the counterparty under
such contracts as realized gain (loss) on the Statement of Operations.
Interest rate swaps are subject to credit risk (if the counterparty fails
to meet its obligations) and interest rate risk. The Fund could be obligated to
pay more under its swap agreements than it receives under them, as a result of
interest rate changes.
As of December 31, 2005, the Fund had entered into the following interest rate
swap agreements:
FIXED RATE FLOATING RATE
PAID BY RECEIVED BY UNREALIZED
NOTIONAL THE FUND AT THE FUND AT FLOATING TERMINATION APPRECIATION
SWAP COUNTERPARTY AMOUNT DEC. 31, 2005 DEC. 31, 2005 RATE INDEX DATES (DEPRECIATION)
- -----------------------------------------------------------------------------------------------------------------------------------
Citigroup Global Markets Six-Month
Holdings, Inc.: 1,260,000 PLZ 5.900% 5.520% WIBO 3/24/10 $ 21,463
Six-Month
2,016,000 PLZ 4.350 5.550 WIBO 3/24/10 35,109
- -----------------------------------------------------------------------------------------------------------------------------------
Credit Suisse First Boston 28-Day MXN
International 9,530,000 MXN 8.900 10.000 TIIE 7/9/15 58,910
- -----------------------------------------------------------------------------------------------------------------------------------
Credit Suisse First Boston, Inc. Six-Month
(Nassau Branch) 3,640,000 PLZ 4.910 4.480 WIBO 7/1/10 (22,674)
- -----------------------------------------------------------------------------------------------------------------------------------
Six-Month
Deutsche Bank AG 930,000 3.660 5.250 LIBOR 6/23/15 74,003
- -----------------------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG, 5 yr.: 90-Day
55,240,000 TWD 2.585 1.360 CPTW 8/19/09 (39,818)
74,350,000 INR 4.880 5.012 IRS 1/15/09 57,230
- -----------------------------------------------------------------------------------------------------------------------------------
Three-Month
Deutsche Bank AG, 10 yr. 10,000,000 3.780 5.320 BBA LIBOR 5/12/14 304,662
- -----------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Capital
Markets LP:
15,887,992 BRR 19.730 17.180 BZDI 1/2/08 116,505
1,682,090 BRR 18.250 17.720 BZDI 1/2/07 --
2,744,000 BRR 19.200 18.160 BZDI 1/2/08 46,558
4,710,000 MXN 8.615 10.000 MXN TIIE 6/24/15 29,995
9,160,000 MXN 9.155 10.220 MXN TIIE 1/30/15 70,396
7,875,000 MXN 9.110 10.430 MXN TIIE 5/29/15 70,924
7,875,000 MXN 9.053 10.300 MXN TIIE 6/1/15 64,522
7,990,000 MXN 9.000 10.290 MXN TIIE 6/14/15 64,885
45 | OPPENHEIMER STRATEGIC BOND FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9. INTEREST RATE SWAP CONTRACTS Continued
FIXED RATE FLOATING RATE
PAID BY RECEIVED BY UNREALIZED
NOTIONAL THE FUND AT THE FUND AT FLOATING TERMINATION APPRECIATION
SWAP COUNTERPARTY AMOUNT DEC. 31, 2005 DEC. 31, 2005 RATE INDEX DATES (DEPRECIATION)
- -----------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc.
(The):
3,307,000 BRR 18.630% 18.000% BZDI 1/2/07 $ 8,113
1,314,230 BRR 18.250 17.170 BZDI 1/2/08 6,036
1,606,280 BRR 18.250 17.170 BZDI 1/2/08 7,377
9,100,000 MXN 8.565 10.700 MXN TIIE 5/8/15 96,552
6,090,000 MXN 8.650 9.410 MXN TIIE 8/31/20 10,680
12,220,000 MXN 8.625 9.500 MXN TIIE 8/28/25 20,576
18,300,000 MXN 8.650 9.510 MXN TIIE 8/26/25 32,541
11,510,000 MXN 8.650 9.740 MXN TIIE 1/5/10 48,889
23,010,000 MXN 8.900 9.840 MXN TIIE 12/31/09 105,173
4,100,000 MXN 8.588 10.850 MXN TIIE 3/5/15 47,142
- -----------------------------------------------------------------------------------------------------------------------------------
JPMorgan Chase Bank: Six-Month
245,400,000 HUF 6.630 7.000 LIBOR flat 7/14/08 3,093
28-Day MXN
14,620,000 MXN 8.650 10.880 TIIE 11/16/14 166,418
9,700,000 MXN 9.140 9.760 MXN TIIE 8/17/15 46,099
Three-Month
100,000,000 3.870 4.430 LIBOR 9/1/10 (629,723)
Three-Month
1,820,000 3.680 4.940 BBA LIBOR 4/30/14 8,170
- -----------------------------------------------------------------------------------------------------------------------------------
Three-Month
JPMorgan Chase Bank, 10 yr. 35,000,000 4.290 4.985 BBA LIBOR 5/6/14 255,049
- -----------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Special
Financing, Inc.: 28-Day MXN
9,440,000 MXN 8.900 9.990 TIIE 7/19/15 56,597
Six-Month
4,680,000 PLZ 4.470 4.530 WIBO 7/5/10 (23,020)
- -----------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital
Services, Inc.:
1,760,273 BRR 18.680 16.880 BZDI 1/2/08 2,417
3,540,000 BRR 19.720 17.590 BZDI 1/2/07 6,120
Six-Month
178,000,000 JPY 1.522 0.406 BBA LIBOR 10/5/13 (986)
Six-Month
603,000,000 JPY 0.376 0.670 BBA LIBOR 10/5/08 189
Three-Month
4,940,000 ZAR 7.000 8.140 JIBA 5/18/10 21,996
---------------
$ 1,248,168
===============
Notional amount is reported in U.S. Dollars, except for those denoted in the
following currencies:
BRR Brazilian Real
HUF Hungary Forints
INR Indian Rupee
JPY Japanese Yen
MXN Mexican Nuevo Peso
PLZ Polish Zloty
TWD New Taiwan Dollar
ZAR South African Rand
Index abbreviations are as follows:
BBA LIBOR British Bankers' Association London-Interbank Offered Rate
BZDI Brazil Cetip Interbank Deposit Rate
CPTW Bloomberg Taiwan Secondary Commercial Papers
IRS India Swap Composites
JIBA South Africa Johannesburg Interbank Agreed Rate
LIBOR London-Interbank Offered Rate
MXN TIIE Mexican Peso-Interbank Equilibrium Interest Rate
WIBO Poland Warsaw Interbank Offer Bid Rate
46 | OPPENHEIMER STRATEGIC BOND FUND/VA
- --------------------------------------------------------------------------------
10. TOTAL RETURN SWAP CONTRACTS
The Fund may enter into a total return swap transaction to maintain a total
return on a particular investment, or portion of its portfolio, or for other
non-speculative purposes. Because the principal amount is not exchanged, it
represents neither an asset nor a liability to either counterparty, and is
referred to as notional. The unrealized gain (loss) related to the valuation of
such contracts as well as the amount due to (owed by) the Fund at termination or
settlement is combined and separately disclosed as an asset (liability) on the
Statement of Assets and Liabilities. The Fund also records any periodic payments
received from (paid to) the counterparty under such contracts as realized gain
(loss) on the Statement of Operations. Total return swaps are subject to risks
(if the counterparty fails to meet its obligations).
As of December 31, 2005, the Fund had entered into the following total return
swap agreements:
NOTIONAL TERMINATION UNREALIZED
COUNTERPARTY SWAP DESCRIPTION AMOUNT DATES APPRECIATION
- -----------------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG Six-Month BBA LIBOR $ 1,620,000 5/13/15 $ 186,249
- -----------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc.
(The):
Six-Month BBA LIBOR 920,000 1/14/15 115,603
Six-Month BBA LIBOR 920,000 1/20/15 126,533
Received or paid monthly. If the sum of the
Lehman Brothers CMBS Index Payer Payment
Amount and the Floating Rate Payer Payment
Amount is positive, the Counterparty will pay
such amount to the Fund. If the sums are
negative, then the Fund shall pay the absolute
value of such amount to the Counterparty. 4,550,000 6/1/06 12,852
------------
$ 441,237
============
Abbreviations are as follows:
BBA LIBOR British Bankers' Association London-Interbank Offered Rate
CMBS Commercial Mortgage Backed Securities
- --------------------------------------------------------------------------------
11. SWAPTION TRANSACTIONS
The Fund may enter into a swaption transaction, whereby a contract that grants
the holder, in return for payment of the purchase price (the "premium") of the
option, the right, but not the obligation, to enter into an interest rate swap
at a preset rate within a specified period of time, with the writer of the
contract. The writer receives premiums and bears the risk of unfavorable changes
in the preset rate on the underlying interest rate swap. Swaption contracts
written by the Fund do not give rise to counterparty credit risk as they
obligate the Fund, not its counterparty, to perform. Swaptions written are
reported as a liability in the Statement of Assets and Liabilities.
Written swaption activity for the year ended December 31, 2005 was as follows:
CALL SWAPTIONS PUT SWAPTIONS
---------------------------- -------------------------
NOTIONAL AMOUNT OF NOTIONAL AMOUNT OF
AMOUNT PREMIUMS AMOUNT PREMIUMS
- ---------------------------------------------------------------------------------------------------------
Swaptions outstanding as of December 31, 2004 $ 6,670,000 $ 66,002 $ 8,240,000 $ 28,460
Swaptions written 48,315,000 284,045 -- --
Swaptions closed or expired (45,985,000) (313,147) (8,240,000) (28,460)
--------------------------------------------------------
Swaptions outstanding as of December 31, 2005 $ 9,000,000 $ 36,900 $ -- $ --
========================================================
As of December 31, 2005, the Fund had entered into the following swaption
contracts:
NOTIONAL EXPIRATION EXERCISE PREMIUM VALUE
SWAPTIONS AMOUNT DATE PRICE RECEIVED SEE NOTE 1
- --------------------------------------------------------------------------------------------------------
U.S. Dollar $9,000,000 2/9/06 $ 4.74 $ 36,900 $ 8,630
47 | OPPENHEIMER STRATEGIC BOND FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
12. ILLIQUID OR RESTRICTED SECURITIES AND CURRENCY
As of December 31, 2005, investments in securities included issues that are
illiquid or restricted. Restricted securities are purchased in private placement
transactions, are not registered under the Securities Act of 1933, may have
contractual restrictions on resale, and are valued under methods approved by the
Board of Trustees as reflecting fair value. A security may also be considered
illiquid if it lacks a readily available market or if its valuation has not
changed for a certain period of time. The Fund will not invest more than 15% of
its net assets (determined at the time of purchase and reviewed periodically) in
illiquid or restricted securities. Certain restricted securities, eligible for
resale to qualified institutional investors, are not subject to that limitation.
