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, 2006
-----------------
ITEM 1. REPORTS TO STOCKHOLDERS.
OPPENHEIMER GLOBAL SECURITIES FUND/VA
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. The Fund's Non-Service shares
produced a total return of 17.69% in comparison to its benchmark, the Morgan
Stanley Capital International, Inc. (MSCI) World Index, which produced a total
return of 20.07% over the 12 months ended December 31, 2006. Our investment
philosophy is based on the idea that earnings growth drives stock prices and
that we are most likely to identify long-term earnings growth opportunities by
examining trends that provide tailwinds for growth in the coming decade. We are
very interested in attributes of industries and companies within those
industries that are likely to be beneficiaries of these long-term trends.
Ideally, we like to buy these businesses at a bargain price, that is, a price
where we have the opportunity to double our investment in three to five years.
This rarely happens except when there is a perception that something has gone
wrong with a wonderful business. If we can identify that what has gone wrong is
merely temporary, rather than permanent, we have the makings of a good
investment.
We had some notable successes with some of our larger holdings such as
Infosys Technologies Ltd., Reckitt Benckiser plc and H&M Hennes & Mauritz AB,
but also some significant underperformances from eBay, Inc., Advanced Micro
Devices, Inc. and Boston Scientific Corp.
There were a few other disappointments, including a significant market
slowdown in the demand for implantable cardiac defibrillators and a slowdown in
the rate of knee and hip replacements, which hurt a couple of our holdings. We
remain confident that the long-term opportunities for all of the segments that
faced setbacks in the past year remains excellent, and that our original theses
will come to pass.
Our investments in software companies, Intuit, Inc. and Adobe Systems,
Inc., continue to pay off, as the companies continue to innovate with new
products that delight not only their existing customer bases but achieve even
broader appeal. Our investments in Industria de Diseno Textil SA, the owner of
Zara stores and Tesco plc, the UK's leading grocery chain, have been worthwhile
as they continued to grow rapidly worldwide, leveraging their scale and supply
chain to achieve high economic returns. Our investments in television companies,
Zee Entertainment Enterprises Ltd. in India, and Grupo Televisa SA in Mexico,
contributed positively to the Fund's performance as they continue to retain high
market shares in their respective markets and as the appeal of their programming
grows worldwide.
We are finding terrific opportunities across a variety of areas
particularly in technology. It should be noted that our investment decision
making process considers the next three to five years as the operative period
rather than the next quarter or two. We continue to favor a number of our
existing holdings such as Telefonaktiebolaget LM Ericsson and Juniper Networks,
Inc., with additional investments, as the opportunity for communication network
build-outs remains robust. Additionally, we are finding good opportunities to
invest in the areas of analog and mixed signal semiconductors.
Companies such as Maxim Integrated Products, Inc. and Linear Technology
Corp. continue to see high margin profitable growth and are now available at a
fraction of their valuations of only a few years ago. Leading companies in the
Programmable Logic Devices arena such as Altera Corp. and Xilinx, Inc., we
believe, also provide significant investment upside. We have also invested
significantly in companies such as Carnival Corp. which run the Carnival Cruise
Lines and the car manufacturer Bayerische Motoren Werke AG, which we feel have
wonderful franchises and are available at bargain prices. Automatic Data
Processing, Inc., the leading payroll processor in the world, is another
investment we are very enthusiastic about, as its business opportunities expand
as more companies look to outsource more of their non-core activities to
high-quality, lower cost providers. As global growth continues to chug along
nicely and interest rates remain relatively low, we remain optimistic about
markets generally. As such, we expect to continue to see good opportunities for
investment. We remain focused on our long-term investment philosophy and our
mantra of looking for "good companies in good businesses at good prices."
AS ALWAYS, WE URGE SHAREHOLDERS TO KEEP IN MIND THE ADDED VOLATILITY AND
RISK--INCLUDING CURRENCY FLUCTUATIONS AND ECONOMIC AND POLITICAL
INSTABILITY--THAT INVESTING IN THE SECURITIES OF INTERNATIONAL MARKETS ENTAILS.
4 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that follow show the
performance of a hypothetical $10,000 investment in each share class of the Fund
held until December 31, 2006. 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 (MSCI) Index, an unmanaged index of equity
securities listed on stock exchanges of 23 foreign countries and the U.S. Index
performance reflects the reinvestment of income but does not consider the effect
of transaction costs, and none of the data in the graphs show the effect of
taxes. The Fund's performance reflects the effects of the Fund's business and
operating expenses. While index comparisons may be useful to provide a benchmark
for the Fund's performance, it must be noted that the Fund's investments are not
limited to the investments in the index.
5 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
NON-SERVICE SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Global Securities Fund/VA (Non-Service)
Morgan Stanley Capital International World Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer
Global Securities Morgan Stanley Capital
Fund/VA (Non-Service) International World Index
--------------------- -------------------------
12/31/1996 $10,000 $10,000
03/31/1997 $10,507 $10,040
06/30/1997 $11,612 $11,562
09/30/1997 $12,540 $11,904
12/31/1997 $12,242 $11,623
03/31/1998 $13,475 $13,299
06/30/1998 $13,735 $13,582
09/30/1998 $11,589 $11,965
12/31/1998 $13,969 $14,505
03/31/1999 $14,459 $15,035
06/30/1999 $15,897 $15,765
09/30/1999 $16,168 $15,544
12/31/1999 $22,139 $18,180
03/31/2000 $25,336 $18,380
06/30/2000 $24,508 $17,741
09/30/2000 $24,109 $16,862
12/31/2000 $23,265 $15,832
03/31/2001 $19,784 $13,809
06/30/2001 $21,316 $14,192
09/30/2001 $17,508 $12,162
12/31/2001 $20,465 $13,216
03/31/2002 $20,860 $13,298
06/30/2002 $18,996 $12,079
09/30/2002 $15,512 $ 9,869
12/31/2002 $15,935 $10,633
03/31/2003 $14,730 $10,108
06/30/2003 $17,802 $11,851
09/30/2003 $19,501 $12,436
12/31/2003 $22,790 $14,223
03/31/2004 $23,789 $14,610
06/30/2004 $23,550 $14,763
09/30/2004 $23,357 $14,629
12/31/2004 $27,158 $16,392
03/31/2005 $26,263 $16,228
06/30/2005 $27,072 $16,326
09/30/2005 $29,667 $17,483
12/31/2005 $31,043 $18,035
03/31/2006 $33,367 $19,246
06/30/2006 $32,245 $19,183
09/30/2006 $33,665 $20,060
12/31/2006 $36,535 $21,760
AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/06
1-Year 17.69% 5-Year 12.29% 10-Year 13.83%
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 Securities Morgan Stanley Capital
Fund/VA (Service) International 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
03/31/2006 $13,163 $10,848
06/30/2006 $12,714 $10,813
09/30/2006 $13,266 $11,307
12/31/2006 $14,385 $12,265
AVERAGE ANNUAL TOTAL RETURNS OF SERVICE SHARES OF THE FUND AT 12/31/06
1-Year 17.36% 5-Year 12.03% Since Inception (7/13/00) 5.78%
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
03/31/2006 $21,030 $17,480
06/30/2006 $20,320 $17,423
09/30/2006 $21,210 $18,219
12/31/2006 $23,032 $19,763
AVERAGE ANNUAL TOTAL RETURNS OF CLASS 3 SHARES OF THE FUND AT 12/31/06
1-Year 17.69% 5-Year N/A Since Inception (5/1/03) 25.53%
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 $13,283 $12,595
03/31/2006 $14,269 $13,441
06/30/2006 $13,782 $13,397
09/30/2006 $14,380 $14,009
12/31/2006 $15,588 $15,196
AVERAGE ANNUAL TOTAL RETURNS OF CLASS 4 SHARES OF THE FUND AT 12/31/06
1-Year 17.40% 5-Year N/A Since Inception (5/3/04) 18.15%
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, 2006.
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
(7/1/06) (12/31/06) DECEMBER 31, 2006
- --------------------------------------------------------------------------------
Non-Service shares Actual $1,000.00 $1,133.10 $3.55
- --------------------------------------------------------------------------------
Non-Service shares Hypothetical 1,000.00 1,021.88 3.37
- --------------------------------------------------------------------------------
Service shares Actual 1,000.00 1,131.50 4.90
- --------------------------------------------------------------------------------
Service shares Hypothetical 1,000.00 1,020.62 4.65
- --------------------------------------------------------------------------------
Class 3 shares Actual 1,000.00 1,132.90 3.55
- --------------------------------------------------------------------------------
Class 3 shares Hypothetical 1,000.00 1,021.88 3.37
- --------------------------------------------------------------------------------
Class 4 shares Actual 1,000.00 1,131.50 4.95
- --------------------------------------------------------------------------------
Class 4 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,
excluding affiliated fund indirect expenses, based on the 6-month period ended
December 31, 2006 are as follows:
CLASS EXPENSE RATIOS
- ------------------------------------
Non-Service shares 0.66%
- ------------------------------------
Service shares 0.91
- ------------------------------------
Class 3 shares 0.66
- ------------------------------------
Class 4 shares 0.92
The expense ratios reflect voluntary waivers or reimbursements of expenses by
the Fund's Manager that can be terminated at any time, without advance notice.
The "Financial Highlights" tables in the Fund's financial statements, included
in this report, also show the gross expense ratios, without such waivers or
reimbursements.
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8 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
STATEMENT OF INVESTMENTS December 31, 2006
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VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
COMMON STOCKS--98.3%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--19.0%
- --------------------------------------------------------------------------------
AUTOMOBILES--2.6%
Bayerische Motoren Werke AG 621,667 $ 35,657,209
- --------------------------------------------------------------------------------
Porsche AG, Preference 19,480 24,864,868
- --------------------------------------------------------------------------------
Toyota Motor Corp. 575,000 37,716,857
-----------------
98,238,934
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--2.5%
Carnival Corp. 976,900 47,916,945
- --------------------------------------------------------------------------------
International Game Technology 524,500 24,231,900
- --------------------------------------------------------------------------------
McDonald's Corp. 549,400 24,354,902
-----------------
96,503,747
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES--2.3%
Koninklijke (Royal) Philips
Electronics NV 1,178,000 44,426,718
- --------------------------------------------------------------------------------
Sony Corp. 1,012,600 43,395,320
-----------------
87,822,038
- --------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL--0.1%
Home Retail Group 575,348 4,618,736
- --------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS--0.2%
Sega Sammy Holdings, Inc. 225,400 6,079,862
- --------------------------------------------------------------------------------
MEDIA--4.9%
Getty Images, Inc. 1 230,600 9,874,292
- --------------------------------------------------------------------------------
Grupo Televisa SA, Sponsored GDR 1,664,596 44,960,738
- --------------------------------------------------------------------------------
Pearson plc 1,044,058 15,723,606
- --------------------------------------------------------------------------------
Singapore Press Holdings Ltd. 3,040,840 8,485,604
- --------------------------------------------------------------------------------
Sirius Satellite Radio, Inc. 1 7,107,110 25,159,169
- --------------------------------------------------------------------------------
Walt Disney Co. (The) 767,000 26,285,090
- --------------------------------------------------------------------------------
WPP Group plc 1,366,790 18,478,815
- --------------------------------------------------------------------------------
Zee Entertainment Enterprises Ltd. 4,170,300 36,242,546
-----------------
185,209,860
- --------------------------------------------------------------------------------
SPECIALTY RETAIL--3.7%
H&M Hennes & Mauritz AB,
B Shares 1,469,100 73,981,716
- --------------------------------------------------------------------------------
Industria de Diseno Textil SA 663,000 35,716,494
- --------------------------------------------------------------------------------
Tiffany & Co. 762,700 29,928,348
-----------------
139,626,558
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS--2.7%
Bulgari SpA 1,284,618 18,229,349
- --------------------------------------------------------------------------------
Burberry Group plc 1,299,628 16,334,275
- --------------------------------------------------------------------------------
Coach, Inc. 1 498,900 21,432,744
- --------------------------------------------------------------------------------
LVMH Moet Hennessey Louis
Vuitton 448,060 47,102,657
-----------------
103,099,025
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
CONSUMER STAPLES--8.4%
- --------------------------------------------------------------------------------
BEVERAGES--2.4%
Companhia de Bebidas das
Americas, ADR, Preference 477,115 $ 23,283,212
- --------------------------------------------------------------------------------
Diageo plc 1,088,380 21,363,557
- --------------------------------------------------------------------------------
Fomento Economico Mexicano
SA de CV, UBD 2,415,200 28,024,190
- --------------------------------------------------------------------------------
Grupo Modelo SA de CV, Series C 3,279,000 18,150,903
-----------------
90,821,862
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--2.0%
Seven & I Holdings Co. Ltd. 298,053 9,266,805
- --------------------------------------------------------------------------------
Tesco plc 3,919,983 31,046,407
- --------------------------------------------------------------------------------
Wal-Mart Stores, Inc. 743,300 34,325,594
-----------------
74,638,806
- --------------------------------------------------------------------------------
FOOD PRODUCTS--1.0%
Cadbury Schweppes plc 3,672,404 39,296,082
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS--2.6%
Colgate-Palmolive Co. 347,300 22,657,852
- --------------------------------------------------------------------------------
Hindustan Lever Ltd. 3,934,500 19,236,914
- --------------------------------------------------------------------------------
Reckitt Benckiser plc 1,201,678 54,915,835
-----------------
96,810,601
- --------------------------------------------------------------------------------
PERSONAL PRODUCTS--0.4%
Avon Products, Inc. 504,300 16,662,072
- --------------------------------------------------------------------------------
ENERGY--6.1%
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--3.0%
GlobalSantaFe Corp. 560,700 32,957,946
- --------------------------------------------------------------------------------
Technip SA 597,970 41,046,056
- --------------------------------------------------------------------------------
Transocean, Inc. 1 515,700 41,714,973
-----------------
115,718,975
- --------------------------------------------------------------------------------
OIL & GAS--3.1%
BP plc, ADR 437,669 29,367,590
- --------------------------------------------------------------------------------
Chevron Corp. 354,244 26,047,561
- --------------------------------------------------------------------------------
Husky Energy, Inc. 622,515 41,659,367
- --------------------------------------------------------------------------------
Neste Oil Oyj 105,900 3,219,427
- --------------------------------------------------------------------------------
Total SA 222,240 16,032,494
-----------------
116,326,439
- --------------------------------------------------------------------------------
FINANCIALS--14.7%
- --------------------------------------------------------------------------------
CAPITAL MARKETS--3.6%
3i Group plc 488,871 9,662,939
- --------------------------------------------------------------------------------
Credit Suisse Group 734,213 51,367,795
- --------------------------------------------------------------------------------
Morgan Stanley 503,900 41,032,577
- --------------------------------------------------------------------------------
Northern Trust Corp. 597,300 36,250,137
-----------------
138,313,448
9 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
COMMERCIAL BANKS--4.4%
HSBC Holdings plc 2,049,283 $ 37,569,618
- --------------------------------------------------------------------------------
ICICI Bank Ltd., Sponsored ADR 236,450 9,869,423
- --------------------------------------------------------------------------------
Resona Holdings, Inc. 5,213 14,236,587
- --------------------------------------------------------------------------------
Royal Bank of Scotland Group plc
(The) 1,591,853 61,865,632
- --------------------------------------------------------------------------------
Societe Generale, Cl. A 200,478 33,919,336
- --------------------------------------------------------------------------------
Sumitomo Mitsui Financial
Group, Inc. 753 7,681,937
-----------------
165,142,533
- --------------------------------------------------------------------------------
CONSUMER FINANCE--0.6%
Credit Saison Co. Ltd. 687,700 23,557,892
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--1.1%
Investor AB, B Shares 931,128 22,746,104
- --------------------------------------------------------------------------------
JPMorgan Chase & Co. 385,963 18,642,013
-----------------
41,388,117
- --------------------------------------------------------------------------------
INSURANCE--4.7%
ACE Ltd. 397,571 24,080,875
- --------------------------------------------------------------------------------
Allianz SE 231,832 47,406,897
- --------------------------------------------------------------------------------
Berkshire Hathaway, Inc., Cl. B 1 6,110 22,399,260
- --------------------------------------------------------------------------------
Everest Re Group Ltd. 104,800 10,281,928
- --------------------------------------------------------------------------------
Manulife Financial Corp. 559,426 18,877,000
- --------------------------------------------------------------------------------
Prudential plc 2,573,657 35,249,018
- --------------------------------------------------------------------------------
XL Capital Ltd., Cl. A 255,900 18,429,918
-----------------
176,724,896
- --------------------------------------------------------------------------------
REAL ESTATE MANAGEMENT & DEVELOPMENT--0.3%
Realogy Corp. 1 354,600 10,751,472
- --------------------------------------------------------------------------------
HEALTH CARE--10.2%
- --------------------------------------------------------------------------------
BIOTECHNOLOGY--2.1%
Amgen, Inc. 1 256,000 17,487,360
- --------------------------------------------------------------------------------
Genentech, Inc. 1 186,300 15,114,519
- --------------------------------------------------------------------------------
Gilead Sciences, Inc. 1 436,160 28,319,869
- --------------------------------------------------------------------------------
NicOx SA 1 163,560 4,903,049
- --------------------------------------------------------------------------------
Nuvelo, Inc. 1 191,700 766,800
- --------------------------------------------------------------------------------
Regeneron Pharmaceuticals, Inc. 1 176,802 3,548,416
- --------------------------------------------------------------------------------
Theravance, Inc. 1 271,000 8,371,190
-----------------
78,511,203
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--2.1%
Biomet, Inc. 557,600 23,012,152
- --------------------------------------------------------------------------------
Boston Scientific Corp. 1 1,465,353 25,174,765
- --------------------------------------------------------------------------------
Medtronic, Inc. 257,400 13,773,474
- --------------------------------------------------------------------------------
Smith & Nephew plc 1,874,897 19,566,505
-----------------
81,526,896
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--0.8%
Express Scripts, Inc. 1 181,800 $ 13,016,880
- --------------------------------------------------------------------------------
Quest Diagnostics, Inc. 294,300 15,597,900
-----------------
28,614,780
- --------------------------------------------------------------------------------
LIFE SCIENCES TOOLS & SERVICES--0.3%
Affymetrix, Inc. 1 322,800 7,443,768
- --------------------------------------------------------------------------------
Nektar Therapeutics 1 314,361 4,781,431
-----------------
12,225,199
- --------------------------------------------------------------------------------
PHARMACEUTICALS--4.9%
AtheroGenics, Inc. 1 769,500 7,625,745
- --------------------------------------------------------------------------------
Chugai Pharmaceutical Co. Ltd. 647,500 13,357,527
- --------------------------------------------------------------------------------
Johnson & Johnson 141,300 9,328,626
- --------------------------------------------------------------------------------
Novartis AG 341,694 19,636,142
- --------------------------------------------------------------------------------
Novo Nordisk AS, Cl. B 139,600 11,627,567
- --------------------------------------------------------------------------------
Roche Holdings AG 266,433 47,776,455
- --------------------------------------------------------------------------------
Sanofi-Aventis SA 625,154 57,724,932
- --------------------------------------------------------------------------------
Shionogi & Co. Ltd. 980,000 19,200,966
-----------------
186,277,960
- --------------------------------------------------------------------------------
INDUSTRIALS--9.4%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE--4.2%
Boeing Co. 286,600 25,461,544
- --------------------------------------------------------------------------------
Empresa Brasileira de Aeronautica
SA, ADR 815,034 33,766,859
- --------------------------------------------------------------------------------
European Aeronautic Defence &
Space Co. 1,219,910 42,029,768
- --------------------------------------------------------------------------------
Lockheed Martin Corp. 229,600 21,139,272
- --------------------------------------------------------------------------------
Northrop Grumman Corp. 248,200 16,803,140
- --------------------------------------------------------------------------------
Raytheon Co. 414,100 21,864,480
-----------------
161,065,063
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--0.6%
Experian Group Ltd. 1 646,239 7,585,618
- --------------------------------------------------------------------------------
Secom Co. Ltd. 296,000 15,346,582
-----------------
22,932,200
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--1.0%
Emerson Electric Co. 856,200 37,749,858
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--2.9%
3M Co. 456,700 35,590,631
- --------------------------------------------------------------------------------
Hutchison Whampoa Ltd. 1,377,000 13,947,557
- --------------------------------------------------------------------------------
Siemens AG 611,871 61,061,907
-----------------
110,600,095
- --------------------------------------------------------------------------------
MACHINERY--0.6%
Fanuc Ltd. 104,500 10,248,400
- --------------------------------------------------------------------------------
Hyundai Heavy Industries Co. Ltd. 1 89,299 12,059,907
-----------------
22,308,307
10 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
ROAD & RAIL--0.1%
Avis Budget Group, Inc. 132,760 $ 2,879,564
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--25.7%
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--6.5%
Cisco Systems, Inc. 1 621,100 16,974,663
- --------------------------------------------------------------------------------
Corning, Inc. 1 1,742,100 32,594,691
- --------------------------------------------------------------------------------
Juniper Networks, Inc. 1 1,827,900 34,620,426
- --------------------------------------------------------------------------------
QUALCOMM, Inc. 48,062 1,816,263
- --------------------------------------------------------------------------------
Tandberg ASA 1,042,850 15,721,693
- --------------------------------------------------------------------------------
Telefonaktiebolaget LM Ericsson,
B Shares 36,028,300 145,514,135
-----------------
247,241,871
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--0.2%
Benq Corp. 1 11,647,000 6,237,230
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--2.9%
Hoya Corp. 621,300 24,224,461
- --------------------------------------------------------------------------------
Keyence Corp. 82,640 20,478,582
- --------------------------------------------------------------------------------
Kyocera Corp. 203,700 19,205,193
- --------------------------------------------------------------------------------
Murata Manufacturing Co. Ltd. 508,500 34,397,084
- --------------------------------------------------------------------------------
Nidec Corp. 138,200 10,683,921
-----------------
108,989,241
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--1.6%
eBay, Inc. 1 1,826,400 54,919,848
- --------------------------------------------------------------------------------
Yahoo!, Inc. 1 250,100 6,387,554
-----------------
61,307,402
- --------------------------------------------------------------------------------
IT SERVICES--2.4%
Automatic Data Processing, Inc. 882,800 43,477,900
- --------------------------------------------------------------------------------
Infosys Technologies Ltd. 965,326 48,708,688
-----------------
92,186,588
- --------------------------------------------------------------------------------
OFFICE ELECTRONICS--0.4%
Canon, Inc. 269,450 15,261,022
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--5.8%
Advanced Micro Devices, Inc. 1 2,030,700 41,324,745
- --------------------------------------------------------------------------------
Altera Corp. 1 1,173,000 23,084,640
- --------------------------------------------------------------------------------
Cree, Inc. 1 573,300 9,929,556
- --------------------------------------------------------------------------------
International Rectifier Corp. 1 355,100 13,682,003
- --------------------------------------------------------------------------------
Linear Technology Corp. 360,496 10,930,239
- --------------------------------------------------------------------------------
Maxim Integrated Products, Inc. 829,265 25,392,094
- --------------------------------------------------------------------------------
MediaTek, Inc. 2,692,700 27,848,393
- --------------------------------------------------------------------------------
Samsung Electronics Co. 37,722 24,705,190
- --------------------------------------------------------------------------------
Taiwan Semiconductor
Manufacturing Co. Ltd. 11,269,837 23,345,527
- --------------------------------------------------------------------------------
Xilinx, Inc. 783,700 18,659,897
-----------------
218,902,284
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
SOFTWARE--5.9%
Adobe Systems, Inc. 1 1,174,100 $ 48,278,992
- --------------------------------------------------------------------------------
Enix Corp. 542,500 14,222,932
- --------------------------------------------------------------------------------
Intuit, Inc. 1 960,800 29,314,008
- --------------------------------------------------------------------------------
Microsoft Corp. 2,292,300 68,448,078
- --------------------------------------------------------------------------------
Nintendo Co. Ltd. 82,700 21,473,299
- --------------------------------------------------------------------------------
SAP AG 777,964 41,427,058
-----------------
223,164,367
- --------------------------------------------------------------------------------
MATERIALS--0.4%
- --------------------------------------------------------------------------------
CHEMICALS--0.4%
Arkema 1 129,175 6,638,219
- --------------------------------------------------------------------------------
Syngenta AG 1 47,067 8,756,741
-----------------
15,394,960
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--3.8%
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--3.8%
KDDI Corp. 5,409 36,679,661
- --------------------------------------------------------------------------------
SK Telecom Co. Ltd., ADR 1,315,660 34,838,677
- --------------------------------------------------------------------------------
Vodafone Group plc 26,488,172 73,066,906
-----------------
144,585,244
- --------------------------------------------------------------------------------
UTILITIES--0.6%
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES--0.6%
Fortum Oyj 811,900 23,106,810
-----------------
Total Common Stocks (Cost $2,500,178,581) 3,728,420,099
- --------------------------------------------------------------------------------
MONEY MARKET FUND--1.4%
- --------------------------------------------------------------------------------
Oppenheimer Institutional Money
Market Fund, Cl. E, 5.25% 2,3
(Cost $51,475,095) 51,475,095 51,475,095
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $2,551,653,676) 99.7% 3,779,895,194
- --------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 0.3 11,110,616
-------------------------------
NET ASSETS 100.0% $ 3,791,005,810
===============================
11 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
2. Represents ownership of an affiliated fund, at or during the period ended
December 31, 2006. Transactions during the period in which the issuer was an
affiliate are as follows:
SHARES SHARES
DECEMBER 31, GROSS GROSS DECEMBER 31,
2005 ADDITIONS REDUCTIONS 2006
- --------------------------------------------------------------------------------
Oppenheimer
Institutional
Money Market
Fund, Cl. E, 5.25%* -- 168,041,033 116,565,938 51,475,095
VALUE DIVIDEND
SEE NOTE 1 INCOME
- --------------------------------------------------------------------------------
Oppenheimer Institutional
Money Market Fund, Cl. E, 5.25%* $51,475,095 $697,540
* The money market fund and the Fund are affiliated by having the same
investment advisor.
3. Rate shown is the 7-day yield as of December 31, 2006.
- --------------------------------------------------------------------------------
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 $ 1,398,786,923 37.0%
United Kingdom 475,711,139 12.6
Japan 396,714,890 10.5
Sweden 242,241,955 6.4
Germany 210,417,939 5.6
France 207,366,743 5.5
Switzerland 127,537,133 3.4
India 114,057,571 3.0
Mexico 91,135,831 2.4
The Netherlands 86,456,486 2.3
Korea, Republic of South 71,603,774 1.9
Canada 60,536,367 1.6
Taiwan 57,431,150 1.5
Brazil 57,050,071 1.5
Cayman Islands 42,510,793 1.1
Spain 35,716,494 0.9
Finland 26,326,237 0.7
Italy 18,229,349 0.5
Norway 15,721,693 0.4
Hong Kong 13,947,557 0.4
Denmark 11,627,567 0.3
Bermuda 10,281,928 0.3
Singapore 8,485,604 0.2
-----------------------------------
Total $ 3,779,895,194 100.0%
===================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
12 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 31, 2006
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
ASSETS
- ----------------------------------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments:
Unaffiliated companies (cost $2,500,178,581) $ 3,728,420,099
Affiliated companies (cost $51,475,095) 51,475,095
-----------------
3,779,895,194
- ----------------------------------------------------------------------------------------------------------
Cash 204,533
- ----------------------------------------------------------------------------------------------------------
Cash--foreign currencies (cost $3,643,638) 3,666,674
- ----------------------------------------------------------------------------------------------------------
Receivables and other assets:
Dividends 4,466,852
Shares of beneficial interest sold 3,403,979
Investments sold 2,727,249
Other 73,318
-----------------
Total assets 3,794,437,799
- ----------------------------------------------------------------------------------------------------------
LIABILITIES
- ----------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Shares of beneficial interest redeemed 2,382,161
Distribution and service plan fees 641,599
Shareholder communications 185,126
Trustees' compensation 56,788
Transfer and shareholder servicing agent fees 3,491
Foreign capital gains tax 1,587
Other 161,237
-----------------
Total liabilities 3,431,989
- ----------------------------------------------------------------------------------------------------------
NET ASSETS $ 3,791,005,810
=================
- ----------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- ----------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 103,228
- ----------------------------------------------------------------------------------------------------------
Additional paid-in capital 2,351,698,141
- ----------------------------------------------------------------------------------------------------------
Accumulated net investment income 32,036,968
- ----------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 178,859,631
- ----------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets and
liabilities denominated in foreign currencies 1,228,307,842
-----------------
NET ASSETS $ 3,791,005,810
=================
- ----------------------------------------------------------------------------------------------------------
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 $2,297,314,868 and 62,443,172 shares of beneficial interest outstanding) $ 36.79
- ----------------------------------------------------------------------------------------------------------
Service Shares:
Net asset value, redemption price per share and offering price per share (based on
net assets of $983,558,174 and 26,952,283 shares of beneficial interest outstanding) $ 36.49
- ----------------------------------------------------------------------------------------------------------
Class 3 Shares:
Net asset value, redemption price per share and offering price per share (based on
net assets of $395,900,494 and 10,702,597 shares of beneficial interest outstanding) $ 36.99
- ----------------------------------------------------------------------------------------------------------
Class 4 Shares:
Net asset value, redemption price per share and offering price per share (based on
net assets of $114,232,274 and 3,130,369 shares of beneficial interest outstanding) $ 36.49
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
13 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 31, 2006
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- ----------------------------------------------------------------------------------------------------------
Dividends:
Unaffiliated companies (net of foreign withholding taxes of $2,070,758) $ 61,975,453
Affiliated companies 697,540
- ----------------------------------------------------------------------------------------------------------
Interest 1,885,026
- ----------------------------------------------------------------------------------------------------------
Portfolio lending fees 763,336
-----------------
Total investment income 65,321,355
- ----------------------------------------------------------------------------------------------------------
EXPENSES
- ----------------------------------------------------------------------------------------------------------
Management fees 21,291,245
- ----------------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Service shares 1,874,012
Class 4 shares 252,314
- ----------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service shares 10,469
Service shares 10,144
Class 3 shares 10,070
Class 4 shares 10,011
- ----------------------------------------------------------------------------------------------------------
Shareholder communications:
Non-Service shares 250,292
Service shares 87,743
Class 3 shares 42,285
Class 4 shares 11,578
- ----------------------------------------------------------------------------------------------------------
Custodian fees and expenses 474,040
- ----------------------------------------------------------------------------------------------------------
Trustees' compensation 52,190
- ----------------------------------------------------------------------------------------------------------
Administration service fees 1,500
- ----------------------------------------------------------------------------------------------------------
Other 123,821
-----------------
Total expenses 24,501,714
Less reduction to custodian expenses (11,073)
Less waivers and reimbursements of expenses (13,271)
-----------------
Net expenses 24,477,370
- ----------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 40,843,985
- ----------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
- ----------------------------------------------------------------------------------------------------------
Net realized gain on:
Investments (net of foreign capital gains tax of $172,786) 192,086,312
Foreign currency transactions 10,653,722
-----------------
Net realized gain 202,740,034
- ----------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation on:
Investments (net of foreign capital gains tax of $2,946) 225,687,523
Translation of assets and liabilities denominated in foreign currencies 90,754,137
-----------------
Net change in unrealized appreciation 316,441,660
- ----------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 560,025,679
=================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2006 2005
- -----------------------------------------------------------------------------------------------------------------
OPERATIONS
- -----------------------------------------------------------------------------------------------------------------
Net investment income $ 40,843,985 $ 29,782,881
- -----------------------------------------------------------------------------------------------------------------
Net realized gain 202,740,034 337,263,306
- -----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation 316,441,660 (12,913,782)
-----------------------------------
Net increase in net assets resulting from operations 560,025,679 354,132,405
- -----------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Non-Service shares (22,390,271) (25,791,077)
Service shares (5,586,912) (3,177,917)
Class 3 shares (3,732,415) (2,857,511)
Class 4 shares (875,877) (420,976)
-----------------------------------
(32,585,475) (32,247,481)
- -----------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Non-Service shares (116,956,054) --
Service shares (34,605,939) --
Class 3 shares (19,539,725) --
Class 4 shares (5,424,732) --
-----------------------------------
(176,526,450) --
- -----------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- -----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from beneficial interest
transactions:
Non-Service shares (44,482,210) (607,707,602)
Service shares 340,074,365 152,495,021
Class 3 shares 12,707,608 40,656,196
Class 4 shares 13,427,523 43,339,023
-----------------------------------
321,727,286 (371,217,362)
- -----------------------------------------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------------------------------------
Total increase (decrease) 672,641,040 (49,332,438)
- -----------------------------------------------------------------------------------------------------------------
Beginning of period 3,118,364,770 3,167,697,208
-----------------------------------
End of period (including accumulated net investment income of
$32,036,968 and $20,023,318, respectively) $ 3,791,005,810 $ 3,118,364,770
===================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
15 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2006 2005 2004 2003 2002
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 33.38 $ 29.51 $ 25.08 $ 17.70 $ 22.84
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .43 1 .32 1 .26 1 .19 .16
Net realized and unrealized gain (loss) 5.20 3.85 4.49 7.34 (5.19)
----------------------------------------------------------------------------------
Total from investment operations 5.63 4.17 4.75 7.53 (5.03)
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.36) (.30) (.32) (.15) (.11)
Distributions from net realized gain (1.86) -- -- -- --
----------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (2.22) (.30) (.32) (.15) (.11)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 36.79 $ 33.38 $ 29.51 $ 25.08 $ 17.70
==================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 17.69% 14.31% 19.16% 43.02% (22.13)%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 2,297,315 $ 2,124,413 $ 2,518,867 $ 2,280,752 $ 1,549,993
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 2,189,511 $ 2,123,523 $ 2,451,188 $ 1,751,226 $ 1,776,289
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 1.27% 1.08% 1.01% 0.99% 0.80%
Total expenses 0.66% 4,5,6 0.67% 4 0.66% 4 0.67% 4 0.67% 4
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 21% 35% 30% 34% 34%
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. Expenses including indirect expenses from affiliated fund were as follows:
Year Ended December 31, 2006 0.66%
6. Voluntary waiver of affiliated funds management fees less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
16 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
SERVICE SHARES YEAR ENDED DECEMBER 31, 2006 2005 2004 2003 2002
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 33.16 $ 29.33 $ 24.96 $ 17.61 $ 22.78
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .33 1 .24 1 .20 1 .12 .12
Net realized and unrealized gain (loss) 5.16 3.84 4.46 7.36 (5.19)
----------------------------------------------------------------------------------
Total from investment operations 5.49 4.08 4.66 7.48 (5.07)
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.30) (.25) (.29) (.13) (.10)
Distributions from net realized gain (1.86) -- -- -- --
----------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (2.16) (.25) (.29) (.13) (.10)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 36.49 $ 33.16 $ 29.33 $ 24.96 $ 17.61
==================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 17.36% 14.06% 18.88% 42.86% (22.37)%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 983,558 $ 557,284 $ 346,403 $ 168,739 $ 52,830
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 750,499 $ 413,849 $ 247,490 $ 91,800 $ 34,847
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 0.98% 0.79% 0.77% 0.68% 0.51%
Total expenses 0.91% 4,5,6 0.92% 4 0.91% 4 0.93% 4 0.90% 4
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 21% 35% 30% 34% 34%
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. Expenses including indirect expenses from affiliated fund were as follows:
Year Ended December 31, 2006 0.91%
6. Voluntary waiver of affiliated funds management fees 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, 2006 2005 2004 2003 1
- ----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 33.55 $ 29.65 $ 25.19 $ 17.55
- ----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .43 2 .32 2 .26 2 .07
Net realized and unrealized gain 5.23 3.88 4.52 7.57
------------------------------------------------------------------
Total from investment operations 5.66 4.20 4.78 7.64
- ----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.36) (.30) (.32) --
Distributions from net realized gain (1.86) -- -- --
------------------------------------------------------------------
Total dividends and/or distributions to shareholders (2.22) (.30) (.32) --
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 36.99 $ 33.55 $ 29.65 $ 25.19
==================================================================
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 17.69% 14.34% 19.19% 43.53%
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 395,901 $ 346,064 $ 265,044 $ 147,576
- ----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 369,406 $ 296,252 $ 199,388 $ 80,579
- ----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 1.26% 1.06% 1.00% 0.73%
Total expenses 0.66% 5,6,7 0.67% 5 0.66% 5 0.68% 5
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 21% 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%.
6. Expenses including indirect expenses from affiliated fund were as follows:
Year Ended December 31, 2006 0.66%
7. Voluntary waiver of affiliated funds management fees less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
18 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
CLASS 4 SHARES YEAR ENDED DECEMBER 31, 2006 2005 2004 1
- -----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 33.15 $ 29.35 $ 25.21
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .34 .24 .09
Net realized and unrealized gain 5.16 3.84 4.05
--------------------------------------------------
Total from investment operations 5.50 4.08 4.14
- -----------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.30) (.28) --
Distributions from net realized gain (1.86) -- --
--------------------------------------------------
Total dividends and/or distributions to shareholders (2.16) (.28) --
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 36.49 $ 33.15 $ 29.35
==================================================
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 17.40% 14.05% 16.42%
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 114,232 $ 90,604 $ 37,384
- -----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 100,973 $ 61,380 $ 19,774
- -----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 1.00% 0.79% 0.53%
Total expenses 0.91% 5,6,7 0.93% 5 0.94% 5
- -----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 21% 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%.
6. Expenses including indirect expenses from affiliated fund were as follows:
Year Ended December 31, 2006 0.91%
7. Voluntary waiver of affiliated funds management fees 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(R) 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, as 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. Options are
valued daily based upon the last sale price on the principal exchange on which
the option is traded. 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. Investments in
open-end registered investment companies (including affiliated funds) are valued
at that fund's net asset value. 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"),
20 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
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.
- --------------------------------------------------------------------------------
AFFILIATED FUNDS. The Fund is permitted to invest daily available cash balances
in affiliated money market funds. Each day, the Fund invests the available cash
in Class E shares of Oppenheimer Institutional Money Market Fund ("IMMF") which
seeks current income and stability of principal. IMMF is a registered open-end
management investment company, regulated as a money market fund under the
Investment Company Act of 1940, as amended. The Manager is also the investment
advisor of IMMF. The Fund's investment in IMMF is included in the Statement of
Investments. As a shareholder, the Fund is subject to its proportional share of
IMMF's Class E expenses, including its management fee. The Manager will waive
fees and/or reimburse Fund expenses in an amount equal to the indirect
management fees incurred through the Fund's investment in IMMF.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders.
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 INCOMETAX PURPOSES
---------------------------------------------------------------------------
$64,626,002 $174,754,860 $-- $1,199,880,214
1. During the fiscal year ended December 31, 2006, the Fund did not utilize any
capital loss carryforward.
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.
21 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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, 2006. 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 3
---------------------------------------------------------------------
$15,875,325 $3,755,140 $19,630,465
3. $15,766,438, including $14,544,502 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, 2006
and December 31, 2005 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2006 DECEMBER 31, 2005
----------------------------------------------------------------
Distributions paid from:
Ordinary income $ 32,585,475 $ 32,247,481
Long-term capital gain 176,526,450 --
---------------------------------
Total $ 209,111,925 $ 32,247,481
=================================
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, 2006 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 $ 2,580,081,304
Federal tax cost of other investments 3,639,525
----------------
Total federal tax cost $ 2,583,720,829
================
Gross unrealized appreciation $ 1,246,837,794
Gross unrealized depreciation (46,957,580)
----------------
Net unrealized appreciation $ 1,199,880,214
================
Certain foreign countries impose a tax on capital gains which is accrued by the
Fund based on unrealized appreciation, if any, on affected securities. The tax
is paid when the gain is realized.
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a compensation
deferral plan for independent trustees that enables trustees to elect to defer
receipt of all or a portion of the annual compensation they are entitled to
receive from the Fund. For purposes of determining the amount owed to the
Trustee under the plan, deferred amounts are treated as though equal dollar
amounts had been invested in shares of the Fund or in other Oppenheimer funds
selected by the Trustee. The Fund purchases shares of the funds selected for
deferral by the Trustee in amounts equal to his or her deemed investment,
resulting in a Fund asset equal to the deferred compensation liability. Such
assets are included as a component of "Other" within the asset section of the
Statement of Assets and Liabilities. Deferral of trustees' fees under the plan
will not affect the net assets of the Fund, and will not materially affect the
Fund's assets, liabilities or net investment income per share. Amounts will be
deferred until distributed in accordance to the Plan.
22 | OPPENHEIMER GLOBAL SECURITIES 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 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, at a rate equal to the
Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line item,
if applicable, represents earnings on cash balances maintained by the Fund
during the period. Such interest expense and other custodian fees may be paid
with these earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Fund's organizational documents provide current and former
trustees and officers with a limited indemnification against liabilities arising
in connection with the performance of their duties to the Fund. In the normal
course of business, the Fund may also enter into contracts that provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would be dependent on future claims that may be made against the
Fund. The risk of material loss from such claims is considered remote.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with 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, 2006 YEAR ENDED DECEMBER 31, 2005
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------
NON-SERVICE SHARES
Sold 6,575,899 $ 223,540,908 8,706,521 $ 257,431,509
Dividends and/or distributions reinvested 4,267,881 139,346,325 895,835 25,791,077
Redeemed (12,034,584) (407,369,443) (31,323,712) (890,930,188)
-------------------------------------------------------------
Net decrease (1,190,804) $ (44,482,210) (21,721,356) $(607,707,602)
=============================================================
- -----------------------------------------------------------------------------------------------------------
SERVICE SHARES
Sold 11,801,332 $ 396,822,488 6,930,473 $ 208,836,898
Dividends and/or distributions reinvested 1,238,609 40,192,851 110,922 3,177,917
Redeemed (2,895,139) (96,940,974) (2,043,354) (59,519,794)
-------------------------------------------------------------
Net increase 10,144,802 $ 340,074,365 4,998,041 $ 152,495,021
=============================================================
23 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST Continued
YEAR ENDED DECEMBER 31, 2006 YEAR ENDED DECEMBER 31, 2005
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------
CLASS 3 SHARES
Sold 1,146,143 $ 39,045,508 2,056,580 $ 61,404,566
Dividends and/or distributions reinvested 708,868 23,272,140 98,739 2,857,511
Redeemed (1,466,336) (49,610,040) (779,132) (23,605,881) 1
---------------------------------------------------------------
Net increase 388,675 $ 12,707,608 1,376,187 $ 40,656,196
===============================================================
- -------------------------------------------------------------------------------------------------------------
CLASS 4 SHARES
Sold 850,052 $ 28,652,172 1,634,734 $ 48,519,848
Dividends and/or distributions reinvested 194,164 6,300,609 14,694 420,976
Redeemed (646,862) (21,525,258) (189,923) (5,601,801) 1
---------------------------------------------------------------
Net increase 397,354 $ 13,427,523 1,459,505 $ 43,339,023
===============================================================
1. Net of redemption fees of $29,707 and $6,752 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 and money market funds, for the year ended December
31, 2006, were as follows:
PURCHASES SALES
--------------------------------------------------------------------
Investment securities $872,965,569 $721,557,820
- --------------------------------------------------------------------------------
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 average net assets as shown in the following table:
FEE SCHEDULE
-------------------------------------------
Up to $200 million 0.75%
Next $200 million 0.72
Next $200 million 0.69
Next $200 million 0.66
Over $800 million 0.60
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the year ended December 31, 2006, the Fund paid
$40,813 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
24 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
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.
The Manager will waive fees and/or reimburse Fund expenses in an amount
equal to the indirect management fees incurred through the Fund's investment in
IMMF. During the year ended December 31, 2006, the Manager waived $13,271 for
IMMF management fees.
- --------------------------------------------------------------------------------
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, 2006, the Fund had no outstanding foreign currency
contracts.
- --------------------------------------------------------------------------------
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
securities, letters of credit 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 each day. If the Fund is
undercollateralized at the close of business due to an increase in market value
of securities on loan, additional collateral is requested from the borrowing
counterparty and is delivered to the Fund on the next business day. Cash
collateral may be invested in approved investments and the Fund bears the risk
of any loss in value of these investments. The Fund retains a portion of the
interest earned from the collateral. 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. 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, 2006, the Fund had no securities on loan.
- --------------------------------------------------------------------------------
7. RECENT ACCOUNTING PRONOUNCEMENTS
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48 ("FIN 48"), ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES.
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with FASB Statement No. 109,
ACCOUNTING FOR INCOME TAXES. FIN 48 requires the evaluation of tax positions
taken in the course of preparing the Fund's tax returns to determine whether it
is
25 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7. RECENT ACCOUNTING PRONOUNCEMENTS Continued
"more-likely-than-not" that tax positions taken in the Fund's tax return will be
ultimately sustained. A tax liability and expense must be recorded in respect of
any tax position that, in Management's judgment, will not be fully realized. FIN
48 is effective for fiscal years beginning after December 15, 2006. As of
December 31, 2006, the Manager has evaluated the implications of FIN 48 and does
not currently anticipate a material impact to the Fund's financial statements.
The Manager will continue to monitor the Fund's tax positions prospectively for
potential future impacts.
In September 2006, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 157, FAIR VALUE MEASUREMENTS. This standard establishes a
single authoritative definition of fair value, sets out a framework for
measuring fair value and expands disclosures about fair value measurements. SFAS
No. 157 applies to fair value measurements already required or permitted by
existing standards. SFAS No. 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. As of December 31, 2006, the Manager does not believe the
adoption of SFAS No. 157 will materially impact the financial statement amounts;
however, additional disclosures may be required about the inputs used to develop
the measurements and the effect of certain of the measurements on changes in net
assets for the period.
- --------------------------------------------------------------------------------
8. LITIGATION
A consolidated amended complaint was filed as a putative class action against
the Manager and the Transfer Agent and other defendants (including 51 of the
Oppenheimer funds excluding the Fund) in the U.S. District Court for the
Southern District of New York on January 10, 2005 and was amended on March 4,
2005. The complaint alleged, among other things, that the Manager charged
excessive fees for distribution and other costs, and that by permitting and/or
participating in those actions, the Directors/Trustees and the Officers of the
funds breached their fiduciary duties to fund shareholders under the Investment
Company Act of 1940 and at common law. The plaintiffs sought unspecified
damages, an accounting of all fees paid, and an award of attorneys' fees and
litigation expenses.
In response to the defendants' motions to dismiss the suit, seven of the
eight counts in the complaint, including the claims against certain of the
Oppenheimer funds, as nominal defendants, and against certain present and former
Directors, Trustees and Officers of the funds, and the Distributor, as
defendants, were dismissed with prejudice, by court order dated March 10, 2006,
and the remaining count against the Manager and the Transfer Agent was dismissed
with prejudice by court order dated April 5, 2006. The plaintiffs filed an
appeal of those dismissals on May 11, 2006.
The Manager believes that the allegations contained in the complaint are
without merit and that there are substantial grounds to sustain the district
court's rulings. The Manager also believes that it is premature to render any
opinion as to the likelihood of an outcome unfavorable to it, the funds, the
Directors/Trustees or the Officers on the appeal of the decisions of the
district court, and that no estimate can yet be made with any degree of
certainty as to the amount or range of any potential loss.
26 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF
OPPENHEIMER GLOBAL SECURITIES FUND/VA:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer Global Securities Fund/VA (the "Fund"), a series of Oppenheimer
Variable Account Funds, including the statement of investments, as of December
31, 2006, 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 period
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
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 audits included 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, 2006, 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 the
Fund as of December 31, 2006, 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
period then ended, in conformity with accounting principles generally accepted
in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
February 16, 2007
27 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2007, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2006. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
Capital gain distributions of $1.8588 per share were paid to Non-Service,
Service, Class 3 and Class 4 shareholders, respectively, on March 13, 2006.
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, 2006 which are not designated as capital gain distributions should be
multiplied by 17.92% 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
$2,317,323 of foreign income taxes paid by the Fund during the fiscal year ended
December 31, 2006. 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 $37,648,597 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.
28 | 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.
29 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew the Fund's
investment advisory agreement (the "Agreement"). The Investment Company Act of
1940, as amended, requires that the Board request and evaluate, and that the
Manager provide, such information as may be reasonably necessary to evaluate the
terms of the Agreement. The Board employs an independent consultant to prepare a
report that provides information, including comparative information, that the
Board requests for that purpose. In addition, the Board receives information
throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager and its affiliates, including
an analysis of the cost of providing services, (v) whether economies of scale
are realized as the Fund grows and whether fee levels reflect these economies of
scale for Fund investors and (vi) other benefits to the Manager from its
relationship with the Fund. Outlined below is a summary of the principal
information considered by the Board as well as the Board's conclusions.
The Board was aware that there are alternatives to retaining the Manager.
NATURE, QUALITY AND EXTENT OF SERVICES. The Board considered information
about the nature and extent of the services provided to the Fund and information
regarding the Manager's key personnel who provide such services. The Manager's
duties include providing the Fund with the services of the portfolio manager and
the Manager's investment team, who provide research, analysis and other advisory
services in regard to the Fund's investments; securities trading services;
oversight of third party service providers; monitoring compliance with
applicable Fund policies and procedures and adherence to the Fund's investment
restrictions. The Manager is responsible for providing certain administrative
services to the Fund as well. Those services include providing and supervising
all administrative and clerical personnel who are necessary in order to provide
effective corporate administration for the Fund; compiling and maintaining
records with respect to the Fund's operations; preparing and filing reports
required by the Securities and Exchange Commission; preparing periodic reports
regarding the operations of the Fund for its shareholders; preparing proxy
materials for shareholder meetings; and preparing the registration statements
required by Federal and state securities laws for the sale of the Fund's shares.
The Manager also provides the Fund with office space, facilities and equipment.
The Board also considered the quality of the services provided and the
quality of the Manager's resources that are available to the Fund. The Board
took account of the fact that the Manager has had over 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. 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 Equity investment team and analysts.
Mr. Bhaman has been a portfolio manager of the Fund since August 2004. 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 investment performance of the Fund and the
Manager at each Board meeting, including comparative performance
30 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
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 growth funds
underlying variable insurance products. The Board noted that the Fund's
one-year, three-year, five-year and ten-year performance were 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 and other global growth, global core and global
value funds underlying variable insurance products. The Board noted that the
Fund's contractual and actual management fees are lower than its peer group
median.
ECONOMIES OF SCALE. The Board reviewed 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
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 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 Agreement, including the management fee,
in light of all of the surrounding circumstances.
31 | 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 HELD; NUMBER OF
FUNDS, LENGTH OF SERVICE, AGE PORTFOLIOS IN THE FUNDS COMPLEX CURRENTLY OVERSEEN
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, President, Colorado Christian University (since 2006); Chairman of the following private mortgage
Chairman of the Board of banking companies: Cherry Creek Mortgage Company (since 1991), Centennial State Mortgage Company
Trustees (since 2003), (since 1994), and The El Paso Mortgage Company (since 1993); Chairman of the following private
Trustee (since 1999) companies: Ambassador Media Corporation (since 1984) and Broadway Ventures (since 1984); Director
Age: 69 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 37 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,
Age: 75 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 37 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: 70 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 37 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: 68 PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price Waterhouse
LLP Global Investment Management Industry Services Group (accounting firm) (July 1994-June 1998).
Oversees 37 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
Age: 65 (October 1999-October 2003); Director of Rocky Mountain Elk Foundation (non-profit organization)
(February 1998-February 2003 and since February 2005); 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 37 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: 66 (until October 1994). Oversees 37 portfolios in the OppenheimerFunds complex.
32 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
BEVERLY L. HAMILTON, Trustee of Monterey Institute for International Studies (educational organization) (since February
Trustee (since 2002) 2000); Board Member of Middlebury College (educational organization) (since December 2005);
Age: 60 Director of The California Endowment (philanthropic organization) (since April 2002); Director
(February 2002-2005) and Chairman of Trustees (since 2006) of the Community Hospital of Monterey
Peninsula; Director (October 1991-2005) and Vice Chairman (since 2006) of American Funds' Emerging
Markets Growth Fund, Inc. (mutual fund); President of ARCO Investment Management Company (February
1991-April 2000); Member of the investment committees of The Rockefeller Foundation (since 2001)
and The University of Michigan (since 2000); Advisor at Credit Suisse First Boston's Sprout
venture capital unit (venture capital fund) (1994-January 2005); Trustee of MassMutual
Institutional Funds (investment company) (1996-June 2004); Trustee of MML Series Investment Fund
(investment company) (April 1989-June 2004); Member of the investment committee of Hartford
Hospital (2000-2003); and Advisor to Unilever (Holland) pension fund (2000-2003). Oversees 37
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: 62 (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 37 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 (since
Age: 64 1987) and Chairman (1994-2005) of the Investment Committee 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); and Executive Vice President of Peoples Heritage Financial Group, Inc.
(commercial bank) (January 1999-July 1999). Oversees 39 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
Trustee, President and 2000) of the Manager; President and director or trustee of other Oppenheimer funds; President and
Principal Executive Officer Director of OAC and of Oppenheimer Partnership Holdings, Inc. (holding company subsidiary of the
(since 2001) Manager) (since July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of the
Age: 57 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 96 portfolios in the OppenheimerFunds complex.
33 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
TRUSTEES AND OFFICERS Unaudited / Continued
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OTHER OFFICERS OF THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. BHAMAN, ZACK,
THE FUND GILLESPIE AND MS. BLOOMBERG, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, NEW YORK, NEW YORK
10281-1008, FOR MESSRS. VANDEHEY, WIXTED, PETERSEN, SZILAGYI AND MS. IVES, 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 Manager (March
Vice President and 1996-January 1997). An officer of 2 portfolios in the OppenheimerFunds complex.
Portfolio Manager
(since 2004)
Age: 40
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 of the
(since 2004) Manager (1997-February 2004). An officer of 96 portfolios in the OppenheimerFunds complex.
Age: 56
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
Financial & Accounting Services, Inc., Oppenheimer Real Asset Management Corporation, and Oppenheimer Partnership
Officer (since 1999) Holdings, Inc. (since March 1999), OFI Private Investments, Inc. (since March 2000),
Age: 47 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 96 portfolios in the
OppenheimerFunds complex.
BRIAN S. PETERSEN, Assistant Vice President of the Manager (since August 2002); Manager/Financial Product Accounting
Assistant Treasurer of the Manager (November 1998-July 2002). An officer of 96 portfolios in the OppenheimerFunds
(since 2004) complex.
Age: 36
BRIAN C. SZILAGYI, Assistant Vice President of the Manager (since July 2004); Director of Financial Reporting and
Assistant Treasurer Compliance of First Data Corporation (April 2003-July 2004); Manager of Compliance of Berger
(since 2005) Financial Group LLC (May 2001-March 2003); Director of Mutual Fund Operations at American Data
Age: 36 Services, Inc. (September 2000-May 2001). An officer of 96 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 of
(since 2001) Centennial Asset Management Corporation (since December 2001); Senior Vice President and General
Age: 58 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 96 portfolios in the
OppenheimerFunds complex.
34 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
LISA I. BLOOMBERG, Vice President and Associate Counsel of the Manager (since May 2004); First Vice President (April
Assistant Secretary 2001-April 2004), Associate General Counsel (December 2000-April 2004), Corporate Vice President
(since 2004) (May 1999-April 2001) and Assistant General Counsel (May 1999-December 2000) of UBS Financial
Age: 39 Services Inc. (formerly, PaineWebber Incorporated). An officer of 96 portfolios in the
OppenheimerFunds complex.
KATHLEEN T. IVES, Vice President (since June 1998) and Senior Counsel and Assistant Secretary (since October 2003)
Assistant Secretary of the Manager; Vice President (since 1999) and Assistant Secretary (since October 2003) of the
(since 2001) Distributor; Assistant Secretary of Centennial Asset Management Corporation (since October 2003);
Age: 41 Vice President and Assistant Secretary of Shareholder Services, Inc. (since 1999); Assistant
Secretary of OppenheimerFunds Legacy Program and Shareholder Financial Services, Inc. (since
December 2001); Assistant Counsel of the Manager (August 1994-October 2003). An officer of 96
portfolios in the OppenheimerFunds complex.
PHILLIP S. GILLESPIE, Senior Vice President and Deputy General Counsel of the Manager (since September 2004); First Vice
Assistant Secretary President (2000-September 2004), Director (2000-September 2004) and Vice President (1998-2000) of
(since 2004) Merrill Lynch Investment Management. An officer of 96 portfolios in the OppenheimerFunds complex.
Age: 43
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.
35 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
OPPENHEIMER VALUE FUND/VA
FUND PERFORMANCE DISCUSSION
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MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. Oppenheimer Value Fund/VA's
Non-Service shares generated solid returns but slightly trailed behind its
benchmark, the Russell 1000 Value Index. The Fund's performance was hindered by
holdings in the financials, information technology and telecommunications
sectors. Underperformance in these sectors more than offset outperformance in
the consumer staples, consumer discretionary, energy and utilities sectors.
Early in the reporting period, investors became concerned about what effects
rising interest rates and high-energy costs might have on future economic
growth. In this environment, many stock prices fell, particularly for small-cap
stocks. When inflation and economic concerns eased during the summer months, the
Fund enjoyed more healthy equity returns.
The Fund's best relative gains were achieved in the consumer staples,
consumer discretionary, energy and utilities areas. Consumer staples stocks
posted strong gains for the Fund. We scored successes with our holdings in
ConAgra Foods, Inc., the global retail food products firm. ConAgra's management
has effectively created a turnaround story by improving its execution on costs,
thereby increasing the company's stock price. The Fund also benefited by owning
Wal-Mart Stores, Inc. during a period when the stock performed well. Within
energy, the Fund benefited from its underweight position to a number of oil and
natural gas companies at a time when falling energy prices hurt stock returns.
In addition, our overweight position in Exxon Mobil Corp. also greatly aided
performance during the reporting period. Utilities stocks also added to the
Fund's relative performance, where AES Corp. and Reliant Energy, Inc. posted
especially positive gains due to generally higher utility valuations. Consumer
discretionary performance benefited from holdings in Liberty Global, Inc. and
Comcast, Inc. We sold our positions in AES and Comcast and took profits.
Most of the Fund's negative performance can be traced to its holdings in
three areas: financials, information technology, and telecommunications. An
underweighting and underperforming stocks detracted from the Fund's performance
in the financials sector. Capital One Financial Corp., a major detractor,
suffered due to fears about credit quality and consumer spending. However, one
bright spot was UBS AG, one of the Fund's largest holdings, which benefited from
robust asset gathering in its private wealth business. What's more, the company
is poised to experience meaningful operating leverage in Europe, where it has
invested a great deal of money to create a comprehensive client service
infrastructure.
An overweight position in information technology dragged on the Fund's
performance. Several holdings disappointed as technology stocks suffered during
the summer months. Novell, Inc., a provider of security software and other
business solutions, disappointed during the reporting period, where its
transition from its previous operating system, NETWARE, to its new system, OES,
has not gone as well as we had hoped. The stock has been punished and our
holdings there hurt the Fund's relative performance. Corning, Inc.
underperformed due to concerns over excessive inventory. The Fund's holdings in
Take-Two Interactive Software, Inc. hindered performance due to investors'
concerns over the company's expense management. However, we continued to believe
that Take-Two's earnings power is substantial in light of their video game
development talent. Compuware Corp. and Hutchinson Technology, Inc. also
detracted from the Fund's relative performance. We have since exited our
position in Compuware.
A significant portion of the Fund's negative performance in the
telecommunications area can be attributed to NOT owning AT&T, Inc. and BellSouth
Telecommunications, Inc. at a time when both companies performed well, and
instead choosing to invest in Sprint Nextel Corp. During the reporting period,
Sprint came under pressure due to its inability to attract enough subscribers as
well as a lack of progress addressing "churn," which is defined as a percentage
of customers that leave. Generally speaking, when churn levels increase,
profitability decreases. We sold our position in Sprint during the reporting
period.
As of the end of the reporting period, the Fund has relative underweight
positions in the energy, financials and telecommunications areas. Conversely,
the Fund's most significant relative overweight positions are within the
industrials and information technology areas. While we are not completely
satisfied with the relative returns generated by the Fund during the reporting
period, we would like to remind shareholders that our investment philosophy is
focused on long-term results rather than short-term performance. That said, we
remain confident in the earnings ability of the stocks in which we are 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, 2006. In the case of Non-Service shares, performance is
measured from inception of the class on January 2, 2003. In the case of Service
shares, performance is measured from inception of the class on September 18,
2006. Performance information does not reflect charges that apply to separate
accounts investing in the Fund. If these charges were taken into account,
performance would be lower. The graphs assume that all dividends and capital
gains distributions were reinvested in additional shares.
The Fund's performance is compared to the performance of the Russell 1000
Value Index, an unmanaged index of equity securities of large capitalization
companies that is a measure of the large-cap value 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 GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Value Fund/VA Russell 1000
(Non-Service) Value 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
03/31/2006 16,117 17,178
06/30/2006 15,948 17,280
09/30/2006 16,803 18,355
12/31/2006 17,835 19,824
AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/06
1-Year 14.03% 5-Year N/A Since Inception (1/2/03) 15.57%
SERVICE SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Value Fund/VA (Service)
Russell 1000 Value Index
Oppenheimer Value Fund/VA Russell 1000
Date (Service) Value Index
09/18/2006 10,000 10,000
09/30/2006 10,076 10,000
12/31/2006 10,681 10,800
[PLOT POINTS TO COME]
AVERAGE ANNUAL TOTAL RETURNS OF SERVICE SHARES OF THE FUND AT 12/31/06
Since Inception (9/18/06) 6.81%
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; 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, 2006.
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.
6 | OPPENHEIMER VALUE FUND/VA
- --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
(7/1/06) (12/31/06) DECEMBER 31, 2006 1,2
- ---------------------------------------------------------------------------------------------
Non-Service shares Actual $ 1,000.00 $ 1,118.30 $ 13.64
- ---------------------------------------------------------------------------------------------
Non-Service shares Hypothetical 1,000.00 1,012.40 12.97
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE THE PERIOD ENDED
(9/18/06) (12/31/06) DECEMBER 31, 2006 2,3
- ---------------------------------------------------------------------------------------------
Service shares Actual $ 1,000.00 $ 1,068.90 $ 8.85
- ---------------------------------------------------------------------------------------------
Service shares Hypothetical 1,000.00 1,010.69 14.70
Hypothetical assumes 5% annual return before expenses.
1. Actual expenses paid for Non-Service shares 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).
2. Hypothetical expenses paid for all classes 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).
3. Actual expenses paid for Service shares are equal to the Fund's annualized
expense ratio for that class, multiplied by the average account value over the
period, multiplied by 105/365 [to reflect the period from September 18, 2006
(inception of offering) to December 31, 2006].
Those annualized expense ratios, excluding affiliated fund indirect expenses,
based on the 6-month period ended December 31, 2006 for Non-Service shares, and
for the period from September 18, 2006 (inception of offering) to December 31,
2006 for Service shares are as follows:
CLASS EXPENSE RATIOS
- ------------------------------------
Non-Service shares 2.54%
- ------------------------------------
Service shares 2.88
The expense ratios reflect voluntary waivers or reimbursements of expenses by
the Fund's Manager that can be terminated at any time, without advance notice.
The "Financial Highlights" tables in the Fund's financial statements, included
in this report, also show the gross expense ratios, without such waivers or
reimbursements.
- --------------------------------------------------------------------------------
7 | OPPENHEIMER VALUE FUND/VA
STATEMENT OF INVESTMENTS December 31, 2006
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
COMMON STOCKS--101.4%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--8.4%
- --------------------------------------------------------------------------------
MEDIA--8.0%
Liberty Global, Inc., Series A 1 1,707 $ 49,759
- --------------------------------------------------------------------------------
Liberty Global, Inc., Series C 1 5,448 152,544
- --------------------------------------------------------------------------------
News Corp., Inc., Cl. A 2,220 47,686
-----------------
249,989
- --------------------------------------------------------------------------------
SPECIALTY RETAIL--0.4%
Office Depot, Inc. 1 340 12,978
- --------------------------------------------------------------------------------
CONSUMER STAPLES--8.1%
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--1.0%
Walgreen Co. 700 32,123
- --------------------------------------------------------------------------------
FOOD PRODUCTS--1.9%
ConAgra Foods, Inc. 2,140 57,780
- --------------------------------------------------------------------------------
TOBACCO--5.2%
Altria Group, Inc. 1,880 161,342
- --------------------------------------------------------------------------------
ENERGY--9.1%
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--1.0%
Schlumberger Ltd. 500 31,580
- --------------------------------------------------------------------------------
OIL & GAS--8.1%
BP plc, ADR 480 32,208
- --------------------------------------------------------------------------------
Exxon Mobil Corp. 2,880 220,694
-----------------
252,902
- --------------------------------------------------------------------------------
FINANCIALS--31.2%
- --------------------------------------------------------------------------------
CAPITAL MARKETS--7.5%
E*TRADE Financial Corp. 1 3,150 70,623
- --------------------------------------------------------------------------------
UBS AG 2,720 164,098
-----------------
234,721
- --------------------------------------------------------------------------------
COMMERCIAL BANKS--7.9%
Wachovia Corp. 2,850 162,308
- --------------------------------------------------------------------------------
Wells Fargo & Co. 2,300 81,788
-----------------
244,096
- --------------------------------------------------------------------------------
CONSUMER FINANCE--3.7%
Capital One Financial Corp. 1,050 80,661
- --------------------------------------------------------------------------------
SLM Corp. 700 34,139
-----------------
114,800
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--2.9%
Bank of America Corp. 1,686 90,016
- --------------------------------------------------------------------------------
INSURANCE--6.6%
Everest Re Group Ltd. 1,410 138,335
- --------------------------------------------------------------------------------
Genworth Financial, Inc., Cl. A 1,100 37,631
- --------------------------------------------------------------------------------
Platinum Underwriters Holdings Ltd. 990 30,631
-----------------
206,597
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE--2.6%
Countrywide Financial Corp. 830 $ 35,234
- --------------------------------------------------------------------------------
Freddie Mac 680 46,172
-----------------
81,406
- --------------------------------------------------------------------------------
HEALTH CARE--6.9%
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--3.3%
Medco Health Solutions, Inc. 1 700 37,408
- --------------------------------------------------------------------------------
WellPoint, Inc. 1 815 64,132
-----------------
101,540
- --------------------------------------------------------------------------------
PHARMACEUTICALS--3.6%
Abbott Laboratories 300 14,613
- --------------------------------------------------------------------------------
Novartis AG, ADR 570 32,741
- --------------------------------------------------------------------------------
Sanofi-Aventis SA, ADR 1,410 65,100
-----------------
112,454
- --------------------------------------------------------------------------------
INDUSTRIALS--15.2%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE--8.2%
Alliant Techsystems, Inc. 1 300 23,457
- --------------------------------------------------------------------------------
KBR, Inc. 1 30 785
- --------------------------------------------------------------------------------
Rockwell Collins, Inc. 980 62,024
- --------------------------------------------------------------------------------
Spirit Aerosystems Holdings, Inc., Cl. A 1 280 9,372
- --------------------------------------------------------------------------------
United Technologies Corp. 2,545 159,113
-----------------
254,751
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--5.4%
Siemens AG, Sponsored ADR 1,700 167,535
- --------------------------------------------------------------------------------
MACHINERY--1.6%
Navistar International Corp. 1 1,510 50,479
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--12.2%
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--3.2%
Corning, Inc. 1 5,300 99,163
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--0.8%
Hutchinson Technology, Inc. 1 1,000 23,570
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--4.3%
Texas Instruments, Inc. 4,700 135,360
- --------------------------------------------------------------------------------
SOFTWARE--3.9%
Novell, Inc. 1 5,520 34,224
- --------------------------------------------------------------------------------
Synopsys, Inc. 1 1,100 29,403
- --------------------------------------------------------------------------------
Take-Two Interactive Software, Inc. 1 3,290 58,430
-----------------
122,057
- --------------------------------------------------------------------------------
MATERIALS--2.3%
- --------------------------------------------------------------------------------
CONSTRUCTION MATERIALS--2.3%
Martin Marietta Materials, Inc. 340 35,329
- --------------------------------------------------------------------------------
Vulcan Materials Co. 400 35,948
-----------------
71,277
8 | OPPENHEIMER VALUE FUND/VA
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--1.1%
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--1.1%
Verizon Communications, Inc. 900 $ 33,516
- --------------------------------------------------------------------------------
UTILITIES--6.9%
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES--3.7%
Entergy Corp. 200 18,464
- --------------------------------------------------------------------------------
Exelon Corp. 1,300 80,457
- --------------------------------------------------------------------------------
Reliant Energy, Inc. 1 1,150 16,342
----------------
115,263
- --------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER--3.2%
CMS Energy Corp. 1 2,140 35,738
- --------------------------------------------------------------------------------
PG&E Corp. 645 30,528
- --------------------------------------------------------------------------------
Sempra Energy 600 33,622
----------------
99,888
----------------
Total Common Stocks (Cost $2,732,372) 3,157,183
- --------------------------------------------------------------------------------
MONEY MARKET FUND--5.9%
- --------------------------------------------------------------------------------
Oppenheimer Institutional Money
Market Fund, Cl. E, 5.25% 2,3
(Cost $183,179) 183,179 183,179
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $2,915,551) 107.3% 3,340,362
- --------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF
OTHER ASSETS (7.3) (228,175)
--------------------------------
NET ASSETS 100.0% $ 3,112,187
================================
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
2. Rate shown is the 7-day yield as of December 31, 2006.
3. Represents ownership of an affiliated fund, at or during the period ended
December 31, 2006. Transactions during the period in which the issuer was an
affiliate are as follows:
SHARES SHARES
DECEMBER 31, GROSS GROSS DECEMBER 31,
2005 ADDITIONS REDUCTIONS 2006
- ----------------------------------------------------------------------------------------------
Oppenheimer Institutional Money Market
Fund, Cl. E, 5.25%* -- 574,139 390,960 183,179
VALUE DIVIDEND
SEE NOTE 1 INCOME
- ----------------------------------------------------------------------------------------------
Oppenheimer Institutional Money
Market Fund, Cl. E, 5.25%* $ 183,179 $ 1,963
* The money market fund and the Fund are affiliated by having the same
investment advisor.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
9 | OPPENHEIMER VALUE FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 31, 2006
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments:
Unaffiliated companies (cost $2,732,372) $ 3,157,183
Affiliated companies (cost $183,179) 183,179
----------------
3,340,362
- -------------------------------------------------------------------------------------------------------------------
Cash 10,036
- -------------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Shares of beneficial interest sold 38,110
Investments sold 26,284
Dividends 3,083
Other 5,775
----------------
Total assets 3,423,650
- -------------------------------------------------------------------------------------------------------------------
LIABILITIES
- -------------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Dividends 264,409
Investments purchased 22,012
Shareholder communications 7,094
Trustees' compensation 5,081
Distribution and service plan fees 183
Shares of beneficial interest redeemed 39
Other 12,645
----------------
Total liabilities 311,463
- -------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 3,112,187
================
- -------------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- -------------------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 269
- -------------------------------------------------------------------------------------------------------------------
Additional paid-in capital 2,611,750
- -------------------------------------------------------------------------------------------------------------------
Accumulated net investment loss (5,081)
- -------------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments 80,438
- -------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 424,811
----------------
NET ASSETS $ 3,112,187
================
- -------------------------------------------------------------------------------------------------------------------
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
$2,657,487 and 229,559 shares of beneficial interest outstanding) $ 11.58
- -------------------------------------------------------------------------------------------------------------------
Service Shares:
Net asset value, redemption price per share and offering price per share (based on net assets of
$454,700 and 39,283 shares of beneficial interest outstanding) $ 11.57
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
10 | OPPENHEIMER VALUE FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 31, 2006
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
INVESTMENT INCOME
- ----------------------------------------------------------------------------------
Dividends:
Unaffiliated companies (net of foreign withholding taxes of $715) $ 44,807
Affiliated companies 1,963
- ----------------------------------------------------------------------------------
Interest 4,324
---------------
Total investment income 51,094
- ----------------------------------------------------------------------------------
EXPENSES
- ----------------------------------------------------------------------------------
Management fees 20,780
- ----------------------------------------------------------------------------------
Distribution and service plan fees--Service shares 183
- ----------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Service shares 14
- ----------------------------------------------------------------------------------
Shareholder communications:
Non-Service shares 12,853
Service shares 1,007
- ----------------------------------------------------------------------------------
Legal, auditing and other professional fees 16,555
- ----------------------------------------------------------------------------------
Trustees' compensation 4,509
- ----------------------------------------------------------------------------------
Administration service fees 1,500
- ----------------------------------------------------------------------------------
Custodian fees and expenses 15
- ----------------------------------------------------------------------------------
Other 2,576
---------------
Total expenses 59,992
Less waivers and reimbursements of expenses (37)
---------------
Net expenses 59,955
- ----------------------------------------------------------------------------------
NET INVESTMENT LOSS (8,861)
- ----------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
- ----------------------------------------------------------------------------------
Net realized gain on investments 359,434
- ----------------------------------------------------------------------------------
Net change in unrealized appreciation on investments 23,864
- ----------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 374,437
===============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11 | OPPENHEIMER VALUE FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2006 2005
- --------------------------------------------------------------------------------------------------------------------------
OPERATIONS
- --------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) $ (8,861) $ 4,332
- --------------------------------------------------------------------------------------------------------------------------
Net realized gain 359,434 444,863
- --------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation 23,864 (281,841)
----------------------------
Net increase in net assets resulting from operations 374,437 167,354
- --------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Non-Service shares (1,194) (4,318)
Service shares -- --
----------------------------
(1,194) (4,318)
- --------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Non-Service shares (263,215) (415,306)
Service shares (37,589) --
----------------------------
(300,804) (415,306)
- --------------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- --------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from beneficial interest transactions:
Non-Service shares -- --
Service shares 477,488 --
----------------------------
477,488 --
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS
- --------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) 549,927 (252,270)
- --------------------------------------------------------------------------------------------------------------------------
Beginning of period 2,562,260 2,814,530
----------------------------
End of period (including accumulated net investment loss of $5,081 and $1,456, respectively) $ 3,112,187 $ 2,562,260
============================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
12 | OPPENHEIMER VALUE FUND/VA
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2006 2005 2004 2003 1
- ----------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.16 $ 12.26 $ 12.90 $ 10.00
- ----------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.03) 2 .02 2 (.01) 2 .03
Net realized and unrealized gain 1.61 .71 1.82 2.87
---------------------------------------------------
Total from investment operations 1.58 .73 1.81 2.90
- ----------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.01) (.02) (.03) --
Distributions from net realized gain (1.15) (1.81) (2.42) --
---------------------------------------------------
Total dividends and/or distributions to shareholders (1.16) (1.83) (2.45) --
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.58 $ 11.16 $ 12.26 $ 12.90
===================================================
- ----------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 14.03% 5.88% 14.50% 29.00%
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 2,657 $ 2,562 $ 2,815 $ 3,871
- ----------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 2,695 $ 2,878 $ 3,370 $ 3,205
- ----------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income (loss) (0.29)% 0.15% (0.08)% 0.27%
Total expenses 2.14% 5,6 1.78% 7 1.82% 7 1.39% 7
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 124% 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. Expenses including indirect expenses from affiliated fund were as follows:
Year Ended December 31, 2006 2.14%
6. Voluntary waiver of management fees less than 0.01%.
7. Reduction to custodian expenses less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
13 | OPPENHEIMER VALUE FUND/VA
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SERVICE SHARES PERIOD ENDED DECEMBER 31, 2006 1
- -----------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------
Net asset value, beginning of period $ 11.89
- -----------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss 2 (.05)
Net realized and unrealized gain .88
----------
Total from investment operations .83
- -----------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income --
Distributions from net realized gain (1.15)
----------
Total dividends and/or distributions to shareholders (1.15)
- -----------------------------------------------------------------------------
Net asset value, end of period $ 11.57
==========
- -----------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 6.81%
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 455
- -----------------------------------------------------------------------------
Average net assets (in thousands) $ 268
- -----------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment loss (1.30)%
Total expenses 2.89% 5
Expenses after payments and waivers and
reduction to custodian expenses 2.88%
- -----------------------------------------------------------------------------
Portfolio turnover rate 124%
1. For the period from September 18, 2006 (inception of offering) to December
31, 2006.
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. Expenses including indirect expenses from affiliated fund were as follows:
Year Ended December 31, 2006 2.89%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14 | 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,
2006, 85% of the Fund's shares were owned by 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(R) 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, as 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. Options are
valued daily based upon the last sale price on the principal exchange on which
the option is traded. 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. Investments in
open-end registered investment companies (including affiliated funds) are valued
at that fund's net asset value. 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
15 | OPPENHEIMER VALUE FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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.
- --------------------------------------------------------------------------------
AFFILIATED FUNDS. The Fund is permitted to invest daily available cash balances
in affiliated money market funds. Each day, the Fund invests the available cash
in Class E shares of Oppenheimer Institutional Money Market Fund ("IMMF") which
seeks current income and stability of principal. IMMF is a registered open-end
management investment company, regulated as a money market fund under the
Investment Company Act of 1940, as amended. The Manager is also the investment
advisor of IMMF. The Fund's investment in IMMF is included in the Statement of
Investments. As a shareholder, the Fund is subject to its proportional share of
IMMF's Class E expenses, including its management fee. The Manager will waive
fees and/or reimburse Fund expenses in an amount equal to the indirect
management fees incurred through the Fund's investment in IMMF.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders.
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
----------------------------------------------------------------------
$ 49,925 $ 30,970 $ 458 $ 424,811
1. The Fund had $458 of straddle losses which were deferred.
2. During the fiscal year ended December 31, 2006, the Fund did not utilize any
capital loss carryforward.
3. During the fiscal year ended December 31, 2005, the Fund did not utilize any
capital loss carryforward.
16 | OPPENHEIMER VALUE FUND/VA
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Fund. Accordingly, the
following amounts have been reclassified for December 31, 2006. Net assets of
the Fund were unaffected by the reclassifications.
REDUCTION TO
REDUCTION TO ACCUMULATED NET
INCREASE TO PAID-IN ACCUMULATED NET REALIZED GAIN ON
CAPITAL INVESTMENT LOSS INVESTMENTS 4
----------------------------------------------------------------
$ 1,319 $ 6,430 $ 7,749
4. $1,319, including $505 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, 2006
and December 31, 2005 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2006 DECEMBER 31, 2005
----------------------------------------------------------------
Distributions paid from:
Ordinary income $ 14,671 $ 103,467
Long-term capital gain 287,327 316,157
------------------------------
Total $ 301,998 $ 419,624
==============================
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, 2006 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 $ 2,915,551
============
Gross unrealized appreciation $ 457,438
Gross unrealized depreciation (32,627)
------------
Net unrealized appreciation $ 424,811
============
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a compensation
deferral plan for independent trustees that enables trustees to elect to defer
receipt of all or a portion of the annual compensation they are entitled to
receive from the Fund. For purposes of determining the amount owed to the
Trustee under the plan, deferred amounts are treated as though equal dollar
amounts had been invested in shares of the Fund or in other Oppenheimer funds
selected by the Trustee. The Fund purchases shares of the funds selected for
deferral by the Trustee in amounts equal to his or her deemed investment,
resulting in a Fund asset equal to the deferred compensation liability. Such
assets are included as a component of "Other" within the asset section of the
Statement of Assets and Liabilities. Deferral of trustees' fees under the plan
will not affect the net assets of the Fund, and will not materially affect the
Fund's assets, liabilities or net investment income per share. Amounts will be
deferred until distributed in accordance to the Plan.
17 | OPPENHEIMER VALUE FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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, at a rate equal to the
Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line item,
if applicable, represents earnings on cash balances maintained by the Fund
during the period. Such interest expense and other custodian fees may be paid
with these earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Fund's organizational documents provide current and former
trustees and officers with a limited indemnification against liabilities arising
in connection with the performance of their duties to the Fund. In the normal
course of business, the Fund may also enter into contracts that provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would be dependent on future claims that may be made against the
Fund. The risk of material loss from such claims is considered remote.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with 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, 2006 1 YEAR ENDED DECEMBER 31, 2005 2
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
NON-SERVICE SHARES
Sold -- $ -- -- $ --
Dividends and/or distributions reinvested -- -- -- --
Redeemed -- -- -- --
--------------------------------------------------------------
Net increase (decrease) -- $ -- -- $ --
==============================================================
- ---------------------------------------------------------------------------------------------------------
SERVICE SHARES
Sold 41,097 $ 500,936 -- $ --
Dividends and/or distributions reinvested 3,229 37,589 -- --
Redeemed (5,043) (61,037) -- --
--------------------------------------------------------------
Net increase 39,283 $ 477,488 -- $ --
==============================================================
1. For the year ended December 31, 2006 for Non-Service Shares and for the
period from September 18, 2006 (inception of offering) to December 31, 2006 for
Service Shares.
2. There were no transactions of beneficial interest in the year ended December
31, 2005.
18 | OPPENHEIMER VALUE FUND/VA
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations and money market funds, for the year ended December
31, 2006, were as follows:
PURCHASES SALES
--------------------------------------------------------------------
Investment securities $ 3,362,454 $ 3,520,004
- --------------------------------------------------------------------------------
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 average net assets as shown in the following table:
FEE SCHEDULE
--------------------------
Up to $200 million 0.75%
Next $200 million 0.72
Next $200 million 0.69
Next $200 million 0.66
Over $800 million 0.60
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the year ended December 31, 2006, the Fund paid $14
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.
The Manager will waive fees and/or reimburse Fund expenses in an amount
equal to the indirect management fees incurred through the Fund's investment in
IMMF. During the year ended December 31, 2006, the Manager waived $37 for IMMF
management fees.
- --------------------------------------------------------------------------------
5. RECENT ACCOUNTING PRONOUNCEMENTS
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48 ("FIN 48"), ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES.
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with FASB Statement No. 109,
ACCOUNTING FOR INCOME TAXES. FIN 48 requires the evaluation of tax positions
taken in the course of preparing the Fund's tax returns to determine whether it
is "more-likely-than-not" that tax positions taken in the Fund's tax return will
be ultimately sustained. A tax liability and
19 | OPPENHEIMER VALUE FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. RECENT ACCOUNTING PRONOUNCEMENTS Continued
expense must be recorded in respect of any tax position that, in Management's
judgment, will not be fully realized. FIN 48 is effective for fiscal years
beginning after December 15, 2006. As of December 31, 2006, the Manager has
evaluated the implications of FIN 48 and does not currently anticipate a
material impact to the Fund's financial statements. The Manager will continue to
monitor the Fund's tax positions prospectively for potential future impacts.
In September 2006, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 157, FAIR VALUE MEASUREMENTS. This standard establishes a
single authoritative definition of fair value, sets out a framework for
measuring fair value and expands disclosures about fair value measurements. SFAS
No. 157 applies to fair value measurements already required or permitted by
existing standards. SFAS No. 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. As of December 31, 2006, the Manager does not believe the
adoption of SFAS No. 157 will materially impact the financial statement amounts;
however, additional disclosures may be required about the inputs used to develop
the measurements and the effect of certain of the measurements on changes in net
assets for the period.
- --------------------------------------------------------------------------------
6. LITIGATION
A consolidated amended complaint was filed as a putative class action against
the Manager and the Transfer Agent and other defendants (including 51 of the
Oppenheimer funds excluding the Fund) in the U.S. District Court for the
Southern District of New York on January 10, 2005 and was amended on March 4,
2005. The complaint alleged, among other things, that the Manager charged
excessive fees for distribution and other costs, and that by permitting and/or
participating in those actions, the Directors/Trustees and the Officers of the
funds breached their fiduciary duties to fund shareholders under the Investment
Company Act of 1940 and at common law. The plaintiffs sought unspecified
damages, an accounting of all fees paid, and an award of attorneys' fees and
litigation expenses.
In response to the defendants' motions to dismiss the suit, seven of the
eight counts in the complaint, including the claims against certain of the
Oppenheimer funds, as nominal defendants, and against certain present and former
Directors, Trustees and Officers of the funds, and the Distributor, as
defendants, were dismissed with prejudice, by court order dated March 10, 2006,
and the remaining count against the Manager and the Transfer Agent was dismissed
with prejudice by court order dated April 5, 2006. The plaintiffs filed an
appeal of those dismissals on May 11, 2006.
The Manager believes that the allegations contained in the complaint are
without merit and that there are substantial grounds to sustain the district
court's rulings. The Manager also believes that it is premature to render any
opinion as to the likelihood of an outcome unfavorable to it, the funds, the
Directors/Trustees or the Officers on the appeal of the decisions of the
district court, and that no estimate can yet be made with any degree of
certainty as to the amount or range of any potential loss.
20 | 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 (the "Fund"), a series of Oppenheimer Variable Account
Funds, including the statement of investments, as of December 31, 2006, 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 period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
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 audits included 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, 2006, 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 the
Fund as of December 31, 2006, 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
period then ended, in conformity with accounting principles generally accepted
in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
February 8, 2007
21 | OPPENHEIMER VALUE FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2007, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2006. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
Capital gain distributions of $1.0952 per share were paid to Non-Service
and Service shareholders, respectively, on December 29, 2006. 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, 2006 which are not designated as capital gain distributions should be
multiplied by 74.52% 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.
22 | 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.
23 | OPPENHEIMER VALUE FUND/VA
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew the Fund's
investment advisory agreement (the "Agreement"). The Investment Company Act of
1940, as amended, requires that the Board request and evaluate, and that the
Manager provide, such information as may be reasonably necessary to evaluate the
terms of the Agreement. The Board employs an independent consultant to prepare a
report that provides information, including comparative information, that the
Board requests for that purpose. In addition, the Board receives information
throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager and its affiliates, including
an analysis of the cost of providing services, (v) whether economies of scale
are realized as the Fund grows and whether fee levels reflect these economies of
scale for Fund investors and (vi) other benefits to the Manager from its
relationship with the Fund. Outlined below is a summary of the principal
information considered by the Board as well as the Board's conclusions.
The Board was aware that there are alternatives to retaining the Manager.
NATURE, QUALITY AND EXTENT OF SERVICES. The Board considered information
about the nature and extent of the services provided to the Fund and information
regarding the Manager's key personnel who provide such services. The Manager's
duties include providing the Fund with the services of the portfolio manager and
the Manager's investment team, who provide research, analysis and other advisory
services in regard to the Fund's investments; securities trading services;
oversight of third party service providers; monitoring compliance with
applicable Fund policies and procedures and adherence to the Fund's investment
restrictions. The Manager is responsible for providing certain administrative
services to the Fund as well. Those services include providing and supervising
all administrative and clerical personnel who are necessary in order to provide
effective corporate administration for the Fund; compiling and maintaining
records with respect to the Fund's operations; preparing and filing reports
required by the Securities and Exchange Commission; preparing periodic reports
regarding the operations of the Fund for its shareholders; preparing proxy
materials for shareholder meetings; and preparing the registration statements
required by Federal and state securities laws for the sale of the Fund's shares.
The Manager also provides the Fund with office space, facilities and equipment.
The Board also considered the quality of the services provided and the
quality of the Manager's resources that are available to the Fund. The Board
took account of the fact that the Manager has had over 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. In its evaluation of the quality of
the portfolio management services provided, the Board considered the experience
of Christopher Leavy and the Manager's Value Equity investment team and
analysts. Mr. Leavy has been a portfolio manager of the Fund since December
2002. 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.
24 | OPPENHEIMER VALUE FUND/VA
INVESTMENT PERFORMANCE OF THE MANAGER AND THE FUND. During the year, the
Manager provided information on the investment 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 underlying
variable insurance products. The Board noted that the Fund's three-year
performance was better than its peer group median. However its one-year and
since inception 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 and other large-cap value funds underlying
variable insurance products. The Board noted that the Fund's contractual
management fees are lower than its peer group median although its actual
management fees are higher than its peer group median. Based on this evaluation
of the Fund's fees and expenses, the Board requested, and the Manager agreed to
voluntarily cap total expenses at 1.25% of average annual net assets for
Non-Service shares and 1.50% of average annual net assets for Service shares.
ECONOMIES OF SCALE. The Board reviewed 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
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 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 Agreement, including the management fee,
in light of all of the surrounding circumstances.
25 | OPPENHEIMER VALUE FUND/VA
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) HELD WITH THE PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS HELD;
FUNDS, LENGTH OF SERVICE, AGE 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, President, Colorado Christian University (since 2006); Chairman of the following private
Chairman of the Board mortgage banking companies: Cherry Creek Mortgage Company (since 1991), Centennial State
of Trustees and Trustee Mortgage Company (since 1994), and The El Paso Mortgage Company (since 1993); Chairman
(since 2003) of the following private companies: Ambassador Media Corporation (since 1984) and
Age: 69 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 37
portfolios in the OppenheimerFunds complex.
ROBERT G. AVIS, Director and President of A.G. Edwards Capital, Inc. (General Partner of private equity
Trustee (since 2003) funds) (until February 2001); Chairman, President and Chief Executive Officer of A.G.
Age: 75 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 37 portfolios in the OppenheimerFunds complex.
GEORGE C. BOWEN, Assistant Secretary and Director of Centennial Asset Management Corporation (December
Trustee (since 2003) 1991-April 1999); President, Treasurer and Director of Centennial Capital Corporation
Age: 70 (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 37
portfolios in the OppenheimerFunds complex.
EDWARD L. CAMERON, Member of The Life Guard of Mount Vernon (George Washington historical site) (since June
Trustee (since 2003) 2000); Director of Genetic ID, Inc. (biotech company) (March 2001-May 2002); Partner at
Age: 68 PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price
Waterhouse LLP Global Investment Management Industry Services Group (accounting firm)
(July 1994-June 1998). Oversees 37 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); Director
Age: 65 of P.R. Pharmaceuticals (October 1999-October 2003); Director of Rocky Mountain Elk
Foundation (non-profit organization) (February 1998-February 2003 and since February
2005); 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 37 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: 66 companies of the Manager (until October 1994). Oversees 37 portfolios in the
OppenheimerFunds complex.
26 | OPPENHEIMER VALUE FUND/VA
BEVERLY L. HAMILTON, Trustee of Monterey Institute for International Studies (educational organization) (since
Trustee (since 2003) February 2000); Board Member of Middlebury College (educational organization) (since
Age: 60 December 2005); Director of The California Endowment (philanthropic organization) (since
April 2002); Director (February 2002-2005) and Chairman of Trustees (since 2006) of the
Community Hospital of Monterey Peninsula; Director (October 1991-2005) and Vice Chairman
(since 2006) of American Funds' Emerging Markets Growth Fund, Inc. (mutual fund);
President of ARCO Investment Management Company (February 1991-April 2000); Member of the
investment committees of The Rockefeller Foundation (since 2001) and The University of
Michigan (since 2000); Advisor at Credit Suisse First Boston's Sprout venture capital
unit (venture capital fund) (1994-January 2005); Trustee of MassMutual Institutional
Funds (investment company) (1996-June 2004); Trustee of MML Series Investment Fund
(investment company) (April 1989-June 2004); Member of the investment committee of
Hartford Hospital (2000-2003); and Advisor to Unilever (Holland) pension fund
(2000-2003). Oversees 37 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: 62 (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 37 portfolios in the OppenheimerFunds complex.
F. WILLIAM MARSHALL, JR., Trustee of MassMutual Select Funds (formerly MassMutual Institutional Funds) (investment
Trustee (since 2003) company) (since 1996) and MML Series Investment Fund (investment company) (since 1996);
Age: 64 Trustee (since 1987) and Chairman (1994-2005) of the Investment Committee 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); and Executive Vice
President of Peoples Heritage Financial Group, Inc. (commercial bank) (January 1999-July
1999). Oversees 39 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 Principal September 2000) of the Manager; President and director or trustee of other Oppenheimer
Executive Officer funds; President and Director of OAC and of Oppenheimer Partnership Holdings, Inc.
(since 2001) and (holding company subsidiary of the Manager) (since July 2001); Director of
Trustee (since 2003) OppenheimerFunds Distributor, Inc. (subsidiary of the Manager) (since November 2001);
Age: 57 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 96 portfolios in the
OppenheimerFunds complex.
27 | 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 ZACK, GILLESPIE AND MS. BLOOMBERG, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, NEW
YORK, NEW YORK 10281-1008, FOR MESSRS. VANDEHEY, WIXTED, PETERSEN, SZILAGYI AND MS.
IVES, 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 Morgan
Vice President and Portfolio Stanley Dean Witter Investment Management (1997-September 2000). An officer of 7
Manager (since 2002) portfolios in the OppenheimerFunds complex.
Age: 35
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
(since 2004) Director of Internal Audit of the Manager (1997-February 2004). An officer of 96
Age: 56 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,
Financial & Accounting Inc., Shareholder Services, Inc., Oppenheimer Real Asset Management Corporation, and
Officer (since 2003) Oppenheimer Partnership Holdings, Inc. (since March 1999), OFI Private Investments, Inc.
Age: 47 (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 96
portfolios in the OppenheimerFunds complex.
BRIAN S. PETERSEN, Assistant Vice President of the Manager (since August 2002); Manager/Financial Product
Assistant Treasurer Accounting of the Manager (November 1998-July 2002). An officer of 96 portfolios in the
(since 2004) OppenheimerFunds complex.
Age: 36
BRIAN C. SZILAGYI, Assistant Vice President of the Manager (since July 2004); Director of Financial
Assistant Treasurer Reporting and Compliance of First Data Corporation (April 2003-July 2004); Manager of
(since 2005) Compliance of Berger Financial Group LLC (May 2001-March 2003); Director of Mutual Fund
Age: 36 Operations at American Data Services, Inc. (September 2000-May 2001). An officer of 96
portfolios in the OppenheimerFunds complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March 2002) of
Vice President and Secretary the Manager; General Counsel and Director of the Distributor (since December 2001);
(since 2003) General Counsel of Centennial Asset Management Corporation (since December 2001); Senior
Age: 58 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 96 portfolios in the OppenheimerFunds
complex.
28 | OPPENHEIMER VALUE FUND/VA
LISA I. BLOOMBERG, Vice President and Associate Counsel of the Manager (since May 2004); First Vice
Assistant Secretary President (April 2001-April 2004), Associate General Counsel (December 2000-April 2004),
(since 2004) Corporate Vice President (May 1999-April 2001) and Assistant General Counsel (May
Age: 39 1999-December 2000) of UBS Financial Services Inc. (formerly, PaineWebber Incorporated).
An officer of 96 portfolios in the OppenheimerFunds complex.
KATHLEEN T. IVES, Vice President (since June 1998) and Senior Counsel and Assistant Secretary (since
Assistant Secretary October 2003) of the Manager; Vice President (since 1999) and Assistant Secretary (since
(since 2001) October 2003) of the Distributor; Assistant Secretary of Centennial Asset Management
Age: 41 Corporation (since October 2003); Vice President and Assistant Secretary of Shareholder
Services, Inc. (since 1999); Assistant Secretary of OppenheimerFunds Legacy Program and
Shareholder Financial Services, Inc. (since December 2001); Assistant Counsel of the
Manager (August 1994-October 2003). An officer of 96 portfolios in the OppenheimerFunds
complex.
PHILLIP S. GILLESPIE, Senior Vice President and Deputy General Counsel of the Manager (since September 2004);
Assistant Secretary First Vice President (2000-September 2004), Director (2000-September 2004) and Vice
(since 2004) President (1998-2000) of Merrill Lynch Investment Management. An officer of 96
Age: 43 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.
29 | OPPENHEIMER VALUE FUND/VA
OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. Although we are never satisfied
with underperformance relative to the Fund's benchmark, the Russell 2000 Index,
we are nonetheless pleased that our disciplined investment approach has helped
the Fund participate in the overall market's gains during a time in which the
factors our quantitative models consider have been in flux.
More specifically, the momentum factors considered by our quantitative
stock selection models became less predictive of performance as market
conditions evolved, and stocks that had done well over the first half of the
year fared relatively poorly over the second half. For example, a number of
industrial and energy companies had strong momentum characteristics after
gaining value over the first half of 2006, but many of those companies lagged
the averages during the second half as the U.S. economy slowed and commodity
prices fell. Conversely, real estate investment trusts that had relatively weak
momentum characteristics rallied strongly during the final six months of 2006.
Our stock selection models also proved to be relatively ineffective in the
consumer staples, technology and health care sectors. In addition, the Fund's
relative performance was hindered by its relatively heavy exposure to mid-cap
stocks during a year in which mid-cap stocks produced below-average results.
These disappointments were offset to a significant degree by better
performance in other areas, where valuation factors contributed to high rankings
for a number of individual companies. For example, our models assigned
relatively low rankings to companies in the financials sector, where the Fund's
underweighted position helped boost its relative performance. Conversely, both
valuation and momentum factors supported high rankings for stocks in the basic
materials sector, leading to an overweighted position in one of the small-cap
market's better performing areas. Finally, seasonal factors considered by our
"turn of the year" model helped the Fund participate more fully in a year-end
rally among lower-quality stocks.
As of the end of the reporting period, our models prefer larger stocks
within the small-cap market and, as a result, we have reduced the Fund's
exposure to micro-cap stocks. Our stock selection models have assigned
relatively high rankings to companies in the basic materials and technology
sectors, and generally lower rankings to stocks in the more fully valued
utilities, heath care, energy and consumer staples areas.
During these relatively rare turning points in the market, we believe that
broad diversification and careful risk management are keys to success under
whatever market conditions lie ahead. Accordingly, the Fund is fully invested
and we remain committed to our quantitative investment discipline, which is
designed to produce excess returns without excessive risk. Indeed, our
disciplined investment approach is essential to what makes Oppenheimer Main
Street Small Cap 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, 2006. 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.
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
Oppenheimer Main Street Small Cap Russell
Fund(R)/VA (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
03/31/2006 20,624 17,517
06/30/2006 19,746 16,637
09/30/2006 19,373 16,710
12/31/2006 21,019 18,198
AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/06
1-Year 15.00% 5-Year 12.92% Since Inception (5/1/98) 8.95%
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
Oppenheimer Main Street Small Cap Russell
Fund(R)/VA (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
03/31/2006 18,615 16,737
06/30/2006 17,817 15,896
09/30/2006 17,468 15,966
12/31/2006 18,935 17,387
AVERAGE ANNUAL TOTAL RETURNS OF SERVICE SHARES OF THE FUND AT 12/31/06
1-Year 14.66% 5-Year 12.70% Since Inception (7/16/01) 12.41%
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 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, 2006.
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
(7/1/06) (12/31/06) DECEMBER 31, 2006
- ------------------------------------------------------------------------------------------
Non-Service shares Actual $1,000.00 $1,064.50 $3.96
- ------------------------------------------------------------------------------------------
Non-Service shares Hypothetical 1,000.00 1,021.37 3.88
- ------------------------------------------------------------------------------------------
Service shares Actual 1,000.00 1,062.70 5.21
- ------------------------------------------------------------------------------------------
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,
excluding affiliated fund indirect expenses, based on the 6-month period ended
December 31, 2006 are as follows:
CLASS EXPENSE RATIOS
- -----------------------------------
Non-Service shares 0.76%
- -----------------------------------
Service shares 1.00
The expense ratios reflect voluntary waivers or reimbursements of expenses by
the Fund's Manager that can be terminated at any time, without advance notice.
The "Financial Highlights" tables in the Fund's financial statements, included
in this report, also show the gross expense ratios, without such waivers or
reimbursements.