Securities that are illiquid or restricted are marked with the applicable
footnote on the Statement of Investments. Information concerning restricted
securities and currency is as follows:
UNREALIZED
ACQUISITION VALUATION AS OF APPRECIATION
SECURITY DATES COST DECEMBER 31, 2005 (DEPRECIATION)
- --------------------------------------------------------------------------------------------------------------------------
Geotek Communications, Inc., Series B, Escrow Shares 1/4/01 $ 840 $ -- $ (840)
Huntsman Corp. 7/15/04 39,675 96,044 56,369
Prandium, Inc. 3/19/99-9/25/02 284,000 242 (283,758)
CURRENCY
Argentine Peso 11/30/05-12/29/05 358,193 371,241 13,048
-----------------------------------------------
$ 682,708 $ 467,527 $ (215,181)
===============================================
- --------------------------------------------------------------------------------
13. SECURITIES LENDING
The Fund lends portfolio securities from time to time in order to earn
additional income. In return, the Fund receives collateral in the form of U.S.
Treasury obligations or cash, against the loaned securities and maintains
collateral in an amount not less than 100% of the market value of the loaned
securities during the period of the loan. The market value of the loaned
securities is determined at the close of business of the funds and any
additional required collateral is delivered to the Fund on the next business
day. If the borrower defaults on its obligation to return the securities loaned
because of insolvency or other reasons, the Fund could experience delays and
cost in recovering the securities loaned or in gaining access to the collateral.
Cash collateral is invested in cash equivalents. The Fund retains a portion of
the interest earned from the collateral. The Fund continues to receive the
economic benefit of interest or dividends paid on the securities loaned in the
form of a substitute payment received from the borrower. As of December 31,
2005, the Fund had on loan securities valued at $66,657,680. Collateral of
$67,772,157 was received for the loans, of which $27,470,079 was received in
cash and subsequently invested in approved instruments.
- --------------------------------------------------------------------------------
14. LITIGATION
A consolidated amended complaint has been filed as putative derivative and class
actions against the Manager, OFS and the Distributor, as well as 51 of the
Oppenheimer funds (as "Nominal Defendants") excluding the Fund, 30 present and
former Directors or Trustees and 8 present and former officers of the funds.
This complaint, initially filed in the U.S. District Court for the Southern
District of New York on January 10, 2005 and amended on March 4, 2005,
consolidates into a single action and amends six individual previously-filed
putative derivative and class action complaints. Like those prior complaints,
the complaint alleges that the Manager charged excessive fees for distribution
and other costs, improperly used assets of the funds in the form of directed
brokerage commissions and 12b-1 fees to pay brokers to promote sales of the
funds, and failed to properly disclose the use of assets of the funds to make
those payments in violation of the Investment Company Act of 1940 and the
Investment Advisers Act of 1940. Also, like those prior complaints, the
complaint further alleges that by permitting and/or participating in those
actions, the Directors/Trustees and the Officers breached their fiduciary duties
to shareholders of the funds under the Investment Company Act of 1940 and at
common law. The complaint seeks unspecified compensatory and punitive damages,
rescission of the funds' investment advisory agreements, an accounting of all
fees paid, and an award of attorneys' fees and litigation expenses.
48 | OPPENHEIMER STRATEGIC BOND FUND/VA
The defendants believe that the allegations contained in the Complaints
are without merit and that they have meritorious defenses against the claims
asserted. The defendants intend to defend these lawsuits vigorously and to
contest any claimed liability. The defendants believe that it is premature to
render any opinion as to the likelihood of an outcome unfavorable to them and
that no estimate can yet be made with any degree of certainty as to the amount
or range of any potential loss.
49 | OPPENHEIMER STRATEGIC BOND FUND/VA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER STRATEGIC BOND FUND/VA:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer Strategic Bond Fund/VA, a series of Oppenheimer Variable Account
Funds, including the statement of investments, as of December 31, 2005, and the
related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the periods presented.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
The Fund is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audit includes consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of December 31, 2005, by correspondence with the
custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer Strategic Bond Fund/VA as of December 31, 2005, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the periods presented, in conformity with accounting
principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
February 13, 2006
50 | OPPENHEIMER STRATEGIC BOND FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2006, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2005. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
Dividends, if any, paid by the Fund during the fiscal year ended December
31, 2005 which are not designated as capital gain distributions should be
multiplied by 0.32% to arrive at the amount eligible for the corporate
dividend-received deduction.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Fund to the Internal Revenue Service. Because of
the complexity of the federal regulations which may affect your individual tax
return and the many variations in state and local tax regulations, we recommend
that you consult your tax advisor for specific guidance.
51 | OPPENHEIMER STRATEGIC BOND FUND/VA
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file Form N-PX, with its complete proxy voting record for the 12 months ended
June 30th, no later than August 31st of each year. The Fund's voting record is
available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at
www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC
for the first quarter and the third quarter of each fiscal year on Form N-Q. The
Fund's Form N-Q filings are available on the SEC's website at
http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public
Reference Room in Washington D.C. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
52 | OPPENHEIMER STRATEGIC BOND FUND/VA
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew the Fund's
investment advisory agreement (the "Agreement"). The Investment Company Act of
1940, as amended, requires that the Board request and evaluate, and that the
Manager provide, such information as may be reasonably necessary to evaluate the
terms of the Agreement. The Board employs an independent consultant to prepare a
report that provides information, including comparative information, that the
Board requests for that purpose. In addition, the Board receives information
throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager, including an analysis of the
cost of providing services, (v) whether economies of scale are realized as the
Fund grows and whether fee levels reflect these economies of scale for Fund
investors and (vi) other benefits to the Manager from its relationship with the
Fund. Outlined below is a summary of the principal information considered by the
Board as well as the Board's conclusions.
NATURE, QUALITY, AND EXTENT OF SERVICES. The Board considered information
on the nature and extent of the services provided to the Fund and information
regarding the Manager's key personnel that provide such services. The Manager's
duties include providing the Fund with the services of the portfolio managers
and the Manager's investment team, who provide research, analysis and other
advisory services in regard to the Fund's investments; securities trading
services; oversight of third party service providers; monitoring compliance with
applicable Fund policies and procedures and adherence to the Fund's investment
restrictions. The Manager is responsible for providing certain administrative
services to the Fund as well. Those services include providing and supervising
all administrative and clerical personnel that are necessary in order to provide
effective corporate administration for the Fund; compiling and maintaining
records with respect to the Fund's operations; preparing and filing reports
required by the Securities and Exchange Commission; preparing periodic reports
regarding the operations of the Fund for its shareholders; preparing proxy
materials for shareholder meetings; and preparing the registration statements
required by Federal and state securities laws for the sale of the Fund's shares.
The Manager also provides the Fund with office space, facilities and equipment.
The Board also considered the quality of the services provided and the
quality of the Manager's resources that are available to the Fund. The Board
took account of the fact that the Manager has had over forty years of experience
as an investment adviser and that its assets under management rank it among the
top mutual fund managers in the United States. The Board evaluated the Manager's
administrative, accounting, legal and compliance services, and information the
Board has received regarding the experience and professional qualifications of
the Manager's key personnel and the size and functions of its staff providing
investment management services to the Fund. The Board also considered compliance
reports from the Fund's Chief Compliance Officer. In its evaluation of the
quality of the portfolio management services provided, the Board considered the
experience of Arthur P. Steinmetz and the Manager's international and
quantitative fixed income investment team and analysts. Mr. Steinmetz has had
over 23 years of experience managing fixed income investments. The Board members
also considered the totality of their experiences with the Manager, as directors
or trustees of the Fund and other funds advised by the Manager. In light of the
foregoing, the Board concluded that the Fund benefits from the services provided
under the Agreement as a result of the Manager's experience, reputation,
personnel, operations, and resources.
INVESTMENT PERFORMANCE OF THE MANAGER AND THE FUND. During the year, the
Manager provided information on the performance of the Fund and the Manager at
each Board meeting, including comparative performance information. The Board
also reviewed information, prepared by the Manager and by the independent
consultant, comparing the Fund's historical performance to relevant market
indices and to the performance of other general bond funds (including both funds
advised by the Manager and funds advised by other investment advisers). The
Board noted that the Fund's one-year, three-year, five-year and ten-year
performance were all better than its peer group median.
53 | OPPENHEIMER STRATEGIC BOND FUND/VA
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited/Continued
- --------------------------------------------------------------------------------
COSTS OF SERVICES AND PROFITS REALIZED BY THE MANAGER. The Board
considered information regarding the Manager's costs in serving as the Fund's
investment adviser, including the costs associated with the personnel and
systems necessary to manage the Fund, and information regarding the Manager's
profitability from its relationship with the Fund. The Board reviewed the fees
paid to the Manager and the other expenses borne by the Fund. The Board also
evaluated the comparability of the fees charged and the services provided to the
Fund to the fees and services for other clients or accounts advised by the
Manager. The independent consultant provided comparative data in regard to the
fees and expenses of the Fund, other flexible income, multi-sector income and
general bond funds and other funds with comparable asset levels and distribution
features. The Board noted that the Fund's contractual and actual management fees
are higher than its peer group median and average, however, its total expenses
are lower than both its peer group median and average. In light of this and of
the Fund's strong performance, the Board concluded that the management fee was
reasonable.
ECONOMIES OF SCALE. The Board considered whether the Manager may realize
economies of scale in managing and supporting the Fund, whether those economies
of scale benefit the Fund's shareholders and the current level of Fund assets in
relation to the Fund's management fee breakpoints, which are intended to share
with shareholders economies of scale that may exist as the Fund grows.
OTHER BENEFITS TO THE MANAGER. In addition to considering the profits
realized by the Manager, the Board considered information that was provided
regarding the direct and indirect benefits the Manager receives as a result of
its relationship with the Fund, including compensation paid to the Manager's
affiliates. The Board also considered the nature and quality of services
provided by affiliates of the Manager, which it reviews at other times during
the year in connection with the renewal of the Fund's service agreements. The
Board considered that the Manager must be able to pay and retain experienced
professional personnel at competitive rates to provide services to the Fund and
that maintaining the financial viability of the Manager is important in order
for the Manager to continue to provide significant services to the Fund and its
shareholders.
CONCLUSIONS. These factors were also considered by the independent
Trustees meeting separately from the full Board, assisted by experienced counsel
to the Fund and to the independent Trustees. Fund counsel and the independent
Trustees' counsel are both independent of the Manager within the meaning and
intent of the Securities and Exchange Commission Rules.
Based on its review of the information it received and its evaluations
described above, the Board, including a majority of the independent Trustees,
decided to continue the advisory agreement for another year. In arriving at this
decision, the Board did not single out any factor or factors as being more
important than others, but considered all of the factors together. The Board
judged the terms and conditions of the advisory agreement, including the
management fee, in light of all of the surrounding circumstances.
54 | OPPENHEIMER STRATEGIC BOND FUND/VA
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) HELD PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS HELD;
WITH THE FUNDS, LENGTH OF NUMBER OF PORTFOLIOS IN THE FUNDS COMPLEX CURRENTLY OVERSEEN
SERVICE, AGE
INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL, COLORADO
TRUSTEES 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER RESIGNATION, RETIREMENT,
DEATH OR REMOVAL.