- --------------------------------------------------------------------------------
6 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
STATEMENT OF INVESTMENTS December 31, 2006
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
COMMON STOCKS--99.6%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--18.5%
- --------------------------------------------------------------------------------
AUTO COMPONENTS--1.4%
Aftermarket Technology Corp. 1 14,000 $ 297,920
- --------------------------------------------------------------------------------
ArvinMeritor, Inc. 2 120,800 2,202,184
- --------------------------------------------------------------------------------
Autoliv, Inc. 12,100 729,630
- --------------------------------------------------------------------------------
Fuel Systems Solutions, Inc. 1,2 4,299 94,922
- --------------------------------------------------------------------------------
GenTek, Inc. 1,2 4,700 162,573
- --------------------------------------------------------------------------------
Goodyear Tire & Rubber
Co. (The) 1,2 49,800 1,045,302
- --------------------------------------------------------------------------------
Lear Corp. 2 56,400 1,665,492
- --------------------------------------------------------------------------------
Modine Manufacturing Co. 2 34,400 861,032
- --------------------------------------------------------------------------------
Sauer-Danfoss, Inc. 2 25,800 832,050
- --------------------------------------------------------------------------------
Shiloh Industries, Inc. 1 5,900 111,805
- --------------------------------------------------------------------------------
Standard Motor Products, Inc. 800 11,984
- --------------------------------------------------------------------------------
Tenneco, Inc. 1 79,800 1,972,656
-----------------
9,987,550
- --------------------------------------------------------------------------------
AUTOMOBILES--0.1%
Winnebago Industries, Inc. 2 30,200 993,882
- --------------------------------------------------------------------------------
DISTRIBUTORS--0.1%
Building Materials Holding Corp. 17,600 434,544
- --------------------------------------------------------------------------------
DIVERSIFIED CONSUMER SERVICES--1.7%
Apollo Group, Inc., Cl. A 1 15,000 584,550
- --------------------------------------------------------------------------------
Bright Horizons
Family Solutions, Inc. 1,2 9,800 378,868
- --------------------------------------------------------------------------------
Career Education Corp. 1 30,000 743,400
- --------------------------------------------------------------------------------
Coinstar, Inc. 1 28,400 868,188
- --------------------------------------------------------------------------------
Corinthian Colleges, Inc. 1,2 65,400 891,402
- --------------------------------------------------------------------------------
CPI Corp. 3,300 153,417
- --------------------------------------------------------------------------------
DeVry, Inc 79,600 2,228,800
- --------------------------------------------------------------------------------
INVESTools, Inc. 1,2 36,300 500,577
- --------------------------------------------------------------------------------
ITT Educational Services, Inc. 1 10,500 696,885
- --------------------------------------------------------------------------------
Jackson Hewitt Tax Service, Inc. 42,500 1,443,725
- --------------------------------------------------------------------------------
Regis Corp. 19,500 771,030
- --------------------------------------------------------------------------------
Service Corp. International 29,400 301,350
- --------------------------------------------------------------------------------
Sotheby's 2 12,900 400,158
- --------------------------------------------------------------------------------
Steiner Leisure Ltd. 1,2 17,300 787,150
- --------------------------------------------------------------------------------
Stewart Enterprises, Inc. 2 42,600 266,250
- --------------------------------------------------------------------------------
Strayer Education, Inc. 2 8,100 859,005
- --------------------------------------------------------------------------------
Vertrue, Inc. 1,2 4,400 169,004
-----------------
12,043,759
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--2.3%
AFC Enterprises, Inc. 1,2 11,100 196,137
- --------------------------------------------------------------------------------
Ambassadors Group, Inc. 2 13,000 394,550
- --------------------------------------------------------------------------------
Aztar Corp. 1,2 18,400 1,001,328
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE Continued
Bally Technologies, Inc. 1,2 15,200 $ 283,936
- --------------------------------------------------------------------------------
Benihana, Inc., Cl. A 1 400 12,280
- --------------------------------------------------------------------------------
Bob Evans Farms, Inc. 41,214 1,410,343
- --------------------------------------------------------------------------------
Brinker International, Inc. 19,800 597,168
- --------------------------------------------------------------------------------
Buffalo Wild Wings, Inc. 1 6,800 361,760
- --------------------------------------------------------------------------------
CBRL Group, Inc. 15,000 671,400
- --------------------------------------------------------------------------------
CEC Entertainment, Inc. 1 6,300 253,575
- --------------------------------------------------------------------------------
Chipotle Mexican Grill, Inc., Cl. A 1,2 4,900 279,300
- --------------------------------------------------------------------------------
Ctrip.com International Ltd., ADR 2 8,500 531,080
- --------------------------------------------------------------------------------
Denny's Corp. 1 53,700 252,927
- --------------------------------------------------------------------------------
Domino's Pizza, Inc. 61,900 1,733,200
- --------------------------------------------------------------------------------
Dover Downs Gaming &
Entertainment, Inc. 2 24,700 330,239
- --------------------------------------------------------------------------------
IHOP Corp. 2 23,900 1,259,530
- --------------------------------------------------------------------------------
Jack in the Box, Inc. 1,2 36,300 2,215,752
- --------------------------------------------------------------------------------
Krispy Kreme Doughnuts, Inc. 1,2 27,700 307,470
- --------------------------------------------------------------------------------
Luby's, Inc. 1,2 19,500 212,355
- --------------------------------------------------------------------------------
Marcus Corp. (The) 2 1,800 46,044
- --------------------------------------------------------------------------------
McCormick & Schmick's
Seafood Restaurants, Inc. 1,2 11,600 278,864
- --------------------------------------------------------------------------------
Monarch Casino & Resort, Inc. 1,2 12,500 298,500
- --------------------------------------------------------------------------------
MTR Gaming Group, Inc. 1,2 10,400 127,088
- --------------------------------------------------------------------------------
Multimedia Games, Inc. 1,2 15,300 146,880
- --------------------------------------------------------------------------------
O'Charley's, Inc. 1 11,000 234,080
- --------------------------------------------------------------------------------
Papa John's International, Inc. 1,2 27,000 783,270
- --------------------------------------------------------------------------------
Ruby Tuesday, Inc. 2 2,400 65,856
- --------------------------------------------------------------------------------
Vail Resorts, Inc. 1,2 14,400 645,408
- --------------------------------------------------------------------------------
Wendy's International, Inc. 24,700 817,323
- --------------------------------------------------------------------------------
WMS Industries, Inc. 1,2 23,200 808,752
-----------------
16,556,395
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES--1.6%
American Greetings Corp., Cl. A 2 42,700 1,019,249
- --------------------------------------------------------------------------------
Black & Decker Corp. 4,300 343,871
- --------------------------------------------------------------------------------
Blyth, Inc. 2 41,800 867,350
- --------------------------------------------------------------------------------
CSS Industries, Inc. 2 650 22,991
- --------------------------------------------------------------------------------
Ethan Allen Interiors, Inc. 2 33,700 1,216,907
- --------------------------------------------------------------------------------
Furniture Brands
International, Inc. 2 5,100 82,773
- --------------------------------------------------------------------------------
Interface, Inc., Cl. A 1 70,900 1,008,198
- --------------------------------------------------------------------------------
Jarden Corp. 1 16,200 563,598
- --------------------------------------------------------------------------------
Kimball International, Inc., Cl. B 38,300 930,690
- --------------------------------------------------------------------------------
La-Z-Boy, Inc. 2 28,000 332,360
- --------------------------------------------------------------------------------
Leggett & Platt, Inc. 8,700 207,930
- --------------------------------------------------------------------------------
Meritage Homes Corp. 1,2 18,800 897,136
- --------------------------------------------------------------------------------
Skyline Corp. 2 400 16,088
7 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES Continued
Snap-On, Inc. 20,300 $ 967,092
- --------------------------------------------------------------------------------
Stanley Furniture Co., Inc. 2 12,600 270,270
- --------------------------------------------------------------------------------
Stanley Works (The) 6,300 316,827
- --------------------------------------------------------------------------------
Tempur-Pedic International, Inc. 1,2 109,500 2,240,370
-----------------
11,303,700
- --------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL--0.6%
Blue Nile, Inc. 1,2 7,300 269,297
- --------------------------------------------------------------------------------
Expedia, Inc. 1 11,700 245,466
- --------------------------------------------------------------------------------
FTD Group, Inc. 1 18,000 322,020
- --------------------------------------------------------------------------------
GSI Commerce, Inc. 1,2 3,300 61,875
- --------------------------------------------------------------------------------
IAC/InterActiveCorp 1 20,800 772,928
- --------------------------------------------------------------------------------
NetFlix.com, Inc. 1,2 41,700 1,078,362
- --------------------------------------------------------------------------------
NutriSystem, Inc. 1,2 3,700 234,543
- --------------------------------------------------------------------------------
Priceline.com, Inc. 1,2 26,400 1,151,304
- --------------------------------------------------------------------------------
Stamps.com, Inc. 1,2 4,200 66,150
- --------------------------------------------------------------------------------
Systemax, Inc. 1,2 6,000 104,700
-----------------
4,306,645
- --------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS--0.7%
Brunswick Corp. 7,600 242,440
- --------------------------------------------------------------------------------
Eastman Kodak Co. 2 34,800 897,840
- --------------------------------------------------------------------------------
Hasbro, Inc. 33,200 904,700
- --------------------------------------------------------------------------------
K2, Inc. 1 23,300 307,327
- --------------------------------------------------------------------------------
Marvel Entertainment, Inc. 1,2 36,300 976,833
- --------------------------------------------------------------------------------
Mattel, Inc. 50,200 1,137,532
- --------------------------------------------------------------------------------
RC2 Corp. 1,2 10,700 470,800
- --------------------------------------------------------------------------------
Steinway Musical Instruments,
Inc. 1 5,700 176,985
- --------------------------------------------------------------------------------
Sturm, Ruger & Co., Inc. 1 2,300 22,080
-----------------
5,136,537
- --------------------------------------------------------------------------------
MEDIA--1.5%
Arbitron, Inc. 2 5,300 230,232
- --------------------------------------------------------------------------------
Catalina Marketing Corp. 4,300 118,250
- --------------------------------------------------------------------------------
Charter Communications, Inc.,
Cl. A 1,2 305,800 935,748
- --------------------------------------------------------------------------------
Citadel Broadcasting Corp. 2 47,100 469,116
- --------------------------------------------------------------------------------
Cox Radio, Inc., Cl. A 1,2 84,600 1,378,980
- --------------------------------------------------------------------------------
Cumulus Media, Inc., Cl. A 1,2 33,300 345,987
- --------------------------------------------------------------------------------
Emmis Communications Corp.,
Cl. A 2 8,300 68,392
- --------------------------------------------------------------------------------
GateHouse Media, Inc. 2 9,400 174,464
- --------------------------------------------------------------------------------
Harris Interactive, Inc. 1 7,800 39,312
- --------------------------------------------------------------------------------
Journal Register Co. 2 26,100 190,530
- --------------------------------------------------------------------------------
Knology, Inc. 1 13,900 147,896
- --------------------------------------------------------------------------------
Lee Enterprises, Inc. 2 26,800 832,408
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
MEDIA Continued
Lin TV Corp. 1 10,200 $ 101,490
- --------------------------------------------------------------------------------
Live Nation, Inc. 1 37,300 835,520
- --------------------------------------------------------------------------------
LodgeNet Entertainment Corp. 1 13,000 325,390
- --------------------------------------------------------------------------------
Mediacom Communications
Corp. 1 62,400 501,696
- --------------------------------------------------------------------------------
ProQuest Co. 1,2 3,100 32,395
- --------------------------------------------------------------------------------
Radio One, Inc., Cl. D 1,2 29,300 197,482
- --------------------------------------------------------------------------------
RCN Corp. 1 5,200 156,780
- --------------------------------------------------------------------------------
Readers Digest Assn., Inc. (The),
Cl. A, Non-Vtg. 27,800 464,260
- --------------------------------------------------------------------------------
Regal Entertainment Group 15,900 338,988
- --------------------------------------------------------------------------------
Scholastic Corp. 1 27,600 989,184
- --------------------------------------------------------------------------------
Sinclair Broadcast Group, Inc.,
Cl. A 2 72,100 757,050
- --------------------------------------------------------------------------------
Warner Music Group Corp. 20,400 468,180
- --------------------------------------------------------------------------------
Westwood One, Inc. 2 38,000 268,280
- --------------------------------------------------------------------------------
World Wrestling Federation
Entertainment, Inc. 2 41,900 682,970
-----------------
11,050,980
- --------------------------------------------------------------------------------
MULTILINE RETAIL--0.8%
Big Lots, Inc. 1 101,800 2,333,256
- --------------------------------------------------------------------------------
Dillard's, Inc., Cl. A 2 23,200 811,304
- --------------------------------------------------------------------------------
Dollar Tree Stores, Inc. 1 35,000 1,053,500
- --------------------------------------------------------------------------------
Family Dollar Stores, Inc. 29,700 871,101
- --------------------------------------------------------------------------------
Nordstrom, Inc. 6,900 340,446
- --------------------------------------------------------------------------------
Retail Ventures, Inc. 1 28,900 550,256
-----------------
5,959,863
- --------------------------------------------------------------------------------
SPECIALTY RETAIL--5.9%
Abercrombie & Fitch Co., Cl. A 14,200 988,746
- --------------------------------------------------------------------------------
Aeropostale, Inc. 1 74,500 2,299,815
- --------------------------------------------------------------------------------
American Eagle Outfitters, Inc. 31,650 987,797
- --------------------------------------------------------------------------------
AnnTaylor Stores Corp. 1 22,700 745,468
- --------------------------------------------------------------------------------
Asbury Automotive Group, Inc. 29,400 692,664
- --------------------------------------------------------------------------------
AutoNation, Inc. 1 26,034 555,045
- --------------------------------------------------------------------------------
AutoZone, Inc. 1 8,400 970,704
- --------------------------------------------------------------------------------
Barnes & Noble, Inc. 25,800 1,024,518
- --------------------------------------------------------------------------------
bebe stores, inc. 2 26,900 532,351
- --------------------------------------------------------------------------------
Blockbuster, Inc., Cl. A 1,2 145,600 770,224
- --------------------------------------------------------------------------------
Books-A-Million, Inc. 2 11,200 254,016
- --------------------------------------------------------------------------------
Buckle, Inc. (The) 2 25,500 1,296,675
- --------------------------------------------------------------------------------
Cache, Inc. 1,2 9,800 247,352
- --------------------------------------------------------------------------------
Casual Male Retail Group, Inc. 1,2 34,100 445,005
- --------------------------------------------------------------------------------
Cato Corp., Cl. A 32,050 734,266
- --------------------------------------------------------------------------------
Charlotte Russe Holding, Inc. 1 16,500 507,375
- --------------------------------------------------------------------------------
Charming Shoppes, Inc. 1 147,100 1,990,263
8 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
SPECIALTY RETAIL Continued
Christopher & Banks Corp. 50,800 $ 947,928
- --------------------------------------------------------------------------------
Circuit City Stores, Inc./Circuit
City Group 23,500 446,030
- --------------------------------------------------------------------------------
CSK Auto Corp. 1,2 18,500 317,275
- --------------------------------------------------------------------------------
Dick's Sporting Goods, Inc. 1 13,600 666,264
- --------------------------------------------------------------------------------
Dress Barn, Inc. (The) 1,2 93,600 2,183,688
- --------------------------------------------------------------------------------
DSW, Inc., Cl. A 1,2 46,600 1,797,362
- --------------------------------------------------------------------------------
Genesco, Inc. 1,2 24,100 898,930
- --------------------------------------------------------------------------------
Group 1 Automotive, Inc. 39,300 2,032,596
- --------------------------------------------------------------------------------
Gymboree Corp. 1 60,400 2,304,864
- --------------------------------------------------------------------------------
Haverty Furniture Cos., Inc. 2 13,600 201,280
- --------------------------------------------------------------------------------
Men's Wearhouse, Inc. (The) 33,150 1,268,319
- --------------------------------------------------------------------------------
Midas, Inc. 1,2 6,000 138,000
- --------------------------------------------------------------------------------
Mothers Work, Inc. 1,2 3,000 118,170
- --------------------------------------------------------------------------------
OfficeMax, Inc. 20,900 1,037,685
- --------------------------------------------------------------------------------
Pacific Sunwear of California, Inc. 1 13,700 268,246
- --------------------------------------------------------------------------------
Payless ShoeSource, Inc. 1 83,000 2,724,060
- --------------------------------------------------------------------------------
PETsMART, Inc. 7,300 210,678
- --------------------------------------------------------------------------------
RadioShack Corp. 2 37,300 625,894
- --------------------------------------------------------------------------------
Rent-A-Center, Inc. 1 82,300 2,428,673
- --------------------------------------------------------------------------------
Ross Stores, Inc. 29,400 861,420
- --------------------------------------------------------------------------------
Select Comfort Corp. 1,2 64,200 1,116,438
- --------------------------------------------------------------------------------
Sherwin-Williams Co. 14,000 890,120
- --------------------------------------------------------------------------------
Shoe Carnival, Inc. 1,2 13,300 420,280
- --------------------------------------------------------------------------------
Sonic Automotive, Inc. 2 26,700 775,368
- --------------------------------------------------------------------------------
Stage Stores, Inc. 2 14,250 433,058
- --------------------------------------------------------------------------------
Syms Corp. 1 3,200 63,712
- --------------------------------------------------------------------------------
Tween Brands, Inc. 1 34,500 1,377,585
- --------------------------------------------------------------------------------
United Retail Group, Inc. 1 5,000 70,100
- --------------------------------------------------------------------------------
West Marine, Inc. 1,2 4,100 70,807
- --------------------------------------------------------------------------------
Wet Seal, Inc., Cl. A 1,2 55,800 372,186
----------------
42,109,300
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS--1.8%
Brown Shoe Co., Inc. 51,550 2,460,997
- --------------------------------------------------------------------------------
Carter's, Inc. 1 5,100 130,050
- --------------------------------------------------------------------------------
Cherokee, Inc. 3,700 158,767
- --------------------------------------------------------------------------------
Deckers Outdoor Corp. 1,2 7,700 461,615
- --------------------------------------------------------------------------------
Jones Apparel Group, Inc. 19,700 658,571
- --------------------------------------------------------------------------------
K-Swiss, Inc., Cl. A 2 8,500 261,290
- --------------------------------------------------------------------------------
Kellwood Co. 2 47,800 1,554,456
- --------------------------------------------------------------------------------
Liz Claiborne, Inc. 3,200 139,072
- --------------------------------------------------------------------------------
Maidenform Brands, Inc. 1 11,100 201,132
- --------------------------------------------------------------------------------
Perry Ellis International, Inc. 1,2 6,000 246,000
- --------------------------------------------------------------------------------
Phillips/Van Heusen Corp. 4,700 235,799
- --------------------------------------------------------------------------------
Polo Ralph Lauren Corp. 11,100 862,026
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS Continued
Skechers USA, Inc., Cl. A 1 49,600 $ 1,652,176
- --------------------------------------------------------------------------------
Steven Madden Ltd. 43,100 1,512,379
- --------------------------------------------------------------------------------
True Religion Apparel, Inc. 1,2 9,300 142,383
- --------------------------------------------------------------------------------
VF Corp. 3,800 311,904
- --------------------------------------------------------------------------------
Volcom, Inc. 1,2 1,400 41,398
- --------------------------------------------------------------------------------
Wolverine World Wide, Inc. 2 71,250 2,032,050
-----------------
13,062,065
- --------------------------------------------------------------------------------
CONSUMER STAPLES--2.7%
- --------------------------------------------------------------------------------
BEVERAGES--0.2%
Boston Beer Co., Inc., Cl. A 1,2 4,900 176,302
- --------------------------------------------------------------------------------
Cott Corp. 1,2 10,800 154,548
- --------------------------------------------------------------------------------
Jones Soda Co. 1,2 4,600 56,580
- --------------------------------------------------------------------------------
MGP Ingredients, Inc. 2 11,300 255,493
- --------------------------------------------------------------------------------
Molson Coors Brewing Co., Cl. B 9,800 749,112
- --------------------------------------------------------------------------------
National Beverage Corp. 2 13,700 192,211
-----------------
1,584,246
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--0.8%
Andersons, Inc. (The) 2 1,300 55,107
- --------------------------------------------------------------------------------
Arden Group, Inc., Cl. A 2 1,405 173,953
- --------------------------------------------------------------------------------
Casey's General Stores, Inc. 2 24,900 586,395
- --------------------------------------------------------------------------------
Ingles Markets, Inc., Cl. A 6,800 202,572
- --------------------------------------------------------------------------------
Longs Drug Stores, Inc. 24,900 1,055,262
- --------------------------------------------------------------------------------
Nash Finch Co. 2 5,300 144,690
- --------------------------------------------------------------------------------
Pantry, Inc. (The) 1,2 39,200 1,836,128
- --------------------------------------------------------------------------------
Performance Food Group Co. 1,2 13,800 381,432
- --------------------------------------------------------------------------------
Rite Aid Corp. 1 39,000 212,160
- --------------------------------------------------------------------------------
Smart & Final, Inc. 1,2 7,600 143,640
- --------------------------------------------------------------------------------
Spartan Stores, Inc. 14,100 295,113
- --------------------------------------------------------------------------------
Weis Markets, Inc. 3,700 148,407
- --------------------------------------------------------------------------------
Wild Oats Markets, Inc. 1,2 8,800 126,544
-----------------
5,361,403
- --------------------------------------------------------------------------------
FOOD PRODUCTS--0.6%
Chiquita Brands International, Inc. 2 14,600 233,162
- --------------------------------------------------------------------------------
Corn Products International, Inc. 9,500 328,130
- --------------------------------------------------------------------------------
Dean Foods Co. 1 18,100 765,268
- --------------------------------------------------------------------------------
Delta & Pine Land Co. 25,400 1,027,430
- --------------------------------------------------------------------------------
Flowers Foods, Inc. 2 17,300 466,927
- --------------------------------------------------------------------------------
Gold Kist Holdings, Inc. 1 1,600 33,632
- --------------------------------------------------------------------------------
J&J Snack Foods Corp. 2 6,800 281,520
- --------------------------------------------------------------------------------
Premium Standard Farms, Inc. 12,000 222,840
- --------------------------------------------------------------------------------
Reddy Ice Holdings, Inc. 6,200 160,084
- --------------------------------------------------------------------------------
Seaboard Corp. 2 550 970,750
-----------------
4,489,743
9 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS--0.1%
Energizer Holdings, Inc. 1 11,400 $ 809,286
- --------------------------------------------------------------------------------
Spectrum Brands, Inc. 1,2 3,300 35,970
- --------------------------------------------------------------------------------
WD-40 Co. 2,500 87,175
-----------------
932,431
- --------------------------------------------------------------------------------
PERSONAL PRODUCTS--0.8%
Chattem, Inc. 1,2 18,500 926,480
- --------------------------------------------------------------------------------
Estee Lauder Cos., Inc. (The), Cl. A 8,400 342,888
- --------------------------------------------------------------------------------
Mannatech, Inc. 2 13,100 192,963
- --------------------------------------------------------------------------------
NBTY, Inc. 1 50,500 2,099,285
- --------------------------------------------------------------------------------
Physicians Formula Holdings, Inc. 1 28,100 525,189
- --------------------------------------------------------------------------------
Playtex Products, Inc. 1,2 18,000 259,020
- --------------------------------------------------------------------------------
USANA Health Sciences, Inc. 1,2 18,600 960,876
-----------------
5,306,701
- --------------------------------------------------------------------------------
TOBACCO--0.2%
Loews Corp./Carolina Group 6,900 446,568
- --------------------------------------------------------------------------------
UST, Inc. 18,000 1,047,600
-----------------
1,494,168
- --------------------------------------------------------------------------------
ENERGY--4.9%
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--2.4%
Basic Energy Services, Inc. 1,2 12,900 317,985
- --------------------------------------------------------------------------------
Dril-Quip, Inc. 1,2 19,200 751,872
- --------------------------------------------------------------------------------
Ensign Energy Services, Inc. 27,200 428,940
- --------------------------------------------------------------------------------
Global Industries Ltd. 1 22,900 298,616
- --------------------------------------------------------------------------------
Grey Wolf, Inc. 1,2 262,600 1,801,436
- --------------------------------------------------------------------------------
Gulfmark Offshore, Inc. 1,2 13,100 490,071
- --------------------------------------------------------------------------------
Horizon North Logistics, Inc. 1 1,470 4,488
- --------------------------------------------------------------------------------
Hornbeck Offshore Services, Inc. 1,2 20,100 717,570
- --------------------------------------------------------------------------------
Hydril Co. 1,2 12,900 969,951
- --------------------------------------------------------------------------------
Input/Output, Inc. 1,2 70,200 956,826
- --------------------------------------------------------------------------------
Leader Energy Services Ltd. 1,3 74,600 105,552
- --------------------------------------------------------------------------------
Lone Star Technologies, Inc. 1 46,100 2,231,701
- --------------------------------------------------------------------------------
Lufkin Industries, Inc. 2 700 40,656
- --------------------------------------------------------------------------------
Matrix Service Co. 1,2 14,300 230,230
- --------------------------------------------------------------------------------
NATCO Group, Inc., Cl. A 1,2 11,400 363,432
- --------------------------------------------------------------------------------
North American Energy
Partners, Inc. 1 36,100 587,708
- --------------------------------------------------------------------------------
Parker Drilling Co. 1 162,400 1,326,808
- --------------------------------------------------------------------------------
Pason Systems, Inc. 12,500 142,134
- --------------------------------------------------------------------------------
Patterson-UTI Energy, Inc. 7,700 178,871
- --------------------------------------------------------------------------------
Savanna Energy Services Corp. 1 5,760 93,551
- --------------------------------------------------------------------------------
Seacor Holdings, Inc. 1 8,700 862,518
- --------------------------------------------------------------------------------
Technicoil Corp. 1 7,100 6,393
- --------------------------------------------------------------------------------
Technicoil Corp. 1 126,700 114,081
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES Continued
Tidewater, Inc. 17,000 $ 822,120
- --------------------------------------------------------------------------------
Trican Well Service Ltd. 18,900 329,330
- --------------------------------------------------------------------------------
Trico Marine Services, Inc. 1,2 10,300 394,593
- --------------------------------------------------------------------------------
Universal Compression
Holdings, Inc. 1 13,800 857,118
- --------------------------------------------------------------------------------
Veritas DGC, Inc. 1 14,100 1,207,383
- --------------------------------------------------------------------------------
W-H Energy Services, Inc. 1 5,300 258,057
-----------------
16,889,991
- --------------------------------------------------------------------------------
OIL & GAS--2.5%
Alberta Clipper Energy, Inc. 1 7,887 40,783
- --------------------------------------------------------------------------------
Alon USA Energy, Inc. 36,100 949,791
- --------------------------------------------------------------------------------
Atlas Energy Ltd. 1 64,300 226,069
- --------------------------------------------------------------------------------
Atlas Energy Ltd. 1 27,900 98,092
- --------------------------------------------------------------------------------
Birchcliff Energy Ltd. 1 4,700 16,484
- --------------------------------------------------------------------------------
Capitol Energy Resources Ltd. 1 24,500 89,710
- --------------------------------------------------------------------------------
Celtic Exploration Ltd. 1 7,400 88,268
- --------------------------------------------------------------------------------
Celtic Exploration Ltd. 1 6,300 75,147
- --------------------------------------------------------------------------------
Comstock Resources, Inc. 1 5,600 173,936
- --------------------------------------------------------------------------------
Cyries Energy, Inc. 1 15,840 171,963
- --------------------------------------------------------------------------------
Delek US Holdings, Inc. 4,000 65,560
- --------------------------------------------------------------------------------
Delphi Energy Corp. 1 5,000 10,633
- --------------------------------------------------------------------------------
Delphi Energy Corp. 1 35,000 74,433
- --------------------------------------------------------------------------------
Duvernay Oil Corp. 1 2,200 65,143
- --------------------------------------------------------------------------------
Edge Petroleum Corp. 1,2 1,700 31,008
- --------------------------------------------------------------------------------
Ember Resources, Inc. 1 5,887 12,974
- --------------------------------------------------------------------------------
Ember Resources, Inc. 1 9,700 21,377
- --------------------------------------------------------------------------------
Foundation Coal Holdings, Inc. 60,600 1,924,656
- --------------------------------------------------------------------------------
Frontier Oil Corp. 28,200 810,468
- --------------------------------------------------------------------------------
Galleon Energy, Inc., Cl. A 1 10,350 160,466
- --------------------------------------------------------------------------------
Galleon Energy, Inc.,
Subscription Receipts 1 11,250 174,420
- --------------------------------------------------------------------------------
General Maritime Corp. 2 31,200 1,097,928
- --------------------------------------------------------------------------------
Giant Industries, Inc. 1 700 52,465
- --------------------------------------------------------------------------------
Harvest Natural Resources, Inc. 1 1,800 19,134
- --------------------------------------------------------------------------------
Highpine Oil & Gas Ltd. 1 511 6,880
- --------------------------------------------------------------------------------
Highpine Oil & Gas Ltd. 1 1,700 22,887
- --------------------------------------------------------------------------------
Holly Corp. 17,300 889,220
- --------------------------------------------------------------------------------
Kereco Energy Ltd. 1 29,365 186,844
- --------------------------------------------------------------------------------
Mahalo Energy Ltd. 1,3 19,500 58,860
- --------------------------------------------------------------------------------
Midnight Oil Exploration Ltd. 1 45,050 91,556
- --------------------------------------------------------------------------------
Midnight Oil Exploration Ltd. 1,3 27,900 56,702
- --------------------------------------------------------------------------------
Mission Oil & Gas, Inc. 1 8,732 94,722
- --------------------------------------------------------------------------------
Mission Oil & Gas, Inc. 1,4 6,400 69,425
- --------------------------------------------------------------------------------
Newfield Exploration Co. 1 4,000 183,800
- --------------------------------------------------------------------------------
OMI Corp. 2 55,300 1,170,701
10 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
OIL & GAS Continued
Open Range Energy Corp. 1 910 $ 2,575
- --------------------------------------------------------------------------------
Overseas Shipholding Group, Inc. 2 13,500 760,050
- --------------------------------------------------------------------------------
Paramount Resources Ltd., Cl. A 1 25,200 518,630
- --------------------------------------------------------------------------------
Pogo Producing Co. 4,300 208,292
- --------------------------------------------------------------------------------
ProEx Energy Ltd. 1 8,840 97,409
- --------------------------------------------------------------------------------
ProspEx Resources Ltd. 1 51,920 197,680
- --------------------------------------------------------------------------------
Real Resources, Inc. 1 4,800 68,739
- --------------------------------------------------------------------------------
Redstar Oil & Gas, Inc. 1 35,955 39,465
- --------------------------------------------------------------------------------
Rosetta Resources, Inc. 1 1,400 26,138
- --------------------------------------------------------------------------------
Sound Energy Trust 16,966 74,344
- --------------------------------------------------------------------------------
St. Mary Land & Exploration Co. 3,600 132,624
- --------------------------------------------------------------------------------
Sunoco, Inc. 17,600 1,097,536
- --------------------------------------------------------------------------------
Sure Energy, Inc. 1 6,023 4,855
- --------------------------------------------------------------------------------
Swift Energy Co. 1,2 13,800 618,378
- --------------------------------------------------------------------------------
Teekay Shipping Corp. 1,600 69,792
- --------------------------------------------------------------------------------
Tesoro Corp. 11,700 769,509
- --------------------------------------------------------------------------------
Thunder Energy Trust 11,833 57,534
- --------------------------------------------------------------------------------
True Energy Trust 1,464 9,403
- --------------------------------------------------------------------------------
Tusk Energy Corp. 1 26,300 71,041
- --------------------------------------------------------------------------------
Tusk Energy Corp. 1,4 21,300 57,535
- --------------------------------------------------------------------------------
Tusk Energy Corp. 1 77,900 210,423
- --------------------------------------------------------------------------------
USEC, Inc. 1,2 171,500 2,181,480
- --------------------------------------------------------------------------------
VAALCO Energy, Inc. 1,2 48,800 329,400
- --------------------------------------------------------------------------------
Vero Energy, Inc. 1 2,482 12,898
- --------------------------------------------------------------------------------
Western Refining, Inc. 2 53,200 1,354,472
- --------------------------------------------------------------------------------
Zenas Energy Corp. 1 17,437 46,652
-----------------
18,299,359
- --------------------------------------------------------------------------------
FINANCIALS--12.2%
- --------------------------------------------------------------------------------
CAPITAL MARKETS--0.9%
Cohen & Steers, Inc. 2 23,900 960,063
- --------------------------------------------------------------------------------
Janus Capital Group, Inc. 32,600 703,834
- --------------------------------------------------------------------------------
KBW, Inc. 1 2,300 67,597
- --------------------------------------------------------------------------------
Knight Capital Group, Inc., Cl. A 1 115,500 2,214,135
- --------------------------------------------------------------------------------
Lazard Ltd., Cl. A 2 3,300 156,222
- --------------------------------------------------------------------------------
Penson Worldwide, Inc. 1,2 100 2,741
- --------------------------------------------------------------------------------
Piper Jaffray Cos., Inc. 1,2 32,700 2,130,405
- --------------------------------------------------------------------------------
Stifel Financial Corp. 1,2 3,000 117,690
- --------------------------------------------------------------------------------
SWS Group, Inc. 2 12,100 431,970
-----------------
6,784,657
- --------------------------------------------------------------------------------
COMMERCIAL BANKS--0.9%
BancorpSouth, Inc. 6,500 174,330
- --------------------------------------------------------------------------------
Banner Corp. 2 2,300 101,982
- --------------------------------------------------------------------------------
Citizens Banking Corp. 1,700 45,050
- --------------------------------------------------------------------------------
City Holding Co. 7,100 290,319
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
COMMERCIAL BANKS Continued
Columbia Banking System, Inc. 2 5,090 $ 178,761
- --------------------------------------------------------------------------------
Community Trust Bancorp, Inc. 2 1,815 75,377
- --------------------------------------------------------------------------------
Financial Institutions, Inc. 2 700 16,135
- --------------------------------------------------------------------------------
First Citizens BancShares, Inc., Cl. A 1,300 263,432
- --------------------------------------------------------------------------------
First Security Group, Inc. 14,800 170,644
- --------------------------------------------------------------------------------
First South Bancorp, Inc. 2 600 19,134
- --------------------------------------------------------------------------------
Frontier Financial Corp. 2 10,450 305,454
- --------------------------------------------------------------------------------
Greater Bay Bancorp 34,800 916,284
- --------------------------------------------------------------------------------
Greene County Bancshares, Inc. 2 1,400 55,622
- --------------------------------------------------------------------------------
Hancock Holding Co. 2 15,800 834,872
- --------------------------------------------------------------------------------
Hanmi Financial Corp. 20,300 457,359
- --------------------------------------------------------------------------------
Independent Bank Corp. 5,827 147,365
- --------------------------------------------------------------------------------
Intervest Bancshares Corp. 1,2 7,800 268,398
- --------------------------------------------------------------------------------
National Penn Bancshares, Inc. 2 1,315 26,629
- --------------------------------------------------------------------------------
Porter Bancorp, Inc. 2,500 55,475
- --------------------------------------------------------------------------------
Preferred Bank 3,300 198,297
- --------------------------------------------------------------------------------
PrivateBancorp, Inc. 2 5,900 245,617
- --------------------------------------------------------------------------------
Provident Bankshares Corp. 2 10,951 389,856
- --------------------------------------------------------------------------------
Republic Bancorp, Inc., Cl. A 2 2,400 60,216
- --------------------------------------------------------------------------------
Southwest Bancorp, Inc. 2,600 72,436
- --------------------------------------------------------------------------------
Sterling Bancshares, Inc. 2 6,850 89,187
- --------------------------------------------------------------------------------
Sterling Financial Corp.,
Western US 2 25,075 847,786
- --------------------------------------------------------------------------------
Taylor Capital Group, Inc. 2 500 18,305
- --------------------------------------------------------------------------------
Union Bankshares Corp. 2 350 10,707
- --------------------------------------------------------------------------------
United Community Banks, Inc. 2 2,400 77,568
-----------------
6,412,597
- --------------------------------------------------------------------------------
CONSUMER FINANCE--1.2%
Advanta Corp., Cl. B 2 38,400 1,675,392
- --------------------------------------------------------------------------------
AmeriCredit Corp. 1 33,100 833,127
- --------------------------------------------------------------------------------
ASTA Funding, Inc. 2 12,600 383,544
- --------------------------------------------------------------------------------
Cash America International, Inc. 2 38,100 1,786,890
- --------------------------------------------------------------------------------
Credit Acceptance Corp. 1,2 3,428 114,255
- --------------------------------------------------------------------------------
Dollar Financial Corp. 1 7,900 220,094
- --------------------------------------------------------------------------------
EZCORP, Inc., Cl. A 1,2 33,600 546,000
- --------------------------------------------------------------------------------
First Cash Financial Services, Inc. 1 6,500 168,155
- --------------------------------------------------------------------------------
First Marblehead Corp. (The) 15,900 868,935
- --------------------------------------------------------------------------------
World Acceptance Corp. 1,2 34,900 1,638,555
-----------------
8,234,947
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--0.2%
IntercontinentalExchange, Inc. 1 2,900 312,910
- --------------------------------------------------------------------------------
International Securities
Exchange, Inc., Cl. A 2 21,000 982,590
- --------------------------------------------------------------------------------
Medallion Financial Corp. 2 2,100 25,977
11 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES Continued
Resource America, Inc., Cl. A 2 1,500 $ 39,600
-----------------
1,361,077
INSURANCE--3.8%
Affirmative Insurance
Holdings, Inc. 4,000 65,080
- --------------------------------------------------------------------------------
AMBAC Financial Group, Inc. 10,900 970,863
- --------------------------------------------------------------------------------
American Financial Group, Inc. 3,900 140,049
- --------------------------------------------------------------------------------
American Physicians Capital, Inc. 1 10,950 438,438
- --------------------------------------------------------------------------------
Argonaut Group, Inc. 1 28,600 996,996
- --------------------------------------------------------------------------------
Assurant, Inc. 18,500 1,022,125
- --------------------------------------------------------------------------------
Bristol West Holdings, Inc. 15,000 237,450
- --------------------------------------------------------------------------------
CNA Financial Corp. 1 13,100 528,192
- --------------------------------------------------------------------------------
CNA Surety Corp. 1 19,200 412,800
- --------------------------------------------------------------------------------
Commerce Group, Inc. (The) 11,500 342,125
- --------------------------------------------------------------------------------
Darwin Professional
Underwriters, Inc. 1,2 6,300 147,735
- --------------------------------------------------------------------------------
Delphi Financial Group, Inc., Cl. A 2 39,250 1,588,055
- --------------------------------------------------------------------------------
Direct General Corp. 2 15,900 328,176
- --------------------------------------------------------------------------------
Donegal Group, Inc., Cl. A 2 9,166 179,562
- --------------------------------------------------------------------------------
EMC Insurance Group, Inc. 2 5,500 187,660
- --------------------------------------------------------------------------------
FBL Financial Group, Inc., Cl. A 2 8,500 332,180
- --------------------------------------------------------------------------------
First Mercury Financial Corp. 1 4,000 94,080
- --------------------------------------------------------------------------------
FPIC Insurance Group, Inc. 1 6,900 268,893
- --------------------------------------------------------------------------------
Great American Financial
Resources, Inc. 2 1,900 43,795
- --------------------------------------------------------------------------------
Hanover Insurance Group, Inc. 14,400 702,720
- --------------------------------------------------------------------------------
Harleysville Group, Inc. 22,700 790,414
- --------------------------------------------------------------------------------
Horace Mann Educators Corp. 2 25,700 519,140
- --------------------------------------------------------------------------------
Infinity Property & Casualty Corp. 24,400 1,180,716
- --------------------------------------------------------------------------------
IPC Holdings Ltd. 600 18,870
- --------------------------------------------------------------------------------
LandAmerica Financial
Group, Inc. 2 1,000 63,110
- --------------------------------------------------------------------------------
Markel Corp. 1 500 240,050
- --------------------------------------------------------------------------------
MBIA, Inc. 15,100 1,103,206
- --------------------------------------------------------------------------------
Meadowbrook Insurance
Group, Inc. 1 20,000 197,800
- --------------------------------------------------------------------------------
Midland Co. (The) 2 1,700 71,315
- --------------------------------------------------------------------------------
National Western Life Insurance
Co., Cl. A 2 800 184,112
- --------------------------------------------------------------------------------
Nationwide Financial Services,
Inc., Cl. A 11,200 607,040
- --------------------------------------------------------------------------------
Odyssey Re Holdings Corp. 2 6,300 234,990
- --------------------------------------------------------------------------------
Ohio Casualty Corp. 63,800 1,901,878
- --------------------------------------------------------------------------------
Old Republic International Corp. 16,850 392,268
- --------------------------------------------------------------------------------
OneBeacon Insurance Group Ltd. 1 17,700 495,600
- --------------------------------------------------------------------------------
Partnerre Holdings Ltd. 7,600 539,828
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
INSURANCE Continued
Phoenix Cos., Inc. (The) 76,900 $ 1,221,941
- --------------------------------------------------------------------------------
Presidential Life Corp. 2 8,100 177,795
- --------------------------------------------------------------------------------
ProCentury Corp. 15,200 281,200
- --------------------------------------------------------------------------------
Reinsurance Group of
America, Inc. 2,900 161,530
- --------------------------------------------------------------------------------
RenaissanceRe Holdings Ltd. 4,700 282,000
- --------------------------------------------------------------------------------
RLI Corp. 10,400 586,768
- --------------------------------------------------------------------------------
Safeco Corp. 14,400 900,720
- --------------------------------------------------------------------------------
Safety Insurance Group, Inc. 2 16,000 811,360
- --------------------------------------------------------------------------------
Seabright Insurance Holdings, Inc. 1 5,400 97,254
- --------------------------------------------------------------------------------
Selective Insurance Group, Inc. 2 21,500 1,231,735
- --------------------------------------------------------------------------------
State Auto Financial Corp. 13,300 461,909
- --------------------------------------------------------------------------------
Torchmark Corp. 5,300 337,928
- --------------------------------------------------------------------------------
Tower Group, Inc. 11,000 341,770
- --------------------------------------------------------------------------------
Transatlantic Holdings, Inc. 700 43,470
- --------------------------------------------------------------------------------
U.S.I. Holdings Corp. 1,2 6,000 92,160
- --------------------------------------------------------------------------------
United America Indemnity Ltd.,
Cl. A 1,2 13,606 344,640
- --------------------------------------------------------------------------------
Universal American Financial
Corp. 1 5,800 108,112
- --------------------------------------------------------------------------------
Zenith National Insurance Corp. 44,400 2,082,804
-----------------
27,132,407
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS--3.2%
Acadia Realty Trust 2 4,600 115,092
- --------------------------------------------------------------------------------
Agree Realty Corp. 2 7,300 250,901
- --------------------------------------------------------------------------------
Alexandria Real Estate Equities,
Inc. 5,800 582,320
- --------------------------------------------------------------------------------
AMB Property Corp. 3,700 216,857
- --------------------------------------------------------------------------------
American Home Mortgage
Investment Corp. 2 3,200 112,384
- --------------------------------------------------------------------------------
Ashford Hospitality Trust 9,800 122,010
- --------------------------------------------------------------------------------
Associated Estates Realty Corp. 2 5,100 70,074
- --------------------------------------------------------------------------------
BioMed Realty Trust, Inc. 2 13,400 383,240
- --------------------------------------------------------------------------------
Brandywine Realty Trust 18,114 602,291
- --------------------------------------------------------------------------------
BRE Properties, Inc., Cl. A 2 1,800 117,036
- --------------------------------------------------------------------------------
Camden Property Trust 2,900 214,165
- --------------------------------------------------------------------------------
Capital Trust, Cl. A 1,300 64,922
- --------------------------------------------------------------------------------
CapitalSource, Inc. 2 18,700 510,697
- --------------------------------------------------------------------------------
CBL & Associates Properties, Inc. 11,000 476,850
- --------------------------------------------------------------------------------
Cedar Shopping Centers, Inc. 4,300 68,413
- --------------------------------------------------------------------------------
CentraCore Properties Trust 2 1,900 61,427
- --------------------------------------------------------------------------------
Colonial Properties Trust 2 9,554 447,892
- --------------------------------------------------------------------------------
Corporate Office Properties Trust 9,800 494,606
- --------------------------------------------------------------------------------
Crescent Real Estate Equities, Inc. 8,000 158,000
- --------------------------------------------------------------------------------
DCT Industrial Trust, Inc. 27,500 324,500
12 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS Continued
DiamondRock Hospitality Co. 29,900 $ 538,499
- --------------------------------------------------------------------------------
Digital Realty Trust, Inc. 12,800 438,144
- --------------------------------------------------------------------------------
Duke Realty Investments, Inc. 2,600 106,340
- --------------------------------------------------------------------------------
EastGroup Properties, Inc. 2 5,300 283,868
- --------------------------------------------------------------------------------
Entertainment Properties Trust 4,900 286,356
- --------------------------------------------------------------------------------
Equity Inns, Inc. 2 22,700 362,292
- --------------------------------------------------------------------------------
Equity Lifestyle Properties, Inc. 1,300 70,759
- --------------------------------------------------------------------------------
Equity One, Inc. 2 14,900 397,234
- --------------------------------------------------------------------------------
Federal Realty Investment Trust 3,700 314,500
- --------------------------------------------------------------------------------
FelCor Lodging Trust, Inc. 10,100 220,584
- --------------------------------------------------------------------------------
First Industrial Realty Trust, Inc. 2 13,100 614,259
- --------------------------------------------------------------------------------
First Potomac Realty Trust 900 26,199
- --------------------------------------------------------------------------------
Franklin Street Properties Corp. 1,100 23,155
- --------------------------------------------------------------------------------
Friedman, Billings, Ramsey Group,
Inc., Cl. A 2 3,300 26,400
- --------------------------------------------------------------------------------
Glimcher Realty Trust 2 6,700 178,957
- --------------------------------------------------------------------------------
Gramercy Capital Corp. 2 5,300 163,717
- --------------------------------------------------------------------------------
Health Care REIT, Inc. 2 7,100 305,442
- --------------------------------------------------------------------------------
Healthcare Realty Trust, Inc. 2 6,900 272,826
- --------------------------------------------------------------------------------
Highland Hospitality Corp. 13,000 185,250
- --------------------------------------------------------------------------------
Highwoods Properties, Inc. 12,300 501,348
- --------------------------------------------------------------------------------
Home Properties of New York, Inc. 10,400 616,408
- --------------------------------------------------------------------------------
Hospitality Properties Trust 8,500 404,005
- --------------------------------------------------------------------------------
HRPT Properties Trust 2 7,300 90,155
- --------------------------------------------------------------------------------
Inland Real Estate Corp. 2 9,200 172,224
- --------------------------------------------------------------------------------
Innkeepers USA Trust 8,900 137,950
- --------------------------------------------------------------------------------
iStar Financial, Inc. 1,100 52,602
- --------------------------------------------------------------------------------
Kilroy Realty Corp. 3,800 296,400
- --------------------------------------------------------------------------------
Kimco Realty Corp. 730 32,814
- --------------------------------------------------------------------------------
Kite Realty Group Trust 1,100 20,482
- --------------------------------------------------------------------------------
KKR Financial Corp. 6,900 184,851
- --------------------------------------------------------------------------------
LaSalle Hotel Properties 5,500 252,175
- --------------------------------------------------------------------------------
Lexington Realty Trust 2 10,100 226,442
- --------------------------------------------------------------------------------
Liberty Property Trust 8,900 437,346
- --------------------------------------------------------------------------------
Longview Fibre Co. Real Estate
Investment Trust 17,176 377,013
- --------------------------------------------------------------------------------
LTC Properties, Inc. 2 7,600 207,556
- --------------------------------------------------------------------------------
Macerich Co. (The) 900 77,913
- --------------------------------------------------------------------------------
Mack-Cali Realty Corp. 6,100 311,100
- --------------------------------------------------------------------------------
Maguire Properties, Inc. 11,700 468,000
- --------------------------------------------------------------------------------
Mid-America Apartment
Communities, Inc. 2 8,300 475,092
- --------------------------------------------------------------------------------
National Retail Properties, Inc. 2 18,700 429,165
- --------------------------------------------------------------------------------
Nationwide Health Properties, Inc. 13,900 420,058
- --------------------------------------------------------------------------------
Newcastle Investment Corp. 2 2,700 84,564
- --------------------------------------------------------------------------------
Omega Healthcare Investors, Inc. 5,500 97,460
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS Continued
Parkway Properties, Inc. 2 4,100 $ 209,141
- --------------------------------------------------------------------------------
Pennsylvania Real Estate
Investment Trust 7,800 307,164
- --------------------------------------------------------------------------------
Post Properties, Inc. 2 7,000 319,900
- --------------------------------------------------------------------------------
PS Business Parks, Inc. 5,500 388,905
- --------------------------------------------------------------------------------
RAIT Financial Trust 2 1,100 37,928
- --------------------------------------------------------------------------------
Ramco-Gershenson Properties
Trust 2 3,800 144,932
- --------------------------------------------------------------------------------
Realty Income Corp. 2 9,700 268,690
- --------------------------------------------------------------------------------
Reckson Associates Realty Corp. 1,600 72,960
- --------------------------------------------------------------------------------
Redwood Trust, Inc. 2 1,400 81,312
- --------------------------------------------------------------------------------
Regency Centers Corp. 2,600 203,242
- --------------------------------------------------------------------------------
Senior Housing Properties Trust 2 21,700 531,216
- --------------------------------------------------------------------------------
SL Green Realty Corp. 1,600 212,448
- --------------------------------------------------------------------------------
Sovran Self Storage, Inc. 2 7,000 400,960
- --------------------------------------------------------------------------------
Spirit Finance Corp. 2 22,300 278,081
- --------------------------------------------------------------------------------
Strategic Hotels & Resorts, Inc. 28,500 621,015
- --------------------------------------------------------------------------------
Sunstone Hotel Investors, Inc. 14,900 398,277
- --------------------------------------------------------------------------------
Tanger Factory Outlet Centers, Inc. 2 11,600 453,328
- --------------------------------------------------------------------------------
U-Store-It Real Estate Investment
Trust 2 5,800 119,190
- --------------------------------------------------------------------------------
United Dominion Realty Trust, Inc. 2 11,200 356,048
- --------------------------------------------------------------------------------
Ventas, Inc. 10,300 435,896
- --------------------------------------------------------------------------------
Washington Real Estate Investment
Trust 2 9,800 392,000
- --------------------------------------------------------------------------------
Weingarten Realty Investors 2 5,700 262,827
- --------------------------------------------------------------------------------
Winston Hotels, Inc. 2 4,800 63,600
-----------------
23,140,641
- --------------------------------------------------------------------------------
REAL ESTATE MANAGEMENT & DEVELOPMENT--0.1%
CB Richard Ellis Group, Inc., Cl. A 1 19,300 640,760
- --------------------------------------------------------------------------------
Stratus Properties, Inc. 1 2,300 73,600
-----------------
714,360
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE--1.9%
Bank Mutual Corp. 2 16,136 195,407
- --------------------------------------------------------------------------------
BankUnited Financial Corp., Cl. A 2 6,800 190,128
- --------------------------------------------------------------------------------
Citizens First Bancorp, Inc. 2 1,600 49,184
- --------------------------------------------------------------------------------
Corus Bankshares, Inc. 2 69,900 1,612,593
- --------------------------------------------------------------------------------
Downey Financial Corp. 2 300 21,774
- --------------------------------------------------------------------------------
Federal Agricultural Mortgage
Corp., Non-Vtg. 2 7,000 189,910
- --------------------------------------------------------------------------------
First Defiance Financial Corp. 500 15,150
- --------------------------------------------------------------------------------
First Financial Holdings, Inc. 2 2,400 94,032
- --------------------------------------------------------------------------------
First Niagara Financial Group, Inc. 69,000 1,025,340
- --------------------------------------------------------------------------------
First Place Financial Corp. 2 2,400 56,376
- --------------------------------------------------------------------------------
FirstFed Financial Corp. 1,2 24,400 1,634,068
13 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE Continued
Fremont General Corp. 2 80,200 $ 1,300,042
- --------------------------------------------------------------------------------
ITLA Capital Corp. 600 34,746
- --------------------------------------------------------------------------------
KBNT Bancorp, Inc. 2 1,100 18,403
- --------------------------------------------------------------------------------
MAF Bancorp, Inc. 15,500 692,695
- --------------------------------------------------------------------------------
MGIC Investment Corp. 12,600 788,004
- --------------------------------------------------------------------------------
NexCen Brands, Inc. 1,2 5,500 39,765
- --------------------------------------------------------------------------------
Ocwen Financial Corp. 1,2 83,900 1,330,654
- --------------------------------------------------------------------------------
PFF Bancorp, Inc. 2 19,210 662,937
- --------------------------------------------------------------------------------
PMI Group, Inc. (The) 17,500 825,475
- --------------------------------------------------------------------------------
Provident Financial Services, Inc. 29,200 529,396
- --------------------------------------------------------------------------------
Radian Group, Inc. 13,800 743,958
- --------------------------------------------------------------------------------
TierOne Corp. 2 9,300 293,973
- --------------------------------------------------------------------------------
Triad Guaranty, Inc. 1,2 16,900 927,303
- --------------------------------------------------------------------------------
WSFS Financial Corp. 3,300 220,869
-----------------
13,492,182
- --------------------------------------------------------------------------------
HEALTH CARE--8.2%
- --------------------------------------------------------------------------------
BIOTECHNOLOGY--0.3%
Alexion Pharmaceuticals, Inc. 1,2 2,000 80,780
- --------------------------------------------------------------------------------
Alnylam Pharmaceuticals, Inc. 1,2 1,400 29,960
- --------------------------------------------------------------------------------
Applera Corp./Celera Genomics
Group 1 8,600 120,314
- --------------------------------------------------------------------------------
Array BioPharma, Inc. 1 1,600 20,672
- --------------------------------------------------------------------------------
Digene Corp. 1 3,500 167,720
- --------------------------------------------------------------------------------
Enzon Pharmaceuticals, Inc. 1,2 13,200 112,332
- --------------------------------------------------------------------------------
Indevus Pharmaceuticals, Inc. 1,2 4,000 28,400
- --------------------------------------------------------------------------------
Isis Pharmaceuticals, Inc. 1,2 24,000 266,880
- --------------------------------------------------------------------------------
Omrix Biopharmaceuticals, Inc. 1 3,600 108,936
- --------------------------------------------------------------------------------
OSI Pharmaceuticals, Inc. 1,2 2,500 87,450
- --------------------------------------------------------------------------------
QLT PhotoTherapeutics, Inc. 1,2 16,300 137,898
- --------------------------------------------------------------------------------
Regeneron Pharmaceuticals, Inc. 1 7,600 152,532
- --------------------------------------------------------------------------------
Savient Pharmaceuticals, Inc. 1 24,701 276,898
- --------------------------------------------------------------------------------
United Therapeutics Corp. 1,2 8,000 434,960
-----------------
2,025,732
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--1.7%
Abaxis, Inc. 1,2 5,000 96,250
- --------------------------------------------------------------------------------
Advanced Medical Optics, Inc. 1 7,300 256,960
- --------------------------------------------------------------------------------
Biosite, Inc. 1,2 17,500 854,875
- --------------------------------------------------------------------------------
Candela Corp. 1 14,900 184,313
- --------------------------------------------------------------------------------
Cholestech Corp. 1 2,000 36,840
- --------------------------------------------------------------------------------
Dade Behring Holdings, Inc. 9,200 366,252
- --------------------------------------------------------------------------------
Datascope Corp. 2 700 25,508
- --------------------------------------------------------------------------------
DJO, Inc. 1 9,300 398,226
- --------------------------------------------------------------------------------
Edwards Lifesciences Corp. 1 18,200 856,128
- --------------------------------------------------------------------------------
Greatbatch, Inc. 1,2 11,100 298,812
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES Continued
Hillenbrand Industries, Inc. 3,200 $ 182,176
- --------------------------------------------------------------------------------
ICU Medical, Inc. 1,2 3,400 138,312
- --------------------------------------------------------------------------------
IDEXX Laboratories, Inc. 1 3,100 245,830
- --------------------------------------------------------------------------------
Immucor, Inc. 1,2 80,300 2,347,169
- --------------------------------------------------------------------------------
Integra LifeSciences Holdings
Corp. 1,2 10,600 451,454
- --------------------------------------------------------------------------------
Invacare Corp. 2 2,400 58,920
- --------------------------------------------------------------------------------
Kinetic Concepts, Inc. 1,2 13,800 545,790
- --------------------------------------------------------------------------------
Medical Action Industries, Inc. 1,2 200 6,448
- --------------------------------------------------------------------------------
Mentor Corp. 2 13,700 669,519
- --------------------------------------------------------------------------------
Meridian Bioscience, Inc. 2 4,100 100,573
- --------------------------------------------------------------------------------
Palomar Medical Technologies,
Inc. 1,2 30,200 1,530,234
- --------------------------------------------------------------------------------
Quidel Corp. 1,2 18,000 245,160
- --------------------------------------------------------------------------------
West Pharmaceutical Services, Inc. 39,400 2,018,462
- --------------------------------------------------------------------------------
Zoll Medical Corp. 1,2 10,400 605,696
-----------------
12,519,907
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--3.1%
Air Methods Corp. 1,2 7,500 209,400
- --------------------------------------------------------------------------------
AMERIGROUP Corp. 1 74,400 2,670,216
- --------------------------------------------------------------------------------
AmerisourceBergen Corp. 22,800 1,025,088
- --------------------------------------------------------------------------------
Apria Healthcare Group, Inc. 1 50,700 1,351,155
- --------------------------------------------------------------------------------
Bio-Reference Laboratories, Inc. 1,2 3,500 78,715
- --------------------------------------------------------------------------------
Centene Corp. 1,2 56,200 1,380,834
- --------------------------------------------------------------------------------
Chemed Corp. 44,100 1,630,818
- --------------------------------------------------------------------------------
CorVel Corp. 1 4,600 218,822
- --------------------------------------------------------------------------------
Coventry Health Care, Inc. 1 18,400 920,920
- --------------------------------------------------------------------------------
Cross Country Healthcare, Inc. 1,2 14,900 325,118
- --------------------------------------------------------------------------------
Emergency Medical Services LP, Cl. A 1 1,400 29,372
- --------------------------------------------------------------------------------
Express Scripts, Inc. 1 4,600 329,360
- --------------------------------------------------------------------------------
Genesis HealthCare Corp. 1,2 10,000 472,300
- --------------------------------------------------------------------------------
Healthspring, Inc. 1,2 46,800 952,380
- --------------------------------------------------------------------------------
Healthways, Inc. 1 31,200 1,488,552
- --------------------------------------------------------------------------------
HMS Holdings Corp. 1 4,600 69,690
- --------------------------------------------------------------------------------
Humana, Inc. 1 21,700 1,200,227
- --------------------------------------------------------------------------------
InVentiv Health, Inc. 1 6,400 226,240
- --------------------------------------------------------------------------------
Kindred Healthcare, Inc. 1 56,600 1,429,150
- --------------------------------------------------------------------------------
Laboratory Corp. of America
Holdings 1 15,800 1,160,826
- --------------------------------------------------------------------------------
Landauer, Inc. 2 200 10,494
- --------------------------------------------------------------------------------
LCA-Vision, Inc. 2 5,600 192,416
- --------------------------------------------------------------------------------
Lincare Holdings, Inc. 1 7,500 298,800
- --------------------------------------------------------------------------------
Magellan Health Services, Inc. 1 36,600 1,581,852
- --------------------------------------------------------------------------------
Manor Care, Inc. 300 14,076
- --------------------------------------------------------------------------------
MedCath Corp. 1 7,500 205,200
14 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES Continued
Molina Healthcare, Inc. 1,2 44,600 $ 1,449,946
- --------------------------------------------------------------------------------
National HealthCare Corp. 2 2,400 132,480
- --------------------------------------------------------------------------------
Odyssey Healthcare, Inc. 1,2 12,800 169,728
- --------------------------------------------------------------------------------
Pediatrix Medical Group, Inc. 1 600 29,340
- --------------------------------------------------------------------------------
PSS World Medical, Inc. 1,2 30,500 595,665
- --------------------------------------------------------------------------------
Res-Care, Inc. 1,2 6,500 117,975
- --------------------------------------------------------------------------------
Visicu, Inc. 1,2 1,900 21,280
- --------------------------------------------------------------------------------
WellCare Health Plans, Inc. 1 8,600 592,540
-----------------
22,580,975
- --------------------------------------------------------------------------------
HEALTH CARE TECHNOLOGY--0.4%
AMICAS, Inc. 1,2 9,400 27,636
- --------------------------------------------------------------------------------
Computer Programs & Systems, Inc. 5,100 173,349
- --------------------------------------------------------------------------------
Dendrite International, Inc. 1 16,940 181,427
- --------------------------------------------------------------------------------
Emdeon Corp. 1 67,900 841,281
- --------------------------------------------------------------------------------
IMS Health, Inc. 9,400 258,312
- --------------------------------------------------------------------------------
Omnicell, Inc. 1,2 20,100 374,463
- --------------------------------------------------------------------------------
Per-Se Technologies, Inc. 1,2 8,100 225,018
- --------------------------------------------------------------------------------
Phase Forward, Inc. 1,2 19,800 296,604
- --------------------------------------------------------------------------------
Trizetto Group, Inc. 1,2 2,900 53,273
- --------------------------------------------------------------------------------
Vital Images, Inc. 1,2 2,900 100,920
-----------------
2,532,283
- --------------------------------------------------------------------------------
LIFE SCIENCES TOOLS & SERVICES--1.0%
Albany Molecular Research, Inc. 1 500 5,280
- --------------------------------------------------------------------------------
Applera Corp./Applied Biosystems
Group 33,400 1,225,446
- --------------------------------------------------------------------------------
Bio-Rad Laboratories, Inc., Cl. A 1,2 7,000 577,640
- --------------------------------------------------------------------------------
Bruker BioSciences Corp. 1,2 34,600 259,846
- --------------------------------------------------------------------------------
Charles River Laboratories
International, Inc. 1 2,900 125,425
- --------------------------------------------------------------------------------
Diversa Corp. 1,2 1,800 19,584
- --------------------------------------------------------------------------------
Illumina, Inc. 1 11,400 448,134
- --------------------------------------------------------------------------------
Invitrogen Corp. 1 6,200 350,858
- --------------------------------------------------------------------------------
Kendle International, Inc. 1 10,300 323,935
- --------------------------------------------------------------------------------
Luminex Corp. 1 9,900 125,730
- --------------------------------------------------------------------------------
Molecular Devices Corp. 1,2 10,500 221,235
- --------------------------------------------------------------------------------
Parexel International Corp. 1 23,700 686,589
- --------------------------------------------------------------------------------
Pharmanet Development Group, Inc. 1 11,000 242,770
- --------------------------------------------------------------------------------
Thermo Fisher Scientific, Inc. 1 22,600 1,023,554
- --------------------------------------------------------------------------------
Varian, Inc. 1 31,000 1,388,490
- --------------------------------------------------------------------------------
Waters Corp. 1 8,400 411,348
-----------------
7,435,864
- --------------------------------------------------------------------------------
PHARMACEUTICALS--1.7%
Alpharma, Inc., Cl. A 60,600 1,460,460
- --------------------------------------------------------------------------------
BioMimetic Therapeutics, Inc. 1,2 21,100 278,309
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
PHARMACEUTICALS Continued
Bradley Pharmaceuticals, Inc. 1,2 15,000 $ 308,700
- --------------------------------------------------------------------------------
DepoMed, Inc. 1,2 4,200 14,490
- --------------------------------------------------------------------------------
Endo Pharmaceuticals Holdings, Inc. 1,2 30,700 846,706
- --------------------------------------------------------------------------------
King Pharmaceuticals, Inc. 1 41,500 660,680
- --------------------------------------------------------------------------------
Medicines Co. (The) 1 22,800 723,216
- --------------------------------------------------------------------------------
Medicis Pharmaceutical Corp., Cl. A 2 45,300 1,591,389
- --------------------------------------------------------------------------------
Mylan Laboratories, Inc. 34,500 688,620
- --------------------------------------------------------------------------------
New River Pharmaceuticals, Inc. 1,2 8,800 481,448
- --------------------------------------------------------------------------------
Noven Pharmaceuticals, Inc. 1,2 15,800 402,110
- --------------------------------------------------------------------------------
Pain Therapeutics, Inc. 1,2 35,900 319,510
- --------------------------------------------------------------------------------
Perrigo Co. 42,300 731,790
- --------------------------------------------------------------------------------
Pozen, Inc. 1,2 10,800 183,492
- --------------------------------------------------------------------------------
Sciele Pharma, Inc. 1,2 61,000 1,464,000
- --------------------------------------------------------------------------------
ViroPharma, Inc. 1 91,400 1,338,096
- --------------------------------------------------------------------------------
Watson Pharmaceuticals, Inc. 1 22,900 596,087
-----------------
12,089,103
- --------------------------------------------------------------------------------
INDUSTRIALS--16.7%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE--1.1%
AerCap Holdings NV 1 38,100 883,158
- --------------------------------------------------------------------------------
Armor Holdings, Inc. 1,2 18,700 1,025,695
- --------------------------------------------------------------------------------
Astronics Corp., Cl. B 1 650 10,855
- --------------------------------------------------------------------------------
Ceradyne, Inc. 1,2 23,100 1,305,150
- --------------------------------------------------------------------------------
Cubic Corp. 2 1,400 30,380
- --------------------------------------------------------------------------------
Curtiss-Wright Corp. 2 2,300 85,284
- --------------------------------------------------------------------------------
DynCorp International, Inc., Cl. A 1 11,200 177,744
- --------------------------------------------------------------------------------
K&F Industries Holdings, Inc. 1,2 12,500 283,875
- --------------------------------------------------------------------------------
L-3 Communications Holdings, Inc. 4,300 351,654
- --------------------------------------------------------------------------------
Orbital Sciences Corp. 1,2 90,000 1,659,600
- --------------------------------------------------------------------------------
Spirit Aerosystems Holdings, Inc.,
Cl. A 1 21,560 721,613
- --------------------------------------------------------------------------------
Teledyne Technologies, Inc. 1 24,100 967,133
- --------------------------------------------------------------------------------
Triumph Group, Inc. 500 26,215
- --------------------------------------------------------------------------------
United Industrial Corp. 2 8,000 406,000
-----------------
7,934,356
- --------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS--0.8%
ABX Air, Inc. 1 12,800 88,704
- --------------------------------------------------------------------------------
Atlas Air Worldwide Holdings, Inc. 1,2 15,600 694,200
- --------------------------------------------------------------------------------
EGL, Inc. 1 27,600 821,928
- --------------------------------------------------------------------------------
Hub Group, Inc., Cl. A 1 74,400 2,049,720
- --------------------------------------------------------------------------------
Pacer International, Inc. 58,500 1,741,545
-----------------
5,396,097
- --------------------------------------------------------------------------------
AIRLINES--0.8%
Alaska Air Group, Inc. 1 41,400 1,635,300
15 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
AIRLINES Continued
Allegiant Travel Co. 1 2,020 $ 56,681
- --------------------------------------------------------------------------------
AMR Corp. 1 46,600 1,408,718
- --------------------------------------------------------------------------------
Continental Airlines, Inc., Cl. B 1,2 32,300 1,332,375
- --------------------------------------------------------------------------------
ExpressJet Holdings, Inc. 1 33,000 267,300
- --------------------------------------------------------------------------------
Frontier Airlines Holdings, Inc. 1,2 19,200 142,080
- --------------------------------------------------------------------------------
Mesa Air Group, Inc. 1,2 1,100 9,427
- --------------------------------------------------------------------------------
SkyWest, Inc. 20,100 512,751
- --------------------------------------------------------------------------------
US Airways Group, Inc. 1 3,100 166,935
-----------------
5,531,567
- --------------------------------------------------------------------------------
BUILDING PRODUCTS--0.6%
American Woodmark Corp. 2 11,600 485,460
- --------------------------------------------------------------------------------
Ameron International Corp. 2 6,100 465,857
- --------------------------------------------------------------------------------
Builders FirstSource, Inc. 1,2 25,300 451,099
- --------------------------------------------------------------------------------
Goodman Global, Inc. 1,2 20,200 347,440
- --------------------------------------------------------------------------------
Insteel Industries, Inc. 2 17,300 307,767
- --------------------------------------------------------------------------------
Jacuzzi Brands, Inc. 1 2,600 32,318
- --------------------------------------------------------------------------------
PW Eagle, Inc. 2 12,100 417,450
- --------------------------------------------------------------------------------
Universal Forest Products, Inc. 2 32,300 1,505,826
-----------------
4,013,217
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--5.2%
ABM Industries, Inc. 2 2,200 49,962
- --------------------------------------------------------------------------------
Acco Brands Corp. 1 8,100 214,407
- --------------------------------------------------------------------------------
Administaff, Inc. 2 51,100 2,185,547
- --------------------------------------------------------------------------------
Allied Waste Industries, Inc. 1 27,200 334,288
- --------------------------------------------------------------------------------
American Ecology Corp. 2 2,000 37,020
- --------------------------------------------------------------------------------
American Reprographics Co. 1,2 15,600 519,636
- --------------------------------------------------------------------------------
AMREP Corp. 2 2,500 306,250
- --------------------------------------------------------------------------------
Avery-Dennison Corp. 4,900 332,857
- --------------------------------------------------------------------------------
Banta Corp. 25,200 917,280
- --------------------------------------------------------------------------------
Bowne & Co., Inc. 5,900 94,046
- --------------------------------------------------------------------------------
CBIZ, Inc. 1,2 40,200 280,194
- --------------------------------------------------------------------------------
CDI Corp. 2 700 17,430
- --------------------------------------------------------------------------------
Central Parking Corp. 2 12,400 223,200
- --------------------------------------------------------------------------------
Cenveo, Inc. 1,2 54,600 1,157,520
- --------------------------------------------------------------------------------
Clean Harbors, Inc. 1 18,300 885,903
- --------------------------------------------------------------------------------
COMSYS IT Partners, Inc. 1 13,600 274,856
- --------------------------------------------------------------------------------
Consolidated Graphics, Inc. 1 15,900 939,213
- --------------------------------------------------------------------------------
Cornell Corrections, Inc. 1,2 3,400 62,322
- --------------------------------------------------------------------------------
Corrections Corp. of America 1 9,950 450,039
- --------------------------------------------------------------------------------
Covanta Holding Corp. 1 34,400 758,176
- --------------------------------------------------------------------------------
CRA International, Inc. 1,2 4,900 256,760
- --------------------------------------------------------------------------------
Deluxe Corp. 2 57,400 1,446,480
- --------------------------------------------------------------------------------
Diamond Management &
Technology Consultants, Inc. 2 5,100 63,444
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES Continued
Donnelley (R.R.) & Sons Co. 15,200 $ 540,208
- --------------------------------------------------------------------------------
Ennis, Inc. 2 17,700 432,942
- --------------------------------------------------------------------------------
Exponent, Inc. 1,2 15,100 281,766
- --------------------------------------------------------------------------------
First Consulting Group, Inc. 1,2 5,300 72,928
- --------------------------------------------------------------------------------
Geo Group, Inc. (The) 1 5,800 217,616
- --------------------------------------------------------------------------------
Harland (John H.) Co. 46,600 2,339,320
- --------------------------------------------------------------------------------
Healthcare Services Group, Inc. 2 7,674 222,239
- --------------------------------------------------------------------------------
Heidrick & Struggles International,
Inc. 1,2 12,200 516,792
- --------------------------------------------------------------------------------
ICT Group, Inc. 1,2 9,900 312,741
- --------------------------------------------------------------------------------
IHS, Inc., Cl. A 1 15,000 592,200
- --------------------------------------------------------------------------------
Ikon Office Solutions, Inc. 129,200 2,115,004
- --------------------------------------------------------------------------------
Kelly Services, Inc., Cl. A 2 2,200 63,668
- --------------------------------------------------------------------------------
Kenexa Corp. 1,2 5,600 186,256
- --------------------------------------------------------------------------------
Kforce, Inc. 1,2 17,300 210,541
- --------------------------------------------------------------------------------
Knoll, Inc. 50,100 1,102,200
- --------------------------------------------------------------------------------
Korn-Ferry International 1 96,800 2,222,528
- --------------------------------------------------------------------------------
Labor Ready, Inc. 1 114,100 2,091,453
- --------------------------------------------------------------------------------
Manpower, Inc. 14,100 1,056,513
- --------------------------------------------------------------------------------
Miller (Herman), Inc. 9,100 330,876
- --------------------------------------------------------------------------------
On Assignment, Inc. 1,2 14,800 173,900
- --------------------------------------------------------------------------------
PeopleSupport, Inc. 1,2 12,400 261,020
- --------------------------------------------------------------------------------
PHH Corp. 1 35,600 1,027,772
- --------------------------------------------------------------------------------
Pike Electric Corp. 1 11,100 181,263
- --------------------------------------------------------------------------------
Resources Connection, Inc. 1,2 1,500 47,760
- --------------------------------------------------------------------------------
Robert Half International, Inc. 9,400 348,928
- --------------------------------------------------------------------------------
SAIC, Inc. 1,2 4,700 83,613
- --------------------------------------------------------------------------------
School Specialty, Inc. 1 5,100 191,199
- --------------------------------------------------------------------------------
SITEL Corp. 1 17,800 75,116
- --------------------------------------------------------------------------------
Spherion Corp. 1 45,000 334,350
- --------------------------------------------------------------------------------
Standard Register Co. (The) 2 4,800 57,600
- --------------------------------------------------------------------------------
Steelcase, Inc., Cl. A 40,000 726,400
- --------------------------------------------------------------------------------
Team, Inc. 1,2 6,100 212,463
- --------------------------------------------------------------------------------
TeleTech Holdings, Inc. 1,2 9,300 222,084
- --------------------------------------------------------------------------------
Tetra Tech, Inc. 1,2 91,800 1,660,662
- --------------------------------------------------------------------------------
United Stationers, Inc. 1 10,600 494,914
- --------------------------------------------------------------------------------
Viad Corp. 42,200 1,713,320
- --------------------------------------------------------------------------------
Volt Information Sciences, Inc. 1,2 14,000 702,940
- --------------------------------------------------------------------------------
Waste Industries USA, Inc. 4,100 125,132
- --------------------------------------------------------------------------------
Watson Wyatt & Co. Holdings 47,500 2,144,625
-----------------
37,499,682
- --------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING--0.9%
Baker (Michael) Corp. 1,2 2,600 58,890
- --------------------------------------------------------------------------------
Chicago Bridge & Iron Co. NV 21,100 576,874
- --------------------------------------------------------------------------------
Comfort Systems USA, Inc. 31,000 391,840
16 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING Continued
EMCOR Group, Inc. 1 43,000 $ 2,444,550
- --------------------------------------------------------------------------------
Granite Construction, Inc. 13,600 684,352
- --------------------------------------------------------------------------------
Infrasource Services, Inc. 1 64,400 1,401,988
- --------------------------------------------------------------------------------
Insituform Technologies, Inc., Cl. A 1,2 2,500 64,650
- --------------------------------------------------------------------------------
Perini Corp. 1 10,500 323,190
- --------------------------------------------------------------------------------
Quanta Services, Inc. 1 29,600 582,232
- --------------------------------------------------------------------------------
Sterling Construction Co., Inc. 1,2 2,400 52,224
-----------------
6,580,790
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--1.8%
Acuity Brands, Inc. 44,500 2,315,780
- --------------------------------------------------------------------------------
AZZ, Inc. 1 400 20,480
- --------------------------------------------------------------------------------
Baldor Electric Co. 2 34,800 1,163,016
- --------------------------------------------------------------------------------
Belden CDT, Inc. 2 57,300 2,239,857
- --------------------------------------------------------------------------------
Cooper Industries Ltd., Cl. A 4,300 388,849
- --------------------------------------------------------------------------------
EnerSys, Inc. 1 27,200 435,200
- --------------------------------------------------------------------------------
First Solar, Inc. 1 2,100 62,580
- --------------------------------------------------------------------------------
Franklin Electric Co., Inc. 2 1,200 61,668
- --------------------------------------------------------------------------------
General Cable Corp. 1 18,900 826,119
- --------------------------------------------------------------------------------
Genlyte Group, Inc. (The) 1,2 6,500 507,715
- --------------------------------------------------------------------------------
GrafTech International Ltd. 1,2 37,700 260,884
- --------------------------------------------------------------------------------
II-VI, Inc. 1 6,200 173,228
- --------------------------------------------------------------------------------
Lamson & Sessions Co. (The) 1,2 8,500 206,210
- --------------------------------------------------------------------------------
LSI Industries, Inc. 7,200 142,920
- --------------------------------------------------------------------------------
Regal-Beloit Corp. 2 31,900 1,675,069
- --------------------------------------------------------------------------------
Smith (A.O.) Corp. 2 3,900 146,484
- --------------------------------------------------------------------------------
Superior Essex, Inc. 1 20,200 671,650
- --------------------------------------------------------------------------------
Thomas & Betts Corp. 1 5,100 241,128
- --------------------------------------------------------------------------------
Vicor Corp. 2 18,300 203,313
- --------------------------------------------------------------------------------
Woodward Governor Co. 2 35,600 1,413,676
-----------------
13,155,826
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--0.2%
Sequa Corp., Cl. A1 5,800 667,348
- --------------------------------------------------------------------------------
Teleflex, Inc. 3,500 225,960
- --------------------------------------------------------------------------------
Tredegar Corp. 2 7,200 162,792
-----------------
1,056,100
- --------------------------------------------------------------------------------
MACHINERY--3.6%
Actuant Corp., Cl. A 2 12,600 600,390
- --------------------------------------------------------------------------------
AGCO Corp. 1,2 29,000 897,260
- --------------------------------------------------------------------------------
Albany International Corp., Cl. A 12,200 401,502
- --------------------------------------------------------------------------------
American Railcar Industries, Inc. 2 4,600 156,584
- --------------------------------------------------------------------------------
American Science & Engineering, Inc. 1,2 1,800 107,118
- --------------------------------------------------------------------------------
Ampco-Pittsburgh Corp. 10,900 364,932
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
MACHINERY Continued
Astec Industries, Inc. 1,2 8,200 $ 287,820
- --------------------------------------------------------------------------------
Briggs & Stratton Corp. 2 11,900 320,705
- --------------------------------------------------------------------------------
Bucyrus International, Inc., Cl. A 2 15,700 812,632
- --------------------------------------------------------------------------------
Cascade Corp. 2 3,800 201,020
- --------------------------------------------------------------------------------
Commercial Vehicle Group, Inc. 1 900 19,620
- --------------------------------------------------------------------------------
Cummins, Inc. 7,800 921,804
- --------------------------------------------------------------------------------
Dynamic Materials Corp. 2 7,700 216,370
- --------------------------------------------------------------------------------
Eaton Corp. 8,400 631,176
- --------------------------------------------------------------------------------
Federal Signal Corp. 21,100 338,444
- --------------------------------------------------------------------------------
Flow International Corp. 1 24,000 264,480
- --------------------------------------------------------------------------------
Freightcar America, Inc. 2 8,900 493,505
- --------------------------------------------------------------------------------
Gardner Denver, Inc. 1 48,800 1,820,728
- --------------------------------------------------------------------------------
Gorman-Rupp Co. (The) 1,275 47,137
- --------------------------------------------------------------------------------
Kadant, Inc. 1 8,500 207,230
- --------------------------------------------------------------------------------
Kaydon Corp. 45,900 1,824,066
- --------------------------------------------------------------------------------
Lindsay Manufacturing Co. 2 8,200 267,730
- --------------------------------------------------------------------------------
Manitowoc Co., Inc. (The) 10,900 647,787
- --------------------------------------------------------------------------------
Middleby Corp. (The) 1,2 3,100 324,477
- --------------------------------------------------------------------------------
Miller Industries, Inc. 1,2 6,300 151,200
- --------------------------------------------------------------------------------
Mueller Industries, Inc. 2 46,500 1,474,050
- --------------------------------------------------------------------------------
NACCO Industries, Inc., Cl. A 10,300 1,406,980
- --------------------------------------------------------------------------------
Navistar International Corp. 1 6,000 200,580
- --------------------------------------------------------------------------------
Nordson Corp. 39,300 1,958,319
- --------------------------------------------------------------------------------
RBC Bearings, Inc. 1 7,500 214,950
- --------------------------------------------------------------------------------
Robbins & Myers, Inc. 9,700 445,424
- --------------------------------------------------------------------------------
SPX Corp. 14,900 911,284
- --------------------------------------------------------------------------------
Sun Hydraulics Corp. 2 2,300 47,173
- --------------------------------------------------------------------------------
Tennant Co. 2 10,700 310,300
- --------------------------------------------------------------------------------
Terex Corp. 1 4,300 277,694
- --------------------------------------------------------------------------------
Titan International, Inc. 2 10,600 213,590
- --------------------------------------------------------------------------------
Toro Co. (The) 47,500 2,214,925
- --------------------------------------------------------------------------------
Valmont Industries, Inc. 2 37,800 2,097,522
- --------------------------------------------------------------------------------
Wabtec Corp. 62,500 1,898,750
-----------------
25,997,258
- --------------------------------------------------------------------------------
MARINE--0.3%
American Commercial Lines, Inc. 1 15,500 1,015,405
- --------------------------------------------------------------------------------
Horizon Lines, Inc., Cl. A 41,700 1,124,232
-----------------
2,139,637
- --------------------------------------------------------------------------------
ROAD & RAIL--0.7%
Arkansas Best Corp. 2 15,100 543,600
- --------------------------------------------------------------------------------
Dollar Thrifty Automotive
- --------------------------------------------------------------------------------
Group, Inc. 1,2 7,500 342,075
- --------------------------------------------------------------------------------
Genesee & Wyoming, Inc., Cl. A 1,2 7,700 202,048
- --------------------------------------------------------------------------------
Heartland Express, Inc. 7,900 118,658
17 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
ROAD & RAIL Continued
Kansas City Southern 1,2 17,800 $ 515,844
- --------------------------------------------------------------------------------
Laidlaw International, Inc. 31,300 952,459
- --------------------------------------------------------------------------------
P.A.M. Transportation Services, Inc. 1,2 3,900 85,878
- --------------------------------------------------------------------------------
Ryder Systems, Inc. 4,800 245,088
- --------------------------------------------------------------------------------
Saia, Inc. 1 13,600 315,656
- --------------------------------------------------------------------------------
Swift Transportation Co., Inc. 1 65,900 1,731,193
- --------------------------------------------------------------------------------
Universal Truckload Services, Inc. 1 500 11,875
- --------------------------------------------------------------------------------
Werner Enterprises, Inc. 2 9,400 164,312
-----------------
5,228,686
- --------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS--0.7%
Applied Industrial Technologies, Inc. 61,075 1,606,883
- --------------------------------------------------------------------------------
BlueLinx Holdings, Inc. 2 19,300 200,720
- --------------------------------------------------------------------------------
Houston Wire & Cable Co. 1,2 8,400 175,560
- --------------------------------------------------------------------------------
Interline Brands, Inc. 1 24,300 546,021
- --------------------------------------------------------------------------------
Kaman Corp., Cl. A 2 5,000 111,950
- --------------------------------------------------------------------------------
Rush Enterprises, Inc., Cl. A 1,2 8,800 148,896
- --------------------------------------------------------------------------------
UAP Holding Corp. 47,000 1,183,460
- --------------------------------------------------------------------------------
United Rentals, Inc. 1,2 28,300 719,669
- --------------------------------------------------------------------------------
W.W. Grainger, Inc. 8,300 580,502
-----------------
5,273,661
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--24.3%
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--3.1%
ADTRAN, Inc. 65,700 1,491,390
- --------------------------------------------------------------------------------
Anaren Microwave, Inc. 1,2 19,200 340,992
- --------------------------------------------------------------------------------
Andrew Corp. 1 5,000 51,150
- --------------------------------------------------------------------------------
Arris Group, Inc. 1 189,400 2,369,394
- --------------------------------------------------------------------------------
Avaya, Inc. 1 77,500 1,083,450
- --------------------------------------------------------------------------------
Avocent Corp. 1 10,300 348,655
- --------------------------------------------------------------------------------
Black Box Corp. 2 3,300 138,567
- --------------------------------------------------------------------------------
C-COR.net Corp. 1,2 23,200 258,448
- --------------------------------------------------------------------------------
Carrier Access Corp. 1 9,800 64,288
- --------------------------------------------------------------------------------
CommScope, Inc. 1 79,900 2,435,352
- --------------------------------------------------------------------------------
Comtech Telecommunications
Corp. 1,2 20,600 784,242
- --------------------------------------------------------------------------------
Digi International, Inc. 1,2 14,800 204,092
- --------------------------------------------------------------------------------
Ditech Networks, Inc. 1,2 21,000 145,320
- --------------------------------------------------------------------------------
Dycom Industries, Inc. 1 7,700 162,624
- --------------------------------------------------------------------------------
EMS Technologies, Inc. 1 12,200 244,366
- --------------------------------------------------------------------------------
Extreme Networks, Inc. 1 53,100 222,489
- --------------------------------------------------------------------------------
Foundry Networks, Inc. 1 60,500 906,290
- --------------------------------------------------------------------------------
Harmonic, Inc. 1,2 35,000 254,450
- --------------------------------------------------------------------------------
Inter-Tel, Inc. 2 1,100 24,376
- --------------------------------------------------------------------------------
InterDigital Communications Corp. 1,2 74,700 2,506,185
- --------------------------------------------------------------------------------
Oplink Communications, Inc. 1,2 11,800 242,608
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT Continued
Packeteer, Inc. 1,2 2,400 $ 32,640
- --------------------------------------------------------------------------------
Performance Technologies, Inc. 1,2 8,300 49,717
- --------------------------------------------------------------------------------
Plantronics, Inc. 2 3,500 74,200
- --------------------------------------------------------------------------------
Polycom, Inc. 1 76,800 2,373,888
- --------------------------------------------------------------------------------
Redback Networks, Inc. 1 7,100 177,074
- --------------------------------------------------------------------------------
SafeNet, Inc. 1,2 6,600 158,004
- --------------------------------------------------------------------------------
Sonus Networks, Inc. 1 131,200 864,608
- --------------------------------------------------------------------------------
Stratex Networks, Inc. 1,2 9,900 47,817
- --------------------------------------------------------------------------------
Symmetricom, Inc. 1,2 5,400 48,168
- --------------------------------------------------------------------------------
Tekelec, Inc. 1,2 61,400 910,562
- --------------------------------------------------------------------------------
Tellabs, Inc. 1 45,800 469,908
- --------------------------------------------------------------------------------
UTStarcom, Inc. 1,2 217,300 1,901,375
- --------------------------------------------------------------------------------
ViaSat, Inc. 1,2 19,300 575,333
-----------------
21,962,022
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--1.8%
Adaptec, Inc. 1,2 19,600 91,336
- --------------------------------------------------------------------------------
Brocade Communications
Systems, Inc. 1 300,300 2,465,463
- --------------------------------------------------------------------------------
Cray, Inc. 1,2 14,300 169,884
- --------------------------------------------------------------------------------
Diebold, Inc. 17,600 820,160
- --------------------------------------------------------------------------------
Electronics for Imaging, Inc. 1,2 36,400 967,512
- --------------------------------------------------------------------------------
Emulex Corp. 1 127,900 2,495,329
- --------------------------------------------------------------------------------
Hypercom Corp. 1,2 35,800 227,330
- --------------------------------------------------------------------------------
Imation Corp. 29,500 1,369,685
- --------------------------------------------------------------------------------
Komag, Inc. 1,2 40,500 1,534,140
- --------------------------------------------------------------------------------
Lexmark International, Inc., Cl. A 1 16,000 1,171,200
- --------------------------------------------------------------------------------
NCR Corp. 1 25,400 1,086,104
- --------------------------------------------------------------------------------
QLogic Corp. 1 29,800 653,216
- --------------------------------------------------------------------------------
Seagate Technology 4,272 113,208
-----------------
13,164,567
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--3.5%
Acacia Research Corp. 1,2 18,700 250,206
- --------------------------------------------------------------------------------
Aeroflex, Inc. 1,2 19,600 229,712
- --------------------------------------------------------------------------------
Agilysys, Inc. 2 4,500 75,330
- --------------------------------------------------------------------------------
Avnet, Inc. 1 18,700 477,411
- --------------------------------------------------------------------------------
AVX Corp. 42,700 631,533
- --------------------------------------------------------------------------------
Bel Fuse, Inc., Cl. A 4,800 144,816
- --------------------------------------------------------------------------------
Benchmark Electronics, Inc. 1,2 19,500 475,020
- --------------------------------------------------------------------------------
CDW Corp. 9,700 682,104
- --------------------------------------------------------------------------------
Checkpoint Systems, Inc. 1 10,800 218,160
- --------------------------------------------------------------------------------
Cogent, Inc. 1,2 7,100 78,171
- --------------------------------------------------------------------------------
Cognex Corp. 2 24,100 574,062
- --------------------------------------------------------------------------------
CPI International, Inc. 1 7,000 105,000
- --------------------------------------------------------------------------------
CTS Corp. 2 21,000 329,700
18 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS Continued
Daktronics, Inc. 2 30,300 $ 1,116,555
- --------------------------------------------------------------------------------
Dolby Laboratories, Inc., Cl. A 1 18,900 586,278
- --------------------------------------------------------------------------------
DTS, Inc. 1,2 2,100 50,799
- --------------------------------------------------------------------------------
Excel Technology, Inc. 1 4,500 115,155
- --------------------------------------------------------------------------------
FLIR Systems, Inc. 1,2 12,800 407,424
- --------------------------------------------------------------------------------
Gerber Scientific, Inc. 1 15,400 193,424
- --------------------------------------------------------------------------------
Global Imaging Systems, Inc. 1 59,200 1,299,440
- --------------------------------------------------------------------------------
Ingram Micro, Inc., Cl. A 1 19,800 404,118
- --------------------------------------------------------------------------------
Insight Enterprises, Inc. 1 33,500 632,145
- --------------------------------------------------------------------------------
IPG Photonics Corp. 1,2 12,020 288,480
- --------------------------------------------------------------------------------
Itron, Inc. 1,2 34,600 1,793,664
- --------------------------------------------------------------------------------
Kemet Corp. 1 21,500 156,950
- --------------------------------------------------------------------------------
Littlefuse, Inc. 1 22,200 707,736
- --------------------------------------------------------------------------------
Methode Electronics, Inc., Cl. A 11,000 119,130
- --------------------------------------------------------------------------------
Mettler-Toledo International, Inc. 1 8,000 630,800
- --------------------------------------------------------------------------------
MTS Systems Corp. 2 19,200 741,504
- --------------------------------------------------------------------------------
Newport Corp. 1 27,400 574,030
- --------------------------------------------------------------------------------
OYO Geospace Corp. 1,2 1,500 87,135
- --------------------------------------------------------------------------------
Park Electrochemical Corp. 17,400 446,310
- --------------------------------------------------------------------------------
Paxar Corp. 1,2 9,800 225,988
- --------------------------------------------------------------------------------
PC Connection, Inc. 1,2 5,300 78,599
- --------------------------------------------------------------------------------
Planar Systems, Inc. 1,2 6,300 60,921
- --------------------------------------------------------------------------------
Plexus Corp. 1 71,000 1,695,480
- --------------------------------------------------------------------------------
RadiSys Corp. 1,2 17,100 285,057
- --------------------------------------------------------------------------------
Rofin-Sinar Technologies, Inc. 1,2 35,200 2,128,192
- --------------------------------------------------------------------------------
Rogers Corp. 1 27,000 1,597,050
- --------------------------------------------------------------------------------
Sanmina-SCI Corp. 1 56,400 194,580
- --------------------------------------------------------------------------------
ScanSource, Inc. 1,2 5,800 176,320
- --------------------------------------------------------------------------------
Solectron Corp. 1 77,000 247,940
- --------------------------------------------------------------------------------
Staktek Holdings, Inc. 1 1,100 5,665
- --------------------------------------------------------------------------------
SYNNEX Corp. 1 11,800 258,892
- --------------------------------------------------------------------------------
Tech Data Corp. 1 27,400 1,037,638
- --------------------------------------------------------------------------------
Technitrol, Inc. 35,700 852,873
- --------------------------------------------------------------------------------
Tektronix, Inc. 16,300 475,471
- --------------------------------------------------------------------------------
TTM Technologies, Inc. 1 35,800 405,614
- --------------------------------------------------------------------------------
Vishay Intertechnology, Inc. 1 51,700 700,018
- --------------------------------------------------------------------------------
Zygo Corp. 1,2 15,800 259,910
-----------------
25,308,510
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--3.0%
24/7 Real Media, Inc. 1,2 25,100 227,155
- --------------------------------------------------------------------------------
Aquantive, Inc. 1,2 18,000 443,880
- --------------------------------------------------------------------------------
Art Technology Group, Inc. 1,2 46,900 109,277
- --------------------------------------------------------------------------------
CMGI, Inc. 1 112,100 150,214
- --------------------------------------------------------------------------------
CyberSource Corp. 1 2,200 24,244
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES Continued
Digital Insight Corp. 1 42,700 $ 1,643,523
- --------------------------------------------------------------------------------
Digital River, Inc. 1,2 18,400 1,026,536
- --------------------------------------------------------------------------------
Digitas, Inc. 1 71,000 952,110
- --------------------------------------------------------------------------------
EarthLink, Inc. 1 185,100 1,314,210
- --------------------------------------------------------------------------------
eCollege.com, Inc. 1,2 6,900 107,985
- --------------------------------------------------------------------------------
InfoSpace, Inc. 1,2 20,600 422,506
- --------------------------------------------------------------------------------
Internap Network Services Corp. 1,2 20,400 405,348
- --------------------------------------------------------------------------------
Interwoven, Inc. 1 30,000 440,100
- --------------------------------------------------------------------------------
j2 Global Communications, Inc. 1,2 62,000 1,689,500
- --------------------------------------------------------------------------------
Liquidity Services, Inc. 1 2,000 34,420
- --------------------------------------------------------------------------------
National Information Consortium,
Inc. 1 4,700 23,359
- --------------------------------------------------------------------------------
Open Text Corp. 1,2 35,800 726,740
- --------------------------------------------------------------------------------
RealNetworks, Inc. 1,2 126,500 1,383,910
- --------------------------------------------------------------------------------
Savvis, Inc. 1,2 26,446 944,387
- --------------------------------------------------------------------------------
Sohu.com, Inc. 1 46,300 1,111,200
- --------------------------------------------------------------------------------
SonicWALL, Inc. 1 51,000 429,420
- --------------------------------------------------------------------------------
TheStreet.com, Inc. 2 25,400 226,060
- --------------------------------------------------------------------------------
Travelzoo, Inc. 1,2 9,900 296,505
- --------------------------------------------------------------------------------
United Online, Inc. 148,000 1,965,440
- --------------------------------------------------------------------------------
ValueClick, Inc. 1 31,900 753,797
- --------------------------------------------------------------------------------
VeriSign, Inc. 1 33,400 803,270
- --------------------------------------------------------------------------------
Vignette Corp. 1 15,600 266,292
- --------------------------------------------------------------------------------
WebEx Communications, Inc. 1 51,400 1,793,346
- --------------------------------------------------------------------------------
webMethods, Inc. 1 51,700 380,512
- --------------------------------------------------------------------------------
Websense, Inc. 1,2 58,500 1,335,555
-----------------
21,430,801
- --------------------------------------------------------------------------------
IT SERVICES--3.0%
Acxiom Corp. 29,600 759,240
- --------------------------------------------------------------------------------
Affiliated Computer Services, Inc.,
Cl. A 1 6,600 322,344
- --------------------------------------------------------------------------------
BearingPoint, Inc. 1,2 7,700 60,599
- --------------------------------------------------------------------------------
BISYS Group, Inc. (The) 1 152,100 1,963,611
- --------------------------------------------------------------------------------
CACI International, Inc., Cl. A 1 3,000 169,500
- --------------------------------------------------------------------------------
Ceridian Corp. 1 25,400 710,692
- --------------------------------------------------------------------------------
CIBER, Inc. 1,2 21,000 142,380
- --------------------------------------------------------------------------------
Computer Sciences Corp. 1 19,100 1,019,367
- --------------------------------------------------------------------------------
Convergys Corp. 1 34,400 818,032
- --------------------------------------------------------------------------------
Covansys Corp. 1 27,100 621,945
- --------------------------------------------------------------------------------
CSG Systems International, Inc. 1 85,400 2,282,742
- --------------------------------------------------------------------------------
DST Systems, Inc. 1 12,800 801,664
- --------------------------------------------------------------------------------
Fiserv, Inc. 1 19,400 1,016,948
- --------------------------------------------------------------------------------
Forrester Research, Inc. 1 16,700 452,737
- --------------------------------------------------------------------------------
Gartner, Inc., Cl. A 1 51,500 1,019,185
- --------------------------------------------------------------------------------
Gevity HR, Inc. 2 6,600 156,354
19 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
IT SERVICES Continued
Hewitt Associates, Inc. 1 1,900 $ 48,925
- --------------------------------------------------------------------------------
Infocrossing, Inc. 1,2 3,200 52,160
- --------------------------------------------------------------------------------
infoUSA, Inc. 30,800 366,828
- --------------------------------------------------------------------------------
Integral Systems, Inc. 2 2,500 57,925
- --------------------------------------------------------------------------------
Isilon Systems, Inc. 1,2 4,600 126,960
- --------------------------------------------------------------------------------
Keane, Inc. 1,2 23,200 276,312
- --------------------------------------------------------------------------------
Lightbridge, Inc. 1 24,600 333,084
- --------------------------------------------------------------------------------
ManTech International Corp. 1 10,900 401,447
- --------------------------------------------------------------------------------
Maximus, Inc. 2 8,000 246,240
- --------------------------------------------------------------------------------
MPS Group, Inc. 1 146,900 2,083,042
- --------------------------------------------------------------------------------
NCI, Inc., Cl. A 1 13,100 200,299
- --------------------------------------------------------------------------------
Ness Technologies, Inc. 1 2,900 41,354
- --------------------------------------------------------------------------------
Perot Systems Corp., Cl. A 1,2 64,400 1,055,516
- --------------------------------------------------------------------------------
Sabre Holdings Corp. 31,200 994,968
- --------------------------------------------------------------------------------
SRA International, Inc., Cl. A 1 25,000 668,500
- --------------------------------------------------------------------------------
Startek, Inc. 2 4,400 59,576
- --------------------------------------------------------------------------------
Sykes Enterprises, Inc. 1 57,200 1,009,008
- --------------------------------------------------------------------------------
TNS, Inc. 1,2 400 7,700
- --------------------------------------------------------------------------------
Total System Services, Inc. 2 11,300 298,207
- --------------------------------------------------------------------------------
Tyler Technologies, Inc. 1,2 33,100 465,386
- --------------------------------------------------------------------------------
Unisys Corp. 1 36,300 284,592
- --------------------------------------------------------------------------------
VeriFone Holdings, Inc. 1 4,500 159,300
-----------------
21,554,669
- --------------------------------------------------------------------------------
LIFE SCIENCES TOOLS & SERVICES--0.1%
Dionex Corp. 1,2 11,500 652,165
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--5.0%
Actel Corp. 1,2 10,400 188,864
- --------------------------------------------------------------------------------
Advanced Analogic Technologies,
Inc. 1,2 1,100 5,929
- --------------------------------------------------------------------------------
Advanced Energy Industries, Inc. 1,2 50,400 951,048
- --------------------------------------------------------------------------------
Agere Systems, Inc. 1 56,400 1,081,188
- --------------------------------------------------------------------------------
Altera Corp. 1 54,200 1,066,656
- --------------------------------------------------------------------------------
AMIS Holdings, Inc. 1 25,900 273,763
- --------------------------------------------------------------------------------
Amkor Technology, Inc. 1,2 245,600 2,293,904
- --------------------------------------------------------------------------------
Applied Micro Circuits Corp. 1 245,300 873,268
- --------------------------------------------------------------------------------
Asyst Technologies, Inc. 1 50,500 369,155
- --------------------------------------------------------------------------------
Atheros Communications, Inc. 1,2 52,100 1,110,772
- --------------------------------------------------------------------------------
Atmel Corp. 1 93,200 563,860
- --------------------------------------------------------------------------------
ATMI, Inc. 1,2 34,300 1,047,179
- --------------------------------------------------------------------------------
Cirrus Logic, Inc. 1 40,700 280,016
- --------------------------------------------------------------------------------
Cohu, Inc. 2 12,800 258,048
- --------------------------------------------------------------------------------
Credence Systems Corp. 1,2 42,600 221,520
- --------------------------------------------------------------------------------
Cree, Inc. 1,2 9,700 168,004
- --------------------------------------------------------------------------------
Cymer, Inc. 1 54,500 2,395,275
- --------------------------------------------------------------------------------
Diodes, Inc. 1 18,600 659,928
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT Continued
DSP Group, Inc. 1,2 3,600 $ 78,120
- --------------------------------------------------------------------------------
Fairchild Semiconductor International,
Inc., Cl. A 1 24,200 406,802
- --------------------------------------------------------------------------------
FormFactor, Inc. 1 6,200 230,950
- --------------------------------------------------------------------------------
Hittite Microwave Corp. 1,2 37,000 1,195,840
- --------------------------------------------------------------------------------
Integrated Device Technology, Inc. 1 45,800 708,984
- --------------------------------------------------------------------------------
Intersil Corp., Cl. A 33,500 801,320
- --------------------------------------------------------------------------------
Intevac, Inc. 1,2 20,300 526,785
- --------------------------------------------------------------------------------
Kulicke & Soffa Industries, Inc. 1,2 47,600 399,840
- --------------------------------------------------------------------------------
Linear Technology Corp. 11,200 339,584
- --------------------------------------------------------------------------------
LSI Logic Corp. 1 93,600 842,400
- --------------------------------------------------------------------------------
LTX Corp. 1 74,900 419,440
- --------------------------------------------------------------------------------
Mattson Technology, Inc. 1 25,200 234,864
- --------------------------------------------------------------------------------
Micrel, Inc. 1,2 178,500 1,924,230
- --------------------------------------------------------------------------------
Microtune, Inc. 1,2 17,300 81,310
- --------------------------------------------------------------------------------
MKS Instruments, Inc. 1 54,700 1,235,126
- --------------------------------------------------------------------------------
National Semiconductor Corp. 46,300 1,051,010
- --------------------------------------------------------------------------------
Novellus Systems, Inc. 1 29,000 998,180
- --------------------------------------------------------------------------------
OmniVision Technologies, Inc. 1,2 115,100 1,571,115
- --------------------------------------------------------------------------------
PortalPlayer, Inc. 1 17,700 238,065
- --------------------------------------------------------------------------------
Power Integrations, Inc. 1,2 6,800 159,460
- --------------------------------------------------------------------------------
RF Micro Devices, Inc. 1,2 27,700 188,083
- --------------------------------------------------------------------------------
Semtech Corp. 1 37,500 490,125
- --------------------------------------------------------------------------------
Silicon Image, Inc. 1,2 139,400 1,773,168
- --------------------------------------------------------------------------------
Silicon Storage Technology, Inc. 1,2 32,000 144,320
- --------------------------------------------------------------------------------
SiRF Technology Holdings, Inc. 1 13,500 344,520
- --------------------------------------------------------------------------------
Supertex, Inc. 1,2 9,300 365,025
- --------------------------------------------------------------------------------
Techwell, Inc. 1,2 1,000 16,060
- --------------------------------------------------------------------------------
Teradyne, Inc. 1 54,700 818,312
- --------------------------------------------------------------------------------
Tessera Technologies, Inc. 1 30,200 1,218,268
- --------------------------------------------------------------------------------
Transmeta Corp. 1,2 32,200 35,742
- --------------------------------------------------------------------------------
Trident Microsystems, Inc. 1 3,200 58,176
- --------------------------------------------------------------------------------
TriQuint Semiconductor, Inc. 1,2 33,000 148,500
- --------------------------------------------------------------------------------
Varian Semiconductor Equipment
Associates, Inc. 1 19,700 896,744
- --------------------------------------------------------------------------------
Veeco Instruments, Inc. 1 17,500 327,775
- --------------------------------------------------------------------------------
Xilinx, Inc. 40,200 957,162
- --------------------------------------------------------------------------------
Zoran Corp. 1 65,300 952,074
-----------------
35,985,856
- --------------------------------------------------------------------------------
SOFTWARE--4.8%
Actuate Corp. 1 43,500 258,390
- --------------------------------------------------------------------------------
Advent Software, Inc. 1,2 28,600 1,009,294
- --------------------------------------------------------------------------------
Altiris, Inc. 1 15,700 398,466
- --------------------------------------------------------------------------------
Amdocs Ltd. 1 16,300 631,625
- --------------------------------------------------------------------------------
Ansoft Corp. 1,2 24,900 692,220
20 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
SOFTWARE Continued
Aspen Technology, Inc. 1,2 40,600 $ 447,412
- --------------------------------------------------------------------------------
Autodesk, Inc. 1 16,900 683,774
- --------------------------------------------------------------------------------
BEA Systems, Inc. 1 75,200 946,016
- --------------------------------------------------------------------------------
Blackbaud, Inc. 77,789 2,022,514
- --------------------------------------------------------------------------------
BMC Software, Inc. 1 39,800 1,281,560
- --------------------------------------------------------------------------------
Cadence Design Systems, Inc. 1 50,900 911,619
- --------------------------------------------------------------------------------
Check Point Software
Technologies Ltd. 1 14,700 322,224
- --------------------------------------------------------------------------------
Cognos, Inc. 1,2 13,500 573,210
- --------------------------------------------------------------------------------
Compuware Corp. 1 99,600 829,668
- --------------------------------------------------------------------------------
Double-Take Software, Inc. 1 10,600 136,528
- --------------------------------------------------------------------------------
ePlus, inc. 1 100 1,045
- --------------------------------------------------------------------------------
Fair Isaac Corp. 27,600 1,121,940
- --------------------------------------------------------------------------------
Hyperion Solutions Corp. 1 21,400 769,116
- --------------------------------------------------------------------------------
i2 Technoloogies, Inc. 1,2 9,700 221,354
- --------------------------------------------------------------------------------
Interactive Intelligence, Inc. 1 15,700 351,994
- --------------------------------------------------------------------------------
Intuit, Inc. 1 13,400 408,834
- --------------------------------------------------------------------------------
JDA Software Group, Inc. 1 16,100 221,697
- --------------------------------------------------------------------------------
Kronos, Inc. 1,2 21,600 793,584
- --------------------------------------------------------------------------------
Lawson Software, Inc. 1,2 93,000 687,270
- --------------------------------------------------------------------------------
Magma Design Automation, Inc. 1,2 7,500 66,975
- --------------------------------------------------------------------------------
Manhattan Associates, Inc. 1,2 41,000 1,233,280
- --------------------------------------------------------------------------------
MapInfo Corp. 1,2 9,400 122,670
- --------------------------------------------------------------------------------
McAfee, Inc. 1 31,700 899,646
- --------------------------------------------------------------------------------
Mentor Graphics Corp. 1,2 135,200 2,437,656
- --------------------------------------------------------------------------------
MICROS Systems, Inc. 1 27,100 1,428,170
- --------------------------------------------------------------------------------
MicroStrategy, Inc., Cl. A 1,2 19,100 2,177,591
- --------------------------------------------------------------------------------
Net 1 UEPS Technologies, Inc. 1,2 7,200 212,832
- --------------------------------------------------------------------------------
Novell, Inc. 1 83,100 515,220
- --------------------------------------------------------------------------------
Open Solutions, Inc. 1,2 7,900 297,356
- --------------------------------------------------------------------------------
OPNET Technologies, Inc. 1,2 4,100 59,245
- --------------------------------------------------------------------------------
Parametric Technology Corp. 1 8,300 149,566
- --------------------------------------------------------------------------------
Progress Software Corp. 1,2 3,400 94,962
- --------------------------------------------------------------------------------
Quality Systems, Inc. 2 21,800 812,486
- --------------------------------------------------------------------------------
Quest Software, Inc. 1 76,000 1,113,400
- --------------------------------------------------------------------------------
Sonic Solutions, Inc. 1,2 9,600 156,480
- --------------------------------------------------------------------------------
SPSS, Inc. 1,2 14,700 442,029
- --------------------------------------------------------------------------------
Sybase, Inc. 1 39,200 968,240
- --------------------------------------------------------------------------------
Synchronoss Technologies, Inc. 1 1,800 24,696
- --------------------------------------------------------------------------------
Synopsys, Inc. 1 42,100 1,125,333
- --------------------------------------------------------------------------------
The9 Ltd., ADR 1 3,300 106,326
- --------------------------------------------------------------------------------
TIBCO Software, Inc. 1 196,000 1,850,240
- --------------------------------------------------------------------------------
Transaction Systems Architects,
Inc., Cl. A 1 29,200 951,044
- --------------------------------------------------------------------------------
Ultimate Software Group, Inc.
(The) 1,2 6,000 139,560
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
SOFTWARE Continued
VA Software Corp. 1,2 60,500 $ 304,315
- --------------------------------------------------------------------------------
Vasco Data Security
International, Inc. 1,2 14,200 168,270
- --------------------------------------------------------------------------------
Verint Systems, Inc. 1,2 8,600 294,808
- --------------------------------------------------------------------------------
Wind River Systems, Inc. 1 50,900 521,725
-----------------
34,395,475
- --------------------------------------------------------------------------------
MATERIALS--8.8%
- --------------------------------------------------------------------------------
CHEMICALS--4.0%
Albemarle Corp. 11,800 847,240
- --------------------------------------------------------------------------------
Arch Chemicals, Inc. 2 16,700 556,277
- --------------------------------------------------------------------------------
Ashland, Inc. 13,100 906,258
- --------------------------------------------------------------------------------
Cabot Corp. 1,800 78,426
- --------------------------------------------------------------------------------
CF Industries Holdings, Inc. 65,400 1,676,856
- --------------------------------------------------------------------------------
Eastman Chemical Co. 2,900 171,999
- --------------------------------------------------------------------------------
FMC Corp. 8,300 635,365
- --------------------------------------------------------------------------------
Fuller (H.B.) Co. 86,700 2,238,594
- --------------------------------------------------------------------------------
Georgia Gulf Corp. 22,400 432,544
- --------------------------------------------------------------------------------
Hercules, Inc. 1 138,300 2,670,573
- --------------------------------------------------------------------------------
Innophos Holdings, Inc. 1 21,000 308,280
- --------------------------------------------------------------------------------
Innospec, Inc. 700 32,585
- --------------------------------------------------------------------------------
Koppers Holdings, Inc. 4,300 112,101
- --------------------------------------------------------------------------------
Landec Corp. 1,2 1,800 19,368
- --------------------------------------------------------------------------------
Lubrizol Corp. (The) 12,500 626,625
- --------------------------------------------------------------------------------
Lyondell Chemical Co. 35,600 910,292
- --------------------------------------------------------------------------------
MacDermid, Inc. 13,300 453,530
- --------------------------------------------------------------------------------
NewMarket Corp. 35,700 2,108,085
- --------------------------------------------------------------------------------
Olin Corp. 40,800 674,016
- --------------------------------------------------------------------------------
OM Group, Inc. 1 49,500 2,241,360
- --------------------------------------------------------------------------------
Pioneer Cos., Inc. 1 12,600 361,116
- --------------------------------------------------------------------------------
PolyOne Corp. 1 167,500 1,256,250
- --------------------------------------------------------------------------------
Rockwood Holdings, Inc. 1 17,500 442,050
- --------------------------------------------------------------------------------
Rohm & Haas Co. 2,700 138,024
- --------------------------------------------------------------------------------
Schulman (A.), Inc. 2 15,700 349,325
- --------------------------------------------------------------------------------
Sensient Technologies Corp. 66,400 1,633,440
- --------------------------------------------------------------------------------
Spartech Corp. 76,000 1,992,720
- --------------------------------------------------------------------------------
Stepan Co. 4,300 136,181
- --------------------------------------------------------------------------------
Terra Industries, Inc. 1,2 116,700 1,398,066
- --------------------------------------------------------------------------------
Tronox, Inc., Cl. A 2 20,600 329,394
- --------------------------------------------------------------------------------
Valspar Corp. (The) 20,900 577,676
- --------------------------------------------------------------------------------
W.R. Grace & Co. 1,2 127,500 2,524,500
-----------------
28,839,116
- --------------------------------------------------------------------------------
CONSTRUCTION MATERIALS--0.6%
Eagle Materials, Inc. 49,500 2,139,885
- --------------------------------------------------------------------------------
Headwaters, Inc. 1,2 70,500 1,689,180
21 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
CONSTRUCTION MATERIALS Continued
U.S. Concrete, Inc. 1,2 30,100 $ 214,312
-----------------
4,043,377
- --------------------------------------------------------------------------------
CONTAINERS & PACKAGING--0.9%
AEP Industries, Inc. 1 4,300 229,233
- --------------------------------------------------------------------------------
Caraustar Industries, Inc. 1,2 4,500 36,405
- --------------------------------------------------------------------------------
Chesapeake Corp. 4,300 73,186
- --------------------------------------------------------------------------------
Graphic Packaging Corp. 1 24,900 107,817
- --------------------------------------------------------------------------------
Greif, Inc., Cl. A 23,800 2,817,920
- --------------------------------------------------------------------------------
Myers Industries, Inc. 18,200 285,012
- --------------------------------------------------------------------------------
Packaging Corp. of America 13,000 287,300
- --------------------------------------------------------------------------------
Pactiv Corp. 1 34,700 1,238,443
- --------------------------------------------------------------------------------
Rock-Tenn Co., Cl. A 2 30,200 818,722
- --------------------------------------------------------------------------------
Silgan Holdings, Inc. 18,700 821,304
- --------------------------------------------------------------------------------
Sonoco Products Co. 3,000 114,180
-----------------
6,829,522
- --------------------------------------------------------------------------------
METALS & MINING--3.0%
A. M. Castle & Co. 2 10,600 269,770
- --------------------------------------------------------------------------------
AK Steel Holding Corp. 1,2 154,000 2,602,600
- --------------------------------------------------------------------------------
Amerigo Resources Ltd. 66,000 122,814
- --------------------------------------------------------------------------------
Brush Engineered Materials, Inc. 1 8,800 297,176
- --------------------------------------------------------------------------------
Carpenter Technology Corp. 8,600 881,672
- --------------------------------------------------------------------------------
Century Aluminum Co. 1,2 37,700 1,683,305
- --------------------------------------------------------------------------------
Chaparral Steel Co. 58,300 2,580,941
- --------------------------------------------------------------------------------
Cleveland-Cliffs, Inc. 2 58,100 2,814,364
- --------------------------------------------------------------------------------
Commercial Metals Co. 5,700 147,060
- --------------------------------------------------------------------------------
Compass Minerals International,
Inc. 2 24,500 773,220
- --------------------------------------------------------------------------------
Dynatec Corp. 1 32,000 58,449
- --------------------------------------------------------------------------------
FNX Mining Co., Inc. 1 3,100 48,568
- --------------------------------------------------------------------------------
Gibraltar Industries, Inc. 2 15,400 362,054
- --------------------------------------------------------------------------------
Inmet Mining Corp. 7,700 412,089
- --------------------------------------------------------------------------------
LionOre Mining International Ltd. 1 24,300 276,101
- --------------------------------------------------------------------------------
Meridian Gold, Inc. 1 900 25,029
- --------------------------------------------------------------------------------
Metal Management, Inc. 20,200 764,570
- --------------------------------------------------------------------------------
Olympic Steel, Inc. 7,400 164,502
- --------------------------------------------------------------------------------
Oregon Steel Mills, Inc. 1 39,200 2,446,472
- --------------------------------------------------------------------------------
Quanex Corp. 2 62,923 2,176,507
- --------------------------------------------------------------------------------
RTI International Metals, Inc. 1,2 5,100 398,922
- --------------------------------------------------------------------------------
Ryerson, Inc. 2 1,200 30,108
- --------------------------------------------------------------------------------
Schnitzer Steel Industries, Inc. 2 9,000 357,300
- --------------------------------------------------------------------------------
Steel Dynamics, Inc. 22,200 720,390
- --------------------------------------------------------------------------------
Steel Technologies, Inc. 2 4,100 71,955
- --------------------------------------------------------------------------------
United States Steel Corp. 14,100 1,031,274
-----------------
21,517,212
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS--0.3%
Bowater, Inc. 2 54,800 $ 1,233,000
- --------------------------------------------------------------------------------
Buckeye Technologies, Inc. 1,2 11,800 141,364
- --------------------------------------------------------------------------------
Louisiana-Pacific Corp. 26,200 564,086
- --------------------------------------------------------------------------------
Neenah Paper, Inc. 2 7,600 268,432
- --------------------------------------------------------------------------------
Schweitzer-Mauduit International,
Inc. 4,900 127,645
-----------------
2,334,527
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--1.6%
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--1.2%
Alaska Communications Systems
Group, Inc. 2 28,500 432,915
- --------------------------------------------------------------------------------
Broadwing Corp. 1 8,500 132,770
- --------------------------------------------------------------------------------
Cbeyond, Inc. 1,2 36,200 1,107,358
- --------------------------------------------------------------------------------
CenturyTel, Inc. 24,800 1,082,768
- --------------------------------------------------------------------------------
Cincinnati Bell, Inc. 1 380,000 1,736,600
- --------------------------------------------------------------------------------
Citizens Communications Co. 46,700 671,079
- --------------------------------------------------------------------------------
Cogent Communications Group,
Inc. 1 23,700 384,414
- --------------------------------------------------------------------------------
Commonwealth Telephone
Enterprises, Inc. 900 37,674
- --------------------------------------------------------------------------------
Consolidated Communications
Holdings, Inc. 13,600 284,240
- --------------------------------------------------------------------------------
CT Communications, Inc. 2 11,600 265,872
- --------------------------------------------------------------------------------
Embarq Corp. 17,900 940,824
- --------------------------------------------------------------------------------
FairPoint Communications, Inc. 2 22,300 422,585
- --------------------------------------------------------------------------------
General Communication, Inc.,
Cl. A 1,2 35,100 552,123
- --------------------------------------------------------------------------------
Golden Telecom, Inc. 2 7,800 365,352
- --------------------------------------------------------------------------------
Iowa Telecommunications
Services, Inc. 2 15,000 295,650
- --------------------------------------------------------------------------------
North Pittsburgh Systems, Inc. 2 6,700 161,738
-----------------
8,873,962
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--0.4%
Dobson Communications Corp.,
Cl. A 1 140,000 1,219,400
- --------------------------------------------------------------------------------
FiberTower Corp. 1,2 30,600 179,928
- --------------------------------------------------------------------------------
Syniverse Holdings, Inc. 1 1,700 25,483
- --------------------------------------------------------------------------------
Telephone & Data Systems, Inc. 16,900 918,177
- --------------------------------------------------------------------------------
USA Mobility, Inc. 2 9,800 219,226
-----------------
2,562,214
- --------------------------------------------------------------------------------
UTILITIES--1.7%
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES--0.6%
Central Vermont Public Service
Corp. 1,800 42,390
- --------------------------------------------------------------------------------
Cleco Corp. 2 23,700 597,951
22 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES Continued
El Paso Electric Co. 1 11,300 $ 275,381
- --------------------------------------------------------------------------------
IDACORP, Inc. 2 26,900 1,039,685
- --------------------------------------------------------------------------------
Otter Tail Corp. 2 4,800 149,568
- --------------------------------------------------------------------------------
Reliant Energy, Inc. 1 17,300 245,833
- --------------------------------------------------------------------------------
UIL Holdings Corp. 2 24,166 1,019,564
- --------------------------------------------------------------------------------
UniSource Energy Corp. 26,700 975,351
-----------------
4,345,723
- --------------------------------------------------------------------------------
ENERGY TRADERS--0.0%
Canadian Hydro Developers, Inc. 1 14,000 71,432
- --------------------------------------------------------------------------------
GAS UTILITIES--0.6%
Cascade Natural Gas Corp. 1,200 31,104
- --------------------------------------------------------------------------------
Laclede Group, Inc. (The) 2 15,300 535,959
- --------------------------------------------------------------------------------
New Jersey Resources Corp. 2 22,400 1,088,192
- --------------------------------------------------------------------------------
Northwest Natural Gas Co. 300 12,732
- --------------------------------------------------------------------------------
ONEOK, Inc. 16,600 715,792
- --------------------------------------------------------------------------------
Peoples Energy Corp. 2 18,200 811,174
- --------------------------------------------------------------------------------
Southwest Gas Corp. 2 21,600 828,792
- --------------------------------------------------------------------------------
UGI Corp. 7,600 207,328
-----------------
4,231,073
- --------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER--0.5%
Avista Corp. 2 77,100 1,951,395
- --------------------------------------------------------------------------------
CenterPoint Energy, Inc. 48,100 797,498
- --------------------------------------------------------------------------------
CH Energy Group, Inc. 2 8,100 427,680
- --------------------------------------------------------------------------------
CMS Energy Corp. 1 21,100 352,370
-----------------
3,528,943
-----------------
Total Common Stocks
(Cost $624,669,945) 715,198,037
- --------------------------------------------------------------------------------
PREFERRED STOCKS--0.0%
- --------------------------------------------------------------------------------
Simon Property Group, Inc., 6%
Cv., Non-Vtg. (Cost $3,213) 60 4,884
- --------------------------------------------------------------------------------
MONEY MARKET FUND--1.0%
- --------------------------------------------------------------------------------
Oppenheimer Institutional
Money Market Fund,
Cl. E, 5.25% 5,6 (Cost $7,142,041) 7,142,041 7,142,041
- --------------------------------------------------------------------------------
Total Investments, at Value
(excluding Investments Purchased
with Cash Collateral from Securities
Loaned) (Cost $631,815,199) 722,344,962
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM
SECURITIES LOANED--23.1% 7
- --------------------------------------------------------------------------------
ASSET BACKED FLOATING NOTE--1.5%
Citigroup Mortgage Loan Trust,
Inc., Series 2006-HE1,
Cl. A1, 5.41%, 1/25/07 $ 1,717,090 $ 1,717,090
- --------------------------------------------------------------------------------
Countrywide Asset-Backed
Certificates, Series 2005-17,
Cl. 4AV1, 5.46%, 1/25/07 1,338,136 1,338,136
- --------------------------------------------------------------------------------
Countrywide Asset-Backed
Certificates, Series 2006-2,
Cl. 2A1, 5.42%, 1/25/07 1,656,970 1,656,970
- --------------------------------------------------------------------------------
GSAA Home Equity Trust,
Series 2005-15, Cl. 2A1, 5.44%,
1/25/07 1,239,628 1,239,628
- --------------------------------------------------------------------------------
Specialty Underwriting &
Residential Finance Trust,
Series 2006 BC1, Cl. A2A, 5.43%,
1/25/07 7 1,778,986 1,778,986
- --------------------------------------------------------------------------------
Structured Asset Investment
Loan Trust, Series 2005-11,
Cl. A4, 5.44%, 1/25/07 963,512 963,512
- --------------------------------------------------------------------------------
Whitehawk CDO Funding
Corp., 5.41%, 3/15/07 2,250,000 2,250,000
-----------------
10,944,322
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--14.2%
Undivided interest of 1.92% in joint repurchase
agreement (Principal Amount/Value
$4,100,000,000, with a maturity value of
$4,102,437,222) with Nomura Securities, 5.35%,
dated 12/29/06, to be repurchased at $78,793,494
on 1/2/07, collateralized by U.S. Agency
Mortgages, 0.00%-22.12%,
3/15/14-5/1/46, with a value
of $4,182,000,000 8 78,746,683 78,746,683
- --------------------------------------------------------------------------------
Undivided interest of 4.60% in joint repurchase
agreement (Principal Amount/Value
$500,000,000, with a maturity value of
$500,299,028) with Greenwich Capital, 5.3825%,
dated 12/29/06, to be repurchased at $23,013,755
on 1/2/07, collateralized by AAA Asset-Backed
Securities, 0.00%-6%,
1/25/08-1/6/46, with a value
of $519,930,042 23,000,000 23,000,000
-----------------
101,746,683
- --------------------------------------------------------------------------------
MASTER FLOATING NOTE--0.4%
CDC Financial Products, Inc.,
5.36%, 1/2/07 3,000,000 3,000,000
- --------------------------------------------------------------------------------
MEDIUM-TERM FLOATING NOTE--5.9%
American Express Credit Corp.,
5.36%, 1/16/07 2,000,000 2,000,000
23 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
MEDIUM-TERM FLOATING NOTE Continued
Bear Stearns, 5.37%, 1/2/07 $ 3,000,000 $ 3,000,000
- --------------------------------------------------------------------------------
Beta Finance, Inc., 5.37%, 1/2/07 2,999,459 2,999,459
- --------------------------------------------------------------------------------
CC USA, Inc., 5.37%, 1/2/07 3,000,000 3,000,000
- --------------------------------------------------------------------------------
CC USA, Inc., 5.37%, 1/2/07 1,000,000 1,000,000
- --------------------------------------------------------------------------------
Citigroup Funding, Inc., 5.36%, 1/2/07 5,000,000 5,000,000
- --------------------------------------------------------------------------------
Dorada Finance, Inc., 5.37%, 1/2/07 3,500,000 3,500,000
- --------------------------------------------------------------------------------
Goldman Sachs Group, Inc.,
5.47%, 1/2/07 3,000,000 3,000,000
- --------------------------------------------------------------------------------
HSBC Finance Corp., 5.34%, 1/8/07 2,000,000 2,000,000
- --------------------------------------------------------------------------------
K2 (USA) LLC, 5.39%, 1/2/07 2,999,061 2,999,061
- --------------------------------------------------------------------------------
LINKS Finance LLC, 5.37%, 1/2/07 3,000,142 3,000,142
- --------------------------------------------------------------------------------
MBIA Global Funding LLC,
5.36%, 1/30/07 2,000,000 2,000,000
- --------------------------------------------------------------------------------
MBIA Global Funding LLC,
5.37%, 1/2/07 2,500,000 2,500,000
- --------------------------------------------------------------------------------
Sigma Finance, Inc., 5.37%, 1/2/07 3,000,000 3,000,000
- --------------------------------------------------------------------------------
Tango Finance Corp., 5.38%, 1/2/07 3,499,125 3,499,125
-----------------
42,497,787
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
YANKEE FLOATING CERTIFICATE OF DEPOSIT--1.1%
Natexis Banques Populaires
NY, 5.37%, 1/2/07 $ 2,000,000 $ 2,000,000
- --------------------------------------------------------------------------------
Natexis Banques Populaires
NY, 5.39%, 1/2/07 1,999,758 1,999,758
- --------------------------------------------------------------------------------
Nordea Bank New York, 5.32%,
1/2/07 3,699,883 3,699,883
-----------------
7,699,641
Total Investments Purchased with
Cash Collateral from Securities
Loaned (Cost $165,888,433) 165,888,433
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $797,703,632) 123.7% 888,233,395
- --------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (23.7) (170,397,944)
--------------------------------
NET ASSETS 100.0% $ 717,835,451
================================
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
2. Partial or fully-loaned security. See Note 7 of accompanying Notes.
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 $221,114 or 0.03% of the Fund's net assets
as of December 31, 2006.