WILLIAM L. ARMSTRONG, Chairman of the following private mortgage banking companies: Cherry Creek Mortgage Company (since
Chairman of the Board of 1991), Centennial State Mortgage Company (since 1994), and The El Paso Mortgage Company (since 1993);
Trustees (since 2003), Chairman of the following private companies: Ambassador Media Corporation (since 1984) and Broadway
Trustee (since 1999) Ventures (since 1984); Director of the following: Helmerich & Payne, Inc. (oil and gas
Age: 68 drilling/production company) (since 1992), Campus Crusade for Christ (since 1991) and The Lynde and
Harry Bradley Foundation, Inc. (non-profit organization) (since 2002); former Chairman of the
following: Transland Financial Services, Inc. (private mortgage banking company) (1997-2003), Great
Frontier Insurance (insurance agency) (1995-2000), Frontier Real Estate, Inc. (residential real
estate brokerage) (1994-2000) and Frontier Title (title insurance agency) (1995-2000); former
Director of the following: UNUMProvident (insurance company) (1991-2004), Storage Technology
Corporation (computer equipment company) (1991-2003) and International Family Entertainment
(television channel) (1992-1997); U.S. Senator (January 1979-January 1991). Oversees 38 portfolios in
the OppenheimerFunds complex.
ROBERT G. AVIS, Director and President of A.G. Edwards Capital, Inc. (General Partner of private equity funds) (until
Trustee (since 1993) February 2001); Chairman, President and Chief Executive Officer of A.G. Edwards Capital, Inc. (until
Age: 74 March 2000); Director of A.G. Edwards & Sons, Inc. (brokerage company) (until 2000) and A.G. Edwards
Trust Company (investment adviser) (until 2000); Vice Chairman and Director of A.G. Edwards, Inc.
(until March 1999); Vice Chairman of A.G. Edwards & Sons, Inc. (until March 1999); Chairman of A.G.
Edwards Trust Company (until March 1999) and A.G.E. Asset Management (investment adviser) (until
March 1999). Oversees 38 portfolios in the OppenheimerFunds complex.
GEORGE C. BOWEN, Assistant Secretary and Director of Centennial Asset Management Corporation (December 1991-April
Trustee (since 1999) 1999); President, Treasurer and Director of Centennial Capital Corporation (June 1989-April 1999);
Age: 69 Chief Executive Officer and Director of MultiSource Services, Inc. (March 1996-April 1999); Mr. Bowen
held several positions with the Manager and with subsidiary or affiliated companies of the Manager
(September 1987-April 1999). Oversees 38 portfolios in the OppenheimerFunds complex.
EDWARD L. CAMERON, Member of The Life Guard of Mount Vernon (George Washington historical site) (since June 2000);
Trustee (since 1999) Director of Genetic ID, Inc. (biotech company) (March 2001-May 2002); Partner at
Age: 67 PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price Waterhouse
LLP Global Investment Management Industry Services Group (July 1994-June 1998). Oversees 38
portfolios in the OppenheimerFunds complex.
JON S. FOSSEL, Director of UNUMProvident (insurance company) (since June 2002); Director of Northwestern Energy
Trustee (since 1990) Corp. (public utility corporation) (since November 2004); Director of P.R. Pharmaceuticals (October
Age: 64 1999-October 2003); Director of Rocky Mountain Elk Foundation (non-profit organization) (February
1998-February 2003); Chairman and Director (until October 1996) and President and Chief Executive
Officer (until October 1995) of the Manager; President, Chief Executive Officer and Director of the
following: Oppenheimer Acquisition Corp. ("OAC") (parent holding company of the Manager),
Shareholders Services, Inc. and Shareholder Financial Services, Inc. (until October 1995). Oversees
38 portfolios in the OppenheimerFunds complex.
SAM FREEDMAN, Director of Colorado Uplift (charitable organization) (since September 1984). Mr. Freedman held
Trustee (since 1996) several positions with the Manager and with subsidiary or affiliated companies of the Manager
Age: 65 (until October 1994). Oversees 38 portfolios in the OppenheimerFunds complex.
55 | OPPENHEIMER STRATEGIC BOND FUND/VA
TRUSTEES AND OFFICERS Unaudited/Continued
- --------------------------------------------------------------------------------
BEVERLY L. HAMILTON, Trustee of Monterey Institute for International Studies (educational organization) (since February
Trustee (since 2002) 2000); Director of The California Endowment (philanthropic organization) (since April 2002); Director
Age: 59 of Community Hospital of Monterey Peninsula (since February 2002); Vice Chair of American Funds'
Emerging Markets Growth Fund, Inc. (mutual fund) (since October 1991); President of ARCO Investment
Management Company (February 1991-April 2000); Member of the investment committees of The Rockefeller
Foundation and The University of Michigan; Advisor at Credit Suisse First Boston's Sprout venture
capital unit (venture capital fund) (1994-January 2005); Trustee of MassMutual Institutional Funds
(investment company) (1996-June 2004); Trustee of MML Series Investment Fund (investment company)
(April 1989-June 2004); Member of the investment committee of Hartford Hospital (2000-2003); and
Advisor to Unilever (Holland) pension fund (2000-2003). Oversees 38 portfolios in the
OppenheimerFunds complex.
ROBERT J. MALONE, Director of Jones International University (educational organization) (since August 2005); Chairman,
Trustee (since 2002) Chief Executive Officer and Director of Steele Street State Bank (commercial banking) (since August
Age: 61 2003); Director of Colorado UpLIFT (charitable organization) (since 1986); Trustee of the Gallagher
Family Foundation (non-profit organization) (since 2000); Former Chairman of U.S. Bank-Colorado
(subsidiary of U.S. Bancorp and formerly Colorado National Bank) (July 1996-April 1999); Director
of Commercial Assets, Inc. (real estate investment trust) (1993-2000); Director of Jones Knowledge,
Inc. (2001-July 2004); and Director of U.S. Exploration, Inc. (oil and gas exploration)
(1997-February 2004). Oversees 38 portfolios in the OppenheimerFunds complex.
F. WILLIAM MARSHALL, JR., Trustee of MassMutual Select Funds (formerly MassMutual Institutional Funds) (investment company)
Trustee (since 2000) (since 1996) and MML Series Investment Fund (investment company) (since 1996); Trustee and Chairman
Age: 63 of the Investment Committee (since 1994) of the Worcester Polytech Institute (private university);
President and Treasurer of the SIS Funds (private charitable fund) (since January 1999); Chairman of
SIS & Family Bank, F.S.B. (formerly SIS Bank) (commercial bank) (January 1999-July 1999); Member of
the Investment Committee of the Community Foundation of Western Massachusetts (1998-2003); and
Executive Vice President of Peoples Heritage Financial Group, Inc. (commercial bank) (January
1999-July 1999). Oversees 40 portfolios in the OppenheimerFunds complex.
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH FLOOR, NEW YORK,
AND OFFICER NEW YORK 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN INDEFINITE TERM, OR UNTIL HIS
RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN OFFICER FOR AN INDEFINITE TERM, OR UNTIL HIS
RESIGNATION, RETIREMENT, DEATH OR REMOVAL. MR. MURPHY IS AN INTERESTED TRUSTEE DUE TO HIS POSITIONS
WITH OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES.
JOHN V. MURPHY, Chairman, Chief Executive Officer and Director (since June 2001) and President (since September 2000)
President and Trustee of the Manager; President and Director or Trustee of other Oppenheimer funds; President and Director
(since 2001) of OAC and of Oppenheimer Partnership Holdings, Inc. (holding company subsidiary of the Manager)
Age: 56 (since July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of the Manager) (since
November 2001); Chairman and Director of Shareholder Services, Inc. and of Shareholder Financial
Services, Inc. (transfer agent subsidiaries of the Manager) (since July 2001); President and Director
of OppenheimerFunds Legacy Program (charitable trust program established by the Manager) (since July
2001); Director of the following investment advisory subsidiaries of the Manager: OFI Institutional
Asset Management, Inc., Centennial Asset Management Corporation, Trinity Investment Management
Corporation and Tremont Capital Management, Inc. (since November 2001), HarbourView Asset Management
Corporation and OFI Private Investments, Inc. (since July 2001); President (since November 2001) and
Director (since July 2001) of Oppenheimer Real Asset Management, Inc.; Executive Vice President of
Massachusetts Mutual Life Insurance Company (OAC's parent company) (since February 1997); Director of
DLB Acquisition Corporation (holding company parent of Babson Capital Management LLC) (since June
1995); Member of the Investment Company Institute's Board of Governors (since October 3, 2003); Chief
Operating Officer of the Manager (September 2000-June 2001); President and Trustee of MML Series
Investment Fund and MassMutual Select Funds (open-end investment companies) (November 1999-November
2001); Director of C.M. Life Insurance Company (September 1999-August 2000); President, Chief
Executive Officer and Director of MML Bay State Life Insurance Company (September 1999-August 2000);
Director of Emerald Isle Bancorp and Hibernia Savings Bank (wholly-owned subsidiary of Emerald Isle
Bancorp) (June 1989-June 1998). Oversees 87 portfolios in the OppenheimerFunds complex.
56 | OPPENHEIMER STRATEGIC BOND FUND/VA
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS OF THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. STEINMETZ AND ZACK, TWO
THE FUND WORLD FINANCIAL CENTER, 225 LIBERTY STREET, NEW YORK, NEW YORK 10281-1008, FOR MESSRS. VANDEHEY AND
WIXTED, 6803 S. TUCSON WAY, CENTENNIAL, COLORADO 80112-3924. EACH OFFICER SERVES FOR AN INDEFINITE
TERM OR UNTIL HIS OR HER RESIGNATION, RETIREMENT DEATH OR REMOVAL.
ARTHUR P. STEINMETZ, Senior Vice President of the Manager (since March 1993) and of HarbourView Asset Management
Vice President and Portfolio Corporation (since March 2000). An officer of 4 portfolios in the OppenheimerFunds complex.
Manager (since 1993)
Age: 47
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Vice President
Vice President and Chief of OppenheimerFunds Distributor, Inc., Centennial Asset Management Corporation and Shareholder
Compliance Officer Services, Inc. (since June 1983); Vice President and Director of Internal Audit of the Manager
(since 2004) (1997-February 2004). An officer of 87 portfolios in the OppenheimerFunds complex.
Age: 55
BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer of the following:
Treasurer and Principal HarbourView Asset Management Corporation, Shareholder Financial Services, Inc., Shareholder Services,
Financial and Accounting Inc., Oppenheimer Real Asset Management Corporation, and Oppenheimer Partnership Holdings, Inc.
Officer (since 1999) (since March 1999), OFI Private Investments, Inc. (since March 2000), OppenheimerFunds International
Age: 46 Ltd. and OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management, Inc. (since
November 2000), and OppenheimerFunds Legacy Program (since June 2003); Treasurer and Chief Financial
Officer of OFI Trust Company (trust company subsidiary of the Manager) (since May 2000); Assistant
Treasurer of the following: OAC (since March 1999), Centennial Asset Management Corporation (March
1999-October 2003) and OppenheimerFunds Legacy Program (April 2000-June 2003); Principal and Chief
Operating Officer of Bankers Trust Company-Mutual Fund Services Division (March 1995-March 1999). An
officer of 87 portfolios in the OppenheimerFunds complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March 2002) of the Manager;
Vice President and Secretary General Counsel and Director of the Distributor (since December 2001); General Counsel of Centennial
(since 2001) Asset Management Corporation (since December 2001); Senior Vice President and General Counsel of
Age: 57 HarbourView Asset Management Corporation (since December 2001); Secretary and General Counsel of OAC
(since November 2001); Assistant Secretary (since September 1997) and Director (since November 2001)
of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice President and Director of
Oppenheimer Partnership Holdings, Inc. (since December 2002); Director of Oppenheimer Real Asset
Management, Inc. (since November 2001); Senior Vice President, General Counsel and Director of
Shareholder Financial Services, Inc. and Shareholder Services, Inc. (since December 2001); Senior
Vice President, General Counsel and Director of OFI Private Investments, Inc. and OFI Trust Company
(since November 2001); Vice President of OppenheimerFunds Legacy Program (since June 2003); Senior
Vice President and General Counsel of OFI Institutional Asset Management, Inc. (since November 2001);
Director of OppenheimerFunds (Asia) Limited (since December 2003); Senior Vice President (May
1985-December 2003), Acting General Counsel (November 2001-February 2002) and Associate General
Counsel (May 1981-October 2001) of the Manager; Assistant Secretary of the following: Shareholder
Services, Inc. (May 1985-November 2001), Shareholder Financial Services, Inc. (November 1989-November
2001), and OppenheimerFunds International Ltd. (September 1997-November 2001). An officer of 87
portfolios in the OppenheimerFunds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION
ABOUT THE FUND'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT CHARGE, UPON
REQUEST, BY CALLING 1.800.981.2871.
57 | OPPENHEIMER STRATEGIC BOND FUND/VA
OPPENHEIMER VALUE FUND/VA
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. The Fund withstood a volatile
market environment to deliver an attractive 12-month total return. Strong
relative total returns for the Fund's financials and consumer staples stocks
helped overcome relative weakness in the portfolio's technology and industrial
holdings.
The Fund's strong performance can be attributed to our bottom-up stock
selection discipline. Our investment strategy centers around finding stocks
whose prices are, in our view, inexpensive relative to the underlying companies'
long-term earnings power and potential to generate cash flow.
During this period, we found relatively few financial services companies
that met our investment parameters. We believe many financial services companies
were overly exposed to a flat yield curve (i.e., a relatively small gap or
difference between short- and long-term fixed-income yields). Due to these
concerns, the portfolio was underweighted (vs. the index) in financial services.
Despite the variance, this sector was an area of relative strength for the Fund.
Among the largest contributors to performance were Lehman Brothers, Inc.,
Franklin Resources, Inc. and Genworth, Inc. The Fund was also underweighted in
the energy sector, which detracted from results as energy stocks outperformed.
The Fund's financial services holdings benefited primarily from
company-specific developments. The stock of brokerage firm Lehman Brothers was
relatively inexpensive when we purchased it, despite its strong profitability
and improvements in its franchises and returns. Since then, the stock has
appreciated. Asset manager Franklin Resources benefited from robust mutual fund
inflows that helped to boost earnings and, its stock price. Stock selection in
consumer staples, lead by our holding in Altria, also contributed to relative
performance.
The underweight in the energy sector detracted from relative performance.
The Fund's energy-related holdings involve companies whose individual merits and
unique industry positioning may enable them to outperform the energy sector.
The Fund's primary area of weakness was technology, a sector in which the
portfolio was overweighted. The single largest detractors from results were Take
Two Interactive Software, Inc., and IBM Corp. Take Two, a manufacturer of
mature-rated and sports-related game software and video game accessories,
suffered primarily due a weaker than expected environment during the current
platform transition period as well as company specific execution issues. In the
first half of the period, IBM experienced difficulty with execution. Although
the situation has improved, the stock still has not recovered fully. Stock
selection in industrials also detracted from performance due primarily to
weakness in Cendant Corp.
COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graph that follows
shows the performance of a hypothetical $10,000 investment in the Fund held
until December 31, 2005. In the case of non-service shares, performance is
measured from inception of the class on January 2, 2003. Performance information
does not reflect charges that apply to separate accounts investing in the Fund.
If these charges were taken into account, performance would be lower. The graph
assumes that all dividends and capital gains distributions were reinvested in
additional shares.
The Fund's performance is compared to the performance of the Russell 1000
Value Index, an unmanaged index of equity securities of small capitalization
companies that is a measure of the small company market. Index performance
reflects the reinvestment of income but does not consider the effect of
transaction costs, and none of the data in the graph shows the effect of taxes.
The Fund's performance reflects the effects of the Fund's business and operating
expenses. While index comparisons may be useful to provide a benchmark for the
Fund's performance, it must be noted that the Fund's investments are not limited
to the investments in the index.
4 | OPPENHEIMER VALUE FUND/VA
NON-SERVICE SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Value Fund/VA (Non-Service)
Russell 1000 Value Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Value of Investment Russell 1000 Value
Date In Fund Index
01/02/2003 10,000 10,000
03/31/2003 9,230 9,514
06/30/2003 10,800 11,157
09/30/2003 11,250 11,387
12/31/2003 12,900 13,003
03/31/2004 13,152 13,397
06/30/2004 13,100 13,515
09/30/2004 13,194 13,723
12/31/2004 14,771 15,148
03/31/2005 14,795 15,161
06/30/2005 15,048 15,415
09/30/2005 15,759 16,014
12/31/2005 15,640 16,216
AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/05
1-Year 5.88% 5-Year N/A Since Inception (1/2/03) 16.09%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, CALL US AT 1.800.981.2871. THE FUND'S
TOTAL RETURNS SHOULD NOT BE EXPECTED TO BE THE SAME AS THE RETURNS OF OTHER
FUNDS, WHETHER OR NOT BOTH FUNDS HAVE THE SAME PORTFOLIO MANAGERS AND/OR SIMILAR
NAMES. THE FUND'S TOTAL RETURNS DO NOT INCLUDE THE CHARGES ASSOCIATED WITH THE
SEPARATE ACCOUNT PRODUCTS THAT OFFER THIS FUND. SUCH PERFORMANCE WOULD HAVE BEEN
LOWER IF SUCH CHARGES WERE TAKEN INTO ACCOUNT.
5 | OPPENHEIMER VALUE FUND/VA
FUND EXPENSES
- --------------------------------------------------------------------------------
FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1)
transaction costs, which may include redemption fees, if any; and (2) ongoing
costs, including management fees and other Fund expenses. These examples are
intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to compare these costs with the ongoing costs of investing in other
mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning
of the period and held for the entire 6-month period ended December 31, 2005.
ACTUAL EXPENSES. The "actual" lines of the table provide information about
actual account values and actual expenses. You may use the information on this
line, together with the amount you invested, to estimate the expense that you
paid over the period. Simply divide your account value by $1,000.00 (for
example, an $8,600.00 account value divided by $1,000.00 = 8.60), then multiply
the result by the number in the "actual" line under the heading entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the
table provide information about hypothetical account values and hypothetical
expenses based on the Fund's actual expense ratio, and an assumed rate of return
of 5% per year before expenses, which is not the Fund's actual return. The
hypothetical account values and expenses may not be used to estimate the actual
ending account balance or expenses you paid for the period. You may use this
information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any charges associated with the separate
accounts that offer this Fund. Therefore, the "hypothetical" lines of the table
are useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these separate
account charges were included, your costs would have been higher.
- --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
(7/1/05) (12/31/05) DECEMBER 31, 2005
- --------------------------------------------------------------------------------
Non-Service shares Actual $1,000.00 $1,039.30 $10.54
- --------------------------------------------------------------------------------
Non-Service shares Hypothetical 1,000.00 1,014.92 10.41
Hypothetical assumes 5% annual return before expenses.
Expenses are equal to the Fund's annualized expense ratio, multiplied by the
average account value over the period, multiplied by 184/365 (to reflect the
one-half year period). The annualized expense ratio based on the 6-month period
ended December 31, 2005 is as follows:
CLASS EXPENSE RATIO
- ---------------------------------
Non-Service shares 2.04%
- --------------------------------------------------------------------------------
6 | OPPENHEIMER VALUE FUND/VA
STATEMENT OF INVESTMENTS December 31, 2005
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------
COMMON STOCKS--114.4%
- -------------------------------------------------------------------------
CONSUMER DISCRETIONARY--10.3%
- -------------------------------------------------------------------------
MEDIA--10.3%
Comcast Corp., Cl. A Special, Non-Vtg. 1 2,300 $ 59,087
- -------------------------------------------------------------------------
Liberty Global, Inc., Series A 2,943 66,218
- -------------------------------------------------------------------------
Liberty Global, Inc., Series C 1 4,343 92,072
- -------------------------------------------------------------------------
News Corp., Inc., Cl. A 3,000 46,650
-------------
264,027
CONSUMER STAPLES--6.4%
- -------------------------------------------------------------------------
BEVERAGES--0.7%
Diageo plc, Sponsored ADR 300 17,490
- -------------------------------------------------------------------------
TOBACCO--5.7%
Altria Group, Inc. 1,950 145,704
- -------------------------------------------------------------------------
ENERGY--13.8%
- -------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--1.1%
Halliburton Co. 470 29,121
- -------------------------------------------------------------------------
OIL & GAS--12.7%
BP plc, ADR 2,070 132,935
- -------------------------------------------------------------------------
Exxon Mobil Corp. 2,500 140,425
- -------------------------------------------------------------------------
TotalFinaElf SA, Sponsored ADR 400 50,560
-------------
323,920
- -------------------------------------------------------------------------
FINANCIALS--35.5%
- -------------------------------------------------------------------------
CAPITAL MARKETS--5.9%
UBS AG 1,600 152,240
- -------------------------------------------------------------------------
COMMERCIAL BANKS--12.0%
Bank of America Corp. 1,288 59,441
- -------------------------------------------------------------------------
Wachovia Corp. 2,000 105,720
- -------------------------------------------------------------------------
Wells Fargo & Co. 2,280 143,252
-------------
308,413
- -------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--8.5%
Capital One Financial Corp. 870 75,168
- -------------------------------------------------------------------------
Citigroup, Inc. 600 29,118
- -------------------------------------------------------------------------
JPMorgan Chase & Co. 2,650 105,179
- -------------------------------------------------------------------------
Lehman Brothers Holdings, Inc. 60 7,690
-------------
217,155
- -------------------------------------------------------------------------
INSURANCE--5.7%
Everest Re Group Ltd. 300 30,105
- -------------------------------------------------------------------------
Genworth Financial, Inc., Cl. A 2,140 74,001
- -------------------------------------------------------------------------
Platinum Underwriters Holdings Ltd. 1,360 42,255
-------------
146,361
- -------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE--3.4%
Countrywide Financial Corp. 1,330 45,473
- -------------------------------------------------------------------------
Freddie Mac 620 40,517
-------------
85,990
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------
HEALTH CARE--5.2%
- -------------------------------------------------------------------------
BIOTECHNOLOGY--1.1%
Wyeth 600 $ 27,642
- -------------------------------------------------------------------------
PHARMACEUTICALS--4.1%
Pfizer, Inc. 1,300 30,316
- -------------------------------------------------------------------------
Sanofi-Aventis SA, ADR 1,720 75,508
-------------
105,824
- -------------------------------------------------------------------------
INDUSTRIALS--11.0%
- -------------------------------------------------------------------------
AEROSPACE & DEFENSE--7.6%
Honeywell International, Inc. 830 30,918
- -------------------------------------------------------------------------
Raytheon Co. 340 13,651
- -------------------------------------------------------------------------
United Technologies Corp. 2,700 150,957
-------------
195,526
- -------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--3.4%
Cendant Corp. 4,990 86,078
- -------------------------------------------------------------------------
INFORMATION TECHNOLOGY--17.4%
- -------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--3.7%
Hutchinson Technology, Inc. 1 1,200 34,140
- -------------------------------------------------------------------------
International Business Machines Corp. 730 60,006
-------------
94,146
- -------------------------------------------------------------------------
SOFTWARE--13.7%
Microsoft Corp. 4,860 127,089
- -------------------------------------------------------------------------
Novell, Inc. 1 4,470 39,470