4. Illiquid or restricted security. The aggregate value of illiquid or
restricted securities as of December 31, 2006 was $126,960, which represents
0.02% of the Fund's net assets, all of which is considered restricted. See Note
6 of accompanying Notes.
5. Represents ownership of an affiliated fund, at or during the period ended
December 31, 2006. Transactions during the period in which the issuer was an
affiliate are as follows:
SHARES GROSS GROSS SHARES
DECEMBER 31, 2005 ADDITIONS REDUCTIONS DECEMBER 31, 2006
- -------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Institutional Money Market Fund, Cl. E, 5.25%* -- 49,711,289 42,569,248 7,142,041
VALUE DIVIDEND
SEE NOTE 1 INCOME
- -------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Institutional Money Market Fund, Cl. E, 5.25%* $ 7,142,041 $84,497
* The money market fund and the Fund are affiliated by having the same
investment advisor.
6. Rate shown is the 7-day yield as of December 31, 2006.
7. The security/securities have 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
accompanying Notes.
8. 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, 2006
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------------------------------------------
Investments, at value (including cost and market value of $101,746,683 in repurchase agreements)--
see accompanying statement of investments:
Unaffiliated companies (cost $790,561,591) $ 881,091,354
Affiliated companies (cost $7,142,041) 7,142,041
--------------
888,233,395
- -------------------------------------------------------------------------------------------------------------------
Cash 481,602
- -------------------------------------------------------------------------------------------------------------------
Unrealized appreciation on foreign currency contracts 30
- -------------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 10,234,380
Shares of beneficial interest sold 1,989,099
Interest and dividends 655,020
Other 12,007
--------------
Total assets 901,605,533
- -------------------------------------------------------------------------------------------------------------------
LIABILITIES
- -------------------------------------------------------------------------------------------------------------------
Return of collateral for securities loaned 165,888,433
- -------------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 16,169,120
Shares of beneficial interest redeemed 1,263,840
Distribution and service plan fees 374,390
Shareholder communications 41,139
Trustees' compensation 7,260
Transfer and shareholder servicing agent fees 1,767
Other 24,133
--------------
Total liabilities 183,770,082
- -------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 717,835,451
==============
- -------------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- -------------------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 37,782
- -------------------------------------------------------------------------------------------------------------------
Additional paid-in capital 601,079,483
- -------------------------------------------------------------------------------------------------------------------
Accumulated net investment income 1,540,319
- -------------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 24,648,095
- -------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets and liabilities denominated
in foreign currencies 90,529,772
--------------
NET ASSETS $ 717,835,451
==============
- -------------------------------------------------------------------------------------------------------------------
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
$81,404,868 and 4,251,978 shares of beneficial interest outstanding) $ 19.15
- -------------------------------------------------------------------------------------------------------------------
Service Shares:
Net asset value, redemption price per share and offering price per share (based on net assets of
$636,430,583 and 33,529,593 shares of beneficial interest outstanding) $ 18.98
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 31, 2006
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- -------------------------------------------------------------------------------------------------------------------
Dividends:
Unaffiliated companies (net of foreign withholding taxes of $10,357) $ 5,647,264
Affiliated companies 84,497
- -------------------------------------------------------------------------------------------------------------------
Portfolio lending fees 560,760
- -------------------------------------------------------------------------------------------------------------------
Interest 409,735
--------------
Total investment income 6,702,256
- -------------------------------------------------------------------------------------------------------------------
EXPENSES
- -------------------------------------------------------------------------------------------------------------------
Management fees 3,908,014
- -------------------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Service shares 1,194,997
- -------------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service shares 10,045
Service shares 10,406
- -------------------------------------------------------------------------------------------------------------------
Shareholder communications:
Non-Service shares 11,486
Service shares 89,217
- -------------------------------------------------------------------------------------------------------------------
Trustees' compensation 9,329
- -------------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 4,965
- -------------------------------------------------------------------------------------------------------------------
Administration service fees 1,500
- -------------------------------------------------------------------------------------------------------------------
Other 52,702
--------------
Total expenses 5,292,661
Less waivers and reimbursements of expenses (1,600)
--------------
Net expenses 5,291,061
- -------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 1,411,195
- -------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- -------------------------------------------------------------------------------------------------------------------
Net realized gain on:
Investments 26,949,295
Foreign currency transactions 99,797
--------------
Net realized gain 27,049,092
- -------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments 41,359,148
Translation of assets and liabilities denominated in foreign currencies (147,027)
--------------
Net change in unrealized appreciation 41,212,121
- -------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 69,672,408
==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2006 2005
- -------------------------------------------------------------------------------------------------------------
OPERATIONS
- -------------------------------------------------------------------------------------------------------------
Net investment income $ 1,411,195 $ 128,062
- -------------------------------------------------------------------------------------------------------------
Net realized gain 27,049,092 13,592,611
- -------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation 41,212,121 14,125,091
-------------------------------
Net increase in net assets resulting from operations 69,672,408 27,845,764
- -------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Non-Service shares (79,081) --
Service shares (90,296) --
-------------------------------
(169,377) --
- -------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Non-Service shares (1,560,912) (1,015,976)
Service shares (11,399,106) (4,826,305)
-------------------------------
(12,960,018) (5,842,281)
- -------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- -------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from beneficial interest transactions:
Non-Service shares 29,898,135 3,420,313
Service shares 271,706,391 122,016,957
-------------------------------
301,604,526 125,437,270
- -------------------------------------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------------------------------------
Total increase 358,147,539 147,440,753
- -------------------------------------------------------------------------------------------------------------
Beginning of period 359,687,912 212,247,159
-------------------------------
End of period (including accumulated net investment income of $1,540,319
and $126,247, respectively) $ 717,835,451 $ 359,687,912
===============================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2006 2005 2004 2003 2002
- ----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 17.18 $ 16.05 $ 13.44 $ 9.31 $ 11.05
- ----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .08 1 .04 1 .01 1 (.03) (.01)
Net realized and unrealized gain (loss) 2.46 1.51 2.60 4.16 (1.73)
---------------------------------------------------------------
Total from investment operations 2.54 1.55 2.61 4.13 (1.74)
- ----------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.03) -- -- -- --
Distributions from net realized gain (.54) (.42) -- -- --
---------------------------------------------------------------
Total dividends and/or distributions to shareholders (.57) (.42) -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 19.15 $ 17.18 $ 16.05 $ 13.44 $ 9.31
===============================================================
- ----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 15.00% 9.92% 19.42% 44.36% (15.75)%
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 81,405 $44,820 $38,636 $27,551 $19,577
- ----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 62,659 $39,708 $30,871 $20,271 $20,505
- ----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income (loss) 0.46% 0.23% 0.06% (0.30)% (0.09)%
Total expenses 0.77% 4,5 0.81% 6 0.83% 6 1.01% 6 1.00% 6
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 110% 110% 147% 130% 121%
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. Voluntary waiver of affiliated funds management fees less than 0.01%.
5. Expenses including indirect expenses from affiliated fund were as follows:
Year Ended December 31, 2006 0.77%
6. 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, 2006 2005 2004 2003 2002
- ------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 17.06 $ 15.97 $ 13.40 $ 9.29 $ 11.05
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .04 1 -- 1,2 (.02) 1 (.02) (.01)
Net realized and unrealized gain (loss) 2.42 1.51 2.59 4.13 (1.75)
-----------------------------------------------------------------
Total from investment operations 2.46 1.51 2.57 4.11 (1.76)
- ------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income -- 2 -- -- -- --
Distributions from net realized gain (.54) (.42) -- -- --
-----------------------------------------------------------------
Total dividends and/or distributions to shareholders (.54) (.42) -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $18.98 $ 17.06 $ 15.97 $ 13.40 $ 9.29
=================================================================
- ------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 14.66% 9.71% 19.18% 44.24% (15.93)%
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 636,430 $314,868 $173,612 $62,660 $ 6,111
- ------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 479,456 $221,324 $112,279 $25,018 $ 2,228
- ------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income (loss) 0.23% 0.02% (0.14)% (0.43)% (0.26)%
Total expenses 1.00% 5 1.04% 1.06% 1.23% 1.21%
Expenses after payments and waivers and reduction to
custodian expenses 1.00% 1.04% 1.06% 1.23% 1.19%
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 110% 110% 147% 130% 121%
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. Expenses including indirect expenses from affiliated fund were as follows:
Year Ended December 31, 2006 1.00%
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(R) 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, as 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. Options are
valued daily based upon the last sale price on the principal exchange on which
the option is traded. 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. Investments in
open-end registered investment companies (including affiliated funds) are valued
at that fund's net asset value. 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
30 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
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.
- --------------------------------------------------------------------------------
AFFILIATED FUNDS. The Fund is permitted to invest daily available cash balances
in affiliated money market funds. Each day, the Fund invests the available cash
in Class E shares of Oppenheimer Institutional Money Market Fund ("IMMF") which
seeks current income and stability of principal. IMMF is a registered open-end
management investment company, regulated as a money market fund under the
Investment Company Act of 1940, as amended. The Manager is also the investment
advisor of IMMF. The Fund's investment in IMMF is included in the Statement of
Investments. As a shareholder, the Fund is subject to its proportional share of
IMMF's Class E expenses, including its management fee. The Manager will waive
fees and/or reimburse Fund expenses in an amount equal to the indirect
management fees incurred through the Fund's investment in IMMF.
- --------------------------------------------------------------------------------
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 TAX PURPOSES
----------------------------------------------------------------------
$ 2,803,309 $ 25,285,267 $ -- $ 88,636,871
1. During the fiscal year ended December 31, 2006, the Fund did not utilize any
capital loss carryforward.
2. During the fiscal year ended December 31, 2005, 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, 2006. Net assets of
the Fund were unaffected by the reclassifications.
31 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
INCREASE REDUCTION
TO ACCUMULATED TO ACCUMULATED NET
INCREASE NET INVESTMENT REALIZED GAIN
TO PAID-IN CAPITAL INCOME ON INVESTMENTS 3
--------------------------------------------------------
$ 1,905,501 $ 172,254 $ 2,077,755
3. $1,905,501, including $1,803,685 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, 2006
and December 31, 2005 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2006 DECEMBER 31, 2005
----------------------------------------------------------------
Distributions paid from:
Ordinary income $ 848,573 $ 5,842,281
Long-term capital gain 12,280,822 --
---------------------------------
Total $ 13,129,395 $ 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, 2006 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 $ 799,596,502
Federal tax cost of other investments (5,323)
--------------
Total federal tax cost $ 799,591,179
==============
Gross unrealized appreciation $ 99,133,172
Gross unrealized depreciation (10,496,301)
--------------
Net unrealized appreciation $ 88,636,871
==============
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a compensation
deferral plan for independent trustees that enables trustees to elect to defer
receipt of all or a portion of the annual compensation they are entitled to
receive from the Fund. For purposes of determining the amount owed to the
Trustee under the plan, deferred amounts are treated as though equal dollar
amounts had been invested in shares of the Fund or in other Oppenheimer funds
selected by the Trustee. The Fund purchases shares of the funds selected for
deferral by the Trustee in amounts equal to his or her deemed investment,
resulting in a Fund asset equal to the deferred compensation liability. Such
assets are included as a component of "Other" within the asset section of the
Statement of Assets and Liabilities. Deferral of trustees' fees under the plan
will not affect the net assets of the Fund, and will not materially affect the
Fund's assets, liabilities or net investment income per share. Amounts will be
deferred until distributed in accordance 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, at a rate equal to the
Federal Funds Rate plus 0.50%. The "Reduction
32 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
to custodian expenses" line item, if applicable, represents earnings on cash
balances maintained by the Fund during the period. Such interest expense and
other custodian fees may be paid with these earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Fund's organizational documents provide current and former
trustees and officers with a limited indemnification against liabilities arising
in connection with the performance of their duties to the Fund. In the normal
course of business, the Fund may also enter into contracts that provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would be dependent on future claims that may be made against the
Fund. The risk of material loss from such claims is considered remote.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with 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, 2006 YEAR ENDED DECEMBER 31, 2005
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------
NON-SERVICE SHARES
Sold 2,252,265 $ 40,943,154 951,013 $ 15,158,198
Dividends and/or distributions reinvested 91,722 1,639,993 65,759 1,015,976
Redeemed (700,330) (12,685,012) (815,388) (12,753,861)
------------------------------------------------------------
Net increase 1,643,657 $ 29,898,135 201,384 $ 3,420,313
============================================================
- --------------------------------------------------------------------------------------------------------
SERVICE SHARES
Sold 17,621,426 $ 317,270,866 9,011,249 $ 144,257,571
Dividends and/or distributions reinvested 639,766 11,362,246 313,963 4,826,305
Redeemed (3,189,608) (56,926,721) (1,735,515) (27,066,919)
------------------------------------------------------------
Net increase 15,071,584 $ 271,706,391 7,589,697 $ 122,016,957
============================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations and money market funds, for the year ended December
31, 2006, were as follows:
PURCHASES SALES
-----------------------------------------------------
Investment securities $ 880,209,397 $590,073,802
- --------------------------------------------------------------------------------
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 average net assets as shown in the following table:
FEE SCHEDULE
-------------------------------
Up to $200 million 0.75%
Next $200 million 0.72
Next $200 million 0.69
Next $200 million 0.66
Over $800 million 0.60
33 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
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, 2006, the Fund paid
$20,493 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.
The Manager will waive fees and/or reimburse Fund expenses in an amount
equal to the indirect management fees incurred through the Fund's investment in
IMMF. During the year ended December 31, 2006, the Manager waived $1,600 for
IMMF management fees.
- --------------------------------------------------------------------------------
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, 2006, the Fund had outstanding foreign currency contracts as
follows:
CONTRACT
EXPIRATION AMOUNT VALUATION AS OF UNREALIZED
CONTRACT DESCRIPTION DATE (000s) DECEMBER 31, 2006 APPRECIATION
- -------------------------------------------------------------------------------
CONTRACTS TO SELL
Canadian Dollar (CAD) 1/2/07 6CAD $5,323 $30
34 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
- --------------------------------------------------------------------------------
6. ILLIQUID OR RESTRICTED SECURITIES
As of December 31, 2006, 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, 2006 APPRECIATION
- --------------------------------------------------------------------------------
Mission Oil & Gas, Inc. 1/18/05 $ 34,507 $ 69,425 $ 34,918
Tusk Energy Corp. 11/15/04 38,148 57,535 19,387
------------------------------------------
$ 72,655 $ 126,960 $ 54,305
==========================================
- --------------------------------------------------------------------------------
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
securities, letters of credit 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 each day. If the Fund is
undercollateralized at the close of business due to an increase in market value
of securities on loan, additional collateral is requested from the borrowing
counterparty and is delivered to the Fund on the next business day. Cash
collateral may be invested in approved investments and the Fund bears the risk
of any loss in value of these investments. The Fund retains a portion of the
interest earned from the collateral. 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. 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, 2006, the Fund
had on loan securities valued at $161,015,091, which are included in the
Statement of Assets and Liabilities as "Investments, at value" and, when
applicable, as "Receivable for Investments sold." Collateral of $165,888,433 was
received for the loans, all of which was received in cash and subsequently
invested in approved investments or held as cash.
- --------------------------------------------------------------------------------
8. RECENT ACCOUNTING PRONOUNCEMENTS
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48 ("FIN 48"), ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES.
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with FASB Statement No. 109,
ACCOUNTING FOR INCOME TAXES. FIN 48 requires the evaluation of tax positions
taken in the course of preparing the Fund's tax returns to determine whether it
is "more-likely-than-not" that tax positions taken in the Fund's tax return will
be ultimately sustained. A tax liability and expense must be recorded in respect
of any tax position that, in Management's judgment, will not be fully realized.
FIN 48 is effective for fiscal years beginning after December 15, 2006. As of
December 31, 2006, the Manager has evaluated the implications of FIN 48 and does
not currently anticipate a material impact to the Fund's financial statements.
The Manager will continue to monitor the Fund's tax positions prospectively for
potential future impacts.
In September 2006, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 157, FAIR VALUE MEASUREMENTS. This standard establishes a
single authoritative definition of fair value, sets out a framework for
measuring fair value and expands disclosures about fair value measurements. SFAS
No. 157 applies to fair value measurements already required or permitted by
existing standards. SFAS No. 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. As of December 31, 2006, the Manager does not believe
35 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8. RECENT ACCOUNTING PRONOUNCEMENTS Continued
the adoption of SFAS No. 157 will materially impact the financial statement
amounts; however, additional disclosures may be required about the inputs used
to develop the measurements and the effect of certain of the measurements on
changes in net assets for the period.
- --------------------------------------------------------------------------------
9. LITIGATION
A consolidated amended complaint was filed as a putative class action against
the Manager and the Transfer Agent and other defendants (including 51 of the
Oppenheimer funds excluding the Fund) in the U.S. District Court for the
Southern District of New York on January 10, 2005 and was amended on March 4,
2005. The complaint alleged, among other things, that the Manager charged
excessive fees for distribution and other costs, and that by permitting and/or
participating in those actions, the Directors/Trustees and the Officers of the
funds breached their fiduciary duties to fund shareholders under the Investment
Company Act of 1940 and at common law. The plaintiffs sought unspecified
damages, an accounting of all fees paid, and an award of attorneys' fees and
litigation expenses.
In response to the defendants' motions to dismiss the suit, seven of the
eight counts in the complaint, including the claims against certain of the
Oppenheimer funds, as nominal defendants, and against certain present and former
Directors, Trustees and Officers of the funds, and the Distributor, as
defendants, were dismissed with prejudice, by court order dated March 10, 2006,
and the remaining count against the Manager and the Transfer Agent was dismissed
with prejudice by court order dated April 5, 2006. The plaintiffs filed an
appeal of those dismissals on May 11, 2006.
The Manager believes that the allegations contained in the complaint are
without merit and that there are substantial grounds to sustain the district
court's rulings. The Manager also believes that it is premature to render any
opinion as to the likelihood of an outcome unfavorable to it, the funds, the
Directors/Trustees or the Officers on the appeal of the decisions of the
district court, and that no estimate can yet be made with any degree of
certainty as to the amount or range of any potential loss.
36 | 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 (the "Fund"), a series of Oppenheimer
Variable Account Funds, including the statement of investments, as of December
31, 2006, 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 period
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
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 audits included 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, 2006, 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 the
Fund as of December 31, 2006, 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
period then ended, in conformity with accounting principles generally accepted
in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
February 16, 2007
37 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
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- --------------------------------------------------------------------------------
In early 2007, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2006. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
Capital gain distributions of $0.5108 per share were paid to Non-Service
and Service shareholders, respectively, on March 13, 2006. 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, 2006 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.
38 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
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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.
39 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
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- --------------------------------------------------------------------------------
Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew the Fund's
investment advisory agreement (the "Agreement"). The Investment Company Act of
1940, as amended, requires that the Board request and evaluate, and that the
Manager provide, such information as may be reasonably necessary to evaluate the
terms of the Agreement. The Board employs an independent consultant to prepare a
report that provides information, including comparative information, that the
Board requests for that purpose. In addition, the Board receives information
throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager and its affiliates, including
an analysis of the cost of providing services, (v) whether economies of scale
are realized as the Fund grows and whether fee levels reflect these economies of
scale for Fund investors and (vi) other benefits to the Manager from its
relationship with the Fund. Outlined below is a summary of the principal
information considered by the Board as well as the Board's conclusions.
The Board was aware that there are alternatives to retaining the Manager.
NATURE, QUALITY AND EXTENT OF SERVICES. The Board considered information
about the nature and extent of the services provided to the Fund and information
regarding the Manager's key personnel who provide such services. The Manager's
duties include providing the Fund with the services of the portfolio managers
and the Manager's investment team, who provide research, analysis and other
advisory services in regard to the Fund's investments; securities trading
services; oversight of third party service providers; monitoring compliance with
applicable Fund policies and procedures and adherence to the Fund's investment
restrictions. The Manager is responsible for providing certain administrative
services to the Fund as well. Those services include providing and supervising
all administrative and clerical personnel who are necessary in order to provide
effective corporate administration for the Fund; compiling and maintaining
records with respect to the Fund's operations; preparing and filing reports
required by the Securities and Exchange Commission; preparing periodic reports
regarding the operations of the Fund for its shareholders; preparing proxy
materials for shareholder meetings; and preparing the registration statements
required by Federal and state securities laws for the sale of the Fund's shares.
The Manager also provides the Fund with office space, facilities and equipment.
The Board also considered the quality of the services provided and the
quality of the Manager's resources that are available to the Fund. The Board
took account of the fact that the Manager has had over 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. 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 Disciplined
Strategies Equity Investment team and analysts. Mr. Monoyios has been a
portfolio manager of the Fund since October 2003 and Mr. Zavanelli has been a
portfolio manager of the Fund since April 1998. 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.
40 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
INVESTMENT PERFORMANCE OF THE MANAGER AND THE FUND. During the year, the
Manager provided information on the investment 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 underlying
variable insurance products. The Board noted that the Fund's one-year,
three-year and five-year performance were 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 and other small-cap core funds underlying variable
insurance products. The Board noted that the Fund's contractual and actual
management fees are lower than its peer group median.
ECONOMIES OF SCALE. The Board reviewed 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
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 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 Agreement, including the management fee,
in light of all of the surrounding circumstances.
41 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
TRUSTEES AND OFFICERS Unaudited
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NAME, POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS HELD; NUMBER OF
THE FUNDS, LENGTH 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, President, Colorado Christian University (since 2006); Chairman of the following private mortgage
Chairman of the Board of banking companies: Cherry Creek Mortgage Company (since 1991), Centennial State Mortgage Company
Trustees (since 2003), (since 1994), and The El Paso Mortgage Company (since 1993); Chairman of the following private
Trustee (since 1999) companies: Ambassador Media Corporation (since 1984) and Broadway Ventures (since 1984); Director
Age: 69 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 37 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 1998) (until February 2001); Chairman, President and Chief Executive Officer of A.G. Edwards Capital,
Age: 75 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 37 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
Age: 70 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 37 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: 68 PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price Waterhouse
LLP Global Investment Management Industry Services Group (accounting firm) (July 1994-June 1998).
Oversees 37 portfolios in the OppenheimerFunds complex.
JON S. FOSSEL, Director of UNUMProvident (insurance company) (since June 2002); Director of Northwestern Energy
Trustee (since 1998) Corp. (public utility corporation) (since November 2004); Director of P.R. Pharmaceuticals
Age: 65 (October 1999-October 2003); Director of Rocky Mountain Elk Foundation (non-profit organization)
(February 1998-February 2003 and since February 2005); 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 37 portfolios in the OppenheimerFunds complex.
SAM FREEDMAN, Director of Colorado UpLIFT (charitable organization) (since September 1984). Mr. Freedman held
Trustee (since 1998) several positions with the Manager and with subsidiary or affiliated companies of the Manager
Age: 66 (until October 1994). Oversees 37 portfolios in the OppenheimerFunds complex.
BEVERLY L. HAMILTON, Trustee of Monterey Institute for International Studies (educational organization) (since
Trustee (since 2002) February 2000); Board Member of Middlebury College (educational organization) (since December
Age: 60 2005); Director of The California Endowment (philanthropic organization) (since April 2002);
Director (February 2002-2005) and Chairman of Trustees (since 2006) of the Community Hospital of
Monterey Peninsula; Director (October 1991-2005) and Vice Chairman (since 2006) of American
Funds' Emerging Markets Growth Fund, Inc. (mutual fund); President of ARCO Investment Management
Company (February 1991-April 2000); Member of the investment committees of The Rockefeller
Foundation (since 2001) and The University of Michigan (since 2000); Advisor at Credit
42 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
BEVERLY L. HAMILTON, Suisse First Boston's Sprout venture capital unit (venture capital fund) (1994-January 2005);
Continued 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 37 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: 62 (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 37 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 (since
Age: 64 1987) and Chairman (1994-2005) of the Investment Committee 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); and Executive Vice President of Peoples Heritage Financial Group, Inc.
(commercial bank) (January 1999-July 1999). Oversees 39 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 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 September
Trustee, President and 2000) of the Manager; President and director or trustee of other Oppenheimer funds; President and
Principal Executive Officer Director of OAC and of Oppenheimer Partnership Holdings, Inc. (holding company subsidiary of the
(since 2001) Manager) (since July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of the
Age: 57 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 96 portfolios in the OppenheimerFunds complex.
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OTHER OFFICERS OF THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. MONOYIOS, ZAVANELLI,
THE FUND ZACK, GILLESPIE AND MS. BLOOMBERG, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, NEW YORK, NEW
YORK 10281-1008, FOR MESSRS. VANDEHEY, WIXTED, PETERSEN, SZILAGYI AND MS. IVES, 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 Portfolio Formerly Vice President of the Manager (April 1998-September 2003). An officer of 6 portfolios in
Manager (since 2003) the OppenheimerFunds complex.
Age: 57
43 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
TRUSTEES AND OFFICERS Unaudited / Continued
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MARK ZAVANELLI, Vice President of the Manager (since November 2000); a Chartered Financial Analyst; an officer of
Vice President (since 2001) 3 portfolios in the OppenheimerFunds complex. Prior to joining the Manager in May 1998 he was
Age: 36 President of Waterside Capital Management, a registered investment advisor (August 1995-April
1998).
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 of
(since 2004) the Manager (1997-February 2004). An officer of 96 portfolios in the OppenheimerFunds complex.
Age: 56
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 & 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 2000),
Age: 47 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 96 portfolios in the
OppenheimerFunds complex.
BRIAN S. PETERSEN, Assistant Vice President of the Manager (since August 2002); Manager/Financial Product Accounting
Assistant Treasurer of the Manager (November 1998-July 2002). An officer of 96 portfolios in the OppenheimerFunds
(since 2004) complex.
Age: 36
BRIAN C. SZILAGYI, Assistant Vice President of the Manager (since July 2004); Director of Financial Reporting and
Assistant Treasurer Compliance of First Data Corporation (April 2003-July 2004); Manager of Compliance of Berger
(since 2005) Financial Group LLC (May 2001-March 2003); Director of Mutual Fund Operations at American Data
Age: 36 Services, Inc. (September 2000-May 2001). An officer of 96 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: 58 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 96 portfolios in the
OppenheimerFunds complex.
LISA I. BLOOMBERG, Vice President and Associate Counsel of the Manager (since May 2004); First Vice President (April
Assistant Secretary 2001-April 2004), Associate General Counsel (December 2000-April 2004), Corporate Vice President
(since 2004) (May 1999-April 2001) and Assistant General Counsel (May 1999-December 2000) of UBS Financial
Age: 39 Services Inc. (formerly, PaineWebber Incorporated). An officer of 96 portfolios in the
OppenheimerFunds complex.
44 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
KATHLEEN T. IVES, Vice President (since June 1998) and Senior Counsel and Assistant Secretary (since October 2003)
Assistant Secretary of the Manager; Vice President (since 1999) and Assistant Secretary (since October 2003) of the
(since 2001) Distributor; Assistant Secretary of Centennial Asset Management Corporation (since October 2003);
Age: 41 Vice President and Assistant Secretary of Shareholder Services, Inc. (since 1999); Assistant
Secretary of OppenheimerFunds Legacy Program and Shareholder Financial Services, Inc. (since
December 2001); Assistant Counsel of the Manager (August 1994-October 2003). An officer of 96
portfolios in the OppenheimerFunds complex.
PHILLIP S. GILLESPIE, Senior Vice President and Deputy General Counsel of the Manager (since September 2004); First
Assistant Secretary Vice President(2000-September 2004), Director (2000-September 2004) and Vice President
(since 2004) (1998-2000) of Merrill Lynch Investment Management. An officer of 96 portfolios in the
Age: 43 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.
45 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
OPPENHEIMER STRATEGIC BOND FUND/ VA
FUND PERFORMANCE DISCUSSION
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MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. The Fund benefited from its
emphasis on bonds and currencies from the emerging markets in 2006. Investments
in Brazil, Mexico and Russia produced particularly attractive returns as these
nations made progress toward reforming their financial systems and taming
inflation. When concerns arose in the spring that a U.S. economic slowdown might
precede a downturn in international economic conditions, the Fund's overweighted
position in emerging market bonds hurt its relative performance. However, most
of the Fund's emerging markets positions bounced back when U.S. economic growth
moderated and U.S. interest rates stabilized. Bonds from Turkey proved to be an
exception, as the country encountered regional political difficulties over the
second half of the year.
The Fund's returns also were bolstered by its relatively heavy exposure to
the euro, which gained value relative to the U.S. dollar. In fact, due to low
interest rates, a soaring current account deficit and other factors, most major
currencies advanced against the U.S. dollar during 2006, making investments
denominated in foreign currencies more valuable for U.S. residents.
In addition, the Fund received generally positive contributions from
high-yield corporate bonds. However, bonds in the lower rated categories tended
to fare better than those with higher credit ratings. Because we had reduced the
Fund's exposure to high-yield bonds generally and lower-rated securities in
particular in anticipation of slower U.S. economic growth, the Fund did not
participate fully in the high-yield sector's strength during the second half of
the year.
Finally, our security selection and duration management strategies helped
support returns from U.S. government securities. We captured higher yields than
those provided by U.S. Treasuries by focusing on mortgage- and asset-backed
securities from U.S. government agencies. In the spring, we began to increase
the Fund's average duration toward a range that was closer to industry averages.
This change helped the Fund participate more fully in rallies as the market
rebounded during the summer and fall.
As of the end of 2006, we remain guardedly optimistic regarding the
prospects for currencies and bonds in the emerging and developed markets. We
believe that the emerging markets remain fundamentally sound despite signs of
slower growth in the United States, and bond prices may rise further as the
global economic expansion continues. While strong corporate profits may continue
to support high yield bond prices, we have remain concerned about rich
valuations and the possibility that recent trends in corporate financing may
cause default rates to rise. Finally, we expect U.S. interest rates to remain
relatively stable, which may help keep prices and yields of U.S. Treasury
securities near current levels. Oppenheimer Strategic Bond Fund/VA enables
investors to participate in all three of these major bond market sectors, making
it an integral part of THE RIGHT WAY TO INVEST.
PLEASE NOTE THAT FIXED-INCOME INVESTING ENTAILS CREDIT RISKS AND INTEREST
RATE RISKS. WHEN INTEREST RATES RISE, BOND PRICES GENERALLY FALL, AND THE FUND'S
SHARE PRICES CAN FALL. THE FUND INVESTS IN DEBT SECURITIES BELOW INVESTMENT
GRADE, WHICH MAY ENTAIL GREATER CREDIT RISKS, AS DESCRIBED IN THE PROSPECTUS.
MORTGAGE-RELATED SECURITIES HAVE GREATER POTENTIAL FOR LOSS WHEN INTEREST RATES
RISE. ALSO, INVESTING IN FOREIGN SECURITIES INVOLVES ADDITIONAL EXPENSES AND
SPECIAL RISKS, SUCH AS CURRENCY FLUCTUATIONS, FOREIGN TAXES AND POLITICAL AND
ECONOMIC UNCERTAINTIES, AS DESCRIBED IN THE PROSPECTUS. INVESTMENTS IN EMERGING
AND DEVELOPING MARKETS ARE SUBJECT TO GREATER VOLATILITY AND RISKS.
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, 2006. 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 Strategic Citigroup
Bond Fund V/A Lehman Brothers World Government
(Non-Service) Aggregate Bond Index Bond Index
12/31/1996 10,000 10,000 10,000
03/31/1997 9,995 9,944 9,586
06/30/1997 10,396 10,309 9,877
09/30/1997 10,745 10,652 10,003
12/31/1997 10,871 10,965 10,023
03/31/1998 11,142 11,136 10,102
06/30/1998 11,229 11,396 10,303
09/30/1998 10,989 11,878 11,161
12/31/1998 11,185 11,918 11,557
03/31/1999 11,201 11,859 11,111
06/30/1999 11,201 11,755 10,728
09/30/1999 11,224 11,835 11,214
12/31/1999 11,502 11,820 11,064
03/31/2000 11,628 12,081 11,084
06/30/2000 11,704 12,291 11,067
09/30/2000 11,830 12,662 10,776
12/31/2000 11,804 13,194 11,240
03/31/2001 12,044 13,595 10,898
06/30/2001 11,948 13,671 10,727
09/30/2001 11,868 14,302 11,495
12/31/2001 12,377 14,308 11,129
03/31/2002 12,570 14,322 10,949
06/30/2002 12,629 14,851 12,225
09/30/2002 12,687 15,531 12,698
12/31/2002 13,298 15,776 13,298
03/31/2003 13,773 15,995 13,711
06/30/2003 14,613 16,395 14,244
09/30/2003 15,048 16,372 14,525
12/31/2003 15,701 16,423 15,281
03/31/2004 16,015 16,860 15,566
06/30/2004 15,720 16,448 15,048
09/30/2004 16,277 16,974 15,542
12/31/2004 17,063 17,136 16,863
03/31/2005 16,832 17,053 16,428
06/30/2005 17,346 17,567 16,193
09/30/2005 17,483 17,448 16,011
12/31/2005 17,518 17,552 15,703
03/31/2006 17,755 17,438 15,640
06/30/2006 17,505 17,425 16,136
09/30/2006 18,185 18,089 16,369
12/31/2006 18,829 18,313 16,664
AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/06
1-Year 7.49% 5-Year 8.75% 10-Year 6.53%
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 Strategic Citigroup
Bond Fund V/A Lehman Brothers World Government
(Service) Aggregate 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
03/31/2006 14,404 12,827 14,351
06/30/2006 14,176 12,818 14,806
09/30/2006 14,718 13,306 15,020
12/31/2006 15,231 13,470 15,291
AVERAGE ANNUAL TOTAL RETURNS OF SERVICE SHARES OF THE FUND AT 12/31/06
1-Year 7.23% 5-Year 8.36% Since Inception (3/19/01) 7.55%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, CALL US AT 1.800.981.2871. THE FUND'S
TOTAL RETURNS SHOULD NOT BE EXPECTED TO BE THE SAME AS THE RETURNS OF OTHER
FUNDS, WHETHER OR NOT BOTH FUNDS HAVE THE SAME PORTFOLIO MANAGERS AND/OR SIMILAR
NAMES. THE FUND'S TOTAL RETURNS DO NOT INCLUDE THE CHARGES ASSOCIATED WITH THE
SEPARATE ACCOUNT PRODUCTS THAT OFFER THIS FUND. SUCH PERFORMANCE WOULD HAVE BEEN
LOWER IF SUCH CHARGES WERE TAKEN INTO ACCOUNT.
5 | OPPENHEIMER STRATEGIC BOND FUND/ VA
FUND EXPENSES
- --------------------------------------------------------------------------------
FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1)
transaction costs, which may include redemption fees, if any; and (2) ongoing
costs, including management fees; distribution and service fees; and other Fund
expenses. These examples are intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning
of the period and held for the entire 6-month period ended December 31, 2006.
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
(7/1/06) (12/31/06) DECEMBER 31, 2006
- --------------------------------------------------------------------------------
Non-Service shares Actual $ 1,000.00 $ 1,075.70 $ 3.25
- --------------------------------------------------------------------------------
Non-Service shares Hypothetical 1,000.00 1,022.08 3.16
- --------------------------------------------------------------------------------
Service shares Actual 1,000.00 1,074.50 4.56
- --------------------------------------------------------------------------------
Service shares Hypothetical 1,000.00 1,020.82 4.44
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,
excluding affiliated fund indirect expenses, based on the 6-month period ended
December 31, 2006 are as follows:
CLASS EXPENSE RATIOS
- ------------------------------------------
Non-Service shares 0.62%
- ------------------------------------------
Service shares 0.87
The expense ratios reflect voluntary waivers or reimbursements of expenses by
the Fund's Manager that can be terminated at any time, without advance notice.
The "Financial Highlights" tables in the Fund's financial statements, included
in this report, also show the gross expense ratios, without such waivers or
reimbursements.
- --------------------------------------------------------------------------------
6 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS December 31, 2006
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--1.4%
- --------------------------------------------------------------------------------
Ace Securities Corp. Home
Equity Loan Trust, Asset-Backed
Pass-Through Certificates,
Series 2005-HE7, Cl. A2B,
5.53%, 11/25/35 1 $ 420,000 $ 420,412
- --------------------------------------------------------------------------------
Aesop Funding II LLC,
Automobile
Asset-Backed Certificates,
Series 2005-1A, Cl. A2,
5.41%, 4/20/08 1 200,000 200,200
- --------------------------------------------------------------------------------
Argent Securities Trust 2004-W8,
Asset-Backed Pass-Through
Certificates,
Series 2004-W8, Cl. A2,
5.83%, 5/25/34 1 1,960,000 1,966,993
- --------------------------------------------------------------------------------
Argent Securities Trust 2006-M3,
Asset-Backed Pass-Through
Certificates,
Series 2006-M3,
Cl. A2B, 5.42%, 9/25/36 1,2 530,000 530,339
- --------------------------------------------------------------------------------
Argent Securities Trust 2006-W5,
Asset-Backed Pass-Through
Certificates,
Series 2006-W5, Cl. A2B,
5.45%, 5/26/36 1 810,000 810,618
- --------------------------------------------------------------------------------
BMW Vehicle Owner Trust
2006-A, Automobile
Asset-Backed Securities,
Series 2006-A, Cl. A2,
5.30%, 5/26/09 1,000,000 1,000,730
- --------------------------------------------------------------------------------
Capital Auto Receivables
Asset Trust 2004-2, Automobile
Asset-Backed Securities,
Series 2004-2, Cl. A3, 3.58%,
1/15/09 740,000 732,000
- --------------------------------------------------------------------------------
Centex Home Equity Loan
Trust 2005-D, Asset-Backed
Certificates,
Series 2005-D, Cl. AF1,
5.04%, 10/25/35 282,231 281,261
- --------------------------------------------------------------------------------
Centex Home Equity Loan Trust
2006-A, Asset-Backed
Certificates,
Series 2006-A, Cl. AV2,
5.45%, 5/16/36 1 1,000,000 1,000,773
- --------------------------------------------------------------------------------
Citigroup Mortgage Loan Trust
2006-WFH3, Asset-Backed
Pass-Through Certificates,
Series 2006-WFH3, Cl. A2,
5.45%, 10/31/36 1 620,000 620,000
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 3 $ 500,000 $ 503,779
- --------------------------------------------------------------------------------
CWABS Asset-Backed
Certificates Trust 2005-10,
Asset-Backed Certificates,
Series 2005-10, Cl. AF1,
5.51%, 2/25/36 1 305,771 306,006
- --------------------------------------------------------------------------------
CWABS Asset-Backed
Certificates Trust 2005-16,
Asset-Backed Certificates,
Series 2005-16, Cl. 2AF2,
5.382%, 5/25/36 1 300,000 299,006
- --------------------------------------------------------------------------------
CWABS Asset-Backed
Certificates Trust 2005-17,
Asset-Backed Certificates:
Series 2005-17, Cl. 1AF1,
5.55%, 5/25/36 1 348,396 348,790
Series 2005-17, Cl. 1AF2,
5.363%, 5/25/36 1 200,000 199,285
- --------------------------------------------------------------------------------
CWABS Asset-Backed
Certificates Trust 2006-25,
Asset-Backed Certificates,
Series 2006-25, Cl. 2A2,
5.44%, 12/25/29 1 1,050,000 1,050,735
- --------------------------------------------------------------------------------
DaimlerChrysler Auto Trust,
Automobile Loan Pass-Through
Certificates,
Series 2006-C, Cl. A2,
5.33%, 5/8/09 1,760,000 1,758,750
- --------------------------------------------------------------------------------
Embarcadero Aircraft
Securitization Trust, Airplane
Receivable Nts.,
Series 2000-A, Cl. B, 8/15/25 2,4,18 1,820,063 18,201
- --------------------------------------------------------------------------------
First Franklin Mortgage Loan
Asset-Backed Certificates,
Home Equity Receivables,
Series 2005-FF3, Cl. A1,
5.43%, 4/25/35 1 596,995 597,422
- --------------------------------------------------------------------------------
First Franklin Mortgage Loan
Trust 2005-FF10, Mtg.
Pass-Through Certificates,
Series 2005-FF10, Cl. A3,
5.56%, 11/25/35 1 1,170,000 1,171,159
- --------------------------------------------------------------------------------
First Franklin Mortgage Loan
Trust 2006-FF10, Mtg.
Pass-Through Certificates,
Series 2006-FF10, Cl. A3,
5.41%, 7/25/36 1 840,000 840,537
7 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
- --------------------------------------------------------------------------------
First Franklin Mortgage Loan
Trust 2006-FF5, Mtg.
Pass-Through Certificates,
Series 2006-FF5, Cl. 2A1,
5.40%, 5/15/36 1 $ 424,516 $ 424,811
- --------------------------------------------------------------------------------
First Franklin Mortgage Loan
Trust 2006-FF9, Mtg.
Pass-Through Certificates,
Series 2006-FF9, Cl. 2A2,
5.43%, 7/7/36 1 430,000 430,275
- --------------------------------------------------------------------------------
Ford Credit Auto Owner Trust,
Automobile Loan Pass-Through
Certificates,
Series 2005-A, Cl. A3,
3.48%, 11/17/08 299,057 297,381
- --------------------------------------------------------------------------------
GS Auto Loan Trust,
Automobile Loan
Asset-Backed Securities,
Series 2005-1, Cl. A2,
4.32%, 5/15/08 299,290 299,247
- --------------------------------------------------------------------------------
Household Home Equity Loan
Trust, Home Equity Loan
Pass-Through Certificates:
Series 2005-3, Cl. A1,
5.61%, 1/20/35 1 384,717 385,341
Series 2006-4, Cl. A2V,
5.46%, 3/20/36 1,2 390,000 390,000
- --------------------------------------------------------------------------------
Lehman XS Trust, Mtg.
Pass-Through Certificates:
Series 2005-10, Cl. 2A3B,
5.55%, 1/25/36 435,630 432,260
Series 2005-2, Cl. 2A1B,
5.18%, 8/25/35 1 381,548 380,713
Series 2005-4, Cl. 2A1B,
5.17%, 10/25/35 344,511 343,071
- --------------------------------------------------------------------------------
Mastr Asset Backed Securities
Trust 2006-WMC3, Mtg.
Pass-Through Certificates,
Series 2006-WMC3, Cl. A3,
5.42%, 8/25/36 1,2 1,310,000 1,310,837
- --------------------------------------------------------------------------------
Morgan Stanley ABS Capital I,
Mtg. Pass-Through Certificates,
Series 2005-WMC6, Cl. A2B,
5.61%, 7/25/35 1 480,000 480,924
- --------------------------------------------------------------------------------
NC Finance Trust, CMO
Pass-Through Certificates,
Series 1999-I, Cl. ECFD,
1.762%, 1/25/29 2 66,744 14,016
- --------------------------------------------------------------------------------
Nissan Auto Receivables Owner
Trust, Automobile
Receivable Nts.,
Series 2005-C, Cl. A2,
3.99%, 1/15/08 303,013 302,871
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
- --------------------------------------------------------------------------------
Option One Mortgage Loan
Trust, Asset-Backed Certificates,
Series 2006-2, Cl. 2A2,
5.45%, 7/1/36 1 $ 1,420,000 $ 1,421,107
- --------------------------------------------------------------------------------
Popular ABS Mortgage
Pass-Through Trust 2004-5,
Mtg. Pass-Through Certificates,
Series 2004-5, Cl. AF2,
3.735%, 11/10/34 1 13,582 13,542
- --------------------------------------------------------------------------------
Popular ABS Mortgage
Pass-Through Trust 2005-1,
Mtg. Pass-Through Certificates,
Series 2005-1, Cl. AF2,
3.914%, 5/25/35 1 46,498 46,340
- --------------------------------------------------------------------------------
Popular ABS Mortgage
Pass-Through Trust 2005-2,
Mtg. Pass-Through Certificates,
Series 2005-2, Cl. AF2,
4.415%, 4/25/35 1 240,000 237,740
- --------------------------------------------------------------------------------
Popular ABS Mortgage
Pass-Through Trust 2005-6,
Mtg. Pass-Through Certificates,
Series 2005-6, Cl. A3,
5.68%, 1/25/36 1 320,000 319,132
- --------------------------------------------------------------------------------
RAMP Series 2004-RS7 Trust, Mtg.
Asset-Backed Pass-Through
Certificates, Series 2004-RS7,
Cl. AI32, 4.45%, 7/25/28 459,496 456,292
- --------------------------------------------------------------------------------
RAMP Series 2006-RS4 Trust, Mtg.
Asset-Backed Pass-Through
Certificates, Series 2006-RS4,
Cl. A1, 5.43%, 7/25/36 1 449,187 449,505
- --------------------------------------------------------------------------------
RASC Series 2006-KS7 Trust,
Home Equity Mtg. Asset-Backed
Pass-Through Certificates,
Series 2006-KS7, Cl. A2,
5.42%, 9/25/36 1 1,070,000 1,070,684
- --------------------------------------------------------------------------------
Start CLO Ltd., Asset-Backed
Credit Linked Securities,
Series 2006-3A, Cl. F,
5.353%, 6/7/11 1,2 950,000 950,000
- --------------------------------------------------------------------------------
Structured Asset Investment
Loan Trust, Mtg. Pass-Through
Certificates, Series 2006-2,
Cl. A1, 5.41%, 4/25/36 1 1,482,241 1,483,265
- --------------------------------------------------------------------------------
Structured Asset Securities Corp.,
Mtg. Pass-Through Certificates:
Series 2003-25XS, Cl. A4,
4.51%, 8/25/33 22,275 22,136
Series 2005-4XS, Cl. 3A1,
5.18%, 3/26/35 392,218 391,263
8 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
- --------------------------------------------------------------------------------
Taganka Car Loan Finance plc,
Automobile Asset-Backed
Certificates,
Series 2006-1A, Cl. C,
8.65%, 11/14/13 1,2 $ 655,000 $ 655,000
- --------------------------------------------------------------------------------
Wells Fargo Home Equity
Asset-Backed Securities 2006-2
Trust, Home Equity
Asset-Backed Certificates,
Series 2006-2, Cl. A2,
5.59%, 7/25/36 1 840,000 840,537
----------------
Total Asset-Backed Securities
(Cost $30,379,242) 28,505,286
- --------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS--16.7%
- --------------------------------------------------------------------------------
Banc of America Commercial
Mortgage, Inc., Commercial
Mtg. Pass-Through Certificates:
Series 2005-3, Cl. A2,
4.501%, 7/10/43 690,000 674,361
Series 2006-5, Cl. A2,
5.348%, 10/10/11 1,700,000 1,703,652
- --------------------------------------------------------------------------------
Banc of America Funding Corp.,
CMO Pass-Through Certificates,
Series 2004-2, Cl. 2A1,
6.50%, 7/20/32 459,951 466,213
- --------------------------------------------------------------------------------
Banc of America Mortgage
Securities, Inc., CMO
Pass-Through Certificates:
Series 2004-8, Cl. 5A1,
6.50%, 5/25/32 398,262 401,871
Series 2005-E, Cl. 2A2,
4.975%, 6/25/35 1 38,327 38,262
- --------------------------------------------------------------------------------
ChaseFlex Trust 2006-2,
Multiclass Mtg. Pass-Through
Certificates,
Series 2006-2,
Cl. A1B, 5.607%, 8/25/08 1,2 708,359 709,103
- --------------------------------------------------------------------------------
Citigroup Mortgage Loan Trust
2006-WF1, Asset-Backed
Pass-Through Certificates,
Series 2006-WF1, Cl. A2B,
5.536%, 3/1/36 260,000 259,216
- --------------------------------------------------------------------------------
Countrywide Alternative Loan
Trust, CMO,
Series 2005-J1, Cl. 3A1,
6.50%, 8/25/32 1,145,796 1,158,328
- --------------------------------------------------------------------------------
Deutsche Alt-A Securities
Mortgage Loan Trust, Mtg.
Pass-Through Certificates:
Series 2006-AB2, Cl. A7,
5.961%, 6/25/36 1,345,912 1,343,462
Series 2006-AB3, Cl. A7,
6.36%, 4/25/08 421,142 421,260
Series 2006-AB4, Cl. A1A,
6.005%, 10/25/36 1,667,037 1,667,167
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS Continued
- --------------------------------------------------------------------------------
Federal Home Loan
Mortgage Corp.:
4.50%, 12/1/18-7/1/19 $ 4,534,307 $ 4,380,732
5%, 9/1/33 3,756,939 3,632,585
6%, 5/1/18-10/1/29 4,915,001 4,979,050
6.50%, 3/1/18-6/1/35 8,496,654 8,708,187
7%, 3/1/31-10/1/31 592,234 609,375
7.50%, 4/1/36 1,877,215 1,960,215
11%, 11/1/14 20,696 21,608
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage
Corp., CMO Gtd. Multiclass
Mtg. Participation Certificates:
Series 1897, Cl. K, 7%, 9/15/26 2,569,401 2,678,004
Series 2191, Cl. MF,
5.95%, 12/17/27 1 100,798 100,948
Series 2410, Cl. PF,
6.33%, 2/15/32 1 1,615,963 1,655,504
Series 2435, Cl. EQ,
6%, 5/15/31 2,100,000 2,114,116
Series 2453, Cl. BD,
6%, 5/15/17 367,631 372,798
Series 2641, Cl. CE,
3.50%, 9/15/25 1,200,359 1,170,411
Series 2727, Cl. UA,
3.50%, 10/15/22 702,655 689,495
Series 2736, Cl. DB,
3.30%, 11/15/26 5,213,047 5,045,541
Series 2777, Cl. PJ,
4%, 5/15/24 730,157 719,602
Series 2934, Cl. NA,
5%, 4/15/24 1,840,635 1,832,586
Series 3105, Cl. BD,
5.50%, 1/15/26 1,500,000 1,492,964
Series 3138, Cl. PA,
5.50%, 2/15/27 4,030,430 4,042,302
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage
Corp., CMO Gtd. Real Estate
Mtg. Investment Conduit
Multiclass Pass-Through
Certificates:
Series 1360, Cl. PZ,
7.50%, 9/15/22 2,233,713 2,321,193
Series 1674, Cl. Z,
6.75%, 2/15/24 1,627,745 1,683,554
Series 2002-66, Cl. FG,
6.35%, 9/25/32 1 2,744,974 2,788,550
Series 2002-84, Cl. FB,
6.35%, 12/25/32 1 2,744,975 2,828,142
Series 2003-11, Cl. FA,
6.35%, 9/25/32 1 2,744,884 2,829,451
Series 2006-11, Cl. PS,
5.06%, 3/25/36 1 894,731 888,617
Series 2043, Cl. ZP,
6.50%, 4/15/28 1,127,450 1,152,505
Series 2055, Cl. ZM,
6.50%, 5/15/28 203,286 206,488
9 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
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: Continued
Series 2080, Cl. Z,
6.50%, 8/15/28 $ 128,529 $ 130,606
Series 2106, Cl. FG,
5.80%, 12/15/28 1 2,846,826 2,882,527
Series 2116, Cl. ZA,
6%, 1/15/29 1,113,025 1,127,912
Series 2135, Cl. OH,
6.50%, 3/15/29 1,677,878 1,719,603
Series 2173, Cl. Z,
6.50%, 7/15/29 947,614 972,069
Series 2195, Cl. LH,
6.50%, 10/15/29 1,245,322 1,270,617
Series 2326, Cl. ZP,
6.50%, 6/15/31 211,910 216,629
Series 2368, Cl. PR,
6.50%, 10/15/31 822,587 842,075
Series 2387, Cl. PD,
6%, 4/15/30 73,499 73,557
Series 2461, Cl. PZ,
6.50%, 6/15/32 1,552,910 1,618,030
Series 2500, Cl. FD,
5.85%, 3/15/32 1 64,857 65,517
Series 2526, Cl. FE,
5.75%, 6/15/29 1 92,360 93,379
Series 2551, Cl. FD,
5.75%, 1/15/33 1 71,999 72,693
Series 2583, Cl. KA,
5.50%, 3/15/22 128,605 128,466
Series 2939, Cl. PE,
5%, 2/15/35 1,585,000 1,483,053
Series 3025, Cl. SJ,
5.133%, 8/15/35 1 1,133,456 1,139,524
Series 3153, Cl. FJ,
5.73%, 5/15/36 1 514,615 516,785
Series 2464, Cl. FI,
6.32%, 2/15/32 1 639,517 654,482
Series 2470, Cl. LF,
6.32%, 2/15/32 1 654,453 672,427
Series 2471, Cl. FD,
6.32%, 3/15/32 1 1,188,602 1,219,995
- --------------------------------------------------------------------------------
Federal Home Loan
Mortgage Corp., CMO
Interest-Only Stripped
Mtg.-Backed Security,
Series 2437, Cl. SB,
8.008%, 4/15/32 5 6,360,255 478,576
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage
Corp., CMO Pass-Through
Participation Certificates,
Series 151, Cl. F, 9%, 5/15/21 58,974 58,848
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS Continued
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage
Corp., Interest-Only Stripped
Mtg.-Backed Security:
Series 177, Cl. IO,
10.487%, 7/1/26 5 $ 240,609 $ 55,023
Series 192, Cl. IO,
11.788%, 2/1/28 5 62,323 13,797
Series 200, Cl. IO,
10.548%, 1/1/29 5 74,531 15,849
Series 2003-118, Cl. S,
7.949%, 12/25/33 5 1,529,972 189,163
Series 2003-13, Cl. IO,
9.458%, 3/25/33 5 1,399,362 313,006
Series 2003-26, Cl. IO,
7.812%, 4/25/33 5 1,127,903 249,470
Series 2005-87, Cl. SE,
5.217%, 10/25/35 5 14,906,359 485,835
Series 2005-87, Cl. SG,
9.386%, 10/25/35 5 4,001,505 219,044
Series 205, Cl. IO,
8.018%, 9/1/29 5 317,601 69,095
Series 2074, Cl. S,
(0.812)%, 7/17/28 5 82,234 8,353
Series 2079, Cl. S,
(2.102)%, 7/17/28 5 130,890 14,191
Series 208, Cl. IO,
(17.635)%, 6/1/30 5 370,617 77,902
Series 2177, Cl. S,
4.623%, 8/15/29 5 3,913,135 345,911
Series 2526, Cl. SE,
(0.586)%, 6/15/29 5 172,672 8,643
Series 2920, Cl. S,
(4.295)%, 1/15/35 5 1,446,867 67,429
Series 3000, Cl. SE,
(5.292)%, 7/15/25 5 1,638,251 57,650
- --------------------------------------------------------------------------------
Federal National Mortgage Assn.:
4.50%, 5/1/18-12/1/20 14,224,234 13,757,203
5%, 12/1/17-3/1/34 35,763,797 34,962,043
5%, 1/1/22-1/1/37 6 22,398,000 21,775,279
5.50%, 3/1/33-1/1/34 19,453,659 19,261,435
5.50%, 1/1/22-1/1/37 6 6,974,000 6,929,428
6%, 7/1/24-4/1/33 17,013,139 17,193,485
6%, 1/1/22 6 22,807,000 23,127,712
6.50%, 4/1/17-4/1/31 8,840,168 9,071,606
6.50%, 1/1/34-1/1/37 6 11,899,527 12,128,637
7%, 11/1/17-3/1/36 5,795,566 5,975,803
7.50%, 2/1/27-3/1/33 5,381,561 5,619,953
8.50%, 7/1/32 10,254 11,042
- --------------------------------------------------------------------------------
Federal National Mortgage
Assn., CMO Gtd. Real Estate
Mtg. Investment Conduit
Pass-Through Certificates:
Trust 2001-44, Cl. QC,
6%, 9/25/16 2,711,436 2,745,809
Trust 2001-50, Cl. NE,
6%, 8/25/30 40,248 40,234
10 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS Continued
- --------------------------------------------------------------------------------
Federal National Mortgage
Assn., CMO Gtd. Real Estate
Mtg. Investment Conduit
Pass-Through Certificates:
Continued
Trust 2001-51, Cl. OD,
6.50%, 10/25/31 $ 626,875 $ 640,664
Trust 2001-69, Cl. PF,
6.32%, 12/25/31 1 1,260,000 1,287,186
Trust 2001-70, Cl. LR,
6%, 9/25/30 73,113 73,128
Trust 2001-72, Cl. NH,
6%, 4/25/30 15,091 15,119
Trust 2001-74, Cl. PD,
6%, 5/25/30 10,063 10,040
Trust 2001-80, Cl. ZB,
6%, 1/25/32 1,402,804 1,419,575
Trust 2001-82, Cl. ZA,
6.50%, 1/25/32 598,568 615,751
Trust 2002-12, Cl. PG,
6%, 3/25/17 1,129,271 1,143,996
Trust 2002-29, Cl. F,
6.32%, 4/25/32 1 692,926 713,452
Trust 2002-56, Cl. KW,
6%, 4/25/23 2,810,000 2,834,731
Trust 2002-64, Cl. FJ,
6.32%, 4/25/32 1 213,375 218,197
Trust 2002-77, Cl. WF,
5.75%, 12/18/32 1 105,693 106,496
Trust 2002-9, Cl. PC,
6%, 3/25/17 1,181,559 1,197,631
Trust 2002-9, Cl. PR,
6%, 3/25/17 1,446,762 1,466,442
Trust 2003-116, Cl. FA,
5.75%, 11/25/33 1 187,744 188,943
Trust 2003-17, Cl. EQ,
5.50%, 3/25/23 1,452,000 1,418,699
Trust 2003-23, Cl. EQ,
5.50%, 4/25/23 890,000 870,717
Trust 2003-81, Cl. PW,
4%, 3/25/25 1,470,266 1,444,227
Trust 2003-84, Cl. AJ,
3%, 4/25/13 1,956,826 1,916,220
Trust 2003-84, Cl. PW,
3%, 6/25/22 1,003,560 986,433
Trust 2004-101, Cl. BG,
5%, 1/25/20 630,000 614,509
Trust 2004-52, Cl. JR,
4.50%, 7/25/24 2,880,042 2,849,251
Trust 2005-100, Cl. BQ,
5.50%, 11/25/25 520,000 500,968
Trust 2005-109, Cl. AH,
5.50%, 12/25/25 2,160,000 2,094,389
Trust 2005-31, Cl. PB,
5.50%, 4/25/35 560,000 549,548
Trust 2005-71, Cl. DB,
4.50%, 8/25/25 480,000 443,175
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS Continued
- --------------------------------------------------------------------------------
Federal National Mortgage
Assn., CMO Gtd. Real Estate
Mtg. Investment Conduit
Pass-Through Certificates:
Continued
Trust 2006-44, Cl. OA,
5.50%, 12/25/26 $ 2,220,000 $ 2,225,586
Trust 2006-46, Cl. SW,
4.583%, 6/25/36 1 1,525,923 1,484,674
Trust 2006-50, Cl. KS,
4.583%, 6/25/36 1 669,744 647,515
Trust 2006-50, Cl. SA,
4.583%, 6/25/36 1 457,598 442,628
Trust 2006-50, Cl. SK,
4.583%, 6/25/36 1 1,252,407 1,210,369
Trust 2006-57, Cl. PA,
5.50%, 8/25/27 2,717,704 2,721,422
- --------------------------------------------------------------------------------
Federal National Mortgage
Assn., CMO Gtd. Real Estate
Mtg. Investment Conduit
Pass-Through Certificates,
Interest-Only Stripped
Mtg.-Backed Security,
Trust 2002-52, Cl. SL,
(0.441)%, 9/25/32 5 89,604 8,470
- --------------------------------------------------------------------------------
Federal National Mortgage
Assn., Interest-Only Stripped
Mtg.-Backed Security:
Trust 2001-61, Cl. SH,
6.906%, 11/18/31 5 806,634 78,993
Trust 2001-63, Cl. SD,
0.309%, 12/18/31 5 182,297 16,840
Trust 2001-68, Cl. SC,
(0.081)%, 11/25/31 5 127,569 12,004
Trust 2001-81, Cl. S,
(0.046)%, 1/25/32 5 154,648 14,522
Trust 2002-28, Cl. SA,
(0.809)%, 4/25/32 5 89,173 7,809
Trust 2002-38, Cl. IO,
(4.343)%, 4/25/32 5 453,280 24,829
Trust 2002-48, Cl. S,
(0.427)%, 7/25/32 5 143,804 13,301
Trust 2002-56, Cl. SN,
0.567%, 7/25/32 5 197,605 18,692
Trust 2002-77, Cl. IS,
0.581%, 12/18/32 5 772,255 65,619
Trust 2002-77, Cl. SH,
0.153%, 12/18/32 5 195,289 18,019
Trust 2002-9, Cl. MS,
(0.456)%, 3/25/32 5 190,116 18,319
Trust 2003-33, Cl. SP,
9.233%, 5/25/33 5 1,271,335 159,237
Trust 2003-4, Cl. S,
6.753%, 2/25/33 5 394,053 41,385
Trust 2005-40, Cl. SA,
(3.22)%, 5/25/35 5 4,123,023 201,789
11 | 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 2005-40, Cl. SB,
(1.908)%, 5/25/35 5 $ 989,660 $ 43,512
Trust 2005-71, Cl. SA,
3.302%, 8/25/25 5 1,035,087 60,215
Trust 2005-83, Cl. SL,
7.334%, 10/25/35 5 5,633,976 300,905
Trust 2006-119, Cl. MS,
8.197%, 12/25/36 5 3,055,324 168,157
Trust 2006-33, Cl. SP,
11.645%, 5/25/36 5 3,466,140 302,486
Trust 2006-34, Cl. SK,
11.144%, 5/25/36 5 6,271,053 557,143
Trust 214, Cl. 2,
14.872%, 3/1/23 5 1,006,657 212,332
Trust 221, Cl. 2,
10.445%, 5/1/23 5 109,566 24,945
Trust 240, Cl. 2,
19.219%, 9/1/23 5 203,613 45,680
Trust 254, Cl. 2,
3.621%, 1/1/24 5 1,661,322 391,746
Trust 2682, Cl. TQ,
13.248%, 10/15/33 5 1,521,031 83,835
Trust 2981, Cl. BS,
13.29%, 5/15/35 5 2,911,498 136,931
Trust 301, Cl. 2,
3.81%, 4/1/29 5 442,443 94,452
Trust 313, Cl. 2,
(14.41)%, 6/1/31 5 484,272 109,362
Trust 319, Cl. 2,
8.837%, 2/1/32 5 145,030 33,364
Trust 321, Cl. 2,
9.624%, 4/1/32 5 644,879 148,281
Trust 324, Cl. 2,
4.072%, 7/1/32 5 1,130,155 251,459
Trust 329, Cl. 2,
7.822%, 1/1/33 5 3,488,504 810,024
Trust 334, Cl. 12,
5.324%, 2/1/33 5 2,082,536 437,597
Trust 340, Cl. 2,
7.032%, 9/1/33 5 976,396 235,478
Trust 342, Cl. 2,
8.94%, 9/1/33 5 7,705,641 1,750,977
Trust 344, Cl. 2,
6.092%, 12/1/33 5 3,695,377 837,993
Trust 346, Cl. 2,
11.437%, 12/1/33 5 4,874,927 1,126,416
Trust 362, Cl. 12,
5.437%, 8/1/35 5 1,500,728 316,835
Trust 362, Cl. 13,
5.445%, 8/1/35 5 896,171 189,636
- --------------------------------------------------------------------------------
Federal National Mortgage
Assn., Principal-Only Stripped
Mtg.-Backed Security, Trust
340, Cl. 1, 5.532%, 9/1/33 7 976,396 713,556
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS Continued
- --------------------------------------------------------------------------------
Ford Credit Auto Owner Trust,
Automobile Loan Pass-Through
Certificates,
Series 2005-C, Cl. A2,
4.24%, 3/15/08 $ 161,676 $ 161,623
- --------------------------------------------------------------------------------
GE Capital Commercial
Mortgage Corp., Commercial
Mtg. Obligations:
Series 2004-C3, Cl. A2,
4.433%, 7/10/39 390,000 382,958
Series 2005-C3, Cl. A2,
4.853%, 7/10/45 430,000 425,193
- --------------------------------------------------------------------------------
GMAC Commercial Mortgage
Securities, Inc., Commercial
Mtg. Pass-Through Certificates:
Series 1997-C1, Cl. A3,
6.869%, 7/15/29 111,442 111,870
Series 1998-C1, Cl. F, 7.09%,
5/15/30 1 1,567,000 1,645,037
- --------------------------------------------------------------------------------
Government National
Mortgage Assn.:
5.125%, 11/20/25 1 10,589 10,736
7%, 3/15/28-7/15/28 492,278 508,876
7.50%, 2/15/27 51,288 53,644
8%, 11/15/25-5/15/26 123,292 130,667
- --------------------------------------------------------------------------------
Government National
Mortgage Assn., CMO,
Series 2001-62, Cl. KZ,
6.50%, 12/16/31 2,576,189 2,659,821
- --------------------------------------------------------------------------------
Government National
Mortgage Assn., CMO Gtd.
Real Estate Mtg. Investment
Conduit Pass-Through
Certificates,
Series 1999-32, Cl. ZB,
8%, 9/16/29 1,800,430 1,940,478
- --------------------------------------------------------------------------------
Government National
Mortgage Assn., Interest-Only
Stripped Mtg.-Backed Security:
Series 1998-19, Cl. SB,
(1.815)%, 7/16/28 5 260,159 27,614
Series 1998-6, Cl. SA,
(0.581)%, 3/16/28 5 163,221 15,998
Series 2001-21, Cl. SB,
(5.039)%, 1/16/27 5 1,257,592 84,854
Series 2006-47, Cl. SA,
14.403%, 8/16/36 5 2,460,381 127,276
- --------------------------------------------------------------------------------
Greenwich Capital Commercial
Funding Corp., Commercial
Mtg. Pass-Through Certificates:
Series 2005-GG3, Cl. A2,
4.305%, 8/10/42 500,000 487,066
Series 2005-GG5, Cl. A2,
5.117%, 4/10/37 1,725,000 1,719,944
12 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS Continued
- --------------------------------------------------------------------------------
GS Mortgage Securities
Corp. II, Commercial Mtg.
Obligations,
Series 2006-GG8, Cl. A2,
5.479%, 11/10/39 1 $ 1,702,000 $ 1,716,705
- --------------------------------------------------------------------------------
JP Morgan Mortgage Trust,
CMO Pass-Through
Certificates,
Series 2005-S2, Cl. 3A1,
6.712%, 2/25/32 1 2,192,535 2,213,932
- --------------------------------------------------------------------------------
JPMorgan Chase Commercial
Mortgage Securities Corp.,
Commercial Mtg. Pass-Through
Certificates:
Series 2005-LDP2, Cl. A2,
4.575%, 7/15/42 160,000 156,756
Series 2005-LDP4, Cl. A2,
4.79%, 10/15/42 2,225,000 2,192,640
- --------------------------------------------------------------------------------
LB-UBS Commercial Mortgage
Trust, Commercial Mtg.
Pass-Through Certificates,
Series 2005-C5, Cl. A2,
4.885%, 9/15/30 520,000 515,313
- --------------------------------------------------------------------------------
Mastr Alternative Loan Trust,
CMO Pass-Through Certificates:
Series 2004-6, Cl. 10A1,
6%, 7/25/34 570,957 568,445
Series 2004-9, Cl. A3,
4.70%, 8/25/34 1 354,364 351,555
- --------------------------------------------------------------------------------
Morgan Stanley Capital I Trust,
Commercial Mtg. Pass-Through
Certificates, Series 1997-XL1,
Cl. G, 7.695%, 10/3/30 390,000 348,446
- --------------------------------------------------------------------------------
Prudential Mortgage Capital
Co. II LLC, Commercial Mtg.
Pass-Through Certificates,
Series PRU-HTG 2000-C1,
Cl. A2, 7.306%, 10/6/15 556,000 598,889
- --------------------------------------------------------------------------------
RALI Series 2006-QS13 Trust, Mtg.
Asset-Backed Pass-Through
Certificates,
Series 2006-QS13, Cl. 1A8,
6%, 9/25/36 1,949,886 1,948,150
- --------------------------------------------------------------------------------
RALI Series 2006-QS5 Trust, Mtg.
Asset-Backed Pass-Through
Certificates,
Series 2006-QS5, Cl. 2A2,
6%, 4/25/08 1,603,354 1,600,477
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS Continued
- --------------------------------------------------------------------------------
Residential Asset Securitization
Trust 2006-A9CB, CMO
Pass-Through Certificates,
Series 2006-A9CB, Cl. A5,
6%, 9/25/36 $ 1,739,487 $ 1,736,790
- --------------------------------------------------------------------------------
Wachovia Bank Commercial
Mortgage Trust 2005-C17,
Commercial Mtg. Obligations,
Series 2005-C17, Cl. A2,
4.782%, 3/15/42 820,000 809,274
- --------------------------------------------------------------------------------
Wachovia Bank Commercial
Mortgage Trust 2006-C29,
Commercial Asset-Backed
Securities,
Series 2006-C29, Cl. A2,
5.272%, 11/15/48 1,357,000 1,355,901
- --------------------------------------------------------------------------------
WAMU Mortgage
Pass-Through Certificates
Series 2005-AR5 Trust,
Series 2005-AR5, Cl. A1,
4.673%, 5/25/35 1 260,850 260,307
- --------------------------------------------------------------------------------
WAMU Mortgage
Pass-Through Certificates
Series 2005-AR8 Trust,
Series 2005-AR8, Cl. 2AB1,
5.60%, 7/25/45 1 324,080 324,920
----------------
Total Mortgage-Backed
Obligations (Cost $334,606,645) 333,601,799
- --------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--6.7%
- --------------------------------------------------------------------------------
Fannie Mae Unsec. Nts.,
3.579%, 1/31/07 8 3,482,000 3,467,226
- --------------------------------------------------------------------------------
Federal Home Loan
Mortgage Corp. Unsec. Nts.:
4.125%, 7/12/10 2,066,000 2,014,955
4.875%, 2/17/09 1,000,000 997,828
5.25%, 7/18/11 9 18,720,000 18,963,023
- --------------------------------------------------------------------------------
Federal National Mortgage
Assn. Unsec. Nts.:
4%, 2/28/07 965,000 963,246
4.25%, 7/15/07 2,198,000 2,186,658
4.75%, 12/15/10 9 1,715,000 1,705,557
5%, 10/15/11 10,11 9,300,000 9,330,420
6%, 5/15/11 9,12 9,860,000 10,276,388
7.25%, 1/15/10 5,077,000 5,405,071
- --------------------------------------------------------------------------------
Resolution Funding Corp.
Bonds, Residual Funding
STRIPS, 5.155%, 1/15/21 8,9 5,667,000 2,798,971
- --------------------------------------------------------------------------------
U.S. Treasury Bills,
5.14%, 5/10/07 9,12 62,855,000 61,775,151
13 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS Continued
- --------------------------------------------------------------------------------
U.S. Treasury Bonds:
4.50%, 2/15/36 9 $ 50,000 $ 47,563
STRIPS, 4.201%, 2/15/11 8,9 900,000 745,844
STRIPS, 4.808%, 2/15/16 8 4,491,000 2,921,373
- --------------------------------------------------------------------------------
U.S. Treasury Inflationary
Index Bonds, 2.50%, 7/15/16 9,13 9,935,000 10,005,887
----------------
Total U.S. Government Obligations
(Cost $133,730,436) 133,605,161
- --------------------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS--21.3%
- --------------------------------------------------------------------------------
ARGENTINA--1.7%
Argentina (Republic of) Bonds:
2%, 9/30/14 2 [ARP] 1,802,000 646,191
5.589%, 8/3/12 1 10,639,500 10,034,753
Series V, 7%, 3/28/11 19,768,000 19,577,736
Series VII, 7%, 9/12/13 1,875,000 1,836,563
- --------------------------------------------------------------------------------
Buenos Aires (Province of)
Bonds, Bonos de Consolidacion
de Deudas,
Series PBA1, 4/1/07 2,4 [ARP] 6,736 3,011
- --------------------------------------------------------------------------------
Central Bank of
Argentina Bonds,
2%, 2/4/18 2 [ARP] 2,261,760 1,192,696
- --------------------------------------------------------------------------------
Neuquen (Province Del)
Sr. Sec. Nts., 8.656%, 10/18/14 2 1,635,000 1,696,313
----------------
34,987,263
- --------------------------------------------------------------------------------
AUSTRALIA--0.7%
New South Wales Treasury
Corp. Gtd. Bonds,
8%, 3/1/08 [AUD] 17,930,000 14,402,056
- --------------------------------------------------------------------------------
BELGIUM--0.6%
Belgium (Kingdom of) Bonds,
Series 44, 5%, 3/28/35 [EUR] 2,310,000 3,480,475
- --------------------------------------------------------------------------------
Belgium (Kingdom of)
Treasury Bills,
3.605%, 5/10/07 8 [EUR] 6,035,000 7,866,914
----------------
11,347,389
- --------------------------------------------------------------------------------
BRAZIL--2.2%
Brazil (Federal Republic of)
Bonds:
6%, 1/17/17 6,390,000 6,316,515
8%, 1/15/18 11,415,000 12,722,018
8.75%, 2/4/25 5,360,000 6,633,000
8.875%, 10/14/19 8,885,000 10,861,913
10.50%, 7/14/14 6,288,000 7,970,040
- --------------------------------------------------------------------------------
Brazil (Federal Republic of) Nts.,
7.875%, 3/7/15 130,000 145,145
----------------
44,648,631
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
BULGARIA--0.1%
Bulgaria (Republic of) Bonds:
8.25%, 1/15/15 $ 740,000 $ 881,525
8.25%, 1/15/15 3 710,000 845,788
----------------
1,727,313
- --------------------------------------------------------------------------------
CANADA--0.7%
Canada (Government of) Nts.,
4%, 9/1/10 [CAD] 16,085,000 13,801,251
- --------------------------------------------------------------------------------
COLOMBIA--1.5%
Colombia (Republic of) Bonds:
7.375%, 9/18/37 6,456,000 6,946,656
10.75%, 1/15/13 1,390,000 1,727,075
12%, 10/22/15 [COP] 26,687,000,000 14,045,368
- --------------------------------------------------------------------------------
Colombia (Republic of) Nts.:
8.25%, 12/22/14 933,000 1,063,620
11.75%, 3/1/10 [COP] 2,617,240,000 1,262,501
- --------------------------------------------------------------------------------
Colombia (Republic of)
Unsec. Bonds,
8.125%, 5/21/24 4,720,000 5,475,200
----------------
30,520,420
- --------------------------------------------------------------------------------
COSTA RICA--0.1%
Costa Rica (Republic of)
Unsec. Bonds,
9.995%, 8/1/20 1,323,000 1,693,440
- --------------------------------------------------------------------------------
DENMARK--0.1%
Denmark (Kingdom of) Bonds:
4%, 11/15/10 [DKK] 5,050,000 896,208
4%, 11/15/15 [DKK] 3,730,000 664,695
7%, 11/10/24 [DKK] 1,360,000 331,044
- --------------------------------------------------------------------------------
Denmark (Kingdom of) Nts.,
4%, 8/15/08 [DKK] 5,380,000 954,510
----------------
2,846,457
- --------------------------------------------------------------------------------
DOMINICAN REPUBLIC--0.0%
Dominican Republic
Unsec. Unsub. Nts.,
9.50%, 9/27/11 3 439,140 474,051
- --------------------------------------------------------------------------------
EL SALVADOR--0.1%
El Salvador (Republic of) Bonds:
7.625%, 9/21/34 3 590,000 683,810
7.65%, 6/15/35 3 1,265,000 1,438,938
----------------
2,122,748
- --------------------------------------------------------------------------------
FRANCE--1.3%
France (Government of)
Bonds,
3.25%, 4/25/16 [EUR] 9,840,000 12,255,804
- --------------------------------------------------------------------------------
France (Government of)
Obligations Assimilables
du Tresor Bonds,
4%, 4/25/55 [EUR] 6,320,000 8,233,311
14 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
FRANCE Continued
France (Government of)
Treasury Bills, 3.564%,
5/10/07 8 [EUR] 4,885,000 $ 6,366,750
----------------
26,855,865
- --------------------------------------------------------------------------------
GERMANY--1.6%
Germany (Federal Republic of)
Bonds,
Series 05, 4%, 1/4/37 [EUR] 8,970,000 11,749,628
- --------------------------------------------------------------------------------
Germany (Federal Republic of)
Treasury Bills, Series 0906,
3.366%, 3/14/07 8 [EUR] 15,390,000 20,178,666
----------------
31,928,294
- --------------------------------------------------------------------------------
GREECE--0.4%
Greece (Republic of) Bonds,
4.60%, 5/20/13 [EUR] 5,345,000 7,250,340
- --------------------------------------------------------------------------------
GUATEMALA--0.0%
Guatemala (Republic of) Nts.:
10.25%, 11/8/11 2 250,000 296,000
10.25%, 11/8/11 2 95,000 112,480
----------------
408,480
- --------------------------------------------------------------------------------
INDONESIA--0.3%
Indonesia (Republic of) Nts.:
6.75%, 3/10/14 3 3,740,000 3,922,325
7.25%, 4/20/15 3 200,000 216,500
- --------------------------------------------------------------------------------
Indonesia (Republic of)
Unsec. Nts.,
8.50%, 10/12/35 3 2,070,000 2,574,563
----------------
6,713,388
- --------------------------------------------------------------------------------
ISRAEL--0.4%
Israel (State of) Bonds,
Series 2682, 7.50%, 3/31/14 [ILS] 27,593,000 7,286,538
- --------------------------------------------------------------------------------
ITALY--0.9%
Italy (Republic of) Nts.,
Certificati di Credito del Tesoro,
3.40%, 7/1/09 1 [EUR] 14,270,000 18,933,109
- --------------------------------------------------------------------------------
JAPAN--0.8%
Japan (Government of) Bonds:
10 yr.,
Series 268, 1.50%, 3/20/15 [JPY] 587,000,000 4,912,836
Series 7, 0.80%, 3/10/16 [JPY] 1,272,919,000 10,375,458
----------------
15,288,294
- --------------------------------------------------------------------------------
MALAYSIA--0.3%
Johor Corp. Malaysia
(Government of) Bonds,
Series P3, 1%, 7/31/12 2 [MYR] 7,980,000 2,510,714
- --------------------------------------------------------------------------------
Malaysia (Government of)
Bonds,
Series 2/05, 4.72%, 9/30/15 2 [MYR] 8,950,000 2,707,071
----------------
5,217,785
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
MEXICO--0.6%
United Mexican States Bonds:
Series M20, 10%,
12/5/24 1 [MXN] 45,000,000 $ 5,181,477
Series M30, 10%,
11/20/36 [MXN] 36,660,000 4,413,096
- --------------------------------------------------------------------------------
United Mexican States Nts.,
7.50%, 1/14/12 2,335,000 2,564,998
----------------
12,159,571
- --------------------------------------------------------------------------------
NIGERIA--0.2%
Nigeria (Federal Republic of)
Promissory Nts.,
Series RC, 5.092%, 1/5/10 152,474 141,793
- --------------------------------------------------------------------------------
Nigeria (Federal Republic of)
Treasury Bonds:
Series 5Y13, 12.99%,
9/29/11 [NGN] 142,800,000 1,187,690
Series 7Y16, 11.99%,
12/22/13 6 [NGN] 236,500,000 1,836,180
Series 7YR, 12.74%,
10/27/13 [NGN] 80,300,000 661,945
----------------
3,827,608
- --------------------------------------------------------------------------------
PANAMA--0.4%
Panama (Republic of) Bonds:
6.70%, 1/26/36 2,816,000 2,942,720
7.25%, 3/15/15 3,700,000 4,023,750
9.375%, 4/1/29 655,000 877,700
----------------
7,844,170
- --------------------------------------------------------------------------------
PERU--1.2%
Peru (Republic of) Bonds:
7.84%, 8/12/20 [PEN] 37,670,000 13,291,948
8.20%, 8/12/26 [PEN] 5,945,000 2,181,284
8.375%, 5/3/16 290,000 345,825
9.91%, 5/5/15 [PEN] 8,101,000 3,145,678
Series 7, 8.60%, 8/12/17 [PEN] 3,450,000 1,270,441
Series 8-1, 12.25%, 8/10/11 [PEN] 1,427,000 559,496
- --------------------------------------------------------------------------------
Peru (Republic of) Past Due
Interest Bonds,
Series 20 yr., 5%, 3/7/17 1 1,323,160 1,319,852
- --------------------------------------------------------------------------------
Peru (Republic of) Sr. Nts.,
4.533%, 2/28/16 8 630,186 364,714
- --------------------------------------------------------------------------------
Peru (Republic of) Unsec.
Unsub. Bonds,
8.75%, 11/21/33 640,000 844,800
----------------
23,324,038
- --------------------------------------------------------------------------------
PHILIPPINES--0.7%
Philippines (Republic of the)
Bonds,
9.50%, 2/2/30 2,390,000 3,190,650
- --------------------------------------------------------------------------------
Philippines (Republic of the)
Unsec. Bonds:
7.75%, 1/14/31 5,762,000 6,568,680
15 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
PHILIPPINES Continued
Philippines (Republic of the)
Unsec. Bonds: Continued
9%, 2/15/13 $ 3,855,000 $ 4,471,800
----------------
14,231,130
- --------------------------------------------------------------------------------
POLAND--0.4%
Poland (Republic of) Bonds:
Series 0K0807, 4.243%,
8/12/07 8 [PLZ] 1,200,000 402,111
Series DS1013, 5%, 10/24/13 [PLZ] 11,340,000 3,886,859
Series WS0922, 5.75%,
9/23/22 [PLZ] 1,000,000 360,133
Series 0511, 4.25%, 5/24/11 [PLZ] 8,605,000 2,879,917
----------------
7,529,020
- --------------------------------------------------------------------------------
RUSSIA--0.1%
Russian Ministry of
Finance Debs.,
Series VII, 3%, 5/14/11 1,510,000 1,363,606
- --------------------------------------------------------------------------------
SPAIN--0.7%
Spain (Government of) Bonds,
3.80%, 1/31/17 [EUR] 3,385,000 4,393,239
- --------------------------------------------------------------------------------
Spain (Government of)
Treasury Bills,
3.694%, 10/19/07 8 [EUR] 6,785,000 8,692,386
----------------
13,085,625
- --------------------------------------------------------------------------------
TURKEY--1.1%
Turkey (Republic of) Bonds,
7%, 9/26/16 9,220,000 9,415,925
- --------------------------------------------------------------------------------
Turkey (Republic of) Nts.:
7.25%, 3/15/15 2,215,000 2,300,831
9.50%, 1/15/14 770,000 900,900
11%, 1/14/13 1,730,000 2,127,900
20.605%, 7/16/08 8 [TRY] 13,225,000 6,925,565
----------------
21,671,121
- --------------------------------------------------------------------------------
UKRAINE--0.2%
Ukraine (Government of)
Bonds, 7.65%, 6/11/13 3,739,000 4,061,489
- --------------------------------------------------------------------------------
UNITED KINGDOM--1.1%
United Kingdom Treasury Bonds,
5%, 3/7/08 [GBP] 3,270,000 6,388,002
- --------------------------------------------------------------------------------
United Kingdom Treasury Bonds,
6%, 12/7/28 [GBP] 4,220,000 10,095,718
- --------------------------------------------------------------------------------
United Kingdom Treasury Nts.,
4%, 3/7/09 [GBP] 3,335,000 6,374,066
----------------
22,857,786
- --------------------------------------------------------------------------------
URUGUAY--0.8%
Uruguay (Oriental Republic of)
Bonds, 7.625%, 3/21/36 6,270,000 6,928,350
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
URUGUAY Continued
Uruguay (Oriental Republic of)
Unsec. Bonds:
5%, 9/14/18 [UYU] 54,110,000 $ 2,443,417
8%, 11/18/22 5,650,000 6,441,000
----------------
15,812,767
----------------
Total Foreign Government
Obligations
(Cost $406,681,420) 426,221,043
- --------------------------------------------------------------------------------
LOAN PARTICIPATIONS--0.4%
- --------------------------------------------------------------------------------
Credit Suisse First Boston
International Export-Import
Bank of Ukraine Loan
Participation Nts., 8.40%, 2/9/16 1,740,000 1,783,500
- --------------------------------------------------------------------------------
Dali Capital plc/Bank of
Moscow Loan Participation
Nts., Series 28, Tranche 1, 7.25%,
11/25/09 [RUR] 100,800,000 3,828,987
- --------------------------------------------------------------------------------
Dali Capital SA (ROSBANK)
Loan Participation Nts., Series 23,
Tranche 1, 8%, 9/30/09 [RUR] 49,400,000 1,942,411
- --------------------------------------------------------------------------------
Reachcom Public Ltd.
Renaissance Consumer Finance
Bank of Russia Loan
Participation Nts.,
10.50%, 7/27/07 2 [RUR] 20,000,000 759,720
----------------
Total Loan Participations
(Cost $8,150,424) 8,314,618
- --------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES--24.4%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--6.9%
- --------------------------------------------------------------------------------
AUTO COMPONENTS--0.4%
Collins & Aikman
Floorcoverings, Inc.,
9.75% Sr. Sub. Nts.,
Series B, 2/15/10 700,000 719,250
- --------------------------------------------------------------------------------
Goodyear Tire & Rubber
Co. (The):
7.857% Nts., 8/15/11 1,125,000 1,136,250
9% Sr. Unsec. Nts., 7/1/15 1,045,000 1,099,863
- --------------------------------------------------------------------------------
Stoneridge, Inc.,
11.50% Sr. Nts., 5/1/12 1,200,000 1,242,000
- --------------------------------------------------------------------------------
Tenneco Automotive, Inc.:
8.625% Sr. Unsec. Sub. Nts.,
11/15/14 900,000 922,500
10.25% Sr. Sec. Nts.,
Series B, 7/15/13 650,000 715,000
- --------------------------------------------------------------------------------
United Components, Inc.,
9.375% Sr. Sub. Nts., 6/15/13 200,000 208,000
- --------------------------------------------------------------------------------
Visteon Corp.:
7% Sr. Unsec. Nts., 3/10/14 1,125,000 990,000
8.25% Sr. Unsec. Nts., 8/1/10 1,700,000 1,666,000
----------------
8,698,863
16 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
AUTOMOBILES--0.6%
Ford Motor Co.,
7.45% Bonds, 7/16/31 $ 800,000 $ 632,000
- --------------------------------------------------------------------------------
Ford Motor Credit Co.,
7.375% Nts., 10/28/09 4,400,000 4,412,135
- --------------------------------------------------------------------------------
General Motors
Acceptance Corp.:
6.875% Nts., 9/15/11 4,720,000 4,846,114
8% Bonds, 11/1/31 2,480,000 2,855,474
----------------
12,745,723
- --------------------------------------------------------------------------------
DISTRIBUTORS--0.0%
SGS International, Inc.,
12% Sr. Unsec. Sub. Nts., 12/15/13 580,000 606,100
- --------------------------------------------------------------------------------
DIVERSIFIED CONSUMER SERVICES--0.1%
Education Management
LLC/Education
Management Corp.,
10.25% Sr. Sub. Nts., 6/1/16 3 1,140,000 1,211,250
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--1.7%
American Casino &
Entertainment Properties LLC,
7.85% Sr. Sec. Nts., 2/1/12 500,000 513,125
- --------------------------------------------------------------------------------
Aztar Corp., 9% Sr. Unsec.
Sub. Nts., 8/15/11 850,000 892,500
- --------------------------------------------------------------------------------
Boyd Gaming Corp., 8.75%
Sr. Sub. Nts., 4/15/12 500,000 525,000
- --------------------------------------------------------------------------------
Buffets, Inc., 12.50% Sr. Unsec.
Nts., 11/1/14 3 185,000 187,313
- --------------------------------------------------------------------------------
CCM Merger, Inc., 8% Unsec.
Nts., 8/1/13 3 1,040,000 1,021,800
- --------------------------------------------------------------------------------
Domino's, Inc., 8.25% Sr. Unsec.
Sub. Nts., 7/1/11 1,047,000 1,090,189
- --------------------------------------------------------------------------------
French Lick Resorts &
Casino LLC,
10.75% First Mtg. Nts., 4/15/14 3 1,460,000 1,372,400
- --------------------------------------------------------------------------------
Gaylord Entertainment Co.,
8% Sr. Nts., 11/15/13 900,000 938,250
- --------------------------------------------------------------------------------
Greektown Holdings, Inc.,
10.75% Sr. Nts., 12/1/13 3 1,335,000 1,401,750
- --------------------------------------------------------------------------------
Isle of Capri Casinos, Inc.:
7% Sr. Unsec. Sub. Nts., 3/1/14 2,100,000 2,100,000
9% Sr. Sub. Nts., 3/15/12 500,000 525,000
- --------------------------------------------------------------------------------
Mandalay Resort Group,
10.25% Sr. Unsec. Sub. Nts.,
Series B, 8/1/07 650,000 668,688
- --------------------------------------------------------------------------------
MGM Mirage, Inc.:
6.75% Sr. Unsec. Nts., 4/1/13 650,000 638,625
8.375% Sr. Unsec. Sub. Nts., 2/1/11 2,300,000 2,397,750
9.75% Sr. Unsec. Sub. Nts., 6/1/07 350,000 356,125
- --------------------------------------------------------------------------------
Mohegan Tribal Gaming Authority:
6.125% Sr. Unsec. Sub. Nts., 2/15/13 225,000 224,438
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE Continued
- --------------------------------------------------------------------------------
Mohegan Tribal
Gaming Authority: Continued
6.375% Sr. Sub. Nts., 7/15/09 $ 250,000 $ 251,250
6.875% Sr. Unsec. Sub. Nts.,
2/15/15 515,000 518,863
7.125% Sr. Unsec. Sub. Nts.,
8/15/14 500,000 509,375
8% Sr. Sub. Nts., 4/1/12 1,200,000 1,255,500
- --------------------------------------------------------------------------------
NCL Corp., 10.625% Sr. Unsub.
Nts., 7/15/14 800,000 804,000
- --------------------------------------------------------------------------------
Park Place Entertainment Corp.:
7.875% Sr. Sub. Nts., 3/15/10 800,000 838,000
9.375% Sr. Unsec. Sub. Nts.,
2/15/07 800,000 803,000
- --------------------------------------------------------------------------------
Penn National Gaming, Inc.:
6.75% Sr. Unsec. Sub. Nts., 3/1/15 230,000 226,550
6.875% Sr. Sub. Nts., 12/1/11 500,000 506,250
- --------------------------------------------------------------------------------
Pinnacle Entertainment, Inc.,
8.25% Sr. Unsec. Sub. Nts.,
3/15/12 1,900,000 1,928,500
- --------------------------------------------------------------------------------
Pokagon Gaming Authority,
10.375% Sr. Nts., 6/15/14 3 525,000 577,500
- --------------------------------------------------------------------------------
Premier Cruise Ltd., 11% Sr. Nts.,
3/15/08 2,4,18 250,000 --
- --------------------------------------------------------------------------------
Six Flags, Inc.:
8.875% Sr. Unsec. Nts., 2/1/10 574,000 558,215
9.625% Sr. Nts., 6/1/14 669,000 623,843
9.75% Sr. Nts., 4/15/13 400,000 377,500
- --------------------------------------------------------------------------------
Station Casinos, Inc.:
6.50% Sr. Unsec. Sub. Nts., 2/1/14 2,203,000 1,968,931
6.875% Sr. Unsec. Sub. Nts.,
3/1/16 235,000 212,088
- --------------------------------------------------------------------------------
Trump Entertainment
Resorts, Inc., 8.50% Sec. Nts.,
6/1/15 3,100,000 3,100,000
- --------------------------------------------------------------------------------
Universal City Development
Partners Ltd.,
11.75% Sr. Nts., 4/1/10 500,000 538,125
- --------------------------------------------------------------------------------
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 2,274,000 2,271,158
----------------
33,827,101
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES--0.2%
Beazer Homes USA, Inc.,
8.375% Sr. Nts., 4/15/12 400,000 413,000
- --------------------------------------------------------------------------------
D.R. Horton, Inc.,
9.75% Sr. Sub. Nts., 9/15/10 400,000 441,703
- --------------------------------------------------------------------------------
K. Hovnanian Enterprises, Inc.,
7.75% Sr. Unsec. Sub. Nts., 5/15/13 300,000 300,750
17 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES Continued
KB Home:
8.625% Sr. Sub. Nts., 12/15/08 $ 250,000 $ 261,004
9.50% Sr. Unsec. Sub. Nts.,
2/15/11 400,000 412,500
- --------------------------------------------------------------------------------
Sealy Mattress Co., 8.25% Sr.
Sub. Nts., 6/15/14 450,000 472,500
- --------------------------------------------------------------------------------
Standard Pacific Corp., 9.25%
Sr. Sub. Nts., 4/15/12 200,000 205,500
- --------------------------------------------------------------------------------
WCI Communities, Inc., 9.125%
Sr. Sub. Nts., 5/1/12 800,000 766,000
- --------------------------------------------------------------------------------
William Lyon Homes, Inc.,
10.75% Sr. Nts., 4/1/13 900,000 861,750
----------------
4,134,707
- --------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS--0.1%
Leslie's Poolmart, Inc.,
7.75% Sr. Unsec. Nts., 2/1/13 825,000 825,000
- --------------------------------------------------------------------------------
Steinway Musical
Instruments, Inc.,
7% Sr. Nts., 3/1/14 3 785,000 771,263
----------------
1,596,263
- --------------------------------------------------------------------------------
MEDIA--3.1%
Adelphia Communications Corp.:
7.875% Sr. Unsec. Nts., 5/1/09 4,18 350,000 317,625
10.25% Sr. Unsec. Sub. Nts.,
6/15/11 4,18 200,000 191,000
10.875% Sr. Unsec. Nts., 10/1/10 4,18 400,000 369,000
- --------------------------------------------------------------------------------
Allbritton Communications Co.,
7.75% Sr. Unsec. Sub. Nts.,
12/15/12 1,100,000 1,116,500
- --------------------------------------------------------------------------------
AMC Entertainment, Inc.:
8% Sr. Unsec. Sub. Nts., 3/1/14 650,000 648,375
9.50% Sr. Unsec. Sub. Nts., 2/1/11 360,000 363,150
- --------------------------------------------------------------------------------
American Media
Operations, Inc.:
8.875% Sr. Unsec. Sub. Nts.,
1/15/11 150,000 137,625
10.25% Sr. Unsec. Sub. Nts.,
Series B, 5/1/09 1,250,000 1,214,063
- --------------------------------------------------------------------------------
Block Communications, Inc.,
8.25% Sr. Nts., 12/15/15 3 405,000 406,013
- --------------------------------------------------------------------------------
Charter Communications
Holdings II LLC/Charter
Communications Holdings II
Capital Corp.:
10.25% Sr. Unsec. Nts., 9/15/10 1,100,000 1,156,375
10.25% Sr. Unsec. Nts.,
Series B, 9/15/10 1,735,000 1,819,581
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
MEDIA Continued
Charter Communications
Operating LLC/Charter
Communications Operating
Capital Corp.,
8.375% Sr. Nts., Second Lien,
4/30/14 3 $ 2,653,000 $ 2,782,334
- --------------------------------------------------------------------------------
Cinemark USA, Inc.,
9% Sr. Unsec. Sub. Nts., 2/1/13 900,000 958,500
- --------------------------------------------------------------------------------
Cinemark, Inc.,
0%/9.75% Sr. Unsec. Disc. Nts.,
3/15/14 15 1,500,000 1,295,625
- --------------------------------------------------------------------------------
CSC Holdings, Inc.:
7.625% Sr. Unsec. Debs., 7/15/18 1,000,000 978,750
7.625% Sr. Unsec. Unsub. Nts.,
Series B, 4/1/11 1,106,000 1,132,268
- --------------------------------------------------------------------------------
Dex Media East LLC/Dex
Media East Finance Co.,
9.875% Sr. Unsec. Nts., 11/15/09 200,000 210,000
- --------------------------------------------------------------------------------
Dex Media West LLC/Dex
Media West Finance Co.:
8.50% Sr. Nts., 8/15/10 300,000 313,125
9.875% Sr. Sub. Nts., 8/15/13 586,000 641,670
- --------------------------------------------------------------------------------
Dex Media, Inc.:
0%/9% Unsec.