- -------------------------------------------------------------------------
Synopsys, Inc. 1 4,060 81,444
- -------------------------------------------------------------------------
Take-Two Interactive Software, Inc. 1 5,890 104,253
-------------
352,256
- -------------------------------------------------------------------------
MATERIALS--4.5%
- -------------------------------------------------------------------------
CHEMICALS--2.9%
Praxair, Inc. 1,370 72,555
- -------------------------------------------------------------------------
METALS & MINING--1.6%
Phelps Dodge Corp. 290 41,722
- -------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--2.3%
- -------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--2.3%
IDT Corp., Cl. B 1 2,730 31,941
- -------------------------------------------------------------------------
Sprint Nextel Corp. 1,200 28,032
-------------
59,973
- -------------------------------------------------------------------------
UTILITIES--8.0%
- -------------------------------------------------------------------------
ELECTRIC UTILITIES--6.7%
AES Corp. (The) 1 5,210 82,474
- -------------------------------------------------------------------------
CMS Energy Corp. 1 2,480 35,985
- -------------------------------------------------------------------------
PG&E Corp. 540 20,045
- -------------------------------------------------------------------------
Reliant Energy, Inc. 1 3,300 34,056
-------------
172,560
7 | OPPENHEIMER VALUE FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------
GAS UTILITIES--1.3%
Sempra Energy 730 $ 32,732
-------------
Total Common Stocks (Cost $2,530,488) 2,931,435
PRINCIPAL
AMOUNT
- -------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--2.1%
- -------------------------------------------------------------------------
Undivided interest of 0.004% in joint repurchase
agreement (Principal Amount/Value $1,414,200,000,
with a maturity value of $1,414,844,247)
with UBS Warburg LLC, 4.10%, dated 12/30/05,
to be repurchased at $54,025 on 1/3/06,
collateralized by Federal Home Loan Mortgage Corp.,
5%, 1/1/35, with a value of $157,513,104 and Federal
National Mortgage Assn., 5%--5.50%, 3/1/34--10/1/35,
with a value of $1,301,420,187
(Cost $54,000) $ 54,000 54,000
VALUE
SEE NOTE 1
- -------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $2,584,488) 116.5% $ 2,985,435
- -------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (16.5) (423,175)
-------------------------------
NET ASSETS 100.0% $ 2,562,260
===============================
FOOTNOTE TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
8 | OPPENHEIMER VALUE FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 31, 2005
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------------------------
Investments, at value (cost $2,584,488)--see accompanying statement of investments $ 2,985,435
- -------------------------------------------------------------------------------------------------
Cash 10,326
- -------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 39,875
Interest and dividends 2,783
Other 2,668
------------
Total assets 3,041,087
- -------------------------------------------------------------------------------------------------
LIABILITIES
- -------------------------------------------------------------------------------------------------
Payables and other liabilities:
Dividends 419,624
Investments purchased 40,239
Trustees' compensation 3,819
Shareholder communications 2,406
Other 12,739
------------
Total liabilities 478,827
- -------------------------------------------------------------------------------------------------
NET ASSETS $ 2,562,260
============
- -------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- -------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 230
- -------------------------------------------------------------------------------------------------
Additional paid-in capital 2,132,982
- -------------------------------------------------------------------------------------------------
Accumulated net investment loss (1,456)
- -------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments 29,557
- -------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 400,947
------------
NET ASSETS--applicable to 229,559 shares of beneficial interest outstanding $ 2,562,260
============
- -------------------------------------------------------------------------------------------------
NET ASSET VALUE, REDEMPTION PRICE PER SHARE AND OFFERING PRICE PER SHARE $ 11.16
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
9 | OPPENHEIMER VALUE FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 31, 2005
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- -------------------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $487) $ 53,424
- -------------------------------------------------------------------------------------------------
Interest 2,021
------------
Total investment income 55,445
- -------------------------------------------------------------------------------------------------
EXPENSES
- -------------------------------------------------------------------------------------------------
Management fees 21,587
- -------------------------------------------------------------------------------------------------
Legal, auditing and other professional fees 14,923
- -------------------------------------------------------------------------------------------------
Shareholder communications 4,981
- -------------------------------------------------------------------------------------------------
Trustees' compensation 4,627
- -------------------------------------------------------------------------------------------------
Administration service fees 1,500
- -------------------------------------------------------------------------------------------------
Insurance expenses 888
- -------------------------------------------------------------------------------------------------
Custodian fees and expenses 132
- -------------------------------------------------------------------------------------------------
Other 2,507
------------
Total expenses 51,145
Less reduction to custodian expenses (32)
------------
Net expenses 51,113
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NET INVESTMENT INCOME 4,332
- -------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
- -------------------------------------------------------------------------------------------------
Net realized gain on investments 444,863
- -------------------------------------------------------------------------------------------------
Net change in unrealized appreciation on investments (281,841)
- -------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 167,354
============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
10 | OPPENHEIMER VALUE FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
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YEAR ENDED DECEMBER 31, 2005 2004
- ----------------------------------------------------------------------------------------------------------------
OPERATIONS
- ----------------------------------------------------------------------------------------------------------------
Net investment income (loss) $ 4,332 $ (2,747)
- ----------------------------------------------------------------------------------------------------------------
Net realized gain 444,863 462,480
- ----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (281,841) (56,226)
---------------------------
Net increase in net assets resulting from operations 167,354 403,507
- ----------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ----------------------------------------------------------------------------------------------------------------
Dividends from net investment income (4,318) (10,068)
- ----------------------------------------------------------------------------------------------------------------
Distributions from net realized gain (415,306) (584,853)
- ----------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- ----------------------------------------------------------------------------------------------------------------
Net decrease in net assets resulting from beneficial interest transactions -- (864,862)
- ----------------------------------------------------------------------------------------------------------------
NET ASSETS
- ----------------------------------------------------------------------------------------------------------------
Total decrease (252,270) (1,056,276)
- ----------------------------------------------------------------------------------------------------------------
Beginning of period 2,814,530 3,870,806
---------------------------
End of period (including accumulated net investment loss of $1,456 and $1,470,
respectively) $ 2,562,260 $ 2,814,530
===========================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11 | OPPENHEIMER VALUE FUND/VA
FINANCIAL HIGHLIGHTS
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NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2005 2004 2003 1
- ------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.26 $ 12.90 $ 10.00
- ------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .02 2 (.01) 2 .03
Net realized and unrealized gain .71 1.82 2.87
-----------------------------------------
Total from investment operations .73 1.81 2.90
- ------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.02) (.03) --
Distributions from net realized gain (1.81) (2.42) --
-----------------------------------------
Total dividends and/or distributions to shareholders (1.83) (2.45) --
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.16 $ 12.26 $ 12.90
=========================================
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 5.88% 14.50% 29.00%
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 2,562 $ 2,815 $ 3,871
- ------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 2,878 $ 3,370 $ 3,205
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income (loss) 0.15% (0.08)% 0.27%
Total expenses 1.78% 5 1.82% 5 1.39% 5
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 86% 100% 120%
1. For the period from January 2, 2003 (commencement of operations) to December
31, 2003.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Total returns are not annualized for
periods less than one full year. Total return information does not reflect
expenses that apply at the separate account level or to related insurance
products. Inclusion of these charges would reduce the total return figures for
all periods shown. Returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
4. Annualized for periods of less than one full year.
5. Reduction to custodian expenses less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
12 | OPPENHEIMER VALUE FUND/VA
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Value Fund/VA (the Fund) is a separate series of Oppenheimer
Variable Account Funds, an open-end management investment company registered
under the Investment Company Act of 1940, as amended. The Fund's investment
objective is to seek long-term growth of capital by investing primarily in
common stocks with low price-earnings ratios and better-than-anticipated
earnings. Realization of current income is a secondary consideration. The Fund's
investment advisor is OppenheimerFunds, Inc. (the Manager). As of December 31,
2005, all of the Non-Service shares were owned by the Manager.
The Fund currently offers Non-Service shares only. The shares are sold at
their offering price, which is the net asset value per share, to separate
investment accounts of participating insurance companies as an underlying
investment for variable life insurance policies, variable annuity contracts or
other investment products.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its
shares as of the close of The New York Stock Exchange (the Exchange), normally
4:00 P.M. Eastern time, on each day the Exchange is open for business.
Securities may be valued primarily using dealer-supplied valuations or a
portfolio pricing service authorized by the Board of Trustees. Securities listed
or traded on National Stock Exchanges or other domestic exchanges are valued
based on the last sale price of the security traded on that exchange prior to
the time when the Fund's assets are valued. Securities traded on NASDAQ are
valued based on the closing price provided by NASDAQ prior to the time when the
Fund's assets are valued. In the absence of a sale, the security is valued at
the last sale price on the prior trading day, if it is within the spread of the
closing "bid" and "asked" prices, and if not, at the closing bid price.
Securities traded on foreign exchanges are valued based on the last sale price
on the principal exchange on which the security is traded, in the country that
is identified by the portfolio pricing service, prior to the time when the
Fund's assets are valued. In the absence of a sale, the security is valued at
the official closing price on the principal exchange. Corporate, government and
municipal debt instruments having a remaining maturity in excess of sixty days
and all mortgage-backed securities will be valued at the mean between the "bid"
and "asked" prices. Futures contracts traded on a commodities or futures
exchange will be valued at the final settlement price or official closing price
on the principal exchange as reported by such principal exchange at its trading
session ending at, or most recently prior to, the time when the Fund's assets
are valued. Securities (including restricted securities) for which market
quotations are not readily available are valued at their fair value. Foreign and
domestic securities whose values have been materially affected by what the
Manager identifies as a significant event occurring before the Fund's assets are
valued but after the close of their respective exchanges will be fair valued.
Fair value is determined in good faith using consistently applied procedures
under the supervision of the Board of Trustees. Short-term "money market type"
debt securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in
U.S. dollars. The values of securities denominated in foreign currencies and
amounts related to the purchase and sale of foreign securities and foreign
investment income are translated into U.S. dollars as of the close of The New
York Stock Exchange (the Exchange), normally 4:00 P.M. Eastern time, on each day
the Exchange is open for business. Foreign exchange rates may be valued
primarily using dealer supplied valuations or a portfolio pricing service
authorized by the Board of Trustees.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
values of assets and liabilities, including investments in securities at fiscal
period end, resulting from changes in exchange rates.
13 | OPPENHEIMER VALUE FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated funds
advised by the Manager, may transfer uninvested cash balances into joint trading
accounts on a daily basis. These balances are invested in one or more repurchase
agreements. Securities pledged as collateral for repurchase agreements are held
by a custodian bank until the agreements mature. Each agreement requires that
the market value of the collateral be sufficient to cover payments of interest
and principal. In the event of default by the other party to the agreement,
retention of the collateral may be subject to legal proceedings.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders.