Disc. Nts., 11/15/13 15 300,000 269,250
0%/9% Unsec. Disc. Nts.,
11/15/13 15 400,000 359,000
8% Unsec. Nts., 11/15/13 3,575,000 3,700,125
- --------------------------------------------------------------------------------
DirecTV Holdings
LLC/DirecTV Financing Co., Inc.:
6.375% Sr. Unsec. Nts., 6/15/15 450,000 433,688
8.375% Sr. Unsec. Nts., 3/15/13 1,100,000 1,149,500
- --------------------------------------------------------------------------------
EchoStar DBS Corp.:
6.625% Sr. Unsec. Nts., 10/1/14 1,427,000 1,394,893
7% Sr. Unsec. Nts., 10/1/13 535,000 537,006
7.125% Sr. Unsec. Nts., 2/1/16 1,400,000 1,407,000
- --------------------------------------------------------------------------------
Granite Broadcasting Corp.,
9.75% Sr. Sec. Nts., 12/1/10 359,000 350,923
- --------------------------------------------------------------------------------
Idearc, Inc., 8% Sr. Nts., 11/15/16 2 1,930,000 1,958,950
- --------------------------------------------------------------------------------
Lamar Media Corp.,
6.625% Sr. Unsec. Sub. Nts.,
8/15/15 1,275,000 1,270,219
- --------------------------------------------------------------------------------
Lin Television Corp.,
6.50% Sr. Sub. Nts., 5/15/13 550,000 526,625
- --------------------------------------------------------------------------------
Marquee Holdings, Inc.,
0%/12% Sr. Disc. Nts., 8/15/14 15 1,600,000 1,350,000
- --------------------------------------------------------------------------------
Mediacom Broadband LLC,
8.50% Sr. Nts., 10/15/15 3 1,220,000 1,241,350
- --------------------------------------------------------------------------------
Mediacom Broadband
LLC/Mediacom Broadband
Corp.,
8.50% Sr. Nts., 10/15/15 280,000 284,900
18 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
MEDIA Continued
Mediacom LLC/Mediacom
Capital Corp.,
9.50% Sr. Unsec. Nts., 1/15/13 $ 969,000 $ 1,002,915
- --------------------------------------------------------------------------------
MediaNews Group, Inc.:
6.375% Sr. Sub. Nts., 4/1/14 1,300,000 1,124,500
6.875% Sr. Unsec. Sub. Nts.,
10/1/13 700,000 637,000
- --------------------------------------------------------------------------------
Nielsen Finance LLC/Nielsen
Finance Co.:
0%/12.50% Sr. Sub. Disc. Nts.,
8/1/16 3,15 1,725,000 1,196,719
10% Sr. Nts., 8/1/14 3 2,195,000 2,389,806
- --------------------------------------------------------------------------------
NTL Cable plc, 9.125% Sr. Nts.,
8/15/16 355,000 376,744
- --------------------------------------------------------------------------------
Paxson Communications Corp.,
11.624% Sr. Sec. Nts., 1/15/13 1,3 760,000 773,300
- --------------------------------------------------------------------------------
PRIMEDIA, Inc.:
8% Sr. Nts., 5/15/13 900,000 875,250
8.875% Sr. Unsec. Nts., 5/15/11 319,000 326,975
- --------------------------------------------------------------------------------
Quebecor World Capital Corp.,
8.75% Sr. Nts., 3/15/16 3 315,000 303,188
- --------------------------------------------------------------------------------
R.H. Donnelley Corp.:
6.875% Sr. Disc. Nts.,
Series A-1, 1/15/13 2,730,000 2,631,038
6.875% Sr. Disc. Nts.,
Series A-2, 1/15/13 1,865,000 1,797,394
6.875% Sr. Nts., 1/15/13 1,300,000 1,252,875
8.875% Sr. Unsec. Nts.,
Series A-3, 1/15/16 3,540,000 3,734,700
- --------------------------------------------------------------------------------
R.H. Donnelley Financial Corp. I,
10.875% Sr. Sub. Nts., 12/15/12 3 400,000 438,000
- --------------------------------------------------------------------------------
Radio One, Inc.,
8.875% Sr. Unsec. Sub. Nts.,
Series B, 7/1/11 600,000 622,500
- --------------------------------------------------------------------------------
Rainbow National Services LLC,
8.75% Sr. Nts., 9/1/12 3 900,000 950,625
- --------------------------------------------------------------------------------
Shaw Communications, Inc.,
8.54% Debs., 9/30/27 [CAD] 340,000 309,716
- --------------------------------------------------------------------------------
Sinclair Broadcast Group, Inc.:
8% Sr. Unsec. Sub. Nts., 3/15/12 2,775,000 2,879,063
8.75% Sr. Sub. Nts., 12/15/11 300,000 313,875
- --------------------------------------------------------------------------------
Sirius Satellite Radio, Inc.,
9.625% Sr. Unsec. Nts., 8/1/13 390,000 385,613
- --------------------------------------------------------------------------------
Vertis, Inc.:
9.75% Sr. Sec. Nts., 4/1/09 700,000 724,500
10.875% Sr. Unsec. Nts.,
Series B, 6/15/09 800,000 808,000
- --------------------------------------------------------------------------------
Warner Music Group,
7.375% Sr. Sub. Bonds, 4/15/14 500,000 497,500
- --------------------------------------------------------------------------------
WMG Holdings Corp.,
0%/9.50% Sr. Disc. Nts., 12/15/14 15 2,057,000 1,655,885
- --------------------------------------------------------------------------------
XM Satellite Radio Holdings, Inc.,
9.75% Sr. Unsec. Nts., 5/1/14 930,000 934,650
----------------
61,227,339
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
MULTILINE RETAIL--0.3%
Bon-Ton Stores, Inc. (The),
10.25% Sr. Unsec. Unsub. Nts.,
3/15/14 $ 1,980,000 $ 2,034,450
- --------------------------------------------------------------------------------
Neiman Marcus Group,
Inc. (The):
9% Sr. Unsec. Nts., 10/15/15 2,020,000 2,214,425
10.375% Sr. Unsec. Sub. Nts.,
10/15/15 660,000 737,550
----------------
4,986,425
- --------------------------------------------------------------------------------
SPECIALTY RETAIL--0.2%
Asbury Automotive Group, Inc.,
9% Sr. Sub. Nts., 6/15/12 300,000 315,000
- --------------------------------------------------------------------------------
Atlantic Broadband Finance LLC,
9.375% Sr. Unsec. Sub. Nts.,
1/15/14 250,000 254,063
- --------------------------------------------------------------------------------
Boise Cascade LLC,
7.125% Sr. Unsec. Sub. Nts.,
10/15/14 1,308,000 1,272,030
- --------------------------------------------------------------------------------
Gamestop Corp.,
8% Sr. Unsec. Nts., 10/1/12 300,000 315,000
- --------------------------------------------------------------------------------
Linens 'N Things, Inc.,
10.999% Sr. Sec. Nts., 1/15/14 1 1,480,000 1,443,000
- --------------------------------------------------------------------------------
Rent-A-Center, Inc.,
7.50% Sr. Unsec. Sub. Nts.,
Series B, 5/1/10 550,000 554,125
----------------
4,153,218
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS--0.2%
Invista, Inc., 9.25% Sr. Nts., 5/1/12 3 1,067,000 1,149,693
- --------------------------------------------------------------------------------
Levi Strauss & Co.,
9.75% Sr. Unsec. Unsub. Nts.,
1/15/15 1,919,000 2,077,318
- --------------------------------------------------------------------------------
Oxford Industries, Inc.,
8.875% Sr. Nts., 6/1/11 2 250,000 259,375
- --------------------------------------------------------------------------------
Quiksilver, Inc.,
6.875% Sr. Unsec. Nts., 4/15/15 610,000 602,375
----------------
4,088,761
- --------------------------------------------------------------------------------
CONSUMER STAPLES--1.1%
- --------------------------------------------------------------------------------
BEVERAGES--0.1%
Constellation Brands, Inc.:
7.25% Sr. Nts., 9/1/16 685,000 707,263
8.125% Sr. Sub. Nts., 1/15/12 300,000 313,500
----------------
1,020,763
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--0.5%
Albertson's, Inc.,
8% Sr. Unsec. Debs., 5/1/31 1,238,000 1,261,966
- --------------------------------------------------------------------------------
Delhaize America, Inc.,
9% Unsub. Debs., 4/15/31 3,798,000 4,528,374
19 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING Continued
Jean Coutu Group (PJC),
Inc. (The), 8.50% Sr. Sub. Nts.,
8/1/14 $ 1,600,000 $ 1,618,000
- --------------------------------------------------------------------------------
Real Time Data Co.,
11% Disc. Nts., 5/31/09 2,4,16,18 142,981 --
- --------------------------------------------------------------------------------
Rite Aid Corp.:
8.125% Sr. Sec. Nts., 5/1/10 450,000 461,813
9.50% Sr. Sec. Nts., 2/15/11 700,000 735,875
- --------------------------------------------------------------------------------
Supervalu, Inc.,
7.50% Sr. Nts., 11/15/14 945,000 990,078
----------------
9,596,106
- --------------------------------------------------------------------------------
FOOD PRODUCTS--0.2%
Del Monte Corp.:
6.75% Sr. Unsec. Sub. Nts.,
2/15/15 180,000 179,100
8.625% Sr. Sub. Nts., 12/15/12 400,000 424,000
- --------------------------------------------------------------------------------
Dole Food Co., Inc.:
8.625% Sr. Nts., 5/1/09 306,000 305,618
8.875% Sr. Unsec. Nts., 3/15/11 71,000 70,290
- --------------------------------------------------------------------------------
Hines Nurseries, Inc.,
10.25% Sr. Unsec. Sub. Nts.,
10/1/11 1,300,000 1,137,500
- --------------------------------------------------------------------------------
MHP SA,
10.25% Sr. Sec. Sub. Bonds,
11/30/11 2 1,360,000 1,397,400
- --------------------------------------------------------------------------------
Smithfield Foods, Inc.:
7% Sr. Nts., 8/1/11 300,000 304,500
7.625% Sr. Unsec. Sub. Nts.,
2/15/08 400,000 408,000
----------------
4,226,408
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS--0.1%
Church & Dwight Co., Inc.,
6% Sr. Unsec. Sub. Nts., 12/15/12 350,000 343,875
- --------------------------------------------------------------------------------
Nutro Products, Inc.,
10.75% Sr. Sub. Nts., 4/15/14 3 370,000 406,075
- --------------------------------------------------------------------------------
Spectrum Brands, Inc.,
7.375% Sr. Unsec. Sub. Nts., 2/1/15 900,000 783,000
----------------
1,532,950
- --------------------------------------------------------------------------------
PERSONAL PRODUCTS--0.1%
Elizabeth Arden, Inc.,
7.75% Sr. Unsec. Sub. Nts.,
1/15/14 1,175,000 1,189,688
- --------------------------------------------------------------------------------
Playtex Products, Inc.:
8% Sr. Sec. Nts., 3/1/11 500,000 525,000
9.375% Sr. Unsec. Sub. Nts.,
6/1/11 740,000 775,150
- --------------------------------------------------------------------------------
Sally Holdings LLC:
9.25% Sr. Nts., 11/15/14 2 240,000 246,600
10.50% Sr. Sub. Nts., 11/15/16 2 240,000 246,000
----------------
2,982,438
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
TOBACCO--0.1%
Reynolds American, Inc.,
7.25% Sr. Sec. Nts., 6/1/13 $ 1,805,000 $ 1,885,315
- --------------------------------------------------------------------------------
ENERGY--2.6%
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--0.1%
Basic Energy Services, Inc.,
7.125% Sr. Unsec. Nts., 4/15/16 335,000 331,650
- --------------------------------------------------------------------------------
Hanover Compressor Co.,
8.625% Sr. Unsec. Sub. Nts.,
12/15/10 800,000 840,000
- --------------------------------------------------------------------------------
Hanover Equipment Trust,
8.50% Sr. Sec. Nts.,
Series A, 9/1/08 221,000 224,868
- --------------------------------------------------------------------------------
PHI, Inc., 7.125% Sr. Unsec. Nts.,
4/15/13 400,000 389,000
- --------------------------------------------------------------------------------
RathGibson, Inc.,
11.25% Sr. Unsec. Nts., 2/15/14 300,000 319,500
- --------------------------------------------------------------------------------
Universal Compression, Inc.,
7.25% Sr. Unsec. Sub. Nts.,
5/15/10 400,000 404,000
----------------
2,509,018
- --------------------------------------------------------------------------------
OIL & GAS--2.5%
Arch Western Finance LLC,
6.75% Sr. Nts., 7/1/13 700,000 698,250
- --------------------------------------------------------------------------------
Atlas Pipeline Partners LP,
8.125% Sr. Unsec. Nts., 12/15/15 290,000 299,425
- --------------------------------------------------------------------------------
Berry Petroleum Co.,
8.25% Sr. Sub. Nts., 11/1/16 370,000 372,313
- --------------------------------------------------------------------------------
Chesapeake Energy Corp.:
6.375% Sr. Unsec. Nts., 6/15/15 250,000 248,750
6.875% Sr. Unsec. Nts., 1/15/16 1,822,000 1,847,053
7.50% Sr. Nts., 6/15/14 300,000 313,125
- --------------------------------------------------------------------------------
Clayton Williams Energy, Inc.,
7.75% Sr. Unsec. Nts., 8/1/13 85,000 78,838
- --------------------------------------------------------------------------------
Compton Petroleum
Finance Corp.,
7.625% Sr. Nts., 12/1/13 1,310,000 1,270,700
- --------------------------------------------------------------------------------
Copano Energy LLC,
8.125% Sr. Unsec. Nts., 3/1/16 180,000 187,200
- --------------------------------------------------------------------------------
El Paso Corp.,
7.875% Sr. Unsec. Nts., 6/15/12 2 2,784,000 2,999,760
- --------------------------------------------------------------------------------
El Paso Energy Corp.,
7.625% Nts., 7/15/11 200,000 213,000
- --------------------------------------------------------------------------------
El Paso Production
Holding Co.,
7.75% Sr. Unsec. Nts., 6/1/13 1,319,000 1,386,599
- --------------------------------------------------------------------------------
Forest Oil Corp.,
7.75% Sr. Nts., 5/1/14 300,000 306,750
- --------------------------------------------------------------------------------
Foundation PA Coal Co.,
7.25% Sr. Unsec. Nts., 8/1/14 550,000 562,375
- --------------------------------------------------------------------------------
Frontier Oil Corp.,
6.625% Sr. Unsec. Nts., 10/1/11 700,000 701,750
20 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
OIL & GAS Continued
Gaz Capital SA,
8.625% Sr. Unsec. Nts., 4/28/34 3 $ 3,555,000 $ 4,577,063
- --------------------------------------------------------------------------------
Inergy LP/Inergy
Finance Corp.,
8.25% Sr. Unsec. Nts., 3/1/16 880,000 928,400
- --------------------------------------------------------------------------------
Massey Energy Co.:
6.625% Sr. Nts., 11/15/10 200,000 201,000
6.875% Sr. Unsec. Nts., 12/15/13 285,000 269,325
- --------------------------------------------------------------------------------
National Gas Co.,
6.05% Nts., 1/15/36 3 1,510,000 1,480,248
- --------------------------------------------------------------------------------
Newfield Exploration Co.,
6.625% Sr. Unsec. Sub. Nts.,
9/1/14 1,900,000 1,909,500
- --------------------------------------------------------------------------------
Pacific Energy Partners
LP/Pacific Energy Finance Corp.,
6.25% Sr. Unsec. Nts., 9/15/15 100,000 97,926
- --------------------------------------------------------------------------------
Peabody Energy Corp.,
6.875% Sr. Unsec. Nts.,
Series B, 3/15/13 700,000 721,000
- --------------------------------------------------------------------------------
Pemex Project
Funding Master Trust:
7.375% Unsec. Unsub. Nts.,
12/15/14 740,000 816,590
8.50% Unsub. Nts., 2/15/08 420,000 433,125
9.125% Unsec. Unsub. Nts.,
10/13/10 610,000 685,640
- --------------------------------------------------------------------------------
Petroleum Export Ltd.
Cayman SPV,
5.265% Sr. Nts., Cl. A3, 6/15/11 3 3,521,812 3,429,249
- --------------------------------------------------------------------------------
Pogo Producing Co.,
7.875% Sr. Unsec. Sub. Nts.,
5/1/13 365,000 372,300
- --------------------------------------------------------------------------------
Premcor Refining Group, Inc.,
9.50% Sr. Nts., 2/1/13 835,000 902,094
- --------------------------------------------------------------------------------
Quicksilver Resources, Inc.,
7.125% Sr. Sub. Nts., 4/1/16 1,340,000 1,316,550
- --------------------------------------------------------------------------------
Range Resources Corp.:
6.375% Sr. Sub. Nts., 3/15/15 430,000 421,400
7.375% Sr. Sub. Nts., 7/15/13 200,000 206,000
7.50% Sr. Sub. Nts., 5/15/16 1,505,000 1,550,150
- --------------------------------------------------------------------------------
Sabine Pass LNG LP:
7.25% Sr. Sec. Nts., 11/30/13 2 1,335,000 1,328,325
7.50% Sr. Sec. Nts., 11/30/16 2 2,770,000 2,763,075
- --------------------------------------------------------------------------------
Southern Natural Gas Co.:
7.35% Nts., 2/15/31 500,000 552,873
8% Sr. Unsub. Nts., 3/1/32 300,000 352,050
- --------------------------------------------------------------------------------
Stone Energy Corp.,
6.75% Sr. Unsec. Sub. Nts.,
12/15/14 1,020,000 979,200
- --------------------------------------------------------------------------------
Targa Resources, Inc.,
8.50% Sr. Nts., 11/1/13 3 525,000 531,563
- --------------------------------------------------------------------------------
Tengizchevroil LLP,
6.124% Nts., 11/15/14 3 2,123,000 2,128,308
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
OIL & GAS Continued
Tennessee Gas Pipeline Co.,
7.50% Bonds, 4/1/17 $ 1,567,000 $ 1,717,647
- --------------------------------------------------------------------------------
Tesoro Corp.:
6.25% Sr. Unsec. Nts., 11/1/12 405,000 405,000
6.625% Sr. Unsec. Nts., 11/1/15 905,000 902,738
- --------------------------------------------------------------------------------
Transcontinental Gas
Pipe Line Corp.,
6.40% Sr. Unsec. Unsub. Nts.,
4/15/16 470,000 477,050
- --------------------------------------------------------------------------------
Whiting Petroleum Corp.,
7.25% Sr. Sub. Nts., 5/1/12 1,500,000 1,511,250
- --------------------------------------------------------------------------------
Williams Cos., Inc. (The):
7.125% Nts., 9/1/11 900,000 940,500
7.625% Nts., 7/15/19 928,000 997,600
8.75% Unsec. Nts., 3/15/32 1,619,000 1,837,565
----------------
49,228,192
- --------------------------------------------------------------------------------
FINANCIALS--2.7%
- --------------------------------------------------------------------------------
CAPITAL MARKETS--0.9%
Berry Plastics Holding Corp.:
8.875% Sr. Sec. Nts., 9/15/14 3 600,000 612,000
9.235% Sr. Sec. Nts., 9/15/14 1,3 600,000 610,500
- --------------------------------------------------------------------------------
E*TRADE Financial Corp.:
7.375% Sr. Unsec. Nts., 9/15/13 1,146,000 1,197,570
8% Sr. Nts., 6/15/11 410,000 430,500
- --------------------------------------------------------------------------------
HBOS Treasury Services plc:
4.375% Sr. Sec. Nts., 7/13/16 [EUR] 5,910,000 7,941,502
4.50% Sr. Sec. Nts., 7/13/21 [EUR] 5,530,000 7,502,893
----------------
18,294,965
- --------------------------------------------------------------------------------
COMMERCIAL BANKS--0.9%
Banco BMG SA,
9.15% Nts., 1/15/16 3 2,980,000 3,027,680
- --------------------------------------------------------------------------------
Banco de Credito del Peru,
6.95% Sub. Nts., 11/7/21 1,2 1,345,000 1,345,000
- --------------------------------------------------------------------------------
Bank Plus Corp.,
12% Sr. Nts., 7/18/07 2 7,000 7,298
- --------------------------------------------------------------------------------
HSBC Bank plc:
11.601% Sr. Unsec. Nts., 1/12/10 8 2,510,000 1,405,600
12.278% Sr. Unsec. Nts., 3/9/09 8 1,960,000 1,234,800
9.751% Sr. Unsec. Nts., 7/8/09 8 1,960,000 1,293,600
- --------------------------------------------------------------------------------
Inter-American
Development Bank:
6.26% Nts., 12/8/09 1 [BRR] 920,000 424,040
7.889% Nts., 1/25/12 1 [COP] 971,928,577 468,846
- --------------------------------------------------------------------------------
Ongko International
Finance Co. BV,
10.50% Sec. Nts., 3/29/10 2,4,18 90,000 --
- --------------------------------------------------------------------------------
RSHB Capital SA/OJSC
Russian Agricultural Bank,
7.175% Nts., 5/16/13 3 3,110,000 3,284,938
21 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
COMMERCIAL BANKS Continued
Salisbury International
Investments Ltd.,
9.524% Sec. Nts.,
Series 2006-003, Tranche E,
7/20/11 1,2 $ 1,100,000 $ 1,100,000
- --------------------------------------------------------------------------------
UBS Luxembourg SA,
6.23% Sub. Nts., 2/11/15 1 2,500,000 2,544,525
- --------------------------------------------------------------------------------
VTB Capital SA,
6.25% Sr. Nts., 6/30/35 3 1,870,000 1,912,075
----------------
18,048,402
- --------------------------------------------------------------------------------
CONSUMER FINANCE--0.0%
Ace Cash Express, Inc.,
10.25% Sr. Nts., 10/1/14 3 250,000 254,375
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--0.6%
AAC Group Holding Corp.,
0%/10.25% Sr. Unsec. Disc.
Nts., 10/1/12 15 100,000 88,000
- --------------------------------------------------------------------------------
Affinia Group, Inc.,
9% Sr. Unsec. Sub. Nts., 11/30/14 60,000 59,100
- --------------------------------------------------------------------------------
Autopistas del Nordeste
Cayman Ltd., 9.39% Nts.,
1/15/26 2 3,791,898 3,924,615
- --------------------------------------------------------------------------------
Cloverie plc, 9.615% Sec. Nts.,
Series 2005-93, 12/20/10 1,2 1,100,000 1,108,800
- --------------------------------------------------------------------------------
Depfa ACS Bank,
3.50% Sec. Nts., 3/16/11 [EUR] 2,090,000 2,697,729
- --------------------------------------------------------------------------------
Halyk Savings Bank
Kazakhstan Europe BV,
7.75% Nts., 5/13/13 3 1,625,000 1,722,500
- --------------------------------------------------------------------------------
JSG Funding plc,
7.75% Sr. Unsec. Sub. Nts.,
4/1/15 2 330,000 318,450
- --------------------------------------------------------------------------------
Nell AF Sarl,
8.375% Sr. Nts., 8/15/15 3 850,000 877,625
- --------------------------------------------------------------------------------
Tiers-BSP, 0%/8.60%
Collateralized Trust, Cl. A,
6/15/97 15 2,695,000 1,138,638
- --------------------------------------------------------------------------------
Universal City Florida:
8.375% Sr. Unsec. Nts., 5/1/10 130,000 133,900
10.121% Sr. Unsec. Nts., 5/1/10 1 130,000 134,875
----------------
12,204,232
- --------------------------------------------------------------------------------
REAL ESTATE--0.2%
Felcor Lodging LP,
8.50% Sr. Nts., 6/1/11 1 925,000 989,750
- --------------------------------------------------------------------------------
Host Hotels & Resorts LP,
6.875% Sr. Nts., 11/1/14 3 375,000 381,563
- --------------------------------------------------------------------------------
Host Marriott LP:
6.375% Sr. Nts., Series O, 3/15/15 730,000 723,613
6.75% Sr. Nts., Series Q, 6/1/16 500,000 503,125
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
REAL ESTATE Continued
Host Marriott LP: Continued
Ventas Realty LP/Ventas
Capital Corp., 6.75% Sr. Nts.,
4/1/17 $ 450,000 $ 466,875
----------------
3,064,926
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE--0.1%
Banco Hipotecario SA,
9.75% Sr. Unsec. Nts., 4/27/16 2 2,340,000 2,258,100
- --------------------------------------------------------------------------------
BankUnited Capital Trust,
10.25% Capital Securities,
12/31/26 2 100,000 105,750
----------------
2,363,850
- --------------------------------------------------------------------------------
HEALTH CARE--1.0%
- --------------------------------------------------------------------------------
BIOTECHNOLOGY--0.0%
Angiotech Pharmaceuticals,
Inc., 7.75% Sr. Sub. Nts., 4/1/14 3 325,000 284,375
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--0.0%
Inverness Medical
Innovations, Inc.,
8.75% Sr. Sub. Nts., 2/15/12 650,000 679,250
- --------------------------------------------------------------------------------
Universal Hospital
Services, Inc.,
10.125% Sr. Unsec. Nts., 11/1/11 300,000 321,750
----------------
1,001,000
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--1.0%
AmeriPath, Inc.,
10.50% Sr. Unsec. Sub. Nts.,
4/1/13 300,000 326,250
- --------------------------------------------------------------------------------
Community Health
Systems, Inc.,
6.50% Sr. Unsec. Sub. Nts.,
12/15/12 400,000 396,000
- --------------------------------------------------------------------------------
DaVita, Inc.:
6.625% Sr. Unsec. Nts., 3/15/13 465,000 468,488
7.25% Sr. Unsec. Sub. Nts., 3/15/15 1,975,000 2,024,375
- --------------------------------------------------------------------------------
Fresenius Medical Care
Capital Trust II, 7.875% Nts.,
2/1/08 900,000 918,000
- --------------------------------------------------------------------------------
Fresenius Medical Care
Capital Trust III,
7.375% Nts., 2/1/08 2 [DEM] 25,000 17,337
- --------------------------------------------------------------------------------
Fresenius Medical Care
Capital Trust IV,
7.875% Trust Preferred
Securities, 6/15/11 2 600,000 631,500
- --------------------------------------------------------------------------------
Genesis HealthCare Corp.,
8% Sr. Sub. Nts., 10/15/13 200,000 209,500
- --------------------------------------------------------------------------------
HCA, Inc.:
6.25% Nts., 2/15/13 100,000 88,750
6.30% Sr. Unsec. Nts., 10/1/12 1,719,000 1,577,183
22 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES Continued
HCA, Inc.: Continued
6.375% Nts., 1/15/15 $ 1,671,000 $ 1,420,350
8.75% Sr. Nts., 9/1/10 200,000 209,000
9.125% Sr. Sec. Nts., 11/15/14 3 320,000 342,800
9.25% Sr. Sec. Nts., 11/15/16 3 320,000 343,600
9.625% Sr. Sec. Nts., 11/15/16 3,16 800,000 862,000
- --------------------------------------------------------------------------------
HEALTHSOUTH Corp.,
10.75% Sr. Nts., 6/15/16 3 875,000 946,094
- --------------------------------------------------------------------------------
Omnicare, Inc.:
6.75% Sr. Sub. Nts., 12/15/13 230,000 228,275
6.875% Sr. Sub. Nts., 12/15/15 285,000 282,863
- --------------------------------------------------------------------------------
Psychiatric Solutions, Inc.,
7.75% Sr. Unsec. Sub. Nts.,
7/15/15 220,000 220,550
- --------------------------------------------------------------------------------
Select Medical Corp.,
7.625% Sr. Unsec. Sub. Nts.,
2/1/15 2,250,000 1,878,750
- --------------------------------------------------------------------------------
Tenet Healthcare Corp.:
6.375% Sr. Nts., 12/1/11 1,282,000 1,179,440
7.375% Nts., 2/1/13 119,000 109,926
9.875% Sr. Nts., 7/1/14 1,932,000 1,975,470
- --------------------------------------------------------------------------------
Triad Hospitals, Inc.,
7% Sr. Sub. Nts., 11/15/13 465,000 470,231
- --------------------------------------------------------------------------------
US Oncology, Inc.:
9% Sr. Unsec. Nts., 8/15/12 2 300,000 318,000
10.75% Sr. Unsec. Sub. Nts.,
8/15/14 300,000 333,000
- --------------------------------------------------------------------------------
Vanguard Health
Holding Co. I LLC,
0%/11.25% Sr. Disc. Nts., 10/1/15 15 2,000,000 1,550,000
----------------
19,327,732
- --------------------------------------------------------------------------------
PHARMACEUTICALS--0.0%
Valeant Pharmaceuticals
International, Inc.,
7% Sr. Nts., 12/15/11 2 350,000 337,750
- --------------------------------------------------------------------------------
INDUSTRIALS--2.0%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE--0.3%
Alliant Techsystems, Inc.,
6.75% Sr. Sub. Nts., 4/1/16 1,335,000 1,338,338
- --------------------------------------------------------------------------------
BE Aerospace, Inc.,
8.875% Sr. Unsec. Sub. Nts.,
5/1/11 219,000 227,760
- --------------------------------------------------------------------------------
Bombardier, Inc.,
8% Sr. Nts., 11/15/14 2 400,000 411,720
- --------------------------------------------------------------------------------
DRS Technologies, Inc.:
6.625% Sr. Nts., 2/1/16 970,000 982,125
7.625% Sr. Sub. Nts., 2/1/18 205,000 212,175
- --------------------------------------------------------------------------------
L-3 Communications Corp.:
5.875% Sr. Sub. Nts., 1/15/15 583,000 565,510
6.125% Sr. Unsec. Sub. Nts., 1/15/14 400,000 393,000
6.375% Sr. Unsec. Sub. Nts.,
Series B, 10/15/15 515,000 512,425
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE Continued
L-3 Communications Corp.:
Continued
7.625% Sr. Sub. Nts., 6/15/12 $ 500,000 $ 520,000
- --------------------------------------------------------------------------------
TRW Automotive, Inc.:
9.375% Sr. Nts., 2/15/13 223,000 240,283
11% Sr. Sub. Nts., 2/15/13 194,000 213,643
----------------
5,616,979
- --------------------------------------------------------------------------------
AIRLINES--0.0%
ATA Holdings Corp.,
13% Sr. Unsec. Nts., 2/1/09 2,4,18 735,000 --
- --------------------------------------------------------------------------------
BUILDING PRODUCTS--0.2%
Associated Materials, Inc.,
9.75% Sr. Sub. Nts., 4/15/12 200,000 207,000
- --------------------------------------------------------------------------------
Dayton Superior Corp.,
13% Sr. Unsec. Sub. Nts.,
6/15/09 200,000 206,000
- --------------------------------------------------------------------------------
Goodman Global
Holding Co., Inc.,
7.875% Sr. Unsec. Sub. Nts.,
12/15/12 770,000 760,375
- --------------------------------------------------------------------------------
Jacuzzi Brands, Inc.,
9.625% Sr. Sec. Nts., 7/1/10 1,011,000 1,079,243
- --------------------------------------------------------------------------------
Nortek, Inc.,
8.50% Sr. Unsec. Unsub. Nts.,
9/1/14 1,250,000 1,231,250
----------------
3,483,868
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--0.2%
Allied Waste North America, Inc.:
7.25% Sr. Nts., 3/15/15 180,000 181,125
7.375% Sr. Sec. Nts.,
Series B, 4/15/14 1,300,000 1,300,000
9.25% Sr. Sec. Debs.,
Series B, 9/1/12 434,000 463,295
- --------------------------------------------------------------------------------
Cenveo Corp.,
7.875% Sr. Sub. Nts., 12/1/13 1,500,000 1,447,500
- --------------------------------------------------------------------------------
Corrections Corp. of America:
6.25% Sr. Unsec. Sub. Nts., 3/15/13 460,000 458,275
7.50% Sr. Nts., 5/1/11 200,000 207,000
- --------------------------------------------------------------------------------
FTI Consulting, Inc.,
7.75% Sr. Unsec. Nts., 10/1/16 3 535,000 557,738
- --------------------------------------------------------------------------------
Mobile Services Group, Inc.,
9.75% Sr. Nts., 8/1/14 3 120,000 126,000
- --------------------------------------------------------------------------------
MSW Energy Holdings II
LLC/MSW Energy Finance
Co. II, Inc.,
7.375% Sr. Sec. Nts.,
Series B, 9/1/10 350,000 358,750
- --------------------------------------------------------------------------------
MSW Energy Holdings
LLC/MSW Energy
Finance Co., Inc.,
8.50% Sr. Sec. Nts., 9/1/10 200,000 209,000
----------------
5,308,683
23 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING--0.4%
IIRSA Norte Finance Ltd.,
8.75% Sr. Nts., 5/30/24 2 $ 6,797,719 $ 8,004,314
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--0.1%
Belden & Blake Corp.,
8.75% Sec. Nts., 7/15/12 325,000 334,750
- --------------------------------------------------------------------------------
Eletropaulo Metropolitana SA,
19.125% Nts., 6/28/10 2 [BRR] 1,115,000 592,336
- --------------------------------------------------------------------------------
General Cable Corp.,
9.50% Sr. Nts., 11/15/10 600,000 639,000
- --------------------------------------------------------------------------------
UCAR Finance, Inc.,
10.25% Sr. Nts., 2/15/12 300,000 317,625
----------------
1,883,711
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--0.1%
Covalence Specialty
Materials Corp.,
10.25% Sr. Sub. Nts., 3/1/16 3 1,280,000 1,177,600
- --------------------------------------------------------------------------------
Great Lakes Dredge
& Dock Co.,
7.75% Sr. Unsec. Sub. Nts.,
12/15/13 120,000 117,600
----------------
1,295,200
- --------------------------------------------------------------------------------
MACHINERY--0.2%
Case New Holland, Inc.:
7.125% Sr. Unsec. Nts., 3/1/14 500,000 510,000
9.25% Sr. Nts., 8/1/11 200,000 212,750
- --------------------------------------------------------------------------------
Douglas Dynamics LLC,
7.75% Sr. Nts., 1/15/12 3 700,000 661,500
- --------------------------------------------------------------------------------
Greenbrier Cos., Inc.,
8.375% Sr. Unsec. Nts., 5/15/15 380,000 388,550
- --------------------------------------------------------------------------------
Manitowoc Co., Inc. (The),
10.50% Sr. Sub. Nts., 8/1/12 325,000 350,594
- --------------------------------------------------------------------------------
Milacron Escrow Corp.,
11.50% Sr. Sec. Nts., 5/15/11 2 700,000 668,500
- --------------------------------------------------------------------------------
Trinity Industries, Inc.,
6.50% Sr. Nts., 3/15/14 300,000 296,250
- --------------------------------------------------------------------------------
Wolverine Tube, Inc.,
7.375% Sr. Nts., 8/1/08 3 950,000 755,250
----------------
3,843,394
- --------------------------------------------------------------------------------
ROAD & RAIL--0.2%
Avis Budget Car Rental
LLC/Avis Budget Finance, Inc.:
7.75% Sr. Nts., 5/15/16 3 335,000 324,113
7.874% Sr. Nts., 5/15/14 1,3 135,000 130,950
- --------------------------------------------------------------------------------
Hertz Corp.:
8.875% Sr. Nts., 1/1/14 3 610,000 642,025
10.50% Sr. Sub. Nts., 1/1/16 3 1,135,000 1,254,175
- --------------------------------------------------------------------------------
Kansas City Southern
Railway Co. (The),
7.50% Sr. Nts., 6/15/09 400,000 405,500
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
ROAD & RAIL Continued
Stena AB:
7% Sr. Unsec. Nts., 12/1/16 2 $ 150,000 $ 143,250
7.50% Sr. Unsec. Nts., 11/1/13 387,000 384,098
9.625% Sr. Nts., 12/1/12 2 750,000 802,500
- --------------------------------------------------------------------------------
TDS Investor Corp.,
11.875% Sr. Sub. Nts., 9/1/16 3 1,000,000 1,030,000
----------------
5,116,611
- --------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS--0.3%
Ashtead Capital, Inc.,
9% Nts., 8/15/16 3 385,000 413,875
- --------------------------------------------------------------------------------
H&E Equipment Services, Inc.,
8.375% Sr. Unsec. Nts., 7/15/16 420,000 442,050
- --------------------------------------------------------------------------------
Interline Brands, Inc.,
8.125% Sr. Sub. Nts., 6/15/14 570,000 588,525
- --------------------------------------------------------------------------------
United Rentals, Inc.,
7% Sr. Sub. Nts., 2/15/14 4,000,000 3,945,000
----------------
5,389,450
- --------------------------------------------------------------------------------
TRANSPORTATION INFRASTRUCTURE--0.0%
Horizon Lines LLC,
9% Nts., 11/1/12 236,000 248,980
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--1.2%
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--0.2%
Loral Skynet Corp.,
14% Sr. Sec. Nts., 11/21/15 2,16 116,000 133,690
- --------------------------------------------------------------------------------
Lucent Technologies, Inc.,
6.45% Unsec. Debs., 3/15/29 3,160,000 2,930,900
- --------------------------------------------------------------------------------
Nortel Networks Ltd.,
9.624% Sr. Nts., 7/15/11 1,3 383,000 405,501
- --------------------------------------------------------------------------------
Orion Network Systems, Inc.,
12.50% Sr. Unsub. Disc. Nts.,
1/15/07 4,18 675,000 7
----------------
3,470,098
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--0.0%
Seagate Technology
HDD Holdings:
6.375% Sr. Nts., 10/1/11 750,000 753,750
6.80% Sr. Nts., 10/1/16 225,000 227,250
----------------
981,000
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--0.2%
Flextronics International Ltd.,
6.25% Sr. Sub. Nts., 11/15/14 2,021,000 1,960,370
- --------------------------------------------------------------------------------
RBS Global & Rexnord Corp.:
9.50% Sr. Nts., 8/1/14 3 585,000 611,325
11.75% Sr. Sub. Nts., 8/1/16 3 930,000 976,500
- --------------------------------------------------------------------------------
Sanmina-SCI Corp.:
6.75% Unsec. Sub. Nts., 3/1/13 380,000 351,500
8.125% Sr. Sub. Nts., 3/1/16 745,000 724,513
24 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS
Continued
Solectron Global Finance Ltd.,
8% Sr. Unsec. Sub. Nts., 3/15/16 $ 425,000 $ 432,438
----------------
5,056,646
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--0.0%
Exodus Communications, Inc.,
10.75% Sr. Nts., 12/15/09 2,4,18 [EUR] 338,620 --
- --------------------------------------------------------------------------------
NorthPoint Communications
Group, Inc.,
12.875% Nts., 2/15/10 2,4,18 200,173 --
- --------------------------------------------------------------------------------
PSINet, Inc., 10.50% Sr.
Unsec. Nts., 12/1/06 2,4,18 [EUR] 100,000 --
----------------
--
- --------------------------------------------------------------------------------
IT SERVICES--0.3%
DI Finance/DynCorp
International LLC,
9.50% Sr. Unsec. Sub. Nts.,
Series B, 2/15/13 607,000 646,455
- --------------------------------------------------------------------------------
iPayment Holdings, Inc.,
9.75% Sr. Unsec. Sub. Nts.,
5/15/14 415,000 428,488
- --------------------------------------------------------------------------------
Iron Mountain, Inc.,
7.75% Sr. Sub. Nts., 1/15/15 400,000 410,000
- --------------------------------------------------------------------------------
SunGard Data Systems, Inc.:
9.125% Sr. Unsec. Nts., 8/15/13 1,535,000 1,619,425
10.25% Sr. Unsec. Sub. Nts.,
8/15/15 2,035,000 2,182,538
----------------
5,286,906
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--0.5%
Advanced Micro Devices, Inc.,
7.75% Sr. Unsec. Nts., 11/1/12 1,758,000 1,828,320
- --------------------------------------------------------------------------------
Amkor Technology, Inc.:
7.75% Sr. Nts., 5/15/13 2,050,000 1,893,688
9.25% Sr. Unsec. Nts., 6/1/16 300,000 295,500
- --------------------------------------------------------------------------------
Conexant Systems, Inc.,
9.126% Sr. Sec. Nts., 11/15/10 1,2 400,000 408,000
- --------------------------------------------------------------------------------
Freescale Semiconductor, Inc.:
8.875% Sr. Nts., 12/15/14 3 1,215,000 1,216,519
9.125% Sr. Nts., 12/15/14 3 2,025,000 2,022,469
10.125% Sr. Sub. Nts., 12/15/16 3 1,620,000 1,630,125
- --------------------------------------------------------------------------------
NXP BV,
7.875% Sr. Sec. Bonds, 10/15/14 3 385,000 399,919
----------------
9,694,540
- --------------------------------------------------------------------------------
MATERIALS--2.9%
- --------------------------------------------------------------------------------
CHEMICALS--0.5%
BCP Crystal US Holdings Corp.,
9.625% Sr. Sub. Nts., 6/15/14 813,000 902,430
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
CHEMICALS Continued
Crystal US Holdings 3
LLC/Crystal US Sub 3 Corp.,
0%/10.50% Sr. Unsec. Disc. Nts.,
Series B, 10/1/14 15 $ 570,000 $ 493,050
- --------------------------------------------------------------------------------
Equistar Chemicals
LP/Equistar Funding Corp.:
8.75% Sr. Unsec. Nts., 2/15/09 550,000 578,875
10.125% Sr. Unsec. Nts., 9/1/08 19,000 20,283
10.625% Sr. Unsec. Nts., 5/1/11 600,000 642,000
- --------------------------------------------------------------------------------
Georgia Gulf Corp.,
10.75% Sr. Sub. Nts., 10/15/16 1,220,000 1,177,300
- --------------------------------------------------------------------------------
Huntsman International LLC:
7.875% Sr. Unsec. Sub. Nts.,
11/13/14 3 375,000 379,688
8.375% Sr. Sub. Nts., 1/1/15 1,3 790,000 788,025
- --------------------------------------------------------------------------------
Huntsman LLC:
11.50% Sr. Unsec. Nts., 7/15/12 1 198,000 224,235
11.625% Sr. Unsec. Nts., 10/15/10 13,000 14,268
- --------------------------------------------------------------------------------
Ineos Group Holdings plc,
8.50% Nts., 2/15/16 3 1,230,000 1,180,800
- --------------------------------------------------------------------------------
Innophos, Inc.,
8.875% Sr. Unsec. Sub. Nts.,
8/15/14 250,000 255,000
- --------------------------------------------------------------------------------
KI Holdings, Inc.,
0%/9.875% Sr. Unsec.
Sub. Disc. Nts., 11/15/14 15 350,000 281,750
- --------------------------------------------------------------------------------
Lyondell Chemical Co.:
8% Sr. Unsec. Nts., 9/15/14 1,125,000 1,172,813
8.25% Sr. Unsec. Nts., 9/15/16 600,000 633,000
10.50% Sr. Sec. Nts., 6/1/13 600,000 663,000
- --------------------------------------------------------------------------------
Mosaic Global Holdings, Inc.:
7.375% Sr. Nts., 12/1/14 3 325,000 335,156
7.625% Sr. Nts., 12/1/16 3 325,000 338,406
- --------------------------------------------------------------------------------
Rockwood Specialties
Group, Inc.,
7.50% Sr. Sub. Nts., 11/15/14 200,000 202,500
- --------------------------------------------------------------------------------
Tronox Worldwide
LLC/Tronox Finance Corp.,
9.50% Sr. Unsec. Nts., 12/1/12 237,000 250,628
----------------
10,533,207
- --------------------------------------------------------------------------------
CONSTRUCTION MATERIALS--0.3%
C10 Capital SPV Ltd.,
6.722% Unsec. Perpetual Debs. 2,17 5,470,000 5,453,371
- --------------------------------------------------------------------------------
NTK Holdings, Inc.,
0%/10.75% Sr. Disc. Nts., 3/1/14 15 1,225,000 863,625
----------------
6,316,996
- --------------------------------------------------------------------------------
CONTAINERS & PACKAGING--0.8%
Ball Corp., 6.625% Sr. Nts., 3/15/18 1,035,000 1,032,413
- --------------------------------------------------------------------------------
Crown Americas, Inc.,
7.75% Sr. Nts., 11/15/15 1,435,000 1,495,988
25 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
CONTAINERS & PACKAGING Continued
Graham Packaging Co., Inc.:
8.50% Sr. Unsec. Nts., 10/15/12 $ 200,000 $ 203,000
9.875% Sr. Unsec. Sub. Nts.,
10/15/14 1,800,000 1,827,000
- --------------------------------------------------------------------------------
Graphic Packaging
International Corp.:
8.50% Sr. Nts., 8/15/11 800,000 832,000
9.50% Sr. Sub. Nts., 8/15/13 1,050,000 1,113,000
- --------------------------------------------------------------------------------
Jefferson Smurfit Corp.:
7.50% Sr. Unsec. Unsub. Nts.,
6/1/13 300,000 283,500
8.25% Sr. Unsec. Nts., 10/1/12 1,450,000 1,421,000
- --------------------------------------------------------------------------------
MDP Acquisitions plc,
9.625% Sr. Nts., 10/1/12 400,000 426,000
- --------------------------------------------------------------------------------
Owens-Brockway
Glass Container, Inc.:
7.75% Sr. Sec. Nts., 5/15/11 450,000 464,625
8.25% Sr. Unsec. Nts., 5/15/13 1,719,000 1,785,611
8.75% Sr. Sec. Nts., 11/15/12 928,000 988,320
8.875% Sr. Sec. Nts., 2/15/09 176,000 180,840
- --------------------------------------------------------------------------------
Pliant Corp.,
11.85% Sr. Sec. Nts., 6/15/09 4,16 403,615 442,463
- --------------------------------------------------------------------------------
Solo Cup Co.,
8.50% Sr. Sub. Nts., 2/15/14 1,675,000 1,457,250
- --------------------------------------------------------------------------------
Stone Container Corp.:
8.375% Sr. Nts., 7/1/12 470,000 462,950
9.75% Sr. Unsec. Nts., 2/1/11 516,000 534,705
- --------------------------------------------------------------------------------
Tekni-Plex, Inc.,
10.875% Sr. Sec. Nts., 8/15/12 3 125,000 141,250
- --------------------------------------------------------------------------------
TriMas Corp.,
9.875% Sr. Unsec. Sub. Nts., 6/15/12 1,300,000 1,264,250
----------------
16,356,165
- --------------------------------------------------------------------------------
METALS & MINING--1.0%
AK Steel Corp.:
7.75% Sr. Unsec. Nts., 6/15/12 1,019,000 1,031,738
7.875% Sr. Unsec. Nts., 2/15/09 100,000 100,500
- --------------------------------------------------------------------------------
Alrosa Finance SA:
8.875% Nts., 11/17/14 3 11,230,000 13,040,838
8.875% Nts., 11/17/14 1,215,000 1,410,919
- --------------------------------------------------------------------------------
Century Aluminum Co.,
7.50% Sr. Unsec. Nts., 8/15/14 600,000 611,250
- --------------------------------------------------------------------------------
Gibraltar Industries, Inc.,
8% Sr. Unsec. Sub. Nts.,
Series B, 12/1/15 2 635,000 629,444
- --------------------------------------------------------------------------------
International Utility
Structures, Inc.,
13% Unsec. Sub. Nts., 2/1/08 2,4,18 71,000 --
- --------------------------------------------------------------------------------
Ispat Inland ULC,
9.75% Sr. Sec. Nts., 4/1/14 585,000 654,602
- --------------------------------------------------------------------------------
Koppers Industry, Inc.,
9.875% Sr. Sec. Nts., 10/15/13 204,000 222,870
- --------------------------------------------------------------------------------
Novelis, Inc.,
8.25% Sr. Nts., 2/15/15 1,3 1,575,000 1,531,688
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
METALS & MINING Continued
Steel Dynamics, Inc.,
9.50% Sr. Nts., 3/15/09 $ 200,000 $ 206,250
- --------------------------------------------------------------------------------
United States Steel Corp.,
9.75% Sr. Nts., 5/15/10 336,000 359,100
----------------
19,799,199
- --------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS--0.3%
Abitibi-Consolidated Co.
of Canada,
8.375% Sr. Unsec. Sub. Nts.,
4/1/15 1,000,000 870,000
- --------------------------------------------------------------------------------
Abitibi-Consolidated, Inc.:
8.55% Nts., 8/1/10 600,000 573,000
8.85% Unsec. Bonds, 8/1/30 400,000 330,000
- --------------------------------------------------------------------------------
Appleton Papers, Inc.,
8.125% Sr. Nts., 6/15/11 190,000 194,750
- --------------------------------------------------------------------------------
Buckeye Technologies, Inc.,
8.50% Sr. Nts., 10/1/13 100,000 106,000
- --------------------------------------------------------------------------------
Catalyst Paper Corp.,
8.625% Sr. Unsec. Nts.,
Series D, 6/15/11 500,000 508,750
- --------------------------------------------------------------------------------
Domtar, Inc., 7.125% Nts.,
8/15/15 500,000 492,500
- --------------------------------------------------------------------------------
JSG Holding plc,
11.50% Sr. Nts., 10/1/15 2,16 [EUR] 168,790 232,837
- --------------------------------------------------------------------------------
Mercer International, Inc.,
9.25% Sr. Nts., 2/15/13 225,000 221,063
- --------------------------------------------------------------------------------
Norske Skog Canada Ltd.,
7.375% Sr. Unsec. Nts., 3/1/14 700,000 666,750
- --------------------------------------------------------------------------------
Verso Paper Holdings LLC/Verson Paper, Inc.:
9.121% Sr. Sec. Nts., 8/1/14 1,3 460,000 469,200
11.375% Sr. Sub. Nts., 8/1/16 3 460,000 485,300
----------------
5,150,150
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--2.1%
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--1.2%
Citizens Communications Co.,
6.25% Sr. Nts., 1/15/13 3 3,200,000 3,156,000
- --------------------------------------------------------------------------------
Intelsat Bermuda Ltd.,
11.25% Sr. Nts., 6/15/16 3 530,000 584,325
- --------------------------------------------------------------------------------
Intelsat Subsidiary Holding Co. Ltd.:
8.25% Sr. Nts., 1/15/13 1 1,000,000 1,020,000
8.625% Sr. Nts., 1/15/15 815,000 851,675
- --------------------------------------------------------------------------------
Level 3 Financing, Inc.,
9.25% Sr. Nts., 11/1/14 3 1,605,000 1,645,125
- --------------------------------------------------------------------------------
Nordic Telephone Co.
Holdings ApS,
8.875% Sr. Nts., 5/1/16 3 345,000 370,875
- --------------------------------------------------------------------------------
PanAmSat Corp.:
9% Sr. Nts., 6/15/16 3 900,000 957,375
9% Sr. Unsec. Nts., 8/15/14 1,350,000 1,432,688
- --------------------------------------------------------------------------------
Qwest Capital Funding, Inc.:
7.25% Unsec. Unsub. Nts., 2/15/11 2,100,000 2,155,125
26 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES
Continued
Qwest Capital Funding, Inc.:
Continued
7.90% Unsec. Nts., 8/15/10 $ 1,719,000 $ 1,798,504
- --------------------------------------------------------------------------------
Qwest Communications
International, Inc.,
7.25% Sr. Unsec. Sub. Nts.,
2/15/11 1 300,000 308,250
- --------------------------------------------------------------------------------
Qwest Corp.:
7.50% Sr. Unsec. Nts., 10/1/14 765,000 814,725
8.875% Unsec. Unsub. Nts.,
3/15/12 1 2,300,000 2,573,125
- --------------------------------------------------------------------------------
Telefonica del Peru SA,
8% Sr. Unsec. Bonds,
4/11/16 2 [PEN] 3,290,100 1,134,804
- --------------------------------------------------------------------------------
Teligent, Inc.,
11.50% Sr. Nts., 12/1/07 2,4,18 500,000 --
- --------------------------------------------------------------------------------
Time Warner Telecom
Holdings, Inc.,
9.25% Sr. Unsec. Unsub. Nts.,
2/15/14 1,700,000 1,825,375
- --------------------------------------------------------------------------------
Valor Telecommunications
Enterprises LLC,
7.75% Sr. Unsec. Sub. Nts.,
2/15/15 225,000 243,281
- --------------------------------------------------------------------------------
West Corp.:
9.50% Sr. Nts., 10/15/14 3 1,080,000 1,085,400
11% Sr. Sub. Nts., 10/15/16 3 470,000 477,050
- --------------------------------------------------------------------------------
Windstream Corp.:
8.125% Sr. Nts., 8/1/13 3 575,000 625,313
8.625% Sr. Nts., 8/1/16 3 875,000 962,500
- --------------------------------------------------------------------------------
Winstar Communications, Inc.,
12.75% Sr. Nts., 4/15/10 2,4,18 250,000 --
----------------
24,021,515
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--0.9%
Alamosa Delaware, Inc.:
8.50% Sr. Nts., 1/31/12 2 700,000 742,088
11% Sr. Unsec. Nts., 7/31/10 2 19,000 20,534
- --------------------------------------------------------------------------------
American Cellular Corp.,
10% Sr. Nts., Series B, 8/1/11 1,120,000 1,190,000
- --------------------------------------------------------------------------------
American Tower Corp.:
7.125% Sr. Unsec. Nts., 10/15/12 250,000 258,125
7.50% Sr. Nts., 5/1/12 400,000 416,000
- --------------------------------------------------------------------------------
CellNet Data Systems, Inc.,
Sr. Unsec. Disc. Nts., 10/1/07 2,4,18 400,000 --
- --------------------------------------------------------------------------------
Centennial Cellular
Operating Co. LLC/Centennial
Communications Corp.,
10.125% Sr. Nts., 6/15/13 2,014,000 2,180,155
- --------------------------------------------------------------------------------
Centennial Communications
Corp., 10% Sr. Unsec. Nts., 1/1/13 200,000 213,750
- --------------------------------------------------------------------------------
Cricket Communications,
Inc., 9.375% Sr. Nts., 11/1/14 3 935,000 991,100
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES
Continued
Dobson Cellular Systems, Inc.,
8.375% Sr. Sec. Nts., 11/1/11 $ 280,000 $ 296,450
- --------------------------------------------------------------------------------
Dobson Communications Corp.:
8.875% Sr. Nts., 10/1/13 859,000 879,401
9.624% Sr. Unsec. Nts., 10/15/12 1 145,000 148,625
- --------------------------------------------------------------------------------
IWO Holdings, Inc.,
9.124% Sr. Sec. Nts., 1/15/12 1 110,000 112,750
- --------------------------------------------------------------------------------
Nextel Communications, Inc.,
7.375% Sr. Nts., Series D, 8/1/15 3,378,000 3,467,216
- --------------------------------------------------------------------------------
Nextel Partners, Inc.,
8.125% Sr. Nts., 7/1/11 500,000 523,125
- --------------------------------------------------------------------------------
Rogers Wireless, Inc.:
7.50% Sec. Nts., 3/15/15 882,000 961,380
8% Sr. Sub. Nts., 12/15/12 800,000 858,000
- --------------------------------------------------------------------------------
Rural Cellular Corp.:
9.75% Sr. Sub. Nts., 1/15/10 2,419,000 2,497,618
9.875% Sr. Nts., 2/1/10 1,400,000 1,496,250
- --------------------------------------------------------------------------------
UbiquiTel Operating Co.,
9.875% Sr. Nts., 3/1/11 600,000 651,000
- --------------------------------------------------------------------------------
US Unwired, Inc.,
10% Sr. Sec. Nts., 6/15/12 250,000 276,250
----------------
18,179,817
- --------------------------------------------------------------------------------
UTILITIES--1.9%
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES--0.9%
Edison Mission Energy:
7.50% Sr. Unsec. Nts., 6/15/13 360,000 378,000
7.75% Sr. Unsec. Nts., 6/15/16 500,000 532,500
- --------------------------------------------------------------------------------
Majapahit Holding BV:
7.25% Nts., 10/17/11 3 1,990,000 2,052,188
7.75% Nts., 10/17/16 3 1,835,000 1,951,981
- --------------------------------------------------------------------------------
Midwest Generation LLC,
8.75% Sr. Sec. Nts., 5/1/34 2,535,000 2,763,150
- --------------------------------------------------------------------------------
Mirant Americas Generation
LLC, Escrow Shares, 5/1/07 2 200,000 --
- --------------------------------------------------------------------------------
National Power Corp.:
5.875% Unsec. Unsub. Bonds,
12/19/16 [PHP] 109,600,000 2,281,155
6.875% Nts., 11/2/16 3 1,324,000 1,348,129
9.625% Unsec. Bonds, 5/15/28 2,270,000 2,761,192
- --------------------------------------------------------------------------------
Reliant Energy, Inc.:
6.75% Sr. Sec. Nts., 12/15/14 200,000 196,500
9.25% Sr. Sec. Nts., 7/15/10 769,000 811,295
9.50% Sr. Sec. Nts., 7/15/13 690,000 743,475
- --------------------------------------------------------------------------------
Sierra Pacific Resources,
6.75% Sr. Unsec. Nts., 8/15/17 1,777,000 1,751,784
----------------
17,571,349
- --------------------------------------------------------------------------------
ENERGY TRADERS--1.0%
AES Corp. (The),
8.75% Sr. Sec. Nts., 5/15/13 3 2,000,000 2,152,500
27 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
ENERGY TRADERS Continued
Aes Dominicana Energia
Finance SA,
11% Sr. Nts., 12/13/15 2 $ 2,313,000 $ 2,440,215
- --------------------------------------------------------------------------------
AES Panama SA,
6.35% Sr. Nts., 12/21/16 2 1,100,000 1,079,309
- --------------------------------------------------------------------------------
AES Red Oak LLC,
8.54% Sr. Sec. Bonds,
Series A, 11/30/19 406,525 444,129
- --------------------------------------------------------------------------------
Dynegy Holdings, Inc.:
6.875% Sr. Unsec. Unsub. Nts.,
4/1/11 621,000 624,105
8.375% Sr. Unsec. Nts., 5/1/16 1,360,000 1,434,800
8.75% Sr. Nts., 2/15/12 292,000 310,980
- --------------------------------------------------------------------------------
Mirant Americas
Generation LLC:
8.30% Sr. Unsec. Nts., 5/1/11 3,700,000 3,811,000
9.125% Sr. Unsec. Nts., 5/1/31 500,000 532,500
- --------------------------------------------------------------------------------
Mirant Mid-Atlantic LLC,
8.625% Sec. Pass-Through
Certificates,
Series A, 6/30/12 701,211 741,969
- --------------------------------------------------------------------------------
NRG Energy, Inc.:
7.375% Sr. Nts., 1/15/17 2,000,000 2,010,000
7.375% Sr. Nts., 2/1/16 3,615,000 3,642,113
----------------
19,223,620
- --------------------------------------------------------------------------------
GAS UTILITIES--0.0%
SEMCO Energy, Inc.,
7.125% Sr. Nts., 5/15/08 150,000 150,599
- --------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER--0.0%
CMS Energy Corp.:
7.50% Sr. Nts., 1/15/09 19,000 19,689
7.75% Sr. Nts., 8/1/10 200,000 212,000
8.50% Sr. Nts., 4/15/11 250,000 273,125
- --------------------------------------------------------------------------------
NorthWestern Corp.,
5.875% Sr. Sec. Nts., 11/1/14 90,000 88,514
----------------
593,328
----------------
Total Corporate Bonds
and Notes
(Cost $480,573,408) 488,014,872
SHARES
- --------------------------------------------------------------------------------
PREFERRED STOCKS--0.1%
- --------------------------------------------------------------------------------
AmeriKing, Inc., 13% Cum. Sr.
Exchangeable, Non-Vtg. 2,16 4,253 --
- --------------------------------------------------------------------------------
Dobson Communications Corp.,
6% Cv., Series F (converts into
Dobson Communications Corp.,
Cl. A common stock), Non-Vtg. 3 608 116,356
- --------------------------------------------------------------------------------
Eagle-Picher Holdings, Inc.,
11.75% Cum. Exchangeable,
Series B, Non-Vtg. 2,18 5,000 --
- --------------------------------------------------------------------------------
ICG Holdings, Inc., 14.25%
Exchangeable, Non-Vtg. 2,16,18 151 --
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
PREFERRED STOCKS Continued
- --------------------------------------------------------------------------------
ION Media Networks, Inc.:
14.25% Cum., Non-Vtg. 2,16 124 $ 922,508
9.75% Cv., Series AI 2,16,18 1 6,109
- --------------------------------------------------------------------------------
Loral Skynet Corp.,
12% Cum., Series A, Non-Vtg. 2,16 1,027 212,589
- --------------------------------------------------------------------------------
Pennsylvania Real Estate
Investment Trust, 11% 2,000 108,600
- --------------------------------------------------------------------------------
PTV, Inc., 10% Cum.,
Series A, Non-Vtg. 7 26
- --------------------------------------------------------------------------------
Rural Cellular Corp.,
11.375% Cum.,
Series B, Non-Vtg. 2,16 228 285,570
- --------------------------------------------------------------------------------
Sovereign Real Estate
Investment Trust,
12% Non-Cum., Series A 2 4,600 716,450
----------------
Total Preferred Stocks (Cost $2,501,291) 2,368,208
- -------------------------------------------------------------------------------
COMMON STOCKS--0.2%
- --------------------------------------------------------------------------------
American Tower Corp. 18 11,276 420,369
- --------------------------------------------------------------------------------
ATA Holdings Corp. 2,18 2,168 32,520
- --------------------------------------------------------------------------------
Beverly Hills Bancorp, Inc. 6,273 52,003
- --------------------------------------------------------------------------------
Cebridge Connections
Holding LLC 2,18 3,734 --
- --------------------------------------------------------------------------------
Charles River Laboratories
International, Inc. 18 2,660 115,045
- --------------------------------------------------------------------------------
Chesapeake Energy Corp. 91 2,644
- --------------------------------------------------------------------------------
Citigroup, Inc. 55 3,064
- --------------------------------------------------------------------------------
Covad Communications
Group, Inc. 18 16,528 22,809
- --------------------------------------------------------------------------------
Dobson Communications
Corp., Cl. A 18 24,300 211,653
- --------------------------------------------------------------------------------
El Paso Corp. 25,800 394,224
- --------------------------------------------------------------------------------
Globix Corp. 18 6,880 29,928
- --------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The) 1,940 386,739
- --------------------------------------------------------------------------------
ICO Global Communication
Holdings Ltd. 18 6,016 27,493
- --------------------------------------------------------------------------------
Idearc, Inc. 18 46 1,318
- --------------------------------------------------------------------------------
iPCS, Inc. 18 8,733 483,459
- --------------------------------------------------------------------------------
Kaiser Aluminum Corp. 18 1,472 82,403
- --------------------------------------------------------------------------------
Leap Wireless International, Inc. 18 1,714 101,932
- --------------------------------------------------------------------------------
Liberty Global, Inc., Series A 18 3,059 89,170
- --------------------------------------------------------------------------------
Liberty Global, Inc., Series C 18 3,102 86,856
- --------------------------------------------------------------------------------
Loral Space &
Communications Ltd. 18 7,277 296,319
- --------------------------------------------------------------------------------
Mirant Corp. 18 1,133 35,769
- --------------------------------------------------------------------------------
NTL, Inc. 28,755 725,776
- --------------------------------------------------------------------------------
Orbital Sciences Corp. 18 745 13,738
- --------------------------------------------------------------------------------
Prandium, Inc. 2,18 24,165 242
- --------------------------------------------------------------------------------
Premier Holdings Ltd. 2,18 18,514 --
28 | OPPENHEIMER STRATEGIC BOND FUND/VA
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
COMMON STOCKS Continued
- --------------------------------------------------------------------------------
Star Gas Partners LP 18 187 $ 658
- --------------------------------------------------------------------------------
Sterling Chemicals, Inc. 2,18 720 9,180
- --------------------------------------------------------------------------------
TVMAX Holdings, Inc. 2,18 1,000 1,000
- --------------------------------------------------------------------------------
Verizon Communications, Inc. 935 34,819
- --------------------------------------------------------------------------------
Viatel Holding (Bermuda) Ltd. 2,18 2,251 11
- --------------------------------------------------------------------------------
Western Forest Products, Inc. 9,18 38,252 62,980
- --------------------------------------------------------------------------------
WRC Media Corp. 2,18 1,082 11
- --------------------------------------------------------------------------------
XO Holdings, Inc. 18 1,469 6,317
----------------
Total Common Stocks (Cost $3,325,250) 3,730,449
UNITS
- --------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- --------------------------------------------------------------------------------
ATA Holdings Corp. Wts.,
Exp. 2/28/11 18 266 1,952
- --------------------------------------------------------------------------------
COLO.com, Inc. Wts.,
Exp. 3/15/10 2,18 400 --
- --------------------------------------------------------------------------------
Concentric Network Corp. Wts.,
Exp. 12/15/07 2,18 100 --
- --------------------------------------------------------------------------------
HF Holdings, Inc. Wts.,
Exp. 9/27/09 2,18 530 --
- --------------------------------------------------------------------------------
iPCS, Inc. Wts., Exp. 6/15/10 2,18 300 --
- --------------------------------------------------------------------------------
Long Distance International,
Inc. Wts., Exp. 4/13/08 2,18 200 --
- --------------------------------------------------------------------------------
Ntelos, Inc. Wts., Exp. 8/15/10 2,18 450 --
- --------------------------------------------------------------------------------
Pathmark Stores, Inc. Wts.,
Exp. 9/19/10 18 5,710 1,428
- --------------------------------------------------------------------------------
Sterling Chemicals, Inc. Wts.,
Exp. 12/19/08 18 1,174 12
- --------------------------------------------------------------------------------
Venezuela (Republic of) Oil
Linked Payment Obligation Wts.,
Exp. 4/15/20 2,18 2,300 76,475
- --------------------------------------------------------------------------------
Verado Holdings, Inc., Cl. B Wts.,
Exp. 4/15/08 18 175 114
- --------------------------------------------------------------------------------
XO Communications, Inc.:
Series A Wts., Exp. 1/16/10 18 2,946 2,062
Series B Wts., Exp. 1/16/10 18 2,209 950
Series C Wts., Exp. 1/16/10 2,18 2,209 486
----------------
Total Rights, Warrants
and Certificates (Cost $34,719) 83,479
PRINCIPAL
AMOUNT
- --------------------------------------------------------------------------------
STRUCTURED NOTES--13.5%
- --------------------------------------------------------------------------------
Aiolos Ltd. Catastrophe
Linked Nts.,
8.214%, 4/8/09 1,3 [EUR] 800,000 1,042,994
- --------------------------------------------------------------------------------
Atlantic & Western Re Ltd.
Catastrophe Linked Nts.,
Series B, 15.375%, 11/15/10 1 1,550,000 1,485,481
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
STRUCTURED NOTES Continued
- --------------------------------------------------------------------------------
Barclays Capital, Russia
Federation Credit Linked Nts.,
5.16%, 8/18/08 8 [RUR] 270,000,000 $ 9,396,745
- --------------------------------------------------------------------------------
Calabash Re Ltd. Catastrophe
Linked Nts., Cl. A-1,
13.87%, 6/1/09 1,2 1,750,000 1,773,800
- --------------------------------------------------------------------------------
Cascadia Ltd. Catastrophe
Linked Nts.:
8.475%, 6/13/08 1,3 500,000 493,425
9.37%, 8/31/09 1 1,130,000 1,123,333
- --------------------------------------------------------------------------------
Cat-Mex Ltd. Catastrophe
Linked Nts., Cl. A,
7.726%, 5/19/09 1,2 1,950,000 1,951,853
- --------------------------------------------------------------------------------
Champlain Ltd. Catastrophe
Linked Nts., Series A,
18.12%, 1/7/09 1 940,000 931,564
- --------------------------------------------------------------------------------
Citigroup Global Markets
Holdings, Inc.:
Argentina (Republic of) Credit
Linked Nts.,
4%, 5/22/08 13 [ARP] 840,000 753,303
Argentina (Republic of)
Unsec. Credit Linked Nts.,
4%, 4/16/10 13 [ARP] 2,081,178 1,158,297
Brazil (Federal Republic of)
Credit Linked Nts.,
10%, 1/5/10 [BRR] 10,670,000 4,695,699
Brazil (Federal Republic of)
Unsec. Credit Linked Nts.,
10%, 1/5/10 [BRR] 2,927,000 1,353,859
Brazil (Federal Republic of)
Unsec. Credit Linked Nts.,
10%, 1/5/10 [BRR] 4,619,000 2,136,479
Brazil (Federal Republic of)
Unsec. Credit Linked Nts.,
14.809%, 1/5/10 8 [BRR] 2,480,096 815,013
Brazil (Federal Republic of)
Unsec. Credit Linked Nts.,
15.427%, 1/2/09 8 [BRR] 2,231,957 826,665
Brazil (Federal Republic of)
Unsec. Credit Linked Nts.,
15.728%, 1/3/08 8 [BRR] 1,948,615 811,715
Colombia (Republic of) Credit
Linked Bonds,
11%, 7/24/20 [COP] 1,060,000,000 553,653
Colombia (Republic of) Credit
Linked Nts., Series II,
15%, 4/27/12 [COP] 552,359,546 307,333
Colombia (Republic of) Unsec.
Credit Linked Nts., 15%,
4/27/12 [COP] 1,200,000,000 667,679
Colombia (Republic of) Unsec.
Credit Linked Nts.,
15%, 4/27/12 [COP] 1,034,000,000 575,317
29 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
STRUCTURED NOTES Continued
- --------------------------------------------------------------------------------
Colombia (Republic of) Unsec.
Credit Linked Nts.,
15%, 4/27/12 [COP] 927,000,000 $ 515,782
Dominican Republic Credit
Linked Nts.,
10.105%, 7/2/07 (linked to
Dominican Republic Treasury
Bills) 6,8 [DOP] 16,200,000 459,896
Dominican Republic
Credit Linked Nts.,
10.705%, 3/5/07 (linked to
Dominican Republic Treasury
Bills) 8 [DOP] 46,250,000 1,357,593
Dominican Republic Credit
Linked Nts.,
14.608%, 5/14/07 (linked to
Dominican Republic Treasury
Bills) 8 [DOP] 18,300,000 526,340
Dominican Republic Credit
Linked Nts., 16.15%, 3/12/07
(linked to Dominican Republic
Treasury Bills) 8 [DOP] 26,500,000 776,280
Dominican Republic Credit
Linked Nts., 17%, 3/12/07 [DOP] 21,900,000 661,773
Dominican Republic Credit
Linked Nts., 22%, 10/3/11 [DOP] 25,600,000 880,012
Dominican Republic Credit
Linked Nts.,
Series II, 15.603%, 4/23/07
(linked to Dominican
Republic Treasury Bills) 8 [DOP] 7,591,000 219,667
Dominican Republic Unsec.
Credit Linked Nts.,
11.648%, 9/24/07 (linked to
Dominican Republic Treasury
Bills) 8 [DOP] 65,700,000 1,806,092
Dominican Republic Unsec.
Credit Linked Nts.,
15.638%, 4/30/07 (linked to
Dominican Republic Treasury
Bills) 8 [DOP] 6,910,000 199,553
Dominican Republic Unsec.
Credit Linked Nts.,
Series II, 15.736%, 4/30/07
(linked to Dominican Republic
Treasury Bills) 8 [DOP] 15,150,000 437,516
Egypt (The Arab Republic of)
Credit Linked Nts.,
8.70%, 7/12/07 (linked to
Egyptian Treasury Bills) 2,8 [EGP] 7,610,000 1,266,168
Egypt (The Arab Republic of)
Credit Linked Nts.,
9.079%, 3/22/07 (linked to
Egyptian Treasury Bills) 2,8 [EGP] 5,200,000 890,972
Egypt (The Arab Republic of)
Unsec. Credit Linked Nts.,
8.50%, 2/16/08 [EGP] 4,450,000 790,540
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
STRUCTURED NOTES Continued
- --------------------------------------------------------------------------------
Egypt (The Arab Republic of)
Unsec. Credit Linked Nts.,
8.775%, 2/22/07 (linked to
Egyptian Treasury Bills) 2,8 [EGP] 7,350,000 $ 1,268,917
Nigeria (Federal Republic of)
Credit Linked Nts.,
12.474%, 7/22/07 8 [NGN] 219,970,000 1,612,373
Nigeria (Federal Republic of)
Credit Linked Nts.,
14.50%, 3/1/11 [NGN] 347,000,000 2,908,199
Nigeria (Federal Republic of)
Credit Linked Nts.,
Series II, 14.50%, 4/4/11 [NGN] 265,000,000 2,223,901
Rusfinans Bank Unsec. Credit
Linked Nts., 7.48%, 7/2/07 6 [RUR] 50,900,000 1,952,686
Russian Federation Credit
Linked Nts., 5.315%, 1/20/11 10,000,000 10,372,540
Ukraine Hryvnia Unsec.
Credit Linked Nts.,
11.94%, 1/4/10 [UAH] 880,000 189,745
Zambia (Republic of) Credit
Linked Nts.,
10.684%, 2/21/07 (linked to
Zambian Treasury Bills) 8 [ZMK] 3,160,000,000 704,243
Zambia (Republic of) Credit
Linked Nts.,
Series II, 10.745%, 2/21/07
(linked to Zambian
Treasury Bills) 8 [ZMK] 1,290,000,000 287,492
- --------------------------------------------------------------------------------
Credit Suisse First
Boston International:
EESRRU Total Return
Linked Nts., 8.25%, 6/22/10 [RUR] 93,500,000 3,691,981
Indonesia (Republic of)
Total Return Linked Nts.,
12%, 9/16/11 [IDR] 14,800,000,000 1,798,545
OAO Gazprom Credit
Linked Nts., 8.11%, 1/21/07 [RUR] 28,065,000 1,106,332
Rurail Total Return Linked Nts.,
6.67%, 1/22/09 [RUR] 49,210,000 1,871,160
South African Rand Interest
Bearing Linked Nts.,
Series FBi 43, 5.245%, 5/23/22 1 825,000 810,563
Turkey (Republic of) Credit
Linked Nts., Series EMG 59,
21.41%, 7/16/08 8 [TRY] 3,485,000 1,825,621
Ukraine (Republic of) Credit
Linked Nts., Series EMG 13,
11.94%, 12/30/09 [UAH] 2,195,000 483,899
- --------------------------------------------------------------------------------
Credit Suisse First Boston, Inc.
(Nassau Branch):
Turkey (Republic of) Credit
Linked Nts.,
Series 2, 20.853%, 7/16/08 8 [TRY] 6,270,000 3,284,545
30 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
STRUCTURED NOTES Continued
- --------------------------------------------------------------------------------
Credit Suisse First Boston, Inc.
(Nassau Branch): Continued
Ukraine (Republic of) Credit
Linked Nts.,
11.94%, 12/30/09 [UAH] 5,650,000 $ 1,245,573
Ukraine (Republic of) Credit
Linked Nts., Series EMG 11,
11.94%, 12/30/09 [UAH] 661,000 145,721
Ukraine (Republic of) Credit
Linked Nts., Series NPC 12,
11.94%, 12/30/09 [UAH] 4,170,000 919,299
- --------------------------------------------------------------------------------
Deutsche Bank AG:
Argentina (Republic of) Credit
Linked Nts., 4%, 12/21/11 [ARP] 2,990,000 2,556,182
Arrendadora Capita Corp. SA
de CV/Capita Corp. (The) de
Mexico SA de CV Credit Linked
Nts., 9.09%, 1/5/11 2 [MXN] 16,172,983 1,498,954
Arrendadora Capita Corp. SA
de CV/Capita Corp. (The) de
Mexico SA de CV Credit Linked
Nts., 9.65%, 1/5/11 2 [MXN] 10,691,738 994,649
Brazil Real Credit Linked Nts.,
13.882%, 3/3/10 8 [BRR] 4,580,760 1,790,066
Brazil Real Credit Linked Nts.,
6%, 8/18/10 [BRR] 2,065,000 1,468,214
Campania Total Return Linked
Nts., 4.211%, 7/30/10 1 [EUR] 5,200,000 6,807,947
Campania Total Return Linked
Nts., 4.248%, 7/30/10 1 [EUR] 5,050,000 6,688,225
Colombia (Republic of) Credit
Linked Nts., 13.50%, 9/15/14 [COP] 2,002,000,000 1,110,692
Egypt (The Arab Republic of)
Total Return Linked Nts.,
10.029%, 9/12/07 (linked to
Egyptian Treasury Bills) 2,8 [EGP] 11,720,000 1,909,675
Egypt (The Arab Republic of)
Total Return Linked Nts.,
9.096%, 2/1/07 (linked to
Egyptian Treasury Bills) 2,8 [EGP] 5,140,000 892,238
European Investment Bank,
Russian Federation Credit
Linked Nts., 5.502%, 1/19/10 8 705,000 610,883
Grupo TMM SA Credit Linked
Nts., 6%, 9/7/12 2 2,473,576 2,492,294
Halyk Bank of Kazakhstan Total
Return Linked Nts., Series I,
7.25%, 3/20/09 [KZT] 258,990,000 2,135,033
Indonesia (Republic of) Credit
Linked Nts., 9.50%, 6/22/15 820,000 787,856
Indonesia (Republic of) Credit
Linked Nts., Series III,
14.25%, 6/15/13 873,600 1,049,630
Nigeria (Federal Republic of)
Credit Linked Nts.,
12.50%, 2/24/09 [NGN] 67,900,000 564,498
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
STRUCTURED NOTES Continued
- --------------------------------------------------------------------------------
Deutsche Bank AG: Continued
Nigeria (Federal Republic of)
Credit Linked Nts.,
15%, 1/27/09 [NGN] 91,000,000 $ 802,185
OAO Gazprom I Credit Nts.,
9.22%, 10/20/07 790,000 827,067
OAO Gazprom II Credit Nts.,
8.97%, 4/20/07 790,000 812,231
Peru (Republic of) Credit Linked
Nts., 6.73%, 2/20/11 1 875,000 891,392
RosSelkhoz Bank Total Return
Linked Nts.,
6.926%, 2/22/08 8 [RUR] 57,640,000 2,022,737
Russian Federation Credit Linked
Nts., 0%, 12/2/09 8 [RUR] 19,221,000 763,532
Russian Federation Total Return
Linked Nts.,
Series II, 9%, 4/22/11 [RUR] 21,590,000 896,610
Russian Unified Energy Systems
Total Return Linked Nts.,
Series FSK3,
7.10%, 12/16/08 [RUR] 50,530,000 1,927,589
Sberbank Total Return
Linked Nts.,
6.588%,
2/27/08 8 [RUR] 76,860,000 2,699,100
Sberbank Total Return
Linked Nts.,
6.593%, 2/20/08 8 [RUR] 57,640,000 2,026,682
Ukraine (Republic of) 5 yr.
Credit Linked Nts.,
4.05%, 8/25/10 885,000 921,657
Ukraine (Republic of) 5.5 yr.
Credit Linked Nts.,
4.05%, 2/25/11 885,000 920,922
Ukraine (Republic of) 6 yr.
Credit Linked Nts.,
4.05%, 8/25/11 885,000 920,763
Ukraine (Republic of) 6.5 yr.
Credit Linked Nts.,
4.05%, 2/27/12 885,000 919,630
Ukraine (Republic of) 7 yr.
Credit Linked Nts.,
4.05%, 8/28/12 885,000 917,249
Ukraine (Republic of) Credit
Linked Nts.,
11.94%, 12/30/09 [UAH] 269,000 58,346
Ukraine (Republic of) Credit
Linked Nts.,
11.94%, 12/30/09 [UAH] 955,000 207,138
Ukraine (Republic of) Credit
Linked Nts.,
5.592%, 5/16/07 [UAH] 2,390,000 478,024
Ukraine (Republic of) Credit
Linked Nts.,
Series A, 5.592%, 5/16/07 [UAH] 2,390,000 478,024
31 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
STRUCTURED NOTES Continued
- --------------------------------------------------------------------------------
United Mexican States BORHIS
Total Return Linked Nts.,
6.10%, 9/27/35 [MXN] 3,814,803 $ 1,484,151
United Mexican States
Credit Linked Nts.,
9.52%, 1/5/11 2 [MXN] 10,708,094 994,932
Videocon International Ltd.
Credit Linked Nts.,
6.26%, 12/29/09 2 1,630,000 1,638,427
- --------------------------------------------------------------------------------
Dow Jones CDX
High Yield Index:
8.25% Pass-Through
Certificates,
Series 4-T1, 6/29/10 2 12,061,200 12,543,648
8.375% Pass-Through
Certificates,
Series 7-T1, 12/29/11 2 10,350,000 10,582,875
- --------------------------------------------------------------------------------
Dresdner Bank AG,
Lukoil Credit Linked Nts.,
Series 3,7.04%, 12/8/11 [RUR] 34,190,000 1,298,741
- --------------------------------------------------------------------------------
Eurus Ltd.
Catastrophe Linked Nts.,
11.626%, 4/8/09 1,2 1,400,000 1,389,500
- --------------------------------------------------------------------------------
Fhu-Jin Ltd.
Catastrophe Linked Nts., Cl. B,
9.27%, 8/10/11 1,2 1,630,000 1,644,426
- --------------------------------------------------------------------------------
Foundation Re II Ltd.
Catastrophe Linked Nts.,
15.173%, 1/8/09 1,2 926,000 926,000
- --------------------------------------------------------------------------------
Foundation Re Ltd.
Catastrophe Linked Nts.,
9.473%, 11/24/08 1,3 1,000,000 943,180
- --------------------------------------------------------------------------------
Goldman Sachs Group,
Inc. (The), Russag Total
Return Linked Nts.,
7.25%, 12/23/09 6 [RUR] 50,540,000 1,919,812
- --------------------------------------------------------------------------------
Goldman Sachs International,
Russian Federation Total
Return Linked Nts.,
8%, 5/13/09 1 [RUR] 84,500,000 3,256,317
- --------------------------------------------------------------------------------
ING Bank NV, Ukraine
(Republic of) Credit Linked
Nts., Series 725, 11.89%,
12/30/09 2 [UAH] 4,689,000 1,016,988
- --------------------------------------------------------------------------------
JPMorgan Chase Bank:
Argentina (Republic of)
Credit Linked Nts.,
4%, 12/19/11 2 [ARP] 4,355,000 3,763,285
Brazil (Federal Republic of)
Credit Linked Nts.,
12.08%, 1/2/15 8 [BRR] 3,693,700 673,372
Brazil (Federal Republic of)
Credit Linked Nts.,
12.683%, 6/1/13 8 [BRR] 5,490,000 1,197,109
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
STRUCTURED NOTES Continued
- --------------------------------------------------------------------------------
JPMorgan Chase Bank: Continued
Brazil (Federal Republic of)
Credit Linked Nts.,
15.326%, 1/2/15 8 [BRR] 10,948,600 $ 1,995,961
Brazil (Federal Republic of)
Credit Linked Nts.,
2.731%, 11/30/12 8 [ARP] 4,550,000 1,235,081
Brazil (Federal Republic of)
Credit Linked Nts.,
6%, 5/16/45 2 [BRR] 5,855,000 3,719,329
Brazil (Federal Republic of)
Credit Linked Nts.,
Series II, 13.553%, 1/2/15 8 [BRR] 8,035,000 1,464,803
Brazil (Federal Republic of)
Credit Linked Nts.,
Series III, 12.184%, 1/2/15 8 [BRR] 8,500,000 1,549,574
Colombia (Republic of) Credit
Linked Bonds,
10.19%, 1/5/16 8 [COP] 20,100,000,000 3,644,668
Colombia (Republic of) Credit
Linked Bonds, 10.218%,
10/31/16 2,8 [COP] 12,177,000,000 1,931,130
Colombia (Republic of) Credit
Linked Bonds, 11.198%,
8/3/20 8 [COP] 11,160,000,000 1,385,076
Colombia (Republic of) Credit
Linked Bonds, Series A,
10.218%, 10/31/16 2,8 [COP] 12,125,000,000 1,922,884
Peru (Republic of) Credit Linked
Nts., 8.115%, 9/2/15 8 [PEN] 3,470,000 596,250
Swaziland (Kingdom of) Credit
Linked Nts., 7.25%, 6/20/10 1,120,000 1,111,824
- --------------------------------------------------------------------------------
Lakeside Re Ltd. Catastrophe
Linked Nts., 11.865%, 12/31/09 1,3 2,000,000 2,000,000
- --------------------------------------------------------------------------------
Lehman Brothers Holdings,
Inc., High Yield Targeted
Return Index Securities,
Series 2006-1, 7.546%, 5/1/16 2,19 9,600,000 9,936,288
- --------------------------------------------------------------------------------
Lehman Brothers International,
Romania (Republic of) Total
Return Linked Nts., 7.90%,
2/9/10 (linked to Romanian
Treasury Bills) [RON] 821,400 368,929
- --------------------------------------------------------------------------------
Lehman Brothers Special
Financing, Inc.:
Romania (Republic of)
Total Return Linked Nts.,
6.50%, 3/10/10 (linked to
Romanian Treasury Bills) [RON] 2,228,300 940,198
Romania (Republic of) Total
Return Linked Nts.,
6.75%, 3/11/08 (linked to
Romanian Treasury Bills) [RON] 2,600,000 1,124,297
Romania (Republic of) Total
Return Linked Nts.,
7.25%, 4/18/10 (linked to
Romanian Treasury Bills) [RON] 213,000 91,952
32 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
STRUCTURED NOTES Continued
- --------------------------------------------------------------------------------
Lehman Brothers Special
Financing, Inc.: Continued
Romania (Republic of) Total
Return Linked Nts., 7.50%,
3/6/07 (linked to Romanian
Treasury Bills) [RON] 354,000 $ 156,744
Romania (Republic of) Total
Return Linked Nts., 7.75%,
4/18/08 (linked to Romanian
Treasury Bills) [RON] 199,000 87,691
Romania (Republic of) Total
Return Linked Nts., 7.75%,
4/18/08 (linked to Romanian
Treasury Bills) [RON] 512,000 225,616
Romania (Republic of) Total
Return Linked Nts., 7.90%,
2/12/08 (linked to Romanian
Treasury Bills) [RON] 1,885,100 844,192
- --------------------------------------------------------------------------------
Merrill Lynch, Colombia
(Republic of) Credit Linked Nts.,
10%, 11/17/16 [COP] 1,784,000,000 804,932
- --------------------------------------------------------------------------------
Merrill Lynch Global Markets &
Investment Banking Group Total
Return Linked Nts., 10.50%,
5/12/08 (linked to RCCF
Loan Participation
Nts.) 2 [RUR] 46,000,000 1,747,355
- --------------------------------------------------------------------------------
Morgan Stanley & Co.
International Ltd./Red Arrow
International Leasing plc:
Total Return Linked Nts.,
Series A, 8.375%, 6/30/12 2 [RUR] 33,845,308 1,329,359
Total Return Linked Nts.,
Series B, 11%, 6/30/12 2 [RUR] 27,965,555 1,089,717
- --------------------------------------------------------------------------------
Morgan Stanley Capital
Services, Inc.:
Bank Center Credit Total Return
Linked Nts.,7.52%, 6/6/08 [KZT] 482,000,000 3,838,228
Brazil (Federal Republic of) Sr.
Linked Nts., 14.40%, 8/4/16 [BRR] 5,793,682 3,233,778
Philippines (Republic of the)
Credit Linked Nts.,
10.24%, 9/20/15 2 10,300,000 12,195,200
Philippines (Republic of the)
Credit Linked Nts.,
8.619%, 9/20/15 2 1,230,000 1,396,173
Philippines (Republic of the)
Credit Linked Nts.,
8.22%, 6/20/16 1,2 1,360,000 1,423,104
United Mexican States Credit
Linked Nts., 5.64%, 11/20/15 2,000,000 2,029,600
Venezuela (Republic of) 10 yr.
Credit Linked Nts.,
7.85%, 11/20/15 1,885,000 2,052,577
Venezuela (Republic of) Credit
Linked Nts., 6.49%, 5/20/10 1,480,000 1,522,476
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
STRUCTURED NOTES Continued
- --------------------------------------------------------------------------------
Morgan Stanley Capital
Services, Inc.: Continued
Venezuela (Republic of) Credit
Linked Nts., 7.382%, 5/20/10 $ 1,900,000 $ 2,073,090
WTI Trading Ltd. Total Return
Linked Nts.,
Series A, 0%, 2/1/09 6,8 3,630,000 3,630,000
WTI Trading Ltd. Total Return
Linked Nts.,
Series B, 0%, 2/1/09 6,8 4,850,000 4,850,000
- --------------------------------------------------------------------------------
Osiris Capital plc Catastrophe
Linked Combined Mortality
Index Nts.,
Series D, 10.37%, 1/15/10 1,2 890,000 894,984
- --------------------------------------------------------------------------------
Residential Reinsurance Ltd.
Catastrophe Linked Nts.,
Series B, 13.819%, 6/6/08 1 1,300,000 1,186,445
- --------------------------------------------------------------------------------
Successor Cal Quake Parametric
Ltd. Catastrophe Linked Nts.,
Cl. A-I, 10.603%, 6/6/08 1,2 1,040,000 1,027,676
- --------------------------------------------------------------------------------
Successor Euro Wind Ltd.
Catastrophe Linked Nts.,
Series A-I, 22.853%, 6/6/08 1,3 1,450,000 1,469,068
- --------------------------------------------------------------------------------
Successor Japan Quake Ltd.
Catastrophe Linked Nts.,
Series A-I, 9.603%, 6/6/08 1,2 2,450,000 2,465,558
- --------------------------------------------------------------------------------
UBS AG:
Ghana (Republic of) Credit
Linked Nts.,
14.47%, 12/21/11 6 [GHC] 12,220,520,000 1,336,226
Israel (State of) Credit Linked
Nts., 7.50%, 4/5/14 [ILS] 4,792,700 1,389,347
- --------------------------------------------------------------------------------
VASCO Re 2006 Ltd.
Catastrophe Linked Nts.,
13.866%, 6/5/09 1,2 1,550,000 1,574,955
----------------
Total Structured Notes (Cost $256,767,956) 271,358,738
STRIKE
DATE PRICE CONTRACTS
- --------------------------------------------------------------------------------
OPTIONS PURCHASED--0.0%
- --------------------------------------------------------------------------------
Euro (EUR) Call 18 1/4/07 1.34USD 10,980,000 1,475
- --------------------------------------------------------------------------------
Euro (EUR) Call 18 3/5/07 1.33USD 19,070,000 198,061
- --------------------------------------------------------------------------------
New Turkish Lira
(TRY)/Japanese
Yen (JPY) Call 18 1/30/07 77.00TRY 6,610,000 339,049
----------------
Total Options Purchased (Cost $570,706) 538,585
33 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
MONEY MARKET FUND--17.4% 20
- --------------------------------------------------------------------------------
Oppenheimer Institutional
Money Market Fund, Cl. E,
5.25% 21,22
(Cost $349,023,806) 349,023,806 $ 349,023,806
- --------------------------------------------------------------------------------
Total Investments, at Value
(excluding Investments
Purchased with Cash
Collateral from
Securities Loaned)
(Cost $2,006,345,303) 2,045,366,044
PRINCIPAL
AMOUNT
- --------------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED--4.1% 14
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--3.9%
Undivided interest of 0.67% in joint
repurchase agreement (Principal
Amount/Value $4,100,000,000, with a
maturity value of $4,102,437,222) with
Nomura Securities, 5.35%, dated 12/29/06,
to be repurchased at $27,646,282 on
1/2/07, collateralized by U.S. Agency
Mortgages, 0.00%-22.12%, 3/15/14-5/1/46,
with a value of $4,182,000,000 $ 27,629,858 27,629,858
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
Undivided interest of 3.33% in joint
repurchase agreement (Principal
Amount/Value $1,500,000,000, with a
maturity value of 1,500,887,083 with Banc
of America Securities LLC, 5.3225%, dated
12/29/06, to be repurchased at $50,029,569
on 1/2/07, collateralized by U.S. Agency
Mortgages, 0.00%-6%, 8/1/34-11/15/36, with
a value of $1,530,000,000 $ 50,000,000 $ 50,000,000
----------------
77,629,858
- --------------------------------------------------------------------------------
YANKEE CERTIFICATE OF DEPOSIT FLOATING NOTE--0.2%
Natexis Banques Populaires NY,
5.34%, 1/2/07 4,000,000 4,000,000
----------------
Total Investments Purchased with
Cash Collateral from Securities Loaned
(Cost $81,629,858) 81,629,858
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS,
AT VALUE
(COST $2,087,975,161) 106.2% 2,126,995,902
- --------------------------------------------------------------------------------
LIABILITIES IN EXCESS
OF OTHER ASSETS (6.2) (124,176,379)
-----------------------------------
NET ASSETS 100.0% $ 2,002,819,523
===================================
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
DKK Danish Krone
DOP Dominican Republic Peso
EGP Egyptian Pounds
EUR Euro
GBP British Pound Sterling
GHC Ghanaian Cedi
IDR Indonesia Rupiah
ILS Israeli Shekel
JPY Japanese Yen
KZT Kazakhstan Tenge
MXN Mexican Nuevo Peso
MYR Malaysian Ringgit
NGN Nigeria Naira
PEN Peruvian New Sol
PHP Philippines Peso
PLZ Polish Zloty
RON New Romanian Leu
RUR Russian Ruble
TRY New Turkish Lira
UAH Ukraine Hryvnia
UYU Uruguay Peso
ZMK Zambian Kwacha
1. Represents the current interest rate for a variable or increasing rate
security.
2. Illiquid or restricted security. The aggregate value of illiquid or
restricted securities as of December 31, 2006 was $154,427,153, which represents
7.71% of the Fund's net assets, of which $242 is considered restricted. In
addition, the Fund has restricted currency of $350,631 which represesnts 0.02%
of the Fund's net assets. See Note 12 of accompanying Notes.
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 $114,299,508 or 5.71% of the Fund's net
assets as of December 31, 2006.
4. Issuer is in default. See Note 1 of accompanying Notes.
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 $12,294,268 or 0.61% of the Fund's net assets
as of December 31, 2006.
6. When-issued security or forward commitment to be delivered and settled after
December 31, 2006. See Note 1 of accompanying Notes.
34 | OPPENHEIMER STRATEGIC BOND FUND/VA
7. Principal-Only Strips represent the right to receive the monthly principal
payments on an underlying pool of mortgage loans. The value of these securities
generally increases as interest rates decline and prepayment rates rise. The
price of these securities is typically more volatile than that of coupon-bearing
bonds of the same maturity. Interest rates disclosed represent current yields
based upon the current cost basis and estimated timing of future cash flows.
These securities amount to $713,556 or 0.04% of the Fund's net assets as of
December 31, 2006.
8. Zero coupon bond reflects effective yield on the date of purchase.
9. Partial or fully-loaned security. See Note 13 of accompanying Notes.
10. A sufficient amount of securities has been designated to cover outstanding
foreign currency contracts. See Note 5 of accompanying Notes.
11. A sufficient amount of securities has been designated to cover outstanding
written put options, as follows:
CONTRACTS EXPIRATION EXERCISE PREMIUM VALUE
SUBJECT TO PUT DATES PRICE RECEIVED SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------
Euro 19,070,000 3/5/07 $ 1.306 $ 141,118 $ 149,286
New Turkish Lira (TRY)/Japanese Yen (JPY) 6,610,000 1/30/07 65.000TRY 112,086 --
------------------------------
$ 253,204 $ 149,286
==============================
12. All or a portion of the security is held in collateralized accounts to cover
initial margin requirements on open futures contracts. The aggregate market
value of such securities is $7,371,675. See Note 6 of accompanying Notes.
13. Denotes an inflation-indexed security: coupon and principal are indexed to
the consumer price index.
14. The security/securities have 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
accompanying Notes.
15. Denotes a step bond: a zero coupon bond that converts to a fixed or variable
interest rate at a designated future date.
16. Interest or dividend is paid-in-kind, when applicable.
17. This bond has no contractual maturity date, is not redeemable and
contractually pays an indefinite stream of interest. Rate reported represents
the current interest rate for this variable rate security.
18. Non-income producing security.
19. Interest rate represents a weighted average rate comprised of the interest
rates of the underlying securities.
20. The Fund may have elements of risk due to concentrated investments. Such
concentrations may subject the Fund to additional risks.
21. Rate shown is the 7-day yield as of December 31, 2006.
22. Represents ownership of an affiliated fund, at or during the period ended
December 31, 2006. Transactions during the period in which the issuer was an
affiliate are as follows:
SHARES GROSS GROSS SHARES
DECEMBER 31, 2005 ADDITIONS REDUCTIONS DECEMBER 31, 2006
- ------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Institutional Money
Market Fund, Cl. E, 5.25%* -- 593,190,594 244,166,788 349,023,806
VALUE DIVIDEND
SEE NOTE 1 INCOME
- ------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Institutional Money Market Fund, Cl. E, 5.25%* $349,023,806 $3,924,658
* The money market fund and the Fund are affiliated by having the same
investment advisor.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
35 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 31, 2006
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments:
Unaffiliated companies (cost $1,738,951,355) $ 1,777,972,096
Affiliated companies (cost $349,023,806) 349,023,806
-----------------
2,126,995,902
- --------------------------------------------------------------------------------------------------
Cash 1,685,264
- --------------------------------------------------------------------------------------------------
Cash--foreign currencies (cost $328,857) 332,540
- --------------------------------------------------------------------------------------------------
Unrealized appreciation on foreign currency contracts 7,334,177
- --------------------------------------------------------------------------------------------------
Unrealized appreciation on swap contracts 10,351,272
- --------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest, dividends and principal paydowns 22,694,611
Investments sold (including $13,407,188 sold on a when-issued basis or
forward commitment) 13,961,783
Shares of beneficial interest sold 5,313,256
Futures margins 199,499
Other 30,150
-----------------
Total assets 2,188,898,454
- --------------------------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------------------------
Options written, at value (premiums received $253,204)--see accompanying
statement of investments 149,286
- --------------------------------------------------------------------------------------------------
Return of collateral for securities loaned 81,629,858
- --------------------------------------------------------------------------------------------------
Unrealized depreciation on foreign currency contracts 3,072,693
- --------------------------------------------------------------------------------------------------
Unrealized depreciation on swap contracts 1,711,141
- --------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased (including $93,798,047 purchased on a when-issued basis
or forward commitment) 96,462,473
Closed foreign currency contracts 1,867,580
Distribution and service plan fees 805,189
Shares of beneficial interest redeemed 240,612
Shareholder communications 42,371
Trustees' compensation 19,926
Transfer and shareholder servicing agent fees 1,732
Other 76,070
-----------------
Total liabilities 186,078,931
- --------------------------------------------------------------------------------------------------
NET ASSETS $ 2,002,819,523
=================
- --------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- --------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 376,752
- --------------------------------------------------------------------------------------------------
Additional paid-in capital 1,895,447,976
- --------------------------------------------------------------------------------------------------
Accumulated net investment income 71,431,376
- --------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions (13,225,859)
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets and
liabilities denominated in foreign currencies 48,789,278
-----------------
NET ASSETS $ 2,002,819,523
=================
- --------------------------------------------------------------------------------------------------
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 $606,631,471 and 115,295,601 shares of beneficial
interest outstanding) $ 5.26
- --------------------------------------------------------------------------------------------------
Service Shares:
Net asset value, redemption price per share and offering price per share
(based on net assets of $1,396,188,052 and 261,456,885 shares of beneficial
interest outstanding) $ 5.34
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
36 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 31, 2006
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------------------------
Interest (net of foreign withholding taxes of $18,055) $ 84,901,358
- --------------------------------------------------------------------------------------------------
Dividends:
Unaffiliated companies (net of foreign withholding taxes of $33,008) 776,901
Affiliated companies 3,924,658
- --------------------------------------------------------------------------------------------------
Fee income 249,146
- --------------------------------------------------------------------------------------------------
Portfolio lending fees 242,632
-----------------
Total investment income 90,094,695
- --------------------------------------------------------------------------------------------------
EXPENSES
- --------------------------------------------------------------------------------------------------
Management fees 9,733,081
- --------------------------------------------------------------------------------------------------
Distribution and service plan fees--Service shares 2,537,242
- --------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service shares 10,034
Service shares 10,057
- --------------------------------------------------------------------------------------------------
Shareholder communications:
Non-Service shares 44,225
Service shares 82,056
- --------------------------------------------------------------------------------------------------
Custodian fees and expenses 74,937
- --------------------------------------------------------------------------------------------------
Trustees' compensation 22,282
- --------------------------------------------------------------------------------------------------
Administration service fees 1,500
- --------------------------------------------------------------------------------------------------
Other 92,894
-----------------
Total expenses 12,608,308
Less reduction to custodian expenses (5,883)
Less waivers and reimbursements of expenses (74,462)
-----------------
Net expenses 12,527,963
- --------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 77,566,732
- --------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- --------------------------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments 12,252,328
Closing and expiration of option contracts written 152,431
Closing and expiration of swaption contracts 57,519
Closing and expiration of futures contracts 4,147,395
Foreign currency transactions (11,266,901)
Swap contracts (1,982,622)
-----------------
Net realized gain 3,360,150
- --------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments 14,128,572
Translation of assets and liabilities denominated in foreign currencies 18,593,974
Futures contracts (3,879,631)
Option contracts written 103,918
Swaption contracts (28,270)
Swap contracts 7,844,472
-----------------
Net change in unrealized appreciation 36,763,035
- --------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 117,689,917
=================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
37 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2006 2005
- ----------------------------------------------------------------------------------------------------------
OPERATIONS
- ----------------------------------------------------------------------------------------------------------
Net investment income $ 77,566,732 $ 44,032,240
- ----------------------------------------------------------------------------------------------------------
Net realized gain 3,360,150 14,763,560
- ----------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation 36,763,035 (33,428,041)
------------------------------------
Net increase in net assets resulting from operations 117,689,917 25,367,759
- ----------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ----------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Non-Service shares (23,204,298) (28,059,108)
Service shares (32,674,854) (12,131,395)
------------------------------------
(55,879,152) (40,190,503)
- ----------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from beneficial
interest transactions:
Non-Service shares 50,531,351 (62,203,962)
Service shares 694,229,148 415,654,659
------------------------------------
744,760,499 353,450,697
- ----------------------------------------------------------------------------------------------------------
NET ASSETS
- ----------------------------------------------------------------------------------------------------------
Total increase 806,571,264 338,627,953
- ----------------------------------------------------------------------------------------------------------
Beginning of period 1,196,248,259 857,620,306
------------------------------------
End of period (including accumulated net investment income of
$71,431,376 and $53,188,525, respectively) $ 2,002,819,523 $ 1,196,248,259
====================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
38 | OPPENHEIMER STRATEGIC BOND FUND/VA
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2006 2005 2004 2003 2002
- --------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 5.11 $ 5.21 $ 5.05 $ 4.57 $ 4.62
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .26 1 .25 1 .22 1 .22 .29
Net realized and unrealized gain (loss) .11 (.12) .20 .56 .03
------------------------------------------------------------------------
Total from investment operations .37 .13 .42 .78 .32
- --------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.22) (.23) (.26) (.30) (.37)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.26 $ 5.11 $ 5.21 $5.05 $ 4.57
========================================================================
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 7.49% 2.67% 8.67% 18.07% 7.44%
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 606,632 $ 538,141 $ 614,915 $ 571,445 $ 406,126
- --------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 564,248 $ 550,201 $ 584,878 $ 472,213 $ 374,519
- --------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 5.05% 4.91% 4.50% 5.61% 6.89%
Total expenses 0.64% 4 0.71% 0.74% 0.75% 0.79%
Expenses after payments and waivers and
reduction to custodian expenses 0.63% 0.71% 0.74% 0.75% 0.78%
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 93% 5 98% 5 88% 5 117% 65%
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. Expenses including indirect expenses from affiliated fund were as follows:
Year Ended December 31, 2006 0.64%
5. The portfolio turnover rate excludes purchase and sale transactions of To Be
Announced (TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
-------------------------------------------------------------------------
Year Ended December 31, 2006 $ 742,785,501 $ 749,719,239
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.
39 | OPPENHEIMER STRATEGIC BOND FUND/VA
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SERVICE SHARES YEAR ENDED DECEMBER 31, 2006 2005 2004 2003 2002
- -------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 5.19 $ 5.29 $ 5.13 $ 4.67 $ 4.73
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .25 1 .21 1 .19 1 .27 .03
Net realized and unrealized gain (loss) .11 (.08) .22 .49 .28
-----------------------------------------------------------------------
Total from investment operations .36 .13 .41 .76 .31
- -------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.21) (.23) (.25) (.30) (.37)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.34 $ 5.19 $ 5.29 $ 5.13 $ 4.67
=======================================================================
TOTAL RETURN, AT NET ASSET VALUE 2 7.23% 2.48% 8.43% 17.16% 7.03%
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 1,396,188 $ 658,107 $ 242,705 $ 79,782 $ 8,138
- -------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 1,016,582 $ 408,515 $ 150,040 $ 34,744 $ 2,307
- -------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 4.83% 4.20% 3.82% 4.57% 5.40%
Total expenses 0.89% 4 0.96% 0.99% 1.02% 1.06%
Expenses after payments and waivers and
reduction to custodian expenses 0.88% 0.96% 0.99% 1.02% 1.03%
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 93% 5 98% 5 88% 5 117% 65%
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. Expenses including indirect expenses from affiliated fund were as follows:
Year Ended December 31, 2006 0.89%
5. The portfolio turnover rate excludes purchase and sale transactions of To Be
Announced (TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
------------------------------------------------------------------------
Year Ended December 31, 2006 $ 742,785,501 $ 749,719,239
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.
40 | 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(R) 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, as 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. Options are
valued daily based upon the last sale price on the principal exchange on which
the option is traded. 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. Investments in
open-end registered investment companies (including affiliated funds) are valued
at that fund's net asset value. 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.
41 | OPPENHEIMER STRATEGIC BOND FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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 take place generally at least 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, 2006, the Fund had purchased
$93,798,047 of securities issued on a when-issued basis or forward commitment
and sold $13,407,188 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, 2006, securities with an
aggregate market value of $1,341,307, representing 0.07% 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.
42 | OPPENHEIMER STRATEGIC BOND FUND/VA
- --------------------------------------------------------------------------------
AFFILIATED FUNDS. The Fund is permitted to invest daily available cash balances
in affiliated money market funds. Each day, the Fund invests the available cash
in Class E shares of Oppenheimer Institutional Money Market Fund ("IMMF") which
seeks current income and stability of principal. IMMF is a registered open-end
management investment company, regulated as a money market fund under the
Investment Company Act of 1940, as amended. The Manager is also the investment
advisor of IMMF. The Fund's investment in IMMF is included in the Statement of
Investments. As a shareholder, the Fund is subject to its proportional share of
IMMF's Class E expenses, including its management fee. The Manager will waive
fees and/or reimburse Fund expenses in an amount equal to the indirect
management fees incurred through the Fund's investment in IMMF.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
INVESTMENTS WITH OFF BALANCE SHEET RISK. The Fund enters into financial
instrument transactions (such as swaps, futures, options and other derivatives)
that may have off-balance sheet market risk. Off-balance sheet market risk
exists when the maximum potential loss on a particular financial instrument is
greater than the value of such financial instrument, as reflected in the Fund's
Statement of Assets and Liabilities.
- --------------------------------------------------------------------------------
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 1,2,3,4,5 TAX PURPOSES
----------------------------------------------------------------------------
$ 76,464,001 $ -- $ 13,919,075 $ 44,833,225
1. As of December 31, 2006, the Fund had $13,349,869 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, 2006,
details of the capital loss carryforwards were as follows:
EXPIRING
--------------------------
2009 $ 6,488,232
2010 6,861,637
-------------
Total $ 13,349,869
=============
2. As of December 31, 2006, the Fund had $535,577 of post-October losses
available to offset future realized capital gains, if any. Such losses, if
unutilized, will expire in 2015
3. The Fund had $33,629 of straddle losses which were deferred.
4. During the fiscal year ended December 31, 2006, the Fund utilized $3,873,854
of capital loss carryforward to offset capital gains realized in that fiscal
year.
5.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.
43 | OPPENHEIMER STRATEGIC BOND FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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, 2006. Net assets of
the Fund were unaffected by the reclassifications.
REDUCTION TO REDUCTION TO
ACCUMULATED ACCUMULATED NET
NET INVESTMENT REALIZED LOSS
INCOME ON INVESTMENTS
-------------------------------------
$ 3,444,729 $ 3,444,729
The tax character of distributions paid during the years ended December 31, 2006
and December 31, 2005 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2006 DECEMBER 31, 2005
-----------------------------------------------------------------------------
Distributions paid from:
Ordinary income $ 55,879,152 $ 40,190,503
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, 2006 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 $ 2,088,057,236
Federal tax cost of other investments 190,632,720
-----------------
Total federal tax cost $ 2,278,689,956
=================
Gross unrealized appreciation $ 65,438,497
Gross unrealized depreciation (20,605,272)
-----------------
Net unrealized appreciation $ 44,833,225
=================
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a compensation
deferral plan for independent trustees that enables trustees to elect to defer
receipt of all or a portion of the annual compensation they are entitled to
receive from the Fund. For purposes of determining the amount owed to the
Trustee under the plan, deferred amounts are treated as though equal dollar
amounts had been invested in shares of the Fund or in other Oppenheimer funds
selected by the Trustee. The Fund purchases shares of the funds selected for
deferral by the Trustee in amounts equal to his or her deemed investment,
resulting in a Fund asset equal to the deferred compensation liability. Such
assets are included as a component of "Other" within the asset section of the
Statement of Assets and Liabilities. Deferral of trustees' fees under the plan
will not affect the net assets of the Fund, and will not materially affect the
Fund's assets, liabilities or net investment income per share. Amounts will be
deferred until distributed in accordance 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.
44 | OPPENHEIMER STRATEGIC BOND FUND/VA
- --------------------------------------------------------------------------------
CUSTODIAN FEES. "Custodian fees and expenses" in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts, to the extent they are not
offset by positive cash balances maintained by the Fund, at a rate equal to the
Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line item,
if applicable, represents earnings on cash balances maintained by the Fund
during the period. Such interest expense and other custodian fees may be paid
with these earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Fund's organizational documents provide current and former
trustees and officers with a limited indemnification against liabilities arising
in connection with the performance of their duties to the Fund. In the normal
course of business, the Fund may also enter into contracts that provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would be dependent on future claims that may be made against the
Fund. The risk of material loss from such claims is considered remote.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with 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, 2006 YEAR ENDED DECEMBER 31, 2005
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------
NON-SERVICE SHARES
Sold 21,634,226 $ 109,527,181 23,774,819 $ 120,696,837
Dividends and/or distributions reinvested 4,678,286 23,204,298 5,623,068 28,059,108
Redeemed (16,241,080) (82,200,128) (42,307,482) (210,959,907)
------------------------------------------------------------
Net increase (decrease) 10,071,432 $ 50,531,351 (12,909,595) $ (62,203,962)
============================================================
- --------------------------------------------------------------------------------------------------------
SERVICE SHARES
Sold 149,725,536 $ 769,804,954 80,659,335 $ 414,986,342
Dividends and/or distributions reinvested 6,483,106 32,674,854 2,388,070 12,131,395
Redeemed (21,471,021) (108,250,660) (2,226,542) (11,463,078)
------------------------------------------------------------
Net increase 134,737,621 $ 694,229,148 80,820,863 $ 415,654,659
============================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations and money market funds, for the year ended December
31, 2006, were as follows:
PURCHASES SALES
- -------------------------------------------------------------------------------------
Investment securities $ 1,333,193,618 $ 948,882,030
U.S. government and government agency obligations 73,322,262 79,934,105
To Be Announced (TBA) mortgage-related securities 742,785,501 749,719,239
45 | OPPENHEIMER STRATEGIC BOND FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 average net assets as shown in the following table:
FEE SCHEDULE
----------------------------
Up to $200 million 0.75%
Next $200 million 0.72
Next $200 million 0.69
Next $200 million 0.66
Next $200 million 0.60
Over $1 billion 0.50
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the year ended December 31, 2006, the Fund paid
$20,112 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.
The Manager will waive fees and/or reimburse Fund expenses in an amount
equal to the indirect management fees incurred through the Fund's investment in
IMMF. During the year ended December 31, 2006, the Manager waived $74,462 for
IMMF management fees.
- --------------------------------------------------------------------------------
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.
46 | OPPENHEIMER STRATEGIC BOND FUND/VA
As of December 31, 2006, the Fund had outstanding foreign currency contracts as
follows:
CONTRACT
EXPIRATION AMOUNT VALUATION AS OF UNREALIZED UNREALIZED
CONTRACT DESCRIPTION DATES (000S) DEC. 31, 2006 APPRECIATION DEPRECIATION
- ------------------------------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
Argentine Peso (ARP) 1/19/07 22,500ARP $ 7,355,826 $ 14,880 $ --
Australian Dollar (AUD) 1/16/07 597AUD 471,028 2,383 --
Brazilian Real (BRR) 2/2/07-11/5/07 120,301BRR 58,803,056 4,216,496 --
British Pound Sterling (GBP) 1/10/07-1/16/07 6,425GBP 12,581,017 319,439 9,277
Canadian Dollar (CAD) 1/16/07 2,310CAD 1,981,838 -- 18,592
Chilean Peso (CLP) 2/20/07-3/28/07 3,574,000CLP 6,713,129 -- 60,249
Dominican Republic Peso (DOP) 1/10/07 15,454DOP 461,999 -- 1,385
Euro (EUR) 1/10/07-1/16/07 12,185EUR 16,096,581 35,609 51,293
Ghanaian Cedi (GHC) 1/8/07 12,428,269GHC 1,347,488 980 --
Hungarian Forint (HUF) 1/4/07 1,500,000HUF 7,873,689 178,224 --
Japanese Yen (JPY) 1/10/07-1/16/07 10,002,000JPY 84,166,242 -- 1,635,285
Malaysian Ringgit (MYR) 2/16/07-2/21/07 12,420MYR 3,528,903 95,833 --
Mexican Nuevo Peso (MXN) 2/23/07-2/27/07 187,690MXN 17,332,401 325,817 --
Norwegian Krone (NOK) 1/10/07 58,390NOK 9,369,148 154,094 74,810
Russian Ruble (RUR) 1/15/07-3/7/07 258,593RUR 9,823,655 -- 28,365
South African Rand (ZAR) 1/8/07 56,200ZAR 8,005,737 173,001 --
South Korean Won (KRW) 1/12/07-2/2/07 6,733,000KRW 7,243,279 107,430 --
Swiss Franc (CHF) 1/10/07-1/16/07 8,466CHF 6,954,831 42,842 60,180
Thailand Baht (THB) 1/17/07 204,000THB 5,722,703 288,500 --
Turkish Lira (TRY) 1/22/07 11,225TRY 7,861,448 98,654 --
---------------------------
6,054,182 1,939,436
---------------------------
CONTRACTS TO SELL
Australian Dollar (AUD) 1/10/07 12,810AUD 10,108,690 -- 446,000
British Pound Sterling (GBP) 2/7/07-3/27/07 3,860GBP 7,559,737 2,958 195,511
Canadian Dollar (CAD) 1/10/07-2/20/07 14,875CAD 12,759,874 567,357 --
Chinese Renminbi (Yuan) (CNY) 1/22/07 62,200CNY 7,997,060 -- 7,985
Czech Koruna (CZK) 1/22/07-12/21/07 261,460CZK 12,694,491 18,963 79,355
Euro (EUR) 2/7/07-5/21/07 18,640EUR 24,672,007 -- 326,868
Hong Kong Dollar (HKD) 12/19/07-12/21/07 77,690HKD 10,111,363 359 2,041
Indian Rupee (INR) 1/2/07 1,085INR 24,521 -- 154
Japanese Yen (JPY) 1/10/07-2/28/07 3,841,000JPY 32,452,086 616,853 --
New Taiwan Dollar (TWD) 1/4/07 242,000TWD 7,430,390 33,447 --
Swedish Krone (SEK) 1/10/07 41,250SEK 6,029,591 17,257 16,403
Swiss Franc (CHF) 1/22/07-12/21/07 19,150CHF 15,883,156 22,801 58,940
---------------------------
1,279,995 1,133,257
---------------------------
Total unrealized appreciation and depreciation $ 7,334,177 $ 3,072,693
===========================
- --------------------------------------------------------------------------------
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.
47 | OPPENHEIMER STRATEGIC BOND FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. FUTURES CONTRACTS Continued
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 at 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, 2006, the Fund had outstanding futures contracts as follows:
UNREALIZED
EXPIRATION NUMBER OF VALUATION AS OF APPRECIATION
CONTRACT DESCRIPTION DATES CONTRACTS DECEMBER 31, 2006 (DEPRECIATION)
- -------------------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
Amsterdam Exchange Index 1/19/07 15 $ 1,966,801 $ 51,296
Canada (Government of) Bonds, 10 yr. 3/21/07 50 4,880,161 (47,502)
DAX Index 3/16/07 33 7,244,819 127,132
Euro-Bundesobligation, 10 yr. 3/8/07 119 18,226,612 (442,375)
Euro-Schatz 3/8/07 454 62,006,613 (357,782)
Japan (Government of) Bonds, 10 yr. 3/9/07 6 6,758,540 (34,857)
Japan (Government of) Mini Bonds, 10 yr. 3/8/07 24 2,700,996 (17,818)
Nikkei 225 Index 3/8/07 5 725,600 32,592
OMXS30 Index 1/26/07 254 4,279,742 26,755
Standard & Poor's/MIB Index, 10 yr. 3/16/07 7 1,929,147 24,102
U.S. Long Bonds 3/21/07 1,354 150,886,375 (2,625,603)
U.S. Treasury Nts., 2 yr. 3/30/07 489 99,771,281 (561,823)
U.S. Treasury Nts., 10 yr. 3/21/07 712 76,517,750 (821,102)
United Kingdom Long Gilt 3/28/07 73 15,455,309 (185,242)
--------------
(4,832,227)
--------------
CONTRACTS TO SELL
Australia (Commonwealth of) Bonds, 10 yr. 3/15/07 28 2,230,837 40,922
CAC-40 10 Index 1/19/07 44 3,224,711 (63,701)
DAX Index 3/16/07 18 3,951,719 (69,363)
Euro-Bundesobligation 3/8/07 19 2,729,298 20,135
Euro-Bundesobligation, 10 yr. 3/8/07 28 4,288,615 75,210
FTSE 100 Index 3/16/07 59 7,180,780 (37,001)
FTSE/JSE Top 40 Index (The) 3/15/07 65 2,121,299 (58,522)
NASDAQ 100 Index E-Mini 3/16/07 187 6,638,500 4,299
Nikkei 225 Index 3/8/07 91 13,205,916 (760,428)
Standard & Poor's 500 E-Mini 3/16/07 517 36,924,140 (41,396)
U.S. Long Bonds 3/21/07 271 30,199,563 356,914
U.S. Treasury Nts., 2 yr. 3/30/07 381 77,735,906 185,882
U.S. Treasury Nts., 5 yr. 3/30/07 1,135 119,245,938 908,700
U.S. Treasury Nts., 10 yr. 3/21/07 764 82,106,125 1,101,608
--------------
1,663,259
--------------
$ (3,168,968)
==============
48 | OPPENHEIMER STRATEGIC BOND 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 or put options are noted
in the Statement of Investments where applicable. Contracts subject to call or
put, 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, 2006 was as follows:
CALL OPTIONS PUT OPTIONS
-------------------------- -----------------------------
NUMBER OF AMOUNT OF NUMBER OF AMOUNT OF
CONTRACTS PREMIUMS CONTRACTS PREMIUMS
- ---------------------------------------------------------------------------------------------------------
Options outstanding as of December 31, 2005 -- $ -- -- $ --
Options written 4,135,000 30,050 6,786,815,000 424,933
Options closed or expired (4,135,000) (30,050) (6,761,135,000) (171,729)
----------------------------------------------------------
Options outstanding as of December 31, 2006 -- $ -- 25,680,000 $ 253,204
==========================================================
- --------------------------------------------------------------------------------
8. CREDIT DEFAULT SWAP CONTRACTS
Credit default swaps are designed to transfer the credit exposure of fixed
income products between counterparties. The Fund may enter into credit default
swaps, both directly ("unfunded swaps") and indirectly in the form of a swap
embedded within a structured note ("funded swaps"), to protect against the risk
that a security will default. Unfunded and funded credit default swaps may be on
a single security, or a basket of securities. The Fund may take a short position
(purchaser of credit protection) or a long position (seller of credit
protection) in the credit default swap. Risks of credit default swaps include,
but are not limited to, the cost of paying for credit protection if there are no
credit events, pricing transparency when assessing the cost of a credit default
swap, counterparty risk, and the need to fund the delivery obligation (either
cash or defaulted bonds depending on whether the Fund is long or short the swap,
respectively).
The Fund would take a short position in a credit default swap (the
"unfunded swap") against a long portfolio position to decrease exposure to
specific high yield issuers. As a purchaser of credit protection under a 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 and is included on the
Statement of Operations. Credit default swaps are marked to market daily using
different sources,
49 | OPPENHEIMER STRATEGIC BOND FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8. CREDIT DEFAULT SWAP CONTRACTS Continued
including quotations from counterparties, pricing services, brokers or market
makers. The unrealized appreciation (depreciation) related to the change in the
valuation of the notional amount of the swap is combined with the amount due to
(owed by) the Fund at termination or settlement and disclosed separately on the
Statement of Assets and Liabilities. The net change in this amount is included
on the Statement of Operations.
Information regarding such credit default swaps as of December 31, 2006 is as
follows:
NOTIONAL
AMOUNT ANNUAL
RECEIVED BY INTEREST
THE FUND UPON RATE PAID TERMINATION UNREALIZED
COUNTERPARTY REFERENCED DEBT OBLIGATION CREDIT EVENT BY THE FUND DATES DEPRECIATION
- ----------------------------------------------------------------------------------------------------------------
Citigroup Global
Markets Holdings, Inc.:
Republic of Hungary $ 2,300,000 0.40% 12/20/15 $ 7,246
Republic of Ukraine 365,000 1.08 11/20/09 1,521
- ----------------------------------------------------------------------------------------------------------------
Deutsche Bank AG:
Ford Motor Co. 2,035,000 3.05 12/20/08 12,353
Ford Motor Co. 2,545,000 3.30 12/20/08 47,272
Ford Motor Co. 1,650,000 3.65 12/20/08 43,064
General Motors Corp. 2,035,000 2.03 12/20/08 9,215
General Motors Corp. 1,650,000 2.55 12/20/08 26,263
Republic of Peru 1,900,000 1.71 12/20/16 40,350
Republic of Philippines 2,000,000 3.69 9/20/15 243,978
- ----------------------------------------------------------------------------------------------------------------
Goldman Sachs Capital
Markets LP General Motors Corp. 1,650,000 2.70 12/20/08 31,001
- ----------------------------------------------------------------------------------------------------------------
JPMorgan Chase Bank:
Ford Motor Co. 1,650,000 3.60 12/20/08 35,688
Russian Federation 730,000 2.40 10/9/13 81,164
- ----------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital
Services, Inc.:
Ford Motor Co. 1,650,000 3.70 12/20/08 49,109
General Motors Corp. 1,650,000 2.70 12/20/08 32,752
General Motors Corp. 2,545,000 2.35 12/20/08 17,988
Republic of Colombia 1,080,000 3.70 8/20/15 157,321
Republic of Indonesia 1,600,000 1.68 3/20/11 46,465
Republic of Venezuela 1,480,000 2.20 5/20/10 67,038
Republic of Venezuela 1,885,000 3.48 11/20/15 199,073
-------------
$ 1,148,861
=============
The Fund would take a long position in the credit default swap note (the
"funded swap") to increase the exposure to specific high yield corporate
issuers. As a seller of credit protection under a 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 and is included on the Statement of Operations. Credit default
swaps are marked to market daily using different sources, including quotations
from counterparties, pricing services, brokers or market makers. The unrealized
appreciation (depreciation) related to the change in the valuation of the
notional amount of the swap is combined with the amount due to (owed by) the
Fund at termination or settlement and disclosed separately on the Statement of
Assets and Liabilities. The net change in this amount is included on the
Statement of Operations.
50 | OPPENHEIMER STRATEGIC BOND FUND/VA
Information regarding such credit default swaps as of December 31, 2006 is as
follows:
NOTIONAL
AMOUNT ANNUAL
PAID BY INTEREST UNREALIZED
THE FUND UPON RATE RECEIVED TERMINATION APPRECIATION
COUNTERPARTY REFERENCED DEBT OBLIGATION CREDIT EVENT BY THE FUND DATES (DEPRECIATION)
- --------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG:
Ford Motor Co. $ 2,540,000 5.80% 12/20/16 $ 14,181
Ford Motor Co. 3,180,000 5.85 12/20/16 29,227
Ford Motor Co. 2,065,000 6.00 12/20/16 38,322
General Motors Corp. 2,035,000 4.68 12/20/16 7,935
General Motors Corp. 1,650,000 4.75 12/20/16 24,137
- --------------------------------------------------------------------------------------------------------------------
Goldman Sachs
Capital Markets LP General Motors Corp. 1,650,000 4.95 12/20/16 40,188
- --------------------------------------------------------------------------------------------------------------------
JPMorgan Chase Bank:
Ford Motor Co. 2,065,000 6.00 12/20/16 34,443
General Motors Corp. 2,545,000 4.75 12/20/16 19,880
Republic of Ukraine 336,000 1.92 8/20/11 8,594
- --------------------------------------------------------------------------------------------------------------------
Morgan Stanley
Capital Services, Inc.:
Ford Motor Co. 2,065,000 6.15 12/20/16 36,864
General Motors Corp. 1,650,000 4.90 12/20/16 53,699
Istanbul Bond Co. SA for
Finansbank 5,180,000 1.30 3/24/13 (34,083)
Republic of Indonesia 1,600,000 1.67 6/20/11 43,948
Republic of Turkey 1,145,000 2.75 11/20/16 30,314
- --------------------------------------------------------------------------------------------------------------------
UBS AG Republic of Indonesia 375,000 2.30 9/20/11 19,471
-----------
$ 367,120
===========
- --------------------------------------------------------------------------------
9.INTEREST RATE SWAP CONTRACTS
An interest rate swap is an agreement under which a set of future cash flows is
exchanged between two counterparties. Interest rate swaps involve the exchange
of rights to receive or commitments to pay interest. One cash flow stream will
typically be a floating rate payment based upon a specified index while the
other is typically a fixed rate. Payments under the swap are based on an agreed
upon principal amount but since this principal amount is not exchanged, it
represents neither an asset nor a liability to either counterparty, and is
referred to as notional. Interest rate swaps are marked to market daily using
different sources, including quotations from counterparties, pricing services,
brokers or market makers. The unrealized appreciation (depreciation) related to
the change in the valuation of the notional amount of the swap is combined with
the amount due to (owed by) the Fund at termination or settlement and disclosed
separately on the Statement of Assets and Liabilities. The net change in this
amount is included on the Statement of Operations. The Fund also records any
periodic payments received from (paid to) the counterparty, including at
termination, under such contracts as realized gain (loss) on the Statement of
Operations.
Swap agreements entail both interest rate risk and credit risk. There is a
risk, based on movements of interest rates in the future, the payments made by
the Fund under a swap agreement will be greater than the payments it received.
Credit risk arises from the possibility that the counterparty will default. If
the counterparty defaults, the Fund's loss will consist of the net amount of
contractual interest payments that the Fund has not yet received. The Manager
will monitor the creditworthiness of counterparties to the Fund's interest rate
swap transactions on an ongoing basis.
51 | OPPENHEIMER STRATEGIC BOND FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9. INTEREST RATE SWAP CONTRACTS Continued
As of December 31, 2006, the Fund had entered into the following interest rate
swap agreements:
UNREALIZED
NOTIONAL PAID BY RECEIVED BY TERMINATION APPRECIATION
SWAP COUNTERPARTY AMOUNT THE FUND THE FUND DATES (DEPRECIATION)
- ------------------------------------------------------------------------------------------------------------------------
Barclays Bank plc 41,700,000 MXN MXN TIIE 9.27% 7/17/26 $ 418,109
- ------------------------------------------------------------------------------------------------------------------------
Citigroup Global
Markets Holdings, Inc.:
1,260,000 PLZ Six-Month WIBO 5.52 3/24/10 21,262
2,016,000 PLZ Six-Month WIBO 5.55 3/25/10 34,485
73,200,000 TWD 2.320% TWD-telerate 6/27/11 (30,415)
- ------------------------------------------------------------------------------------------------------------------------
Credit Suisse First
Boston International 9,530,000 MXN 28-Day MXN TIIE 10.00 7/9/15 124,690
- ------------------------------------------------------------------------------------------------------------------------
Credit Suisse First
Boston, Inc. (Nassau Branch) 3,640,000 PLZ Six-Month WIBO 4.48 7/1/10 (17,143)
- ------------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG 360,000,000 HUF 8.440 Six-Month 7/4/11 (453)
BUBOR
- ------------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG, 5 yr. 73,400,000 INR 7.175 INR MIBOR-OIS
Compound 6/27/11 19,265
- ------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Capital Markets LP: MXN-TIIE
Floating
9,700,000 MXN Index Rate 9.33 9/16/26 115,658
8,790,000 BRR BZDI 12.92 1/2/14 65,962
8,740,000 BRR BZDI 12.67 1/4/10 23,736
2,630,000 BRR BZDI 12.84 1/2/14 17,006
4,390,000 BRR BZDI 12.87 1/2/14 30,109
8,750,000 BRR BZDI 12.71 1/4/10 26,937
5,710,000 BRR BZDI 12.73 1/2/14 28,736
26,250,000 BRR BZDI 12.61 1/4/10 57,469
7,990,000 MXN MXN TIIE 10.29 6/4/15 117,945
19,400,000 BRR BZDI 12.39 1/2/12 10,753
9,160,000 MXN MXN TIIE 10.22 1/30/15 129,367
21,000,000 BRR BZDI 14.55 1/4/10 653,404
6,355,197 BRR BZDI 17.18 1/2/08 188,784
4,710,000 MXN MXN TIIE 10.00 6/24/15 61,991
7,875,000 MXN MXN TIIE 10.43 5/29/15 122,952
7,875,000 MXN MXN TIIE 10.30 6/1/15 116,766
- ------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The):
22,300,000 MXN MXN TIIE 9.15 8/27/26 229,471
6,090,000 MXN MXN TIIE 9.41 8/31/20 71,220
4,100,000 MXN MXN TIIE 10.85 3/5/15 72,966
9,100,000 MXN MXN TIIE 10.70 5/8/15 155,324
18,300,000 MXN MXN TIIE 9.51 8/26/25 248,561
12,220,000 MXN MXN TIIE 9.50 8/28/25 164,818
25,560,000 BRR BZDI 14.89 1/4/10 579,970
33,400,000 MXN MXN TIIE 9.29 7/17/26 385,609
4,420,000 BRR BZDI 14.05 1/2/12 87,022
37,300,000 MXN MXN TIIE 8.70 2/5/16 208,010
23,010,000 MXN MXN TIIE 9.84 12/31/09 144,979
52 | OPPENHEIMER STRATEGIC BOND FUND/VA
UNREALIZED
NOTIONAL PAID BY RECEIVED BY TERMINATION APPRECIATION
SWAP COUNTERPARTY AMOUNT THE FUND THE FUND DATES (DEPRECIATION)
- -------------------------------------------------------------------------------------------------------------------------
JPMorgan Chase Bank:
Three-Month
39,520,000 ZAR 8.290% JIBA 6/23/08 $ 59,495
19,400,000 BRR BZDI 12.38% 1/2/12 6,165
8,750,000 BRR BZDI 13.91 1/2/12 156,451
Three-Month
82,000,000 LIBOR 5.57 5/26/16 2,524,435
9,700,000 MXN MXN TIIE 9.76 8/17/15 112,124
- -------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Special Financing, Inc.:
4,680,000 PLZ Six-Month WIBO 4.53 7/5/10 (19,474)
9,440,000 MXN 28-Day MXN TIIE 9.99 7/9/15 121,736
- -------------------------------------------------------------------------------------------------------------------------
Santander Central Hispano 4,420,000 BRR BZDI 14.00 1/3/12 82,131
---------------
$ 7,728,388
===============
Notional amount is reported in U.S. Dollars, except for those denoted in the
following currencies:
BRR Brazilian Real
HUF Hungarian Forint
INR Indian Rupee
MXN Mexican Nuevo Peso
PLZ Polish Zloty
TWD New Taiwan Dollar
ZAR South African Rand
Index abbreviations are as follows:
BUBOR Budapest Interbank Offered Rate
BZDI Brazil Interbank Deposit Rate
JIBA South Africa Johannesburg Interbank Agreed Rate
LIBOR London-Interbank Offered Rate
MXN TIIE Mexican Peso-Interbank Equilibrium Interest Rate
MIBOR-OIS Mid Market Interest Rate for French Franc/Austrian Schilling and
India Swap Composites-Overnight Indexed Swap
WIBO Poland Warsaw Interbank Offer Bid Rate
- --------------------------------------------------------------------------------
10. TOTAL RETURN SWAP CONTRACTS
A total return swap is an agreement under which a set of future cash flows is
exchanged between two counterparties. One cash flow stream will typically be
based on a reference interest rate or index and the other on the total return of
a reference asset such as a security, a basket of securities, or an index. The
total return includes appreciation or depreciation on the reference asset, plus
any interest or dividend payments. Payments under the swap are based on an
agreed upon principal amount but since this principal amount is not exchanged,
it represents neither an asset nor a liability to either counterparty, and is
referred to as notional. Total return swaps are marked to market daily using
different sources, including quotations from counterparties, pricing services,
brokers or market makers. The unrealized appreciation (depreciation) related to
the change in the valuation of the notional amount of the swap is combined with
the amount due to (owed by) the Fund at termination or settlement and disclosed
separately on the Statement of Assets and Liabilities. The net change in this
amount is included on the Statement of Operations. The Fund also records any
periodic payments received from (paid to) the counterparty, including at
termination, under such contracts as realized gain (loss) on the Statement of
Operations. The primary risks associated with total return swaps are credit
risks (if the counterparty fails to meet its obligations) and market risk (if
there is no liquid market for the agreement or unfavorable changes occur in the
reference asset).
53 | OPPENHEIMER STRATEGIC BOND FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10. TOTAL RETURN SWAP CONTRACTS Continued
As of December 31, 2006, the Fund had entered into the following total return
swap agreements:
UNREALIZED
NOTIONAL PAID BY RECEIVED BY TERMINATION APPRECIATION
SWAP COUNTERPARTY AMOUNT/UNITS THE FUND THE FUND DATES (DEPRECIATION)
- -----------------------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG:
$ 930,000 Six-Month LIBOR 5.25% 6/23/15 $ 160,429
1,620,000 Six-Month BBA LIBOR 5.46 5/13/15 334,417
- -----------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The):
920,000 Six-Month BBA LIBOR 5.10 1/14/15 186,412
920,000 Six-Month BBA LIBOR 5.08 1/20/15 204,898
- -----------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs International:
If negative, the absolute If positive, the Total
value of the Total Return Return of the
of the BMU/BOVESPA 2/07 BMU/BOVESPA 2/07
96 Index. Index. 2/14/07 41,064
One-Month BBA LIBOR
USD minus spread plus,
if negative, the absolute If positive, the Total
value of the Total Return Return of a custom
191,315 of a custom equity basket. equity basket. 1/8/08 (339,010)
If positive, the absolute
value of the Total Return If negative, the Total
of the Swiss Market Index Return of the Swiss
26 3/07 Future. Index 3/07 Future. 3/19/07 (27,130)
If negative, the
If positive, the Total absolute value of the
Return of the Total Return
INDF/NSE NIFTY INDF/NSE NIFTY
218 Index 1/07 Future. Index 1/07 Future. 1/25/07 (66,687)
One-Month BBA LIBOR
USD and if negative the If positive the Total
absolute value of the Return of the MSCI
Total Return of the MSCI Daily Total Return
Daily Total Return Net Net Belgium USD
177 Belgium USD Market Index. Market Index. 10/8/07 83,114
One-Month BBA LIBOR USD
minus spread plus,
if negative, the absolute Total Return of a
value of the Total Return custom equity basket
46,046 of custom equity basket. if positive. 1/8/08 (27,885)
- -----------------------------------------------------------------------------------------------------------------------------------
If negative, the absolute
value of the Total Return If positive, the Total
Morgan Stanley & Co. of the KS200 12/06 Return of the KS200
International Ltd. 20 Future. 12/06 Future. 12/15/09 85,598
54 | OPPENHEIMER STRATEGIC BOND FUND/VA
UNREALIZED
NOTIONAL PAID BY RECEIVED BY TERMINATION APPRECIATION
SWAP COUNTERPARTY AMOUNT/UNITS THE FUND THE FUND DATES (DEPRECIATION)
- -----------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley International:
If positive, the Total
One-Month BBA LIBOR Return of a custom
EUR and if negative the basket of securities
absolute value of the Total plus the dividends
Return of a custom basket from the basket of
56,713 of securities. securities. 10/9/07 $ 553,567
One-Month BBA LIBOR If positive, the Total
GBP and if negative Return of a custom
the absolute value basket of securities
of the Total Return plus the dividends
of a custom basket from the basket of
26,724 of securities. securities. 10/9/07 371,193
One-Month BBA LIBOR If positive, the Total
JPY and if negative Return of a custom
the absolute value basket of securities
of the Total Return plus the dividends
of a custom basket from the basket
6,682,225 of securities. of securities. 12/20/07 133,504
-----------
$ 1,693,484
===========
Abbreviations are as follows:
BBA LIBOR British Bankers' Association London-Interbank Offered Rate
BBA LIBOR EUR British Bankers' Association London-Interbank Offered Rate for
Euro
BBA LIBOR GBP British Bankers' Association London-Interbank Offered Rate for
British Pound Sterling
BBA LIBOR JPY British Bankers' Association London-Interbank Offered Rate for
Yen
BBA LIBOR USD British Bankers' Association London-Interbank Offered Rate for
United States Dollar
BMU/BOVESPA Bovespa Index that trades on the Sao Paulo Stock Exchange
INDF/NSE NIFTY Indian National Stock Exchange Nifty Index
KS200 Korean Stock Exchange Capitalization-weighted Index
LIBOR London-Interbank Offered Rate
MSCI Morgan Stanley Capital International
- --------------------------------------------------------------------------------
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, 2006 was as follows:
CALL SWAPTIONS
------------------------------
NOTIONAL AMOUNT OF
AMOUNT PREMIUMS
- ------------------------------------------------------------------------------
Swaptions outstanding as of December 31, 2005 $ 9,000,000 $ 36,900
Swaptions written 18,600,000 20,683
Swaptions closed or expired (27,600,000) (57,583)
------------------------------
Swaptions outstanding as of December 31, 2006 $ -- $ --
==============================
55 | OPPENHEIMER STRATEGIC BOND FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
12. ILLIQUID OR RESTRICTED SECURITIES AND CURRENCY
As of December 31, 2006, 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, 2006 (DEPRECIATION)
- ------------------------------------------------------------------------------------
Prandium, Inc. 3/19/99-9/25/02 $ 284,000 $ 242 $ (283,758)
================================================
CURRENCY
Argentine Peso 9/18/06-12/22/06 $ 346,957 $ 350,631 $ 3,674
================================================
- --------------------------------------------------------------------------------
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
securities, letters of credit 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 each day. If the Fund is
undercollateralized at the close of business due to an increase in market value
of securities on loan, additional collateral is requested from the borrowing
counterparty and is delivered to the Fund on the next business day. Cash
collateral may be invested in approved investments and the Fund bears the risk
of any loss in value of these investments. The Fund retains a portion of the
interest earned from the collateral. 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. 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, 2006, the Fund
had on loan securities valued at $93,806,259, which are included in the
Statement of Assets and Liabilities as "Investments, at value" and, when
applicable, as "Receivable for Investments sold." Cash collateral of $81,629,858
was received for the loans, all of which was subsequently invested in approved
instruments. In addition, collateral of $13,966,433 was also received in the
form of securities.
- --------------------------------------------------------------------------------
14. RECENT ACCOUNTING PRONOUNCEMENTS
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48 ("FIN 48"), ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES.
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with FASB Statement No. 109,
ACCOUNTING FOR INCOME TAXES. FIN 48 requires the evaluation of tax positions
taken in the course of preparing the Fund's tax returns to determine whether it
is "more-likely-than-not" that tax positions taken in the Fund's tax return will
be ultimately sustained. A tax liability and expense must be recorded in respect
of any tax position that, in Management's judgment, will not be fully realized.
FIN 48 is effective for fiscal years beginning after December 15, 2006. As of
December 31, 2006, the Manager has evaluated the implications of FIN 48 and does
not currently anticipate a material impact to the Fund's financial statements.
The Manager will continue to monitor the Fund's tax positions prospectively for
potential future impacts.
56 | OPPENHEIMER STRATEGIC BOND FUND/VA
In September 2006, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 157, FAIR VALUE MEASUREMENTS. This standard establishes a
single authoritative definition of fair value, sets out a framework for
measuring fair value and expands disclosures about fair value measurements. SFAS
No. 157 applies to fair value measurements already required or permitted by
existing standards. SFAS No. 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. As of December 31, 2006, the Manager does not believe the
adoption of SFAS No. 157 will materially impact the financial statement amounts;
however, additional disclosures may be required about the inputs used to develop
the measurements and the effect of certain of the measurements on changes in net
assets for the period.
- --------------------------------------------------------------------------------
15. LITIGATION
A consolidated amended complaint was filed as a putative class action against
the Manager and the Transfer Agent and other defendants (including 51 of the
Oppenheimer funds excluding the Fund) in the U.S. District Court for the
Southern District of New York on January 10, 2005 and was amended on March 4,
2005. The complaint alleged, among other things, that the Manager charged
excessive fees for distribution and other costs, and that by permitting and/or
participating in those actions, the Directors/Trustees and the Officers of the
funds breached their fiduciary duties to fund shareholders under the Investment
Company Act of 1940 and at common law. The plaintiffs sought unspecified
damages, an accounting of all fees paid, and an award of attorneys' fees and
litigation expenses.
In response to the defendants' motions to dismiss the suit, seven of the
eight counts in the complaint, including the claims against certain of the
Oppenheimer funds, as nominal defendants, and against certain present and former
Directors, Trustees and Officers of the funds, and the Distributor, as
defendants, were dismissed with prejudice, by court order dated March 10, 2006,
and the remaining count against the Manager and the Transfer Agent was dismissed
with prejudice by court order dated April 5, 2006. The plaintiffs filed an
appeal of those dismissals on May 11, 2006.
The Manager believes that the allegations contained in the complaint are
without merit and that there are substantial grounds to sustain the district
court's rulings. The Manager also believes that it is premature to render any
opinion as to the likelihood of an outcome unfavorable to it, the funds, the
Directors/Trustees or the Officers on the appeal of the decisions of the
district court, and that no estimate can yet be made with any degree of
certainty as to the amount or range of any potential loss.
57 | 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 (the "Fund"), a series of Oppenheimer
Variable Account Funds, including the statement of investments, as of December
31, 2006, 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 period
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
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 audits included 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, 2006, 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 the
Fund as of December 31, 2006, 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
period then ended, in conformity with accounting principles generally accepted
in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
February 8, 2007
58 | OPPENHEIMER STRATEGIC BOND FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2007, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2006. 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, 2006 which are not designated as capital gain distributions should be
multiplied by 0.39% 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.
59 | OPPENHEIMER STRATEGIC BOND FUND/VA
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
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- --------------------------------------------------------------------------------
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.
60 | OPPENHEIMER STRATEGIC BOND FUND/VA
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
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- --------------------------------------------------------------------------------
Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew the Fund's
investment advisory agreement (the "Agreement"). The Investment Company Act of
1940, as amended, requires that the Board request and evaluate, and that the
Manager provide, such information as may be reasonably necessary to evaluate the
terms of the Agreement. The Board employs an independent consultant to prepare a
report that provides information, including comparative information, that the
Board requests for that purpose. In addition, the Board receives information
throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager and its affiliates, including
an analysis of the cost of providing services, (v) whether economies of scale
are realized as the Fund grows and whether fee levels reflect these economies of
scale for Fund investors and (vi) other benefits to the Manager from its
relationship with the Fund. Outlined below is a summary of the principal
information considered by the Board as well as the Board's conclusions.
The Board was aware that there are alternatives to retaining the Manager.
NATURE, QUALITY AND EXTENT OF SERVICES. The Board considered information
about the nature and extent of the services provided to the Fund and information
regarding the Manager's key personnel who provide such services. The Manager's
duties include providing the Fund with the services of the portfolio manager and
the Manager's investment team, who provide research, analysis and other advisory
services in regard to the Fund's investments; securities trading services;
oversight of third party service providers; monitoring compliance with
applicable Fund policies and procedures and adherence to the Fund's investment
restrictions. The Manager is responsible for providing certain administrative
services to the Fund as well. Those services include providing and supervising
all administrative and clerical personnel who are necessary in order to provide
effective corporate administration for the Fund; compiling and maintaining
records with respect to the Fund's operations; preparing and filing reports
required by the Securities and Exchange Commission; preparing periodic reports
regarding the operations of the Fund for its shareholders; preparing proxy
materials for shareholder meetings; and preparing the registration statements
required by Federal and state securities laws for the sale of the Fund's shares.
The Manager also provides the Fund with office space, facilities and equipment.
The Board also considered the quality of the services provided and the
quality of the Manager's resources that are available to the Fund. The Board
took account of the fact that the Manager has had over 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. In its evaluation of the quality of
the portfolio management services provided, the Board considered the experience
of Arthur Steinmetz and the Manager's International Fixed Income investment team
and analysts. Mr. Steinmetz has been a portfolio manager of the Fund since May
1993. 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.
61 | OPPENHEIMER STRATEGIC BOND 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 investment 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 underlying
variable insurance products. The Board noted that the Fund's one-year,
three-year, five-year and ten-year performance were 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 and other general bond funds underlying variable
insurance products. The Board noted that the Fund's contractual and actual
management fees are higher than its peer group median although its total
expenses are lower than its peer group median.
ECONOMIES OF SCALE. The Board reviewed 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
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 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 Agreement, including the management fee,
in light of all of the surrounding circumstances.
62 | OPPENHEIMER STRATEGIC BOND 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 OF NUMBER OF PORTFOLIOS IN THE FUNDS COMPLEX CURRENTLY OVERSEEN
SERVICE, AGE
INDEPENDENT TRUSTEES THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL, COLORADO
80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER RESIGNATION,
RETIREMENT, DEATH OR REMOVAL.
WILLIAM L. ARMSTRONG, President, Colorado Christian University (since 2006); Chairman of the following private
Chairman of the Board of mortgage banking companies: Cherry Creek Mortgage Company (since 1991), Centennial State
Trustees (since 2003), Mortgage Company (since 1994), and The El Paso Mortgage Company (since 1993); Chairman of
Trustee (since 1999) the following private companies: Ambassador Media Corporation (since 1984) and Broadway
Age: 69 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 37 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: 75 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 37
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: 70 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 37 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: 68 PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price
Waterhouse LLP Global Investment Management Industry Services Group (accounting firm) (July
1994-June 1998). Oversees 37 portfolios in the OppenheimerFunds complex.
JON S. FOSSEL, Director of UNUMProvident (insurance company) (since June 2002); Director of Northwestern
Trustee (since 1993) Energy Corp. (public utility corporation) (since November 2004); Director of P.R.
Age: 65 Pharmaceuticals (October 1999-October 2003); Director of Rocky Mountain Elk Foundation
(non-profit organization) (February 1998-February 2003 and since February 2005); 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 37
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: 66 Manager (until October 1994). Oversees 37 portfolios in the OppenheimerFunds complex.
BEVERLY L. HAMILTON, Trustee of Monterey Institute for International Studies (educational organization) (since
Trustee (since 2002) February 2000); Board Member of Middlebury College (educational organization) (since
Age: 60 December 2005); Director of The California Endowment (philanthropic organization) (since
April 2002); Director (February 2002-2005) and Chairman of Trustees (since 2006) of the
Community Hospital of Monterey Peninsula; Director (October 1991-2005) and Vice Chairman
(since 2006) of American Funds' Emerging Markets Growth Fund, Inc. (mutual fund); President
of ARCO Investment Management Company (February 1991-April 2000); Member of the investment
committees of The Rockefeller Foundation (since 2001) and The University of Michigan
(since 2000); Advisor at Credit
63 | OPPENHEIMER STRATEGIC BOND FUND/VA
TRUSTEES AND OFFICERS Unaudited/Continued
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BEVERLY L. HAMILTON, Suisse First Boston's Sprout venture capital unit (venture capital fund) (1994-January
Continued 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 37 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: 62 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
37 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: 64 Trustee (since 1987) and Chairman (1994-2005) of the Investment Committee 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); and Executive Vice President of Peoples
Heritage Financial Group, Inc. (commercial bank) (January 1999-July 1999). Oversees 39
portfolios in the OppenheimerFunds complex.
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INTERESTED TRUSTEE AND OFFICER THE ADDRESS OF MR. MURPHY IS TWO WORLD 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 (since June 2001) and President (since
Trustee, President and September 2000) of the Manager; President and director or trustee of other Oppenheimer
Principal Executive Officer funds; President and Director of OAC and of Oppenheimer Partnership Holdings, Inc. (holding
(since 2001) company subsidiary of the Manager) (since July 2001); Director of OppenheimerFunds
Age: 57 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 96 portfolios in the OppenheimerFunds complex.
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OTHER OFFICERS OF THE FUND THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. STEINMETZ,
ZACK, GILLESPIE AND MS. BLOOMBERG, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, NEW
YORK, NEW YORK 10281-1008, FOR MESSRS. VANDEHEY, WIXTED, PETERSEN, SZILAGYI AND MS. IVES,
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: 48
64 | OPPENHEIMER STRATEGIC BOND FUND/VA
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
Compliance Officer and Shareholder Services, Inc. (since June 1983); Vice President and Director of Internal
(since 2004) Audit of the Manager (1997-February 2004). An officer of 96 portfolios in the
Age: 56 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 & 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: 47 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 96 portfolios in the OppenheimerFunds complex.
BRIAN S. PETERSEN, Assistant Vice President of the Manager (since August 2002); Manager/Financial Product
Assistant Treasurer Accounting of the Manager (November 1998-July 2002). An officer of 96 portfolios in the
(since 2004) OppenheimerFunds complex.
Age: 36
BRIAN C. SZILAGYI, Assistant Vice President of the Manager (since July 2004); Director of Financial Reporting
Assistant Treasurer and Compliance of First Data Corporation (April 2003-July 2004); Manager of Compliance of
(since 2005) Berger Financial Group LLC (May 2001-March 2003); Director of Mutual Fund Operations at
Age: 36 American Data Services, Inc. (September 2000-May 2001). An officer of 96 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: 58 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 96
portfolios in the OppenheimerFunds complex.
LISA I. BLOOMBERG, Vice President and Associate Counsel of the Manager (since May 2004); First Vice President
Assistant Secretary (April 2001-April 2004), Associate General Counsel (December 2000-April 2004), Corporate
(since 2004) Vice President (May 1999-April 2001) and Assistant General Counsel (May 1999-December 2000)
Age: 39 of UBS Financial Services Inc. (formerly, PaineWebber Incorporated). An officer of 96
portfolios in the OppenheimerFunds complex.
KATHLEEN T. IVES, Vice President (since June 1998) and Senior Counsel and Assistant Secretary (since October
Assistant Secretary 2003) of the Manager; Vice President (since 1999) and Assistant Secretary (since October
(since 2001) 2003) of the Distributor; Assistant Secretary of Centennial Asset Management Corporation
Age: 41 (since October 2003); Vice President and Assistant Secretary of Shareholder Services, Inc.
(since 1999); Assistant Secretary of OppenheimerFunds Legacy Program and Shareholder
Financial Services, Inc. (since December 2001); Assistant Counsel of the Manager (August
1994-October 2003). An officer of 96 portfolios in the OppenheimerFunds complex.
65 | OPPENHEIMER STRATEGIC BOND FUND/VA
TRUSTEES AND OFFICERS Unaudited/Continued
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PHILLIP S. GILLESPIE, Senior Vice President and Deputy General Counsel of the Manager (since September 2004);
Assistant Secretary First Vice President (2000-September 2004), Director (2000-September 2004) and Vice
(since 2004) President (1998-2000) of Merrill Lynch Investment Management. An officer of 96 portfolios
Age: 43 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.
66 | OPPENHEIMER STRATEGIC BOND FUND/VA
OPPENHEIMER BALANCED FUND/VA
FUND PERFORMANCE DISCUSSION
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MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
For the 12-month period under review, Oppenheimer Balanced Fund/VA
underperformed its primary benchmark, the S&P 500 Index, but outperformed its
secondary benchmark, the Lehman Brothers Aggregate Bond Index. In addition, as
this is a blended portfolio, we also measure performance using a 60% stocks/40%
bonds blend of these indices, which returned 11.11% during the period. Overall,
the Fund's returns were supported by the equity component of the Fund, which
returned approximately 18% for the year. The fixed-income component also
performed reasonably well, posting positive returns amidst a period marked by
rising interest rates, a condition that typically challenges the total return of
most bond securities.
For example, in consumer discretionary stocks, holdings like Liberty
Global, Inc., the largest cable systems operator in Europe, Japan and South
America and the third-largest cable operator in the world, benefited strongly
from digital conversion within the industry, and was up measurably for the year.
Similarly, Liberty Media Holding Corp., a media holding company that has large
voting stakes in News Corp., Expedia and QVC, also performed well for the Fund's
portfolio.
Successful stock selection stood out still more prominently in our
healthcare holdings. Healthcare stocks were the worst-performing stocks within
the benchmark this year, yet we derived very strong results from names like
Vanda Pharmaceuticals, Inc. Both of Vanda's primary drugs--an insomnia drug and
a schizophrenia treatment drug--currently appear positioned favorably for strong
demand, and as such, Vanda's stock performed extremely well this period, thereby
adding to our returns. In industrials, our decision to overweight Orbital
Sciences Corp., where we held a large position, benefited our returns
significantly, as Orbital posted very strong operating performance this year. As
a result, its stock rose appreciably.
Stock selection continued to benefit us in a variety of other industry
sectors, including consumer staples. In this area, holdings like Altria Group,
Inc., a tobacco company and our third largest holding at period end, performed
strongly due, in part, to the resolution of outstanding legal issues. In
utilities, our position in AES Corp., an unregulated utilities company,
supported Fund returns markedly, as this stock rose significantly during the
period.
One of our largest holdings in the equity component, Microsoft Corp., has
performed well this year, and in our opinion, is poised to continue this trend.
Microsoft is currently embarking on a new product cycle on the operating-systems
side of its business with its Vista product, and should experience continued
strength in its videogame division through products like X-Box 360, for example.
In other areas, our largest position in financial services stocks, UBS AG, ended
up being one of our top performers after lagging slightly earlier in the year.
Thanks to strong revenue growth, UBS' stock was up measurably for the year, and
as such, was a large contributor to the equity component's returns.
Finally, strength in the U.S. equity markets provided a friendly backdrop
for most of the equity component's holdings. Therefore, the overall macro
environment, in which stocks across the board generally enjoyed gains, helped
support returns for the portfolio's stocks. The sole negative impact to the
equity component's performance was our underexposure to financial services
stocks in general, particularly banks, which performed well in spite of the
pressure of an inverted yield curve.
On the fixed-income side, several factors supported performance and
enabled the bond component to deliver satisfactory, positive returns. To begin,
active management of the bond component's duration, or interest-rate
sensitivity, added to performance. By actively adjusting our exposure to
interest-rate risk opportunistically throughout the fiscal year, we enabled the
bond component to both benefit from fluctuations in rates as well as avoid some
of the losses affiliated with rate volatility.
The most significant contributor to the bond component's returns, however,
was our active management of the Fund's allocation to corporate bonds, or the
credit sector. We began the year modestly overweight in our credit exposure, and
after two very strong months of outperformance by the sector, pared this down to
a meaningful underweight by selling off many of our longer-maturity (30-year)
bonds. This substantially added to returns, not only since we reaped sizable
gains in trimming our position, but also since March and April proved to be very
difficult months for the credit market, particularly long-maturity credits. As
such, we effectively missed a good portion of the losses the sector suffered
during that brief period and gained relative performance. At the same time, our
decision to heavily overweight our exposure to financial services credit,
specifically longer-maturity, banking-related bonds, pushed the
4 | OPPENHEIMER BALANCED FUND/VA
FUND PERFORMANCE DISCUSSION
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bond component's returns higher, as this was the best-performing sector within
the corporate bond market this year. Finally, our decision to significantly
increase our high-yield bond exposure solidly added to both absolute and
relative returns for the period, since high-yield bonds were the best-performing
segment of the fixed-income markets this year.
Our mortgage exposure throughout the year also served us well, boosting
Fund performance in a number of ways. First, mortgage-backed securities (MBS)
enjoyed a very strong year, outperforming Treasuries with like durations by a
substantial margin. As such, our decision to opportunistically overweight
exposure to the sector throughout the year added to Fund returns. MBS benefited
over the course of the year, as did most other spread sectors, from tightening
spreads versus Treasuries. The muted interest-rate movements over the past also
reduced the costs associated with managing the interest-rate exposure of MBS,
therefore investors were able to realize much of the spread advantage MBS
offered versus Treasuries. In addition, this sector also derived support from
the market's lower expectations for future interest-rate volatility. When
investors' expectations regarding future rate volatility decreases, the MBS
market typically benefits, since investors then anticipate lower costs
associated with managing the interest-rate exposure of MBS.
In addition, the MBS market behaved similarly to the corporate market this
year, in that longer maturity MBS (30-year maturity)--which are seen as holding
more volatility risk--outperformed shorter-maturity MBS. Therefore, our decision
to maintain an overweight allocation over the past year to 30-year maturity MBS
definitively added to our returns. Finally, our underweighted allocation to
Government National Mortgage Security Association (GNMA or "Ginnie Mae")
securities, which performed very poorly relative to other areas of the mortgage
market, helped us.
The most significant detractor to the bond component's performance this
year came from our emphasis on higher-coupon MBS. While some of these securities
performed reasonably well for us, lower-coupon MBS, which held more risk,
enjoyed greater return relative to equal-duration Treasuries than did higher
coupon issues; therefore our overweight allocation to the high-coupon sector of
the MBS market had a slightly negative impact on Fund returns.
In general, we maintained a slightly lower risk profile within the equity
component this period in an attempt to mitigate risk and preserve capital.
Nevertheless, successful individual stock selection enabled us to capture the
upside of what proved to be a strong equity market environment. As such, we
believe this approach permits us to strike what we consider an ideal balance in
terms of actively managing the equity component's holdings from a long-term
perspective. We intend to maintain this slightly defensive posture within our
equity holdings, while continuing our rigorous, individual security analysis to
identify strong performers regardless of macro conditions.
Given the prolonged strength in the prices of many oil- and energy-related
stocks, an area where we believe certain names have reached near-peak
valuations, we currently hold a generally cautious outlook on this sector. After
posting significant gains for the portfolio, holdings like Lukoil, in our
opinion, offered limited potential for further price appreciation. Accordingly,
we sold our position in Lukoil, reaping sizable benefits for fiscal-year returns
in doing so. Similarly, we have reduced our position in Orbital Sciences Corp.,
which has been a phenomenal performer for us for more than four years. We sold
much of our position and reaped solid gains. Finally, we intend to maintain an
underweight exposure to both real estate and banking stocks, a posture
appropriate given our generally cautious outlook on both these industry sectors.
On the fixed-income side, we believe we hold a more optimistic outlook on
the U.S. economy than does the market currently, as reflected by, or priced
into, the yield curve. Specifically, we believe the market is extrapolating any
current cyclical weakness in the economy too far out on the horizon to be
consistent with both economic fundamentals as well as historical trends in the
U.S. economy. As such, we intend to maintain a lower-than-market duration, or
interest-rate sensitivity, in the fixed-income component as a way to minimize
the effects of future increases in market interest rates on the portfolio's
assets.
In addition to our interest-rate positioning, we currently maintain a
slightly lower risk profile within the portfolio's exposure to non-Treasury
products. Within our MBS holdings, we have an overweight position in 15-year
maturity MBS relative to 30-year maturity MBS. We feel these 15-year MBS offer
compelling value with the added benefit of being less risky than 30-year MBS. In
addition, we intend to continue our focus on select higher coupon MBS which we
also believe offer compelling value. We feel the market is currently
undervaluing these securities and offering a yield
5 | OPPENHEIMER BALANCED FUND/VA
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
premium based on the market's expectation of higher prepayment risk. Based on
our research, it is our opinion that these MBS present less pre-payment risk
than the market currently compensates investors for. We are optimistic that our
focus on prepayment profiles will enable us to identify attractive yield in the
MBS market plus favorable potential for price appreciation over time.
In our credit exposure, we have significantly increased our overall
allocation to the high-yield sector, while placing a strong emphasis on
shorter-maturity high-yield credits. These credits tend to exhibit fewer, less
significant price fluctuations over time than do longer-term bonds, and will
serve our quest to reduce the portfolio's overall spread risk.
Given the fact that the U.S. equity markets have benefited from record
levels of corporate profit margins, across an overall market that we believe is
currently in the later stages of a bull-market run, we believe a generally
cautious outlook is warranted. However, we intend to remain steadfast in our
approach of investing only in what we call our "highest conviction" ideas--an
approach that has enabled us to outperform significantly despite our somewhat
defensive posture. We believe this balanced strategy best serves the Fund's
mission, and subsequently, its investors. The pursuit of strong ideas based on
strict, bottom-up security analysis, surrounded by an unwavering commitment to
risk management and capital preservation, are what we believe the most important
elements to managing a balanced portfolio of diverse assets, and fundamental to
what helps make Oppenheimer Balanced 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, 2006. 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.
6 | 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 Balanced Lehman Brothers
Fund/VA Aggregate
(Non-Service) S&P 500 Index Bond Index
-------------------- ------------- ---------------
12/31/1996 $10,000 $10,000 $10,000
03/31/1997 $10,003 $10,269 $ 9,944
06/30/1997 $10,915 $12,060 $10,309
09/30/1997 $11,761 $12,963 $10,652
12/31/1997 $11,722 $13,335 $10,965
03/31/1998 $12,531 $15,194 $11,136
06/30/1998 $12,553 $15,698 $11,396
09/30/1998 $11,241 $14,140 $11,878
12/31/1998 $12,502 $17,149 $11,918
03/31/1999 $12,704 $18,003 $11,859
06/30/1999 $13,561 $19,269 $11,755
09/30/1999 $13,113 $18,069 $11,835
12/31/1999 $13,977 $20,756 $11,820
03/31/2000 $14,832 $21,231 $12,081
06/30/2000 $14,913 $20,667 $12,291
09/30/2000 $14,958 $20,467 $12,662
12/31/2000 $14,877 $18,867 $13,194
03/31/2001 $14,753 $16,631 $13,595
06/30/2001 $15,671 $17,604 $13,671
09/30/2001 $13,953 $15,021 $14,302
12/31/2001 $15,207 $16,626 $14,308
03/31/2002 $15,261 $16,672 $14,322
06/30/2002 $14,143 $14,440 $14,851
09/30/2002 $12,766 $11,946 $15,531
12/31/2002 $13,625 $12,953 $15,776
03/31/2003 $13,486 $12,545 $15,995
06/30/2003 $15,175 $14,475 $16,395
09/30/2003 $15,710 $14,858 $16,372
12/31/2003 $17,026 $16,666 $16,423
03/31/2004 $17,416 $16,948 $16,860
06/30/2004 $17,254 $17,240 $16,448
09/30/2004 $17,384 $16,917 $16,974
12/31/2004 $18,745 $18,478 $17,136
03/31/2005 $18,539 $18,082 $17,053
06/30/2005 $19,029 $18,329 $17,567
09/30/2005 $19,600 $18,989 $17,448
12/31/2005 $19,474 $19,385 $17,552
03/31/2006 $19,858 $20,200 $17,438
06/30/2006 $19,357 $19,909 $17,425
09/30/2006 $20,409 $21,036 $18,089
12/31/2006 $21,645 $22,444 $18,313
AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/06
1-Year 11.15% 5-Year 7.32% 10-Year 8.03%
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 Balanced Lehman Brothers
Fund/VA Aggregate
(Service) S&P 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
03/31/2006 $13,096 $12,898 $11,945
06/30/2006 $12,756 $12,712 $11,935
09/30/2006 $13,437 $13,432 $12,390
12/31/2006 $14,248 $14,331 $12,543
AVERAGE ANNUAL TOTAL RETURNS OF SERVICE SHARES OF THE FUND AT 12/31/06
1-Year 10.86% 5-Year N/A Since Inception (5/1/02) 7.88%
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 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, 2006.
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
(7/1/06) (12/31/06) DECEMBER 31, 2006
- --------------------------------------------------------------------------------
Non-Service shares Actual $1,000.00 $1,118.20 $4.07
- --------------------------------------------------------------------------------
Non-Service shares Hypothetical 1,000.00 1,021.37 3.88
- --------------------------------------------------------------------------------
Service shares Actual 1,000.00 1,117.00 5.40
- --------------------------------------------------------------------------------
Service shares Hypothetical 1,000.00 1,020.11 5.16
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,
excluding affiliated fund indirect expenses, based on the 6-month period ended
December 31, 2006 are as follows:
CLASS EXPENSE RATIOS
- ---------------------------------------
Non-Service shares 0.76%
- ---------------------------------------
Service shares 1.01
The expense ratios reflect voluntary waivers or reimbursements of expenses by
the Fund's Manager that can be terminated at any time, without advance notice.
The "Financial Highlights" tables in the Fund's financial statements, included
in this report, also show the gross expense ratios, without such waivers or
reimbursements.
- --------------------------------------------------------------------------------
8 | OPPENHEIMER BALANCED FUND/VA
STATEMENT OF INVESTMENTS December 31, 2006
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
COMMON STOCKS--54.6%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--7.0%
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--1.1%
Hilton Hotels Corp. 44,200 $ 1,542,580
- --------------------------------------------------------------------------------
Starwood Hotels & Resorts
Worldwide, Inc. 36,300 2,268,750
- --------------------------------------------------------------------------------
Wyndham Worldwide Corp. 1 73,420 2,350,908
---------------
6,162,238
- --------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL--1.0%
Liberty Media Holding
Corp.-Interactive, Series A 1 250,550 5,404,364
- --------------------------------------------------------------------------------
MEDIA--4.9%
Liberty Global, Inc., Series A 1 355,108 10,351,398
- --------------------------------------------------------------------------------
Liberty Global, Inc., Series C 1 360,130 10,083,640
- --------------------------------------------------------------------------------
Liberty Media Holding
Corp.-Capital, Series A 1 65,470 6,414,751
---------------
26,849,789
- --------------------------------------------------------------------------------
CONSUMER STAPLES--5.9%
- --------------------------------------------------------------------------------
BEVERAGES--1.3%
Constellation Brands, Inc., Cl. A 1 104,900 3,044,198
- --------------------------------------------------------------------------------
Diageo plc, Sponsored ADR 48,600 3,854,466
---------------
6,898,664
- --------------------------------------------------------------------------------
FOOD PRODUCTS--0.3%
ConAgra Foods, Inc. 71,900 1,941,300
- --------------------------------------------------------------------------------
TOBACCO--4.3%
Altria Group, Inc. 194,700 16,709,154
- --------------------------------------------------------------------------------
Loews Corp./Carolina Group 105,200 6,808,544
---------------
23,517,698
- --------------------------------------------------------------------------------
ENERGY--3.5%
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--0.4%
Halliburton Co. 2 62,000 1,925,100
- --------------------------------------------------------------------------------
OIL & GAS--3.1%
BP plc, ADR 47,400 3,180,540
- --------------------------------------------------------------------------------
Exxon Mobil Corp. 135,800 10,406,354
- --------------------------------------------------------------------------------
Kinder Morgan, Inc. 15,800 1,670,850
- --------------------------------------------------------------------------------
Petroleo Brasileiro SA, Preference 73,000 1,701,568
---------------
16,959,312
- --------------------------------------------------------------------------------
FINANCIALS--9.0%
- --------------------------------------------------------------------------------
CAPITAL MARKETS--2.6%
E*TRADE Financial Corp. 1 126,900 2,845,098
- --------------------------------------------------------------------------------
UBS AG 184,934 11,196,841
---------------
14,041,939
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
COMMERCIAL BANKS--1.4%
Wachovia Corp. 136,415 $ 7,768,834
- --------------------------------------------------------------------------------
CONSUMER FINANCE--1.1%
Capital One Financial Corp. 77,100 5,922,822
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--1.6%
Bank of America Corp. 165,368 8,828,998
- --------------------------------------------------------------------------------
INSURANCE--1.9%
Everest Re Group Ltd. 45,400 4,454,194
- --------------------------------------------------------------------------------
Genworth Financial, Inc., Cl. A 80,000 2,736,800
- --------------------------------------------------------------------------------
Platinum Underwriters Holdings Ltd. 102,200 3,162,068
---------------
10,353,062
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE--0.4%
Freddie Mac 34,000 2,308,600
- --------------------------------------------------------------------------------
HEALTH CARE--6.6%
- --------------------------------------------------------------------------------
BIOTECHNOLOGY--2.7%
Amgen, Inc. 1,3 42,900 2,930,499
- --------------------------------------------------------------------------------
Human Genome Sciences, Inc. 1,2 146,600 1,823,704
- --------------------------------------------------------------------------------
MedImmune, Inc. 1 138,000 4,467,060
- --------------------------------------------------------------------------------
Vanda Pharmaceuticals, Inc. 1 226,800 5,590,620
---------------
14,811,883
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--1.1%
Beckman Coulter, Inc. 55,500 3,318,900
- --------------------------------------------------------------------------------
Boston Scientific Corp. 1 147,900 2,540,922
---------------
5,859,822
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--0.8%
WellPoint, Inc. 1 55,700 4,383,033
- --------------------------------------------------------------------------------
PHARMACEUTICALS--2.0%
Medicines Co. (The) 1,2 70,800 2,245,776
- --------------------------------------------------------------------------------
Novartis AG, ADR 50,700 2,912,208
- --------------------------------------------------------------------------------
Sanofi-Aventis SA, ADR 120,600 5,568,102
---------------
10,726,086
- --------------------------------------------------------------------------------
INDUSTRIALS--5.2%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE--3.1%
Empresa Brasileira de
Aeronautica SA, ADR 2 101,400 4,201,002
- --------------------------------------------------------------------------------
Orbital Sciences Corp. 1 291,764 5,380,128
- --------------------------------------------------------------------------------
Spirit Aerosystems Holdings,
Inc., Cl. A 1 46,060 1,541,628
- --------------------------------------------------------------------------------
United Technologies Corp. 96,900 6,058,188
---------------
17,180,946
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--1.8%
Siemens AG, Sponsored ADR 99,800 9,835,290
9 | OPPENHEIMER BALANCED FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
MACHINERY--0.3%
Navistar International Corp. 1,2 43,400 $ 1,450,862
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--14.0%
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--1.3%
Cisco Systems, Inc. 1,2 163,100 4,457,523
- --------------------------------------------------------------------------------
Juniper Networks, Inc. 1 74,600 1,412,924
- --------------------------------------------------------------------------------
QUALCOMM, Inc. 34,300 1,296,197
---------------
7,166,644
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--1.1%
Hutchinson Technology, Inc. 1,2 89,700 2,114,229
- --------------------------------------------------------------------------------
International Business Machines Corp. 41,300 4,012,295
---------------
6,126,524
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--0.0%
CalAmp Corp. 1 19 160
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--1.0%
eBay, Inc. 1 128,900 3,876,023
- --------------------------------------------------------------------------------
Yahoo!, Inc. 1 53,600 1,368,944
---------------
5,244,967
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--1.0%
Texas Instruments, Inc. 192,500 5,544,000
- --------------------------------------------------------------------------------
SOFTWARE--9.6%
Compuware Corp. 1 384,700 3,204,551
- --------------------------------------------------------------------------------
Microsoft Corp. 628,700 18,772,982
- --------------------------------------------------------------------------------
Novell, Inc. 1 597,500 3,704,500
- --------------------------------------------------------------------------------
Synopsys, Inc. 1 286,300 7,652,799
- --------------------------------------------------------------------------------
Take-Two Interactive Software, Inc. 1,2 1,083,450 19,242,072
---------------
52,576,904
- --------------------------------------------------------------------------------
MATERIALS--1.2%
- --------------------------------------------------------------------------------
CHEMICALS--0.0%
Sterling Chemicals, Inc. 1,4 21 268
- --------------------------------------------------------------------------------
CONSTRUCTION MATERIALS--0.8%
Martin Marietta Materials, Inc. 15,500 1,610,605
- --------------------------------------------------------------------------------
Texas Industries, Inc. 2 23,700 1,522,251
- --------------------------------------------------------------------------------
Vulcan Materials Co. 17,000 1,527,790
---------------
4,660,646
- --------------------------------------------------------------------------------
METALS & MINING--0.4%
Companhia Vale do Rio Doce,
Sponsored ADR 77,400 2,031,750
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--0.0%
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--0.0%
WorldCom, Inc./WorldCom Group 1,4 375,000 --
- --------------------------------------------------------------------------------
XO Holdings, Inc. 1,2 85 366
---------------
366
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
UTILITIES--2.2%
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES--0.8%
Reliant Energy, Inc. 1 297,500 $ 4,227,475
- --------------------------------------------------------------------------------
ENERGY TRADERS--1.4%
AES Corp. (The) 1 355,500 7,835,220
---------------
Total Common Stocks (Cost $225,220,347) 298,545,566
UNITS
- --------------------------------------------------------------------------------
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 2,753
- --------------------------------------------------------------------------------
Sterling Chemicals, Inc. Wts.,
Exp. 12/19/08 1 36 --
- --------------------------------------------------------------------------------
XO Communications, Inc.:
Series A Wts., Exp. 1/16/10 1 171 120
Series B Wts., Exp. 1/16/10 1 128 55
Series C Wts., Exp. 1/16/10 1,4 128 28
---------------
Total Rights, Warrants and
Certificates (Cost $38,932) 2,956
PRINCIPAL
AMOUNT
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--4.1%
- --------------------------------------------------------------------------------
Ace Securities Corp. Home Equity
Loan Trust, Asset-Backed
Pass-Through Certificates, Series
2005-HE7, Cl. A2B, 5.53%, 11/25/35 5 $ 510,000 510,500
- --------------------------------------------------------------------------------
Aesop Funding II LLC, Automobile
Asset-Backed Certificates, Series
2005-1A, Cl. A2, 5.41%, 4/20/08 5 370,000 370,371
- --------------------------------------------------------------------------------
Argent Securities Trust 2004-W8,
Asset-Backed Pass-Through
Certificates, Series 2004-W8, Cl.
A2, 5.83%, 5/25/34 5 1,760,000 1,766,280
- --------------------------------------------------------------------------------
Argent Securities Trust 2006-W5,
Asset-Backed Pass-Through
Certificates, Series 2006-W5, Cl.
A2B, 5.45%, 5/26/36 5 670,000 670,511
- --------------------------------------------------------------------------------
Capital Auto Receivables Asset
Trust 2004-2, Automobile
Asset-Backed Securities, Series
2004-2, Cl. A3, 3.58%, 1/15/09 1,270,000 1,256,270
- --------------------------------------------------------------------------------
Centex Home Equity Loan Trust
2005-D, Asset-Backed Certificates:
Series 2005-D, Cl. AF1,
5.04%, 10/25/35 237,770 236,953
Series 2005-D, Cl. AV2,
5.62%, 10/25/35 5 1,000,000 1,001,006
- --------------------------------------------------------------------------------
Centex Home Equity Loan Trust
2006-A, Asset-Backed Certificates,
Series 2006-A, Cl. AV2, 5.45%, 5/16/36 5 850,000 850,657
10 | OPPENHEIMER BALANCED FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
- --------------------------------------------------------------------------------
Citibank Credit Card Issuance Trust,
Credit Card Receivable Nts., Series
2003-C4, Cl. C4, 5%, 6/10/15 $ 180,000 $ 175,159
- --------------------------------------------------------------------------------
Citigroup Mortgage Loan Trust
2005-WF2, Asset-Backed
Pass-Through Certificates, Series
2005-WF2, Cl. AF2, 4.922%, 8/25/35 5 640,438 635,893
- --------------------------------------------------------------------------------
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 1,138,541
- --------------------------------------------------------------------------------
CWABS Asset-Backed Certificates
Trust 2002-4, Asset-Backed
Certificates, Series 2002-4, Cl. A1,
5.72%, 2/25/33 5 18,836 18,859
- --------------------------------------------------------------------------------
CWABS Asset-Backed Certificates
Trust 2005-16, Asset-Backed
Certificates, Series 2005-16, Cl.
2AF2, 5.382%, 5/25/36 5 360,000 358,807
- --------------------------------------------------------------------------------
CWABS Asset-Backed Certificates
Trust 2005-17, Asset-Backed
Certificates:
Series 2005-17, Cl. 1AF1, 5.55%,
5/25/36 5 408,277 408,739
Series 2005-17, Cl. 1AF2, 5.363%,
5/25/36 5 240,000 239,141
- --------------------------------------------------------------------------------
CWABS Asset-Backed Certificates
Trust 2006-25, Asset-Backed
Certificates, Series 2006-25, Cl.
2A2, 5.44%, 12/25/29 5 480,000 480,336
- --------------------------------------------------------------------------------
First Franklin Mortgage Loan Trust
2005-FF10, Mtg. Pass-Through
Certificates, Series 2005-FF10, Cl.
A3, 5.56%, 11/25/35 5 1,480,000 1,481,467
- --------------------------------------------------------------------------------
First Franklin Mortgage Loan Trust
2006-FF10, Mtg. Pass-Through
Certificates, Series 2006-FF10, Cl.
A3, 5.41%, 7/25/36 5 660,000 660,422
- --------------------------------------------------------------------------------
First Franklin Mortgage Loan Trust
2006-FF5, Mtg. Pass-Through
Certificates, Series 2006-FF5, Cl.
2A1, 5.40%, 5/15/36 5 384,085 384,353
- --------------------------------------------------------------------------------
First Franklin Mortgage Loan Trust
2006-FF9, Mtg. Pass-Through
Certificates, Series 2006-FF9, Cl.
2A2, 5.43%, 7/7/36 5 330,000 330,211
- --------------------------------------------------------------------------------
Ford Credit Auto Owner Trust,
Automobile Loan Pass-Through
Certificates, Series 2005-A, Cl. A3,
3.48%, 11/17/08 505,678 502,844
- --------------------------------------------------------------------------------
GS Auto Loan Trust, Automobile
Loan Asset-Backed Securities, Series
2005-1, Cl. A2, 4.32%, 5/15/08 431,043 430,981
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
- --------------------------------------------------------------------------------
Household Home Equity Loan
Trust, Home Equity Loan
Pass-Through Certificates:
Series 2005-3, Cl. A1, 5.61%, 1/20/35 5 $ 479,417 $ 480,194
Series 2006-4, Cl. A2V, 5.46%,
3/20/36 4,5 180,000 180,000
- --------------------------------------------------------------------------------
Lehman XS Trust, Mtg.
Pass-Through Certificates, Series
2005-2, Cl. 2A1B, 5.18%, 8/25/35 5 568,582 567,337
- --------------------------------------------------------------------------------
MBNA Credit Card Master Note
Trust, Credit Card Receivables,
Series 2003-C7, Cl. C7, 6.70%,
3/15/16 5 1,710,000 1,814,857
- --------------------------------------------------------------------------------
Morgan Stanley ABS Capital I,
Mtg. Pass-Through Certificates,
Series 2005-WMC6, Cl. A2B,
5.61%, 7/25/35 5 430,000 430,827
- --------------------------------------------------------------------------------
Option One Mortgage Loan Trust,
Asset-Backed Certificates, Series
2006-2, Cl. 2A2, 5.45%, 7/1/36 5 1,100,000 1,100,858
- --------------------------------------------------------------------------------
Popular ABS Mortgage
Pass-Through Trust 2004-5, Mtg.
Pass-Through Certificates, Series
2004-5, Cl. AF2, 3.735%, 11/10/34 5 23,090 23,022
- --------------------------------------------------------------------------------
Popular ABS Mortgage
Pass-Through Trust 2005-1, Mtg.
Pass-Through Certificates, Series
2005-1, Cl. AF2, 3.914%, 5/25/35 5 80,597 80,322
- --------------------------------------------------------------------------------
Popular ABS Mortgage
Pass-Through Trust 2005-2, Mtg.
Pass-Through Certificates, Series
2005-2, Cl. AF2, 4.415%, 4/25/35 5 420,000 416,045
- --------------------------------------------------------------------------------
RAMP:
Series 2004-RS7 Trust, Mtg.
Asset-Backed Pass-Through
Certificates, Series 2004-RS7, Cl.
AI32, 4.45%, 7/25/28 514,361 510,775
Series 2006-RS4 Trust, Mtg.
Asset-Backed Pass-Through
Certificates, Series 2006-RS4, Cl.
A1, 5.43%, 7/25/36 5 354,621 354,872
- --------------------------------------------------------------------------------
RASC, Series 2006-KS7 Trust,
Home Equity Mtg. Asset-Backed
Pass-Through Certificates, Series
2006-KS7, Cl. A2, 5.42%, 9/25/36 5 800,000 800,511
- --------------------------------------------------------------------------------
Structured Asset Investment Loan
Trust, Mtg. Pass-Through
Certificates, Series 2006-2, Cl. A1,
5.41%, 4/25/36 5 358,858 359,106
- --------------------------------------------------------------------------------
Structured Asset Securities Corp.,
Mtg. Pass-Through Certificates,
Series 2005-4XS, Cl. 3A1,
5.18%, 3/26/35 841,473 839,423
11 | OPPENHEIMER BALANCED FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
- --------------------------------------------------------------------------------
Wells Fargo Home Equity
Asset-Backed Securities 2006-2
Trust, Home Equity Asset-Backed
Certificates, Series 2006-2, Cl.
A2, 5.59%, 7/25/36 5 $ 660,000 $ 660,422
---------------
Total Asset-Backed Securities
(Cost $22,546,229) 22,526,872
- --------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS--24.7%
- --------------------------------------------------------------------------------
GOVERNMENT AGENCY--21.0%
- --------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED--20.9%
Federal Home Loan Mortgage Corp.:
4.50%, 5/1/19-7/1/19 2,128,279 2,054,145
5%, 12/1/32-8/1/33 3,308,361 3,199,136
5%, 1/1/37 7 574,000 553,910
6.50%, 4/1/18-4/1/34 3,471,519 3,558,460
7%, 5/1/29-11/1/32 1,486,351 1,529,629
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage
Corp., CMO Gtd. Real Estate Mtg.
Investment Conduit Multiclass
Pass-Through Certificates:
Series 2006-11, Cl. PS, 5.06%, 3/25/36 5 401,716 398,971
Series 2043, Cl. ZP, 6.50%, 4/15/28 684,523 699,735
Series 2055, Cl. ZM, 6.50%, 5/15/28 400,925 407,240
Series 2075, Cl. D, 6.50%, 8/15/28 936,505 956,148
Series 2080, Cl. Z, 6.50%, 8/15/28 257,059 261,213
Series 2387, Cl. PD, 6%, 4/15/30 140,156 140,267
Series 2461, Cl. PZ, 6.50%, 6/15/32 696,132 725,324
Series 2500, Cl. FD, 5.85%, 3/15/32 5 125,987 127,268
Series 2526, Cl. FE, 5.75%, 6/15/29 5 179,700 181,682
Series 2551, Cl. FD, 5.75%, 1/15/33 5 139,763 141,109
Series 2583, Cl. KA, 5.50%, 3/15/22 239,805 239,545
Series 3025, Cl. SJ, 5.133%, 8/15/35 5 133,873 134,589
Series 3153, Cl. FJ, 5.73%, 5/15/36 5 399,270 400,954
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage
Corp., Interest-Only Stripped
Mtg.-Backed Security:
Series 176, Cl. IO, 12.035%, 6/1/26 8 255,764 54,607
Series 183, Cl. IO, 8.654%, 4/1/27 8 390,287 86,143
Series 184, Cl. IO, 14.269%, 12/1/26 8 424,978 90,239
Series 192, Cl. IO, 11.884%, 2/1/28 8 115,972 25,674
Series 200, Cl. IO, 10.64%, 1/1/29 8 138,280 29,405
Series 2003-118, Cl. S, 7.949%,
12/25/33 8 1,959,797 242,306
Series 2005-87, Cl. SG, 9.386%,
10/25/35 8 3,083,867 168,812
Series 2130, Cl. SC, (4.254)%, 3/15/29 8 311,540 22,093
Series 2796, Cl. SD, (0.663)%, 7/15/26 8 444,351 32,195
Series 2920, Cl. S, (4.226)%, 1/15/35 8 2,487,135 115,909
Series 3000, Cl. SE, (4.716)%, 7/15/25 8 2,501,259 88,019
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage
Corp., Principal-Only Stripped
Mtg.-Backed Security, Series 176,
Cl. PO, 4.691%, 6/1/26 9 112,560 91,816
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal National Mortgage Assn.:
4.50%, 5/1/18-12/1/20 $ 6,475,199 $ 6,261,326
5%, 12/1/17-11/1/33 13,457,424 13,197,071
5%, 1/1/22-1/1/37 7 14,021,000 13,607,733
5.50%, 3/1/33-11/1/34 9,086,608 8,995,205
5.50%, 1/1/22-1/1/37 7 3,153,000 3,149,277
6%, 8/1/32-11/1/32 6,534,153 6,596,038
6%, 1/1/22-3/1/33 7 11,501,040 11,638,540
6.50%, 6/1/17-10/1/30 6,010,243 6,167,872
7%, 11/1/17-11/1/35 3,269,130 3,371,275
7.50%, 1/1/33 443,183 462,800
8.50%, 7/1/32 19,093 20,560
- --------------------------------------------------------------------------------
Federal National Mortgage Assn.
Grantor Trust, CMO, Trust 2002-T1,
Cl. A2, 7%, 11/25/31 848,359 872,907
- --------------------------------------------------------------------------------
Federal National Mortgage Assn.,
CMO Gtd. Real Estate Mtg.
Investment Conduit Pass-Through
Certificates:
Trust 1998-61, Cl. PL, 6%, 11/25/28 388,430 393,419
Trust 1993-215, Cl. ZQ,
6.50%, 11/25/23 801,016 819,334
Trust 1993-87, Cl. Z, 6.50%, 6/25/23 729,745 750,012
Trust 2001-50, Cl. NE, 6%, 8/25/30 77,768 77,741
Trust 2001-51, Cl. OD, 6.50%, 10/25/31 995,625 1,017,526
Trust 2001-70, Cl. LR, 6%, 9/25/30 138,765 138,794
Trust 2001-72, Cl. NH, 6%, 4/25/30 29,050 29,104
Trust 2001-74, Cl. PD, 6%, 5/25/30 19,497 19,452
Trust 2001-82, Cl. ZA, 6.50%, 1/25/32 361,205 371,574
Trust 2002-77, Cl. WF, 5.75%, 12/18/32 5 205,272 206,831
Trust 2002-9, Cl. PC, 6%, 3/25/17 879,748 891,715
Trust 2003-28, Cl. KG, 5.50%, 4/25/23 1,052,000 1,036,120
Trust 2003-84, Cl. PW, 3%, 6/25/22 771,255 758,092
Trust 2004-101, Cl. BG, 5%, 1/25/20 1,110,000 1,082,707
Trust 2006-24, Cl. DB, 5.50%, 4/25/26 1,000,000 995,551
Trust 2006-44, Cl. OA, 5.50%, 12/25/26 1,660,000 1,664,177
Trust 2006-46, Cl. SW, 4.583%, 6/25/36 5 297,024 288,994
Trust 2006-50, Cl. KS, 4.583%, 6/25/36 5 798,189 771,696
Trust 2006-50, Cl. SA, 4.583%, 6/25/36 5 242,472 234,540
Trust 2006-50, Cl. SK, 4.583%, 6/25/36 5 765,861 740,153
Trust 2006-57, Cl. PA, 5.50%, 8/25/27 2,215,422 2,218,453
Trust 2006-64, Cl. MD, 5.50%, 7/25/36 2,983,000 2,908,382
- --------------------------------------------------------------------------------
Federal National Mortgage Assn.,
Interest-Only Stripped Mtg.-Backed
Security:
Trust 2001-65, Cl. S, 7.004%, 11/25/31 8 1,130,568 108,545
Trust 2001-81, Cl. S, (0.047)%, 1/25/32 8 251,237 23,593
Trust 2002-47, Cl. NS,
(1.251)%, 4/25/32 8 536,602 50,772
Trust 2002-51, Cl. S, (1.134)%, 8/25/32 8 492,728 46,584
Trust 2002-52, Cl. SD, (2.64)%, 9/25/32 8 573,378 46,641
Trust 2002-77, Cl. SH,
0.153%, 12/18/32 8 325,809 30,062
12 | OPPENHEIMER BALANCED FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal National Mortgage Assn.,
Interest-Only Stripped Mtg.-Backed
Security: Continued
Trust 2002-84, Cl. SA, 6.972%,
12/25/32 8 $ 976,034 $ 100,412
Trust 2002-9, Cl. MS, (0.473)%,
3/25/32 8 364,145 35,087
Trust 2003-33, Cl. SP, 9.233%, 5/25/33 8 1,061,700 132,980
Trust 2003-4, Cl. S, 6.753%, 2/25/33 8 626,066 65,751
Trust 2003-46, Cl. IH, 6.736%, 6/25/33 8 3,646,879 746,824
Trust 2004-54, Cl. DS, (6.639)%,
11/25/30 8 479,796 28,741
Trust 2005-19, Cl. SA, (3.159)%,
3/25/35 8 6,556,373 334,895
Trust 2005-40, Cl. SA, (3.22)%,
5/25/35 8 1,404,405 68,735
Trust 2005-6, Cl. SE, (3.646)%,
2/25/35 8 1,760,227 89,699
Trust 2005-71, Cl. SA, 3.302%,
8/25/25 8 1,574,195 91,577
Trust 2006-33, Cl. SP, 11.645%,
5/25/36 8 3,234,090 282,235
Trust 222, Cl. 2, 11.975%, 6/1/23 8 882,409 187,360
Trust 233, Cl. 2, 12.908%, 8/1/23 8 782,327 168,845
Trust 240, Cl. 2, 15.955%, 9/1/23 8 1,391,801 312,248
Trust 252, Cl. 2, 9.293%, 11/1/23 8 663,924 152,895
Trust 273, Cl. 2, 11.97%, 8/1/26 8 188,367 40,146
Trust 319, Cl. 2, 9.936%, 2/1/32 8 243,244 55,958
Trust 321, Cl. 2, 5.259%, 4/1/32 8 2,521,837 579,861
Trust 329, Cl. 2, 8.358%, 1/1/33 8 680,149 157,929
Trust 331, Cl. 9, 8.274%, 2/1/33 8 704,001 171,675
Trust 334, Cl. 17, 16.631%, 2/1/33 8 399,830 92,595
Trust 342, Cl. 2, 9.01%, 9/1/33 8 493,276 112,089
Trust 344, Cl. 2, 4.612%, 12/1/33 8 1,733,236 393,042
Trust 346, Cl. 2, 11.437%, 12/1/33 8 1,271,810 293,869
Trust 362, Cl. 12, 5.435%, 8/1/35 8 1,580,902 333,762
Trust 362, Cl. 13, 5.442%, 8/1/35 8 877,256 185,634
- --------------------------------------------------------------------------------
Federal National Mortgage Assn.,
Principal-Only Stripped Mtg.-Backed
Security, Trust 1993-184, Cl. M,
5.671%, 9/25/23 9 295,674 240,366
---------------
114,272,921
- --------------------------------------------------------------------------------
GNMA/GUARANTEED--0.1%
Government National Mortgage
Assn., 8%, 4/15/23 161,236 170,597
- --------------------------------------------------------------------------------
Government National Mortgage
Assn., Interest-Only Stripped
Mtg.-Backed Security:
Series 2001-21, Cl. SB, (5.039)%,
1/16/27 8 520,547 35,123
Series 2002-15, Cl. SM, (8.305)%,
2/16/32 8 584,597 38,407
Series 2002-76, Cl. SY, (4.851)%,
12/16/26 8 1,214,303 84,888
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
GNMA/GUARANTEED Continued
Government National Mortgage
Assn., Interest-Only Stripped
Mtg.-Backed Security: Continued
Series 2004-11, Cl. SM, (7.941)%,
1/17/30 8 $ 425,124 $ 30,055
---------------
359,070
- --------------------------------------------------------------------------------
NON-AGENCY--3.7%
- --------------------------------------------------------------------------------
COMMERCIAL--3.4%
Banc of America Commercial
Mortgage, Inc., Commercial Mtg.
Pass-Through Certificates, Series
2005-3, Cl. A2, 4.501%, 7/10/43 1,050,000 1,026,202
- --------------------------------------------------------------------------------
Banc of America Funding Corp.,
CMO Pass-Through Certificates,
Series 2004-2, Cl. 2A1, 6.50%, 7/20/32 766,585 777,021
- --------------------------------------------------------------------------------
Banc of America Mortgage
Securities, Inc., CMO Pass-Through
Certificates:
Series 2005-E, Cl. 2A2, 4.975%,
6/25/35 5 62,716 62,611
Series 2004-8, Cl. 5A1, 6.50%, 5/25/32 646,640 652,501
- --------------------------------------------------------------------------------
ChaseFlex Trust 2006-2, Multiclass
Mtg. Pass-Through Certificates,
Series 2006-2, Cl. A1B, 5.607%,
8/25/08 4,5 537,108 537,671
- --------------------------------------------------------------------------------
Citigroup Mortgage Loan Trust
2006-WF1, Asset-Backed
Pass-Through Certificates, Series
2006-WF1, Cl. A2B, 5.536%, 3/1/36 260,000 259,216
- --------------------------------------------------------------------------------
Deutsche Alt-A Securities Mortgage
Loan Trust, Mtg. Pass-Through
Certificates:
Series 2006-AB2, Cl. A7, 5.961%,
6/25/36 1,124,942 1,122,894
Series 2006-AB3, Cl. A7, 6.36%,
4/25/08 326,045 326,137
- --------------------------------------------------------------------------------
GE Capital Commercial Mortgage
Corp., Commercial Mtg.
Obligations, Series 2005-C3, Cl.
A2, 4.853%, 7/10/45 620,000 613,069
- --------------------------------------------------------------------------------
GMAC Commercial Mortgage
Securities, Inc., Commercial Mtg.
Pass-Through Certificates, Series
1997-C1, Cl. A3, 6.869%, 7/15/29 191,928 192,665
- --------------------------------------------------------------------------------
Greenwich Capital Commercial
Funding Corp., Commercial Mtg.
Pass-Through Certificates:
Series 2005-GG3, Cl. A2, 4.305%,
8/10/42 890,000 866,977
Series 2005-GG5, Cl. A2, 5.117%,
4/10/37 680,000 678,007
13 | OPPENHEIMER BALANCED FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
COMMERCIAL Continued
JPMorgan Chase Commercial
Mortgage Securities Corp.,
Commercial Mtg. Pass-Through
Certificates:
Series 2005-LDP2, Cl. A2, 4.575%,
7/15/42 $ 260,000 $ 254,729
Series 2005-LDP4, Cl. A2, 4.79%,
10/15/42 890,000 877,056
- --------------------------------------------------------------------------------
LB-UBS Commercial Mortgage
Trust, Commercial Mtg.
Pass-Through Certificates, Series
2005-C5, Cl. A2, 4.885%, 9/15/30 740,000 733,330
- --------------------------------------------------------------------------------
Mastr Alternative Loan Trust, CMO
Pass-Through Certificates:
Series 2004-9, Cl. A3, 4.70%, 8/25/34 5 1,125,264 1,116,344
Series 2004-6, Cl. 10A1, 6%, 7/25/34 1,034,463 1,029,911
- --------------------------------------------------------------------------------
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 1,058,828
- --------------------------------------------------------------------------------
RALI:
Series 2003-QS1 Trust, Mtg.
Asset-Backed Pass-Through
Certificates, Series 2003-QS1, Cl.
A2, 5.75%, 1/25/33 504,922 502,698
Series 2006-QS5 Trust, Mtg.
Asset-Backed Pass-Through
Certificates, Series 2006-QS5, Cl.
2A2, 6%, 4/25/08 1,309,289 1,306,940
Series 2006-QS13 Trust, Mtg.
Asset-Backed Pass-Through
Certificates, Series 2006-QS13, Cl.
1A8, 6%, 9/25/36 1,231,973 1,230,877
- --------------------------------------------------------------------------------
Residential Asset Securitization
Trust 2006-A9CB, CMO
Pass-Through Certificates, Series
2006-A9CB, Cl. A5, 6%, 9/25/36 1,343,731 1,341,647
- --------------------------------------------------------------------------------
Wachovia Bank Commercial
Mortgage Trust 2005-C17,
Commercial Mtg. Obligations,
Series 2005-C17, Cl. A2, 4.782%,
3/15/42 1,450,000 1,431,033
- --------------------------------------------------------------------------------
Wachovia Bank Commercial
Mortgage Trust 2006-C29,
Commercial Asset-Backed Securities,
Series 2006-C29, Cl. A2, 5.272%,
11/15/48 256,000 255,793
- --------------------------------------------------------------------------------
WAMU Mortgage Pass-Through
Certificates Series 2005-AR5 Trust,
Series 2005-AR5, Cl. A1, 4.673%,
5/25/35 5 371,036 370,264
---------------
18,624,421
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
RESIDENTIAL--0.3%
Countrywide Alternative Loan
Trust, CMO, Series 2005-J1, Cl. 3A1,
6.50%, 8/25/32 $ 1,526,024 $ 1,542,716
---------------
Total Mortgage-Backed Obligations
(Cost $135,674,737) 134,799,128
- --------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--3.4%
- --------------------------------------------------------------------------------
Federal Home Loan Bank Unsec.
Bonds, 3.50%, 11/15/07 650,000 640,615
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage
Corp. Unsec. Nts.:
4.125%, 7/12/10 807,000 787,061
5.25%, 7/18/11 2 870,000 881,294
- --------------------------------------------------------------------------------
Federal National Mortgage
Assn. Unsec. Nts.:
4%, 2/28/07 1,470,000 1,467,328
4.25%, 7/15/07 2,015,000 2,004,603
5%, 10/15/11 2 1,200,000 1,203,925
6%, 5/15/11 2 1,200,000 1,250,676
7.25%, 1/15/10 800,000 851,695
- --------------------------------------------------------------------------------
U.S. Treasury Bonds:
4.50%, 2/15/36 2,10 1,768,000 1,681,812
5.375%, 2/15/31 2 193,000 206,797
8.875%, 8/15/17 2 687,000 919,238
- --------------------------------------------------------------------------------
U.S. Treasury Nts.:
4.375%, 1/31/08 2 565,000 561,447
4.625%, 10/31/11-11/15/16 2 5,665,000 5,643,718
4.875%, 10/31/08 2 684,000 684,535
---------------
Total U.S. Government Obligations
(Cost $18,851,123) 18,784,744
- --------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES--14.8%
- --------------------------------------------------------------------------------
ABN Amro Bank NV (NY Branch),
7.125% Sub. Nts., Series B, 10/15/93 400,000 448,900
- --------------------------------------------------------------------------------
Albertson's, Inc., 8% Sr. Unsec.
Debs., 5/1/31 880,000 897,036
- --------------------------------------------------------------------------------
BAE Systems Holdings, Inc., 5.20%
Nts., 8/15/15 6 1,120,000 1,068,661
- --------------------------------------------------------------------------------
Barclays Bank plc, 6.278% Perpetual
Bonds 11 1,120,000 1,102,158
- --------------------------------------------------------------------------------
Beazer Homes USA, Inc., 6.875%
Sr. Unsec. Nts., 7/15/15 2 595,000 586,075
- --------------------------------------------------------------------------------
British Sky Broadcasting Group
plc, 8.20% Sr. Unsec. Nts., 7/15/09 665,000 708,496
- --------------------------------------------------------------------------------
Bunge Ltd. Finance Corp., 4.375%
Unsec. Nts., 12/15/08 320,000 313,400
- --------------------------------------------------------------------------------
Caesars Entertainment, Inc., 7.50%
Sr. Unsec. Nts., 9/1/09 1,195,000 1,240,766
- --------------------------------------------------------------------------------
CenterPoint Energy, Inc., 7.25%
Sr. Nts., Series B, 9/1/10 1,510,000 1,592,247
- --------------------------------------------------------------------------------
Chancellor Media CCU, 8% Sr.
Unsec. Nts., 11/1/08 845,000 878,883
14 | OPPENHEIMER BALANCED FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued
- --------------------------------------------------------------------------------
CIT Group, Inc., 5.40% Sr.
Nts., 3/7/13 $ 1,070,000 $ 1,063,303
- --------------------------------------------------------------------------------
Citigroup, Inc., 6.125% Sub.
Nts., 8/25/36 445,000 464,993
- --------------------------------------------------------------------------------
Clear Channel Communications,
Inc., 6.25% Nts., 3/15/11 2 710,000 690,614
- --------------------------------------------------------------------------------
Coca-Cola Co. (The), 7.375% Unsec.
Debs., 7/29/93 360,000 443,812
- --------------------------------------------------------------------------------
Comcast Corp., 6.45% Unsec. Nts.,
3/15/37 1,280,000 1,284,938
- --------------------------------------------------------------------------------
D.R. Horton, Inc.:
5.375% Sr. Unsec. Nts., 6/15/12 690,000 668,143
6.125% Nts., 1/15/14 525,000 522,019
- --------------------------------------------------------------------------------
DaimlerChrysler North America
Holding Corp., 7.30% Nts., 1/15/12 1,085,000 1,152,967
- --------------------------------------------------------------------------------
Delhaize America, Inc., 9% Unsub.
Debs., 4/15/31 655,000 780,960
- --------------------------------------------------------------------------------
Duke Energy Field Services Corp.,
6.875% Sr. Unsec. Nts., 2/1/11 760,000 795,397
- --------------------------------------------------------------------------------
Earthgrains Co. (The), 6.50% Nts.,
4/15/09 335,000 340,882
- --------------------------------------------------------------------------------
Eastman Kodak Co., 3.625% Nts.,
Series A, 5/15/08 131,000 126,941
- --------------------------------------------------------------------------------
EchoStar DBS Corp., 5.75% Sr. Unsec.
Nts., 10/1/08 900,000 898,875
- --------------------------------------------------------------------------------
El Paso Corp.:
6.50% Sr. Unsec. Nts., 6/1/08 210,000 212,888
7.625% Sr. Unsec. Nts., 9/1/08 780,000 807,300
- --------------------------------------------------------------------------------
Enbridge Energy Partners LP, 5.95%
Sr. Unsec. Nts., Series B, 6/1/33 275,000 254,706
- --------------------------------------------------------------------------------
Energy Transfer Partners LP:
5.65% Sr. Unsec. Unsub. Nts., 8/1/12 200,000 199,394
6.625% Sr. Nts., 10/15/36 440,000 454,548
- --------------------------------------------------------------------------------
Enterprise Products Operating LP,
7.50% Sr. Unsec. Unsub. Nts., 2/1/11 995,000 1,062,038
- --------------------------------------------------------------------------------
EOP Operating LP, 8.10% Unsec.
Nts., 8/1/10 1,345,000 1,483,162
- --------------------------------------------------------------------------------
Federated Department Stores, Inc.,
6.625% Sr. Unsec. Nts., 9/1/08 760,000 772,660
- --------------------------------------------------------------------------------
FirstEnergy Corp., 7.375% Sr. Unsub.
Nts., Series C, 11/15/31 410,000 468,342
- --------------------------------------------------------------------------------
Ford Motor Credit Co., 9.75% Sr.
Unsec. Nts., 9/15/10 6 2,030,000 2,161,205
- --------------------------------------------------------------------------------
Gap, Inc. (The):
6.90% Nts., 9/15/07 685,000 689,859
9.445% Unsub. Nts., 12/15/08 5 141,000 150,591
- --------------------------------------------------------------------------------
General Motors Acceptance Corp.,
8% Bonds, 11/1/31 930,000 1,070,803
- --------------------------------------------------------------------------------
Goldman Sachs Capital, Inc. (The),
6.345% Sub. Bonds, 2/15/34 1,090,000 1,106,932
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued
- --------------------------------------------------------------------------------
HBOS plc, 6.413% Sub. Perpetual
Bonds, Series A 6,11 $ 1,100,000 $ 1,096,174
- --------------------------------------------------------------------------------
HCA, Inc., 8.75% Sr. Nts., 9/1/10 1,075,000 1,123,375
- --------------------------------------------------------------------------------
Heinz (H.J.) Co., 6.428% Bonds,
12/1/08 6 150,000 152,744
- --------------------------------------------------------------------------------
Hilton Hotels Corp., 8.25% Sr.
Unsec. Nts., 2/15/11 785,000 845,838
- --------------------------------------------------------------------------------
HSBC Finance Capital Trust IX,
5.911% Nts., 11/30/35 5 1,600,000 1,610,672
- --------------------------------------------------------------------------------
Hyatt Equities LLC, 6.875% Nts.,
6/15/07 6 1,045,000 1,049,457
- --------------------------------------------------------------------------------
Hyundai Motor Manufacturing
Alabama LLC, 5.30% Sr. Unsec.
Nts., 12/19/08 6 610,000 606,148
- --------------------------------------------------------------------------------
IPALCO Enterprises, Inc., 8.375%
Sr. Sec. Nts., 11/14/08 5 540,000 562,950
- --------------------------------------------------------------------------------
iStar Financial, Inc., 5.15% Sr.
Unsec. Nts., 3/1/12 1,090,000 1,061,246
- --------------------------------------------------------------------------------
J.C. Penney Co., Inc., 9% Nts., 8/1/12 275,000 314,797
- --------------------------------------------------------------------------------
JPMorgan Chase & Co., 5.15% Sub.
Nts., 10/1/15 1,065,000 1,046,913
- --------------------------------------------------------------------------------
K. Hovnanian Enterprises, Inc.,
6.50% Sr. Nts., 1/15/14 925,000 901,875
- --------------------------------------------------------------------------------
Kaneb Pipe Line Operating
Partnership LP:
5.875% Sr. Unsec. Nts., 6/1/13 175,000 175,744
7.75% Sr. Unsec. Nts., 2/15/12 100,000 109,102
- --------------------------------------------------------------------------------
KB Home, 5.75% Sr. Unsec. Unsub.
Nts., 2/1/14 750,000 693,938
- --------------------------------------------------------------------------------
Kinder Morgan Energy Partners
LP, 7.30% Sr. Unsec. Nts., 8/15/33 975,000 1,060,587
- --------------------------------------------------------------------------------
Kroger Co. (The), 5.50% Unsec.
Unsub. Nts., 2/1/13 1,110,000 1,099,414
- --------------------------------------------------------------------------------
Lennar Corp., 7.625% Sr. Unsec.
Nts., 3/1/09 2 980,000 1,020,753
- --------------------------------------------------------------------------------
Liberty Media Corp., 7.875% Sr.
Nts., 7/15/09 290,000 303,869
- --------------------------------------------------------------------------------
Limited Brands, Inc., 6.125% Sr.
Unsec. Nts., 12/1/12 1,090,000 1,103,285
- --------------------------------------------------------------------------------
Marsh & McLennan Cos., Inc.:
5.875% Sr. Unsec. Bonds, 8/1/33 705,000 644,173
7.125% Sr. Unsec. Nts., 6/15/09 590,000 610,029
- --------------------------------------------------------------------------------
May Department Stores Co., 7.90%
Unsec. Debs., 10/15/07 410,000 416,204
- --------------------------------------------------------------------------------
MBIA, Inc., 5.70% Sr. Unsec. Unsub.
Nts., 12/1/34 1,115,000 1,064,923
- --------------------------------------------------------------------------------
MeadWestvaco Corp., 6.85% Unsec.
Unsub. Nts., 4/1/12 2 1,030,000 1,080,534
- --------------------------------------------------------------------------------
MGM Mirage, Inc., 6% Sr. Sec.
Nts., 10/1/09 1,085,000 1,087,713
15 | OPPENHEIMER BALANCED FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued
- --------------------------------------------------------------------------------
Mission Energy Holding Co.,
13.50% Sr. Sec. Nts., 7/15/08 $ 935,000 $ 1,035,513
- --------------------------------------------------------------------------------
Monongahela Power Co., 7.36%
Unsec. Nts., Series A, 1/15/10 695,000 728,580
- --------------------------------------------------------------------------------
Morgan Stanley, 4.75% Sub.
Nts., 4/1/14 1,120,000 1,072,475
- --------------------------------------------------------------------------------
NCR Corp., 7.125% Sr. Unsec. Unsub.
Nts., 6/15/09 100,000 102,615
- --------------------------------------------------------------------------------
NiSource Finance Corp., 7.875% Sr.
Unsec. Nts., 11/15/10 1,450,000 1,565,639
- --------------------------------------------------------------------------------
ONEOK Partners LP:
7.10% Sr. Unsec. Nts., 3/15/11 150,000 157,839
6.65% Nts., 10/1/36 520,000 533,615
- --------------------------------------------------------------------------------
Pemex Project Funding Master
Trust, 7.875% Unsec. Unsub.
Nts., 2/1/09 1,025,000 1,076,763
- --------------------------------------------------------------------------------
Petroleum Export Ltd. Cayman
SPV, 4.623% Sr. Nts., Cl. A1, 6/15/10 6 1,398,444 1,377,122
- --------------------------------------------------------------------------------
PF Export Receivables Master
Trust, 3.748% Sr. Nts., Series B, 6/1/13 6 338,601 317,565
- --------------------------------------------------------------------------------
Popular North America, Inc., 4.70%
Nts., 6/30/09 1,360,000 1,332,083
- --------------------------------------------------------------------------------
Prudential Holdings LLC, 8.695%
Bonds, Series C, 12/18/23 6 1,095,000 1,342,131
- --------------------------------------------------------------------------------
Prudential Insurance Co. of America,
8.30% Nts., 7/1/25 1,110,000 1,397,201
- --------------------------------------------------------------------------------
PSEG Funding Trust I, 5.381% Nts.,
11/16/07 690,000 688,698
- --------------------------------------------------------------------------------
Pulte Homes, Inc., 4.875% Nts.,
7/15/09 1,075,000 1,059,184
- --------------------------------------------------------------------------------
Qwest Corp., 5.625% Unsec. Nts.,
11/15/08 131,000 131,819
- --------------------------------------------------------------------------------
R&B Falcon Corp., 9.50% Sr. Unsec.
Nts., 12/15/08 500,000 537,603
- --------------------------------------------------------------------------------
R.J. Reynolds Tobacco Holdings,
Inc., 6.50% Unsec. Nts., 6/1/07 30,000 30,190
- --------------------------------------------------------------------------------
Reed Elsevier Capital, Inc., 4.625%
Nts., 6/15/12 480,000 458,996
- --------------------------------------------------------------------------------
Reynolds American, Inc., 6.50% Sr.
Sec. Nts., 6/1/07 665,000 669,218
- --------------------------------------------------------------------------------
Royal Caribbean Cruises Ltd., 7%
Sr. Unsec. Unsub. Nts., 10/15/07 294,000 298,137
- --------------------------------------------------------------------------------
Safeway, Inc., 6.50% Sr. Unsec.
Nts., 3/1/11 1,560,000 1,615,378
- --------------------------------------------------------------------------------
Sara Lee Corp., 2.75% Unsec.
Nts., 6/15/08 450,000 432,538
- --------------------------------------------------------------------------------
Telecom Italia Capital SpA:
4% Sr. Unsec. Nts., 11/15/08 525,000 511,499
4% Unsec. Unsub. Nts., 1/15/10 575,000 549,447
- --------------------------------------------------------------------------------
Telefonos de Mexico SA de CV,
4.50% Nts., 11/19/08 1,085,000 1,070,855
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued
- --------------------------------------------------------------------------------
Telus Corp., 8% Nts., 6/1/11 $ 950,000 $ 1,039,829
- --------------------------------------------------------------------------------
TEPPCO Partners LP:
6.125% Nts., 2/1/13 490,000 490,662
7.625% Sr. Unsec. Nts., 2/15/12 145,000 156,073
- --------------------------------------------------------------------------------
Time Warner Entertainment Co.
LP, 8.375% Sr. Nts., 7/15/33 860,000 1,042,477
- --------------------------------------------------------------------------------
Tribune Co., 5.50% Nts., Series E,
10/6/08 595,000 589,202
- --------------------------------------------------------------------------------
TXU Energy Co., 6.125% Nts.,
3/15/08 755,000 759,971
- --------------------------------------------------------------------------------
Univision Communications, Inc.:
3.50% Sr. Unsec. Nts., 10/15/07 670,000 655,685
3.875% Sr. Unsec. Nts., 10/15/08 315,000 300,564
- --------------------------------------------------------------------------------
Valero Logistics Operations LP,
6.05% Nts., 3/15/13 760,000 766,582
- --------------------------------------------------------------------------------
Vornado Realty LP, 5.625% Sr.
Unsec. Unsub. Nts., 6/15/07 1,175,000 1,174,349
- --------------------------------------------------------------------------------
Westar Energy, Inc., 7.125% Sr.
Unsec. Nts., 8/1/09 890,000 924,366
- --------------------------------------------------------------------------------
Williams Cos., Inc. Credit Linked
Certificate Trust (The), 6.75%
Nts., 4/15/09 4 1,050,000 1,073,625
- --------------------------------------------------------------------------------
Xerox Corp., 9.75% Sr. Unsec.
Nts., 1/15/09 980,000 1,063,300
- --------------------------------------------------------------------------------
Yum! Brands, Inc., 7.70% Sr.
Nts., 7/1/12 750,000 820,805
---------------
Total Non-Convertible Corporate
Bonds and Notes (Cost $79,799,007) 80,757,544
SHARES
- --------------------------------------------------------------------------------
MONEY MARKET FUND--2.9%
- --------------------------------------------------------------------------------
Oppenheimer Institutional Money
Market Fund, Cl. E, 5.25% 12,13
(Cost $15,913,062) 15,913,062 15,913,062
- --------------------------------------------------------------------------------
Total Investments, at Value
(excluding Investments
Purchased with Cash Collateral
from Securities Loaned)
(Cost $498,043,437) 571,329,872
16 | OPPENHEIMER BALANCED FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED--7.5% 14
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--7.1%
Undivided interest of 0.95% in joint repurchase
agreement (Principal Amount/Value
$4,100,000,000, with a maturity value of
$4,102,437,222) with Nomura Securities, 5.35%,
dated 12/29/06, to be repurchased
at $39,072,095 on 1/2/07, collateralized by
U.S. Agency Mortgages, 0.00%-22.12%,
3/15/14-5/1/46, with a value of
$4,182,000,000 $ 39,048,883 $ 39,048,883
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
YANKEE FLOATING CERTIFICATE OF DEPOSIT--0.4%
Natexis Banques Populaires NY,
5.34%, 1/2/07 $ 2,000,000 $ 2,000,000
---------------
Total Investments Purchased with
Cash Collateral from Securities
Loaned (Cost $41,048,883) 41,048,883
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $539,092,320) 112.0% 612,378,755
- --------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (12.0) (65,377,150)
--------------------------------
NET ASSETS 100.0% $ 547,001,605
================================
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
2. Partial or fully-loaned security. See Note 10 of accompanying Notes.
3. 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
- --------------------------------------------------------------------------------
Amgen, Inc. 89 4/23/07 $75 $46,768 $11,125
4. Illiquid security. The aggregate value of illiquid securities as of December
31, 2006 was $1,791,592, which represents 0.33% of the Fund's net assets. See
Note 9 of accompanying Notes.
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 $10,309,748 or 1.88% of the Fund's net
assets as of December 31, 2006.
7. When-issued security or forward commitment to be delivered and settled after
December 31, 2006. See Note 1 of accompanying Notes.
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 $6,664,916 or 1.22% of the Fund's net assets
as of December 31, 2006.
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 $332,182 or 0.06% of the Fund's net assets as of
December 31, 2006.
10. All or a portion of the security is held in collateralized accounts to cover
initial margin requirements on open futures contracts. The aggregate market
value of such securities is $1,236,626. See Note 6 of accompanying Notes.
11. This bond has no contractual maturity date, is not redeemable and
contractually pays an indefinite stream of interest. Rate reported represents
the current interest rate for this variable rate security.
12. Represents ownership of an affiliated fund, at or during the period ended
December 31, 2006. Transactions during the period in which the issuer was an
affiliate are as follows:
SHARES GROSS GROSS SHARES
DECEMBER 31, 2005 ADDITIONS REDUCTIONS DECEMBER 31, 2006
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Institutional Money Market Fund, Cl. E, 5.25%* -- 67,843,655 51,930,593 15,913,062
VALUE DIVIDEND
SEE NOTE 1 INCOME
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Institutional Money Market Fund, Cl. E, 5.25%* $15,913,062 $226,614
* The money market fund and the Fund are affiliated by having the same
investment advisor.
13. Rate shown is the 7-day yield as of December 31, 2006.
14. The security/securities have 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
accompanying Notes.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
17 | OPPENHEIMER BALANCED FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 31, 2006
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
ASSETS
- -----------------------------------------------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments:
Unaffiliated companies (cost $523,179,258) $ 596,465,693
Affiliated companies (cost $15,913,062) 15,913,062
--------------
612,378,755
- -----------------------------------------------------------------------------------------------------------------------
Cash 32,618
- -----------------------------------------------------------------------------------------------------------------------
Unrealized appreciation on swap contracts 234,018
- -----------------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold (including $7,205,196 sold on a when-issued basis or forward commitment) 10,076,306
Interest, dividends and principal paydowns 2,804,922
Futures margins 20,599
Other 22,490
--------------
Total assets 625,569,708
- -----------------------------------------------------------------------------------------------------------------------
LIABILITIES
- -----------------------------------------------------------------------------------------------------------------------
Options written, at value (premiums received $46,768)--see accompanying statement of investments 11,125
- -----------------------------------------------------------------------------------------------------------------------
Return of collateral for securities loaned 41,048,883
- -----------------------------------------------------------------------------------------------------------------------
Unrealized depreciation on swap contracts 209,969
- -----------------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased (including $36,396,850 purchased on a when-issued basis or forward commitment) 36,723,640
Shares of beneficial interest redeemed 411,393
Distribution and service plan fees 67,923
Shareholder communications 48,421
Trustees' compensation 15,880
Transfer and shareholder servicing agent fees 1,725
Other 29,144
--------------
Total liabilities 78,568,103
- -----------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 547,001,605
==============
- -----------------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 30,963
- -----------------------------------------------------------------------------------------------------------------------
Additional paid-in capital 417,345,514
- -----------------------------------------------------------------------------------------------------------------------
Accumulated net investment income 13,444,735
- -----------------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 42,592,233
- -----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets and
liabilities denominated in foreign currencies 73,588,160
--------------
NET ASSETS $ 547,001,605
==============
- -----------------------------------------------------------------------------------------------------------------------
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 $435,638,757 and 24,622,795 shares of beneficial interest outstanding) $ 17.69
- -----------------------------------------------------------------------------------------------------------------------
Service Shares:
Net asset value, redemption price per share and offering price per share
(based on net assets of $111,362,848 and 6,339,774 shares of beneficial interest outstanding) $ 17.57
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
18 | OPPENHEIMER BALANCED FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 31, 2006
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- -----------------------------------------------------------------------------------------------------------------------
Interest $ 13,669,624
- -----------------------------------------------------------------------------------------------------------------------
Dividends:
Unaffiliated companies (net of foreign withholding taxes of $108,963) 3,561,909
Affiliated companies 226,614
- -----------------------------------------------------------------------------------------------------------------------
Portfolio lending fees 198,706
--------------
Total investment income 17,656,853
- -----------------------------------------------------------------------------------------------------------------------
EXPENSES
- -----------------------------------------------------------------------------------------------------------------------
Management fees 4,020,826
- -----------------------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Service shares 249,902
- -----------------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service shares 10,120
Service shares 10,014
- -----------------------------------------------------------------------------------------------------------------------
Shareholder communications:
Non-Service shares 59,572
Service shares 13,386
- -----------------------------------------------------------------------------------------------------------------------
Trustees' compensation 13,760
- -----------------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 10,598
- -----------------------------------------------------------------------------------------------------------------------
Administration service fees 1,500
- -----------------------------------------------------------------------------------------------------------------------
Other 49,536
--------------
Total expenses 4,439,214
Less waivers and reimbursements of expenses (4,303)
--------------
Net expenses 4,434,911
- -----------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 13,221,942
- -----------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- -----------------------------------------------------------------------------------------------------------------------
Net realized gain on:
Investments 47,956,962
Closing and expiration of option contracts written 109,425
Closing and expiration of futures contracts 832,920
Foreign currency transactions 420,870
Swap contracts 122,209
--------------
Net realized gain 49,442,386
- -----------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments (5,140,761)
Translation of assets and liabilities denominated in foreign currencies 182,101
Futures contracts (18,386)
Option contracts (30,516)
Swap contracts 14,078
--------------
Net change in unrealized appreciation (4,993,484)
- -----------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 57,670,844
==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19 | OPPENHEIMER BALANCED FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2006 2005
- -----------------------------------------------------------------------------------------------------------------------
OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------
Net investment income $ 13,221,942 $ 11,621,499
- -----------------------------------------------------------------------------------------------------------------------
Net realized gain 49,442,386 31,133,140
- -----------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (4,993,484) (20,360,340)
-------------------------------
Net increase in net assets resulting from operations 57,670,844 22,394,299
- -----------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Non-Service shares (10,383,550) (9,339,985)
Service shares (1,826,958) (1,047,623)
-------------------------------
(12,210,508) (10,387,608)
- -----------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Non-Service shares (22,826,230) (19,081,318)
Service shares (4,434,656) (2,361,220)
-------------------------------
(27,260,886) (21,442,538)
- -----------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
beneficial interest transactions:
Non-Service shares (81,734,942) (34,790,673)
Service shares 18,628,043 29,195,366
-------------------------------
(63,106,899) (5,595,307)
- -----------------------------------------------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------
Total decrease (44,907,449) (15,031,154)
- -----------------------------------------------------------------------------------------------------------------------
Beginning of period 591,909,054 606,940,208
-------------------------------
End of period (including accumulated net investment income of $13,444,735
and $12,162,267, respectively) $ 547,001,605 $ 591,909,054
===============================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20 | OPPENHEIMER BALANCED FUND/VA
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2006 2005 2004 2003 2002
- -------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 17.07 $ 17.35 $ 15.92 $ 13.16 $ 15.40
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .40 1 .33 1 .26 1 .27 .50
Net realized and unrealized gain (loss) 1.38 .31 1.33 2.90 (2.02)
------------------------------------------------------------------------
Total from investment operations 1.78 .64 1.59 3.17 (1.52)
- -------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.36) (.30) (.16) (.41) (.51)
Distributions from net realized gain (.80) (.62) -- -- (.21)
------------------------------------------------------------------------
Total dividends and/or distributions to shareholders (1.16) (.92) (.16) (.41) (.72)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 17.69 $ 17.07 $ 17.35 $ 15.92 $ 13.16
========================================================================
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 11.15% 3.89% 10.10% 24.96% (10.40)%
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 435,639 $ 503,753 $ 547,290 $ 533,710 $ 458,848
- -------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 456,513 $ 522,754 $ 528,655 $ 475,389 $ 517,516
- -------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 2.42% 1.98% 1.59% 1.82% 3.31%
Total expenses 0.75% 4,5 0.74% 6 0.74% 6 0.76% 6 0.74% 6
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 76% 7 67% 7 68% 7 248% 42%
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. Expenses including indirect expenses from affiliated fund were as follows:
Year Ended December 31, 2006 0.75%
5. Voluntary waiver of affiliated funds management fees less than 0.01%.
6. Reduction to custodian expenses less than 0.01%.
7. The portfolio turnover rate excludes purchase and sale transactions of To Be
Announced (TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
----------------------------------------------------------------------------
Year Ended December 31, 2006 $ 612,825,833 $ 666,549,894
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.
21 | OPPENHEIMER BALANCED FUND/VA
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SERVICE SHARES YEAR ENDED DECEMBER 31, 2006 2005 2004 2003 2002 1
- -------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 16.97 $ 17.26 $ 15.87 $ 13.14 $ 14.51
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .36 2 .29 2 .23 2 .39 .13
Net realized and unrealized gain (loss) 1.37 .31 1.31 2.74 (1.50)
------------------------------------------------------------------------
Total from investment operations 1.73 .60 1.54 3.13 (1.37)
- -------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.33) (.27) (.15) (.40) --
Distributions from net realized gain (.80) (.62) -- -- --
------------------------------------------------------------------------
Total dividends and/or distributions to shareholders (1.13) (.89) (.15) (.40) --
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 17.57 $ 16.97 $ 17.26 $ 15.87 $ 13.14
========================================================================
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 10.86% 3.67% 9.79% 24.69% (9.44)%
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 111,363 $ 88,156 $ 59,650 $ 25,302 $ 2,306
- -------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 100,010 $ 72,977 $ 39,851 $ 9,908 $ 1,037
- -------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 2.17% 1.74% 1.41% 1.37% 3.30%
Total expenses 1.01% 5,6 1.00% 7 1.02% 7 1.01% 7 0.99% 7
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 76% 8 67% 8 68% 8 248% 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. Expenses including indirect expenses from affiliated fund were as follows:
Year Ended December 31, 2006 1.01%
6. Voluntary waiver of affiliated funds management fees less than 0.01%.
7. Reduction to custodian expenses less than 0.01%.
8. The portfolio turnover rate excludes purchase and sale transactions of To Be
Announced (TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
----------------------------------------------------------------------------
Year Ended December 31, 2006 $ 612,825,833 $ 666,549,894
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.
22 | OPPENHEIMER BALANCED FUND/VA
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Balanced Fund/VA (the Fund), is a separate series of Oppenheimer
Variable Account Funds, an open end management investment company registered
under the Investment Company Act of 1940, as amended. The Fund's investment
objective is to seek 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(R) 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, as 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. Options are
valued daily based upon the last sale price on the principal exchange on which
the option is traded. 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. Investments in
open-end registered investment companies (including affiliated funds) are valued
at that fund's net asset value. 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 take place generally at least 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, 2006,
23 | OPPENHEIMER BALANCED FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
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- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
the Fund had purchased $36,396,850 of securities issued on a when-issued basis
or forward commitment and sold $7,205,196 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.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
AFFILIATED FUNDS. The Fund is permitted to invest daily available cash balances
in affiliated money market funds. Each day, the Fund invests the available cash
in Class E shares of Oppenheimer Institutional Money Market Fund ("IMMF") which
seeks current income and stability of principal. IMMF is a registered open-end
management investment company, regulated as a money market fund under the
Investment Company Act of 1940, as amended. The Manager is also the investment
advisor of IMMF. The Fund's investment in IMMF is included in the Statement of
Investments. As a shareholder, the Fund is subject to its proportional share of
IMMF's Class E expenses, including its management fee. The Manager will waive
fees and/or reimburse Fund expenses in an amount equal to the indirect
management fees incurred through the Fund's investment in IMMF.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
INVESTMENTS WITH OFF BALANCE SHEET RISK. The Fund enters into financial
instrument transactions (such as swaps, futures, options and other derivatives)
that may have off-balance sheet market risk. Off-balance sheet market risk
exists when the maximum potential loss on a particular financial instrument is
greater than the value of such financial instrument, as reflected in the Fund's
Statement of Assets and Liabilities.
24 | OPPENHEIMER BALANCED FUND/VA
- --------------------------------------------------------------------------------
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 1,2,3,4 TAX PURPOSES
--------------------------------------------------------------------------
$14,779,244 $41,618,992 $291,587 $73,534,353
1. The Fund had $180 of post-October foreign currency losses which were
deferred.
2. The Fund had $291,407 of straddle losses which were deferred.
3. During the fiscal year ended December 31, 2006, the Fund did not utilize any
capital loss carryforward.
4. During the fiscal year ended December 31, 2005, 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, 2006. Net assets of
the Fund were unaffected by the reclassifications.