The tax components of capital shown in the table below represent distribution
requirements the Fund must satisfy under the income tax regulations, losses the
Fund may be able to offset against income and gains realized in future years and
unrealized appreciation or depreciation of securities and other investments for
federal income tax purposes.
NET UNREALIZED
APPRECIATION
BASED ON COST OF
SECURITIES AND
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED OTHER INVESTMENTS
NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME
INCOME GAIN CARRYFORWARD 1,2 TAX PURPOSES
-------------------------------------------------------------------------
$14,670 $16,079 $-- $400,947
1. During the fiscal year ended December 31, 2005, the Fund did not utilize any
capital loss carryforward.
2. During the fiscal year ended December 31, 2004, the Fund did not utilize any
capital loss carryforward.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Fund.
The tax character of distributions paid during the years ended December 31, 2005
and December 31, 2004 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2005 DECEMBER 31, 2004
------------------------------------------------------------------
Distributions paid from:
Ordinary income $ 103,467 $ 305,198
Long-term capital gain 316,157 289,723
-------------------------------
TOTAL $ 419,624 $ 594,921
===============================
The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for
federal income tax purposes as of December 31, 2005 are noted below. The primary
difference between book and tax appreciation or depreciation of securities and
other investments, if applicable, is attributable to the tax deferral of losses
or tax realization of financial statement unrealized gain or loss.
Federal tax cost of securities $2,584,488
===========
Gross unrealized appreciation $ 465,790
Gross unrealized depreciation (64,843)
-----------
Net unrealized appreciation (depreciation) $ 400,947
===========
14 | OPPENHEIMER VALUE FUND/VA
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred
compensation plan for independent trustees that enables trustees to elect to
defer receipt of all or a portion of the annual compensation they are entitled
to receive from the Fund. For purposes of determining the amount owed to the
Trustee under the plan, deferred amounts are treated as though equal dollar
amounts had been invested in shares of the Fund or in other Oppenheimer funds
selected by the Trustee. The Fund purchases shares of the funds selected for
deferral by the Trustee in amounts equal to his or her deemed investment,
resulting in a Fund asset equal to the deferred compensation liability. Such
assets are included as a component of "Other" within the asset section of the
Statement of Assets and Liabilities. Deferral of trustees' fees under the plan
will not affect the net assets of the Fund, and will not materially affect the
Fund's assets, liabilities or net investment income per share. Amounts will be
deferred until distributed in accordance to the Plan.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date. Income and capital gain distributions, if
any, are declared and paid annually.
- --------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and amortization
of premium, is accrued as earned.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. Custodian Fees and Expenses in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts to the extent they are not
offset by positive cash balances maintained by the Fund. The Reduction to
Custodian Expenses line item, if applicable, represents earnings on cash
balances maintained by the Fund during the period. Such interest expense and
other custodian fees may be paid with these earnings. At December 31, 2005, the
Fund had $13 of such earnings on cash balances available to offset future
custodian fees or interest expenses incurred during the next fiscal year.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Trust has authorized an unlimited number of $0.001 par value shares of
beneficial interest. Transactions in shares of beneficial interest were as
follows:
YEAR ENDED DECEMBER 31, 2005 YEAR ENDED DECEMBER 31, 2004
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
NON-SERVICE SHARES
Dividends and/or distributions reinvested -- $ -- 10,679 $ 135,090
Redeemed -- -- (81,120) (999,952)
-----------------------------------------------------------
Net decrease -- $ -- (70,441) $(864,862)
===========================================================
15 | OPPENHEIMER VALUE FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended December 31, 2005, were as
follows:
PURCHASES SALES
- ---------------------------------------------------------
Investment securities $ 2,478,228 $ 2,906,942
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee at an
annual rate of 0.75% of the first $200 million of average annual net assets,
0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the
next $200 million and 0.60% of average annual net assets over $800 million.
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee.
Additionally, funds offered in variable annuity separate accounts are
subject to minimum fees of $10,000 for assets of $10 million or more. The Fund
is subject to the minimum fee in the event that the per account fee does not
equal or exceed the applicable minimum fee.
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit
transfer and shareholder servicing agent fees to 0.35% of average annual net
assets of the Fund. This undertaking may be amended or withdrawn at any time.
- --------------------------------------------------------------------------------
5. LITIGATION
A consolidated amended complaint has been filed as putative derivative and class
actions against the Manager, OFS and the Distributor, as well as 51 of the
Oppenheimer funds (as "Nominal Defendants") excluding the Fund, 30 present and
former Directors or Trustees and 8 present and former officers of the funds.
This complaint, initially filed in the U.S. District Court for the Southern
District of New York on January 10, 2005 and amended on March 4, 2005,
consolidates into a single action and amends six individual previously-filed
putative derivative and class action complaints. Like those prior complaints,
the complaint alleges that the Manager charged excessive fees for distribution
and other costs, improperly used assets of the funds in the form of directed
brokerage commissions and 12b-1 fees to pay brokers to promote sales of the
funds, and failed to properly disclose the use of assets of the funds to make
those payments in violation of the Investment Company Act of 1940 and the
Investment Advisers Act of 1940. Also, like those prior complaints, the
complaint further alleges that by permitting and/or participating in those
actions, the Directors/Trustees and the Officers breached their fiduciary duties
to shareholders of the funds under the Investment Company Act of 1940 and at
common law. The complaint seeks unspecified compensatory and punitive damages,
rescission of the funds' investment advisory agreements, an accounting of all
fees paid, and an award of attorneys' fees and litigation expenses.
The defendants believe that the allegations contained in the Complaints
are without merit and that they have meritorious defenses against the claims
asserted. The defendants intend to defend these lawsuits vigorously and to
contest any claimed liability. The defendants believe that it is premature to
render any opinion as to the likelihood of an outcome unfavorable to them and
that no estimate can yet be made with any degree of certainty as to the amount
or range of any potential loss.
16 | OPPENHEIMER VALUE FUND/VA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER VALUE FUND/VA:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer Value Fund/VA, a series of Oppenheimer Variable Account Funds,
including the statement of investments, as of December 31, 2005, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the periods presented. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
The Fund is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audit includes consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of December 31, 2005, by correspondence with the
custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer Value Fund/VA as of December 31, 2005, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the five
years in the periods presented, in conformity with accounting principles
generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
February 13, 2006
17 | OPPENHEIMER VALUE FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2006, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2005. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
Capital gain distributions of $1.3772 per share were paid to Non-Service
shareholders, respectively, on December 30, 2005. Whether received in stock or
in cash, the capital gain distribution should be treated by shareholders as a
gain from the sale of the capital assets held for more than one year (long-term
capital gains).
Dividends, if any, paid by the Fund during the fiscal year ended December
31, 2005 which are not designated as capital gain distributions should be
multiplied by 37.48% to arrive at the amount eligible for the corporate
dividend-received deduction.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Fund to the Internal Revenue Service. Because of
the complexity of the federal regulations which may affect your individual tax
return and the many variations in state and local tax regulations, we recommend
that you consult your tax advisor for specific guidance.
18 | OPPENHEIMER VALUE FUND/VA
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file Form N-PX, with its complete proxy voting record for the 12 months ended
June 30th, no later than August 31st of each year. The Fund's voting record is
available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at
www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC
for the first quarter and the third quarter of each fiscal year on Form N-Q. The
Fund's Form N-Q filings are available on the SEC's website at
http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public
Reference Room in Washington D.C. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
19 | OPPENHEIMER VALUE FUND/VA
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew the Fund's
investment advisory agreement (the "Agreement"). The Investment Company Act of
1940, as amended, requires that the Board request and evaluate, and that the
Manager provide, such information as may be reasonably necessary to evaluate the
terms of the Agreement. The Board employs an independent consultant to prepare a
report that provides information, including comparative information, that the
Board requests for that purpose. In addition, the Board receives information
throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager, including an analysis of the
cost of providing services, (v) whether economies of scale are realized as the
Fund grows and whether fee levels reflect these economies of scale for Fund
investors and (vi) other benefits to the Manager from its relationship with the
Fund. Outlined below is a summary of the principal information considered by the
Board as well as the Board's conclusions.
NATURE, QUALITY, AND EXTENT OF SERVICES. The Board considered information
on the nature and extent of the services provided to the Fund and information
regarding the Manager's key personnel that provide such services. The Manager's
duties include providing the Fund with the services of the portfolio managers
and the Manager's investment team, who provide research, analysis and other
advisory services in regard to the Fund's investments; securities trading
services; oversight of third party service providers; monitoring compliance with
applicable Fund policies and procedures and adherence to the Fund's investment
restrictions. The Manager is responsible for providing certain administrative
services to the Fund as well. Those services include providing and supervising
all administrative and clerical personnel that are necessary in order to provide
effective corporate administration for the Fund; compiling and maintaining
records with respect to the Fund's operations; preparing and filing reports
required by the Securities and Exchange Commission; preparing periodic reports
regarding the operations of the Fund for its shareholders; preparing proxy
materials for shareholder meetings; and preparing the registration statements
required by Federal and state securities laws for the sale of the Fund's shares.
The Manager also provides the Fund with office space, facilities and equipment.
The Board also considered the quality of the services provided and the
quality of the Manager's resources that are available to the Fund. The Board
took account of the fact that the Manager has had over forty years of experience
as an investment adviser and that its assets under management rank it among the
top mutual fund managers in the United States. The Board evaluated the Manager's
administrative, accounting, legal and compliance services, and information the
Board has received regarding the experience and professional qualifications of
the Manager's key personnel and the size and functions of its staff providing
investment management services to the Fund. The Board also considered compliance
reports from the Fund's Chief Compliance Officer. In its evaluation of the
quality of the portfolio management services provided, the Board considered the
experience of Christopher Leavy and the Manager's Equity Value investment team
and analysts. Mr. Leavy has had over 13 years of experience managing equity
investments. The Board members also considered the totality of their experiences
with the Manager, as directors or trustees of the Fund and other funds advised
by the Manager. In light of the foregoing, the Board concluded that the Fund
benefits from the services provided under the Agreement as a result of the
Manager's experience, reputation, personnel, operations, and resources.
INVESTMENT PERFORMANCE OF THE MANAGER AND THE FUND. During the year, the
Manager provided information on the performance of the Fund and the Manager at
each Board meeting, including comparative performance information. The Board
also reviewed information, prepared by the Manager and by the independent
consultant, comparing the Fund's historical performance to relevant market
indices and to the performance of other large-cap value funds (including both
funds advised by the Manager and funds advised by other investment advisers).
The Board noted that the Fund's one-year performance was better than its peer
group median. The Fund did not have three-year performance yet since its
inception date was January 1, 2003.
20 | OPPENHEIMER VALUE FUND/VA
COSTS OF SERVICES AND PROFITS REALIZED BY THE MANAGER. The Board
considered information regarding the Manager's costs in serving as the Fund's
investment adviser, including the costs associated with the personnel and
systems necessary to manage the Fund, and information regarding the Manager's
profitability from its relationship with the Fund. The Board reviewed the fees
paid to the Manager and the other expenses borne by the Fund. The Board also
evaluated the comparability of the fees charged and the services provided to the
Fund to the fees and services for other clients or accounts advised by the
Manager. The independent consultant provided comparative data in regard to the
fees and expenses of the Fund, other large-cap value and large-cap core funds
and other funds with comparable asset levels and distribution features. The
Board noted that the Fund's contractual and actual management fees are both
lower than its peer group median and average, although its total expenses are
higher than its peer group median and average. The Board concluded that, in
light of the Fund's strong performance, the management fee was reasonable.