INCREASE DECREASE
TO ACCUMULATED TO ACCUMULATED NET
INCREASE NET INVESTMENT REALIZED GAIN
TO PAID-IN CAPITAL INCOME ON INVESTMENTS 5
----------------------------------------------------------------------
$5,842,781 $271,034 $6,113,815
5. $5,842,781, including $5,663,677 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, 2006
and December 31, 2005 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2006 DECEMBER 31, 2005
-----------------------------------------------------------------------
Distributions paid from:
Ordinary income $ 15,967,610 $ 10,387,608
Long-term capital gain 23,503,784 21,442,538
---------------------------------------
Total $ 39,471,394 $ 31,830,146
=======================================
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, 2006 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.
25 | OPPENHEIMER BALANCED FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
Federal tax cost of securities $ 539,128,378
Federal tax cost of other investments (58,285,567)
--------------
Total federal tax cost $ 480,842,811
==============
Gross unrealized appreciation $ 81,639,790
Gross unrealized depreciation (8,105,437)
--------------
Net unrealized appreciation $ 73,534,353
==============
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a compensation
deferral plan for independent trustees that enables trustees to elect to defer
receipt of all or a portion of the annual compensation they are entitled to
receive from the Fund. For purposes of determining the amount owed to the
Trustee under the plan, deferred amounts are treated as though equal dollar
amounts had been invested in shares of the Fund or in other Oppenheimer funds
selected by the Trustee. The Fund purchases shares of the funds selected for
deferral by the Trustee in amounts equal to his or her deemed investment,
resulting in a Fund asset equal to the deferred compensation liability. Such
assets are included as a component of "Other" within the asset section of the
Statement of Assets and Liabilities. Deferral of trustees' fees under the plan
will not affect the net assets of the Fund, and will not materially affect the
Fund's assets, liabilities or net investment income per share. Amounts will be
deferred until distributed in accordance 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, at a rate equal to the
Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line item,
if applicable, represents earnings on cash balances maintained by the Fund
during the period. Such interest expense and other custodian fees may be paid
with these earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Fund's organizational documents provide current and former
trustees and officers with a limited indemnification against liabilities arising
in connection with the performance of their duties to the Fund. In the normal
course of business, the Fund may also enter into contracts that provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would be dependent on future claims that may be made against the
Fund. The risk of material loss from such claims is considered remote.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with 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.
26 | OPPENHEIMER BALANCED 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, 2006 YEAR ENDED DECEMBER 31, 2005
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------
NON-SERVICE SHARES
Sold 714,924 $ 11,819,806 1,776,358 $ 29,867,328
Dividends and/or distributions reinvested 2,069,145 33,209,780 1,726,689 28,421,303
Redeemed (7,669,019) (126,764,528) (5,537,549) (93,079,304)
-------------------------------------------------------------
Net decrease (4,884,950) $ (81,734,942) (2,034,502) $ (34,790,673)
=============================================================
SERVICE SHARES
Sold 1,978,250 $ 32,390,681 1,918,395 $ 32,184,682
Dividends and/or distributions reinvested 392,086 6,261,614 207,983 3,408,843
Redeemed (1,226,866) (20,024,252) (385,436) (6,398,159)
-------------------------------------------------------------
Net increase 1,143,470 $ 18,628,043 1,740,942 $ 29,195,366
=============================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations and money market funds, for the year ended December
31, 2006, were as follows:
PURCHASES SALES
------------------------------------------------------------------
Investment securities $327,098,095 $374,792,936
U.S. government and government
agency obligations 54,372,214 66,701,912
To Be Announced (TBA)
mortgage-related securities 612,825,833 666,549,894
- --------------------------------------------------------------------------------
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 average net assets as shown in the following table:
FEE SCHEDULE
----------------------------------------------------
Up to $200 million 0.75%
Next $200 million 0.72
Next $200 million 0.69
Next $200 million 0.66
Over $800 million 0.60
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the year ended December 31, 2006, the Fund paid
$20,164 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
27 | OPPENHEIMER BALANCED FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
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.
The Manager will waive fees and/or reimburse Fund expenses in an amount
equal to the indirect management fees incurred through the Fund's investment in
IMMF. During the year ended December 31, 2006, the Manager waived $4,303 for
IMMF management fees.
- --------------------------------------------------------------------------------
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, 2006, 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
28 | OPPENHEIMER BALANCED FUND/VA
Operations at 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, 2006, the Fund had outstanding futures contracts as follows:
UNREALIZED
EXPIRATION NUMBER OF VALUATION AS OF APPRECIATION
CONTRACT DESCRIPTION DATES CONTRACTS DECEMBER 31, 2006 (DEPRECIATION)
- --------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
U.S. Long Bonds 3/21/07 160 $ 17,830,000 $ (226,586)
------------
CONTRACTS TO SELL
Euro-Bundesobligation, 10 yr. 3/8/07 59 9,036,724 223,746
U.S. Treasury Nts., 2 yr. 3/30/07 245 49,987,656 121,360
U.S. Treasury Nts., 5 yr. 3/30/07 65 6,829,063 40,101
U.S Treasury Nts., 10 yr. 3/21/07 93 9,994,594 80,373
------------
465,580
------------
$ 238,994
============
- --------------------------------------------------------------------------------
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 or put options are noted
in the Statement of Investments where applicable. Contracts subject to call or
put, 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, 2006 was as follows:
CALL OPTIONS
--------------------------
NUMBER OF AMOUNT OF
CONTRACTS PREMIUMS
---------------------------------------------------------------
Options outstanding as of
December 31, 2005 539 $ 66,159
Options written 549 90,034
Options closed or expired (999) (109,425)
--------------------------
Options outstanding as of
December 31, 2006 89 $ 46,768
==========================
29 | OPPENHEIMER BALANCED FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8. CREDIT DEFAULT SWAP CONTRACTS
Credit default swaps are designed to transfer the credit exposure of fixed
income products between counterparties. The Fund may enter into credit default
swaps, both directly ("unfunded swaps") and indirectly in the form of a swap
embedded within a structured note ("funded swaps"), to protect against the risk
that a security will default. Unfunded and funded credit default swaps may be on
a single security, or a basket of securities. The Fund may take a short position
(purchaser of credit protection) or a long position (seller of credit
protection) in the credit default swap. Risks of credit default swaps include,
but are not limited to, the cost of paying for credit protection if there are no
credit events, pricing transparency when assessing the cost of a credit default
swap, counterparty risk, and the need to fund the delivery obligation (either
cash or defaulted bonds depending on whether the Fund is long or short the swap,
respectively).
The Fund would take a short position in a credit default swap (the
"unfunded swap") against a long portfolio position to decrease exposure to
specific high yield issuers. As a purchaser of credit protection under a 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 and is included on the
Statement of Operations. Credit default swaps are marked to market daily using
different sources, including quotations from counterparties, pricing services,
brokers or market makers. The unrealized appreciation (depreciation) related to
the change in the valuation of the notional amount of the swap is combined with
the amount due to (owed by) the Fund at termination or settlement and disclosed
separately on the Statement of Assets and Liabilities. The net change in this
amount is included on the Statement of Operations.
Information regarding such credit default swaps as of December 31, 2006 is as
follows:
NOTIONAL AMOUNT ANNUAL
RECEIVED BY INTEREST
REFERENCED DEBT THE FUND UPON RATE PAID BY TERMINATION UNREALIZED
COUNTERPARTY OBLIGATION CREDIT EVENT THE FUND DATES DEPRECIATION
- -------------------------------------------------------------------------------------------------------------
Deutsche Bank AG:
CDX.NA.IG.7 $4,700,000 0.400% 12/20/11 $ 13,917
J.C. Penney Co., Inc. 320,000 0.580 3/20/12 539
Weyerhaeuser Co. 1,070,000 0.580 9/20/11 6,991
- -------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital
Services, Inc.:
Arrow Electronics, Inc. 1,070,000 0.790 9/20/11 19,155
Arrow Electronics, Inc. 530,000 0.770 9/20/11 9,037
Belo Corp. 660,000 0.650 6/20/11 4,530
Belo Corp. 365,000 0.670 6/20/11 2,800
Belo Corp. 735,000 0.675 6/20/11 5,787
Ford Motor Co. 525,000 5.300 12/20/08 29,212
Ford Motor Co. 1,100,000 5.400 12/20/08 63,280
General Motors Corp. 545,000 4.000 12/20/08 22,468
General Motors Corp. 535,000 3.950 12/20/08 21,548
International Paper Co. 1,090,000 0.409 12/20/11 3,465
-------------
$ 202,729
=============
The Fund would take a long position in the credit default swap note (the "funded
swap") to increase the exposure to specific high yield corporate issuers. As a
seller of credit protection under a 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
30 | OPPENHEIMER BALANCED FUND/VA
received and the notional amount paid is recorded as realized loss and is
included on the Statement of Operations. Credit default swaps are marked to
market daily using different sources, including quotations from counterparties,
pricing services, brokers or market makers. The unrealized appreciation
(depreciation) related to the change in the valuation of the notional amount of
the swap is combined with the amount due to (owed by) the Fund at termination or
settlement and disclosed separately on the Statement of Assets and Liabilities.
The net change in this amount is included on the Statement of Operations.
Information regarding such credit default swaps as of December 31, 2006 is as
follows:
NOTIONAL AMOUNT ANNUAL
PAID BY THE INTEREST RATE UNREALIZED
REFERENCED DEBT FUND UPON RECEIVED TERMINATION APPRECIATION
COUNTERPARTY OBLIGATION CREDIT EVENT BY THE FUND DATES (DEPRECIATION)
- -------------------------------------------------------------------------------------------------------------
Deutsche Bank AG:
Abitibi-Consolidated Co. of Canada $ 860,000 1.52% 9/20/07 $ 3,547
Allied Waste North America, Inc. 340,000 2.00 9/20/09 9,245
Allied Waste North America, Inc. 530,000 2.00 9/20/09 14,412
Bombardier, Inc. 265,000 0.90 9/20/07 975
Eastman Kodak Co. 735,000 1.00 12/20/08 4,146
General Motors Acceptance Corp. 200,000 2.30 6/20/07 1,960
- -------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital
Services, Inc.:
ArvinMeritor, Inc. 295,000 1.05 9/20/07 885
ArvinMeritor, Inc. 240,000 1.10 9/20/07 811
ArvinMeritor, Inc. 20,000 1.20 9/20/07 83
Bombardier, Inc. 290,000 1.00 9/20/07 1,542
Bombardier, Inc. 295,000 1.05 9/20/07 1,681
Ford Motor Co. 525,000 7.05 12/20/16 30,598
Ford Motor Co. 1,100,000 7.15 12/20/16 69,924
General Motors Corp. 545,000 5.80 12/20/16 42,960
General Motors Corp. 535,000 5.75 12/20/16 40,620
General Motors Acceptance Corp. 730,000 3.15 6/20/07 10,010
Hyundai Motor Manufacturing Alabama LLC 465,000 0.40 6/20/07 619
J.C. Penney Co., Inc. 1,070,000 0.61 6/20/13 (7,240)
-------------
$ 226,778
=============
- --------------------------------------------------------------------------------
9. ILLIQUID SECURITIES
As of December 31, 2006, 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
securities, letters of credit 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 each day. If the Fund is
undercollateralized at the close of business due to an increase in market value
of securities on loan, additional collateral is requested from the borrowing
counterparty and is delivered to the Fund on the next business day. Cash
collateral may be invested in approved investments and the Fund bears the risk
of any loss in value of these investments. The Fund retains a portion of the
interest earned from the collateral. 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
31 | OPPENHEIMER BALANCED FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
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- --------------------------------------------------------------------------------
10. SECURITIES LENDING Continued
or in gaining access to 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,
2006, the Fund had on loan securities valued at $48,104,010, which are included
in the Statement of Assets and Liabilities as "Investments, at value" and, when
applicable, as "Receivable for Investments sold." Cash collateral of $41,048,883
was received for the loans, all of which was received in cash and subsequently
invested in approved investments. In addition, collateral of $8,500,439 was also
received in the form of securities.
- --------------------------------------------------------------------------------
11. RECENT ACCOUNTING PRONOUNCEMENTS
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48 ("FIN 48"), ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES.
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with FASB Statement No. 109,
ACCOUNTING FOR INCOME TAXES. FIN 48 requires the evaluation of tax positions
taken in the course of preparing the Fund's tax returns to determine whether it
is "more-likely-than-not" that tax positions taken in the Fund's tax return will
be ultimately sustained. A tax liability and expense must be recorded in respect
of any tax position that, in Management's judgment, will not be fully realized.
FIN 48 is effective for fiscal years beginning after December 15, 2006. As of
December 31, 2006, the Manager has evaluated the implications of FIN 48 and does
not currently anticipate a material impact to the Fund's financial statements.
The Manager will continue to monitor the Fund's tax positions prospectively for
potential future impacts.
In September 2006, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 157, FAIR VALUE MEASUREMENTS. This standard establishes a
single authoritative definition of fair value, sets out a framework for
measuring fair value and expands disclosures about fair value measurements. SFAS
No. 157 applies to fair value measurements already required or permitted by
existing standards. SFAS No. 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. As of December 31, 2006, the Manager does not believe the
adoption of SFAS No. 157 will materially impact the financial statement amounts;
however, additional disclosures may be required about the inputs used to develop
the measurements and the effect of certain of the measurements on changes in net
assets for the period.
- --------------------------------------------------------------------------------
12. LITIGATION
A consolidated amended complaint was filed as a putative class action against
the Manager and the Transfer Agent and other defendants (including 51 of the
Oppenheimer funds excluding the Fund) in the U.S. District Court for the
Southern District of New York on January 10, 2005 and was amended on March 4,
2005. The complaint alleged, among other things, that the Manager charged
excessive fees for distribution and other costs, and that by permitting and/or
participating in those actions, the Directors/Trustees and the Officers of the
funds breached their fiduciary duties to fund shareholders under the Investment
Company Act of 1940 and at common law. The plaintiffs sought unspecified
damages, an accounting of all fees paid, and an award of attorneys' fees and
litigation expenses.
In response to the defendants' motions to dismiss the suit, seven of the
eight counts in the complaint, including the claims against certain of the
Oppenheimer funds, as nominal defendants, and against certain present and former
Directors, Trustees and Officers of the funds, and the Distributor, as
defendants, were dismissed with prejudice, by court order dated March 10, 2006,
and the remaining count against the Manager and the Transfer Agent was dismissed
with prejudice by court order dated April 5, 2006. The plaintiffs filed an
appeal of those dismissals on May 11, 2006.
The Manager believes that the allegations contained in the complaint are
without merit and that there are substantial grounds to sustain the district
court's rulings. The Manager also believes that it is premature to render any
opinion as to the likelihood of an outcome unfavorable to it, the funds, the
Directors/Trustees or the Officers on the appeal of the decisions of the
district court, 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 BALANCED FUND/VA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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- --------------------------------------------------------------------------------
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 (the "Fund"), a series of Oppenheimer Variable
Account Funds, including the statement of investments, as of December 31, 2006,
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 period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
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 audits included 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, 2006, 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 the
Fund as of December 31, 2006, 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
period then ended, in conformity with accounting principles generally accepted
in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
February 8, 2007
33 | OPPENHEIMER BALANCED FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2007, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2006. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
Capital gain distributions of $0.6896 per share were paid to Non-Service
and Service shareholders, respectively, on March 13, 2006. 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, 2006 which are not designated as capital gain distributions should be
multiplied by 17.21% 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 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.
35 | OPPENHEIMER BALANCED FUND/VA
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew the Fund's
investment advisory agreement (the "Agreement"). The Investment Company Act of
1940, as amended, requires that the Board request and evaluate, and that the
Manager provide, such information as may be reasonably necessary to evaluate the
terms of the Agreement. The Board employs an independent consultant to prepare a
report that provides information, including comparative information, that the
Board requests for that purpose. In addition, the Board receives information
throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager and its affiliates, including
an analysis of the cost of providing services, (v) whether economies of scale
are realized as the Fund grows and whether fee levels reflect these economies of
scale for Fund investors and (vi) other benefits to the Manager from its
relationship with the Fund. Outlined below is a summary of the principal
information considered by the Board as well as the Board's conclusions.
The Board was aware that there are alternatives to retaining the Manager.
NATURE, QUALITY AND EXTENT OF SERVICES. The Board considered information
about the nature and extent of the services provided to the Fund and information
regarding the Manager's key personnel who provide such services. The Manager's
duties include providing the Fund with the services of the portfolio managers
and the Manager's investment team, who provide research, analysis and other
advisory services in regard to the Fund's investments; securities trading
services; oversight of third party service providers; monitoring compliance with
applicable Fund policies and procedures and adherence to the Fund's investment
restrictions. The Manager is responsible for providing certain administrative
services to the Fund as well. Those services include providing and supervising
all administrative and clerical personnel who are necessary in order to provide
effective corporate administration for the Fund; compiling and maintaining
records with respect to the Fund's operations; preparing and filing reports
required by the Securities and Exchange Commission; preparing periodic reports
regarding the operations of the Fund for its shareholders; preparing proxy
materials for shareholder meetings; and preparing the registration statements
required by Federal and state securities laws for the sale of the Fund's shares.
The Manager also provides the Fund with office space, facilities and equipment.
The Board also considered the quality of the services provided and the
quality of the Manager's resources that are available to the Fund. The Board
took account of the fact that the Manager has had over 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. In its evaluation of the quality of
the portfolio management services provided, the Board considered the experience
of Christopher Leavy, Emmanuel Ferreira, Angelo Manioudakis and the Manager's
Value Equity and Core Fixed Income investment teams and analysts. Mr. Leavy has
been a portfolio manager of the Fund since May 2003, and Messrs. Ferreira and
Manioudakis have been portfolio managers of the Fund since January 2003. 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.
36 | OPPENHEIMER BALANCED FUND/VA
INVESTMENT PERFORMANCE OF THE MANAGER AND THE FUND. During the year, the
Manager provided information on the investment 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 mixed-asset target allocation
moderate funds underlying variable insurance products. The Board noted that the
Fund's three-year, five-year and ten-year performance were better than its peer
group median. However its one-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 and other mixed-asset target allocation moderate
funds underlying variable insurance products. The Board noted that the Fund's
contractual and actual management fees are higher than its peer group median.
The Board considered these fees in light of the Fund's strong performance.
ECONOMIES OF SCALE. The Board reviewed 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
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 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 Agreement, including the management fee,
in light of all of the surrounding circumstances.
37 | OPPENHEIMER BALANCED FUND/VA
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER
THE FUND, LENGTH OF SERVICE, TRUSTEESHIPS/DIRECTORSHIPS HELD; NUMBER OF PORTFOLIOS IN THE FUND COMPLEX
AGE 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, President, Colorado Christian University (since 2006); Chairman of the
Chairman of the Board following private mortgage banking companies: Cherry Creek Mortgage Company
of Trustees (since 2003), (since 1991), Centennial State Mortgage Company (since 1994), and The El Paso
Trustee (since 1999) Mortgage Company (since 1993); Chairman of the following private companies:
Age: 69 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 37 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: 75 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 37 portfolios in the OppenheimerFunds complex.
GEORGE C. BOWEN, Assistant Secretary and Director of Centennial Asset Management Corporation
Trustee (since 1999) (December 1991-April 1999); President, Treasurer and Director of Centennial
Age: 70 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 37 portfolios
in the OppenheimerFunds complex.
EDWARD L. CAMERON, Member of The Life Guard of Mount Vernon (George Washington historical site)
Trustee (since 1999) (since June 2000); Director of Genetic ID, Inc. (biotech company) (March
Age: 68 2001-May 2002); Partner at PricewaterhouseCoopers LLP (accounting firm) (July
1974-June 1999); Chairman of Price Waterhouse LLP Global Investment
Management Industry Services Group (accounting firm) (July 1994-June 1998).
Oversees 37 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: 65 Director of P.R. Pharmaceuticals (October 1999-October 2003); Director of
Rocky Mountain Elk Foundation (non-profit organization) (February
1998-February 2003 and since February 2005); 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 37 portfolios in the OppenheimerFunds
complex.
SAM FREEDMAN, Director of Colorado UpLIFT (charitable organization) (since September 1984).
Trustee (since 1996) Mr. Freedman held several positions with the Manager and with subsidiary or
Age: 66 affiliated companies of the Manager (until October 1994). Oversees 37
portfolios in the OppenheimerFunds complex.
38 | OPPENHEIMER BALANCED FUND/VA
BEVERLY L. HAMILTON, Trustee of Monterey Institute for International Studies (educational
Trustee (since 2002) organization) (since February 2000); Board Member of Middlebury College
Age: 60 (educational organization) (since December 2005); Director of The California
Endowment (philanthropic organization) (since April 2002); Director (February
2002-2005) and Chairman of Trustees (since 2006) of the Community Hospital of
Monterey Peninsula; Director (October 1991-2005) and Vice Chairman (since
2006) of American Funds' Emerging Markets Growth Fund, Inc. (mutual fund);
President of ARCO Investment Management Company (February 1991-April 2000);
Member of the investment committees of The Rockefeller Foundation (since
2001) and The University of Michigan (since 2000); Advisor at Credit Suisse
First Boston's Sprout venture capital unit (venture capital fund)
(1994-January 2005); Trustee of MassMutual Institutional Funds (investment
company) (1996-June 2004); Trustee of MML Series Investment Fund (investment
company) (April 1989-June 2004); Member of the investment committee of
Hartford Hospital (2000-2003); and Advisor to Unilever (Holland) pension fund
(2000-2003). Oversees 37 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: 62 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 37 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: 64 company) (since 1996); Trustee (since 1987) and Chairman (1994-2005) of the
Investment Committee 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); and Executive Vice
President of Peoples Heritage Financial Group, Inc. (commercial bank)
(January 1999-July 1999). Oversees 39 portfolios in the OppenheimerFunds
complex.
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INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET,
AND OFFICER 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 ANNUAL 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
Trustee, President and President (since September 2000) of the Manager; President and director or
Principal Executive trustee of other Oppenheimer funds; President and Director of OAC and of
Officer (since 2001) Oppenheimer Partnership Holdings, Inc. (holding company subsidiary of the
Age: 57 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 96 portfolios in the
OppenheimerFunds complex.
39 | OPPENHEIMER BALANCED FUND/VA
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
OTHER OFFICERS OF THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS.
THE FUND LEAVY, FERREIRA, ZACK, GILLESPIE AND MS. BLOOMBERG, TWO WORLD FINANCIAL
CENTER, 225 LIBERTY STREET, NEW YORK, NEW YORK 10281-1008, FOR MESSRS.
VANDEHEY, WIXTED, PETERSEN, SZILAGYI AND MS. IVES, 6803 S. TUCSON WAY,
CENTENNIAL, COLORADO 80112-3924; FOR MESSRS. MANIOUDAKIS, BOMFIM, CAAN, GORD
AND SWANEY, 470 ATLANTIC AVENUE, 11TH FLOOR, BOSTON, MA 02210. 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
Vice President and Portfolio manager of Morgan Stanley Dean Witter Investment Management (1997-September
Manager (since 2003) 2000). An officer of 7 portfolios in the OppenheimerFunds complex.
Age: 35
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 in
Manager (since 2003) the OppenheimerFunds complex.
Age: 39
ANGELO G. MANIOUDAKIS, Senior Vice President of the Manager (since April 2002), of HarbourView Asset
Vice President and Portfolio Management Corporation (since April 2002) and of OFI Institutional Asset
Manager (since 2003) Management, Inc. (since June 2002); Executive Director and portfolio manager
Age: 40 for Miller, Anderson & Sherrerd, a division of Morgan Stanley Investment
Management (August 1993-April 2002). An officer of 17 portfolios in the
OppenheimerFunds complex.
ANTULIO N. BOMFIM, Vice President of the Manager (since October 2003); Senior Economist at the
Vice President and Portfolio Board of Governors of the Federal Reserve System (June 1992-October 2003). A
Manager (since 2006) portfolio manager of 15 portfolios in the OppenheimerFunds complex.
Age: 40
GEOFFREY CAAN, Vice President and Portfolio Manager of the Manager (since August 2003); Vice
Vice President and Portfolio President of ABN AMRO NA, Inc. (June 2002-August 2003); Vice President of
Manager (since 2006) Zurich Scudder Investments (January 1999-June 2002). A portfolio manager of
Age: 37 15 portfolios in the OppenheimerFunds complex.
BENJAMIN J. GORD, Vice President of the Manager (since April 2002), of HarbourView Asset
Vice President and Portfolio Management Corporation (since April 2002) and of OFI Institutional Asset
Manager (since 2006) Management, Inc. (as of June 2002); Executive Director and senior fixed
Age: 44 income analyst at Miller Anderson & Sherrerd, a division of Morgan Stanley
Investment Management (April 1992-March 2002). A portfolio manager of 15
portfolios in the OppenheimerFunds complex.
THOMAS SWANEY, Vice President of the Manager (since April 2006); senior analyst, high grade
Vice President and Portfolio investment team (June 2002-March 2006); senior fixed income analyst at
Manager (since 2006) Miller Anderson & Sherrerd, a division of Morgan Stanley Investment
Age: 34 Management (May 1998-May 2002). A portfolio manager of 15 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., Centennial
Compliance Officer Asset Management Corporation and Shareholder Services, Inc. (since June
(since 2004) 1983); Vice President and Director of Internal Audit of the Manager
Age: 56 (1997-February 2004). An officer of 96 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 & Accounting Shareholder Financial Services, Inc., Shareholder Services, Inc., Oppenheimer
Officer (since 1999) Real Asset Management Corporation, and Oppenheimer Partnership Holdings, Inc.
Age: 47 (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 96 portfolios in the
OppenheimerFunds complex.
40 | OPPENHEIMER BALANCED FUND/VA
BRIAN S. PETERSEN, Assistant Vice President of the Manager (since August 2002);
Assistant Treasurer Manager/Financial Product Accounting of the Manager (November 1998-July
(since 2004) 2002). An officer of 96 portfolios in the OppenheimerFunds complex.
Age: 36
BRIAN C. SZILAGYI, Assistant Vice President of the Manager (since July 2004); Director of
Assistant Treasurer Financial Reporting and Compliance of First Data Corporation (April 2003-July
(since 2005) 2004); Manager of Compliance of Berger Financial Group LLC (May 2001-March
Age: 36 2003); Director of Mutual Fund Operations at American Data Services, Inc.
(September 2000-May 2001). An officer of 96 portfolios in the
OppenheimerFunds complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since
Vice President and March 2002) of the Manager; General Counsel and Director of the Distributor
Secretary (since 2001) (since December 2001); General Counsel of Centennial Asset Management
Age: 58 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 96 portfolios in the OppenheimerFunds
complex.
LISA I. BLOOMBERG, Vice President and Associate Counsel of the Manager (since May 2004); First
Assistant Secretary Vice President (April 2001-April 2004), Associate General Counsel (December
(since 2004) 2000-April 2004), Corporate Vice President (May 1999-April 2001) and
Age: 39 Assistant General Counsel (May 1999-December 2000) of UBS Financial Services
Inc. (formerly, PaineWebber Incorporated). An officer of 96 portfolios in the
OppenheimerFunds complex.
KATHLEEN T. IVES, Vice President (since June 1998) and Senior Counsel and Assistant Secretary
Assistant Secretary (since October 2003) of the Manager; Vice President (since 1999) and
(since 2001) Assistant Secretary (since October 2003) of the Distributor; Assistant
Age: 41 Secretary of Centennial Asset Management Corporation (since October 2003);
Vice President and Assistant Secretary of Shareholder Services, Inc. (since
1999); Assistant Secretary of OppenheimerFunds Legacy Program and Shareholder
Financial Services, Inc. (since December 2001); Assistant Counsel of the
Manager (August 1994-October 2003). An officer of 96 portfolios in the
OppenheimerFunds complex.
PHILLIP S. GILLESPIE, Senior Vice President and Deputy General Counsel of the Manager (since
Assistant Secretary September 2004); First Vice President (2000-September 2004), Director
(since 2004) (2000-September 2004) and Vice President (1998-2000) of Merrill Lynch
Age: 43 Investment Management. An officer of 96 portfolios in the OppenheimerFunds
complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION
ABOUT THE FUND'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT CHARGE, UPON
REQUEST, BY CALLING 1.800.981.2871.
41 | OPPENHEIMER BALANCED FUND/VA
OPPENHEIMER HIGH INCOME FUND/VA
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
For its fiscal year ended December 31, 2006, Oppenheimer High Income Fund/VA
produced modest total returns and trailed its benchmark, the Merrill Lynch High
Yield Master Index, which returned 11.64% over the reporting period. We
attribute the Fund's underperformance against its benchmark to its neutral
position, which limited it from participating in the strong rally seen in the
more speculative areas of the high-yield bond market. In contrast, the Fund
benefited from gains generated by a variety of higher-quality issues across
multiple market sectors.
During the reporting period, given the expectation that spreads were
likely to remain in a relatively narrow range, we maintained the Fund's neutral
position, with an underweighted exposure to the markets' more speculative
issues. This position served the Fund well mid-way into the reporting period
when investors sought out higher-quality issues. However, in terms of the Fund's
full year returns, this generally conservative positioning detracted from
performance as market sentiment tended to favor lower-quality bonds.
Nevertheless, the Fund's focus on security selection enabled it to continue
delivering positive returns without having to take unnecessary risks.
The Fund's exposure to an active leveraged buyout market, in addition to
its exposure in companies where other types of actions taken by management teams
which benefited shareholders at the expense of bondholders, hurt performance.
Top detractors in these areas included Station Casinos, Inc. and wholesale
energy marketer Mirant Americas Generation LLC. Additionally, the Fund's
underweighted position to the airline industry negatively impacted returns. Over
the reporting period, a wave of possible consolidation announcements were made
as airlines struggled to boost profits in the face of soaring jet fuel prices by
eliminating overlapping routes and reducing labor costs. News of these possible
mergers, most notably between US Airways Group, Inc. and Delta Air Lines, Inc.,
boosted the sector's returns.
On the positive side, the Fund benefited from its exposure to an active
mergers-and-acquisitions environment. Performance contributors included the
Fund's exposure to credits issued by Doane Pet Care Co., a holding that
delivered solid returns for the Fund as the company was involved in two
acquisitions. As a result of this activity, the Fund's positions in Doane were
sold at very attractive premiums. The Neiman Marcus Group, Inc., which benefited
from strong same store sales, also aided performance. The Fund's holdings in
United Rentals, Inc. enabled it to participate in the fast growing commercial
real estate market. Additionally, the Fund's overweighted exposure to movie
theater chain operators bolstered returns, as theaters benefited from increased
ticket sales. Top contributors in this area included AMC Entertainment, Inc. and
Carmike Cinemas, Inc. We have since sold our position in Carmike Cinemas.
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, 2006. 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 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.
5 | OPPENHEIMER HIGH INCOME FUND/VA
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
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 GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer High
Income Fund/VA Merrill Lynch High
(Non-Service) Yield Master Index
---------------- ------------------
12/31/1996 $ 10,000 $ 10,000
03/31/1997 $ 10,041 $ 10,105
06/30/1997 $ 10,473 $ 10,584
09/30/1997 $ 11,049 $ 10,999
12/31/1997 $ 11,221 $ 11,283
03/31/1998 $ 11,664 $ 11,597
06/30/1998 $ 11,756 $ 11,791
09/30/1998 $ 10,919 $ 11,369
12/31/1998 $ 11,256 $ 11,696
03/31/1999 $ 11,651 $ 11,822
06/30/1999 $ 11,684 $ 11,902
09/30/1999 $ 11,552 $ 11,753
12/31/1999 $ 11,738 $ 11,880
03/31/2000 $ 11,580 $ 11,665
06/30/2000 $ 11,665 $ 11,739
09/30/2000 $ 11,811 $ 11,898
12/31/2000 $ 11,299 $ 11,429
03/31/2001 $ 11,778 $ 12,139
06/30/2001 $ 11,522 $ 11,985
09/30/2001 $ 10,861 $ 11,501
12/31/2001 $ 11,522 $ 12,139
03/31/2002 $ 11,590 $ 12,376
06/30/2002 $ 11,111 $ 11,616
09/30/2002 $ 10,707 $ 11,249
12/31/2002 $ 11,246 $ 12,000
03/31/2003 $ 11,851 $ 12,828
06/30/2003 $ 12,904 $ 14,068
09/30/2003 $ 13,244 $ 14,424
12/31/2003 $ 13,940 $ 15,267
03/31/2004 $ 14,154 $ 15,608
06/30/2004 $ 14,172 $ 15,470
09/30/2004 $ 14,655 $ 16,188
12/31/2004 $ 15,190 $ 16,910
03/31/2005 $ 14,971 $ 16,667
06/30/2005 $ 15,265 $ 17,116
09/30/2005 $ 15,394 $ 17,271
12/31/2005 $ 15,541 $ 17,389
03/31/2006 $ 15,952 $ 17,885
06/30/2006 $ 15,912 $ 17,912
09/30/2006 $ 16,389 $ 18,632
12/31/2006 $ 17,006 $ 19,413
AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/06
1-Year 9.42% 5-Year 8.10% 10-Year 5.45%
SERVICE SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer High Income Fund/VA (Service)
Merrill Lynch High Yield
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer High
Income Fund/VA Merrill Lynch
(Service) High Yield
---------------- -------------
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
03/31/2006 $ 13,931 $ 15,550
06/30/2006 $ 13,896 $ 15,574
09/30/2006 $ 14,298 $ 16,200
12/31/2006 $ 14,839 $ 16,879
AVERAGE ANNUAL TOTAL RETURNS OF SERVICE SHARES OF THE FUND AT 12/31/06
1-Year 9.23% 5-Year 7.86% Since Inception (9/18/01) 7.75%
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.
6 | OPPENHEIMER HIGH INCOME FUND/VA
FUND EXPENSES
- --------------------------------------------------------------------------------
FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1)
transaction costs, 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, 2006.
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
(7/1/06) (12/31/06) DECEMBER 31, 2006
- --------------------------------------------------------------------------------
Non-Service shares Actual $1,000.00 $1,068.80 $3.81
- --------------------------------------------------------------------------------
Non-Service shares Hypothetical 1,000.00 1,021.53 3.73
- --------------------------------------------------------------------------------
Service shares Actual 1,000.00 1,067.80 5.12
- --------------------------------------------------------------------------------
Service shares Hypothetical 1,000.00 1,020.27 5.00
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,
excluding affiliated fund indirect expenses, based on the 6-month period ended
December 31, 2006 are as follows:
CLASS EXPENSE RATIOS
- ------------------------------------
Non-Service shares 0.73%
- ------------------------------------
Service shares 0.98
The expense ratios reflect voluntary waivers or reimbursements of expenses by
the Fund's Manager that can be terminated at any time, without advance notice.
The "Financial Highlights" tables in the Fund's financial statements, included
in this report, also show the gross expense ratios, without such waivers or
reimbursements.
- --------------------------------------------------------------------------------
7 | OPPENHEIMER HIGH INCOME FUND/VA
STATEMENT OF INVESTMENTS December 31, 2006
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES--89.4%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--31.0%
- --------------------------------------------------------------------------------
AUTO COMPONENTS--1.4%
Collins & Aikman Floorcoverings, Inc.,
9.75% Sr. Sub. Nts., Series B, 2/15/10 $ 800,000 $ 822,000
- --------------------------------------------------------------------------------
Goodyear Tire & Rubber Co. (The):
7.857% Nts., 8/15/11 1,250,000 1,262,500
9% Sr. Unsec. Nts., 7/1/15 445,000 468,363
- --------------------------------------------------------------------------------
Keystone Automotive Operations,
Inc., 9.75% Sr. Unsec. Sub. Nts., 11/1/13 200,000 199,000
- --------------------------------------------------------------------------------
Stoneridge, Inc., 11.50% Sr. Nts., 5/1/12 900,000 931,500
- --------------------------------------------------------------------------------
Tenneco Automotive, Inc., 10.25% Sr.
Sec. Nts., Series B, 7/15/13 900,000 990,000
- --------------------------------------------------------------------------------
United Components, Inc., 9.375% Sr.
Sub. Nts., 6/15/13 400,000 416,000
- --------------------------------------------------------------------------------
Visteon Corp.:
7% Sr. Unsec. Nts., 3/10/14 800,000 704,000
8.25% Sr. Unsec. Nts., 8/1/10 1,800,000 1,764,000
---------------
7,557,363
- --------------------------------------------------------------------------------
AUTOMOBILES--2.9%
Ford Motor Co., 7.45% Bonds,
7/16/31 800,000 632,000
- --------------------------------------------------------------------------------
Ford Motor Credit Co., 7.375% Nts.,
10/28/09 4,500,000 4,512,411
- --------------------------------------------------------------------------------
General Motors Acceptance Corp.:
6.875% Nts., 9/15/11 6,490,000 6,663,406
8% Bonds, 11/1/31 3,210,000 3,695,997
---------------
15,503,814
- --------------------------------------------------------------------------------
DISTRIBUTORS--0.1%
SGS International, Inc., 12% Sr. Unsec.
Sub. Nts., 12/15/13 745,000 778,525
- --------------------------------------------------------------------------------
DIVERSIFIED CONSUMER SERVICES--0.2%
Education Management
LLC/Education Management Corp.,
10.25% Sr. Sub. Nts., 6/1/16 1 830,000 881,875
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--7.0%
American Casino & Entertainment
Properties LLC, 7.85% Sr. Sec. Nts.,
2/1/12 1,300,000 1,334,125
- --------------------------------------------------------------------------------
Aztar Corp., 9% Sr. Unsec. Sub. Nts.,
8/15/11 450,000 472,500
- --------------------------------------------------------------------------------
Boyd Gaming Corp., 8.75% Sr. Sub.
Nts., 4/15/12 1,200,000 1,260,000
- --------------------------------------------------------------------------------
Buffets, Inc., 12.50% Sr. Unsec. Nts.,
11/1/14 1 315,000 318,938
- --------------------------------------------------------------------------------
CCM Merger, Inc., 8% Unsec. Nts.,
8/1/13 1 1,340,000 1,316,550
- --------------------------------------------------------------------------------
Domino's, Inc., 8.25% Sr. Unsec. Sub.
Nts., 7/1/11 875,000 911,094
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE Continued
French Lick Resorts & Casino LLC,
10.75% First Mtg. Nts., 4/15/14 1 $ 1,310,000 $ 1,231,400
- --------------------------------------------------------------------------------
Gaylord Entertainment Co.:
6.75% Sr. Unsec. Unsub. Nts., 11/15/14 500,000 498,750
8% Sr. Nts., 11/15/13 700,000 729,750
- --------------------------------------------------------------------------------
Greektown Holdings, Inc., 10.75% Sr.
Nts., 12/1/13 1 1,435,000 1,506,750
- --------------------------------------------------------------------------------
Isle of Capri Casinos, Inc.:
7% Sr. Unsec. Sub. Nts., 3/1/14 1,150,000 1,150,000
9% Sr. Sub. Nts., 3/15/12 600,000 630,000
- --------------------------------------------------------------------------------
Mandalay Resort Group:
9.375% Sr. Sub. Nts., 2/15/10 41,000 44,075
10.25% Sr. Unsec. Sub. Nts., Series B,
8/1/07 800,000 823,000
- --------------------------------------------------------------------------------
MGM Mirage, Inc.:
6.75% Sr. Unsec. Nts., 4/1/13 510,000 501,075
8.375% Sr. Unsec. Sub. Nts., 2/1/11 3,200,000 3,336,000
9.75% Sr. Unsec. Sub. Nts., 6/1/07 800,000 814,000
- --------------------------------------------------------------------------------
Mohegan Tribal Gaming Authority:
6.125% Sr. Unsec. Sub. Nts., 2/15/13 440,000 438,900
6.375% Sr. Sub. Nts., 7/15/09 800,000 804,000
6.875% Sr. Unsec. Sub. Nts., 2/15/15 915,000 921,863
8% Sr. Sub. Nts., 4/1/12 1,700,000 1,778,625
- --------------------------------------------------------------------------------
NCL Corp., 10.625% Sr. Unsub. Nts.,
7/15/14 800,000 804,000
- --------------------------------------------------------------------------------
Park Place Entertainment Corp.:
7.875% Sr. Sub. Nts., 3/15/10 1,000,000 1,047,500
9.375% Sr. Unsec. Sub. Nts., 2/15/07 1,500,000 1,505,625
- --------------------------------------------------------------------------------
Penn National Gaming, Inc.:
6.75% Sr. Unsec. Sub. Nts., 3/1/15 145,000 142,825
6.875% Sr. Sub. Nts., 12/1/11 150,000 151,875
- --------------------------------------------------------------------------------
Pinnacle Entertainment, Inc., 8.25%
Sr. Unsec. Sub. Nts., 3/15/12 2,350,000 2,385,250
- --------------------------------------------------------------------------------
Pokagon Gaming Authority,
10.375% Sr. Nts., 6/15/14 1 610,000 671,000
- --------------------------------------------------------------------------------
Six Flags, Inc.:
9.625% Sr. Nts., 6/1/14 957,000 892,403
9.75% Sr. Nts., 4/15/13 850,000 802,188
- --------------------------------------------------------------------------------
Station Casinos, Inc.:
6.50% Sr. Unsec. Sub. Nts., 2/1/14 1,800,000 1,608,750
6.875% Sr. Unsec. Sub. Nts., 3/1/16 480,000 433,200
- --------------------------------------------------------------------------------
Trump Entertainment Resorts, Inc.,
8.50% Sec. Nts., 6/1/15 1,500,000 1,500,000
- --------------------------------------------------------------------------------
Universal City Development
Partners Ltd., 11.75% Sr. Nts., 4/1/10 1,000,000 1,076,250
- --------------------------------------------------------------------------------
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 2,500,000 2,496,875
---------------
37,444,636
8 | OPPENHEIMER HIGH INCOME FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES--1.6%
Beazer Homes USA, Inc.:
6.875% Sr. Unsec. Nts., 7/15/15 $ 300,000 $ 295,500
8.375% Sr. Nts., 4/15/12 500,000 516,250
- --------------------------------------------------------------------------------
D.R. Horton, Inc., 9.75% Sr. Sub.
Nts., 9/15/10 300,000 331,277
- --------------------------------------------------------------------------------
K. Hovnanian Enterprises, Inc.:
6.50% Sr. Nts., 1/15/14 300,000 292,500
7.75% Sr. Unsec. Sub. Nts., 5/15/13 900,000 902,250
8.875% Sr. Sub. Nts., 4/1/12 800,000 816,000
- --------------------------------------------------------------------------------
KB Home:
8.625% Sr. Sub. Nts., 12/15/08 150,000 156,602
9.50% Sr. Unsec. Sub. Nts., 2/15/11 350,000 360,938
- --------------------------------------------------------------------------------
Meritage Homes Corp., 6.25% Sr.
Unsec. Nts., 3/15/15 300,000 286,500
- --------------------------------------------------------------------------------
Sealy Mattress Co., 8.25% Sr. Sub.
Nts., 6/15/14 460,000 483,000
- --------------------------------------------------------------------------------
Standard Pacific Corp.:
6.25% Sr. Unsec. Unsub. Nts., 4/1/14 600,000 562,500
7.75% Sr. Nts., 3/15/13 650,000 648,375
9.25% Sr. Sub. Nts., 4/15/12 700,000 719,250
- --------------------------------------------------------------------------------
Toll Corp., 8.25% Sr. Sub. Nts., 12/1/11 500,000 517,500
- --------------------------------------------------------------------------------
WCI Communities, Inc., 9.125% Sr.
Sub. Nts., 5/1/12 800,000 766,000
- --------------------------------------------------------------------------------
William Lyon Homes, Inc., 10.75%
Sr. Nts., 4/1/13 1,150,000 1,101,125
---------------
8,755,567
- --------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS--0.3%
Leslie's Poolmart, Inc., 7.75% Sr. Unsec.
Nts., 2/1/13 1,245,000 1,245,000
- --------------------------------------------------------------------------------
Steinway Musical Instruments, Inc.,
7% Sr. Nts., 3/1/14 1 275,000 270,188
---------------
1,515,188
- --------------------------------------------------------------------------------
MEDIA--15.0%
Adelphia Communications Corp.:
7.875% Sr. Unsec. Nts., 5/1/09 2,9 360,000 326,700
8.125% Sr. Nts., Series B, 7/15/03 2,9 575,000 530,438
8.375% Sr. Nts., Series B, 2/1/08 2,9 1,000,000 922,500
10.25% Sr. Unsec. Sub. Nts., 6/15/11 2,9 1,000,000 955,000
10.875% Sr. Unsec. Nts., 10/1/10 2,9 1,000,000 922,500
- --------------------------------------------------------------------------------
Allbritton Communications Co.,
7.75% Sr. Unsec. Sub. Nts., 12/15/12 700,000 710,500
- --------------------------------------------------------------------------------
AMC Entertainment, Inc.:
8% Sr. Unsec. Sub. Nts., 3/1/14 1,050,000 1,047,375
9.50% Sr. Unsec. Sub. Nts., 2/1/11 192,000 193,680
- --------------------------------------------------------------------------------
American Media Operations, Inc.:
8.875% Sr. Unsec. Sub. Nts., 1/15/11 900,000 825,750
10.25% Sr. Unsec. Sub. Nts., Series B,
5/1/09 1,450,000 1,408,313
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
MEDIA Continued
Block Communications, Inc., 8.25%
Sr. Nts., 12/15/15 1 $ 625,000 $ 626,563
- --------------------------------------------------------------------------------
Charter Communications Holdings II
LLC/Charter Communications
Holdings II Capital Corp.:
10.25% Sr. Unsec. Nts., 9/15/10 2,050,000 2,155,063
10.25% Sr. Unsec. Nts., Series B,
9/15/10 1,845,000 1,934,944
- --------------------------------------------------------------------------------
Charter Communications Operating
LLC/Charter Communications
Operating Capital Corp., 8.375% Sr.
Nts., Second Lien, 4/30/14 1 2,450,000 2,569,438
- --------------------------------------------------------------------------------
Cinemark USA, Inc., 9% Sr. Unsec.
Sub. Nts., 2/1/13 400,000 426,000
- --------------------------------------------------------------------------------
Cinemark, Inc., 0%/9.75% Sr. Unsec.
Disc. Nts., 3/15/14 3 2,700,000 2,332,125
- --------------------------------------------------------------------------------
CSC Holdings, Inc.:
7.625% Sr. Unsec. Debs., 7/15/18 1,500,000 1,468,125
7.625% Sr. Unsec. Unsub. Nts.,
Series B, 4/1/11 900,000 921,375
- --------------------------------------------------------------------------------
Dex Media East LLC/Dex Media
East Finance Co., 9.875% Sr. Unsec.
Nts., 11/15/09 800,000 840,000
- --------------------------------------------------------------------------------
Dex Media West LLC/Dex Media
West Finance Co.:
8.50% Sr. Nts., 8/15/10 700,000 730,625
9.875% Sr. Sub. Nts., 8/15/13 1,772,000 1,940,340
- --------------------------------------------------------------------------------
Dex Media, Inc.:
0%/9% Unsec. Disc. Nts., 11/15/13 3 500,000 448,750
8% Unsec. Nts., 11/15/13 2,250,000 2,328,750
- --------------------------------------------------------------------------------
DirecTV Holdings LLC/DirecTV
Financing Co., Inc.:
6.375% Sr. Unsec. Nts., 6/15/15 1,100,000 1,060,125
8.375% Sr. Unsec. Nts., 3/15/13 1,800,000 1,881,000
- --------------------------------------------------------------------------------
EchoStar DBS Corp.:
6.625% Sr. Unsec. Nts., 10/1/14 2,800,000 2,737,000
7% Sr. Unsec. Nts., 10/1/13 640,000 642,400
7.125% Sr. Unsec. Nts., 2/1/16 800,000 804,000
- --------------------------------------------------------------------------------
Granite Broadcasting Corp., 9.75%
Sr. Sec. Nts., 12/1/10 610,000 596,275
- --------------------------------------------------------------------------------
Gray Television, Inc., 9.25% Sr. Sub.
Nts., 12/15/11 500,000 524,375
- --------------------------------------------------------------------------------
Idearc, Inc., 8% Sr. Nts., 11/15/16 4 2,300,000 2,334,500
- --------------------------------------------------------------------------------
Lamar Media Corp.:
6.625% Sr. Unsec. Sub. Nts., 8/15/15 1,357,000 1,351,911
7.25% Sr. Unsec. Sub. Nts., 1/1/13 200,000 204,750
- --------------------------------------------------------------------------------
Lin Television Corp., 6.50% Sr. Sub.
Nts., 5/15/13 785,000 751,638
- --------------------------------------------------------------------------------
Marquee Holdings, Inc., 0%/12% Sr.
Disc. Nts., 8/15/14 3 2,200,000 1,856,250
- --------------------------------------------------------------------------------
Mediacom Broadband LLC, 8.50%
Sr. Nts., 10/15/15 1 1,465,000 1,490,638
9 | OPPENHEIMER HIGH INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
MEDIA Continued
Mediacom Broadband
LLC/Mediacom Broadband Corp.,
8.50% Sr. Nts., 10/15/15 $ 280,000 $ 284,900
- --------------------------------------------------------------------------------
Mediacom LLC/Mediacom Capital
Corp., 9.50% Sr. Unsec. Nts., 1/15/13 957,000 990,495
- --------------------------------------------------------------------------------
MediaNews Group, Inc.:
6.375% Sr. Sub. Nts., 4/1/14 1,400,000 1,211,000
6.875% Sr. Unsec. Sub. Nts., 10/1/13 800,000 728,000
- --------------------------------------------------------------------------------
Nielsen Finance LLC/Nielsen
Finance Co.:
0%/12.50% Sr. Sub. Disc. Nts., 8/1/16 1,3 1,090,000 756,188
10% Sr. Nts., 8/1/14 1 3,230,000 3,516,663
- --------------------------------------------------------------------------------
NTL Cable plc, 9.125% Sr. Nts.,
8/15/16 395,000 419,194
- --------------------------------------------------------------------------------
Paxson Communications Corp.,
11.624% Sr. Sec. Nts., 1/15/13 1,5 1,165,000 1,185,388
- --------------------------------------------------------------------------------
PRIMEDIA, Inc.:
8% Sr. Nts., 5/15/13 1,100,000 1,069,750
8.875% Sr. Unsec. Nts., 5/15/11 1,157,000 1,185,925
- --------------------------------------------------------------------------------
Quebecor World Capital Corp.,
8.75% Sr. Nts., 3/15/16 1 460,000 442,750
- --------------------------------------------------------------------------------
R.H. Donnelley Corp.:
6.875% Sr. Disc. Nts., Series A-1,
1/15/13 4,135,000 3,985,106
6.875% Sr. Disc. Nts., Series A-2,
1/15/13 1,960,000 1,888,950
6.875% Sr. Nts., 1/15/13 2,700,000 2,602,125
8.875% Sr. Unsec. Nts., Series A-3,
1/15/16 2,855,000 3,012,025
- --------------------------------------------------------------------------------
R.H. Donnelley Financial Corp. I,
10.875% Sr. Sub. Nts., 12/15/12 1 1,000,000 1,095,000
- --------------------------------------------------------------------------------
Radio One, Inc., 8.875% Sr. Unsec.
Sub. Nts., Series B, 7/1/11 800,000 830,000
- --------------------------------------------------------------------------------
Rainbow National Services LLC,
8.75% Sr. Nts., 9/1/12 1 900,000 950,625
- --------------------------------------------------------------------------------
Sinclair Broadcast Group, Inc., 8%
Sr. Unsec. Sub. Nts., 3/15/12 4,300,000 4,461,250
- --------------------------------------------------------------------------------
Sirius Satellite Radio, Inc., 9.625%
Sr. Unsec. Nts., 8/1/13 730,000 721,788
- --------------------------------------------------------------------------------
Vertis, Inc.:
9.75% Sr. Sec. Nts., 4/1/09 1,400,000 1,449,000
10.875% Sr. Unsec. Nts., Series B,
6/15/09 400,000 404,000
- --------------------------------------------------------------------------------
Warner Music Group, 7.375% Sr.
Sub. Bonds, 4/15/14 800,000 796,000
- --------------------------------------------------------------------------------
WMG Holdings Corp., 0%/9.50% Sr.
Disc. Nts., 12/15/14 3 2,365,000 1,903,825
- --------------------------------------------------------------------------------
XM Satellite Radio Holdings, Inc.,
9.75% Sr. Unsec. Nts., 5/1/14 1,500,000 1,507,500
---------------
80,197,163
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
MULTILINE RETAIL--0.7%
Bon-Ton Stores, Inc. (The), 10.25%
Sr. Unsec. Unsub. Nts., 3/15/14 $ 1,800,000 $ 1,849,500
- --------------------------------------------------------------------------------
Neiman Marcus Group, Inc. (The):
9% Sr. Unsec. Nts., 10/15/15 1,345,000 1,474,456
10.375% Sr. Unsec. Sub. Nts., 10/15/15 625,000 698,438
---------------
4,022,394
- --------------------------------------------------------------------------------
SPECIALTY RETAIL--0.8%
Asbury Automotive Group, Inc.,
9% Sr. Sub. Nts., 6/15/12 600,000 630,000
- --------------------------------------------------------------------------------
Atlantic Broadband Finance LLC,
9.375% Sr. Unsec. Sub. Nts., 1/15/14 400,000 406,500
- --------------------------------------------------------------------------------
Boise Cascade LLC, 7.125% Sr. Unsec.
Sub. Nts., 10/15/14 550,000 534,875
- --------------------------------------------------------------------------------
Gamestop Corp., 8% Sr. Unsec.
Nts., 10/1/12 900,000 945,000
- --------------------------------------------------------------------------------
Linens `N Things, Inc., 10.999%
Sr. Sec. Nts., 1/15/14 5 1,335,000 1,301,625
- --------------------------------------------------------------------------------
Rent-A-Center, Inc., 7.50% Sr. Unsec.
Sub. Nts., Series B, 5/1/10 350,000 352,625
---------------
4,170,625
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS--1.0%
Invista, Inc., 9.25% Sr. Nts., 5/1/12 1 1,075,000 1,158,313
- --------------------------------------------------------------------------------
Levi Strauss & Co., 9.75% Sr. Unsec.
Unsub. Nts., 1/15/15 2,270,000 2,457,275
- --------------------------------------------------------------------------------
Oxford Industries, Inc., 8.875%
Sr. Nts., 6/1/11 4 500,000 518,750
- --------------------------------------------------------------------------------
Quiksilver, Inc., 6.875% Sr. Unsec.
Nts., 4/15/15 975,000 962,813
---------------
5,097,151
- --------------------------------------------------------------------------------
CONSUMER STAPLES--5.1%
- --------------------------------------------------------------------------------
BEVERAGES--0.3%
Constellation Brands, Inc.:
7.25% Sr. Nts., 9/1/16 1,035,000 1,068,638
8.125% Sr. Sub. Nts., 1/15/12 500,000 522,500
---------------
1,591,138
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--1.9%
Albertson's, Inc., 8% Sr. Unsec.
Debs., 5/1/31 1,370,000 1,396,522
- --------------------------------------------------------------------------------
Delhaize America, Inc., 9% Unsub.
Debs., 4/15/31 4,092,000 4,878,912
- --------------------------------------------------------------------------------
Jean Coutu Group (PJC), Inc. (The),
8.50% Sr. Sub. Nts., 8/1/14 1,200,000 1,213,500
- --------------------------------------------------------------------------------
Real Time Data Co., 11% Disc.
Nts., 5/31/09 2,4,6,9 476,601 --
- --------------------------------------------------------------------------------
Rite Aid Corp.:
8.125% Sr. Sec. Nts., 5/1/10 900,000 923,625
9.50% Sr. Sec. Nts., 2/15/11 450,000 473,063
10 | OPPENHEIMER HIGH INCOME FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING Continued
Supervalu, Inc., 7.50% Sr. Nts., 11/15/14 $ 1,170,000 $ 1,225,811
---------------
10,111,433
- --------------------------------------------------------------------------------
FOOD PRODUCTS--1.1%
Del Monte Corp.:
6.75% Sr. Unsec. Sub. Nts., 2/15/15 350,000 348,250
8.625% Sr. Sub. Nts., 12/15/12 1,000,000 1,060,000
- --------------------------------------------------------------------------------
Dole Food Co., Inc.:
7.25% Sr. Unsec. Nts., 6/15/10 400,000 383,000
8.625% Sr. Nts., 5/1/09 687,000 686,141
8.875% Sr. Unsec. Nts., 3/15/11 146,000 144,540
- --------------------------------------------------------------------------------
Hines Nurseries, Inc., 10.25% Sr.
Unsec. Sub. Nts., 10/1/11 1,200,000 1,050,000
- --------------------------------------------------------------------------------
Smithfield Foods, Inc.:
7% Sr. Nts., 8/1/11 300,000 304,500
7.625% Sr. Unsec. Sub. Nts., 2/15/08 925,000 943,500
8% Sr. Nts., Series B, 10/15/09 900,000 945,000
---------------
5,864,931
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS--0.6%
Church & Dwight Co., Inc., 6% Sr.
Unsec. Sub. Nts., 12/15/12 900,000 884,250
- --------------------------------------------------------------------------------
Nutro Products, Inc., 10.75% Sr. Sub.
Nts., 4/15/14 1 460,000 504,850
- --------------------------------------------------------------------------------
Spectrum Brands, Inc., 7.375% Sr.
Unsec. Sub. Nts., 2/1/15 1,900,000 1,653,000
---------------
3,042,100
- --------------------------------------------------------------------------------
PERSONAL PRODUCTS--0.8%
Elizabeth Arden, Inc., 7.75% Sr. Unsec.
Sub. Nts., 1/15/14 1,150,000 1,164,375
- --------------------------------------------------------------------------------
Playtex Products, Inc.:
8% Sr. Sec. Nts., 3/1/11 1,000,000 1,050,000
9.375% Sr. Unsec. Sub. Nts., 6/1/11 1,295,000 1,356,513
- --------------------------------------------------------------------------------
Sally Holdings LLC:
9.25% Sr. Nts., 11/15/14 4 275,000 282,563
10.50% Sr. Sub. Nts., 11/15/16 4 275,000 281,875
---------------
4,135,326
- --------------------------------------------------------------------------------
TOBACCO--0.4%
Reynolds American, Inc., 7.25% Sr.
Sec. Nts., 6/1/13 2,265,000 2,365,783
- --------------------------------------------------------------------------------
ENERGY--9.0%
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--0.7%
Basic Energy Services, Inc., 7.125%
Sr. Unsec. Nts., 4/15/16 455,000 450,450
- --------------------------------------------------------------------------------
Hanover Compressor Co., 8.625%
Sr. Unsec. Sub. Nts., 12/15/10 700,000 735,000
- --------------------------------------------------------------------------------
Hanover Equipment Trust, 8.50%
Sr. Sec. Nts., Series A, 9/1/08 221,000 224,868
- --------------------------------------------------------------------------------
PHI, Inc., 7.125% Sr. Unsec.
Nts., 4/15/13 545,000 530,013
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES Continued
RathGibson, Inc., 11.25% Sr.
Unsec. Nts., 2/15/14 $ 660,000 $ 702,900
- --------------------------------------------------------------------------------
Universal Compression, Inc., 7.25%
Sr. Unsec. Sub. Nts., 5/15/10 800,000 808,000
---------------
3,451,231
- --------------------------------------------------------------------------------
OIL & GAS--8.3%
Arch Western Finance LLC, 6.75%
Sr. Nts., 7/1/13 900,000 897,750
- --------------------------------------------------------------------------------
Atlas Pipeline Partners LP, 8.125%
Sr. Unsec. Nts., 12/15/15 450,000 464,625
- --------------------------------------------------------------------------------
Berry Petroleum Co., 8.25% Sr. Sub.
Nts., 11/1/16 260,000 261,625
- --------------------------------------------------------------------------------
Chesapeake Energy Corp.:
6.375% Sr. Unsec. Nts., 6/15/15 1,150,000 1,144,250
6.875% Sr. Unsec. Nts., 1/15/16 1,920,000 1,946,400
7.50% Sr. Nts., 6/15/14 700,000 730,625
- --------------------------------------------------------------------------------
Clayton Williams Energy, Inc., 7.75%
Sr. Unsec. Nts., 8/1/13 195,000 180,863
- --------------------------------------------------------------------------------
Compton Petroleum Finance Corp.,
7.625% Sr. Nts., 12/1/13 1,400,000 1,358,000
- --------------------------------------------------------------------------------
Copano Energy LLC, 8.125% Sr.
Unsec. Nts., 3/1/16 425,000 442,000
- --------------------------------------------------------------------------------
El Paso Corp.:
7.75% Sr. Nts., 1/15/32 1,300,000 1,430,000
7.875% Sr. Unsec. Nts., 6/15/12 4 3,207,000 3,455,543
- --------------------------------------------------------------------------------
El Paso Energy Corp., 7.625%
Nts., 7/15/11 350,000 372,750
- --------------------------------------------------------------------------------
El Paso Production Holding Co.,
7.75% Sr. Unsec. Nts., 6/1/13 3,000,000 3,153,750
- --------------------------------------------------------------------------------
Forest Oil Corp., 7.75% Sr. Nts., 5/1/14 1,000,000 1,022,500
- --------------------------------------------------------------------------------
Foundation PA Coal Co., 7.25%
Sr. Unsec. Nts., 8/1/14 850,000 869,125
- --------------------------------------------------------------------------------
Frontier Oil Corp., 6.625%
Sr. Unsec. Nts., 10/1/11 450,000 451,125
- --------------------------------------------------------------------------------
Inergy LP/Inergy Finance Corp.,
8.25% Sr. Unsec. Nts., 3/1/16 1,165,000 1,229,075
- --------------------------------------------------------------------------------
Massey Energy Co., 6.625% Sr. Nts.,
11/15/10 400,000 402,000
- --------------------------------------------------------------------------------
Newfield Exploration Co., 6.625%
Sr. Unsec. Sub. Nts., 9/1/14 1,600,000 1,608,000
- --------------------------------------------------------------------------------
Pacific Energy Partners LP/Pacific
Energy Finance Corp., 6.25% Sr.
Unsec. Nts., 9/15/15 195,000 190,955
- --------------------------------------------------------------------------------
Peabody Energy Corp., 6.875% Sr.
Unsec. Nts., Series B, 3/15/13 1,200,000 1,236,000
- --------------------------------------------------------------------------------
Pogo Producing Co.:
6.875% Sr. Unsec. Sub. Nts., 10/1/17 200,000 192,000
7.875% Sr. Unsec. Sub. Nts., 5/1/13 440,000 448,800
- --------------------------------------------------------------------------------
Premcor Refining Group, Inc., 9.50%
Sr. Nts., 2/1/13 1,000,000 1,080,352
11 | OPPENHEIMER HIGH INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
OIL & GAS Continued
Quicksilver Resources, Inc., 7.125%
Sr. Sub. Nts., 4/1/16 $ 1,515,000 $ 1,488,488
- --------------------------------------------------------------------------------
Range Resources Corp.:
6.375% Sr. Sub. Nts., 3/15/15 745,000 730,100
7.375% Sr. Sub. Nts., 7/15/13 400,000 412,000
7.50% Sr. Sub. Nts., 5/15/16 1,760,000 1,812,800
- --------------------------------------------------------------------------------
Sabine Pass LNG LP:
7.25% Sr. Sec. Nts., 11/30/13 4 1,300,000 1,293,500
7.50% Sr. Sec. Nts., 11/30/16 4 2,600,000 2,593,500
- --------------------------------------------------------------------------------
Southern Natural Gas Co.:
7.35% Nts., 2/15/31 1,100,000 1,216,321
8% Sr. Unsub. Nts., 3/1/32 500,000 586,751
8.875% Sr. Nts., 3/15/10 700,000 737,863
- --------------------------------------------------------------------------------
Stone Energy Corp.:
6.75% Sr. Unsec. Sub. Nts., 12/15/14 860,000 825,600
8.25% Sr. Unsec. Sub. Nts., 12/15/11 1,300,000 1,283,750
- --------------------------------------------------------------------------------
Targa Resources, Inc., 8.50%
Sr. Nts., 11/1/13 1 950,000 961,875
- --------------------------------------------------------------------------------
Teekay Shipping Corp., 8.875%
Sr. Nts., 7/15/11 375,000 404,531
- --------------------------------------------------------------------------------
Tennessee Gas Pipeline Co., 7.50%
Bonds, 4/1/17 965,000 1,057,772
- --------------------------------------------------------------------------------
Tesoro Corp.:
6.25% Sr. Unsec. Nts., 11/1/12 515,000 515,000
6.625% Sr. Unsec. Nts., 11/1/15 515,000 513,713
- --------------------------------------------------------------------------------
Transcontinental Gas Pipe Line Corp.:
6.40% Sr. Unsec. Unsub. Nts., 4/15/16 635,000 644,525
8.875% Sr. Unsub. Nts.,
Series B, 7/15/12 200,000 227,000
- --------------------------------------------------------------------------------
Whiting Petroleum Corp.:
7.25% Sr. Sub. Nts., 5/1/12 800,000 806,000
7.25% Sr. Unsec. Sub. Nts., 5/1/13 350,000 352,625
- --------------------------------------------------------------------------------
Williams Cos., Inc. (The):
7.125% Nts., 9/1/11 150,000 156,750
8.75% Unsec. Nts., 3/15/32 900,000 1,021,500
- --------------------------------------------------------------------------------
Williams Holdings of Delaware, Inc.,
6.50% Nts., 12/1/08 4 300,000 298,500
---------------
44,508,577
- --------------------------------------------------------------------------------
FINANCIALS--2.4%
- --------------------------------------------------------------------------------
CAPITAL MARKETS--0.8%
Berry Plastics Holding Corp.:
8.875% Sr. Sec. Nts., 9/15/14 1 735,000 749,700
9.235% Sr. Sec. Nts., 9/15/14 1,5 735,000 747,863
- --------------------------------------------------------------------------------
DeCrane Aircraft Holdings, Inc., 12%
Sr. Unsec. Sub. Nts., Series B, 9/30/08 4 1,550,000 1,325,250
- --------------------------------------------------------------------------------
E*TRADE Financial Corp.:
7.375% Sr. Unsec. Nts., 9/15/13 691,000 722,095
8% Sr. Nts., 6/15/11 825,000 866,250
---------------
4,411,158
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
COMMERCIAL BANKS--0.1%
Bank Plus Corp., 12% Sr. Nts., 7/18/07 4 $ 517,000 $ 538,973
- --------------------------------------------------------------------------------
CONSUMER FINANCE--0.2%
Ace Cash Express, Inc., 10.25%
Sr. Nts., 10/1/14 1 785,000 798,738
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--0.5%
AAC Group Holding Corp.,
0%/10.25% Sr. Unsec. Disc. Nts.,
10/1/12 3 200,000 176,000
- --------------------------------------------------------------------------------
Affinia Group, Inc., 9% Sr. Unsec.
Sub. Nts., 11/30/14 135,000 132,975
- --------------------------------------------------------------------------------
JSG Funding plc, 7.75% Sr. Unsec.
Sub. Nts., 4/1/15 4 865,000 834,725
- --------------------------------------------------------------------------------
Nell AF Sarl, 8.375% Sr. Nts., 8/15/15 1 920,000 949,900
- --------------------------------------------------------------------------------
Universal City Florida:
8.375% Sr. Unsec. Nts., 5/1/10 270,000 278,100
10.121% Sr. Unsec. Nts., 5/1/10 5 270,000 280,125
---------------
2,651,825
- --------------------------------------------------------------------------------
REAL ESTATE--0.8%
Felcor Lodging LP, 8.50% Sr.
Nts., 6/1/11 5 837,000 895,590
- --------------------------------------------------------------------------------
Host Hotels & Resorts LP, 6.875%
Sr. Nts., 11/1/14 1 260,000 264,550
- --------------------------------------------------------------------------------
Host Marriott LP:
6.375% Sr. Nts., Series O, 3/15/15 2,025,000 2,007,281
6.75% Sr. Nts., Series Q, 6/1/16 500,000 503,125
- --------------------------------------------------------------------------------
Ventas Realty LP/Ventas Capital
Corp., 6.75% Sr. Nts., 4/1/17 550,000 570,625
---------------
4,241,171
- --------------------------------------------------------------------------------
HEALTH CARE--4.4%
- --------------------------------------------------------------------------------
BIOTECHNOLOGY--0.1%
Angiotech Pharmaceuticals, Inc.,
7.75% Sr. Sub. Nts., 4/1/14 1 455,000 398,125
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--0.3%
Inverness Medical Innovations, Inc.,
8.75% Sr. Sub. Nts., 2/15/12 600,000 627,000
- --------------------------------------------------------------------------------
Universal Hospital Services, Inc.,
10.125% Sr. Unsec. Nts., 11/1/11 800,000 858,000
---------------
1,485,000
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--3.9%
AmeriPath, Inc., 10.50% Sr. Unsec.
Sub. Nts., 4/1/13 700,000 761,250
- --------------------------------------------------------------------------------
Community Health Systems, Inc.,
6.50% Sr. Unsec. Sub. Nts., 12/15/12 900,000 891,000
- --------------------------------------------------------------------------------
DaVita, Inc.:
6.625% Sr. Unsec. Nts., 3/15/13 890,000 896,675
7.25% Sr. Unsec. Sub. Nts., 3/15/15 1,910,000 1,957,750
- --------------------------------------------------------------------------------
Fresenius Medical Care Capital Trust II,
7.875% Nts., 2/1/08 1,600,000 1,632,000
12 | OPPENHEIMER HIGH INCOME FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES Continued
Genesis HealthCare Corp., 8% Sr.
Sub. Nts., 10/15/13 $ 400,000 $ 419,000
- --------------------------------------------------------------------------------
HCA, Inc.:
6.25% Nts., 2/15/13 20,000 17,750
8.75% Sr. Nts., 9/1/10 2,800,000 2,926,000
9.125% Sr. Sec. Nts., 11/15/14 1 365,000 391,006
9.25% Sr. Sec. Nts., 11/15/16 1 365,000 391,919
9.625% Sr. Sec. Nts., 11/15/16 1,6 910,000 980,525
- --------------------------------------------------------------------------------
HEALTHSOUTH Corp., 10.75% Sr.
Nts., 6/15/16 1 505,000 546,031
- --------------------------------------------------------------------------------
Omnicare, Inc.:
6.75% Sr. Sub. Nts., 12/15/13 185,000 183,613
6.875% Sr. Sub. Nts., 12/15/15 285,000 282,863
- --------------------------------------------------------------------------------
Psychiatric Solutions, Inc., 7.75% Sr.
Unsec. Sub. Nts., 7/15/15 485,000 486,213
- --------------------------------------------------------------------------------
Select Medical Corp., 7.625% Sr.
Unsec. Sub. Nts., 2/1/15 2,475,000 2,066,625
- --------------------------------------------------------------------------------
Tenet Healthcare Corp.:
6.375% Sr. Nts., 12/1/11 974,000 896,080
7.375% Nts., 2/1/13 77,000 71,129
9.875% Sr. Nts., 7/1/14 1,950,000 1,993,875
- --------------------------------------------------------------------------------
Triad Hospitals, Inc., 7% Sr. Sub.
Nts., 11/15/13 270,000 273,038
- --------------------------------------------------------------------------------
US Oncology, Inc.:
9% Sr. Unsec. Nts., 8/15/12 4 650,000 689,000
10.75% Sr. Unsec. Sub. Nts., 8/15/14 650,000 721,500
- --------------------------------------------------------------------------------
Vanguard Health Holding Co. I LLC,
0%/11.25% Sr. Disc. Nts., 10/1/15 3 1,760,000 1,364,000
---------------
20,838,842
- --------------------------------------------------------------------------------
PHARMACEUTICALS--0.1%
Valeant Pharmaceuticals
International, Inc., 7% Sr. Nts.,
12/15/11 4 800,000 772,000
- --------------------------------------------------------------------------------
INDUSTRIALS--8.1%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE--1.4%
Alliant Techsystems, Inc., 6.75% Sr.
Sub. Nts., 4/1/16 910,000 912,275
- --------------------------------------------------------------------------------
BE Aerospace, Inc., 8.875% Sr. Unsec.
Sub. Nts., 5/1/11 57,000 59,280
- --------------------------------------------------------------------------------
Bombardier, Inc., 8% Sr. Nts., 11/15/14 4 455,000 468,332
- --------------------------------------------------------------------------------
DRS Technologies, Inc.:
6.625% Sr. Nts., 2/1/16 735,000 744,188
6.875% Sr. Unsec. Sub. Nts., 11/1/13 300,000 303,750
7.625% Sr. Sub. Nts., 2/1/18 320,000 331,200
- --------------------------------------------------------------------------------
L-3 Communications Corp.:
5.875% Sr. Sub. Nts., 1/15/15 684,000 663,480
6.125% Sr. Unsec. Sub. Nts., 1/15/14 1,100,000 1,080,750
6.375% Sr. Unsec. Sub. Nts., Series B,
10/15/15 1,280,000 1,273,600
7.625% Sr. Sub. Nts., 6/15/12 500,000 520,000
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE Continued
TRW Automotive, Inc.:
9.375% Sr. Nts., 2/15/13 $ 580,000 $ 624,950
11% Sr. Sub. Nts., 2/15/13 454,000 499,968
---------------
7,481,773
- --------------------------------------------------------------------------------
AIRLINES--0.0%
ATA Holdings Corp., 13% Sr. Unsec.
Nts., 2/1/09 2,4,9 1,575,000 --
- --------------------------------------------------------------------------------
BUILDING PRODUCTS--0.6%
Associated Materials, Inc., 9.75%
Sr. Sub. Nts., 4/15/12 700,000 724,500
- --------------------------------------------------------------------------------
Dayton Superior Corp., 13% Sr.
Unsec. Sub. Nts., 6/15/09 100,000 103,000
- --------------------------------------------------------------------------------
Goodman Global Holding Co., Inc.,
7.875% Sr. Unsec. Sub. Nts., 12/15/12 1,060,000 1,046,750
- --------------------------------------------------------------------------------
Jacuzzi Brands, Inc., 9.625% Sr. Sec.
Nts., 7/1/10 544,000 580,720
- --------------------------------------------------------------------------------
Nortek, Inc., 8.50% Sr. Unsec. Unsub.
Nts., 9/1/14 600,000 591,000
---------------
3,045,970
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--1.4%
Allied Waste North America, Inc.:
7.25% Sr. Nts., 3/15/15 225,000 226,406
7.375% Sr. Sec. Nts., Series B, 4/15/14 2,850,000 2,850,000
9.25% Sr. Sec. Debs., Series B, 9/1/12 283,000 302,103
- --------------------------------------------------------------------------------
American Pad & Paper Co., 13% Sr.
Sub. Nts., Series B, 11/15/05 2,4,9 200,000 --
- --------------------------------------------------------------------------------
Cenveo Corp., 7.875% Sr. Sub.
Nts., 12/1/13 1,100,000 1,061,500
- --------------------------------------------------------------------------------
Corrections Corp. of America:
6.25% Sr. Unsec. Sub. Nts., 3/15/13 890,000 886,663
7.50% Sr. Nts., 5/1/11 500,000 517,500
- --------------------------------------------------------------------------------
FTI Consulting, Inc., 7.75% Sr. Unsec.
Nts., 10/1/16 1 640,000 667,200
- --------------------------------------------------------------------------------
Mobile Services Group, Inc., 9.75%
Sr. Nts., 8/1/14 1 130,000 136,500
- --------------------------------------------------------------------------------
MSW Energy Holdings II LLC/MSW
Energy Finance Co. II, Inc., 7.375% Sr.
Sec. Nts., Series B, 9/1/10 700,000 717,500
- --------------------------------------------------------------------------------
MSW Energy Holdings LLC/MSW
Energy Finance Co., Inc., 8.50% Sr.
Sec. Nts., 9/1/10 400,000 418,000
---------------
7,783,372
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--0.3%
Belden & Blake Corp., 8.75% Sec.
Nts., 7/15/12 650,000 669,500
- --------------------------------------------------------------------------------
General Cable Corp., 9.50% Sr.
Nts., 11/15/10 500,000 532,500
13 | OPPENHEIMER HIGH INCOME 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 $ 400,000 $ 423,500
---------------
1,625,500
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--0.3%
Covalence Specialty Materials Corp.,
10.25% Sr. Sub. Nts., 3/1/16 1 1,475,000 1,357,000
- --------------------------------------------------------------------------------
Great Lakes Dredge & Dock Co.,
7.75% Sr. Unsec. Sub. Nts., 12/15/13 250,000 245,000
---------------
1,602,000
- --------------------------------------------------------------------------------
MACHINERY--1.3%
Case New Holland, Inc.:
7.125% Sr. Unsec. Nts., 3/1/14 730,000 744,600
9.25% Sr. Nts., 8/1/11 800,000 851,000
- --------------------------------------------------------------------------------
Douglas Dynamics LLC, 7.75% Sr.
Nts., 1/15/12 1 600,000 567,000
- --------------------------------------------------------------------------------
Greenbrier Cos., Inc., 8.375% Sr.
Unsec. Nts., 5/15/15 740,000 756,650
- --------------------------------------------------------------------------------
Manitowoc Co., Inc. (The):
7.125% Sr. Nts., 11/1/13 150,000 152,250
10.50% Sr. Sub. Nts., 8/1/12 520,000 560,950
- --------------------------------------------------------------------------------
Milacron Escrow Corp., 11.50% Sr.
Sec. Nts., 5/15/11 4 1,700,000 1,623,500
- --------------------------------------------------------------------------------
Trinity Industries, Inc., 6.50% Sr.
Nts., 3/15/14 1,000,000 987,500
- --------------------------------------------------------------------------------
Wolverine Tube, Inc., 7.375% Sr.
Nts., 8/1/08 1 1,250,000 993,750
---------------
7,237,200
- --------------------------------------------------------------------------------
ROAD & RAIL--1.5%
Avis Budget Car Rental LLC/Avis
Budget Finance, Inc.:
7.625% Sr. Nts., 5/15/14 800,000 784,000
7.75% Sr. Nts., 5/15/16 1 455,000 440,213
7.874% Sr. Nts., 5/15/14 1,5 180,000 174,600
- --------------------------------------------------------------------------------
Hertz Corp.:
8.875% Sr. Nts., 1/1/14 1 90,000 94,725
10.50% Sr. Sub. Nts., 1/1/16 1 1,570,000 1,734,850
- --------------------------------------------------------------------------------
Kansas City Southern Railway Co.
(The), 7.50% Sr. Nts., 6/15/09 500,000 506,875
- --------------------------------------------------------------------------------
Stena AB:
7% Sr. Unsec. Nts., 12/1/16 4 150,000 143,250
7.50% Sr. Unsec. Nts., 11/1/13 928,000 921,040
9.625% Sr. Nts., 12/1/12 4 1,100,000 1,177,000
- --------------------------------------------------------------------------------
TDS Investor Corp., 11.875% Sr. Sub.
Nts., 9/1/16 1 1,800,000 1,854,000
---------------
7,830,553
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS--1.2%
Ashtead Capital, Inc., 9%
Nts., 8/15/16 1 $ 440,000 $ 473,000
- --------------------------------------------------------------------------------
H&E Equipment Services, Inc.,
8.375% Sr. Unsec. Nts., 7/15/16 480,000 505,200
- --------------------------------------------------------------------------------
Interline Brands, Inc., 8.125% Sr.
Sub. Nts., 6/15/14 575,000 593,688
- --------------------------------------------------------------------------------
United Rentals, Inc., 7% Sr. Sub.
Nts., 2/15/14 7 5,000,000 4,931,250
---------------
6,503,138
- --------------------------------------------------------------------------------
TRANSPORTATION INFRASTRUCTURE--0.1%
Horizon Lines LLC, 9% Nts., 11/1/12 473,000 499,015
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--4.8%
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--0.8%
Loral Skynet Corp., 14% Sr. Sec.
Nts., 11/21/15 4,6 198,000 228,195
- --------------------------------------------------------------------------------
Lucent Technologies, Inc., 6.45%
Unsec. Debs., 3/15/29 4,100,000 3,802,750
- --------------------------------------------------------------------------------
Nortel Networks Ltd., 9.624% Sr.
Nts., 7/15/11 1,5 435,000 460,556
- --------------------------------------------------------------------------------
Orion Network Systems, Inc.,
12.50% Sr. Unsub. Disc. Nts., 1/15/07 2,9 1,150,000 12
---------------
4,491,513
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--0.2%
Seagate Technology HDD Holdings:
6.375% Sr. Nts., 10/1/11 920,000 924,600
6.80% Sr. Nts., 10/1/16 275,000 277,750
---------------
1,202,350
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--0.4%
Flextronics International Ltd.,
6.25% Sr. Sub. Nts., 11/15/14 300,000 291,000
- --------------------------------------------------------------------------------
RBS Global & Rexnord Corp.:
9.50% Sr. Nts., 8/1/14 1 75,000 78,375
11.75% Sr. Sub. Nts., 8/1/16 1 265,000 278,250
- --------------------------------------------------------------------------------
Sanmina-SCI Corp.:
6.75% Unsec. Sub. Nts., 3/1/13 470,000 434,750
8.125% Sr. Sub. Nts., 3/1/16 550,000 534,875
- --------------------------------------------------------------------------------
Solectron Global Finance Ltd., 8%
Sr. Unsec. Sub. Nts., 3/15/16 240,000 244,200
---------------
1,861,450
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--0.0%
Exodus Communications, Inc.,
10.75% Sr. Nts., 12/15/09 2,4,9 [EUR] 846,550 --
- --------------------------------------------------------------------------------
NorthPoint Communications
Group, Inc., 12.875% Nts., 2/15/10 2,4,9 240,208 --
- --------------------------------------------------------------------------------
PSINet, Inc., 10.50% Sr. Unsec.
Nts., 12/1/06 2,4,9 [EUR] 1,000,000 --
---------------
--
14 | OPPENHEIMER HIGH INCOME FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
IT SERVICES--1.3%
DI Finance/DynCorp International
LLC, 9.50% Sr. Unsec. Sub. Nts.,
Series B, 2/15/13 $ 1,186,000 $ 1,263,090
- --------------------------------------------------------------------------------
iPayment Holdings, Inc., 9.75% Sr.
Unsec. Sub. Nts., 5/15/14 750,000 774,375
- --------------------------------------------------------------------------------
Iron Mountain, Inc.:
7.75% Sr. Sub. Nts., 1/15/15 200,000 205,000
8.625% Sr. Unsec. Sub. Nts., 4/1/13 1,000,000 1,037,500
- --------------------------------------------------------------------------------
SunGard Data Systems, Inc.:
9.125% Sr. Unsec. Nts., 8/15/13 700,000 738,500
10.25% Sr. Unsec. Sub. Nts., 8/15/15 2,490,000 2,670,525
---------------
6,688,990
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--2.1%
Advanced Micro Devices, Inc.,
7.75% Sr. Unsec. Nts., 11/1/12 1,955,000 2,033,200
- --------------------------------------------------------------------------------
Amkor Technology, Inc.:
7.75% Sr. Nts., 5/15/13 1,750,000 1,616,563
9.25% Sr. Unsec. Nts., 6/1/16 1,200,000 1,182,000
- --------------------------------------------------------------------------------
Conexant Systems, Inc., 9.126%
Sr. Sec. Nts., 11/15/10 4,5 455,000 464,100
- --------------------------------------------------------------------------------
Freescale Semiconductor, Inc.:
8.875% Sr. Nts., 12/15/14 1 1,370,000 1,371,713
9.125% Sr. Nts., 12/15/14 1 2,285,000 2,282,144
10.125% Sr. Sub. Nts., 12/15/16 1 1,830,000 1,841,438
- --------------------------------------------------------------------------------
NXP BV, 7.875% Sr. Sec. Bonds,
10/15/14 1 455,000 472,631
---------------
11,263,789
- --------------------------------------------------------------------------------
MATERIALS--9.4%
- --------------------------------------------------------------------------------
CHEMICALS--2.7%
BCP Crystal US Holdings Corp.,
9.625% Sr. Sub. Nts., 6/15/14 1,560,000 1,731,600
- --------------------------------------------------------------------------------
Crystal US Holdings 3 LLC/Crystal
US Sub 3 Corp., 0%/10.50% Sr. Unsec.
Disc. Nts., Series B, 10/1/14 3 1,600,000 1,384,000
- --------------------------------------------------------------------------------
Equistar Chemicals LP/Equistar
Funding Corp.:
8.75% Sr. Unsec. Nts., 2/15/09 400,000 421,000
10.125% Sr. Unsec. Nts., 9/1/08 57,000 60,848
10.625% Sr. Unsec. Nts., 5/1/11 1,400,000 1,498,000
- --------------------------------------------------------------------------------
Georgia Gulf Corp., 10.75% Sr. Sub.
Nts., 10/15/16 1,465,000 1,413,725
- --------------------------------------------------------------------------------
Huntsman International LLC:
7.875% Sr. Unsec. Sub. Nts., 11/13/14 1 260,000 263,250
8.375% Sr. Sub. Nts., 1/1/15 1,5 420,000 418,950
- --------------------------------------------------------------------------------
Huntsman LLC:
11.50% Sr. Unsec. Nts., 7/15/12 5 332,000 375,990
11.625% Sr. Unsec. Nts., 10/15/10 37,000 40,608
- --------------------------------------------------------------------------------
Ineos Group Holdings plc, 8.50%
Nts., 2/15/16 1 590,000 566,400
- --------------------------------------------------------------------------------
Innophos, Inc., 8.875% Sr. Unsec.
Sub. Nts., 8/15/14 280,000 285,600
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
CHEMICALS Continued
KI Holdings, Inc., 0%/9.875% Sr.
Unsec. Sub. Disc. Nts., 11/15/14 3 $ 750,000 $ 603,750
- --------------------------------------------------------------------------------
Lyondell Chemical Co.:
8% Sr. Unsec. Nts., 9/15/14 1,375,000 1,433,438
8.25% Sr. Unsec. Nts., 9/15/16 735,000 775,425
10.50% Sr. Sec. Nts., 6/1/13 800,000 884,000
11.125% Sr. Sec. Nts., 7/15/12 300,000 324,000
- --------------------------------------------------------------------------------
Mosaic Global Holdings, Inc.:
7.375% Sr. Nts., 12/1/14 1 365,000 376,406
7.625% Sr. Nts., 12/1/16 1 365,000 380,056
- --------------------------------------------------------------------------------
Rockwood Specialties Group, Inc.:
7.50% Sr. Sub. Nts., 11/15/14 400,000 405,000
10.625% Sr. Unsec. Sub. Nts., 5/15/11 291,000 311,370
- --------------------------------------------------------------------------------
Tronox Worldwide LLC/Tronox
Finance Corp., 9.50% Sr. Unsec.
Nts., 12/1/12 195,000 206,213
---------------
14,159,629
- --------------------------------------------------------------------------------
CONSTRUCTION MATERIALS--0.3%
NTK Holdings, Inc., 0%/10.75% Sr.
Disc. Nts., 3/1/14 3 2,420,000 1,706,100
- --------------------------------------------------------------------------------
CONTAINERS & PACKAGING--3.6%
Ball Corp., 6.625% Sr. Nts., 3/15/18 910,000 907,725
- --------------------------------------------------------------------------------
Crown Americas, Inc., 7.75% Sr.
Nts., 11/15/15 760,000 792,300
- --------------------------------------------------------------------------------
Graham Packaging Co., Inc., 9.875%
Sr. Unsec. Sub. Nts., 10/15/14 3,500,000 3,552,500
- --------------------------------------------------------------------------------
Graphic Packaging International Corp.:
8.50% Sr. Nts., 8/15/11 1,000,000 1,040,000
9.50% Sr. Sub. Nts., 8/15/13 950,000 1,007,000
- --------------------------------------------------------------------------------
Jefferson Smurfit Corp.:
7.50% Sr. Unsec. Unsub. Nts., 6/1/13 350,000 330,750
8.25% Sr. Unsec. Nts., 10/1/12 1,750,000 1,715,000
- --------------------------------------------------------------------------------
MDP Acquisitions plc, 9.625% Sr.
Nts., 10/1/12 800,000 852,000
- --------------------------------------------------------------------------------
Owens-Brockway Glass Container, Inc.:
7.75% Sr. Sec. Nts., 5/15/11 500,000 516,250
8.25% Sr. Unsec. Nts., 5/15/13 1,657,000 1,721,209
8.75% Sr. Sec. Nts., 11/15/12 1,350,000 1,437,750
8.875% Sr. Sec. Nts., 2/15/09 264,000 271,260
- --------------------------------------------------------------------------------
Pliant Corp., 11.85% Sr. Sec.
Nts., 6/15/09 2,6 605,424 663,696
- --------------------------------------------------------------------------------
Solo Cup Co., 8.50% Sr. Sub.
Nts., 2/15/14 1,100,000 957,000
- --------------------------------------------------------------------------------
Stone Container Corp.:
8.375% Sr. Nts., 7/1/12 220,000 216,700
9.75% Sr. Unsec. Nts., 2/1/11 601,000 622,786
- --------------------------------------------------------------------------------
Tekni-Plex, Inc., 10.875% Sr. Sec.
Nts., 8/15/12 1 290,000 327,700
- --------------------------------------------------------------------------------
TriMas Corp., 9.875% Sr. Unsec.
Sub. Nts., 6/15/12 2,300,000 2,236,750
---------------
19,168,376
15 | OPPENHEIMER HIGH INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
METALS & MINING--1.6%
AK Steel Corp., 7.75% Sr. Unsec.
Nts., 6/15/12 $ 1,107,000 $ 1,120,838
- --------------------------------------------------------------------------------
Century Aluminum Co., 7.50% Sr.
Unsec. Nts., 8/15/14 1,000,000 1,018,750
- --------------------------------------------------------------------------------
Gibraltar Industries, Inc., 8% Sr.
Unsec. Sub. Nts., Series B, 12/1/15 4 1,075,000 1,065,594
- --------------------------------------------------------------------------------
IPSCO, Inc., 8.75% Sr. Nts., 6/1/13 300,000 322,875
- --------------------------------------------------------------------------------
Ispat Inland ULC, 9.75% Sr. Sec.
Nts., 4/1/14 1,364,000 1,526,286
- --------------------------------------------------------------------------------
Koppers Industry, Inc., 9.875% Sr. Sec.
Nts., 10/15/13 614,000 670,795
- --------------------------------------------------------------------------------
Northwest Pipeline Corp., 8.125% Sr.
Nts., 3/1/10 200,000 209,250
- --------------------------------------------------------------------------------
Novelis, Inc., 8.25% Sr. Nts., 2/15/15 1,5 1,915,000 1,862,338
- --------------------------------------------------------------------------------
Steel Dynamics, Inc., 9.50% Sr.
Nts., 3/15/09 400,000 412,500
- --------------------------------------------------------------------------------
United States Steel Corp., 9.75% Sr.
Nts., 5/15/10 505,000 539,719
---------------
8,748,945
- --------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS--1.2%
Abitibi-Consolidated Co. of Canada,
8.375% Sr. Unsec. Sub. Nts., 4/1/15 1,200,000 1,044,000
- --------------------------------------------------------------------------------
Abitibi-Consolidated, Inc.:
8.55% Nts., 8/1/10 600,000 573,000
8.85% Unsec. Bonds, 8/1/30 500,000 412,500
- --------------------------------------------------------------------------------
Appleton Papers, Inc., 8.125% Sr.
Nts., 6/15/11 380,000 389,500
- --------------------------------------------------------------------------------
Buckeye Technologies, Inc., 8.50% Sr.
Nts., 10/1/13 350,000 371,000
- --------------------------------------------------------------------------------
Domtar, Inc., 7.125% Nts., 8/15/15 800,000 788,000
- --------------------------------------------------------------------------------
JSG Holding plc, 11.50% Sr. Nts.,
10/1/15 4,6 [EUR] 325,525 449,044
- --------------------------------------------------------------------------------
Mercer International, Inc., 9.25%
Sr. Nts., 2/15/13 440,000 432,300
- --------------------------------------------------------------------------------
Norske Skog Canada Ltd., 7.375%
Sr. Unsec. Nts., 3/1/14 1,000,000 952,500
- --------------------------------------------------------------------------------
Verso Paper Holdings LLC/Verson
Paper, Inc.:
9.121% Sr. Sec. Nts., 8/1/14 1,5 530,000 540,600
11.375% Sr. Sub. Nts., 8/1/16 1 530,000 559,150
---------------
6,511,594
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--9.3%
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--5.0%
Citizens Communications Co.,
6.25% Sr. Nts., 1/15/13 1 3,500,000 3,451,875
- --------------------------------------------------------------------------------
Intelsat Bermuda Ltd., 11.25% Sr.
Nts., 6/15/16 1 430,000 474,075
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES Continued
Intelsat Subsidiary Holding Co. Ltd.:
8.25% Sr. Nts., 1/15/13 5 $ 1,300,000 $ 1,326,000
8.625% Sr. Nts., 1/15/15 625,000 653,125
- --------------------------------------------------------------------------------
Level 3 Financing, Inc., 9.25% Sr.
Nts., 11/1/14 1 2,075,000 2,126,875
- --------------------------------------------------------------------------------
Nordic Telephone Co. Holdings
ApS, 8.875% Sr. Nts., 5/1/16 1 455,000 489,125
- --------------------------------------------------------------------------------
PanAmSat Corp.:
9% Sr. Nts., 6/15/16 1 495,000 526,556
9% Sr. Unsec. Nts., 8/15/14 1,300,000 1,379,625
- --------------------------------------------------------------------------------
Qwest Capital Funding, Inc.:
7.25% Unsec. Unsub. Nts., 2/15/11 900,000 923,625
7.90% Unsec. Nts., 8/15/10 757,000 792,011
- --------------------------------------------------------------------------------
Qwest Communications
International, Inc., 7.25% Sr. Unsec.
Sub. Nts., 2/15/11 5 600,000 616,500
- --------------------------------------------------------------------------------
Qwest Corp.:
7.50% Sr. Unsec. Nts., 10/1/14 880,000 937,200
8.875% Unsec. Unsub. Nts., 3/15/12 5 3,700,000 4,139,375
- --------------------------------------------------------------------------------
Teligent, Inc., 11.50% Sr. Nts., 12/1/07 2,4,9 400,000 --
- --------------------------------------------------------------------------------
Time Warner Telecom Holdings,
Inc., 9.25% Sr. Unsec. Unsub.
Nts., 2/15/14 2,650,000 2,845,438
- --------------------------------------------------------------------------------
Valor Telecommunications
Enterprises LLC, 7.75% Sr. Unsec.
Sub. Nts., 2/15/15 445,000 481,156
- --------------------------------------------------------------------------------
West Corp.:
9.50% Sr. Nts., 10/15/14 1 1,040,000 1,045,200
11% Sr. Sub. Nts., 10/15/16 1 935,000 949,025
- --------------------------------------------------------------------------------
Windstream Corp.:
8.125% Sr. Nts., 8/1/13 1 655,000 712,313
8.625% Sr. Nts., 8/1/16 1 2,555,000 2,810,500
- --------------------------------------------------------------------------------
Winstar Communications, Inc.,
12.75% Sr. Nts., 4/15/10 2,4,9 1,000,000 --
---------------
26,679,599
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--4.3%
Alamosa Delaware, Inc.:
8.50% Sr. Nts., 1/31/12 4 500,000 530,063
11% Sr. Unsec. Nts., 7/31/10 4 57,000 61,602
- --------------------------------------------------------------------------------
American Cellular Corp., 10% Sr.
Nts., Series B, 8/1/11 2,110,000 2,241,875
- --------------------------------------------------------------------------------
American Tower Corp.:
7.125% Sr. Unsec. Nts., 10/15/12 500,000 516,250
7.50% Sr. Nts., 5/1/12 1,450,000 1,508,000
- --------------------------------------------------------------------------------
CellNet Data Systems, Inc., Sr.
Unsec. Disc. Nts., 10/1/07 2,4,9 1,834,000 --
- --------------------------------------------------------------------------------
Centennial Cellular Operating
Co. LLC/Centennial Communications
Corp., 10.125% Sr. Nts., 6/15/13 2,200,000 2,381,500
- --------------------------------------------------------------------------------
Centennial Communications
Corp., 10% Sr. Unsec. Nts., 1/1/13 300,000 320,625
16 | OPPENHEIMER HIGH INCOME FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES Continued
Cricket Communications, Inc.,
9.375% Sr. Nts., 11/1/14 1 $ 1,170,000 $ 1,240,200
- --------------------------------------------------------------------------------
Dobson Cellular Systems, Inc.,
8.375% Sr. Sec. Nts., 11/1/11 470,000 497,613
- --------------------------------------------------------------------------------
Dobson Communications Corp.:
8.875% Sr. Nts., 10/1/13 769,000 787,264
9.624% Sr. Unsec. Nts., 10/15/12 5 290,000 297,250
- --------------------------------------------------------------------------------
IWO Holdings, Inc., 9.124% Sr. Sec.
Nts., 1/15/12 5 220,000 225,500
- --------------------------------------------------------------------------------
Nextel Communications, Inc., 7.375%
Sr. Nts., Series D, 8/1/15 3,590,000 3,684,815
- --------------------------------------------------------------------------------
Nextel Partners, Inc., 8.125% Sr.
Nts., 7/1/11 700,000 732,375
- --------------------------------------------------------------------------------
Rogers Wireless, Inc.:
6.375% Sec. Nts., 3/1/14 700,000 712,250
7.50% Sec. Nts., 3/15/15 900,000 981,000
8% Sr. Sub. Nts., 12/15/12 600,000 643,500
- --------------------------------------------------------------------------------
Rural Cellular Corp.:
9.75% Sr. Sub. Nts., 1/15/10 3,357,000 3,466,103
9.875% Sr. Nts., 2/1/10 600,000 641,250
- --------------------------------------------------------------------------------
UbiquiTel Operating Co., 9.875%
Sr. Nts., 3/1/11 1,100,000 1,193,500
- --------------------------------------------------------------------------------
US Unwired, Inc., 10% Sr. Sec.
Nts., 6/15/12 500,000 552,500
---------------
23,215,035
- --------------------------------------------------------------------------------
UTILITIES--5.9%
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES--2.0%
Edison Mission Energy:
7.50% Sr. Unsec. Nts., 6/15/13 445,000 467,250
7.75% Sr. Unsec. Nts., 6/15/16 525,000 559,125
- --------------------------------------------------------------------------------
ESI Tractebel Acquisition Corp.,
7.99% Sec. Bonds, Series B, 12/30/11 782,000 806,460
- --------------------------------------------------------------------------------
Midwest Generation LLC, 8.75%
Sr. Sec. Nts., 5/1/34 4,420,000 4,817,800
- --------------------------------------------------------------------------------
Reliant Energy, Inc.:
6.75% Sr. Sec. Nts., 12/15/14 600,000 589,500
9.25% Sr. Sec. Nts., 7/15/10 457,000 482,135
9.50% Sr. Sec. Nts., 7/15/13 1,825,000 1,966,438
- --------------------------------------------------------------------------------
Sierra Pacific Resources, 6.75% Sr.
Unsec. Nts., 8/15/17 1,081,000 1,065,661
---------------
10,754,369
- --------------------------------------------------------------------------------
ENERGY TRADERS--3.5%
AES Corp. (The):
7.75% Sr. Unsec. Unsub. Nts., 3/1/14 200,000 212,000
8.75% Sr. Sec. Nts., 5/15/13 1 1,550,000 1,668,188
- --------------------------------------------------------------------------------
AES Red Oak LLC:
8.54% Sr. Sec. Bonds, Series A,
11/30/19 570,019 622,746
9.20% Sr. Sec. Bonds, Series B,
11/30/29 500,000 566,250
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
ENERGY TRADERS Continued
Dynegy Holdings, Inc.:
6.875% Sr. Unsec. Unsub. Nts., 4/1/11 $ 1,501,000 $ 1,508,505
8.375% Sr. Unsec. Nts., 5/1/16 410,000 432,550
8.75% Sr. Nts., 2/15/12 424,000 451,560
- --------------------------------------------------------------------------------
Mirant Americas Generation LLC:
8.30% Sr. Unsec. Nts., 5/1/11 4,400,000 4,532,000
9.125% Sr. Unsec. Nts., 5/1/31 1,200,000 1,278,000
- --------------------------------------------------------------------------------
Mirant Mid-Atlantic LLC, 8.625%
Sec. Pass-Through Certificates,
Series A, 6/30/12 1,132,726 1,198,566
- --------------------------------------------------------------------------------
NRG Energy, Inc.:
7.375% Sr. Nts., 1/15/17 2,300,000 2,311,500
7.375% Sr. Nts., 2/1/16 4,140,000 4,171,050
---------------
18,952,915
- --------------------------------------------------------------------------------
GAS UTILITIES--0.1%
SEMCO Energy, Inc., 7.125% Sr.
Nts., 5/15/08 400,000 401,598
- --------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER--0.3%
CMS Energy Corp.:
7.50% Sr. Nts., 1/15/09 357,000 369,941
7.75% Sr. Nts., 8/1/10 400,000 424,000
- --------------------------------------------------------------------------------
NorthWestern Corp., 5.875% Sr.
Sec. Nts., 11/1/14 580,000 570,753
---------------
1,364,694
---------------
Total Corporate Bonds and Notes
(Cost $471,832,897) 477,910,119
SHARES
- --------------------------------------------------------------------------------
PREFERRED STOCKS--0.8%
- --------------------------------------------------------------------------------
AmeriKing, Inc., 13% Cum. Sr.
Exchangeable, Non-Vtg. 4,6 13,764 --
- --------------------------------------------------------------------------------
Dobson Communications Corp.,
6% Cv., Series F (converts into
Dobson Communications Corp.,
Cl. A common stock), Non-Vtg. 1 885 169,367
- --------------------------------------------------------------------------------
Eagle-Picher Holdings, Inc., 11.75%
Cum. Exchangeable, Series B,
Non-Vtg. 4,9 8,000 --
- --------------------------------------------------------------------------------
ICG Holdings, Inc., 14.25%
Exchangeable, Non-Vtg. 4,6,9 342 --
- --------------------------------------------------------------------------------
ION Media Networks, Inc.:
14.25% Cum., Non-Vtg. 4,6 229 1,705,693
9.75% Cv., Series AI 4,6,9 1 894
- --------------------------------------------------------------------------------
Loral Skynet Corp., 12% Cum.,
Series A, Non-Vtg. 4,6 1,750 362,250
- --------------------------------------------------------------------------------
PTV, Inc., 10% Cum., Series A,
Non-Vtg. 22 83
- --------------------------------------------------------------------------------
Rural Cellular Corp., 11.375%
Cum., Series B, Non-Vtg. 4,6 245 306,863
17 | OPPENHEIMER HIGH INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
PREFERRED STOCKS Continued
- --------------------------------------------------------------------------------
Sovereign Real Estate Investment
Trust, 12% Non-Cum., Series A 4 10,000 $ 1,557,500
---------------
Total Preferred Stocks (Cost $4,495,691) 4,102,650
- --------------------------------------------------------------------------------
COMMON STOCKS--1.8%
- --------------------------------------------------------------------------------
American Tower Corp. 9 19,733 735,646
- --------------------------------------------------------------------------------
ATA Holdings Corp. 4,9 4,647 69,705
- --------------------------------------------------------------------------------
Cebridge Connections Holding LLC 4,9 18,668 --
- --------------------------------------------------------------------------------
Charles River Laboratories
International, Inc. 9 8,360 361,570
- --------------------------------------------------------------------------------
Chesapeake Energy Corp. 12,000 348,600
- --------------------------------------------------------------------------------
Citigroup, Inc. 359 19,996
- --------------------------------------------------------------------------------
Covad Communications Group, Inc. 9 20,660 28,511
- --------------------------------------------------------------------------------
Dobson Communications Corp.,
Cl. A 9 43,391 377,936
- --------------------------------------------------------------------------------
El Paso Corp. 45,000 687,600
- --------------------------------------------------------------------------------
Globix Corp. 9 11,467 49,881
- --------------------------------------------------------------------------------
Gulfstream Holding, Inc. 4,9 56 --
- --------------------------------------------------------------------------------
ICO Global Communication
Holdings Ltd. 9 42,107 192,429
- --------------------------------------------------------------------------------
Idearc, Inc. 9 46 1,318
- --------------------------------------------------------------------------------
iPCS, Inc. 9 10,189 564,063
- --------------------------------------------------------------------------------
Kaiser Aluminum Corp. 9 2,945 164,861
- --------------------------------------------------------------------------------
Leap Wireless International, Inc. 9 1,913 113,766
- --------------------------------------------------------------------------------
Liberty Global, Inc., Series A 9 7,577 220,870
- --------------------------------------------------------------------------------
Liberty Global, Inc., Series C 9 7,684 215,152
- --------------------------------------------------------------------------------
Loral Space & Communications Ltd. 9 12,399 504,887
- --------------------------------------------------------------------------------
Manitowoc Co., Inc. (The) 2,078 123,496
- --------------------------------------------------------------------------------
NTL, Inc. 69,198 1,746,558
- --------------------------------------------------------------------------------
Orbital Sciences Corp. 9 2,235 41,213
- --------------------------------------------------------------------------------
Polymer Group, Inc., Cl. A 9 24,040 614,222
- --------------------------------------------------------------------------------
Prandium, Inc. 4,9 62,829 628
- --------------------------------------------------------------------------------
Quicksilver Resources, Inc. 9 15,000 548,850
- --------------------------------------------------------------------------------
Smithfield Foods, Inc. 9 18,000 461,880
- --------------------------------------------------------------------------------
Sterling Chemicals, Inc. 4,9 398 5,075
- --------------------------------------------------------------------------------
Teco Energy, Inc. 20,000 344,600
- --------------------------------------------------------------------------------
TVMAX Holdings, Inc. 4,9 7,500 7,500
- --------------------------------------------------------------------------------
United Rentals, Inc. 9 36,000 915,446
- --------------------------------------------------------------------------------
Verizon Communications, Inc. 935 34,819
- --------------------------------------------------------------------------------
Viatel Holding (Bermuda) Ltd. 4,9 2,701 14
- --------------------------------------------------------------------------------
Western Forest Products, Inc. 9,10 85,047 140,025
- --------------------------------------------------------------------------------
WRC Media Corp. 4,9 1,353 14
- --------------------------------------------------------------------------------
XO Holdings, Inc. 9 3,538 15,213
---------------
Total Common Stocks
(Cost $9,140,100) 9,656,344
VALUE
UNITS SEE NOTE 1
- --------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- --------------------------------------------------------------------------------
ATA Holdings Corp. Wts.,
Exp. 2/28/11 9 570 $ 4,183
- --------------------------------------------------------------------------------
COLO.com, Inc. Wts., Exp. 3/15/10 4,9 600 --
- --------------------------------------------------------------------------------
Concentric Network Corp. Wts.,
Exp. 12/15/07 4,9 750 --
- --------------------------------------------------------------------------------
DeCrane Aircraft Holdings, Inc.
Wts., Exp. 9/30/08 4,9 1,750 --
- --------------------------------------------------------------------------------
Diva Systems Corp. Wts.,
Exp. 3/1/08 4,9 1,500 --
- --------------------------------------------------------------------------------
iPCS, Inc. Wts., Exp. 6/15/10 4,9 750 --
- --------------------------------------------------------------------------------
Long Distance International, Inc.
Wts., Exp. 4/13/08 4,9 800 --
- --------------------------------------------------------------------------------
Ntelos, Inc. Wts., Exp. 8/15/10 4,9 1,000 --
- --------------------------------------------------------------------------------
Pathmark Stores, Inc. Wts.,
Exp. 9/19/10 9 20,000 5,000
- --------------------------------------------------------------------------------
Sterling Chemicals, Inc. Wts.,
Exp. 12/19/08 9 651 7
- --------------------------------------------------------------------------------
XO Communications, Inc.:
Series A Wts., Exp. 1/16/10 9 7,093 4,965
Series B Wts., Exp. 1/16/10 9 5,319 2,287
Series C Wts., Exp. 1/16/10 4,9 5,319 1,170
---------------
Total Rights, Warrants and Certificates
(Cost $76,785) 17,612
PRINCIPAL
AMOUNT
- --------------------------------------------------------------------------------
STRUCTURED NOTES--0.4%
- --------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc.,
High Yield Targeted Return Index
Securities, Series 2006-1, 7.546%,
5/1/16 4,11 (Cost $1,943,845) $ 1,920,000 1,987,258
SHARES
- --------------------------------------------------------------------------------
MONEY MARKET FUND--5.5%
- --------------------------------------------------------------------------------
Oppenheimer Institutional Money
Market Fund, Cl. E, 5.25% 12,13
(Cost $29,765,155) 29,765,155 29,765,155
- --------------------------------------------------------------------------------
Total Investments, at Value
(excluding Investments Purchased
with Cash Collateral from
Securities Loaned)
(Cost $517,254,473) 523,439,138
18 | OPPENHEIMER HIGH INCOME FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM
SECURITIES LOANED--0.0% 8
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--0.0%
Undivided interest of 0.001% in joint repurchase
agreement (Principal Amount/Value $4,100,000,000,
with a maturity value of $4,102,437,222) with
Nomura Securities, 5.35%, dated 12/29/06,
to be repurchased at $53,539 on 1/2/07,
collateralized by U.S. Agency Mortgages,
0.00%-22.12%, 3/15/14-5/1/46, with a
value of $4,182,000,000
(Cost $53,507) $ 53,507 $ 53,507
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $517,307,980) 97.9% 523,492,645
- --------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 2.1 11,250,911
--------------------------------
NET ASSETS 100.0% $ 534,743,556
================================
FOOTNOTES TO STATEMENT OF INVESTMENTS
Principal amount is reported in U.S. Dollars, except for those denoted in the
following currency:
EUR Euro
1. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $63,909,443 or 11.95% of the Fund's net
assets as of December 31, 2006.
2. Issuer is in default. See Note 1 of accompanying Notes.
3. Denotes a step bond: a zero coupon bond that converts to a fixed or variable
interest rate at a designated future date.
4. Illiquid or restricted security. The aggregate value of illiquid or
restricted securities as of December 31, 2006 was $27,433,923, which represents
5.13% of the Fund's net assets, of which $628 is considered restricted. See Note
8 of accompanying Notes.
5. Represents the current interest rate for a variable or increasing rate
security.
6. Interest or dividend is paid-in-kind, when applicable.
7. All or a portion of the security is held in collateralized accounts to cover
initial margin requirements on open futures contracts. The aggregate market
value of such securities is $986,250. See Note 6 of accompanying Notes.
8. The security/securities have 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 9 of
accompanying Notes.
9. Non-income producing security.
10. Partial or fully-loaned security. See Note 9 of accompanying Notes.
11. Interest rate represents a weighted average rate comprised of the interest
rates of the underlying securities.
12. Rate shown is the 7-day yield as of December 31, 2006.
13. Represents ownership of an affiliated fund, at or during the period ended
December 31, 2006. Transactions during the period in which the issuer was an
affiliate are as follows:
SHARES GROSS GROSS SHARES
DECEMBER 31, 2005 ADDITIONS REDUCTIONS DECEMBER 31, 2006
- -------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Institutional Money Market Fund, Cl. E, 5.25%* -- 59,265,639 29,500,484 29,765,155
VALUE DIVIDEND
SEE NOTE 1 INCOME
- -------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Institutional Money Market Fund, Cl. E, 5.25%* $29,765,155 $344,798
* The money market fund and the Fund are affiliated by having the same
investment advisor.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19 | OPPENHEIMER HIGH INCOME FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 31, 2006
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
ASSETS
- ---------------------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments:
Unaffiliated companies (cost $487,542,825) $ 493,727,490
Affiliated companies (cost $29,765,155) 29,765,155
----------------
523,492,645
- ---------------------------------------------------------------------------------------------
Cash 1,020,392
- ---------------------------------------------------------------------------------------------
Unrealized appreciation on swap contracts 334,476
- ---------------------------------------------------------------------------------------------
Receivables and other assets:
Interest, dividends and principal paydowns 10,140,274
Shares of beneficial interest sold 548,180
Investments sold 30,000
Futures margins 26,359
Other 21,103
----------------
Total assets 535,613,429
- ---------------------------------------------------------------------------------------------
LIABILITIES
- ---------------------------------------------------------------------------------------------
Return of collateral for securities loaned 53,507
- ---------------------------------------------------------------------------------------------
Unrealized depreciation on swap contracts 340,355
- ---------------------------------------------------------------------------------------------
Payables and other liabilities:
Shares of beneficial interest redeemed 307,981
Distribution and service plan fees 106,295
Shareholder communications 20,314
Trustees' compensation 14,777
Transfer and shareholder servicing agent fees 1,727
Other 24,917
----------------
Total liabilities 869,873
- ---------------------------------------------------------------------------------------------
NET ASSETS $ 534,743,556
================
- ---------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- ---------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 62,648
- ---------------------------------------------------------------------------------------------
Additional paid-in capital 595,343,637
- ---------------------------------------------------------------------------------------------
Accumulated net investment income 36,328,896
- ---------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign
currency transactions (103,210,528)
- ---------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation
of assets and liabilities denominated in foreign currencies 6,218,903
----------------
NET ASSETS $ 534,743,556
================
- ---------------------------------------------------------------------------------------------
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 $361,444,400 and 42,256,593 shares
of beneficial interest outstanding) $ 8.55
- ---------------------------------------------------------------------------------------------
Service Shares:
Net asset value, redemption price per share and offering price per share
(based on net assets of $173,299,156 and 20,391,802 shares
of beneficial interest outstanding) $ 8.50
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20 | OPPENHEIMER HIGH INCOME FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 31, 2006
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
INVESTMENT INCOME
- ---------------------------------------------------------------------------------------------
Interest (net of foreign withholding taxes of $3,354) $ 40,248,660
- ---------------------------------------------------------------------------------------------
Dividends:
Unaffiliated companies (net of foreign withholding taxes of $38) 381,790
Affiliated companies 344,798
- ---------------------------------------------------------------------------------------------
Portfolio lending fees 53
----------------
Total investment income 40,975,301
- ---------------------------------------------------------------------------------------------
EXPENSES
- ---------------------------------------------------------------------------------------------
Management fees 3,808,520
- ---------------------------------------------------------------------------------------------
Distribution and service plan fees -- Service shares 401,558
- ---------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service shares 10,126
Service shares 10,047
- ---------------------------------------------------------------------------------------------
Shareholder communications:
Non-Service shares 13,468
Service shares 5,217
- ---------------------------------------------------------------------------------------------
Trustees' compensation 13,364
- ---------------------------------------------------------------------------------------------
Administrative fees 1,500
- ---------------------------------------------------------------------------------------------
Custodian fees and expenses 1,326
- ---------------------------------------------------------------------------------------------
Other 46,809
----------------
Total expenses 4,311,935
Less reduction to custodian expenses (474)
Less waivers and reimbursements of expenses (6,549)
----------------
Net expenses 4,304,912
- ---------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 36,670,389
- ---------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- ---------------------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments 2,583,312
Closing and expiration of futures contracts (516,413)
Foreign currency transactions 375,064
Swap contracts 495,170
----------------
Net realized gain 2,937,133
- ---------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments 7,637,549
Translation of assets and liabilities denominated in foreign currencies (33,052)
Futures contracts 89,353
Swap contracts (5,879)
----------------
Net change in unrealized appreciation 7,687,971
- ---------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 47,295,493
================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
21 | OPPENHEIMER HIGH INCOME FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2006 2005
- ---------------------------------------------------------------------------------------------
OPERATIONS
- ---------------------------------------------------------------------------------------------
Net investment income $ 36,670,389 $ 39,416,355
- ---------------------------------------------------------------------------------------------
Net realized gain 2,937,133 4,793,340
- ---------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) 7,687,971 (31,729,313)
----------------------------------
Net increase in net assets resulting from operations 47,295,493 12,480,382
- ---------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ---------------------------------------------------------------------------------------------
Dividends from net investment income:
Non-Service shares (28,179,781) (29,392,362)
Service shares (11,514,103) (8,541,230)
----------------------------------
(39,693,884) (37,933,592)
- ---------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- ---------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from beneficial interest transactions:
Non-Service shares (28,076,230) (74,783,236)
Service shares 14,875,665 27,161,237
----------------------------------
(13,200,565) (47,621,999)
- ---------------------------------------------------------------------------------------------
NET ASSETS
- ---------------------------------------------------------------------------------------------
Total decrease (5,598,956) (73,075,209)
- ---------------------------------------------------------------------------------------------
Beginning of period 540,342,512 613,417,721
----------------------------------
End of period (including accumulated net investment
income of $36,328,896 and $38,892,209, respectively) $ 534,743,556 $ 540,342,512
==================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22 | OPPENHEIMER HIGH INCOME FUND/VA
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2006 2005 2004 2003 2002
- ----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.44 $ 8.80 $ 8.61 $ 7.51 $ 8.54
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .58 1 .57 1 .58 1 .60 .58
Net realized and unrealized gain (loss) .17 (.37) .15 1.09 (.76)
--------------------------------------------------------------------------------
Total from investment operations .75 .20 .73 1.69 (.18)
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.64) (.56) (.54) (.59) (.85)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 8.55 $ 8.44 $ 8.80 $ 8.61 $ 7.51
================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 9.42% 2.31% 8.97% 23.96% (2.40)%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 361,445 $ 384,726 $ 479,405 $ 480,112 $ 345,670
- ----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 365,154 $ 444,477 $ 460,877 $ 396,858 $ 335,894
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 7.05% 6.79% 6.91% 8.31% 8.29%
Total expenses 0.74% 4,5,6 0.75% 4 0.75% 4 0.76% 4 0.77% 4
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 57% 64% 51% 48% 75%
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. Voluntary waiver of affiliated fund management fees less than 0.01%.
6. Expenses including indirect expenses from affiliated fund were as follows:
Year Ended December 31, 2006 0.74%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23 | OPPENHEIMER HIGH INCOME FUND/VA
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SERVICE SHARES YEAR ENDED DECEMBER 31, 2006 2005 2004 2003 2002
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.39 $ 8.76 $ 8.58 $ 7.49 $ 8.54
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .56 1 .55 1 .56 1 .61 .88
Net realized and unrealized gain (loss) .17 (.38) .15 1.06 (1.08)
----------------------------------------------------------------------------------
Total from investment operations .73 .17 .71 1.67 (.20)
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.62) (.54) (.53) (.58) (.85)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 8.50 $ 8.39 $ 8.76 $ 8.58 $ 7.49
==================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 9.23% 2.01% 8.73% 23.79% (2.67)%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 173,299 $ 155,617 $ 134,013 $ 76,354 $ 17,705
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 160,703 $ 141,287 $ 101,464 $ 41,246 $ 5,602
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 6.80% 6.54% 6.63% 7.84% 8.91%
Total expenses 1.00% 4,5,6 1.00% 4 1.01% 4 1.04% 4 1.02% 4,7
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 57% 64% 51% 48% 75%
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. Voluntary waiver of affiliated fund management fees less than 0.01%.
6. Expenses including indirect expenses from affiliated fund were as follows:
Year Ended December 31, 2006 1.00%
7. 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(R) 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, as 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. Options are
valued daily based upon the last sale price on the principal exchange on which
the option is traded. 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. Investments in
open-end registered investment companies (including affiliated funds) are valued
at that fund's net asset value. 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.
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, 2006, securities with an
aggregate market value of $4,320,846, representing 0.81% 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.
- --------------------------------------------------------------------------------
AFFILIATED FUNDS. The Fund is permitted to invest daily available cash balances
in affiliated money market funds. Each day, the Fund invests the available cash
in Class E shares of Oppenheimer Institutional Money Market Fund ("IMMF") which
seeks current income and stability of principal. IMMF is a registered open-end
management investment company, regulated as a money market fund under the
Investment Company Act of 1940, as amended. The Manager is also the investment
advisor of IMMF. The Fund's investment in IMMF is included in the Statement of
Investments. As a shareholder, the Fund is subject to its proportional share of
IMMF's Class E expenses, including its management fee. The Manager will waive
fees and/or reimburse Fund expenses in an amount equal to the indirect
management fees incurred through the Fund's investment in IMMF.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
INVESTMENTS WITH OFF BALANCE SHEET RISK. The Fund enters into financial
instrument transactions (such as swaps, futures, options and other derivatives)
that may have off-balance sheet market risk. Off-balance sheet market risk
exists when the maximum potential loss on a particular financial instrument is
greater than the value of such financial instrument, as reflected in the Fund's
Statement of Assets and Liabilities.
- --------------------------------------------------------------------------------
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.
26 | OPPENHEIMER HIGH INCOME 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 AND
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED OTHER INVESTMENTS
NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME
INCOME GAIN CARRYFORWARD 1,2,3 TAX PURPOSES
--------------------------------------------------------------------------
$36,748,883 $-- $101,963,617 $4,912,735
1. As of December 31, 2006, the Fund had $101,963,617 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, 2006,
details of the capital loss carryforwards were as follows:
EXPIRING
-------------------------
2007 $ 2,974,885
2008 11,572,833
2009 22,696,701
2010 56,061,391
2011 8,529,303
2012 128,504
--------------
Total $ 101,963,617
==============
2. During the fiscal year ended December 31, 2006, the Fund utilized $2,201,464
of capital loss carryforward to offset capital gains realized in that fiscal
year.
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.
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, 2006. Net assets of
the Fund were unaffected by the reclassifications.
INCREASE TO INCREASE TO
ACCUMULATED ACCUMULATED NET
NET INVESTMENT REALIZED LOSS
INCOME ON INVESTMENTS
----------------------------------------------
$460,182 $460,182
The tax character of distributions paid during the years ended December 31, 2006
and December 31, 2005 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2006 DECEMBER 31, 2005
------------------------------------------------------------------
Distributions paid from:
Ordinary income $39,693,884 $37,933,592
27 | OPPENHEIMER HIGH INCOME FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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, 2006 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 $ 518,515,348
Federal tax cost of other investments 14,631,351
---------------
Total federal tax cost $ 533,146,699
===============
Gross unrealized appreciation $ 19,530,601
Gross unrealized depreciation (14,617,866)
---------------
Net unrealized appreciation $ 4,912,735
===============
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a compensation
deferral plan for independent trustees that enables trustees to elect to defer
receipt of all or a portion of the annual compensation they are entitled to
receive from the Fund. For purposes of determining the amount owed to the
Trustee under the plan, deferred amounts are treated as though equal dollar
amounts had been invested in shares of the Fund or in other Oppenheimer funds
selected by the Trustee. The Fund purchases shares of the funds selected for
deferral by the Trustee in amounts equal to his or her deemed investment,
resulting in a Fund asset equal to the deferred compensation liability. Such
assets are included as a component of "Other" within the asset section of the
Statement of Assets and Liabilities. Deferral of trustees' fees under the plan
will not affect the net assets of the Fund, and will not materially affect the
Fund's assets, liabilities or net investment income per share. Amounts will be
deferred until distributed in accordance 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, at a rate equal to the
Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line item,
if applicable, represents earnings on cash balances maintained by the Fund
during the period. Such interest expense and other custodian fees may be paid
with these earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Fund's organizational documents provide current and former
trustees and officers with a limited indemnification against liabilities arising
in connection with the performance of their duties to the Fund. In the normal
course of business, the Fund may also enter into contracts that provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would be dependent on future claims that may be made against the
Fund. The risk of material loss from such claims is considered remote.
28 | OPPENHEIMER HIGH INCOME 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, 2006 YEAR ENDED DECEMBER 31, 2005
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------
NON-SERVICE SHARES
Sold 5,280,216 $ 43,432,010 10,721,772 $ 89,596,389
Dividends and/or distributions reinvested 3,544,627 28,179,781 3,524,264 29,392,362
Redeemed (12,151,871) (99,688,021) (23,117,209) (193,771,987)
--------------------------------------------------------------
Net decrease (3,327,028) $ (28,076,230) (8,871,173) $ (74,783,236)
==============================================================
SERVICE SHARES
Sold 5,002,490 $ 40,899,612 9,211,332 $ 76,634,515
Dividends and/or distributions reinvested 1,455,639 11,514,103 1,027,826 8,541,230
Redeemed (4,611,753) (37,538,050) (6,989,741) (58,014,508)
--------------------------------------------------------------
Net increase 1,846,376 $ 14,875,665 3,249,417 $ 27,161,237
==============================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations and money market funds, for the year ended December
31, 2006, were as follows:
PURCHASES SALES
---------------------------------------------------------------
Investment securities $258,123,423 $279,192,275
- --------------------------------------------------------------------------------
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 average net assets as shown in the following table:
FEE SCHEDULE
-------------------------------------
Up to $200 million 0.75%
Next $200 million 0.72
Next $200 million 0.69
Next $200 million 0.66
Next $200 million 0.60
Over $1 billion 0.50
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the year ended December 31, 2006, the Fund paid
$20,223 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.
29 | OPPENHEIMER HIGH INCOME 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.
The Manager will waive fees and/or reimburse Fund expenses in an amount
equal to the indirect management fees incurred through the Fund's investment in
IMMF. During the year ended December 31, 2006, the Manager waived $6,549 for
IMMF management fees.
- --------------------------------------------------------------------------------
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, 2006, 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
30 | OPPENHEIMER HIGH INCOME FUND/VA
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 at 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, 2006, the Fund had outstanding futures contracts as follows:
UNREALIZED
EXPIRATION NUMBER OF VALUATION AS OF APPRECIATION
CONTRACT DESCRIPTION DATES CONTRACTS DECEMBER 31, 2006 (DEPRECIATION)
- -------------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
U.S. Long Bonds 3/21/07 271 $ 30,199,563 $ (370,194)
U.S. Treasury Nts., 2 yr. 3/30/07 211 43,050,594 (131,560)
-----------
(501,754)
-----------
CONTRACTS TO SELL
U.S. Treasury Nts., 10 yr. 3/21/07 546 58,677,938 541,422
-----------
$ 39,668
===========
- --------------------------------------------------------------------------------
7. CREDIT DEFAULT SWAP CONTRACTS
Credit default swaps are designed to transfer the credit exposure of fixed
income products between counterparties. The Fund may enter into credit default
swaps, both directly ("unfunded swaps") and indirectly in the form of a swap
embedded within a structured note ("funded swaps"), to protect against the risk
that a security will default. Unfunded and funded credit default swaps may be on
a single security, or a basket of securities. The Fund may take a short position
(purchaser of credit protection) or a long position (seller of credit
protection) in the credit default swap. Risks of credit default swaps include,
but are not limited to, the cost of paying for credit protection if there are no
credit events, pricing transparency when assessing the cost of a credit default
swap, counterparty risk, and the need to fund the delivery obligation (either
cash or defaulted bonds depending on whether the Fund is long or short the swap,
respectively).
The Fund would take a short position in a credit default swap (the
"unfunded swap") against a long portfolio position to decrease exposure to
specific high yield issuers. As a purchaser of credit protection under a 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 and is included on the
Statement of Operations. Credit default swaps are marked to market daily using
different sources, including quotations from counterparties, pricing services,
brokers or market makers. The unrealized appreciation
31 | OPPENHEIMER HIGH INCOME FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7. CREDIT DEFAULT SWAP CONTRACTS Continued
(depreciation) related to the change in the valuation of the notional amount of
the swap is combined with the amount due to (owed by) the Fund at termination or
settlement and disclosed separately on the Statement of Assets and Liabilities.
The net change in this amount is included on the Statement of Operations.
Information regarding such credit default swaps as of December 31, 2006 is as
follows:
NOTIONAL AMOUNT ANNUAL
RECEIVED BY INTEREST
REFERENCED DEBT THE FUND UPON RATE PAID BY TERMINATION UNREALIZED
COUNTERPARTY OBLIGATION CREDIT EVENT THE FUND DATES DEPRECIATION
- --------------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG:
Ford Motor Co. $ 2,200,000 3.05% 12/20/08 $ 13,355
Ford Motor Co. 2,760,000 3.30 12/20/08 51,265
Ford Motor Co. 1,865,000 3.65 12/20/08 48,675
General Motors Corp. 2,200,000 2.03 12/20/08 9,962
General Motors Corp. 1,865,000 2.55 12/20/08 29,685
- --------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Capital
Markets LP General Motors Corp. 1,865,000 2.70 12/20/08 35,040
- --------------------------------------------------------------------------------------------------------------------------
JPMorgan Chase Bank:
Ford Motor Co. 1,865,000 3.60 12/20/08 40,338
General Motors Corp. 2,760,000 2.35 12/20/08 19,508
- --------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital
Services, Inc.:
Ford Motor Co. 1,865,000 3.70 12/20/08 55,508
General Motors Corp. 1,865,000 2.70 12/20/08 37,019
----------
$ 340,355
==========
The Fund would take a long position in the credit default swap note (the "funded
swap") to increase the exposure to specific high yield corporate issuers. As a
seller of credit protection under a 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 and
is included on the Statement of Operations. Credit default swaps are marked to
market daily using different sources, including quotations from counterparties,
pricing services, brokers or market makers. The unrealized appreciation
(depreciation) related to the change in the valuation of the notional amount of
the swap is combined with the amount due to (owed by) the Fund at termination or
settlement and disclosed separately on the Statement of Assets and Liabilities.
The net change in this amount is included on the Statement of Operations.
Information regarding such credit default swaps as of December 31, 2006 is as
follows:
NOTIONAL AMOUNT ANNUAL
PAID BY THE INTEREST RATE
REFERENCED DEBT FUND UPON RECEIVED TERMINATION UNREALIZED
COUNTERPARTY OBLIGATION CREDIT EVENT BY THE FUND DATES APPRECIATION
- --------------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG:
Ford Motor Co. $ 2,750,000 5.80% 12/20/16 $ 15,353
Ford Motor Co. 3,440,000 5.85 12/20/16 31,617
Ford Motor Co. 2,335,000 6.00 12/20/16 43,333
General Motors Corp. 2,200,000 4.68 12/20/16 8,578
General Motors Corp. 1,865,000 4.75 12/20/16 27,282
32 | OPPENHEIMER HIGH INCOME FUND/VA
NOTIONAL AMOUNT ANNUAL
PAID BY THE INTEREST RATE
REFERENCED DEBT FUND UPON RECEIVED TERMINATION UNREALIZED
COUNTERPARTY OBLIGATION CREDIT EVENT BY THE FUND DATES APPRECIATION
- --------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Capital
Markets LP General Motors Corp. $ 1,865,000 4.95% 12/20/16 $ 45,425
- --------------------------------------------------------------------------------------------------------------------------
JPMorgan Chase Bank:
Ford Motor Co. 2,335,000 6.00 12/20/16 38,947
General Motors Corp. 2,760,000 4.75 12/20/16 21,560
- --------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital
Services, Inc.:
Ford Motor Co. 2,335,000 6.15 12/20/16 41,685
General Motors Corp. 1,865,000 4.90 12/20/16 60,696
----------
$ 334,476
==========
- --------------------------------------------------------------------------------
8. ILLIQUID OR RESTRICTED SECURITIES
As of December 31, 2006, 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, 2006 DEPRECIATION
- ----------------------------------------------------------------------------------------------
Prandium, Inc. 3/19/99-7/19/02 $738,000 $628 $737,372
- --------------------------------------------------------------------------------
9. 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
securities, letters of credit 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 each day. If the Fund is
undercollateralized at the close of business due to an increase in market value
of securities on loan, additional collateral is requested from the borrowing
counterparty and is delivered to the Fund on the next business day. Cash
collateral may be invested in approved investments and the Fund bears the risk
of any loss in value of these investments. The Fund retains a portion of the
interest earned from the collateral. 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. 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, 2006, the Fund
had on loan securities valued at $68,488, which are included in the Statement of
Assets and Liabilities as "Investments, at value" and, when applicable, as
"Receivable for Investments sold." Collateral of $53,507 was received for the
loans, all of which was received in cash and subsequently invested in approved
investments or held as cash.
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10. RECENT ACCOUNTING PRONOUNCEMENTS
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48 ("FIN 48"), ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES.
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with FASB Statement No. 109,
ACCOUNTING FOR INCOME TAXES. FIN 48 requires the evaluation of tax positions
taken in the course of preparing the Fund's tax returns to determine whether it
33 | OPPENHEIMER HIGH INCOME FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
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10. RECENT ACCOUNTING PRONOUNCEMENTS Continued
is "more-likely-than-not" that tax positions taken in the Fund's tax return will
be ultimately sustained. A tax liability and expense must be recorded in respect
of any tax position that, in Management's judgment, will not be fully realized.
FIN 48 is effective for fiscal years beginning after December 15, 2006. As of
December 31, 2006, the Manager has evaluated the implications of FIN 48 and does
not currently anticipate a material impact to the Fund's financial statements.
The Manager will continue to monitor the Fund's tax positions prospectively for
potential future impacts.
In September 2006, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 157, FAIR VALUE MEASUREMENTS. This standard establishes
a single authoritative definition of fair value, sets out a framework for
measuring fair value and expands disclosures about fair value measurements. SFAS
No. 157 applies to fair value measurements already required or permitted by
existing standards. SFAS No. 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. As of December 31, 2006, the Manager does not believe the
adoption of SFAS No. 157 will materially impact the financial statement amounts;
however, additional disclosures may be required about the inputs used to develop
the measurements and the effect of certain of the measurements on changes in net
assets for the period.
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11. LITIGATION
A consolidated amended complaint was filed as a putative class action against
the Manager and the Transfer Agent and other defendants (including 51 of the
Oppenheimer funds excluding the Fund) in the U.S. District Court for the
Southern District of New York on January 10, 2005 and was amended on March 4,
2005. The complaint alleged, among other things, that the Manager charged
excessive fees for distribution and other costs, and that by permitting and/or
participating in those actions, the Directors/Trustees and the Officers of the
funds breached their fiduciary duties to fund shareholders under the Investment
Company Act of 1940 and at common law. The plaintiffs sought unspecified
damages, an accounting of all fees paid, and an award of attorneys' fees and
litigation expenses.
In response to the defendants' motions to dismiss the suit, seven of the
eight counts in the complaint, including the claims against certain of the
Oppenheimer funds, as nominal defendants, and against certain present and former
Directors, Trustees and Officers of the funds, and the Distributor, as
defendants, were dismissed with prejudice, by court order dated March 10, 2006,
and the remaining count against the Manager and the Transfer Agent was dismissed
with prejudice by court order dated April 5, 2006. The plaintiffs filed an
appeal of those dismissals on May 11, 2006.
The Manager believes that the allegations contained in the complaint are
without merit and that there are substantial grounds to sustain the district
court's rulings. The Manager also believes that it is premature to render any
opinion as to the likelihood of an outcome unfavorable to it, the funds, the
Directors/Trustees or the Officers on the appeal of the decisions of the
district court, and that no estimate can yet be made with any degree of
certainty as to the amount or range of any potential loss.
34 | OPPENHEIMER HIGH INCOME FUND/VA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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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 (the "Fund"), a series of Oppenheimer Variable
Account Funds, including the statement of investments, as of December 31, 2006,
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 period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
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 audits included 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, 2006, 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 the
Fund as of December 31, 2006, 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
period then ended, in conformity with accounting principles generally accepted
in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
February 8, 2007
35 | OPPENHEIMER HIGH INCOME FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
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- --------------------------------------------------------------------------------
In early 2007, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2006. 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, 2006 which are not designated as capital gain distributions should be
multiplied by 0.68% 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.
36 | OPPENHEIMER HIGH INCOME FUND/VA
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
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- --------------------------------------------------------------------------------
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.
37 | OPPENHEIMER HIGH INCOME FUND/VA
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
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Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew the Fund's
investment advisory agreement (the "Agreement"). The Investment Company Act of
1940, as amended, requires that the Board request and evaluate, and that the
Manager provide, such information as may be reasonably necessary to evaluate the
terms of the Agreement. The Board employs an independent consultant to prepare a
report that provides information, including comparative information, that the
Board requests for that purpose. In addition, the Board receives information
throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager and its affiliates, including
an analysis of the cost of providing services, (v) whether economies of scale
are realized as the Fund grows and whether fee levels reflect these economies of
scale for Fund investors and (vi) other benefits to the Manager from its
relationship with the Fund. Outlined below is a summary of the principal
information considered by the Board as well as the Board's conclusions.
The Board was aware that there are alternatives to retaining the Manager.
NATURE, QUALITY AND EXTENT OF SERVICES. The Board considered information
about the nature and extent of the services provided to the Fund and information
regarding the Manager's key personnel who provide such services. The Manager's
duties include providing the Fund with the services of the portfolio manager and
the Manager's investment team, who provide research, analysis and other advisory
services in regard to the Fund's investments; securities trading services;
oversight of third party service providers; monitoring compliance with
applicable Fund policies and procedures and adherence to the Fund's investment
restrictions. The Manager is responsible for providing certain administrative
services to the Fund as well. Those services include providing and supervising
all administrative and clerical personnel who are necessary in order to provide
effective corporate administration for the Fund; compiling and maintaining
records with respect to the Fund's operations; preparing and filing reports
required by the Securities and Exchange Commission; preparing periodic reports
regarding the operations of the Fund for its shareholders; preparing proxy
materials for shareholder meetings; and preparing the registration statements
required by Federal and state securities laws for the sale of the Fund's shares.
The Manager also provides the Fund with office space, facilities and equipment.
The Board also considered the quality of the services provided and the
quality of the Manager's resources that are available to the Fund. The Board
took account of the fact that the Manager has had over 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. In its evaluation of the quality of
the portfolio management services provided, the Board considered the experience
of Angelo Manioudakis and the Manager's Core Fixed income investment team and
analysts. Mr. Manioudakis and the Core Fixed Income team became the portfolio
managers of the Fund in November 2006. 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 investment 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
38 | OPPENHEIMER HIGH INCOME FUND/VA
the Fund's historical performance to relevant market indices and to the
performance of other high current yield funds underlying variable insurance
products. The Board noted that the Fund's one-year, three-year, five-year and
ten-year performance were below its peer group median. The Board also
considered, however, that for the one-year period, the Fund's performance has
been in the second quintile (the first quintile being the best) of the
performance universe identified by the independent consultant. The Board also
noted the recent transfer of the Fund's investment management responsibilities
to Angelo Manioudakis and the Core Fixed Income team in an effort to improve the
Fund's performance. The Board considered it reasonable to permit the new
portfolio management team to develop its own performance record.
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 and other high current yield funds underlying
variable insurance products. The Board noted that while the Fund's contractual
and actual management fees are higher than its peer group median, the Fund's
total expenses are only six basis points above the peer group median. The Board
also considered the management changes being made and the additional resources
being developed to manage the Fund.
ECONOMIES OF SCALE. The Board reviewed 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 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 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 Agreement, including the management fee,
in light of all of the surrounding circumstances.
39 | OPPENHEIMER HIGH INCOME FUND/VA
TRUSTEES AND OFFICERS Unaudited
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NAME, POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS HELD; NUMBER
THE FUNDS, LENGTH OF SERVICE, 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, President, Colorado Christian University (since 2006); Chairman of the following private mortgage
Chairman of the Board banking companies: Cherry Creek Mortgage Company (since 1991), Centennial State Mortgage Company
of Trustees (since 2003), (since 1994), and The El Paso Mortgage Company (since 1993); Chairman of the following private
Trustee (since 1999) companies: Ambassador Media Corporation (since 1984) and Broadway Ventures (since 1984);
Age: 69 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 37 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
Age: 75 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 37 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
Age: 70 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 37 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: 68 PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price Waterhouse
LLP Global Investment Management Industry Services Group (accounting firm) (July 1994-June
1998). Oversees 37 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
Age: 65 (October 1999-October 2003); Director of Rocky Mountain Elk Foundation (non-profit organization)
(February 1998-February 2003 and since February 2005); 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 37 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: 66 (until October 1994). Oversees 37 portfolios in the OppenheimerFunds complex.
40 | OPPENHEIMER HIGH INCOME FUND/VA
BEVERLY L. HAMILTON, Trustee of Monterey Institute for International Studies (educational organization) (since
Trustee (since 2002) February 2000); Board Member of Middlebury College (educational organization) (since December
Age: 60 2005); Director of The California Endowment (philanthropic organization) (since April 2002);
Director (February 2002-2005) and Chairman of Trustees (since 2006) of the Community Hospital
of Monterey Peninsula; Director (October 1991-2005) and Vice Chairman (since 2006) of American
Funds' of ARCO Investment Management Company (February 1991-April 2000); Member of the
investment committees of The Rockefeller Foundation (since 2001) and The University of
Michigan (since 2000); Advisor at Credit Suisse First Boston's Sprout venture capital unit
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 37 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: 62 (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 37 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: 64 (since 1987) and Chairman (1994-2005) of the Investment Committee 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); and Executive Vice President of Peoples Heritage
Financial Group, Inc. (commercial bank) (January 1999-July 1999). Oversees 39 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 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 September
Trustee, President and 2000) of the Manager; President and director or trustee of other Oppenheimer funds; President
Principal Executive Officer and Director of OAC and of Oppenheimer Partnership Holdings, Inc. (holding company subsidiary of
(since 2001) the Manager) (since July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of the
Age: 57 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), HarbourViewAsset 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 1997); Director of DLB Acquisition Corporation (holding company
parent of Babson Capital Management LLC) (since June 1995); Member of the Investment Company
Institute's 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
96 portfolios in the OppenheimerFunds complex.
41 | OPPENHEIMER HIGH INCOME FUND/VA
TRUSTEES AND OFFICERS Unaudited / Continued
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OTHER OFFICERS OF THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. ZACK, GILLESPIE AND
THE FUND MS. BLOOMBERG, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, NEW YORK, NEW YORK 10281-1008, FOR
MESSRS.VANDEHEY, WIXTED, PETERSEN, SZILAGYI AND MS. IVES, 6803 S.TUCSON WAY, CENTENNIAL, COLORADO
80112-3924; FOR MESSRS. MANIOUDAKIS, BOMFIM, CAAN, GORD AND SWANEY, 470 ATLANTIC AVENUE, 11TH
FLOOR, BOSTON, MA 02210. EACH OFFICER SERVES FOR AN INDEFINITE TERM OR UNTIL HIS OR HER
RESIGNATION, RETIREMENT, DEATH OR REMOVAL.
ANGELO G. MANIOUDAKIS, Senior Vice President of the Manager (since April 2002), of HarbourViewAsset Management
Vice President and Portfolio Corporation (since April 2002) and of OFI Institutional Asset Management, Inc. (since June 2002);
Manager (since 2002) Executive Director and portfolio manager for Miller, Anderson & Sherrerd, a division of Morgan
Age: 40 Stanley Investment Management (August 1993-April 2002). An officer of 17 portfolios in the
OppenheimerFunds complex.
ANTULIO N. BOMFIM, Vice President of the Manager (since October 2003); Senior Economist at the Board of Governors
Vice President and Portfolio of the Federal Reserve System (June 1992-October 2003). A portfolio manager of 15 portfolios in
Manager (since 2006) the OppenheimerFunds complex.
Age: 40
GEOFFREY CAAN, Vice President and Portfolio Manager of the Manager (since August 2003); Vice President of ABN
Vice President and Portfolio AMRO NA, Inc. (June 2002-August 2003); Vice President of Zurich Scudder Investments (January
Manager (since 2006) 1999-June 2002). A portfolio manager of 15 portfolios in the OppenheimerFunds complex.
Age: 37
BENJAMIN J. GORD, Vice President of the Manager (since April 2002), of HarbourViewAsset Management Corporation
Vice President and Portfolio (since April 2002) and of OFI Institutional Asset Management, Inc. (as of June 2002); Executive
Manager (since 2006) Director and senior fixed income analyst at Miller Anderson & Sherrerd, a division of Morgan
Age: 44 Stanley Investment Management (April 1992-March 2002). A portfolio manager of 15 portfolios in
the OppenheimerFunds complex.
THOMAS SWANEY, Vice President of the Manager (since April 2006); senior analyst, high grade investment team
Vice President and Portfolio (June 2002-March 2006); senior fixed income analyst at Miller Anderson & Sherrerd, a division of
Manager (since 2006) Morgan Stanley Investment Management (May 1998-May 2002). A portfolio manager of 15 portfolios in
Age: 34 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 of
(since 2004) the Manager (1997-February 2004). An officer of 96 portfolios in the OppenheimerFunds complex.
Age: 56
BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer of the
Treasurer and Principal following: HarbourViewAsset Management Corporation, Shareholder Financial
Financial & Accounting Services, Inc., Shareholder Services, Inc., Oppenheimer Real Asset Management Corporation, and
Officer (since 1999) Oppenheimer Partnership Holdings, Inc. (since March 1999), OFI Private Investments, Inc. (since
Age: 47 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 96
portfolios in the OppenheimerFunds complex.
BRIAN S. PETERSEN, Assistant Vice President of the Manager (since August 2002); Manager/Financial Product
Assistant Treasurer Accounting of the Manager (November 1998-July 2002). An officer of 96 portfolios in the
(since 2004) OppenheimerFunds complex.
Age: 36
42 | OPPENHEIMER HIGH INCOME FUND/VA
BRIAN C. SZILAGYI, Assistant Vice President of the Manager (since July 2004); Director of Financial Reporting and
Assistant Treasurer Compliance of First Data Corporation (April 2003-July 2004); Manager of Compliance of Berger
(since 2005) Financial Group LLC (May 2001-March 2003); Director of Mutual Fund Operations at American Data
Age: 36 Services, Inc. (September 2000-May 2001). An officer of 96 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: 58 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 96 portfolios
in the OppenheimerFunds complex.
LISA I. BLOOMBERG, Vice President and Associate Counsel of the Manager (since May 2004); First Vice President
Assistant Secretary (April 2001-April 2004), Associate General Counsel (December 2000-April 2004), Corporate Vice
(since 2004) President (May 1999-April 2001) and Assistant General Counsel (May 1999-December 2000) of UBS
Age: 39 Financial Services Inc. (formerly, PaineWebber Incorporated). An officer of 96 portfolios in the
OppenheimerFunds complex.
KATHLEEN T. IVES, Vice President (since June 1998) and Senior Counsel and Assistant Secretary (since October 2003)
Assistant Secretary of the Manager; Vice President (since 1999) and Assistant Secretary (since October 2003) of the
(since 2001) Distributor; Assistant Secretary of Centennial Asset Management Corporation (since October
Age: 41 2003); Vice President and Assistant Secretary of Shareholder Services, Inc. (since 1999);
Assistant Secretary of OppenheimerFunds Legacy Program and Shareholder Financial
Services, Inc. (since December 2001); Assistant Counsel of the Manager (August 1994-October
2003). An officer of 96 portfolios in the OppenheimerFunds complex.
PHILLIP S. GILLESPIE, Senior Vice President and Deputy General Counsel of the Manager (since September 2004); First
Assistant Secretary Vice President (2000-September 2004), Director (2000-September 2004) and Vice President
(since 2004) (1998-2000) of Merrill Lynch Investment Management. An officer of 96 portfolios in the
Age: 43 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 HIGH INCOME FUND/VA
OPPENHEIMER CORE BOND FUND/ VA
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. For the 12-month fiscal year ended
December 31, 2006, multiple factors contributed to the Fund's positive,
competitive total return, the most significant being our positioning within the
corporate bond sector. Additionally, our active management of the Fund's
duration, or interest-rate sensitivity, added value, as did our overweight
allocation to "spread," or non-Treasury securities, such as Mortgage-Backed
Securities (MBS) and Commerical Mortgage-Backed Securities (CMBS).
The most significant contributor to performance throughout the Fund's
fiscal year was our active management of the portfolio's allocation to corporate
bonds, or the credit sector. We began the year modestly overweight credit, and
after two very strong months of outperformance by the sector, pared this down to
a meaningful underweight by selling off many of our longer-maturity (30-year)
bonds. This substantially added to returns, not only since we reaped sizable
gains in trimming our position, but also since March and April proved to be very
difficult months for the credit market, particularly long-maturity credits. As
such, we effectively missed a good portion of the losses the sector suffered
during that brief period and gained relative performance.
In May, conditions began to show signs of improvement, and we took what we
saw as an ideal opportunity to restore our position in credit at attractive
valuations. We held a generally neutral exposure to credit for the remainder of
the year. Within that exposure, we focused on bonds rated BBB (lower quality),
with maturities of 5-years and under, where we perceived favorable yield at
relatively less risk. At the same time, our decision to heavily overweight our
exposure to financial-services credit, specifically longer-maturity,
banking-related bonds, pushed Fund returns higher, as this was the
best-performing sector within the corporate bond market this year.
Also within our credit allocation, our decision to significantly increase
our high-yield bond exposure solidly added to both absolute and relative returns
for the period. First, high-yield bonds were the best-performing segment of the
fixed-income markets this year, buoyed by investors' growing appetite for risk,
as well as low default rates and a still-solid economic backdrop. Second, our
specific areas of focus within the high-yield universe also benefited returns.
By focusing on high-yield bonds of lower credit quality and short maturities, we
worked to minimize volatility in the Fund's portfolio while capturing attractive
yield. At the same time, our decision to overweight domestic auto-related
high-yield credits, namely Ford Motor Credit Co. and General Motors Acceptance
Corp., substantially added to our returns, as these names delivered significant
outperformance within a sector that generally outperformed the market.
Another significant contributor to performance throughout the Fund's
fiscal year under review was our active management of our duration, or
interest-rate sensitivity. We began the fiscal year with less interest-rate
exposure than the market, based on our belief that at that time, the Federal
Reserve was not finished raising short-term rates and, that the U.S. economy was
healthier than some market participants believed. When rates increased rather
markedly over the first half of the year, this stance helped Fund performance
substantially against our benchmarks.
As we entered the second half of the period, we saw yields reaching levels
that we deemed more consistent with economic fundamentals. As such, we began
trending our short duration position a bit closer to a neutral stance. In
August, when the market began to react to various data hinting at economic
softening, yields fell rather quickly. We again viewed this as more pessimistic
than warranted given the state of the economy, and as such, we reverted back to
a short-duration position on interest rates for the remainder of the year. For
the period, the adjustments we made to our interest-rate sensitivity generally
aided the Fund's total return. We believe we have positioned the portfolio well
for the conditions we anticipate moving forward.
Our mortgage exposure throughout the year served us well, boosting Fund
performance in a number of ways. First, mortgages in general enjoyed a very
strong year, outperforming like-duration Treasuries by a substantial margin, and
as such, our decision to opportunistically overweight the sector throughout the
year added to Fund returns. Mortgage-backed Securities (MBS) benefited over the
course of the year, as did most other spread sectors, from tightening spreads
5 | OPPENHEIMER CORE BOND FUND/VA
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
versus Treasuries. In addition, this sector also derived support from the
market's lower expectations for future interest-rate volatility. When investors'
expectations regarding future rate volatility decrease, the mortgage market
typically benefits, since investors then anticipate lower costs associated with
managing the interest-rate exposure of mortgages.
The MBS market behaved similarly to the corporate bond market this year,
in that longer maturity MBS (30-year maturity)--which are seen as holding more
spread and volatility risk--outperformed shorter-maturity MBS. Therefore, our
decision to maintain an overweight allocation over the past year to 30-year
maturity MBS definitively added to our returns. Finally, our underweighted
allocation to GNMA, or Ginnie Mae's, which performed very poorly relative to
other areas of the MBS market, helped us.
Despite the positive results we derived from the bulk of our MBS
allocation, the one detractor to Fund performance this year came from our
emphasis on higher-coupon MBS. While some of these securities performed
reasonably well for us, lower-coupon MBS, which held more risk, enjoyed greater
return relative to equal duration Treasuries than did higher coupon issues, so
our overweight to the high coupon sector of the MBS market had a slight negative
impact on Fund returns.
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, 2006. 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.
The Fund's performance is compared to the performance of its primary
benchmark, the Citigroup Broad Investment Grade Index, a market-capitalization
weighted index that includes fixed-rate Treasury, government-sponsored,
corporate and mortgage securities. The Fund is also compared against 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)
Citigroup Broad Investment Grade Bond Index
Lehman Brothers Credit Index
Lehman Brothers Aggregate Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Citigroup
Oppenheimer Broad Lehman
Core Bond Investment Lehman Brothers
Fund/VA Grade Bond Brothers Aggregate
(Non-Service) Index Credit Index Bond Index
------------- ---------- ------------ ----------
12/31/1996 $10,000 $10,000 $10,000 $10,000
03/31/1997 $ 9,956 $ 9,948 $ 9,899 $ 9,944
06/30/1997 $10,289 $10,307 $10,307 $10,309
09/30/1997 $10,618 $10,650 $10,711 $10,652
12/31/1997 $10,925 $10,964 $11,023 $10,965
03/31/1998 $11,081 $11,140 $11,192 $11,136
06/30/1998 $11,356 $11,398 $11,480 $11,396
09/30/1998 $11,678 $11,871 $11,897 $11,878
12/31/1998 $11,669 $11,919 $11,968 $11,918
03/31/1999 $11,631 $11,864 $11,883 $11,859
06/30/1999 $11,471 $11,754 $11,697 $11,755
09/30/1999 $11,442 $11,839 $11,730 $11,835
12/31/1999 $11,491 $11,820 $11,734 $11,820
03/31/2000 $11,607 $12,079 $11,902 $12,081
06/30/2000 $11,715 $12,284 $12,049 $12,291
09/30/2000 $11,932 $12,658 $12,418 $12,662
12/31/2000 $12,192 $13,190 $12,836 $13,194
03/31/2001 $12,684 $13,597 $13,385 $13,595
06/30/2001 $12,848 $13,667 $13,527 $13,671
09/30/2001 $13,352 $14,311 $14,046 $14,302
12/31/2001 $13,141 $14,314 $14,171 $14,308
03/31/2002 $13,098 $14,323 $14,134 $14,322
06/30/2002 $13,453 $14,828 $14,543 $14,851
09/30/2002 $13,985 $15,510 $15,195 $15,531
12/31/2002 $14,327 $15,758 $15,663 $15,776
03/31/2003 $14,615 $15,979 $16,039 $15,995
06/30/2003 $15,071 $16,389 $16,808 $16,395
09/30/2003 $15,164 $16,361 $16,784 $16,372
12/31/2003 $15,298 $16,420 $16,867 $16,423
03/31/2004 $15,746 $16,861 $17,420 $16,860
06/30/2004 $15,395 $16,450 $16,823 $16,448
09/30/2004 $15,914 $16,986 $17,530 $16,974
12/31/2004 $16,139 $17,155 $17,752 $17,136
03/31/2005 $16,098 $17,068 $17,564 $17,053
06/30/2005 $16,527 $17,602 $18,192 $17,567
09/30/2005 $16,467 $17,483 $18,009 $17,448
12/31/2005 $16,556 $17,596 $18,099 $17,552
03/31/2006 $16,524 $17,479 $17,888 $17,438
06/30/2006 $16,477 $17,459 $17,818 $17,425
09/30/2006 $17,133 $18,131 $18,621 $18,089
12/31/2006 $17,431 $18,358 $18,869 $18,313
AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/06
1-Year 5.28% 5-Year 5.81% 10-Year 5.71%
SERVICE SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Core Bond Fund/VA (Service)
Citigroup Broad Investment Grade Bond Index
Lehman Brothers Credit Index
Lehman Brothers Aggregate Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Citigroup Lehman
Oppenheimer Broad Lehman Brothers
Core Bond Investment Brothers Aggregate
Fund/VA Grade Bond Credit Bond
(Service) Index Index Index
----------- ---------- ----------- -----------
05/01/2002 $10,000 $10,000 $10,000 $10,000
06/30/2002 $10,153 $10,159 $10,148 $10,172
09/30/2002 $10,554 $10,627 $10,604 $10,638
12/31/2002 $10,803 $10,797 $10,930 $10,806
03/31/2003 $11,017 $10,948 $11,192 $10,956
06/30/2003 $11,350 $11,229 $11,729 $11,230
09/30/2003 $11,411 $11,210 $11,712 $11,214
12/31/2003 $11,512 $11,251 $11,770 $11,249
03/31/2004 $11,839 $11,553 $12,156 $11,548
06/30/2004 $11,564 $11,271 $11,740 $11,266
09/30/2004 $11,955 $11,638 $12,232 $11,626
12/31/2004 $12,113 $11,754 $12,388 $11,737
03/31/2005 $12,074 $11,695 $12,257 $11,681
06/30/2005 $12,385 $12,060 $12,695 $12,032
09/30/2005 $12,341 $11,979 $12,567 $11,951
12/31/2005 $12,396 $12,056 $12,630 $12,022
03/31/2006 $12,351 $11,976 $12,483 $11,945
06/30/2006 $12,316 $11,962 $12,434 $11,935
09/30/2006 $12,797 $12,423 $12,994 $12,390
12/31/2006 $13,007 $12,578 $13,167 $12,543
AVERAGE ANNUAL TOTAL RETURNS OF SERVICE SHARES OF THE FUND AT 12/31/06
1-Year 4.93% 5-Year N/A Since Inception (5/1/02) 5.80%
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, 2006.
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
(7/1/06) (12/31/06) DECEMBER 31, 2006
- --------------------------------------------------------------------------------
Non-Service shares Actual $1,000.00 $1,057.80 $3.95
- --------------------------------------------------------------------------------
Non-Service shares Hypothetical 1,000.00 1,021.37 3.88
- --------------------------------------------------------------------------------
Service shares Actual 1,000.00 1,056.10 5.40
- --------------------------------------------------------------------------------
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,
excluding affiliated fund indirect expenses, based on the 6-month period ended
December 31, 2006 are as follows:
CLASS EXPENSE RATIOS
- -------------------------------------
Non-Service shares 0.76%
- -------------------------------------
Service shares 1.04
The expense ratios reflect voluntary waivers or reimbursements of expenses by
the Fund's Manager that can be terminated at any time, without advance notice.
The "Financial Highlights" tables in the Fund's financial statements, included
in this report, also show the gross expense ratios, without such waivers or
reimbursements.
- --------------------------------------------------------------------------------
8 | OPPENHEIMER CORE BOND FUND/VA
STATEMENT OF INVESTMENTS December 31, 2006
- -------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--9.0%
- -------------------------------------------------------------------------------
Ace Securities Corp. Home Equity
Loan Trust, Asset-Backed
Pass-Through Certificates, Series
2005-HE7, Cl. A2B, 5.53%, 11/25/35 1 $ 960,000 $ 960,941
- -------------------------------------------------------------------------------
Aesop Funding II LLC, Automobile
Asset-Backed Certificates, Series
2005-1A, Cl. A2, 5.41%, 4/20/08 1 640,000 640,641
- -------------------------------------------------------------------------------
Argent Securities Trust 2004-W8,
Asset-Backed Pass-Through
Certificates, Series 2004-W8, Cl. A2,
5.83%, 5/25/34 1 3,130,000 3,141,168
- -------------------------------------------------------------------------------
Argent Securities Trust 2006-W5,
Asset-Backed Pass-Through
Certificates, Series 2006-W5, Cl. A2B,
5.45%, 5/26/36 1 1,230,000 1,230,938
- -------------------------------------------------------------------------------
Centex Home Equity Loan Trust
2005-D, Asset-Backed Certificates:
Series 2005-D, Cl. AF1, 5.04%,
10/25/35 448,477 446,936
Series 2005-D, Cl. AV2, 5.62%,
10/25/35 1 1,920,000 1,921,931
- -------------------------------------------------------------------------------
Centex Home Equity Loan Trust
2006-A, Asset-Backed Certificates,
Series 2006-A, Cl. AV2, 5.45%, 5/16/36 1 1,540,000 1,541,190
- -------------------------------------------------------------------------------
Citibank Credit Card Issuance Trust,
Credit Card Receivable Nts., Series
2003-C4, Cl. C4, 5%, 6/10/15 310,000 301,663
- -------------------------------------------------------------------------------
Citigroup Mortgage Loan Trust
2005-WF2, Asset-Backed
Pass-Through Certificates, Series
2005-WF2, Cl. AF2, 4.922%, 8/25/35 1 1,237,886 1,229,100
- -------------------------------------------------------------------------------
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 1,531,489
- -------------------------------------------------------------------------------
CWABS Asset-Backed Certificates
Trust 2002-4, Asset-Backed
Certificates, Series 2002-4, Cl. A1,
5.72%, 2/25/33 1 35,747 35,791
- -------------------------------------------------------------------------------
CWABS Asset-Backed Certificates
Trust 2005-16, Asset-Backed
Certificates,
Series 2005-16, Cl. 2AF2,
5.382%, 5/25/36 1 670,000 667,780
- -------------------------------------------------------------------------------
CWABS Asset-Backed Certificates
Trust 2005-17, Asset-Backed
Certificates:
Series 2005-17, Cl. 1AF1, 5.55%,
5/25/36 1 756,673 757,529
Series 2005-17, Cl. 1AF2, 5.363%,
5/25/36 1 440,000 438,426
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
- -------------------------------------------------------------------------------
First Franklin Mortgage Loan Trust
2005-FF10, Mtg. Pass-Through
Certificates, Series 2005-FF10, Cl. A3,
5.56%, 11/25/35 1 $ 2,840,000 $ 2,842,814
- -------------------------------------------------------------------------------
First Franklin Mortgage Loan Trust
2006-FF10, Mtg. Pass-Through
Certificates, Series 2006-FF10, Cl. A3,
5.41%, 7/25/36 1 1,240,000 1,240,792
- -------------------------------------------------------------------------------
First Franklin Mortgage Loan Trust
2006-FF5, Mtg. Pass-Through
Certificates, Series 2006-FF5, Cl. 2A1,
5.40%, 5/15/36 1 673,834 674,303
- -------------------------------------------------------------------------------
First Franklin Mortgage Loan Trust
2006-FF9, Mtg. Pass-Through
Certificates, Series 2006-FF9, Cl. 2A2,
5.43%, 7/7/36 1 630,000 630,403
- -------------------------------------------------------------------------------
Household Home Equity Loan Trust,
Home Equity Loan Pass-Through
Certificates, Series 2005-3, Cl. A1,
5.61%, 1/20/35 1 917,402 918,889
- -------------------------------------------------------------------------------
Lehman XS Trust, Mtg. Pass-Through
Certificates:
Series 2005-10, Cl. 2A3B, 5.55%,
1/25/36 962,972 955,521
Series 2005-4, Cl. 2A1B, 5.17%,
10/25/35 885,128 881,429
- -------------------------------------------------------------------------------
Litigation Settlement Monetized
Fee Trust, Asset-Backed Certificates,
Series 2001-1A, Cl. A1, 8.33%, 4/25/31 3 2,865,539 2,925,171
- -------------------------------------------------------------------------------
Morgan Stanley ABS Capital I, Mtg.
Pass-Through Certificates, Series
2005-WMC6, Cl. A2B, 5.61%, 7/25/35 1 770,000 771,482
- -------------------------------------------------------------------------------
NC Finance Trust, CMO Pass-Through
Certificates, Series 1999-I, Cl. ECFD,
1.762%, 1/25/29 3 3,370,016 707,703
- -------------------------------------------------------------------------------
Popular ABS Mortgage Pass-Through
Trust 2004-5, Mtg. Pass-Through
Certificates, Series 2004-5, Cl. AF2,
3.735%, 11/10/34 1 42,105 41,981
- -------------------------------------------------------------------------------
Popular ABS Mortgage Pass-Through
Trust 2005-1, Mtg. Pass-Through
Certificates, Series 2005-1, Cl. AF2,
3.914%, 5/25/35 1 139,495 139,019
- -------------------------------------------------------------------------------
Popular ABS Mortgage Pass-Through
Trust 2005-2, Mtg. Pass-Through
Certificates, Series 2005-2, Cl. AF2,
4.415%, 4/25/35 1 730,000 723,127
- -------------------------------------------------------------------------------
Popular ABS Mortgage Pass-Through
Trust 2005-6, Mtg. Pass-Through
Certificates, Series 2005-6, Cl. A3,
5.68%, 1/25/36 1 690,000 688,129
9 | OPPENHEIMER CORE BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
- -------------------------------------------------------------------------------
RAMP:
Series 2004-RS7 Trust, Mtg.
Asset-Backed Pass-Through
Certificates, Series 2004-RS7, Cl.
AI32, 4.45%, 7/25/28 $ 1,028,722 $ 1,021,550
Series 2006-RS4 Trust, Mtg.
Asset-Backed Pass-Through
Certificates, Series 2006-RS4, Cl. A1,
5.43%, 7/25/36 1 661,960 662,428
- -------------------------------------------------------------------------------
Structured Asset Investment Loan
Trust, Mtg. Pass-Through Certificates,
Series 2006-2, Cl. A1, 5.41%, 4/25/36 1 639,704 640,146
- -------------------------------------------------------------------------------
Structured Asset Securities Corp.,
Mtg. Pass-Through Certificates:
Series 2002-AL1, Cl. B2, 3.45%, 2/25/32 2,586,647 2,280,923
Series 2003-25XS, Cl. A4, 4.51%,
8/25/33 53,832 53,496
- -------------------------------------------------------------------------------
Tobacco Settlement Authority,
Asset-Backed Securities, Series 2001-A,
6.79%, 6/1/10 1,740,000 1,779,324
- -------------------------------------------------------------------------------
Wells Fargo Home Equity
Asset-Backed Securities 2006-2 Trust,
Home Equity Asset-Backed
Certificates, Series 2006-2, Cl. A2,
5.59%, 7/25/36 1 1,230,000 1,230,786
---------------
Total Asset-Backed Securities
(Cost $39,070,290) 36,654,939
- -------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS--62.6%
- -------------------------------------------------------------------------------
GOVERNMENT AGENCY--52.9%
- -------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED--52.7%
Fannie Mae Whole Loan, CMO
Pass-Through Certificates, Trust
2004-W9, Cl. 2A2, 7%, 2/25/44 654,894 675,257
- -------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.:
4.50%, 5/1/19 11,024,502 10,646,848
5%, 8/1/33 4,457,463 4,309,921
5%, 1/1/37 4 2,538,000 2,449,170
6%, 7/1/17-10/1/29 9,447,241 9,580,695
6.50%, 4/1/18-4/1/34 1,517,346 1,554,380
7%, 5/1/29-3/1/35 7,754,133 7,974,131
8%, 4/1/16 725,984 768,104
9%, 8/1/22-5/1/25 213,538 228,743
- -------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
CMO Gtd. Real Estate Mtg.
Investment Conduit Multiclass
Pass-Through Certificates:
Series 2006-11, Cl. PS, 5.06%, 3/25/36 1 742,261 737,189
Series 2043, Cl. ZP, 6.50%, 4/15/28 1,268,381 1,296,568
Series 2066, Cl. Z, 6.50%, 6/15/28 2,670,596 2,725,222
Series 2195, Cl. LH, 6.50%, 10/15/29 1,557,689 1,589,329
Series 2326, Cl. ZP, 6.50%, 6/15/31 534,014 545,904
Series 2461, Cl. PZ, 6.50%, 6/15/32 1,289,183 1,343,244
Series 2500, Cl. FD, 5.85%, 3/15/32 1 386,160 390,087
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: Continued
Series 2526, Cl. FE, 5.75%, 6/15/29 1 $ 605,356 $ 612,036
Series 2551, Cl. FD, 5.75%, 1/15/33 1 472,230 476,777
Series 3025, Cl. SJ, 5.133%, 8/15/35 1 160,647 161,507
- -------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
CMO Pass-Through Participation
Certificates, Series 151, Cl. F, 9%,
5/15/21 39,317 39,232
- -------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
Interest-Only Stripped Mtg.-Backed
Security:
Series 176, Cl. IO, 12.115%, 6/1/26 5 690,695 147,466
Series 183, Cl. IO, 8.723%, 4/1/27 5 1,016,879 224,443
Series 184, Cl. IO, 14.333%, 12/1/26 5 1,118,621 237,526
Series 192, Cl. IO, 11.951%, 2/1/28 5 268,566 59,455
Series 200, Cl. IO, 10.703%, 1/1/29 5 320,154 68,080
Series 2003-118, Cl. S, 7.949%,
12/25/33 5 3,786,553 468,163
Series 2005-87, Cl. SG, 9.386%,
10/25/35 5 5,814,217 318,273
Series 206, Cl. IO, (9.382)%, 12/1/29 5 667,816 152,991
Series 2130, Cl. SC, (4.254)%, 3/15/29 5 729,893 51,761
Series 2796, Cl. SD, (0.684)%, 7/15/26 5 1,157,734 83,883
Series 2920, Cl. S, (4.226)%, 1/15/35 5 4,286,489 199,765
Series 3000, Cl. SE, (4.716)%, 7/15/25 5 4,987,890 175,523
- -------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
Principal-Only Stripped Mtg.-Backed
Security, Series 176, Cl. PO, 4.681%,
6/1/26 6 281,400 229,539
- -------------------------------------------------------------------------------
Federal National Mortgage Assn.:
4.50%, 9/1/18-3/1/19 6,575,524 6,360,913
5%, 12/1/17-3/1/34 30,087,785 29,442,361
5%, 1/1/22-1/1/37 4 20,040,000 19,477,860
5.50%, 1/1/33-1/1/34 14,498,887 14,356,626
5.50%, 1/1/22-1/1/37 4 12,900,000 12,828,743
6%, 5/1/29-11/1/33 6,836,919 6,913,567
6%, 1/1/22-3/1/33 4 14,979,975 15,159,436
6.50%, 3/1/11-11/1/31 12,568,915 12,899,235
7%, 11/1/17-7/1/35 4,916,180 5,068,464
7.50%, 1/1/08-1/1/33 33,097 34,368
8%, 5/1/17 9,179 9,612
8.50%, 7/1/32 68,241 73,485
- -------------------------------------------------------------------------------
Federal National Mortgage Assn.,
CMO Gtd. Real Estate Mtg.
Investment Conduit Pass-Through
Certificates:
Series 1998-61, Cl. PL, 6%, 11/25/28 731,162 740,553
Trust 1989-17, Cl. E, 10.40%, 4/25/19 73,607 78,968
Trust 1993-87, Cl. Z, 6.50%, 6/25/23 1,558,559 1,601,843
Trust 1998-58, Cl. PC, 6.50%, 10/25/28 1,305,097 1,341,104
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: Continued
Trust 2001-70, Cl. LR, 6%, 9/25/30 $ 319,309 $ 319,374
Trust 2001-72, Cl. NH, 6%, 4/25/30 66,400 66,524
Trust 2001-74, Cl. PD, 6%, 5/25/30 44,026 43,924
Trust 2001-82, Cl. ZA, 6.50%, 1/25/32 681,129 700,682
Trust 2002-77, Cl. WF, 5.75%, 12/18/32 1 693,558 698,824
Trust 2002-9, Cl. PC, 6%, 3/25/17 1,676,016 1,698,814
Trust 2003-28, Cl. KG, 5.50%, 4/25/23 3,964,000 3,904,163
Trust 2003-84, Cl. PW, 3%, 6/25/22 1,468,171 1,443,115
Trust 2004-101, Cl. BG, 5%, 1/25/20 1,908,000 1,861,085
Trust 2005-100, Cl. BQ, 5.50%, 11/25/25 1,120,000 1,079,008
Trust 2006-44, Cl. OA, 5.50%, 12/25/26 3,160,000 3,167,951
Trust 2006-46, Cl. SW, 4.583%, 6/25/36 1 560,834 545,673
Trust 2006-50, Cl. KS, 4.583%, 6/25/36 1 1,256,918 1,215,199
Trust 2006-50, Cl. SA, 4.583%, 6/25/36 1 1,608,885 1,556,251
Trust 2006-50, Cl. SK, 4.583%, 6/25/36 1 513,577 496,338
Trust 2006-57, Cl. PA, 5.50%, 8/25/27 4,081,041 4,086,623
Trust 2006-64, Cl. MD, 5.50%, 7/25/36 4,671,000 4,554,157
- -------------------------------------------------------------------------------
Federal National Mortgage Assn.,
Interest-Only Stripped Mtg.-Backed
Security:
Trust 2001-65, Cl. S, 7.004%, 11/25/31 5 2,202,780 211,487
Trust 2001-81, Cl. S, (0.047)%, 1/25/32 5 549,448 51,597
Trust 2002-47, Cl. NS, (1.251)%,
4/25/32 5 1,396,749 132,156
Trust 2002-51, Cl. S, (1.134)%, 8/25/32 5 1,282,220 121,226
Trust 2002-52, Cl. SD, (2.785)%,
9/25/32 5 1,498,543 121,898
Trust 2002-77, Cl. SH, 0.153%,
12/18/32 5 657,507 60,667
Trust 2002-84, Cl. SA, 8.972%,
12/25/32 5 1,905,713 196,054
Trust 2003-33, Cl. SP, 9.233%, 5/25/33 5 1,950,958 244,362
Trust 2003-4, Cl. S, 6.753%, 2/25/33 5 1,270,545 133,436
Trust 2004-54, Cl. DS, (6.639)%,
11/25/30 5 1,066,822 63,904
Trust 2005-19, Cl. SA, (3.159)%,
3/25/35 5 10,940,322 558,824
Trust 2005-40, Cl. SA, (3.22)%, 5/25/35 5 2,444,953 119,661
Trust 2005-6, Cl. SE, (3.646)%, 2/25/35 5 3,074,826 156,689
Trust 2005-71, Cl. SA, 3.302%, 8/25/25 5 3,134,014 182,318
Trust 2006-33, Cl. SP, 11.645%, 5/25/36 5 4,348,663 379,503
Trust 222, Cl. 2, 12.629%, 6/1/23 5 2,228,340 473,138
Trust 240, Cl. 2, 14.777%, 9/1/23 5 2,665,145 597,920
Trust 252, Cl. 2, 9.386%, 11/1/23 5 1,736,899 399,989
Trust 273, Cl. 2, 12.07%, 8/1/26 5 508,719 108,422
Trust 303, Cl. IO, (5.565)%, 11/1/29 5 293,651 69,853
Trust 319, Cl. 2, 10.023%, 2/1/32 5 473,620 108,956
Trust 321, Cl. 2, 5.116%, 4/1/32 5 5,226,157 1,201,681
Trust 329, Cl. 2, 8.389%, 1/1/33 5 2,383,681 553,486
Trust 331, Cl. 9, 8.348%, 2/1/33 5 1,241,594 302,770
Trust 334, Cl. 17, 16.758%, 2/1/33 5 844,069 195,475
Trust 340, Cl. 2, 7.032%, 9/1/33 5 826,482 199,324
Trust 344, Cl. 2, 4.951%, 12/1/33 5 4,128,193 936,141
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal National Mortgage Assn.,
Interest-Only Stripped Mtg.-Backed
Security: Continued
Trust 346, Cl. 2, 11.437%, 12/1/33 5 $ 3,563,664 $ 823,432
Trust 362, Cl. 12, 5.435%, 8/1/35 5 2,244,411 473,843
Trust 362, Cl. 13, 5.442%, 8/1/35 5 1,245,443 263,545
- -------------------------------------------------------------------------------
Federal National Mortgage Assn.,
Principal-Only Stripped Mtg.-Backed
Security:
Trust 1993-184, Cl. M, 5.655%, 9/25/23 6 625,613 508,586
Trust 340, Cl. 1, 5.532%, 9/1/33 6 826,482 603,998
---------------
214,900,396
- -------------------------------------------------------------------------------
GNMA/GUARANTEED--0.2%
Government National Mortgage
Assn.:
7%, 1/15/09-5/15/09 19,479 19,771
8.50%, 8/15/17-12/15/17 297,871 317,646
- -------------------------------------------------------------------------------
Government National Mortgage
Assn., Interest-Only Stripped
Mtg.-Backed Security:
Series 2001-21, Cl. SB, (5.039)%,
1/16/27 5 1,166,756 78,725
Series 2002-15, Cl. SM, (8.305)%,
2/16/32 5 1,355,279 89,039
Series 2004-11, Cl. SM, (7.941)%,
1/17/30 5 970,768 68,631
Series 2006-47, Cl. SA, 14.403%,
8/16/36 5 7,185,348 371,700
---------------
945,512
- -------------------------------------------------------------------------------
NON-AGENCY--9.7%
- -------------------------------------------------------------------------------
COMMERCIAL--8.1%
Asset Securitization Corp.,
Commercial Interest-Only Stripped
Mtg.-Backed Security, Series 1997-D4,
Cl. PS1, 1.889%, 4/14/29 5 28,135,292 737,904
- -------------------------------------------------------------------------------
Asset Securitization Corp.,
Commercial Mtg. Pass-Through
Certificates, Series 1996-MD6, Cl. A3,
7.267%, 11/13/29 1 1,200,000 1,218,210
- -------------------------------------------------------------------------------
Banc of America Commercial
Mortgage, Inc., Commercial Mtg.
Pass-Through Certificates, Series
2005-3, Cl. A2, 4.501%, 7/10/43 2,100,000 2,052,404
- -------------------------------------------------------------------------------
Banc of America Funding Corp.,
CMO Pass-Through Certificates,
Series 2004-2, Cl. 2A1, 6.50%, 7/20/32 1,690,418 1,713,432
- -------------------------------------------------------------------------------
Banc of America Mortgage Securities,
Inc., CMO Pass-Through Certificates:
Series 2005-E, Cl. 2A2, 4.975%, 6/25/35 1 128,917 128,700
Series 2004-8, Cl. 5A1, 6.50%, 5/25/32 1,370,363 1,382,783
11 | OPPENHEIMER CORE BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------
COMMERCIAL Continued
Capital Lease Funding Securitization
LP, Interest-Only Corporate-Backed
Pass-Through Certificates, Series
1997-CTL1, 7.269%, 6/22/24 5 $ 18,232,329 $ 722,013
- -------------------------------------------------------------------------------
Citigroup Mortgage Loan Trust
2006-WF1, Asset-Backed
Pass-Through Certificates, Series
2006-WF1, Cl. A2B, 5.536%, 3/1/36 460,000 458,613
- -------------------------------------------------------------------------------
Deutsche Alt-A Securities Mortgage
Loan Trust, Mtg. Pass-Through
Certificates:
Series 2006-AB2, Cl. A7, 5.961%,
6/25/36 2,062,393 2,058,639
Series 2006-AB3, Cl. A7, 6.36%,
4/25/08 618,128 618,301
- -------------------------------------------------------------------------------
GE Capital Commercial Mortgage
Corp., Commercial Mtg. Obligations,
Series 2005-C3, Cl. A2, 4.853%, 7/10/45 1,190,000 1,176,696
- -------------------------------------------------------------------------------
GMAC Commercial Mortgage
Securities, Inc., Commercial Mtg.
Pass-Through Certificates, Series
1997-C1, Cl. A3, 6.869%, 7/15/29 436,482 438,156
- -------------------------------------------------------------------------------
Greenwich Capital Commercial
Funding Corp., Commercial Mtg.
Pass-Through Certificates:
Series 2005-GG3, Cl. A2, 4.305%,
8/10/42 1,460,000 1,422,232
Series 2005-GG5, Cl. A2, 5.117%,
4/10/37 1,290,000 1,286,219
- -------------------------------------------------------------------------------
JPMorgan Chase Commercial
Mortgage Securities Corp.,
Commercial Mtg. Pass-Through
Certificates:
Series 2005-LDP2, Cl. A2, 4.575%,
7/15/42 510,000 499,661
Series 2005-LDP4, Cl. A2, 4.79%,
10/15/42 1,720,000 1,694,984
- -------------------------------------------------------------------------------
LB-UBS Commercial Mortgage Trust,
Commercial Mtg. Pass-Through
Certificates, Series 2005-C5, Cl. A2,
4.885%, 9/15/30 1,430,000 1,417,110
- -------------------------------------------------------------------------------
Lehman Brothers Commercial
Conduit Mortgage Trust,
Interest-Only Stripped Mtg.-Backed
Security, Series 1998-C1, Cl. IO,
5.566%, 2/18/30 5 15,327,819 287,556
- -------------------------------------------------------------------------------
Lehman Structured Securities Corp.,
CMO, Series 2002-GE1, Cl. A, 2.514%,
7/26/24 3 304,351 190,219
- -------------------------------------------------------------------------------
Mastr Alternative Loan Trust, CMO
Pass-Through Certificates:
Series 2004-9, Cl. A3, 4.70%, 8/25/34 1 1,310,775 1,300,384
Series 2004-6, Cl. 10A1, 6%, 7/25/34 1,923,379 1,914,915
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------
COMMERCIAL Continued
RALI:
Series 2003-QS1 Trust, Mtg.
Asset-Backed Pass-Through
Certificates, Series 2003-QS1, Cl. A2,
5.75%, 1/25/33 $ 1,006,564 $ 1,002,132
Series 2006-QS5 Trust, Mtg.
Asset-Backed Pass-Through
Certificates, Series 2006-QS5, Cl.
2A2, 6%, 4/25/08 2,450,541 2,446,144
- -------------------------------------------------------------------------------
Residential Asset Securitization Trust
2006-A9CB, CMO Pass-Through
Certificates, Series 2006-A9CB, Cl. A5,
6%, 9/25/36 2,549,407 2,545,454
- -------------------------------------------------------------------------------
Salomon Brothers Mortgage
Securities VII, Inc., Interest-Only
Commercial Mtg. Pass-Through
Certificates, Series 1999-C1, Cl. X,
(5.022)%, 5/18/32 5 290,528,367 723,299
- -------------------------------------------------------------------------------
Wachovia Bank Commercial
Mortgage Trust 2005-C17,
Commercial Mtg. Obligations, Series
2005-C17, Cl. A2, 4.782%, 3/15/42 2,520,000 2,487,037
- -------------------------------------------------------------------------------
Wachovia Bank Commercial
Mortgage Trust 2006-C29,
Commercial Asset-Backed Securities,
Series 2006-C29, Cl. A2, 5.272%,
11/15/48 355,000 354,712
- -------------------------------------------------------------------------------
WAMU Mortgage Pass-Through
Certificates Series 2005-AR5 Trust,
Series 2005-AR5, Cl. A1, 4.673%,
5/25/35 1 846,075 844,315
---------------
33,122,224
- -------------------------------------------------------------------------------
OTHER--0.2%
Salomon Brothers Mortgage
Securities VI, Inc., Interest-Only
Stripped Mtg.-Backed Security, Series
1987-3, Cl. B, 70.949%, 10/23/17 5 12,563 2,412
- -------------------------------------------------------------------------------
Salomon Brothers Mortgage
Securities VI, Inc., Principal-Only
Stripped Mtg.-Backed Security, Series
1987-3, Cl. A, 6.109%, 10/23/17 6 18,593 16,802
- -------------------------------------------------------------------------------
WAMU Mortgage Pass-Through
Certificates Series 2005-AR8 Trust,
Series 2005-AR8, Cl. 2AB1, 5.60%,
7/25/45 1 824,931 827,069
---------------
846,283
12 | OPPENHEIMER CORE BOND FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------
RESIDENTIAL--1.4%
Countrywide Alternative Loan Trust,
CMO:
Series 2005-J1, Cl. 3A1, 6.50%, 8/25/32 $ 2,943,703 $ 2,975,901
Series 2005-J3, Cl. 3A1, 6.50%, 9/25/34 2,602,980 2,647,378
---------------
5,623,279
---------------
Total Mortgage-Backed Obligations
(Cost $257,344,422) 255,437,694
- -------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--1.8%
- -------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.
Unsec. Nts., 5.25%, 7/18/11 7 1,860,000 1,884,147
- -------------------------------------------------------------------------------
Federal National Mortgage Assn.
Unsec. Nts., 5%, 10/15/11 7 2,800,000 2,809,159
- -------------------------------------------------------------------------------
U.S. Treasury Bonds, 4.50%, 2/15/36 7 787,000 748,635
- -------------------------------------------------------------------------------
U.S. Treasury Nts.:
4.625%, 10/31/11 211,000 210,299
4.625%, 11/15/16 7 417,000 414,394
4.875%, 10/31/08 7 1,293,000 1,294,011
---------------
Total U.S. Government Obligations
(Cost $7,378,286) 7,360,645
- -------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES--36.7%
- -------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--12.5%
- -------------------------------------------------------------------------------
AUTOMOBILES--2.3%
DaimlerChrysler North America
Holding Corp., 7.30% Nts., 1/15/12 1,930,000 2,050,899
- -------------------------------------------------------------------------------
Ford Motor Credit Co., 9.75% Sr.
Unsec. Nts., 9/15/10 2 3,860,000 4,109,483
- -------------------------------------------------------------------------------
General Motors Acceptance Corp.,
8% Bonds, 11/1/31 1,660,000 1,911,326
- -------------------------------------------------------------------------------
Hyundai Motor Manufacturing
Alabama LLC, 5.30% Sr. Unsec. Nts.,
12/19/08 2 1,115,000 1,107,959
---------------
9,179,667
- -------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--2.4%
Caesars Entertainment, Inc., 7.50% Sr.
Unsec. Nts., 9/1/09 2,250,000 2,336,171
- -------------------------------------------------------------------------------
Hilton Hotels Corp., 8.25% Sr. Unsec.
Nts., 2/15/11 1,475,000 1,589,313
- -------------------------------------------------------------------------------
Hyatt Equities LLC, 6.875% Nts.,
6/15/07 2 1,965,000 1,973,381
- -------------------------------------------------------------------------------
MGM Mirage, Inc., 6% Sr. Sec. Nts.,
10/1/09 2,020,000 2,025,050
- -------------------------------------------------------------------------------
Royal Caribbean Cruises Ltd., 7% Sr.
Unsec. Unsub. Nts., 10/15/07 545,000 552,670
- -------------------------------------------------------------------------------
Yum! Brands, Inc., 7.70% Sr. Nts., 7/1/12 1,335,000 1,461,032
---------------
9,937,617
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------
HOUSEHOLD DURABLES--2.5%
Beazer Homes USA, Inc., 6.875% Sr.
Unsec. Nts., 7/15/15 7 $ 1,150,000 $ 1,132,750
- -------------------------------------------------------------------------------
D.R. Horton, Inc.:
5.375% Sr. Unsec. Nts., 6/15/12 1,200,000 1,161,988
6.125% Nts., 1/15/14 1,035,000 1,029,123
- -------------------------------------------------------------------------------
K. Hovnanian Enterprises, Inc., 6.50%
Sr. Nts., 1/15/14 1,725,000 1,681,875
- -------------------------------------------------------------------------------
KB Home, 5.75% Sr. Unsec. Unsub.
Nts., 2/1/14 1,445,000 1,336,986
- -------------------------------------------------------------------------------
Lennar Corp., 7.625% Sr. Unsec. Nts.,
3/1/09 7 1,870,000 1,947,764
- -------------------------------------------------------------------------------
Pulte Homes, Inc., 4.875% Nts.,
7/15/09 2,025,000 1,995,206
---------------
10,285,692
- -------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS--0.1%
Eastman Kodak Co., 3.625% Nts.,
Series A, 5/15/08 247,000 239,346
- -------------------------------------------------------------------------------
MEDIA--3.6%
British Sky Broadcasting Group plc,
8.20% Sr. Unsec. Nts., 7/15/09 1,265,000 1,347,741
- -------------------------------------------------------------------------------
Chancellor Media CCU, 8% Sr.
Unsec. Nts., 11/1/08 1,540,000 1,601,751
- -------------------------------------------------------------------------------
Clear Channel Communications, Inc.,
6.25% Nts., 3/15/11 7 1,370,000 1,332,594
- -------------------------------------------------------------------------------
Comcast Corp., 6.45% Unsec. Nts.,
3/15/37 2,425,000 2,434,356
- -------------------------------------------------------------------------------
EchoStar DBS Corp., 5.75% Sr. Unsec.
Nts., 10/1/08 1,670,000 1,667,913
- -------------------------------------------------------------------------------
Liberty Media Corp., 7.875% Sr. Nts.,
7/15/09 480,000 502,956
- -------------------------------------------------------------------------------
Reed Elsevier Capital, Inc., 4.625%
Nts., 6/15/12 860,000 822,368
- -------------------------------------------------------------------------------
Time Warner Entertainment Co. LP,
8.375% Sr. Nts., 7/15/33 1,645,000 1,994,039
- -------------------------------------------------------------------------------
Tribune Co., 5.50% Nts., Series E,
10/6/08 1,115,000 1,104,134
- -------------------------------------------------------------------------------
Univision Communications, Inc.:
3.50% Sr. Unsec. Nts., 10/15/07 1,270,000 1,242,865
3.875% Sr. Unsec. Nts., 10/15/08 590,000 562,961
---------------
14,613,678
- -------------------------------------------------------------------------------
MULTILINE RETAIL--0.7%
Federated Department Stores, Inc.,
6.625% Sr. Unsec. Nts., 9/1/08 1,455,000 1,479,237
- -------------------------------------------------------------------------------
J.C. Penney Co., Inc., 9% Nts., 8/1/12 510,000 583,806
- -------------------------------------------------------------------------------
May Department Stores Co., 7.90%
Unsec. Debs., 10/15/07 785,000 796,878
---------------
2,859,921
13 | OPPENHEIMER CORE BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------
SPECIALTY RETAIL--0.9%
Gap, Inc. (The):
6.90% Nts., 9/15/07 $ 1,315,000 $ 1,324,327
9.445% Unsub. Nts., 12/15/08 1 466,000 497,699
- -------------------------------------------------------------------------------
Limited Brands, Inc., 6.125% Sr. Unsec.
Nts., 12/1/12 8 2,025,000 2,049,681
---------------
3,871,707
- -------------------------------------------------------------------------------
CONSUMER STAPLES--2.9%
- -------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--2.0%
Albertson's, Inc., 8% Sr. Unsec. Debs.,
5/1/31 7 1,675,000 1,707,426
- -------------------------------------------------------------------------------
Delhaize America, Inc., 9% Unsub.
Debs., 4/15/31 1,235,000 1,472,497
- -------------------------------------------------------------------------------
Kroger Co. (The), 5.50% Unsec.
Unsub. Nts., 2/1/13 2,065,000 2,045,306
- -------------------------------------------------------------------------------
Safeway, Inc., 6.50% Sr. Unsec. Nts.,
3/1/11 2,905,000 3,008,125
---------------
8,233,354
- -------------------------------------------------------------------------------
FOOD PRODUCTS--0.6%
Bunge Ltd. Finance Corp., 4.375%
Unsec. Nts., 12/15/08 595,000 582,728
- -------------------------------------------------------------------------------
Earthgrains Co. (The), 6.50% Nts.,
4/15/09 600,000 610,534
- -------------------------------------------------------------------------------
Heinz (H.J.) Co., 6.428% Bonds,
12/1/08 2 280,000 285,122
- -------------------------------------------------------------------------------
Sara Lee Corp., 2.75% Unsec. Nts.,
6/15/08 845,000 812,210
---------------
2,290,594
- -------------------------------------------------------------------------------
TOBACCO--0.3%
R.J. Reynolds Tobacco Holdings, Inc.,
6.50% Unsec. Nts., 6/1/07 60,000 60,381
- -------------------------------------------------------------------------------
Reynolds American, Inc., 6.50% Sr.
Sec. Nts., 6/1/07 1,272,000 1,280,068
---------------
1,340,449
- -------------------------------------------------------------------------------
ENERGY--4.6%
- -------------------------------------------------------------------------------
OIL & GAS--4.6%
El Paso Corp.:
6.50% Sr. Unsec. Nts., 6/1/08 7 390,000 395,363
7.625% Sr. Unsec. Nts., 9/1/08 1,490,000 1,542,150
- -------------------------------------------------------------------------------
Enbridge Energy Partners LP, 5.95%
Sr. Unsec. Nts., Series B, 6/1/33 505,000 467,734
- -------------------------------------------------------------------------------
Energy Transfer Partners LP:
5.65% Sr. Unsec. Unsub. Nts., 8/1/12 380,000 378,848
6.625% Sr. Nts., 10/15/36 810,000 836,781
- -------------------------------------------------------------------------------
Enterprise Products Operating LP
7.50% Sr. Unsec. Unsub. Nts., 2/1/11 1,880,000 2,006,665
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------
OIL & GAS Continued
Kaneb Pipe Line Operating
Partnership LP:
5.875% Sr. Unsec. Nts., 6/1/13 $ 330,000 $ 331,403
7.75% Sr. Unsec. Nts., 2/15/12 180,000 196,384
- -------------------------------------------------------------------------------
Kinder Morgan Energy Partners LP,
7.30% Sr. Unsec. Nts., 8/15/33 1,845,000 2,006,958
- -------------------------------------------------------------------------------
ONEOK Partners LP, 7.10% Sr. Unsec.
Nts., 3/15/11 275,000 289,372
- -------------------------------------------------------------------------------
Pemex Project Funding Master Trust,
7.875% Unsec. Unsub. Nts., 2/1/09 1,890,000 1,985,445
- -------------------------------------------------------------------------------
Petroleum Export Ltd. Cayman SPV,
4.623% Sr. Nts., Cl. A1, 6/15/10 2 2,741,667 2,699,864
- -------------------------------------------------------------------------------
PF Export Receivables Master Trust,
3.748% Sr. Nts., Series B, 6/1/13 2 1,213,636 1,138,238
- -------------------------------------------------------------------------------
TEPPCO Partners LP:
6.125% Nts., 2/1/13 900,000 901,216
7.625% Sr. Unsec. Nts., 2/15/12 285,000 306,764
- -------------------------------------------------------------------------------
Valero Logistics Operations LP, 6.05%
Nts., 3/15/13 1,410,000 1,422,211
- -------------------------------------------------------------------------------
Williams Cos., Inc. (The) Credit Linked
Certificate Trust, 6.75% Nts.,
4/15/09 3 1,885,000 1,927,413
---------------
18,832,809
- -------------------------------------------------------------------------------
FINANCIALS--8.5%
- -------------------------------------------------------------------------------
CAPITAL MARKETS--1.0%
Goldman Sachs Capital, Inc. (The),
6.345% Sub. Bonds, 2/15/34 2,045,000 2,076,767
- -------------------------------------------------------------------------------
Morgan Stanley, 4.75% Sub. Nts.,
4/1/14 2,100,000 2,010,891
---------------
4,087,658
- -------------------------------------------------------------------------------
COMMERCIAL BANKS--2.3%
Barclays Bank plc, 6.278% Perpetual
Bonds 9 2,110,000 2,076,388
- -------------------------------------------------------------------------------
HBOS plc, 6.413% Sub. Perpetual
Bonds, Series A 2,9 2,100,000 2,092,696
- -------------------------------------------------------------------------------
HSBC Finance Capital Trust IX,
5.911% Nts., 11/30/35 1 2,900,000 2,919,343
- -------------------------------------------------------------------------------
Popular North America, Inc., 4.70%
Nts., 6/30/09 2,485,000 2,433,990
---------------
9,522,417
- -------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--1.2%
CIT Group, Inc., 5.40% Sr. Nts., 3/7/13 2,010,000 1,997,419
- -------------------------------------------------------------------------------
Citigroup, Inc., 6.125% Sub. Nts.,
8/25/36 810,000 846,391
- -------------------------------------------------------------------------------
JPMorgan Chase & Co., 5.15% Sub.
Nts., 10/1/15 2,035,000 2,000,440
---------------
4,844,250
14 | OPPENHEIMER CORE BOND FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------
INSURANCE--2.3%
Marsh & McLennan Cos., Inc.:
5.875% Sr. Unsec. Bonds, 8/1/33 $ 1,355,000 $ 1,238,091
7.125% Sr. Unsec. Nts., 6/15/09 1,050,000 1,085,644
- -------------------------------------------------------------------------------
MBIA, Inc., 5.70% Sr. Unsec. Unsub.
Nts., 12/1/34 2,090,000 1,996,134
- -------------------------------------------------------------------------------
Prudential Holdings LLC, 8.695%
Bonds, Series C, 12/18/23 2 2,055,000 2,518,793
- -------------------------------------------------------------------------------
Prudential Insurance Co. of America,
8.30% Nts., 7/1/25 2,035,000 2,561,536
---------------
9,400,198
- -------------------------------------------------------------------------------
REAL ESTATE--1.7%
EOP Operating LP, 8.10% Unsec. Nts.,
8/1/10 2,505,000 2,762,321
- -------------------------------------------------------------------------------
iStar Financial, Inc., 5.15% Sr. Unsec.
Nts., 3/1/12 2,050,000 1,995,921
- -------------------------------------------------------------------------------
Vornado Realty LP, 5.625% Sr. Unsec.
Unsub. Nts., 6/15/07 2,225,000 2,223,767
---------------
6,982,009
- -------------------------------------------------------------------------------
HEALTH CARE--0.5%
- -------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--0.5%
HCA, Inc., 8.75% Sr. Nts., 9/1/10 2,055,000 2,147,475
- -------------------------------------------------------------------------------
INDUSTRIALS--0.5%
- -------------------------------------------------------------------------------
AEROSPACE & DEFENSE--0.5%
BAE Systems Holdings, Inc., 5.20%
Nts., 8/15/15 2 2,115,000 2,018,053
- -------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--0.6%
- -------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--0.1%
NCR Corp., 7.125% Sr. Unsec. Unsub.
Nts., 6/15/09 185,000 189,837
- -------------------------------------------------------------------------------
OFFICE ELECTRONICS--0.5%
Xerox Corp., 9.75% Sr. Unsec. Nts.,
1/15/09 1,860,000 2,018,100
- -------------------------------------------------------------------------------
MATERIALS--0.5%
- -------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS--0.5%
MeadWestvaco Corp., 6.85% Unsec.
Unsub. Nts., 4/1/12 1,930,000 2,024,690
- -------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--1.5%
- -------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--1.5%
Qwest Corp., 5.625% Unsec. Nts.,
11/15/08 250,000 251,563
- -------------------------------------------------------------------------------
Telecom Italia Capital SpA:
4% Sr. Unsec. Nts., 11/15/08 985,000 959,669
4% Unsec. Unsub. Nts., 1/15/10 1,085,000 1,036,783
- -------------------------------------------------------------------------------
Telefonos de Mexico SA de CV, 4.50%
Nts., 11/19/08 2,035,000 2,008,470
- -------------------------------------------------------------------------------
Telus Corp., 8% Nts., 6/1/11 1,790,000 1,959,257
---------------
6,215,742
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------
UTILITIES--4.6%
- -------------------------------------------------------------------------------
ELECTRIC UTILITIES--1.4%
FirstEnergy Corp., 7.375% Sr. Unsub.
Nts., Series C, 11/15/31 $ 780,000 $ 890,992
- -------------------------------------------------------------------------------
Mission Energy Holding Co., 13.50%
Sr. Sec. Nts., 7/15/08 1,780,000 1,971,350
- -------------------------------------------------------------------------------
Monongahela Power Co., 7.36%
Unsec. Nts., Series A, 1/15/10 1,285,000 1,347,087
- -------------------------------------------------------------------------------
Westar Energy, Inc., 7.125% Sr. Unsec.
Nts., 8/1/09 1,635,000 1,698,132
---------------
5,907,561
- -------------------------------------------------------------------------------
ENERGY TRADERS--0.7%
IPALCO Enterprises, Inc., 8.375% Sr.
Sec. Nts., 11/14/08 1 1,180,000 1,230,150
- -------------------------------------------------------------------------------
TXU Energy Co., 6.125% Nts., 3/15/08 1,430,000 1,439,415
---------------
2,669,565
- -------------------------------------------------------------------------------
GAS UTILITIES--0.2%
ONEOK Partners LP, 6.65% Nts.,
10/1/36 970,000 995,397
- -------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER--2.3%
CenterPoint Energy, Inc., 7.25% Sr.
Nts., Series B, 9/1/10 2,790,000 2,941,966
- -------------------------------------------------------------------------------
Duke Energy Field Services Corp.,
6.875% Sr. Unsec. Nts., 2/1/11 1,400,000 1,465,205
- -------------------------------------------------------------------------------
NiSource Finance Corp., 7.875% Sr.
Unsec. Nts., 11/15/10 2,753,000 2,972,585
- -------------------------------------------------------------------------------
PSEG Funding Trust I, 5.381% Nts.,
11/16/07 1,835,000 1,831,538
---------------
9,211,294
---------------
Total Corporate Bonds and Notes
(Cost $148,350,437) 149,919,080
UNITS
- -------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- -------------------------------------------------------------------------------
Pathmark Stores, Inc. Wts., Exp.
9/19/10 10 (Cost $14,872) 5,408 1,352
SHARES
- -------------------------------------------------------------------------------
MONEY MARKET FUND--1.1%
- -------------------------------------------------------------------------------
Oppenheimer Institutional Money
Market Fund, Cl. E, 5.25% 11,12
(Cost $4,562,502) 4,562,502 4,562,502
- -------------------------------------------------------------------------------
Total Investments, at Value
(excluding Investments Purchased
with Cash Collateral from Securities
Loaned) (Cost $456,720,809) 453,936,212
15 | OPPENHEIMER CORE BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM
SECURITIES LOANED--1.5% 13
- -------------------------------------------------------------------------------
ASSET-BACKED FLOATING NOTES--0.6%
Trust Money Market Securities,
Series A-2, 5.43%, 1/16/07 $ 1,000,000 $ 1,000,000
- -------------------------------------------------------------------------------
Whitehawk CDO Funding Corp.,
5.41%, 3/15/07 1,500,000 1,500,000
---------------
2,500,000
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--0.9%
Undivided interest of 0.09% in joint repurchase agreement
(Principal Amount/Value $4,100,000,000, with a maturity
value of $4,102,437,222) with Nomura Securities, 5.35%,
dated 12/29/06, to be repurchased at $3,822,669 on
1/2/07, collateralized by U.S. Agency Mortgages,
0.00%-22.12%, 3/15/14-5/1/46, with a
value of $4,182,000,000 $ 3,820,398 $ 3,820,398
---------------
Total Investments Purchased with
Cash Collateral from Securities
Loaned (Cost $6,320,398) 6,320,398
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $463,041,207) 112.7% 460,256,610
- -------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (12.7) (51,959,187)
---------------------------------
NET ASSETS 100.0% $ 408,297,423
=================================
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 $19,475,078 or 4.77% of the Fund's net
assets as of December 31, 2006.
3. Illiquid security. The aggregate value of illiquid securities as of December
31, 2006 was $5,750,506, which represents 1.41% of the Fund's net assets. See
Note 7 of accompanying Notes.
4. When-issued security or forward commitment to be delivered and settled after
December 31, 2006. See Note 1 of accompanying Notes.
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 $14,710,365 or 3.60% of the Fund's net assets
as of December 31, 2006.
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 $1,358,925 or 0.33% of the Fund's net assets as of
December 31, 2006.
7. Partial or fully-loaned security. See Note 8 of accompanying Notes.
8. All or a portion of the security is held in collateralized accounts to cover
initial margin requirements on open futures contracts. The aggregate market
value of such securities is $2,024,376. See Note 5 of accompanying Notes.
9. This bond has no contractual maturity date, is not redeemable and
contractually pays an indefinite stream of interest. Rate reported represents
the current interest rate for this variable rate security.
10. Non-income producing security.
11. Rate shown is the 7-day yield as of December 31, 2006.
12. Represents ownership of an affiliated fund, at or during the period ended
December 31, 2006. Transactions during the period in which the issuer was an
affiliate are as follows
SHARES GROSS GROSS SHARES
DECEMBER 31, 2005 ADDITIONS REDUCTIONS DECEMBER 31, 2006
- -----------------------------------------------------------------------------------------------------------------------------
Oppenheimer Institutional Money Market Fund, Cl. E, 5.25% * -- 22,171,390 17,608,888 4,562,502
VALUE DIVIDEND
SEE NOTE 1 INCOME
- -----------------------------------------------------------------------------------------------------------------------------
Oppenheimer Institutional Money Market Fund, Cl. E, 5.25% * $4,562,502 $5,949
* The money market fund and the Fund are affiliated by having the same
investment advisor.
13. The security/securities have 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
accompanying Notes.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
16 | OPPENHEIMER CORE BOND FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 31, 2006
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
ASSETS
- ----------------------------------------------------------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments:
Unaffiliated companies (cost $458,478,705) $ 455,694,108
Affiliated companies (cost $4,562,502) 4,562,502
--------------
460,256,610
- ----------------------------------------------------------------------------------------------------------------------------------
Cash 600,311
- ----------------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation on swap contracts 439,906
- ----------------------------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold (including $7,921,226 sold on a when-issued basis or forward commitment) 8,483,875
Interest and principal paydowns 4,073,005
Shares of beneficial interest sold 893,379
Futures margins 28,106
Other 20,518
--------------
Total assets 474,795,710
- ----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
- ----------------------------------------------------------------------------------------------------------------------------------
Return of collateral for securities loaned 6,320,398
- ----------------------------------------------------------------------------------------------------------------------------------
Unrealized depreciation on swap contracts 377,329
- ----------------------------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased (including $58,229,544 purchased on a when-issued basis or forward commitment) 59,396,000
Shares of beneficial interest redeemed 292,872
Shareholder communications 46,578
Distribution and service plan fees 22,206
Trustees' compensation 15,015
Transfer and shareholder servicing agent fees 1,722
Other 26,167
--------------
Total liabilities 66,498,287
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 408,297,423
==============
- ----------------------------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 36,604
- ----------------------------------------------------------------------------------------------------------------------------------
Additional paid-in capital 426,378,068
- ----------------------------------------------------------------------------------------------------------------------------------
Accumulated net investment income 20,676,318
- ----------------------------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions (36,249,470)
- ----------------------------------------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments (2,544,097)
--------------
NET ASSETS $ 408,297,423
==============
- ----------------------------------------------------------------------------------------------------------------------------------
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 $367,106,124 and 32,892,925 shares of beneficial interest outstanding) $ 11.16
- ----------------------------------------------------------------------------------------------------------------------------------
Service Shares:
Net asset value, redemption price per share and offering price per share
(based on net assets of $41,191,299 and 3,710,736 shares of beneficial interest outstanding) $ 11.10
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
17 | OPPENHEIMER CORE BOND FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 31, 2006
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- ----------------------------------------------------------------------------------------------------------------------------------
Interest $ 22,467,196
- ----------------------------------------------------------------------------------------------------------------------------------
Fee income 594,169
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio lending fees 53,580
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends--Affiliated companies 5,949
--------------
Total investment income 23,120,894
- ----------------------------------------------------------------------------------------------------------------------------------
EXPENSES
- ----------------------------------------------------------------------------------------------------------------------------------
Management fees 3,030,438
- ----------------------------------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Service shares 53,042
- ----------------------------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service shares 10,079
Service shares 9,952
- ----------------------------------------------------------------------------------------------------------------------------------
Shareholder communications:
Non-Service shares 70,804
Service shares 3,755
- ----------------------------------------------------------------------------------------------------------------------------------
Trustees' compensation 11,925
- ----------------------------------------------------------------------------------------------------------------------------------
Administration service fees 1,500
- ----------------------------------------------------------------------------------------------------------------------------------
Other 41,843
--------------
Total expenses 3,233,338
Less waivers and reimbursements of expenses (126)
--------------
Net expenses 3,233,212
- ----------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 19,887,682
- ----------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments (3,695,752)
Closing and expiration of futures contracts 1,570,446
Foreign currency transactions 14,895
Swap contracts 254,005
--------------
Net realized loss (1,856,406)
- ----------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments 2,914,992
Futures contracts (214,870)
Swap contracts 36,618
--------------
Net change in unrealized depreciation 2,736,740
- ----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 20,768,016
==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
18 | OPPENHEIMER CORE BOND FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2006 2005
- ----------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 19,887,682 $ 21,402,707
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized loss (1,856,406) (480,546)
- ----------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized depreciation 2,736,740 (8,992,109)
-------------------------------
Net increase in net assets resulting from operations 20,768,016 11,930,052
- ----------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Non-Service shares (21,803,446) (24,996,468)
Service shares (608,147) (231,902)
-------------- --------------
(22,411,593) (25,228,370)
- ----------------------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from beneficial interest transactions:
Non-Service shares (61,099,902) (60,382,816)
Service shares 29,289,033 7,684,268
-------------------------------
(31,810,869) (52,698,548)
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------------------
Total decrease (33,454,446) (65,996,866)
- ----------------------------------------------------------------------------------------------------------------------------------
Beginning of period 441,751,869 507,748,735
-------------------------------
End of period (including accumulated net investment income of $20,676,318 and
$22,323,507, respectively) $ 408,297,423 $ 441,751,869
===============================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19 | OPPENHEIMER CORE BOND FUND/VA
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2006 2005 2004 2003 2002
- -----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.19 $ 11.50 $ 11.42 $ 11.31 $ 11.21
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .53 1 .51 1 .43 1 .51 .65
Net realized and unrealized gain (loss) .03 (.23) .18 .23 .27
Payment from affiliate -- -- -- -- .01
-----------------------------------------------------------------------
Total from investment operations .56 .28 .61 .74 .93
- -----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.59) (.59) (.53) (.63) (.83)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.16 $ 11.19 $ 11.50 $ 11.42 $ 11.31
=======================================================================
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN:
- -----------------------------------------------------------------------------------------------------------------------------
Total return at net asset value 2 5.28% 2.59% 5.49% 6.78% 9.02%
Total return before payment from affiliate 3 N/A N/A N/A N/A 8.93%
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 367,106 $ 430,642 $ 504,244 $ 618,234 $ 724,787
- -----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 391,750 $ 466,033 $ 552,293 $ 691,931 $ 686,932
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income before payment from affiliate 4.83% 4.56% 3.82% 4.03% 5.91% 3
Net investment income after payment from affiliate N/A N/A N/A N/A 6.07%
Total expenses 0.77% 5,6 0.76% 7 0.75% 7 0.73% 7 0.73% 7
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 114% 8 111% 8 95% 8 101% 157%
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. Expenses including indirect expenses from affiliated fund were as follows:
Year Ended December 31, 2006 0.77%
6. Voluntary waiver of affiliated funds management fees less than 0.01%.
7. Reduction to custodian expenses less than 0.01%.
8. The portfolio turnover rate excludes purchase and sale transactions of To Be
Announced (TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
--------------------------------------------------------------------------
Year Ended December 31, 2006 $1,168,229,255 $1,270,329,129
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, 2006 2005 2004 2003 2002 1
- -------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.15 $ 11.47 $ 11.39 $ 11.30 $ 10.46
- -------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .49 2 .47 2 .40 2 .43 .11
Net realized and unrealized gain (loss) .03 (.22) .18 .28 .72
Payment from affiliate -- -- -- -- .01
-------------------------------------------------------------------------
Total from investment operations .52 .25 .58 .71 .84
- -------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.57) (.57) (.50) (.62) --
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.10 $ 11.15 $ 11.47 $ 11.39 $ 11.30
=========================================================================
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN:
- -------------------------------------------------------------------------------------------------------------------------------
Total return at net asset value 3 4.93% 2.33% 5.22% 6.56% 8.03%
Total return before payment from affiliate 4 N/A N/A N/A N/A 7.94%
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 41,191 $ 11,110 $ 3,505 $ 3,835 $ 2,435
- -------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 21,265 $ 7,213 $ 3,002 $ 3,903 $ 834
- -------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 5
Net investment income before payment from affiliate 4.56% 4.29% 3.55% 3.73% 4.37% 4
Net investment income after payment from affiliate N/A N/A N/A N/A 5.04%
Total expenses 1.06% 6,7 1.03% 8 0.99% 8 0.98% 8 0.98% 8,9
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 114% 10 111% 10 95% 10 101% 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. Expenses including indirect expenses from affiliated fund were as follows:
Year Ended December 31, 2006 1.06%
7. Voluntary waiver of affiliated funds management fees less than 0.01%.
8. Reduction to custodian expenses less than 0.01%.
9. Voluntary waiver of transfer agent fees less than 0.01%.
10. The portfolio turnover rate excludes purchase and sale transactions of To Be
Announced (TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
--------------------------------------------------------------------------
Year Ended December 31, 2006 $ 1,168,229,255 $ 1,270,329,129
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), 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(R) 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, as 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. Options are
valued daily based upon the last sale price on the principal exchange on which
the option is traded. 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. Investments in
open-end registered investment companies (including affiliated funds) are valued
at that fund's net asset value. 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 take place generally at least 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
22 | OPPENHEIMER CORE BOND FUND/VA
when-issued basis or forward commitment prior to settlement of the original
purchase. As of December 31, 2006, the Fund had purchased $58,229,544 of
securities issued on a when-issued basis or forward commitment and sold
$7,921,226 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.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
AFFILIATED FUNDS. The Fund is permitted to invest daily available cash balances
in affiliated money market funds. Each day, the Fund invests the available cash
in Class E shares of Oppenheimer Institutional Money Market Fund ("IMMF") which
seeks current income and stability of principal. IMMF is a registered open-end
management investment company, regulated as a money market fund under the
Investment Company Act of 1940, as amended. The Manager is also the investment
advisor of IMMF. The Fund's investment in IMMF is included in the Statement of
Investments. As a shareholder, the Fund is subject to its proportional share of
IMMF's Class E expenses, including its management fee. The Manager will waive
fees and/or reimburse Fund expenses in an amount equal to the indirect
management fees incurred through the Fund's investment in IMMF.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
INVESTMENTS WITH OFF BALANCE SHEET RISK. The Fund enters into financial
instrument transactions (such as swaps, futures, options and other derivatives)
that may have off-balance sheet market risk. Off-balance sheet market risk
exists when the maximum potential loss on a particular financial instrument is
greater than the value of such financial instrument, as reflected in the Fund's
Statement of Assets and Liabilities.
23 | OPPENHEIMER CORE 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
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 TAX PURPOSES
--------------------------------------------------------------------------
$20,696,739 $-- $36,231,290 $2,567,686
1. As of December 31, 2006, the Portfolio had $36,024,345 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, 2006,
details of the capital loss carryforwards were as follows:
EXPIRING
--------------------------
2010 $ 29,885,554
2013 57,295
2014 6,081,496
-------------
Total $ 36,024,345
=============
2. As of December 31, 2006, the Portfolio had $206,945 of post-October losses
available to offset future realized capital gains, if any. Such losses, if
unutilized, will expire in 2015.
3. During the fiscal year ended December 31, 2006, the Portfolio did not utilize
any capital loss carryforward.
4. During the fiscal year ended December 31, 2005, the Portfolio 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, 2006. Net assets of
the Fund were unaffected by the reclassifications.
INCREASE TO INCREASE TO
ACCUMULATED ACCUMULATED NET
NET INVESTMENT REALIZED LOSS
INCOME ON INVESTMENTS
-------------------------------------
$876,722 $876,722
24 | OPPENHEIMER CORE BOND FUND/VA
The tax character of distributions paid during the years ended December 31, 2006
and December 31, 2005 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2006 DECEMBER 31, 2005
------------------------------------------------------------------
Distributions paid from:
Ordinary income $22,411,593 $25,228,370
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, 2006 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 $ 463,144,411
Federal tax cost of other investments (74,626,488)
-------------
Total federal tax cost $ 388,517,923
=============
Gross unrealized appreciation $ 5,342,946
Gross unrealized depreciation (7,910,632)
-------------
Net unrealized depreciation $ (2,567,686)
=============
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a compensation
deferral plan for independent trustees that enables trustees to elect to defer
receipt of all or a portion of the annual compensation they are entitled to
receive from the Fund. For purposes of determining the amount owed to the
Trustee under the plan, deferred amounts are treated as though equal dollar
amounts had been invested in shares of the Fund or in other Oppenheimer funds
selected by the Trustee. The Fund purchases shares of the funds selected for
deferral by the Trustee in amounts equal to his or her deemed investment,
resulting in a Fund asset equal to the deferred compensation liability. Such
assets are included as a component of "Other" within the asset section of the
Statement of Assets and Liabilities. Deferral of trustees' fees under the plan
will not affect the net assets of the Fund, and will not materially affect the
Fund's assets, liabilities or net investment income per share. Amounts will be
deferred until distributed in accordance 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, at a rate equal to the
Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line item,
if applicable, represents earnings on cash balances maintained by the Fund
during the period. Such interest expense and other custodian fees may be paid
with these earnings.
25 | OPPENHEIMER CORE BOND FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Fund's organizational documents provide current and former
trustees and officers with a limited indemnification against liabilities arising
in connection with the performance of their duties to the Fund. In the normal
course of business, the Fund may also enter into contracts that provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would be dependent on future claims that may be made against the
Fund. The risk of material loss from such claims is considered remote.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with 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, 2006 YEAR ENDED DECEMBER 31, 2005
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------------------
NON-SERVICE SHARES
Sold 953,894 $ 10,320,632 1,220,400 $ 13,663,072
Dividends and/or distributions reinvested 2,058,871 21,803,446 2,291,152 24,996,468
Redeemed (8,604,369) (93,223,980) (8,857,827) (99,042,356)
-----------------------------------------------------------------
Net decrease (5,591,604) $ (61,099,902) (5,346,275) $(60,382,816)
=================================================================
- -----------------------------------------------------------------------------------------------------------------------------
SERVICE SHARES
Sold 2,826,656 $ 30,522,972 767,551 $ 8,537,370
Dividends and/or distributions reinvested 57,590 608,147 21,295 231,902
Redeemed (170,116) (1,842,086) (97,717) (1,085,004)
-----------------------------------------------------------------
Net increase 2,714,130 $ 29,289,033 691,129 $ 7,684,268
=================================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations and money market funds, for the year ended December
31, 2006, were as follows:
PURCHASES SALES
- ----------------------------------------------------------------------------------------
Investment securities $ 334,577,936 $ 324,181,656
U.S. government and government agency obligations 82,309,782 105,592,841
To Be Announced (TBA) mortgage-related securities 1,168,229,255 1,270,329,129
- --------------------------------------------------------------------------------
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 average net assets as shown in the following table:
26 | OPPENHEIMER CORE BOND FUND/VA
FEE SCHEDULE
-------------------------------
Up to $200 million 0.75%
Next $200 million 0.72
Next $200 million 0.69
Next $200 million 0.66
Next $200 million 0.60
Over $1 billion 0.50
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the year ended December 31, 2006, the Fund paid
$20,100 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.
The Manager will waive fees and/or reimburse Fund expenses in an amount
equal to the indirect management fees incurred through the Fund's investment in
IMMF. During the year ended December 31, 2006, the Manager waived $126 for IMMF
management fees.
- --------------------------------------------------------------------------------
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.
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.
27 | OPPENHEIMER CORE BOND FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. FUTURES CONTRACTS Continued
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 at 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, 2006, the Fund had outstanding futures contracts as follows:
UNREALIZED
EXPIRATION NUMBER OF VALUATION AS OF APPRECIATION
CONTRACT DESCRIPTION DATES CONTRACTS DECEMBER 31, 2006 (DEPRECIATION)
- -------------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
U.S. Long Bonds 3/21/07 404 $ 45,020,750 $ (636,497)
U.S. Treasury Nts., 5 yr. 3/30/07 255 26,790,938 (149,269)
--------------
(785,766)
--------------
CONTRACTS TO SELL
Euro-Bundesobligation, 10 yr. 3/8/07 71 10,874,701 269,254
U.S. Treasury Nts., 2 yr. 3/30/07 522 106,504,313 265,345
U.S. Treasury Nts., 10 yr. 3/21/07 268 28,801,625 435,396
--------------
969,995
--------------
$ 184,229
==============
- --------------------------------------------------------------------------------
6. CREDIT DEFAULT SWAP CONTRACTS
Credit default swaps are designed to transfer the credit exposure of fixed
income products between counterparties. The Fund may enter into credit default
swaps, both directly ("unfunded swaps") and indirectly in the form of a swap
embedded within a structured note ("funded swaps"), to protect against the risk
that a security will default. Unfunded and funded credit default swaps may be on
a single security, or a basket of securities. The Fund may take a short position
(purchaser of credit protection) or a long position (seller of credit
protection) in the credit default swap. Risks of credit default swaps include,
but are not limited to, the cost of paying for credit protection if there are no
credit events, pricing transparency when assessing the cost of a credit default
swap, counterparty risk, and the need to fund the delivery obligation (either
cash or defaulted bonds depending on whether the Fund is long or short the swap,
respectively).
The Fund would take a short position in a credit default swap (the
"unfunded swap") against a long portfolio position to decrease exposure to
specific high yield issuers. As a purchaser of credit protection under a 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 and is included on the
Statement of Operations. Credit default swaps are marked to market daily using
different sources, including quotations from counterparties, pricing services,
brokers or market makers. The unrealized appreciation (depreciation) related to
the change in the valuation of the notional amount of the swap is combined with
the amount due to (owed by) the Fund at termination or settlement and disclosed
separately on the Statement of Assets and Liabilities. The net change in this
amount is included on the Statement of Operations.