ECONOMIES OF SCALE. The Board considered whether the Manager may realize
economies of scale in managing and supporting the Fund, whether those economies
of scale benefit the Fund's shareholders and the current level of Fund assets in
relation to the Fund's management fee breakpoints, which are intended to share
with shareholders economies of scale that may exist as the Fund grows.
OTHER BENEFITS TO THE MANAGER. In addition to considering the profits
realized by the Manager, the Board considered information that was provided
regarding the direct and indirect benefits the Manager receives as a result of
its relationship with the Fund, including compensation paid to the Manager's
affiliates and research provided to the Manager in connection with permissible
brokerage arrangements (soft dollar arrangements). The Board also considered the
nature and quality of services provided by affiliates of the Manager, which it
reviews at other times during the year in connection with the renewal of the
Fund's service agreements. The Board considered that the Manager must be able to
pay and retain experienced professional personnel at competitive rates to
provide services to the Fund and that maintaining the financial viability of the
Manager is important in order for the Manager to continue to provide significant
services to the Fund and its shareholders.
CONCLUSIONS. These factors were also considered by the independent
Trustees meeting separately from the full Board, assisted by experienced counsel
to the Fund and to the independent Trustees. Fund counsel and the independent
Trustees' counsel are both independent of the Manager within the meaning and
intent of the Securities and Exchange Commission Rules.
Based on its review of the information it received and its evaluations
described above, the Board, including a majority of the independent Trustees,
decided to continue the advisory agreement for another year. In arriving at this
decision, the Board did not single out any factor or factors as being more
important than others, but considered all of the factors together. The Board
judged the terms and conditions of the advisory agreement, including the
management fee, in light of all of the surrounding circumstances.
21 | OPPENHEIMER VALUE FUND/VA
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS
THE FUNDS, LENGTH OF HELD; NUMBER OF PORTFOLIOS IN THE FUNDS COMPLEX CURRENTLY OVERSEEN
SERVICE, AGE
INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL,
TRUSTEES COLORADO 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER
RESIGNATION, RETIREMENT, DEATH OR REMOVAL.
WILLIAM L. ARMSTRONG, Chairman of the following private mortgage banking companies: Cherry Creek Mortgage
Chairman of the Board Company (since 1991), Centennial State Mortgage Company (since 1994), and The El
of Trustees (since 2003), Paso Mortgage Company (since 1993); Chairman of the following private companies:
Trustee (since 2003) Ambassador Media Corporation (since 1984) and Broadway Ventures (since 1984);
Age: 68 Director of the following: Helmerich & Payne, Inc. (oil and gas drilling/production
company) (since 1992), Campus Crusade for Christ (since 1991) and The Lynde and
Harry Bradley Foundation, Inc. (non-profit organization) (since 2002); former
Chairman of the following: Transland Financial Services, Inc. (private mortgage
banking company) (1997-2003), Great Frontier Insurance (insurance agency)
(1995-2000), Frontier Real Estate, Inc. (residential real estate brokerage)
(1994-2000) and Frontier Title (title insurance agency) (1995-2000); former Director
of the following: UNUMProvident (insurance company) (1991-2004), Storage Technology
Corporation (computer equipment company) (1991-2003) and International Family
Entertainment (television channel) (1992-1997); U.S. Senator (January 1979-January
1991). Oversees 38 portfolios in the OppenheimerFunds complex.
ROBERT G. AVIS, Director and President of A.G. Edwards Capital, Inc. (General Partner of private
Trustee (since 2003) equity funds) (until February 2001); Chairman, President and Chief Executive Officer
Age: 74 of A.G. Edwards Capital, Inc. (until March 2000); Director of A.G. Edwards & Sons,
Inc. (brokerage company) (until 2000) and A.G. Edwards Trust Company (investment
adviser) (until 2000); Vice Chairman and Director of A.G. Edwards, Inc. (until March
1999); Vice Chairman of A.G. Edwards & Sons, Inc. (until March 1999); Chairman of
A.G. Edwards Trust Company (until March 1999) and A.G.E. Asset Management
(investment adviser) (until March 1999). Oversees 38 portfolios in the
OppenheimerFunds complex.
GEORGE C. BOWEN, Assistant Secretary and Director of Centennial Asset Management Corporation
Trustee (since 2003) (December 1991-April 1999); President, Treasurer and Director of Centennial Capital
Age: 69 Corporation (June 1989-April 1999); Chief Executive Officer and Director of
MultiSource Services, Inc. (March 1996-April 1999); Mr. Bowen held several positions
with the Manager and with subsidiary or affiliated companies of the Manager
(September 1987-April 1999). Oversees 38 portfolios in the OppenheimerFunds complex.
EDWARD L. CAMERON, Member of The Life Guard of Mount Vernon (George Washington historical site) (since
Trustee (since 2003) June 2000); Director of Genetic ID, Inc. (biotech company) (March 2001-May 2002);
Age: 67 Partner at PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999);
Chairman of Price Waterhouse LLP Global Investment Management Industry Services
Group (July 1994-June 1998). Oversees 38 portfolios in the OppenheimerFunds complex.
JON S. FOSSEL, Director of UNUMProvident (insurance company) (since June 2002); Director of
Trustee (since 2003) Northwestern Energy Corp. (public utility corporation) (since November 2004);
Age: 64 Director of P.R. Pharmaceuticals (October 1999-October 2003); Director of Rocky
Mountain Elk Foundation (non-profit organization) (February 1998-February 2003);
Chairman and Director (until October 1996) and President and Chief Executive Officer
(until October 1995) of the Manager; President, Chief Executive Officer and Director
of the following: Oppenheimer Acquisition Corp. ("OAC") (parent holding company of
the Manager), Shareholders Services, Inc. and Shareholder Financial Services, Inc.
(until October 1995). Oversees 38 portfolios in the OppenheimerFunds complex.
SAM FREEDMAN, Director of Colorado Uplift (charitable organization) (since September 1984). Mr.
Trustee (since 2003) Freedman held several positions with the Manager and with subsidiary or affiliated
Age: 65 companies of the Manager (until October 1994). Oversees 38 portfolios in the
OppenheimerFunds complex.
22 | OPPENHEIMER VALUE FUND/VA
BEVERLY L. HAMILTON, Trustee of Monterey Institute for International Studies (educational organization)
Trustee (since 2003) (since February 2000); Director of The California Endowment (philanthropic
Age: 59 organization) (since April 2002); Director of Community Hospital of Monterey
Peninsula (since February 2002); Vice Chair of American Funds' Emerging Markets
Growth Fund, Inc. (mutual fund) (since October 1991); President of ARCO Investment
Management Company (February 1991-April 2000); Member of the investment committees
of The Rockefeller Foundation and The University of Michigan; Advisor at Credit
Suisse First Boston's Sprout venture capital unit (venture capital fund)
(1994-January 2005); Trustee of MassMutual Institutional Funds (investment company)
(1996-June 2004); Trustee of MML Series Investment Fund (investment company) (April
1989-June 2004); Member of the investment committee of Hartford Hospital
(2000-2003); and Advisor to Unilever (Holland) pension fund (2000-2003). Oversees 38
portfolios in the OppenheimerFunds complex.
ROBERT J. MALONE, Director of Jones International University (educational organization) (since August
Trustee (since 2003) 2005); Chairman, Chief Executive Officer and Director of Steele Street State Bank
Age: 61 (commercial banking) (since August 2003); Director of Colorado UpLIFT (charitable
organization) (since 1986); Trustee of the Gallagher Family Foundation (non-profit
organization) (since 2000); Former Chairman of U.S. Bank-Colorado (subsidiary of
U.S. Bancorp and formerly Colorado National Bank) (July 1996-April 1999); Director
of Commercial Assets, Inc. (real estate investment trust) (1993-2000); Director of
Jones Knowledge, Inc. (2001-July 2004); and Director of U.S. Exploration, Inc. (oil
and gas exploration) (1997-February 2004). Oversees 38 portfolios in the
OppenheimerFunds complex.
F. WILLIAM MARSHALL, JR., Trustee of MassMutual Select Funds (formerly MassMutual Institutional Funds)
Trustee (since 2003) (investment company) (since 1996) and MML Series Investment Fund (investment
Age: 63 company) (since 1996), Trustee and Chairman of the Investment Committee (since 1994)
of the Worcester Polytech Institute (private university); President and Treasurer of
the SIS Funds (private charitable fund) (since January 1999); Chairman of SIS &
Family Bank, F.S.B. (formerly SIS Bank) (commercial bank) (January 1999-July 1999);
Member of the Investment Committee of the Community Foundation of Western
Massachusetts (1998-2003); and Executive Vice President of Peoples Heritage
Financial Group, Inc. (commercial bank) (January 1999-July 1999). Oversees 40
portfolios in the OppenheimerFunds complex.
- --------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH
AND OFFICER FLOOR, NEW YORK, NEW YORK 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN
INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN
OFFICER FOR AN INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR
REMOVAL. MR. MURPHY IS AN INTERESTED TRUSTEE DUE TO HIS POSITIONS WITH
OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES.
JOHN V. MURPHY, Chairman, Chief Executive Officer and Director (since June 2001) and President
President and Principal (since September 2000) of the Manager; President and Director or Trustee of other
Executive Officer Oppenheimer funds; President and Director of OAC and of Oppenheimer Partnership
(since 2001) and Holdings, Inc. (holding company subsidiary of the Manager) (since July 2001);
Trustee (since 2003) Director of OppenheimerFunds Distributor, Inc. (subsidiary of the Manager) (since
Age: 56 November 2001); Chairman and Director of Shareholder Services, Inc. and of
Shareholder Financial Services, Inc. (transfer agent subsidiaries of the Manager)
(since July 2001); President and Director of OppenheimerFunds Legacy Program
(charitable trust program established by the Manager) (since July 2001); Director of
the following investment advisory sub-sidiaries of the Manager: OFI Institutional
Asset Management, Inc., Centennial Asset Management Corporation, Trinity Investment
Management Corporation and Tremont Capital Management, Inc. (since November 2001),
HarbourView Asset Management Corporation and OFI Private Investments, Inc. (since
July 2001); President (since November 2001) and Director (since July 2001) of
Oppenheimer Real Asset Management, Inc.; Executive Vice President of Massachusetts
Mutual Life Insurance Company (OAC's parent company) (since February 1997); Director
of DLB Acquisition Corporation (holding company parent of Babson Capital Management
LLC) (since June 1995); Member of the Investment Company Institute's Board of
Governors (since October 3, 2003); Chief Operating Officer of the Manager (September
2000-June 2001); President and Trustee of MML Series Investment Fund and MassMutual
Select Funds (open-end investment companies) (November 1999-November 2001); Director
of C.M. Life Insurance Company (September 1999-August 2000); President, Chief
Executive Officer and Director of MML Bay State Life Insurance Company (September
1999-August 2000); Director of Emerald Isle Bancorp and Hibernia Savings Bank
(wholly-owned subsidiary of Emerald Isle Bancorp) (June 1989-June 1998). Oversees
87 portfolios in the OppenheimerFunds complex.
23 | OPPENHEIMER VALUE FUND/VA
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS OF THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. LEAVY
THE FUND AND ZACK, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, NEW YORK, NEW YORK
10281-1008, FOR MESSRS. VANDEHEY AND WIXTED, 6803 S. TUCSON WAY, CENTENNIAL,
COLORADO 80112-3924. EACH OFFICER SERVES FOR AN INDEFINITE TERM OR UNTIL HIS OR HER
RESIGNATION, RETIREMENT DEATH OR REMOVAL.
CHRISTOPHER LEAVY, Senior Vice President of the Manager since September 2000; portfolio manager of
Vice President and Morgan Stanley Dean Witter Investment Management (1997-September 2000). An officer
Portfolio Manager of 8 portfolios in the OppenheimerFunds complex.
(since 2002)
Age: 34
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March
Vice President and Chief 2004); Vice President of OppenheimerFunds Distributor, Inc., Centennial Asset
Compliance Officer Management Corporation and Shareholder Services, Inc. (since June 1983); Vice
(since 2004) President and Director of Internal Audit of the Manager (1997-February 2004). An
Age: 55 officer of 87 portfolios in the OppenheimerFunds complex.
BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer of
Treasurer and Principal the following: HarbourView Asset Management Corporation, Shareholder Financial
Financial and Accounting Services, Inc., Shareholder Services, Inc., Oppenheimer Real Asset Management
Officer (since 2003) Corporation, and Oppenheimer Partnership Holdings, Inc. (since March 1999), OFI
Age: 46 Private Investments, Inc. (since March 2000), OppenheimerFunds International Ltd.
and OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management, Inc.
(since November 2000), and OppenheimerFunds Legacy Program (since June 2003);
Treasurer and Chief Financial Officer of OFI Trust Company (trust company subsidiary
of the Manager) (since May 2000); Assistant Treasurer of the following: OAC (since
March 1999), Centennial Asset Management Corporation (March 1999-October 2003) and
OppenheimerFunds Legacy Program (April 2000-June 2003); Principal and Chief
Operating Officer of Bankers Trust Company-Mutual Fund Services Division (March
1995-March 1999). An officer of 87 portfolios in the OppenheimerFunds complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March 2002)
Vice President and Secretary of the Manager; General Counsel and Director of the Distributor (since December
(since 2003) 2001); General Counsel of Centennial Asset Management Corporation (since December
Age: 57 2001); Senior Vice President and General Counsel of HarbourView Asset Management
Corporation (since December 2001); Secretary and General Counsel of OAC (since
November 2001); Assistant Secretary (since September 1997) and Director (since
November 2001) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice
President and Director of Oppenheimer Partnership Holdings, Inc. (since December
2002); Director of Oppenheimer Real Asset Management, Inc. (since November 2001);
Senior Vice President, General Counsel and Director of Shareholder Financial
Services, Inc. and Shareholder Services, Inc. (since December 2001); Senior Vice
President, General Counsel and Director of OFI Private Investments, Inc. and OFI
Trust Company (since November 2001); Vice President of OppenheimerFunds Legacy
Program (since June 2003); Senior Vice President and General Counsel of OFI
Institutional Asset Management, Inc. (since November 2001); Director of
OppenheimerFunds (Asia) Limited (since December 2003); Senior Vice President (May
1985-December 2003), Acting General Counsel (November 2001-February 2002) and
Associate General Counsel (May 1981-October 2001) of the Manager; Assistant
Secretary of the following: Shareholder Services, Inc. (May 1985-November 2001),
Shareholder Financial Services, Inc. (November 1989-November 2001), and
OppenheimerFunds International Ltd. (September 1997-November 2001). An officer of 87
portfolios in the OppenheimerFunds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION
ABOUT THE FUND'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT CHARGE, UPON
REQUEST, BY CALLING 1.800.981.2871.
24 | OPPENHEIMER VALUE FUND/VA
ITEM 2. CODE OF ETHICS.
The registrant has adopted a code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal accounting
officer or controller or persons performing similar functions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Trustees of the registrant has determined that Edward L. Cameron,
the Chairman of the Board's Audit Committee, and George C. Bowen, a member of
the Board's Audit Committee, possess the technical attributes identified in
Instruction 2(b) of Item 3 to Form N-CSR to qualify as "audit committee
financial experts," and has designated Messrs. Cameron and
Bowen as the Audit Committee's financial experts. Messrs. Cameron and Bowen are
"independent" Trustees pursuant to paragraph (a)(2) of Item 3 to Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The principal accountant for the audit of the registrant's annual financial
statements billed $216,250 in fiscal 2005 and $201,500 in fiscal 2004.
(b) Audit-Related Fees
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees during the last two fiscal years.
The principal accountant for the audit of the registrant's annual financial
statements billed $5,000 in fiscal 2005 and no such fees in fiscal 2004 to the
registrant's investment adviser or any entity controlling, controlled by, or
under common control with the adviser that provides ongoing services to the
registrant.
Such services: seed money audit.
(c) Tax Fees
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees to the registrant during the last two fiscal
years.
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees to the registrant during the last two fiscal
years to the registrant's investment adviser or any entity controlling,
controlled by, or under common control with the adviser that provides ongoing
services to the registrant.
(d) All Other Fees
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees during the last two fiscal years.
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees during the last two fiscal years to the
registrant's investment adviser or any entity controlling, controlled by, or
under common control with the adviser that provides ongoing services to the
registrant.
(e) (1) During its regularly scheduled periodic meetings, the registrant's
audit committee will pre-approve all audit, audit-related, tax and other
services to be provided by the principal accountants of the registrant.
The audit committee has delegated pre-approval authority to its Chairman
for any subsequent new engagements that arise between regularly scheduled
meeting dates provided that any fees such pre-approved are presented to
the audit committee at its next regularly scheduled meeting.
Under applicable laws, pre-approval of non-audit services maybe waived
provided that: 1) the aggregate amount of all such services provided
constitutes no more than five percent of the total amount of fees paid by
the registrant to it principal accountant during the fiscal year in which
services are provided 2) such services were not recognized by the
registrant at the time of engagement as non-audit services and 3) such
services are promptly brought to the attention of the audit committee of
the registrant and approved prior to the completion of the audit.
(2) 100%
(f) Not applicable as less than 50%.
(g) The principal accountant for the audit of the registrant's annual
financial statements billed $5,000 in fiscal 2005 and no such fees in
fiscal 2004 to the registrant and the registrant's investment adviser or
any entity controlling, controlled by, or under common control with the
adviser that provides ongoing services to the registrant related to
non-audit fees. Those billings did not include any prohibited non-audit
services as defined by the Securities Exchange Act of 1934.
(h) The registrant's audit committee of the board of trustees has considered
whether the provision of non-audit services that were rendered to the
registrant's investment adviser, and any entity controlling, controlled
by, or under common control with the investment adviser that provides
ongoing services to the registrant that were not pre-approved pursuant to
paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with
maintaining the principal accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
THE FUND'S GOVERNANCE COMMITTEE PROVISIONS WITH RESPECT TO NOMINATIONS OF
DIRECTORS/TRUSTEES TO THE RESPECTIVE BOARDS
1. The Fund's Governance Committee (the "Committee") will evaluate potential
Board candidates to assess their qualifications. The Committee shall have
the authority, upon approval of the Board, to retain an executive search
firm to assist in this effort. The Committee may consider recommendations
by business and personal contacts of current Board members and by
executive search firms which the Committee may engage from time to time
and may also consider shareholder recommendations. The Committee may
consider the advice and recommendation of the Funds' investment manager
and its affiliates in making the selection.
2. The Committee shall screen candidates for Board membership. The Committee
has not established specific qualifications that it believes must be met
by a trustee nominee. In evaluating trustee nominees, the Committee
considers, among other things, an individual's background, skills, and
experience; whether the individual is an "interested person" as defined in
the Investment Company Act of 1940; and whether the individual would be
deemed an "audit committee financial expert" within the meaning of
applicable SEC rules. The Committee also considers whether the
individual's background, skills, and experience will complement the
background, skills, and experience of other nominees and will contribute
to the Board. There are no differences in the manner in which the
Committee evaluates nominees for trustees based on whether the nominee is
recommended by a shareholder.
3. The Committee may consider nominations from shareholders for the Board at
such times as the Committee meets to consider new nominees for the Board.
The Committee shall have the sole discretion to determine the candidates
to present to the Board and, in such cases where required, to
shareholders. Recommendations for trustee nominees should, at a minimum,
be accompanied by the following:
o the name, address, and business, educational, and/or other pertinent
background of the person being recommended;
o a statement concerning whether the person is an "interested person"
as defined in the Investment Company Act of 1940;
o any other information that the Funds would be required to include in
a proxy statement concerning the person if he or she was nominated;
and
o the name and address of the person submitting the recommendation
and, if that person is a shareholder, the period for which that
person held Fund shares.
The recommendation also can include any additional information which the
person submitting it believes would assist the Committee in evaluating the
recommendation.
4. Shareholders should note that a person who owns securities issued by
Massachusetts Mutual Life Insurance Company (the parent company of the
Funds' investment adviser) would be deemed an "interested person" under
the Investment Company Act of 1940. In addition, certain other
relationships with Massachusetts Mutual Life Insurance Company or its
subsidiaries, with registered broker-dealers, or with the Funds' outside
legal counsel may cause a person to be deemed an "interested person."
5. Before the Committee decides to nominate an individual as a trustee,
Committee members and other directors customarily interview the individual
in person. In addition, the individual customarily is asked to complete a
detailed questionnaire which is designed to elicit information which must
be disclosed under SEC and stock exchange rules and to determine whether
the individual is subject to any statutory disqualification from serving
as a trustee of a registered investment company.
ITEM 11. CONTROLS AND PROCEDURES.
Based on their evaluation of the registrant's disclosure controls and procedures
(as defined in rule 30a-3(c) under the Investment Company Act of 1940 (17 CFR
270.30a-3(c)) as of December 31, 2005, the registrant's principal executive
officer and principal financial officer found the registrant's disclosure
controls and procedures to provide reasonable assurances that information
required to be disclosed by the registrant in the reports that it files under
the Securities Exchange Act of 1934 (a) is accumulated and communicated to
registrant's management, including its principal executive officer and principal
financial officer, to allow timely decisions regarding required disclosure, and
(b) is recorded, processed, summarized and reported, within the time periods
specified in the rules and forms adopted by the U.S. Securities and Exchange
Commission.
There have been no changes in the registrant's internal controls over financial
reporting that occurred during the registrant's second fiscal quarter of the
period covered by this report that
have materially affected, or are reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a) (1) Exhibit attached hereto.
(2) Exhibits attached hereto.
(3) Not applicable.
(b) Exhibit attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Oppenheimer Variable Account Funds
By: /s/ John V. Murphy
-------------------
John V. Murphy
Principal Executive Officer
Date: February 14, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ John V. Murphy
-------------------
John V. Murphy
Principal Executive Officer
Date: February 14, 2006
By: /s/ Brian W. Wixted
-------------------
Brian W. Wixted
Principal Financial Officer
Date: February 14, 2006