28 | OPPENHEIMER CORE BOND FUND/VA
Information regarding such credit default swaps as of December 31, 2006 is as
follows:
NOTIONAL AMOUNT ANNUAL
RECEIVED BY INTEREST
REFERENCED DEBT THE FUND UPON RATE PAID BY TERMINATION UNREALIZED
COUNTERPARTY OBLIGATION CREDIT EVENT THE FUND DATES DEPRECIATION
- -------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG:
CDX.NA.IG.7 $3,600,000 0.400% 12/20/11 $ 10,659
J.C. Penney Co., Inc. 590,000 0.580 3/20/12 994
Weyerhaeuser Co. 2,010,000 0.580 9/20/11 13,133
- -------------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital
Services, Inc.:
Arrow Electronics, Inc. 2,010,000 0.790 9/20/11 35,983
Arrow Electronics, Inc. 1,000,000 0.770 9/20/11 17,052
Belo Corp. 1,170,000 0.650 6/20/11 8,031
Belo Corp. 655,000 0.670 6/20/11 5,025
Belo Corp. 1,295,000 0.675 6/20/11 10,196
Ford Motor Co. 980,000 5.300 12/20/08 54,529
Ford Motor Co. 2,065,000 5.400 12/20/08 118,793
General Motors Corp. 1,035,000 4.000 12/20/08 42,668
General Motors Corp. 1,000,000 3.950 12/20/08 40,277
International Paper Co. 2,020,000 0.409 12/20/11 6,422
--------------
$ 363,762
==============
The Fund would take a long position in the credit default swap note (the "funded
swap") to increase the exposure to specific high yield corporate issuers. As a
seller of credit protection under a 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 and
is included on the Statement of Operations. Credit default swaps are marked to
market daily using different sources, including quotations from counterparties,
pricing services, brokers or market makers. The unrealized appreciation
(depreciation) related to the change in the valuation of the notional amount of
the swap is combined with the amount due to (owed by) the Fund at termination or
settlement and disclosed separately on the Statement of Assets and Liabilities.
The net change in this amount is included on the Statement of Operations.
Information regarding such credit default swaps as of December 31, 2006 is as
follows:
NOTIONAL AMOUNT ANNUAL
PAID BY INTEREST RATE UNREALIZED
REFERENCED DEBT THE FUND UPON RECEIVED BY TERMINATION APPRECIATION
COUNTERPARTY OBLIGATION CREDIT EVENT THE FUND DATES (DEPRECIATION)
- -------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG:
Abitibi-Consolidated Co. of Canada $ 1,630,000 1.52% 9/20/07 $ 6,723
Allied Waste North America, Inc. 630,000 2.00 9/20/09 17,131
Allied Waste North America, Inc. 990,000 2.00 9/20/09 26,920
Bombardier, Inc. 500,000 0.90 9/20/07 1,840
Eastman Kodak Co. 1,390,000 1.00 12/20/08 7,841
General Motors Acceptance Corp. 465,000 2.30 6/20/07 4,557
29 | OPPENHEIMER CORE BOND FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. CREDIT DEFAULT SWAP CONTRACTS Continued
NOTIONAL AMOUNT ANNUAL
PAID BY INTEREST RATE UNREALIZED
REFERENCED DEBT THE FUND UPON RECEIVED BY TERMINATION APPRECIATION
COUNTERPARTY OBLIGATION CREDIT EVENT THE FUND DATES (DEPRECIATION)
- -------------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital
Services, Inc.:
ArvinMeritor, Inc. $ 555,000 1.05% 9/20/07 $ 1,665
ArvinMeritor, Inc. 445,000 1.10 9/20/07 1,504
Bombardier, Inc. 550,000 1.00 9/20/07 2,924
Bombardier, Inc. 555,000 1.05 9/20/07 3,163
Ford Motor Co. 980,000 7.05 12/20/16 57,117
Ford Motor Co. 2,065,000 7.15 12/20/16 131,267
General Motors Corp. 1,035,000 5.80 12/20/16 81,585
General Motors Corp. 1,000,000 5.75 12/20/16 75,925
General Motors Acceptance Corp. 1,355,000 3.15 6/20/07 18,579
Hyundai Motor Manufacturing Alabama LLC 875,000 0.40 6/20/07 1,165
J.C. Penney Co., Inc. 2,005,000 0.61 6/20/13 (13,567)
--------------
$ 426,339
==============
- --------------------------------------------------------------------------------
7. ILLIQUID SECURITIES
As of December 31, 2006, 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
securities, letters of credit 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 each day. If the Fund is
undercollateralized at the close of business due to an increase in market value
of securities on loan, additional collateral is requested from the borrowing
counterparty and is delivered to the Fund on the next business day. Cash
collateral may be invested in approved investments and the Fund bears the risk
of any loss in value of these investments. The Fund retains a portion of the
interest earned from the collateral. 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. 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, 2006, the Fund
had on loan securities valued at $9,911,060, which are included in the Statement
of Assets and Liabilities as "Investments, at value" and, when applicable, as
"Receivable for Investments sold." Collateral of $10,075,173 was received for
the loans, of which $6,320,398 was received in cash and subsequently invested in
approved investments or held as cash.
- --------------------------------------------------------------------------------
9. RECENT ACCOUNTING PRONOUNCEMENTS
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48 ("FIN 48"), ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES.
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with FASB Statement No. 109,
ACCOUNTING FOR INCOME TAXES. FIN 48 requires the evaluation of tax positions
taken in the course of preparing the Fund's tax returns to determine whether it
is "more-likely-than-not" that tax positions taken in the Fund's tax return will
be ultimately sustained. A tax liability and
30 | OPPENHEIMER CORE BOND FUND/VA
expense must be recorded in respect of any tax position that, in Management's
judgment, will not be fully realized. FIN 48 is effective for fiscal years
beginning after December 15, 2006. As of December 31, 2006, the Manager has
evaluated the implications of FIN 48 and does not currently anticipate a
material impact to the Fund's financial statements. The Manager will continue to
monitor the Fund's tax positions prospectively for potential future impacts.
In September 2006, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 157, FAIR VALUE MEASUREMENTS. This standard establishes a
single authoritative definition of fair value, sets out a framework for
measuring fair value and expands disclosures about fair value measurements. SFAS
No. 157 applies to fair value measurements already required or permitted by
existing standards. SFAS No. 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. As of December 31, 2006, the Manager does not believe the
adoption of SFAS No. 157 will materially impact the financial statement amounts;
however, additional disclosures may be required about the inputs used to develop
the measurements and the effect of certain of the measurements on changes in net
assets for the period.
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10. LITIGATION
A consolidated amended complaint was filed as a putative class action against
the Manager and the Transfer Agent and other defendants (including 51 of the
Oppenheimer funds excluding the Fund) in the U.S. District Court for the
Southern District of New York on January 10, 2005 and was amended on March 4,
2005. The complaint alleged, among other things, that the Manager charged
excessive fees for distribution and other costs, and that by permitting and/or
participating in those actions, the Directors/Trustees and the Officers of the
funds breached their fiduciary duties to fund shareholders under the Investment
Company Act of 1940 and at common law. The plaintiffs sought unspecified
damages, an accounting of all fees paid, and an award of attorneys' fees and
litigation expenses.
In response to the defendants' motions to dismiss the suit, seven of the
eight counts in the complaint, including the claims against certain of the
Oppenheimer funds, as nominal defendants, and against certain present and former
Directors, Trustees and Officers of the funds, and the Distributor, as
defendants, were dismissed with prejudice, by court order dated March 10, 2006,
and the remaining count against the Manager and the Transfer Agent was dismissed
with prejudice by court order dated April 5, 2006. The plaintiffs filed an
appeal of those dismissals on May 11, 2006.
The Manager believes that the allegations contained in the complaint are
without merit and that there are substantial grounds to sustain the district
court's rulings. The Manager also believes that it is premature to render any
opinion as to the likelihood of an outcome unfavorable to it, the funds, the
Directors/Trustees or the Officers on the appeal of the decisions of the
district court, and that no estimate can yet be made with any degree of
certainty as to the amount or range of any potential loss.
31 | 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 (the "Fund"), a series of Oppenheimer Variable
Account Funds, including the statement of investments, as of December 31, 2006,
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 period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
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 audits included 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, 2006, 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 the
Fund as of December 31, 2006, 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
period then ended, in conformity with accounting principles generally accepted
in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
February 8, 2007
32 | OPPENHEIMER CORE BOND FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2007, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2006. 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.
33 | 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.
34 | OPPENHEIMER CORE BOND FUND/VA
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew the Fund's
investment advisory agreement (the "Agreement"). The Investment Company Act of
1940, as amended, requires that the Board request and evaluate, and that the
Manager provide, such information as may be reasonably necessary to evaluate the
terms of the Agreement. The Board employs an independent consultant to prepare a
report that provides information, including comparative information, that the
Board requests for that purpose. In addition, the Board receives information
throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager and its affiliates, including
an analysis of the cost of providing services, (v) whether economies of scale
are realized as the Fund grows and whether fee levels reflect these economies of
scale for Fund investors and (vi) other benefits to the Manager from its
relationship with the Fund. Outlined below is a summary of the principal
information considered by the Board as well as the Board's conclusions.
The Board was aware that there are alternatives to retaining the Manager.
NATURE, QUALITY AND EXTENT OF SERVICES. The Board considered information
about the nature and extent of the services provided to the Fund and information
regarding the Manager's key personnel who provide such services. The Manager's
duties include providing the Fund with the services of the portfolio managers
and the Manager's investment team, who provide research, analysis and other
advisory services in regard to the Fund's investments; securities trading
services; oversight of third party service providers; monitoring compliance with
applicable Fund policies and procedures and adherence to the Fund's investment
restrictions. The Manager is responsible for providing certain administrative
services to the Fund as well. Those services include providing and supervising
all administrative and clerical personnel who are necessary in order to provide
effective corporate administration for the Fund; compiling and maintaining
records with respect to the Fund's operations; preparing and filing reports
required by the Securities and Exchange Commission; preparing periodic reports
regarding the operations of the Fund for its shareholders; preparing proxy
materials for shareholder meetings; and preparing the registration statements
required by Federal and state securities laws for the sale of the Fund's shares.
The Manager also provides the Fund with office space, facilities and equipment.
The Board also considered the quality of the services provided and the
quality of the Manager's resources that are available to the Fund. The Board
took account of the fact that the Manager has had over 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. In its evaluation of the quality of
the portfolio management services provided, the Board considered the experience
of Angelo Manioudakis and the Manager's Core Fixed Income investment team and
analysts. Mr. Manioudakis has been a portfolio manager of the Fund since April
2002. 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 investment 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
underlying variable insurance products. The Board noted that the Fund's
one-year, three-year and five-year performance were better than its peer group
median. However its ten-year performance was below its peer group average.
35 | OPPENHEIMER CORE 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 and other A-rated corporate debt funds underlying
variable insurance products. The Board noted that the Fund's contractual and
actual management fees were higher than its peer group median. Based on this
evaluation of the Fund's fees and expenses, the Board requested, and the Manager
agreed to a new contractual management fee rate, effective May 1, 2007, of 0.60%
on the first $1.0 billion of the Fund's average annual net assets and 0.50% on
Fund average annual net assets exceeding $1.0 billion.
ECONOMIES OF SCALE. The Board reviewed 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 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 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 Agreement, including the management fee,
in light of all of the surrounding circumstances.
36 | OPPENHEIMER CORE BOND FUND/VA
TRUSTEES AND OFFICERS Unaudited
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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,
TRUSTEES COLORADO 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER
RESIGNATION, RETIREMENT, DEATH OR REMOVAL.
WILLIAM L. ARMSTRONG, President, Colorado Christian University (since 2006); Chairman of the following
Chairman of the Board of private mortgage banking companies: Cherry Creek Mortgage Company (since 1991),
Trustees (since 2003), Centennial State Mortgage Company (since 1994), and The El Paso Mortgage Company (since
Trustee (since 1999) 1993); Chairman of the following private companies: Ambassador Media Corporation (since
Age: 69 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 37 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: 75 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 37 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: 70 (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 37 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: 68 Partner at PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman
of Price Waterhouse LLP Global Investment Management Industry Services Group
(accounting firm) (July 1994-June 1998). Oversees 37 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: 65 Director of P.R. Pharmaceuticals (October 1999-October 2003); Director of Rocky
Mountain Elk Foundation (non-profit organization) (February 1998-February 2003 and
since February 2005); 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 37 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: 66 companies of the Manager (until October 1994). Oversees 37 portfolios in the
OppenheimerFunds complex.
37 | OPPENHEIMER CORE BOND FUND/ VA
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
BEVERLY L. HAMILTON, Trustee of Monterey Institute for International Studies (educational organization)
Trustee (since 2002) (since February 2000); Board Member of Middlebury College (educational organization)
Age: 60 (since December 2005); Director of The California Endowment (philanthropic
organization) (since April 2002); Director (February 2002-2005) and Chairman of
Trustees (since 2006) of the Community Hospital of Monterey Peninsula; Director
(October 1991-2005) and Vice Chairman (since 2006) of American Funds' Emerging Markets
Growth Fund, Inc. (mutual fund); President of ARCO Investment Management Company
(February 1991-April 2000); Member of the investment committees of The Rockefeller
Foundation (since 2001) and The University of Michigan (since 2000); Advisor at Credit
Suisse First Boston's Sprout venture capital unit (venture capital fund) (1994-January
2005); Trustee of MassMutual Institutional Funds (investment company) (1996-June
2004); Trustee of MML Series Investment Fund (investment company) (April 1989-June
2004); Member of the investment committee of Hartford Hospital (2000-2003); and
Advisor to Unilever (Holland) pension fund (2000-2003). Oversees 37 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: 62 (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 37 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: 64 (since 1996); Trustee (since 1987) and Chairman (1994-2005) of the Investment
Committee 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); and Executive Vice President of Peoples Heritage Financial Group, Inc.
(commercial bank) (January 1999-July 1999). Oversees 39 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
Trustee, President and September 2000) of the Manager; President and director or trustee of other Oppenheimer
Principal Executive Officer funds; President and Director of OAC and of Oppenheimer Partnership Holdings, Inc.
(since 2001) (holding company subsidiary of the Manager) (since July 2001); Director of
Age: 57 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 96 portfolios in the OppenheimerFunds complex.
38 | OPPENHEIMER CORE BOND FUND/ VA
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OTHER OFFICERS THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. ZACK,
OF THE FUND GILLESPIE AND MS. BLOOMBERG, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, NEW YORK,
NEW YORK 10281-1008, FOR MESSRS. VANDEHEY, WIXTED, PETERSEN, SZILAGYI AND MS. IVES,
6803 S. TUCSON WAY, CENTENNIAL, COLORADO 80112-3924; FOR MESSRS. MANIOUDAKIS, BOMFIM,
CAAN, GORD AND SWANEY, 470 ATLANTIC AVENUE, 11TH FLOOR, BOSTON, MA 02210. EACH OFFICER
SERVES FOR AN INDEFINITE TERM OR UNTIL HIS OR HER RESIGNATION, RETIREMENT, DEATH OR
REMOVAL.
ANGELO G. MANIOUDAKIS, Senior Vice President of the Manager (since April 2002), of HarbourView Asset
Senior 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: 40 2002). An officer of 17 portfolios in the OppenheimerFunds complex.
ANTULIO N. BOMFIM, Vice President of the Manager (since October 2003); Senior Economist at the Board of
Vice President and Portfolio Governors of the Federal Reserve System from June 1992 to October 2003. A portfolio
Manager (since 2006) manager of 15 portfolios in the OppenheimerFunds complex.
Age: 40
GEOFFREY CAAN, Vice President and Portfolio Manager of the Manager (since August 2003); Vice
Vice President and Portfolio President of ABN AMRO NA, Inc. (June 2002-August 2003); Vice President of Zurich
Manager (since 2006) Scudder Investments (January 1999-June 2002). A portfolio manager of 15 portfolios
Age: 37 in the OppenheimerFunds complex.
BENJAMIN J. GORD, Vice President of the Manager (since April 2002), of HarbourView Asset Management
Vice President and Portfolio Corporation (since April 2002) and of OFI Institutional Asset Management, Inc. (as of
Manager (since 2006) June 2002); Executive Director and senior fixed income analyst at Miller Anderson &
Age: 44 Sherrerd, a division of Morgan Stanley Investment Management (April 1992-March 2002).
A portfolio manager of 15 portfolios in the OppenheimerFunds complex.
THOMAS SWANEY, Vice President of the Manager (since April 2006); senior analyst, high grade investment
Vice President and Portfolio team (June 2002-March 2006); senior fixed income analyst at Miller Anderson & Sherrerd,
Manager (since 2006) a division of Morgan Stanley Investment Management (May 1998-May 2002). A portfolio
Age: 34 manager of 15 portfolios in the OppenheimerFunds complex.
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
(since 2004) Director of Internal Audit of the Manager (1997-February 2004). An officer of 96
Age: 56 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 & Accounting Services, Inc., Shareholder Services, Inc., Oppenheimer Real Asset Management
Officer (since 1999) Corporation, and Oppenheimer Partnership Holdings, Inc. (since March 1999), OFI
Age: 47 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 96 portfolios in the OppenheimerFunds complex.
BRIAN S. PETERSEN, Assistant Vice President of the Manager (since August 2002); Manager/Financial Product
Assistant Treasurer Accounting of the Manager (November 1998-July 2002). An officer of 96 portfolios in
(since 2004) the OppenheimerFunds complex.
Age: 36
39 | OPPENHEIMER CORE BOND FUND/ VA
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
BRIAN C. SZILAGYI, Assistant Vice President of the Manager (since July 2004); Director of Financial
Assistant Treasurer Reporting and Compliance of First Data Corporation (April 2003-July 2004); Manager of
(since 2005) Compliance of Berger Financial Group LLC (May 2001-March 2003); Director of Mutual
Age: 36 Fund Operations at American Data Services, Inc. (September 2000-May 2001). An officer
of 96 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 2001);
(since 2001) General Counsel of Centennial Asset Management Corporation (since December 2001);
Age: 58 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 96 portfolios in the OppenheimerFunds complex.
LISA I. BLOOMBERG, Vice President and Associate Counsel of the Manager (since May 2004); First Vice
Assistant Secretary President (April 2001-April 2004), Associate General Counsel (December 2000-April
(since 2004) 2004), Corporate Vice President (May 1999-April 2001) and Assistant General Counsel
Age: 39 (May 1999-December 2000) of UBS Financial Services Inc. (formerly, PaineWebber
Incorporated). An officer of 96 portfolios in the OppenheimerFunds complex.
KATHLEEN T. IVES, Vice President (since June 1998) and Senior Counsel and Assistant Secretary (since
Assistant Secretary October 2003) of the Manager; Vice President (since 1999) and Assistant Secretary
(since 2001) (since October 2003) of the Distributor; Assistant Secretary of Centennial Asset
Age: 41 Management Corporation (since October 2003); Vice President and Assistant Secretary of
Shareholder Services, Inc. (since 1999); Assistant Secretary of OppenheimerFunds
Legacy Program and Shareholder Financial Services, Inc. (since December 2001);
Assistant Counsel of the Manager (August 1994-October 2003). An officer of 96
portfolios in the OppenheimerFunds complex.
PHILLIP S. GILLESPIE, Senior Vice President and Deputy General Counsel of the Manager (since September
Assistant Secretary 2004); First Vice President (2000-September 2004), Director (2000-September 2004) and
(since 2004) Vice President (1998-2000) of Merrill Lynch Investment Management. An officer of 96
Age: 43 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 CORE BOND 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, 2006.
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
(7/1/06) (12/31/06) DECEMBER 31, 2006
- --------------------------------------------------------------------------------
Actual $1,000.00 $1,024.70 $2.49
- --------------------------------------------------------------------------------
Hypothetical 1,000.00 1,022.75 2.49
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, 2006 is as follows:
EXPENSE RATIO
- -------------
0.49%
- --------------------------------------------------------------------------------
5 | OPPENHEIMER MONEY FUND/VA
STATEMENT OF INVESTMENTS December 31, 2006
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT--15.8%
Bank of Nova Scotia, 5.28%, 1/8/07 $2,000,000 $ 2,000,000
- --------------------------------------------------------------------------------
Barclays Bank plc, New York:
5.32%, 1/18/07 2,000,000 2,000,000
5.32%, 2/15/07 1,000,000 1,000,000
- --------------------------------------------------------------------------------
BNP Paribas, New York, 5.32%, 2/12/07 2,000,000 2,000,000
- --------------------------------------------------------------------------------
Chase Bank USA, N.A., 5.27%, 1/16/07 1,000,000 1,000,000
- --------------------------------------------------------------------------------
Citibank NA:
5.32%, 2/8/07 2,000,000 2,000,000
5.325%, 3/28/07 4,000,000 4,000,000
- --------------------------------------------------------------------------------
Deutsche Bank, New York, 5.40%,
12/12/07 1,000,000 1,000,000
- --------------------------------------------------------------------------------
Lloyds TSB Bank plc, New York, 5.29%,
1/23/07 1,500,000 1,500,000
- --------------------------------------------------------------------------------
M&I Marshall & Ilsley Bank, 5.31%,
1/10/07 2,000,000 2,000,000
- --------------------------------------------------------------------------------
Royal Bank of Canada, New York,
5.30%, 2/5/07 1,000,000 1,000,000
- --------------------------------------------------------------------------------
Svenska Handelsbanken NY, 5.32%,
3/19/07 1,000,000 1,000,000
- --------------------------------------------------------------------------------
Toronto Dominion Bank, New York:
5.305%, 1/12/07 2,000,000 1,999,980
5.32%, 3/16/07 1,500,000 1,500,000
- --------------------------------------------------------------------------------
Washington Mutual Bank FA:
5.30%, 1/16/07 1,000,000 1,000,000
5.32%, 2/15/07 2,000,000 2,000,000
-------------
Total Certificates of Deposit (Cost $26,999,980) 26,999,980
- --------------------------------------------------------------------------------
DIRECT BANK OBLIGATIONS--16.8%
- --------------------------------------------------------------------------------
Bank of America NA, 5.32%, 2/16/07 1,000,000 1,000,000
- --------------------------------------------------------------------------------
Canadian Imperial Holdings, Inc.,
5.26%, 1/24/07 1,000,000 996,643
- --------------------------------------------------------------------------------
Danske Corp., 5.25%, 1/8/07 1 1,000,000 998,979
- --------------------------------------------------------------------------------
Dexia Delaware LLC, 5.24%, 3/13/07 1,000,000 989,666
- --------------------------------------------------------------------------------
Fortis Funding LLC, 5.25%, 1/29/07 1 1,000,000 995,917
- --------------------------------------------------------------------------------
Governor & Co. of the Bank of Ireland:
5.24%, 2/28/07 1 2,000,000 1,983,116
5.25%, 1/22/07 1 1,700,000 1,694,794
- --------------------------------------------------------------------------------
HBOS Treasury Services:
5.245%, 2/1/07 2,000,000 1,990,958
5.25%, 2/14/07 1,500,000 1,490,375
5.255%, 1/26/07 1,500,000 1,494,526
- --------------------------------------------------------------------------------
Nationwide Building Society:
5.22%, 3/12/07 1 2,000,000 1,979,700
5.23%, 2/12/07 1 1,500,000 1,490,848
- --------------------------------------------------------------------------------
Rabobank USA Financial Corp.,
5.24%, 1/10/07 1,000,000 998,691
- --------------------------------------------------------------------------------
Santander Central Hispano Finance
(Delaware), Inc.:
5.25%, 1/16/07 1,000,000 997,813
5.26%, 1/5/07 2,500,000 2,498,539
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
DIRECT BANK OBLIGATIONS Continued
Societe Generale North America, Inc.,
5.16%, 4/5/07 $2,000,000 $ 1,973,053
- --------------------------------------------------------------------------------
St. George Bank Ltd., 5.25%, 1/10/07 1 1,000,000 998,688
- --------------------------------------------------------------------------------
Swedbank Mortgage AB, 5.25%, 2/2/07 1,300,000 1,293,933
- --------------------------------------------------------------------------------
Wachovia Corp., 5.43%, 2/6/07 1,000,000 1,000,099
- --------------------------------------------------------------------------------
Westpac Banking Corp., 5.25%, 1/24/07 1 2,000,000 1,993,292
-------------
Total Direct Bank Obligations
(Cost $28,859,630) 28,859,630
- --------------------------------------------------------------------------------
LETTERS OF CREDIT--2.3%
- --------------------------------------------------------------------------------
Fortis Bank SA/NV, guaranteeing
commercial paper of ICICI Bank Ltd.,
5.27%, 2/9/07 2,000,000 1,988,571
- --------------------------------------------------------------------------------
Suntrust Bank, guaranteeing
commercial paper of NATC
California LLC, 5.27%, 1/12/07 2,000,000 1,996,779
-------------
Total Letters of Credit (Cost $3,985,350) 3,985,350
- --------------------------------------------------------------------------------
SHORT-TERM NOTES--64.8%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE--0.2%
Montgomery, AL Industrial
Development Board, Revenue Bonds,
Industrial Bristol Project, Series B,
5.70%, 2/1/07 2 400,000 400,000
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--21.6%
Barton Capital Corp., 5.26%, 1/19/07 1 2,800,000 2,792,636
- --------------------------------------------------------------------------------
Capital Auto Receivables Asset Trust
2006-SN1A, 5.32%, 9/20/07 2 970,969 970,969
- --------------------------------------------------------------------------------
Chesham Finance LLC:
5.27%, 1/5/07 2,000,000 1,998,829
5.28%, 2/20/07 1,000,000 992,667
- --------------------------------------------------------------------------------
Concord Minutemen Capital Co. LLC,
5.26%, 2/23/07 1 1,000,000 992,256
- --------------------------------------------------------------------------------
Fairway Finance Corp., 5.27%, 1/17/07 1 3,400,000 3,392,036
- --------------------------------------------------------------------------------
FCAR Owner Trust I, 5.27%, 3/23/07 2,600,000 2,569,171
- --------------------------------------------------------------------------------
Gotham Funding Corp., 5.30%, 1/3/07 1 1,000,000 999,706
- --------------------------------------------------------------------------------
GOVCO, Inc., 5.26%, 1/16/07 1 2,000,000 1,995,617
- --------------------------------------------------------------------------------
Grampian Funding LLC, 5.27%, 3/22/07 1 2,000,000 1,976,578
- --------------------------------------------------------------------------------
Legacy Capital LLC:
5.19%, 4/10/07 2,000,000 1,971,455
5.265%, 1/26/07 2,000,000 1,992,688
- --------------------------------------------------------------------------------
Lexington Parker Capital Co. LLC,
5.27%, 1/19/07 1 2,000,000 1,994,730
- --------------------------------------------------------------------------------
New Center Asset Trust:
5.25%, 1/29/07 2,000,000 1,991,833
5.27%, 1/31/07 2,000,000 1,991,225
- --------------------------------------------------------------------------------
Perry Global Funding LLC, Series A,
5.25%, 3/12/07 1 2,000,000 1,979,583
- --------------------------------------------------------------------------------
Sheffield Receivables Corp., 5.27%,
1/4/07 1 3,000,000 2,998,684
6 | OPPENHEIMER MONEY FUND/VA
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
Victory Receivables Corp., 5.30%,
1/9/07 1 $2,500,000 $ 2,497,056
- --------------------------------------------------------------------------------
Yorktown Capital LLC, 5.29%, 1/19/07 1 1,000,000 997,355
-------------
37,095,074
- --------------------------------------------------------------------------------
AUTOMOBILES--1.1%
Ande Chevrolet Olds, Inc., Series 2004,
5.50%, 2/1/07 2 1,935,000 1,935,000
- --------------------------------------------------------------------------------
CAPITAL MARKETS--6.4%
Banc of America Securities LLC, 5.32%,
1/5/07 2 5,000,000 5,000,000
- --------------------------------------------------------------------------------
Bear Stearns Cos., Inc., 5.25%, 2/16/07 1,000,000 993,292
- --------------------------------------------------------------------------------
Goldman Sachs Group, Inc., 5.40%,
4/6/07 2,3 2,000,000 2,000,000
- --------------------------------------------------------------------------------
Lehman Brothers, Inc., 5.50%, 1/2/07 2 1,000,000 1,000,000
- --------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., Series C,
5.50%, 10/19/07 2 2,000,000 2,002,397
-------------
10,995,689
- --------------------------------------------------------------------------------
CHEMICALS--0.6%
BASF AG, 5.26%, 1/25/07 1 1,000,000 996,497
- --------------------------------------------------------------------------------
COMMERCIAL BANKS--2.0%
Bank of America Corp., 5.25%, 3/15/07 1,500,000 1,484,031
- --------------------------------------------------------------------------------
HSBC USA, Inc., 5.25%, 4/3/07 2,000,000 1,973,167
-------------
3,457,198
- --------------------------------------------------------------------------------
COMMERCIAL FINANCE--2.3%
Countrywide Financial Corp.:
5.30%, 1/4/07 1,000,000 999,558
5.35%, 1/3/07 2,900,000 2,899,130
-------------
3,898,688
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--4.1%
General Electric Capital Services,
5.25%, 1/25/07 2,000,000 1,993,000
- --------------------------------------------------------------------------------
Greenwich Capital Holdings, Inc.,
5.53%, 2/15/07 2 2,000,000 2,000,000
- --------------------------------------------------------------------------------
HSBC Finance Corp.:
5.24%, 3/9/07 1,000,000 990,248
5.25%, 1/26/07 2,000,000 1,992,708
-------------
6,975,956
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--1.3%
Alta Mira LLC, Series 2004, 5.45%,
1/1/07 2 2,250,000 2,250,000
- --------------------------------------------------------------------------------
INSURANCE--6.7%
ING America Insurance Holdings, Inc.,
5.25%, 1/22/07 2,000,000 1,993,875
- --------------------------------------------------------------------------------
Jackson National Life Global Funding,
Series 2004-6, 5.42%, 1/16/07 2,3 2,500,000 2,500,000
- --------------------------------------------------------------------------------
Metropolitan Life Global Funding I,
Series 2003-5, 5.44%, 1/16/07 2,3 4,000,000 4,000,000
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
INSURANCE Continued
Prudential Insurance Co. of America,
5.38%, 2/1/07 2 $3,000,000 $ 3,000,000
-------------
11,493,875
- --------------------------------------------------------------------------------
LEASING & FACTORING--4.1%
American Honda Finance Corp.:
5.336%, 9/26/07 2,4 2,000,000 2,000,000
5.345%, 8/8/07 2,4 2,000,000 2,000,000
5.346%, 10/30/07 2,4 1,000,000 999,989
- --------------------------------------------------------------------------------
Toyota Motor Credit Corp., 5.25%,
2/9/07 2,000,000 1,988,636
-------------
6,988,625
- --------------------------------------------------------------------------------
MUNICIPAL--0.4%
Hayward, CA Multifamily Housing
Revenue Bonds, Lord Tennyson Apts.,
5.65%, 1/2/07 2 710,000 710,000
- --------------------------------------------------------------------------------
PERSONAL PRODUCTS--1.2%
Procter & Gamble Co. International
Funding, 5.25%, 1/11/07 1 1,000,000 998,542
- --------------------------------------------------------------------------------
Reckitt Benckiser plc, 5.27%, 2/9/07 1 1,000,000 994,291
-------------
1,992,833
- --------------------------------------------------------------------------------
SPECIAL PURPOSE FINANCIAL--12.8%
Blue Spice LLC, 5.30%, 1/2/07 1 3,000,000 2,999,559
- --------------------------------------------------------------------------------
Cooperative Assn. of Tractor Dealers,
Inc., Series B:
5.26%, 2/27/07 1,175,000 1,165,214
5.28%, 1/5/07 1,015,000 1,014,405
- --------------------------------------------------------------------------------
LINKS Finance LLC, 5.32%, 12/20/07 2,4 1,000,000 999,810
- --------------------------------------------------------------------------------
Parkland (USA) LLC, 5.33%, 12/12/07 2,4 1,000,000 999,811
- --------------------------------------------------------------------------------
Premier Asset Collateralized Entity
LLC 1, 5.28%, 3/27/07 4 1,900,000 1,876,313
- --------------------------------------------------------------------------------
RACERS Trust, Series 2004-6-MM,
5.37%, 1/22/07 2 1,000,000 1,000,000
- --------------------------------------------------------------------------------
Sigma Finance, Inc., 5.25%, 2/22/07 5,000,000 4,962,083
- --------------------------------------------------------------------------------
Ticonderoga Funding LLC, 5.30%,
1/24/07 2,000,000 1,993,224
- --------------------------------------------------------------------------------
Union Hamilton Special Purpose
Funding LLC, 5.36%, 3/28/07 2,4 2,000,000 2,000,000
- --------------------------------------------------------------------------------
ZAIS Leveraged Loan Fund, Series
2006-1A 1, 5.43%, 3/1/07 2,3 3,000,000 3,000,000
-------------
22,010,419
-------------
Total Short-Term Notes (Cost $111,199,854) 111,199,854
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $171,044,814) 99.7% 171,044,814
- --------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 0.3 475,882
---------------------------
NET ASSETS 100.0% $171,520,696
===========================
7 | OPPENHEIMER MONEY FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
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. Security issued in an exempt transaction without registration under the
Securities Act of 1933. Such securities amount to $40,740,460, or 23.75% of the
Fund's net assets, and have been determined to be liquid pursuant to guidelines
adopted by the Board of Trustees.
2. Represents the current interest rate for a variable or increasing rate
security.
3. Illiquid security. The aggregate value of illiquid securities as of December
31, 2006 was $11,500,000, which represents 6.70% of the Fund's net assets. See
Note 4 of accompanying Notes.
4. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $10,875,923 or 6.34% of the Fund's net
assets as of December 31, 2006.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
8 | OPPENHEIMER MONEY FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 31, 2006
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------------------------------------
Investments, at value (cost $171,044,814)--see accompanying statement of investments $171,044,814
- ------------------------------------------------------------------------------------------------------
Cash 236,769
- ------------------------------------------------------------------------------------------------------
Receivables and other assets:
Shares of beneficial interest sold 421,308
Interest 343,832
Other 8,185
-------------
Total assets 172,054,908
- ------------------------------------------------------------------------------------------------------
LIABILITIES
- ------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Dividends 320,194
Shares of beneficial interest redeemed 198,992
Trustees' compensation 5,342
Transfer and shareholder servicing agent fees 874
Other 8,810
-------------
Total liabilities 534,212
- ------------------------------------------------------------------------------------------------------
NET ASSETS $171,520,696
- ------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- ------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 171,492
- ------------------------------------------------------------------------------------------------------
Additional paid-in capital 171,346,624
- ------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments 2,580
-------------
NET ASSETS--applicable to 171,492,028 shares of beneficial interest outstanding $171,520,696
=============
- ------------------------------------------------------------------------------------------------------
NET ASSET VALUE, REDEMPTION PRICE PER SHARE AND OFFERING PRICE PER SHARE $ 1.00
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
9 | OPPENHEIMER MONEY FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 31, 2006
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Interest $8,724,019
- --------------------------------------------------------------------------------
EXPENSES
- --------------------------------------------------------------------------------
Management fees 770,054
- --------------------------------------------------------------------------------
Shareholder communications 20,088
- --------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees 10,016
- --------------------------------------------------------------------------------
Trustees' compensation 5,071
- --------------------------------------------------------------------------------
Administration service fees 1,500
- --------------------------------------------------------------------------------
Custodian fees and expenses 925
- --------------------------------------------------------------------------------
Other 26,854
-----------
Total expenses 834,508
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 7,889,511
- --------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS 3,420
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $7,892,931
===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
10 | OPPENHEIMER MONEY FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2006 2005
- --------------------------------------------------------------------------------------------------------------------------
OPERATIONS
- --------------------------------------------------------------------------------------------------------------------------
Net investment income $ 7,889,511 $ 5,228,375
- --------------------------------------------------------------------------------------------------------------------------
Net realized gain 3,420 6,036
---------------------------------
Net increase in net assets resulting from operations 7,892,931 5,234,411
- --------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (7,889,609) (5,228,277)
- --------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain (6,674) --
- --------------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- --------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets resulting from beneficial interest transactions (1,637,470) (23,347,439)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS
- --------------------------------------------------------------------------------------------------------------------------
Total decrease (1,640,822) (23,341,305)
- --------------------------------------------------------------------------------------------------------------------------
Beginning of period 173,161,518 196,502,823
---------------------------------
End of period (including accumulated net investment income of $98 for the year ended
December 31, 2005) $ 171,520,696 $ 173,161,518
=================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11 | OPPENHEIMER MONEY FUND/VA
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2006 2005 2004 2003 2002
- -----------------------------------------------------------------------------------------------------------------------------
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 .05 1 .03 1 .01 1 .01 .01
- -----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.05) (.03) (.01) (.01) (.01)
Distributions from net realized gain -- 2 -- -- -- -- 2
---------------------------------------------------------------------
Total dividends and/or distributions to shareholders (.05) (.03) (.01) (.01) (.01)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======================================================================
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 3 4.71% 2.86% 0.98% 0.79% 1.47%
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $171,521 $173,162 $196,503 $237,613 $379,969
- -----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $171,118 $186,453 $218,243 $316,096 $386,457
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 4.61% 2.80% 0.97% 0.80% 1.46%
Total expenses 0.49% 0.48% 5 0.48% 5 0.47% 5 0.47% 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.
12 | 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. As permitted under Rule 2a-7 of the Investment Company Act
of 1940, portfolio securities are valued on the basis of amortized cost, which
approximates market value. If amortized cost is determined not to approximate
market value, the fair value of the portfolio securities will be determined
under procedures approved by the Fund's Board of Trustees.
- --------------------------------------------------------------------------------
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
---------------------------------------------------------------------
$375,255 $-- $--
1. During the fiscal year ended December 31, 2006, the Fund did not utilize any
capital loss carryforward.
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.
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, 2006
and December 31, 2005 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2006 DECEMBER 31, 2005
---------------------------------------------------------------------
Distributions paid from:
Ordinary income $7,896,283 $5,228,277
---------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a compensation
deferral plan for independent trustees that enables trustees to elect to defer
receipt of all or a portion of the annual compensation they are entitled to
receive from the Fund. For purposes of determining the amount owed to the
Trustee under the plan, deferred amounts are treated as though equal dollar
amounts had been invested in shares of the Fund or in other Oppenheimer funds
selected by the Trustee. The Fund purchases shares of the funds selected for
deferral by the Trustee in amounts equal to his or her deemed investment,
resulting in a Fund asset equal to the deferred compensation liability. Such
assets are included as a component of "Other" within the asset section of the
Statement of Assets and Liabilities. Deferral of trustees' fees under the plan
will not affect the net assets of the Fund, and will not materially affect the
Fund's assets, liabilities or net investment income per share. Amounts will be
deferred until distributed in accordance to the Plan.
13 | OPPENHEIMER MONEY FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
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- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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, at a rate equal to the
Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line item,
if applicable, represents earnings on cash balances maintained by the Fund
during the period. Such interest expense and other custodian fees may be paid
with these earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Fund's organizational documents provide current and former
trustees and officers with a limited indemnification against liabilities arising
in connection with the performance of their duties to the Fund. In the normal
course of business, the Fund may also enter into contracts that provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would be dependent on future claims that may be made against the
Fund. The risk of material loss from such claims is considered remote.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with 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, 2006 YEAR ENDED DECEMBER 31, 2005
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------
Sold 102,552,229 $ 102,552,229 126,305,556 $ 126,305,556
Dividends and/or distributions reinvested 7,809,321 7,809,321 5,103,537 5,103,537
Redeemed (111,999,020) (111,999,020) (154,754,850) (154,756,532)
-----------------------------------------------------------------
Net decrease (1,637,470) $ (1,637,470) (23,345,757) $ (23,347,439)
=================================================================
- --------------------------------------------------------------------------------
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 average net assets as shown in the following table:
FEE SCHEDULE
--------------------------------
Up to $500 million 0.450%
Next $500 million 0.425
Next $500 million 0.400
Over $1.5 billion 0.375
14 | OPPENHEIMER MONEY FUND/VA
- --------------------------------------------------------------------------------
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, 2006, the Fund paid
$10,011 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.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
4. ILLIQUID SECURITIES
As of December 31, 2006, 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. RECENT ACCOUNTING PRONOUNCEMENTS
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48 ("FIN 48"), ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES.
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with FASB Statement No. 109,
ACCOUNTING FOR INCOME TAXES. FIN 48 requires the evaluation of tax positions
taken in the course of preparing the Fund's tax returns to determine whether it
is "more-likely-than-not" that tax positions taken in the Fund's tax return will
be ultimately sustained. A tax liability and expense must be recorded in respect
of any tax position that, in Management's judgment, will not be fully realized.
FIN 48 is effective for fiscal years beginning after December 15, 2006. As of
December 31, 2006, the Manager has evaluated the implications of FIN 48 and does
not currently anticipate a material impact to the Fund's financial statements.
The Manager will continue to monitor the Fund's tax positions prospectively for
potential future impacts.
In September 2006, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 157, FAIR VALUE MEASUREMENTS. This standard establishes a
single authoritative definition of fair value, sets out a framework for
measuring fair value and expands disclosures about fair value measurements. SFAS
No. 157 applies to fair value measurements already required or permitted by
existing standards. SFAS No. 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. As of December 31, 2006, the Manager does not believe the
adoption of SFAS No. 157 will materially impact the financial statement amounts;
however, additional disclosures may be required about the inputs used to develop
the measurements and the effect of certain of the measurements on changes in net
assets for the period.
- --------------------------------------------------------------------------------
6. LITIGATION
A consolidated amended complaint was filed as a putative class action against
the Manager and the Transfer Agent and other defendants (including 51 of the
Oppenheimer funds excluding the Fund) in the U.S. District Court for the
Southern District of New York on January 10, 2005 and was amended on March 4,
2005. The complaint alleged, among other things, that the Manager charged
excessive fees for distribution and other costs, and that by permitting and/or
participating in those actions, the Directors/Trustees and the Officers of the
funds breached their fiduciary duties to fund shareholders under the Investment
Company Act of 1940 and at common law. The plaintiffs sought unspecified
damages, an accounting of all fees paid, and an award of attorneys' fees and
litigation expenses.
15 | OPPENHEIMER MONEY FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. LITIGATION Continued
In response to the defendants' motions to dismiss the suit, seven of the
eight counts in the complaint, including the claims against certain of the
Oppenheimer funds, as nominal defendants, and against certain present and former
Directors, Trustees and Officers of the funds, and the Distributor, as
defendants, were dismissed with prejudice, by court order dated March 10, 2006,
and the remaining count against the Manager and the Transfer Agent was dismissed
with prejudice by court order dated April 5, 2006. The plaintiffs filed an
appeal of those dismissals on May 11, 2006.
The Manager believes that the allegations contained in the complaint are
without merit and that there are substantial grounds to sustain the district
court's rulings. The Manager also believes that it is premature to render any
opinion as to the likelihood of an outcome unfavorable to it, the funds, the
Directors/Trustees or the Officers on the appeal of the decisions of the
district court, 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 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 (the "Fund"), a series of Oppenheimer Variable Account
Funds, including the statement of investments, as of December 31, 2006, 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 period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
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 audits included 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, 2006, 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 the
Fund as of December 31, 2006, 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
period then ended, in conformity with accounting principles generally accepted
in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
February 8, 2007
17 | OPPENHEIMER MONEY FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2007, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2006. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
None of the dividends paid by the Fund during the fiscal year ended
December 31, 2006 are qualified dividend income or 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 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 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 MONEY FUND/VA
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew the Fund's
investment advisory agreement (the "Agreement"). The Investment Company Act of
1940, as amended, requires that the Board request and evaluate, and that the
Manager provide, such information as may be reasonably necessary to evaluate the
terms of the Agreement. The Board employs an independent consultant to prepare a
report that provides information, including comparative information, that the
Board requests for that purpose. In addition, the Board receives information
throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager and its affiliates, including
an analysis of the cost of providing services, (v) whether economies of scale
are realized as the Fund grows and whether fee levels reflect these economies of
scale for Fund investors and (vi) other benefits to the Manager from its
relationship with the Fund. Outlined below is a summary of the principal
information considered by the Board as well as the Board's conclusions.
The Board was aware that there are alternatives to retaining the Manager.
NATURE, QUALITY AND EXTENT OF SERVICES. The Board considered information
about the nature and extent of the services provided to the Fund and information
regarding the Manager's key personnel who provide such services. The Manager's
duties include providing the Fund with the services of the portfolio managers
and the Manager's investment team, who provide research, analysis and other
advisory services in regard to the Fund's investments; securities trading
services; oversight of third party service providers; monitoring compliance with
applicable Fund policies and procedures and adherence to the Fund's investment
restrictions. The Manager is responsible for providing certain administrative
services to the Fund as well. Those services include providing and supervising
all administrative and clerical personnel who are necessary in order to provide
effective corporate administration for the Fund; compiling and maintaining
records with respect to the Fund's operations; preparing and filing reports
required by the Securities and Exchange Commission; preparing periodic reports
regarding the operations of the Fund for its shareholders; preparing proxy
materials for shareholder meetings; and preparing the registration statements
required by Federal and state securities laws for the sale of the Fund's shares.
The Manager also provides the Fund with office space, facilities and equipment.
The Board also considered the quality of the services provided and the
quality of the Manager's resources that are available to the Fund. The Board
took account of the fact that the Manager has had over 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. In its evaluation of the quality of
the portfolio management services provided, the Board considered the experience
of Barry D. Weiss and Carol E. Wolf and the Manager's Money Market investment
team and analysts. Ms. Wolf has been a portfolio manager of the Fund since July
1998 and Mr. Weiss has been a portfolio manager of the Fund since July 2001. 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.
20 | OPPENHEIMER MONEY FUND/VA
INVESTMENT PERFORMANCE OF THE MANAGER AND THE FUND. During the year, the
Manager provided information on the investment 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 underlying
variable insurance products. The Board noted that the one-year, three-year,
five-year and ten-year performance were 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 and other money market funds underlying variable
insurance products. The Board noted that the Fund's contractual and actual
management fees are lower than its peer group median.
ECONOMIES OF SCALE. The Board reviewed 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 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 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 Agreement, including the management fee,
in light of all of the surrounding circumstances.
21 | OPPENHEIMER MONEY FUND/VA
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) HELD PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS HELD; NUMBER OF
WITH THE FUNDS, LENGTH 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, President, Colorado Christian University (since 2006); Chairman of the following private mortgage
Chairman of the Board banking companies: Cherry Creek Mortgage Company (since 1991), Centennial State Mortgage Company
of Trustees (since 2003), (since 1994), and The El Paso Mortgage Company (since 1993); Chairman of the following private
Trustee (since 1999) companies: Ambassador Media Corporation (since 1984) and Broadway Ventures (since 1984); Director
Age: 69 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 37 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,
Age: 75 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 37 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: 70 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 37 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: 68 PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price Waterhouse
LLP Global Investment Management Industry Services Group (accounting firm) (July 1994-June 1998).
Oversees 37 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
Age: 65 (October 1999-October 2003); Director of Rocky Mountain Elk Foundation (non-profit organization)
(February 1998-February 2003 and since February 2005); 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 37 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: 66 (until October 1994). Oversees 37 portfolios in the OppenheimerFunds complex.
BEVERLY L. HAMILTON, Trustee of Monterey Institute for International Studies (educational organization) (since February
Trustee (since 2002) 2000); Board Member of Middlebury College (educational organization) (since December 2005);
Age: 60 Director of The California Endowment (philanthropic organization) (since April 2002); Director
(February 2002-2005) and Chairman of Trustees (since 2006) of the Community Hospital of Monterey
Peninsula; Director (October 1991-2005) and Vice Chairman (since 2006) of American Funds' Emerging
Markets Growth Fund, Inc. (mutual fund); President of ARCO Investment Management Company (February
1991-April 2000); Member of the investment committees of The Rockefeller Foundation (since 2001)
and The University of Michigan (since 2000); Advisor at Credit
22 | OPPENHEIMER MONEY FUND/VA
BEVERLY L. HAMILTON, Suisse First Boston's Sprout venture capital unit (venture capital fund) (1994-January 2005);
Continued 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 37 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: 62 (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 37 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 (since
Age: 64 1987) and Chairman (1994-2005) of the Investment Committee 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); and Executive Vice President of Peoples Heritage Financial Group, Inc.
(commercial bank) (January 1999-July 1999). Oversees 39 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
Trustee, President and 2000) of the Manager; President and director or trustee of other Oppenheimer funds; President and
Principal Executive Officer Director of OAC and of Oppenheimer Partnership Holdings, Inc. (holding company subsidiary of the
(since 2001) Manager) (since July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of the
Age: 57 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 96 portfolios in the OppenheimerFunds complex.
23 | OPPENHEIMER MONEY FUND/VA
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. ZACK, GILLESPIE AND
OF THE FUND MS. BLOOMBERG, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, NEW YORK, NEW YORK 10281-1008, FOR
MESSRS. WEISS, VANDEHEY, WIXTED, PETERSEN, SZILAGYI AND MSS. WOLF AND IVES, 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.
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 7 portfolios in the OppenheimerFunds complex.
Portfolio Manager Formerly Vice President of the Manager (June 1990-June 2000).
(since 1998)
Age: 55
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 Assistant
Portfolio Manager Vice President and Senior Credit Analyst of the Manager (February 2000-June 2001). Prior to
(since 2001) joining the Manager in February 2000, he was Associate Director, Structured Finance, Fitch IBCA
Age: 42 Inc. (April 1998-February 2000).
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 the
(since 2004) Manager (1997-February 2004). An officer of 96 portfolios in the OppenheimerFunds complex.
Age: 56
BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer of the following:
Treasurer and HarbourView Asset Management Corporation, Shareholder Financial Services, Inc., Shareholder
Principal Financial & Services, Inc., Oppenheimer Real Asset Management Corporation, and Oppenheimer Partnership
Accounting Officer Holdings, Inc. (since March 1999), OFI Private Investments, Inc. (since March 2000),
(since 1999) OppenheimerFunds International Ltd. and OppenheimerFunds plc (since May 2000), OFI Institutional
Age: 47 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 96 portfolios in the
OppenheimerFunds complex.
BRIAN S. PETERSEN, Assistant Vice President of the Manager (since August 2002); Manager/Financial Product Accounting
Assistant Treasurer of the Manager (November 1998-July 2002). An officer of 96 portfolios in the OppenheimerFunds
(since 2004) complex.
Age: 36
BRIAN C. SZILAGYI, Assistant Vice President of the Manager (since July 2004); Director of Financial Reporting and
Assistant Treasurer Compliance of First Data Corporation (April 2003-July 2004); Manager of Compliance of Berger
(since 2005) Financial Group LLC (May 2001-March 2003); Director of Mutual Fund Operations at American Data
Age: 36 Services, Inc. (September 2000-May 2001). An officer of 96 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 of
(since 2001) Centennial Asset Management Corporation (since December 2001); Senior Vice President and General
Age: 58 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
24 | OPPENHEIMER MONEY FUND/VA
ROBERT G. ZACK, (November 2001-February 2002) and Associate General Counsel (May 1981-October 2001) of the
Continued 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 96 portfolios in the
OppenheimerFunds complex.
LISA I. BLOOMBERG, Vice President and Associate Counsel of the Manager (since May 2004); First Vice President (April
Assistant Secretary 2001-April 2004), Associate General Counsel (December 2000-April 2004), Corporate Vice President
(since 2004) (May 1999-April 2001) and Assistant General Counsel (May 1999-December 2000) of UBS Financial
Age: 39 Services Inc. (formerly, PaineWebber Incorporated). An officer of 96 portfolios in the
OppenheimerFunds complex.
KATHLEEN T. IVES, Vice President (since June 1998) and Senior Counsel and Assistant Secretary (since October 2003)
Assistant Secretary of the Manager; Vice President (since 1999) and Assistant Secretary (since October 2003) of the
(since 2001) Distributor; Assistant Secretary of Centennial Asset Management Corporation (since October 2003);
Age: 41 Vice President and Assistant Secretary of Shareholder Services, Inc. (since 1999); Assistant
Secretary of OppenheimerFunds Legacy Program and Shareholder Financial Services, Inc. (since
December 2001); Assistant Counsel of the Manager (August 1994-October 2003). An officer of 96
portfolios in the OppenheimerFunds complex.
PHILLIP S. GILLESPIE, Senior Vice President and Deputy General Counsel of the Manager (since September 2004); First Vice
Assistant Secretary President (2000-September 2004), Director (2000-September 2004) and Vice President (1998-2000) of
(since 2004) Merrill Lynch Investment Management. An officer of 96 portfolios in the OppenheimerFunds complex.
Age: 43
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.
25 | OPPENHEIMER MONEY FUND/VA
OPPENHEIMER CAPITAL APPRECIATION FUND/VA
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. Large-cap growth stocks again
trailed the broader averages as energy and high-yielding stocks outperformed.
Thus, despite outpacing its large cap growth peers, Oppenheimer Capital
Appreciation Fund/VA trailed both the Russell 1000 Growth Index and the S&P 500
Index. Overall, we benefited from our allocation to the strong-performing energy
sector as well as to consumer staples stocks. In contrast, stock selection in
health care had a negative impact on results, as did our decision to reduce
exposure to consumer discretionary stocks, which as a group performed better
than we had anticipated.
As always, our portfolio management strategy remained consistent
throughout the past year. We continued to keep the Fund broadly diversified in
growth companies with good long-term business models and a track record of
shareholder-friendly management. We remained focused on companies that we
believe have the potential to outperform over the next three to five years at
least; offer the potential for strong, sustainable earnings growth; and are
trading at appropriate valuations given their growth prospects. At the same
time, we avoided concentrating too heavily in any single stock and at period end
owned approximately 103 names in the portfolio.
Our investment approach is "bottom up"--meaning that we buy and sell
stocks based on individual company characteristics as opposed to our assessment
of macroeconomic conditions. At the same time, we evaluate broad secular trends
when making decisions about which names to add to the portfolio. For example, in
the technology sector, we believe a number of our investments are positioned to
benefit from the rapid development of the internet. In our opinion, we are in
the early stages of an internet-driven transformation of daily life--a
transformation that will require huge increases in bandwidth and technical
infrastructure before it is fully realized. Portfolio holdings such as Cisco
Systems, Inc., the leading maker of network communications equipment, and
internet search company Google, Inc. are potential beneficiaries of this growth
in online usage. Cisco, in fact, was the Fund's largest holding at period end
and one of our best contributors to performance during the year, recovering
impressively following several disappointing quarters in the prior year.
Another trend we have been watching is the aging of the "baby boomers."
This generation is just beginning to enter retirement, and in the coming years
its members will be leaving the workforce in great numbers. Many of these
individuals will need help with financial planning, which we believe could
generate significant demand for wealth-management companies, such as portfolio
holdings Northern Trust Corp., UBS AG and Legg Mason, Inc.
In the energy sector, oil field services company Schlumberger Ltd. was a
significant positive performer for the Fund. As with many other energy-related
firms, Schlumberger was helped by continued strength in oil prices for much of
the period. In addition, the company benefited from strong demand for its
advanced technologies, which have enabled its energy exploration and production
customers to be more efficient. Another strong stock was United Kingdom-based
household products company Reckitt Benckiser plc. We especially liked this
company's very solid management team and focus on generating consistent cash
flows and returns. Reckitt Benckiser continued to put up solid earnings during
the period and added to our returns. Also boosting the Fund's performance was
The Chicago Mercantile Exchange, the world's largest futures exchange, which
continued to benefit from the growing use of sophisticated strategies to reduce
financial risk.
On the negative side, a position in Israeli generic drug maker Teva
Pharmaceutical Industries Ltd. detracted. While Teva's products with a six-month
market exclusivity period proved quite profitable, a large stable of older
generics experienced large-than-expected price drops. In the consumer
discretionary sector, XM Satellite Radio Holdings, Inc. detracted from
performance as well. One of two main players in the satellite radio business, XM
has been pressured by increased competition as well as a slowdown in its retail
business. However, we remain optimistic about the company's growth potential, as
several new ORIGINAL EQUIPMENT MANAGER (OEM) launch models with built-in XM
receivers are driving new subscription growth. A third recent disappointment was
internet services company Yahoo!, Inc., whose revenues suffered as the company
delayed the launch of long-anticipated advertising search software.
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, 2006. 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
4 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
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.
5 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
NON-SERVICE SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Capital Appreciation Fund/VA (Non-Service)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Oppenheimer Capital
Appreciation Fund/VA
Date (Non-Service) S&P 500 Index
12/31/1996 10,000 10,000
03/31/1997 9,903 10,269
06/30/1997 11,481 12,060
09/30/1997 12,965 12,963
12/31/1997 12,668 13,335
03/31/1998 14,282 15,194
06/30/1998 14,826 15,698
09/30/1998 12,393 14,140
12/31/1998 15,709 17,149
03/31/1999 16,738 18,003
06/30/1999 18,194 19,269
09/30/1999 17,319 18,069
12/31/1999 22,252 20,756
03/31/2000 25,500 21,231
06/30/2000 24,348 20,667
09/30/2000 24,219 20,467
12/31/2000 22,201 18,867
03/31/2001 19,902 16,631
06/30/2001 21,117 17,604
09/30/2001 16,798 15,021
12/31/2001 19,409 16,626
03/31/2002 18,846 16,672
06/30/2002 15,684 14,440
09/30/2002 13,193 11,946
12/31/2002 14,196 12,953
03/31/2003 13,730 12,545
06/30/2003 15,953 14,475
09/30/2003 16,655 14,858
12/31/2003 18,589 16,666
03/31/2004 18,766 16,948
06/30/2004 19,029 17,240
09/30/2004 18,303 16,917
12/31/2004 19,878 18,478
03/31/2005 19,335 18,082
06/30/2005 19,427 18,329
09/30/2005 20,138 18,989
12/31/2005 20,891 19,385
03/31/2006 21,866 20,200
06/30/2006 20,865 19,909
09/30/2006 21,561 21,036
12/31/2006 22,552 22,444
AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/06
1-Year 7.95% 5-Year 3.05% 10-Year 8.47%
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 CHART 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
03/31/2006 12,870 13,448
06/30/2006 12,273 13,254
09/30/2006 12,677 14,005
12/31/2006 13,251 14,942
AVERAGE ANNUAL TOTAL RETURNS OF SERVICE SHARES OF THE FUND AT 12/31/06
1-Year 7.68% 5-Year 2.78% Since Inception (9/18/01) 5.47%
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.
6 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
FUND EXPENSES
- --------------------------------------------------------------------------------
FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1)
transaction costs, 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, 2006.
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
(7/1/06) (12/31/06) DECEMBER 31, 2006
- ----------------------------------------------------------------------------------------------
Non-Service shares Actual $1,000.00 $1,080.90 $3.52
- ----------------------------------------------------------------------------------------------
Non-Service shares Hypothetical 1,000.00 1,021.83 3.42
- ----------------------------------------------------------------------------------------------
Service shares Actual 1,000.00 1,079.60 4.83
- ----------------------------------------------------------------------------------------------
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,
excluding affiliated fund indirect expenses, based on the 6-month period ended
December 31, 2006 are as follows:
CLASS EXPENSE RATIOS
- ----------------------------------------
Non-Service shares 0.67%
- ----------------------------------------
Service shares 0.92
The expense ratios reflect voluntary waivers or reimbursements of expenses by
the Fund's Manager that can be terminated at any time, without advance notice.
The "Financial Highlights" tables in the Fund's financial statements, included
in this report, also show the gross expense ratios, without such waivers or
reimbursements.
- --------------------------------------------------------------------------------
7 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
STATEMENT OF INVESTMENTS December 31, 2006
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
COMMON STOCKS--98.7%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--11.5%
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--2.1%
Las Vegas Sands Corp. 1 176,600 $ 15,802,168
- --------------------------------------------------------------------------------
Melco PBL Entertainment Ltd., ADR 1 205,400 4,366,804
- --------------------------------------------------------------------------------
Panera Bread Co., Cl. A 1 159,720 8,929,945
- --------------------------------------------------------------------------------
Starbucks Corp. 1 422,100 14,950,782
---------------
44,049,699
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES--0.6%
Harman International Industries, Inc. 124,700 12,458,777
- --------------------------------------------------------------------------------
MEDIA--1.8%
Comcast Corp., Cl. A
Special, Non-Vtg. 1 533,500 22,342,980
- --------------------------------------------------------------------------------
XM Satellite Radio Holdings, Inc.,
Cl. A 1 1,062,500 15,353,125
---------------
37,696,105
- --------------------------------------------------------------------------------
MULTILINE RETAIL--2.7%
J.C. Penney Co., Inc. (Holding Co.) 216,300 16,732,968
- --------------------------------------------------------------------------------
Kohl's Corp. 1 269,000 18,407,670
- --------------------------------------------------------------------------------
Target Corp. 344,200 19,636,610
---------------
54,777,248
- --------------------------------------------------------------------------------
SPECIALTY RETAIL--3.3%
Best Buy Co., Inc. 334,150 16,436,839
- --------------------------------------------------------------------------------
Lowe's Cos., Inc. 762,000 23,736,300
- --------------------------------------------------------------------------------
Staples, Inc. 1,044,200 27,880,140
---------------
68,053,279
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS--1.0%
Polo Ralph Lauren Corp. 264,200 20,517,772
- --------------------------------------------------------------------------------
CONSUMER STAPLES--7.7%
- --------------------------------------------------------------------------------
BEVERAGES--1.0%
PepsiCo, Inc. 342,900 21,448,395
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--1.5%
CVS Corp. 389,600 12,042,536
- --------------------------------------------------------------------------------
Sysco Corp. 280,620 10,315,591
- --------------------------------------------------------------------------------
Whole Foods Market, Inc. 171,900 8,067,267
---------------
30,425,394
- --------------------------------------------------------------------------------
FOOD PRODUCTS--2.1%
Cadbury Schweppes plc 1,125,400 12,042,196
- --------------------------------------------------------------------------------
Nestle SA 84,757 30,118,819
---------------
42,161,015
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS--3.1%
Procter & Gamble Co. (The) 599,800 38,549,146
- --------------------------------------------------------------------------------
Reckitt Benckiser plc 568,470 25,978,677
---------------
64,527,823
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
ENERGY--6.2%
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--4.3%
Halliburton Co. 957,600 $ 29,733,480
- --------------------------------------------------------------------------------
Schlumberger Ltd. 533,600 33,702,176
- --------------------------------------------------------------------------------
Smith International, Inc. 610,000 25,052,700
---------------
88,488,356
- --------------------------------------------------------------------------------
OIL & GAS--1.9%
Kinder Morgan Management LLC 1 241,018 11,009,702
- --------------------------------------------------------------------------------
Occidental Petroleum Corp. 257,000 12,549,310
- --------------------------------------------------------------------------------
XTO Energy, Inc. 343,100 16,142,855
---------------
39,701,867
- --------------------------------------------------------------------------------
FINANCIALS--10.4%
- --------------------------------------------------------------------------------
CAPITAL MARKETS--5.1%
Franklin Resources, Inc. 119,000 13,110,230
- --------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The) 105,100 20,951,685
- --------------------------------------------------------------------------------
Legg Mason, Inc. 261,200 24,827,060
- --------------------------------------------------------------------------------
Nomura Securities Co. Ltd. 538,000 10,149,237
- --------------------------------------------------------------------------------
Northern Trust Corp. 263,200 15,973,608
- --------------------------------------------------------------------------------
UBS AG 331,286 20,057,733
---------------
105,069,553
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--1.6%
Chicago Mercantile Exchange (The) 65,200 33,235,700
- --------------------------------------------------------------------------------
INSURANCE--3.7%
American International Group, Inc. 457,450 32,780,867
- --------------------------------------------------------------------------------
Hartford Financial Services Group,
Inc. (The) 166,800 15,564,108
- --------------------------------------------------------------------------------
Prudential Financial, Inc. 324,700 27,878,742
---------------
76,223,717
- --------------------------------------------------------------------------------
HEALTH CARE--14.5%
- --------------------------------------------------------------------------------
BIOTECHNOLOGY--2.9%
Celgene Corp. 1 286,700 16,493,851
- --------------------------------------------------------------------------------
Genentech, Inc. 1 237,200 19,244,036
- --------------------------------------------------------------------------------
Genzyme Corp. (General Division) 1 203,300 12,519,214
- --------------------------------------------------------------------------------
Gilead Sciences, Inc. 1 180,600 11,726,358
---------------
59,983,459
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--1.4%
St. Jude Medical, Inc. 1 465,300 17,011,368
- --------------------------------------------------------------------------------
Varian Medical Systems, Inc. 1 248,500 11,821,145
---------------
28,832,513
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--2.7%
Caremark Rx, Inc. 290,800 16,607,588
- --------------------------------------------------------------------------------
Express Scripts, Inc. 1 136,100 9,744,760
- --------------------------------------------------------------------------------
UnitedHealth Group, Inc. 538,700 28,944,351
---------------
55,296,699
8 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
LIFE SCIENCES TOOLS & SERVICES--2.2%
Covance, Inc. 1 292,157 $ 17,210,969
- --------------------------------------------------------------------------------
Thermo Fisher Scientific, Inc. 1 638,400 28,913,136
---------------
46,124,105
- --------------------------------------------------------------------------------
PHARMACEUTICALS--5.3%
Allergan, Inc. 77,600 9,291,824
- --------------------------------------------------------------------------------
Novartis AG 611,525 35,142,530
- --------------------------------------------------------------------------------
Roche Holdings AG 182,548 32,734,295
- --------------------------------------------------------------------------------
Sepracor, Inc. 1 166,700 10,265,386
- --------------------------------------------------------------------------------
Shionogi & Co. Ltd. 487,000 9,541,705
- --------------------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.,
Sponsored ADR 364,646 11,333,198
---------------
108,308,938
- --------------------------------------------------------------------------------
INDUSTRIALS--9.7%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE--4.6%
Empresa Brasileira de Aeronautica SA,
ADR 434,900 18,017,907
- --------------------------------------------------------------------------------
General Dynamics Corp. 266,100 19,784,535
- --------------------------------------------------------------------------------
KBR, Inc. 1 136,660 3,575,026
- --------------------------------------------------------------------------------
Lockheed Martin Corp. 227,400 20,936,718
- --------------------------------------------------------------------------------
Rockwell Collins, Inc. 154,980 9,808,684
- --------------------------------------------------------------------------------
United Technologies Corp. 375,000 23,445,000
---------------
95,567,870
- --------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS--0.3%
Expeditors International of
Washington, Inc. 178,400 7,225,200
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--1.0%
Corporate Executive Board Co. (The) 239,500 21,004,150
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--2.3%
General Electric Co. 961,000 35,758,810
- --------------------------------------------------------------------------------
Textron, Inc. 118,500 11,111,745
---------------
46,870,555
- --------------------------------------------------------------------------------
MACHINERY--1.0%
Danaher Corp. 271,600 19,674,704
- --------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS--0.5%
Fastenal Co. 265,400 9,522,552
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--32.3%
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--7.5%
Cisco Systems, Inc. 1 2,484,100 67,890,453
- --------------------------------------------------------------------------------
Corning, Inc. 1 1,606,200 30,052,002
- --------------------------------------------------------------------------------
F5 Networks, Inc. 1 182,400 13,535,904
- --------------------------------------------------------------------------------
QUALCOMM, Inc. 555,100 20,977,229
- --------------------------------------------------------------------------------
Telefonaktiebolaget LM Ericsson,
Sponsored ADR 563,900 22,685,697
---------------
155,141,285
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--3.5%
Apple Computer, Inc. 1 388,200 $ 32,934,888
- --------------------------------------------------------------------------------
EMC Corp. 1 1,831,500 24,175,800
- --------------------------------------------------------------------------------
Network Appliance, Inc. 1 360,700 14,168,296
---------------
71,278,984
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--6.4%
eBay, Inc. 1 1,282,400 38,561,768
- --------------------------------------------------------------------------------
Google, Inc., Cl. A 1 120,300 55,395,744
- --------------------------------------------------------------------------------
Yahoo!, Inc. 1 1,510,200 38,570,508
---------------
132,528,020
- --------------------------------------------------------------------------------
IT SERVICES--4.6%
Affiliated Computer Services, Inc.,
Cl. A 1 649,300 31,711,812
- --------------------------------------------------------------------------------
Alliance Data Systems Corp. 1 169,100 10,563,677
- --------------------------------------------------------------------------------
Automatic Data Processing, Inc. 494,420 24,350,185
- --------------------------------------------------------------------------------
Cognizant Technology Solutions
Corp. 1 245,200 18,919,632
- --------------------------------------------------------------------------------
Global Payments, Inc. 181,700 8,412,710
---------------
93,958,016
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--4.7%
Advanced Micro Devices, Inc. 1 709,600 14,440,360
- --------------------------------------------------------------------------------
ASML Holding NV 1 370,900 9,135,267
- --------------------------------------------------------------------------------
Broadcom Corp., Cl. A 1 864,900 27,944,919
- --------------------------------------------------------------------------------
Marvell Technology Group Ltd. 1 591,800 11,356,642
- --------------------------------------------------------------------------------
Microchip Technology, Inc. 490,700 16,045,890
- --------------------------------------------------------------------------------
SiRF Technology Holdings, Inc. 1 322,260 8,224,075
- --------------------------------------------------------------------------------
Texas Instruments, Inc. 321,300 9,253,440
---------------
96,400,593
- --------------------------------------------------------------------------------
SOFTWARE--5.6%
Adobe Systems, Inc. 1 654,600 26,917,152
- --------------------------------------------------------------------------------
Amdocs Ltd. 1 565,040 21,895,300
- --------------------------------------------------------------------------------
Autodesk, Inc. 1 452,900 18,324,334
- --------------------------------------------------------------------------------
Electronic Arts, Inc. 1 229,600 11,562,656
- --------------------------------------------------------------------------------
Microsoft Corp. 727,800 21,732,108
- --------------------------------------------------------------------------------
Red Hat, Inc. 1 668,600 15,377,800
---------------
115,809,350
- --------------------------------------------------------------------------------
MATERIALS--3.7%
- --------------------------------------------------------------------------------
CHEMICALS--3.7%
Monsanto Co. 948,200 49,808,946
- --------------------------------------------------------------------------------
Praxair, Inc. 433,300 25,707,689
---------------
75,516,635
9 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--2.7%
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--2.7%
America Movil SA de CV, Series L 293,500 $ 13,272,069
- --------------------------------------------------------------------------------
American Tower Corp. 1 580,500 21,641,040
- --------------------------------------------------------------------------------
Crown Castle International Corp. 1 369,400 11,931,620
- --------------------------------------------------------------------------------
NII Holdings, Inc. 1 153,500 9,891,540
---------------
56,736,269
---------------
Total Common Stocks (Cost $1,629,190,808) 2,034,614,597
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
MONEY MARKET FUND--0.7%
Oppenheimer Institutional Money
Market Fund, Cl. E, 5.25% 2,3
(Cost $15,177,546) 15,177,546 $ 15,177,546
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $1,644,368,354) 99.4% 2,049,792,143
- --------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 0.6 12,314,409
-------------------------------
NET ASSETS 100.0% $2,062,106,552
==============================
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
2. Represents ownership of an affiliated fund, at or during the period ended
December 31, 2006. Transactions during the period in which the issuer was an
affiliate are as follows:
SHARES GROSS GROSS SHARES
DECEMBER 31, 2005 ADDITIONS REDUCTIONS DECEMBER 31, 2006
- -----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Institutional Money Market Fund, Cl. E, 5.25%* -- 59,735,542 44,557,996 15,177,546
VALUE DIVIDEND
SEE NOTE 1 INCOME
- -----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Institutional Money Market Fund, Cl. E, 5.25%* $15,177,546 $279,935
* The money market fund and the Fund are affiliated by having the same
investment advisor.
3. Rate shown is the 7-day yield as of December 31, 2006.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
10 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 31, 2006
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments:
Unaffiliated companies (cost $1,629,190,808) $2,034,614,597
Affiliated companies (cost $15,177,546) 15,177,546
---------------
2,049,792,143
- --------------------------------------------------------------------------------------------------------------------
Cash 26,829
- --------------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 16,779,917
Shares of beneficial interest sold 2,314,639
Dividends 1,616,855
Other 46,152
---------------
Total assets 2,070,576,535
- --------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payables and other liabilities:
Investments purchased 6,800,366
Shares of beneficial interest redeemed 1,138,776
Distribution and service plan fees 288,231
Shareholder communications 165,525
Trustees' compensation 33,461
Transfer and shareholder servicing agent fees 1,770
Other 41,854
---------------
Total liabilities 8,469,983
- --------------------------------------------------------------------------------------------------------------------
NET ASSETS $2,062,106,552
===============
- --------------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- --------------------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 49,864
- --------------------------------------------------------------------------------------------------------------------
Additional paid-in capital 1,942,128,151
- --------------------------------------------------------------------------------------------------------------------
Accumulated net investment income 2,398,470
- --------------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions (287,913,618)
- --------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets and liabilities denominated
in foreign currencies 405,443,685
---------------
NET ASSETS $2,062,106,552
===============
- --------------------------------------------------------------------------------------------------------------------
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 $1,598,967,158 and 38,592,272 shares of beneficial interest outstanding) $ 41.43
- --------------------------------------------------------------------------------------------------------------------
Service Shares:
Net asset value, redemption price per share and offering price per share (based on net assets
of $463,139,394 and 11,271,776 shares of beneficial interest outstanding) $ 41.09
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 31, 2006
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
INVESTMENT INCOME
- -----------------------------------------------------------------------------------------
Dividends:
Unaffiliated companies (net of foreign withholding taxes of $438,675) $ 15,720,860
Affiliated companies 279,935
- -----------------------------------------------------------------------------------------
Interest 1,055,606
- -----------------------------------------------------------------------------------------
Portfolio lending fees 17,038
-------------
Total investment income 17,073,439
- -----------------------------------------------------------------------------------------
EXPENSES
- -----------------------------------------------------------------------------------------
Management fees 13,090,904
- -----------------------------------------------------------------------------------------
Distribution and service plan fees -- Service shares 1,065,348
- -----------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service shares 10,350
Service shares 10,080
- -----------------------------------------------------------------------------------------
Shareholder communications:
Non-Service shares 264,533
Service shares 70,997
- -----------------------------------------------------------------------------------------
Custodian fees and expenses 39,285
- -----------------------------------------------------------------------------------------
Trustees' compensation 32,615
- -----------------------------------------------------------------------------------------
Administration service fees 1,500
- -----------------------------------------------------------------------------------------
Other 83,009
-------------
Total expenses 14,668,621
Less reduction to custodian expenses (3,441)
Less waivers and reimbursements of expenses (5,287)
-------------
Net expenses 14,659,893
- -----------------------------------------------------------------------------------------
NET INVESTMENT INCOME 2,413,546
- -----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
- -----------------------------------------------------------------------------------------
Net realized gain on:
Investments 29,275,475
Foreign currency transactions 692,347
-------------
Net realized gain 29,967,822
- -----------------------------------------------------------------------------------------
Net change in unrealized appreciation on:
Investments 113,124,566
Translation of assets and liabilities denominated in foreign currencies 9,929,507
-------------
Net change in unrealized appreciation 123,054,073
- -----------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $155,435,441
=============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
12 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2006 2005
- ------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 2,413,546 $ 8,432,318
- ------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) 29,967,822 (33,018,356)
- ------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation 123,054,073 121,242,883
-----------------------------------
Net increase in net assets resulting from operations 155,435,441 96,656,845
- ------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Non-Service shares (6,085,308) (15,541,862)
Service shares (772,510) (1,926,965)
-----------------------------------
(6,857,818) (17,468,827)
- ------------------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from beneficial interest transactions:
Non-Service shares (169,765,856) (181,635,386)
Service shares 49,160,827 117,658,602
-----------------------------------
(120,605,029) (63,976,784)
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
Total increase 27,972,594 15,211,234
- ------------------------------------------------------------------------------------------------------------------------------
Beginning of period 2,034,133,958 2,018,922,724
-----------------------------------
End of period (including accumulated net investment income of $2,398,470 and
$6,819,916, respectively) $2,062,106,552 $2,034,133,958
===================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
13 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2006 2005 2004 2003 2002
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
Net asset value, beginning of period $ 38.52 $ 36.99 $ 34.70 $ 26.62 $ 36.58
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .07 1 .18 1 .35 1,2 .12 .11
Net realized and unrealized gain (loss) 2.98 1.68 2.05 8.07 (9.89)
----------------------------------------------------------------------------------
Total from investment operations 3.05 1.86 2.40 8.19 (9.78)
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.14) (.33) (.11) (.11) (.18)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 41.43 $ 38.52 $ 36.99 $ 34.70 $ 26.62
==================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 7.95% 5.10% 6.93% 30.94% (26.86)%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $1,598,967 $1,652,282 $1,770,273 $1,715,240 $1,338,769
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $1,615,352 $1,658,910 $1,708,511 $1,468,297 $1,630,430
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 0.17% 0.47% 0.99% 2 0.39% 0.35%
Total expenses 0.67% 5,6,7 0.66% 6 0.66% 6 0.67% 6 0.66% 6
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 47% 70% 44% 48% 32%
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. Expenses including indirect expenses from affiliated fund were as follows:
Year Ended December 31, 2006 0.67%
6. Reduction to custodian expenses less than 0.01%.
7. Voluntary waiver of affiliated funds management fees less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
SERVICE SHARES YEAR ENDED DECEMBER 31, 2006 2005 2004 2003 2002
- ------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
Net asset value, beginning of period $ 38.23 $ 36.73 $ 34.53 $ 26.53 $ 36.56
- ------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.03) 1 .08 1 .29 1,2 .08 .20
Net realized and unrealized gain (loss) 2.96 1.69 1.99 8.02 (10.05)
--------------------------------------------------------------------------
Total from investment operations 2.93 1.77 2.28 8.10 (9.85)
- ------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.07) (.27) (.08) (.10) (.18)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 41.09 $ 38.23 $ 36.73 $ 34.53 $ 26.53
==========================================================================
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 7.68% 4.87% 6.62% 30.69% (27.09)%
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $463,140 $381,852 $248,649 $119,699 $ 18,260
- ------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $426,539 $301,780 $184,273 $ 48,178 $ 6,263
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income (loss) (0.08)% 0.20% 0.85% 2 0.14% 0.26%
Total expenses 0.92% 5,6,7 0.91% 6 0.91% 6 0.94% 6 0.81% 6,8
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 47% 70% 44% 48% 32%
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. Expenses including indirect expenses from affiliated fund were as follows:
Year Ended December 31, 2006 0.92%
6. Reduction to custodian expenses less than 0.01%.
7. Voluntary waiver of affiliated funds management fees less than 0.01%.
8. Voluntary waiver of transfer agent fees less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
15 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Capital Appreciation Fund/VA (the Fund) is a separate series of
Oppenheimer Variable Account Funds, an open-end management investment company
registered under the Investment Company Act of 1940, as amended. The Fund's
investment objective is to seek capital appreciation by investing in securities
of well-known, established companies. The Fund's investment 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(R) 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, as 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. Options are
valued daily based upon the last sale price on the principal exchange on which
the option is traded. 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. Investments in
open-end registered investment companies (including affiliated funds) are valued
at that fund's net asset value. 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
16 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
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.
- --------------------------------------------------------------------------------
AFFILIATED FUNDS. The Fund is permitted to invest daily available cash balances
in affiliated money market funds. Each day, the Fund invests the available cash
in Class E shares of Oppenheimer Institutional Money Market Fund ("IMMF") which
seeks current income and stability of principal. IMMF is a registered open-end
management investment company, regulated as a money market fund under the
Investment Company Act of 1940, as amended. The Manager is also the investment
advisor of IMMF. The Fund's investment in IMMF is included in the Statement of
Investments. As a shareholder, the Fund is subject to its proportional share of
IMMF's Class E expenses, including its management fee. The Manager will waive
fees and/or reimburse Fund expenses in an amount equal to the indirect
management fees incurred through the Fund's investment in IMMF.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders.
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
----------------------------------------------------------------------------
$3,754,173 $-- $282,941,512 $400,331,942
1. As of December 31, 2006, the Fund had $282,941,512 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, 2006,
details of the capital loss carryforwards were as follows:
EXPIRING
------------------------------
2010 $ 54,487,309
2011 193,776,365
2013 34,677,838
------------
Total $282,941,512
============
2. During the fiscal year ended December 31, 2006, the Fund utilized $28,826,516
of capital loss carryforward to offset capital gains realized in that fiscal
year.
3. During the fiscal year ended December 31, 2005, 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, 2006. Net assets of
the Fund were unaffected by the reclassifications.
17 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
INCREASE TO ACCUMULATED
INCREASE TO ACCUMULATED NET REALIZED LOSS
NET INVESTMENT INCOME ON INVESTMENTS
-------------------------------------------------------------
$22,826 $22,826
The tax character of distributions paid during the years ended December 31, 2006
and December 31, 2005 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2006 DECEMBER 31, 2005
-------------------------------------------------------------------
Distributions paid from:
Ordinary income $6,857,818 $17,468,827
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, 2006 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 $ 1,649,480,097
================
Gross unrealized appreciation $ 430,460,413
Gross unrealized depreciation (30,128,471)
----------------
Net unrealized appreciation $ 400,331,942
================
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a compensation
deferral plan for independent trustees that enables trustees to elect to defer
receipt of all or a portion of the annual compensation they are entitled to
receive from the Fund. For purposes of determining the amount owed to the
Trustee under the plan, deferred amounts are treated as though equal dollar
amounts had been invested in shares of the Fund or in other Oppenheimer funds
selected by the Trustee. The Fund purchases shares of the funds selected for
deferral by the Trustee in amounts equal to his or her deemed investment,
resulting in a Fund asset equal to the deferred compensation liability. Such
assets are included as a component of "Other" within the asset section of the
Statement of Assets and Liabilities. Deferral of trustees' fees under the plan
will not affect the net assets of the Fund, and will not materially affect the
Fund's assets, liabilities or net investment income per share. Amounts will be
deferred until distributed in accordance 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, at a rate equal to the
Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line item,
if applicable, represents earnings on cash balances maintained by the Fund
during the period. Such interest expense and other custodian fees may be paid
with these earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
18 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Fund's organizational documents provide current and former
trustees and officers with a limited indemnification against liabilities arising
in connection with the performance of their duties to the Fund. In the normal
course of business, the Fund may also enter into contracts that provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would be dependent on future claims that may be made against the
Fund. The risk of material loss from such claims is considered remote.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with 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, 2006 YEAR ENDED DECEMBER 31, 2005
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------
NON-SERVICE SHARES
Sold 4,072,357 $ 160,034,277 4,329,144 $ 158,705,810
Dividends and/or distributions reinvested 154,136 6,085,308 429,927 15,541,862
Redeemed (8,524,929) (335,885,441) (9,732,224) (355,883,058)
------------------------------------------------------------------
Net decrease (4,298,436) $(169,765,856) (4,973,153) $(181,635,386)
==================================================================
- -----------------------------------------------------------------------------------------------------------------
SERVICE SHARES
Sold 3,206,477 $ 125,342,151 4,094,952 $ 149,465,324
Dividends and/or distributions reinvested 19,641 770,510 53,616 1,926,965
Redeemed (1,942,425) (76,951,834) (929,573) (33,733,687)
------------------------------------------------------------------
Net increase 1,283,693 $ 49,160,827 3,218,995 $ 117,658,602
==================================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations and money market funds, for the year ended December
31, 2006, were as follows:
PURCHASES SALES
-------------------------------------------------------------
Investment securities $952,157,069 $1,060,183,222
- --------------------------------------------------------------------------------
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 average net assets as shown in the following table:
FEE SCHEDULE
--------------------------------------
Up to $200 million 0.75%
Next $200 million 0.72
Next $200 million 0.69
Next $200 million 0.66
Over $800 million 0.60
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.
19 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES 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, 2006, the Fund paid
$20,489 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.
The Manager will waive fees and/or reimburse Fund expenses in an amount
equal to the indirect management fees incurred through the Fund's investment in
IMMF. During the year ended December 31, 2006, the Manager waived $5,287 for
IMMF management fees.
- --------------------------------------------------------------------------------
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, 2006, the Fund had no outstanding foreign currency
contracts.
- --------------------------------------------------------------------------------
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
securities, letters of credit 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 each day. If the Fund is
undercollateralized at the close of business due to an increase in market value
of securities on loan, additional collateral is requested from the borrowing
counterparty and is delivered to the Fund on the next business day. Cash
collateral may be invested in
20 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
approved investments and the Fund bears the risk of any loss in value of these
investments. The Fund retains a portion of the interest earned from the
collateral. 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. 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, 2006, the Fund had no securities on loan.
- --------------------------------------------------------------------------------
7. RECENT ACCOUNTING PRONOUNCEMENTS
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48 ("FIN 48"), ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES.
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with FASB Statement No. 109,
ACCOUNTING FOR INCOME TAXES. FIN 48 requires the evaluation of tax positions
taken in the course of preparing the Fund's tax returns to determine whether it
is "more-likely-than-not" that tax positions taken in the Fund's tax return will
be ultimately sustained. A tax liability and expense must be recorded in respect
of any tax position that, in Management's judgment, will not be fully realized.
FIN 48 is effective for fiscal years beginning after December 15, 2006. As of
December 31, 2006, the Manager has evaluated the implications of FIN 48 and does
not currently anticipate a material impact to the Fund's financial statements.
The Manager will continue to monitor the Fund's tax positions prospectively for
potential future impacts.
In September 2006, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 157, FAIR VALUE MEASUREMENTS. This standard establishes a
single authoritative definition of fair value, sets out a framework for
measuring fair value and expands disclosures about fair value measurements. SFAS
No. 157 applies to fair value measurements already required or permitted by
existing standards. SFAS No. 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. As of December 31, 2006, the Manager does not believe the
adoption of SFAS No. 157 will materially impact the financial statement amounts;
however, additional disclosures may be required about the inputs used to develop
the measurements and the effect of certain of the measurements on changes in net
assets for the period.
- --------------------------------------------------------------------------------
8. LITIGATION
A consolidated amended complaint was filed as a putative class action against
the Manager and the Transfer Agent and other defendants (including 51 of the
Oppenheimer funds excluding the Fund) in the U.S. District Court for the
Southern District of New York on January 10, 2005 and was amended on March 4,
2005. The complaint alleged, among other things, that the Manager charged
excessive fees for distribution and other costs, and that by permitting and/or
participating in those actions, the Directors/Trustees and the Officers of the
funds breached their fiduciary duties to fund shareholders under the Investment
Company Act of 1940 and at common law. The plaintiffs sought unspecified
damages, an accounting of all fees paid, and an award of attorneys' fees and
litigation expenses.
In response to the defendants' motions to dismiss the suit, seven of the
eight counts in the complaint, including the claims against certain of the
Oppenheimer funds, as nominal defendants, and against certain present and former
Directors, Trustees and Officers of the funds, and the Distributor, as
defendants, were dismissed with prejudice, by court order dated March 10, 2006,
and the remaining count against the Manager and the Transfer Agent was dismissed
with prejudice by court order dated April 5, 2006. The plaintiffs filed an
appeal of those dismissals on May 11, 2006.
The Manager believes that the allegations contained in the complaint are
without merit and that there are substantial grounds to sustain the district
court's rulings. The Manager also believes that it is premature to render any
opinion as to the likelihood of an outcome unfavorable to it, the funds, the
Directors/Trustees or the Officers on the appeal of the decisions of the
district court, and that no estimate can yet be made with any degree of
certainty as to the amount or range of any potential loss.
21 | 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 (the "Fund"), a series of Oppenheimer
Variable Account Funds, including the statement of investments, as of December
31, 2006, 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 period
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
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 audits included 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, 2006, 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 the
Fund as of December 31, 2006, 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
period then ended, in conformity with accounting principles generally accepted
in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
February 8, 2007
22 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2007, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2006. 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, 2006 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.
23 | 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.
24 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew the Fund's
investment advisory agreement (the "Agreement"). The Investment Company Act of
1940, as amended, requires that the Board request and evaluate, and that the
Manager provide, such information as may be reasonably necessary to evaluate the
terms of the Agreement. The Board employs an independent consultant to prepare a
report that provides information, including comparative information, that the
Board requests for that purpose. In addition, the Board receives information
throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager and its affiliates, including
an analysis of the cost of providing services, (v) whether economies of scale
are realized as the Fund grows and whether fee levels reflect these economies of
scale for Fund investors and (vi) other benefits to the Manager from its
relationship with the Fund. Outlined below is a summary of the principal
information considered by the Board as well as the Board's conclusions.
The Board was aware that there are alternatives to retaining the Manager.
NATURE, QUALITY AND EXTENT OF SERVICES. The Board considered information
about the nature and extent of the services provided to the Fund and information
regarding the Manager's key personnel who provide such services. The Manager's
duties include providing the Fund with the services of the portfolio managers
and the Manager's investment team, who provide research, analysis and other
advisory services in regard to the Fund's investments; securities trading
services; oversight of third party service providers; monitoring compliance with
applicable Fund policies and procedures and adherence to the Fund's investment
restrictions. The Manager is responsible for providing certain administrative
services to the Fund as well. Those services include providing and supervising
all administrative and clerical personnel who are necessary in order to provide
effective corporate administration for the Fund; compiling and maintaining
records with respect to the Fund's operations; preparing and filing reports
required by the Securities and Exchange Commission; preparing periodic reports
regarding the operations of the Fund for its shareholders; preparing proxy
materials for shareholder meetings; and preparing the registration statements
required by Federal and state securities laws for the sale of the Fund's shares.
The Manager also provides the Fund with office space, facilities and equipment.
The Board also considered the quality of the services provided and the
quality of the Manager's resources that are available to the Fund. The Board
took account of the fact that the Manager has had over 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. In its evaluation of the quality of
the portfolio management services provided, the Board considered the experience
of William L. Wilby, Marc Baylin and the Manager's Growth Equity investment team
and analysts. Mr. Wilby and Mr. Baylin have been portfolio managers of the Fund
since October 2005. 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.
25 | OPPENHEIMER CAPITAL APPRECIATION 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 investment 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 growth funds underlying
variable insurance products. The Board noted that the Fund's one-year,
three-year, five-year and ten-year performance were 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 and other large-cap growth funds underlying
variable insurance products. The Board noted that the Fund's contractual
management fees are higher than its peer group median although its actual
management fees are equal to its peer group median.
ECONOMIES OF SCALE. The Board reviewed 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
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 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 Agreement, including the management fee,
in light of all of the surrounding circumstances.
26 | 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 FUND, LENGTH OF SERVICE, PORTFOLIOS IN THE FUND 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, President, Colorado Christian University (since 2006); Chairman of the following private mortgage
Chairman of the Board of banking companies: Cherry Creek Mortgage Company (since 1991), Centennial State Mortgage Company
Trustees (since 2003), (since 1994), and The El Paso Mortgage Company (since 1993); Chairman of the following private
Trustee (since 1999) companies: Ambassador Media Corporation (since 1984) and Broadway Ventures (since 1984); Director
Age: 69 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 37 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,
Age: 75 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 37 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: 70 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 37 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: 68 PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price Waterhouse
LLP Global Investment Management Industry Services Group (accounting firm) (July 1994-June 1998).
Oversees 37 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
Age: 65 (October 1999-October 2003); Director of Rocky Mountain Elk Foundation (non-profit organization)
(February 1998-February 2003 and since February 2005); 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 37 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: 66 (until October 1994). Oversees 37 portfolios in the OppenheimerFunds complex.
BEVERLY L. HAMILTON, Trustee of Monterey Institute for International Studies (educational organization) (since February
Trustee (since 2002) 2000); Board Member of Middlebury College (educational organization) (since December 2005);
Age: 60 Director of The California Endowment (philanthropic organization) (since April 2002); Director
(February 2002-2005) and Chairman of Trustees (since 2006) of the Community Hospital of Monterey
Peninsula; Director (October 1991-2005) and Vice Chairman (since 2006) of American Funds' Emerging
Markets Growth Fund, Inc. (mutual fund); President of ARCO Investment Management Company (February
1991-April 2000); Member of the investment committees of The Rockefeller Foundation (since 2001)
and The University of Michigan (since 2000); Advisor at Credit
27 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
BEVERLY L. HAMILTON, Suisse First Boston's Sprout venture capital unit (venture capital fund) (1994-January 2005);
Continued 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 37 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: 62 (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 37 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 (since
Age: 64 1987) and Chairman (1994-2005) of the Investment Committee 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); and Executive Vice President of Peoples Heritage Financial Group, Inc.
(commercial bank) (January 1999-July 1999). Oversees 39 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 ANNUAL 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
Trustee, President and 2000) of the Manager; President and director or trustee of other Oppenheimer funds; President and
Principal Executive Officer Director of OAC and of Oppenheimer Partnership Holdings, Inc. (holding company subsidiary of the
(since 2001) Manager) (since July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of the
Age: 57 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 96 portfolios in the OppenheimerFunds complex.
28 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS OF THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. BAYLIN, WILBY, ZACK,
THE FUND GILLESPIE AND MS. BLOOMBERG, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, NEW YORK, NEW YORK
10281-1008, FOR MESSRS. VANDEHEY, WIXTED, PETERSEN, SZILAGYI AND MS. IVES, 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: Managing Director
Vice President and Portfolio and Lead Portfolio Manager at JP Morgan Fleming Investment Management (June 2002 to August 2005);
Manager (since 2005) Vice President of T. Rowe Price and a portfolio manager (March 1999 to June 2002) and an analyst
Age: 38 (from June 1993). 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
Vice President and Portfolio of Equities of the Manager (since July 2004-December 2006). Mr. Wilby was Director of
Manager (since 2005) International Equities of the Manager (May 2000 through July 2004) and Senior Vice President of
Age: 62 HarbourView Asset Management Corporation (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
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 of the
(since 2004) Manager (1997-February 2004). An officer of 96 portfolios in the OppenheimerFunds complex.
Age: 56
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
Financial & Accounting Services, Inc., Oppenheimer Real Asset Management Corporation, and Oppenheimer Partnership
Officer (since 1999) Holdings, Inc. (since March 1999), OFI Private Investments, Inc. (since March 2000),
Age: 47 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 96 portfolios in the
OppenheimerFunds complex.
BRIAN S. PETERSEN, Assistant Vice President of the Manager (since August 2002); Manager/Financial Product Accounting
Assistant Treasurer of the Manager (November 1998-July 2002). An officer of 96 portfolios in the OppenheimerFunds
(since 2004) complex.
Age: 36
BRIAN C. SZILAGYI, Assistant Vice President of the Manager (since July 2004); Director of Financial Reporting and
Assistant Treasurer Compliance of First Data Corporation (April 2003-July 2004); Manager of Compliance of Berger
(since 2005) Financial Group LLC (May 2001-March 2003); Director of Mutual Fund Operations at American Data
Age: 36 Services, Inc. (September 2000-May 2001). An officer of 96 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 of
(since 2001) Centennial Asset Management Corporation (since December 2001); Senior Vice President and General
Age: 58 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
29 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
ROBERT G. ZACK, (May 1985-December 2003), Acting General Counsel (November 2001-February 2002) and Associate
Continued 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 96 portfolios in the OppenheimerFunds complex.
LISA I. BLOOMBERG, Vice President and Associate Counsel of the Manager (since May 2004); First Vice President (April
Assistant Secretary 2001-April 2004), Associate General Counsel (December 2000-April 2004), Corporate Vice President
(since 2004) (May 1999-April 2001) and Assistant General Counsel (May 1999-December 2000) of UBS Financial
Age: 39 Services Inc. (formerly, PaineWebber Incorporated). An officer of 96 portfolios in the
OppenheimerFunds complex.
KATHLEEN T. IVES, Vice President (since June 1998) and Senior Counsel and Assistant Secretary (since October 2003)
Assistant Secretary of the Manager; Vice President (since 1999) and Assistant Secretary (since October 2003) of the
(since 2001) Distributor; Assistant Secretary of Centennial Asset Management Corporation (since October 2003);
Age: 41 Vice President and Assistant Secretary of Shareholder Services, Inc. (since 1999); Assistant
Secretary of OppenheimerFunds Legacy Program and Shareholder Financial Services, Inc. (since
December 2001); Assistant Counsel of the Manager (August 1994-October 2003). An officer of 96
portfolios in the OppenheimerFunds complex.
PHILLIP S. GILLESPIE, Senior Vice President and Deputy General Counsel of the Manager (since September 2004); First Vice
Assistant Secretary President (2000-September 2004), Director (2000-September 2004) and Vice President (1998-2000) of
(since 2004) Merrill Lynch Investment Management. An officer of 96 portfolios in the OppenheimerFunds complex.
Age: 43
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.
30 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
OPPENHEIMER MIDCAP FUND/VA
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. For the 12-month period ending
December 31, 2006, Oppenheimer MidCap Fund/VA's Non-Service shares returned
2.96% and underperformed its benchmark, the S&P 500 Index, which returned
15.78%. We attribute this underperformance to the Fund's focus on higher quality
companies during a market environment that predominantly favored lower quality
companies. Performance also suffered from weak individual stock results, notably
in the consumer discretionary and consumer staples sectors. Underperformance in
these sectors more than offset the gains generated by our holdings in the
industrials and information technology sectors.
Due to the Fund's focus on higher quality stocks, the Fund tends to be
negatively impacted during investment environments that favor more speculative
stocks, as seen over this period. Historically, during the end stages of a bull
market, many investors' appetite for risk increases, and they tend to focus on
lower quality companies in their pursuit of gaining higher returns. As a result
of this cyclical event, higher quality companies tend to underperform. However,
when economic growth slows, investors often become risk adverse and shift assets
to higher quality stocks, in which case higher quality issuers tend to
outperform.
In terms of individual stock performance, weak results from holdings in
the consumer discretionary and consumer staples areas significantly detracted
from results. In the consumer discretionary sector, in addition to disappointing
stock performance, our relative overweighting to the sector, which struggled in
general, hurt returns. Top detractors in this space included specialty retailer,
Chico's FAS, Inc. and online photography provider Getty Images, Inc., both of
which we sold. Within consumer staples, Whole Foods Market, Inc. declined as the
market negatively reacted to its conservative outlook for future growth. Within
the information technology sector, software company NAVTEQ Corp. experienced
difficulties in growing profits. We thus exited our position in NAVTEQ. In the
financials sector, our relative underweighting and weak results from individual
holdings hurt performance. Our relative underweighting to the energy sector also
detracted from results.
On the positive side, most of the Fund's relative gains came from
securities within the industrials and information technology sectors. Within
industrials, Expeditors International of Washington, Inc., a freight forwarding
company and long-term holding of the Fund, benefited from growth in global
trade. In the information technology sector, IT Services providers outperformed
as the strong outsourcing trend continued. Top performers in this area included
Cognizant Technology Solutions Corp. and Alliance Data Systems Corp.
Additionally, within the textiles, apparel and luxury goods sector, fashion
retailer Polo Ralph Lauren Corp. bucked the negative trend that overshadowed the
specialty retail market by successfully managing its brand. Lastly, within the
health care equipment and supplies sector, strong performance from Bard (C.R.),
Inc., a diversified medical products company, added to returns.
At the end of the period, we have made a few notable adjustments to the
Fund's sector weightings. For example, we decreased the Fund's exposure to the
consumer discretionary, industrials, and energy sectors based generally on our
concerns over an economic slowdown. In contrast, we greatly increased the Fund's
weighting to the financials sector.
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, 2006. 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 MIDCAP FUND/VA
NON-SERVICE SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer MidCap Fund/VA (Non-Service)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer MidCap
Fund/VA
(Non-Service) S&P 500 Index
------------------ -------------
12/31/1996 $ 10,000 $10,000
03/31/1997 $ 8,817 $10,269
06/30/1997 $ 10,644 $12,060
09/30/1997 $ 12,097 $12,963
12/31/1997 $ 11,167 $13,335
03/31/1998 $ 12,623 $15,194
06/30/1998 $ 13,110 $15,698
09/30/1998 $ 10,062 $14,140
12/31/1998 $ 12,548 $17,149
03/31/1999 $ 13,765 $18,003
06/30/1999 $ 15,184 $19,269
09/30/1999 $ 15,797 $18,069
12/31/1999 $ 23,038 $20,756
03/31/2000 $ 28,947 $21,231
06/30/2000 $ 27,924 $20,667
09/30/2000 $ 29,643 $20,467
12/31/2000 $ 20,449 $18,867
03/31/2001 $ 14,997 $16,631
06/30/2001 $ 14,928 $17,604
09/30/2001 $ 12,926 $15,021
12/31/2001 $ 14,055 $16,626
03/31/2002 $ 13,330 $16,672
06/30/2002 $ 11,632 $14,440
09/30/2002 $ 9,868 $11,946
12/31/2002 $ 10,149 $12,953
03/31/2003 $ 9,993 $12,545
06/30/2003 $ 11,541 $14,475
09/30/2003 $ 12,177 $14,858
12/31/2003 $ 12,746 $16,666
03/31/2004 $ 13,434 $16,948
06/30/2004 $ 14,031 $17,240
09/30/2004 $ 13,573 $16,917
12/31/2004 $ 15,267 $18,478
03/31/2005 $ 15,163 $18,082
06/30/2005 $ 15,635 $18,329
09/30/2005 $ 16,462 $18,989
12/31/2005 $ 17,149 $19,385
03/31/2006 $ 18,514 $20,200
06/30/2006 $ 17,510 $19,909
09/30/2006 $ 17,281 $21,036
12/31/2006 $ 17,656 $22,444
AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/06
1-Year 2.96% 5-Year 4.67% 10-Year 5.85%
SERVICE SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer MidCap Fund/VA (Service)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer MidCap
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
03/31/2006 $ 6,477 $ 9,912
06/30/2006 $ 6,122 $ 9,769
09/30/2006 $ 6,038 $ 10,322
12/31/2006 $ 6,165 $ 11,013
AVERAGE ANNUAL TOTAL RETURNS OF SERVICE SHARES OF THE FUND AT 12/31/06
1-Year 2.70% 5-Year 4.39% Since Inception (10/16/00) -7.50%
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 MIDCAP 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, 2006.
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
(7/1/06) (12/31/06) DECEMBER 31, 2006
- --------------------------------------------------------------------------------
Non-Service shares Actual $1,000.00 $1,008.30 $3.55
- --------------------------------------------------------------------------------
Non-Service shares Hypothetical 1,000.00 1,021.68 3.57
- --------------------------------------------------------------------------------
Service shares Actual 1,000.00 1,007.00 4.92
- --------------------------------------------------------------------------------
Service shares Hypothetical 1,000.00 1,020.32 4.95
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,
excluding affiliated fund indirect expenses, based on the 6-month period ended
December 31, 2006 are as follows:
CLASS EXPENSE RATIOS
- -------------------------------------
Non-Service shares 0.70%
- -------------------------------------
Service shares 0.97
The expense ratios reflect voluntary waivers or reimbursements of expenses by
the Fund's Manager that can be terminated at any time, without advance notice.
The "Financial Highlights" tables in the Fund's financial statements, included
in this report, also show the gross expense ratios, without such waivers or
reimbursements.
- --------------------------------------------------------------------------------
6 | OPPENHEIMER MIDCAP FUND/VA
STATEMENT OF INVESTMENTS December 31, 2006
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
COMMON STOCKS--98.1%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--13.3%
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--2.3%
International Game Technology 270,100 $ 12,478,620
- --------------------------------------------------------------------------------
Panera Bread Co., Cl. A 1 224,400 12,546,204
---------------
25,024,824
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES--0.4%
Harman International Industries, Inc. 47,100 4,705,761
- --------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL--1.1%
Coldwater Creek, Inc. 1 488,100 11,968,212
- --------------------------------------------------------------------------------
SPECIALTY RETAIL--5.6%
O'Reilly Automotive, Inc. 1 1,051,124 33,699,035
- --------------------------------------------------------------------------------
Tiffany & Co. 475,700 18,666,468
- --------------------------------------------------------------------------------
Tractor Supply Co. 1 203,100 9,080,601
---------------
61,446,104
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS--3.9%
Coach, Inc. 1 289,400 12,432,624
- --------------------------------------------------------------------------------
Polo Ralph Lauren Corp. 402,900 31,289,214
---------------
43,721,838
- --------------------------------------------------------------------------------
CONSUMER STAPLES--1.7%
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--1.7%
Whole Foods Market, Inc. 396,800 18,621,824
- --------------------------------------------------------------------------------
ENERGY--3.2%
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--1.2%
Smith International, Inc. 305,700 12,555,099
- --------------------------------------------------------------------------------
OIL & GAS--2.0%
Murphy Oil Corp. 240,800 12,244,680
- --------------------------------------------------------------------------------
XTO Energy, Inc. 210,399 9,899,273
---------------
22,143,953
- --------------------------------------------------------------------------------
FINANCIALS--22.3%
- --------------------------------------------------------------------------------
CAPITAL MARKETS--6.9%
Affiliated Managers Group, Inc. 1 210,800 22,161,404
- --------------------------------------------------------------------------------
Greenhill & Co., Inc. 259,800 19,173,240
- --------------------------------------------------------------------------------
Investors Financial Services Corp. 288,600 12,314,562
- --------------------------------------------------------------------------------
Legg Mason, Inc. 239,100 22,726,455
---------------
76,375,661
- --------------------------------------------------------------------------------
COMMERCIAL BANKS--5.6%
Commerce Bancorp, Inc. 952,200 33,584,094
- --------------------------------------------------------------------------------
East West Bancorp, Inc. 321,600 11,391,072
- --------------------------------------------------------------------------------
Marshall & Ilsley Corp. 345,700 16,631,627
---------------
61,606,793
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--1.8%
Chicago Mercantile Exchange (The) 38,000 $ 19,370,500
- --------------------------------------------------------------------------------
INSURANCE--5.4%
AMBAC Financial Group, Inc. 191,300 17,039,091
- --------------------------------------------------------------------------------
Brown & Brown, Inc. 714,700 20,161,687
- --------------------------------------------------------------------------------
Philadelphia Consolidated Holding Co. 1 513,500 22,881,560
---------------
60,082,338
- --------------------------------------------------------------------------------
REAL ESTATE MANAGEMENT & DEVELOPMENT--2.6%
CB Richard Ellis Group, Inc., Cl. A 1 847,820 28,147,624
- --------------------------------------------------------------------------------
HEALTH CARE--16.9%
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--9.5%
Bard (C.R.), Inc. 423,500 35,137,795
- --------------------------------------------------------------------------------
Gen-Probe, Inc. 1 109,500 5,734,515
- --------------------------------------------------------------------------------
IDEXX Laboratories, Inc. 1 137,500 10,903,750
- --------------------------------------------------------------------------------
Intuitive Surgical, Inc. 1 75,200 7,211,680
- --------------------------------------------------------------------------------
ResMed, Inc. 1 395,800 19,481,276
- --------------------------------------------------------------------------------
Varian Medical Systems, Inc. 1 547,300 26,035,061
---------------
104,504,077
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--3.5%
Coventry Health Care, Inc. 1 593,275 29,693,414
- --------------------------------------------------------------------------------
Schein (Henry), Inc. 1 181,400 8,884,972
---------------
38,578,386
- --------------------------------------------------------------------------------
HEALTH CARE TECHNOLOGY--1.6%
Cerner Corp. 1 399,200 18,163,600
- --------------------------------------------------------------------------------
LIFE SCIENCES TOOLS & SERVICES--2.3%
Covance, Inc. 1 421,600 24,836,456
- --------------------------------------------------------------------------------
INDUSTRIALS--13.2%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE--3.1%
Rockwell Collins, Inc. 532,600 33,708,254
- --------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS--2.0%
C.H. Robinson Worldwide, Inc. 279,600 11,432,844
- --------------------------------------------------------------------------------
Expeditors International of
Washington, Inc. 273,800 11,088,900
---------------
22,521,744
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--4.7%
Corporate Executive Board Co. (The) 254,800 22,345,960
- --------------------------------------------------------------------------------
Stericycle, Inc. 1 389,800 29,429,900
---------------
51,775,860
- --------------------------------------------------------------------------------
MACHINERY--1.6%
Donaldson Co., Inc. 510,700 17,726,397
- --------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS--1.8%
Fastenal Co. 543,400 19,497,192
7 | OPPENHEIMER MIDCAP FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--24.5%
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--1.0%
Trimble Navigation Ltd. 1 212,900 $ 10,800,417
- --------------------------------------------------------------------------------
IT SERVICES--10.2%
Alliance Data Systems Corp. 1 579,600 36,207,612
- --------------------------------------------------------------------------------
Cognizant Technology Solutions Corp. 1 336,300 25,948,908
- --------------------------------------------------------------------------------
Global Payments, Inc. 620,000 28,706,000
- --------------------------------------------------------------------------------
SRA International, Inc., Cl. A 1 274,700 7,345,478
- --------------------------------------------------------------------------------
VeriFone Holdings, Inc. 1 390,500 13,823,700
---------------
112,031,698
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--3.3%
FormFactor, Inc. 1 371,500 13,838,375
- --------------------------------------------------------------------------------
Microchip Technology, Inc. 703,400 23,001,180
---------------
36,839,555
- --------------------------------------------------------------------------------
SOFTWARE--10.0%
Adobe Systems, Inc. 1 564,300 23,204,016
- --------------------------------------------------------------------------------
Amdocs Ltd. 1 628,000 24,335,000
- --------------------------------------------------------------------------------
Citrix Systems, Inc. 1 452,900 12,250,945
- --------------------------------------------------------------------------------
FactSet Research Systems, Inc. 430,850 24,334,408
- --------------------------------------------------------------------------------
Intuit, Inc. 1 843,300 25,729,083
---------------
109,853,452
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
MATERIALS--2.3%
- --------------------------------------------------------------------------------
CHEMICALS--2.3%
Ecolab, Inc. 570,700 $ 25,795,640
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--0.7%
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--0.7%
NeuStar, Inc., Cl. A 1 252,700 8,197,588
---------------
Total Common Stocks
(Cost $813,692,823) 1,080,600,847
- --------------------------------------------------------------------------------
PREFERRED STOCKS--0.0%
- --------------------------------------------------------------------------------
Blaze Network Products, Inc., 8% Cv.,
Series D 1,2,3 (Cost $7,346,317) 1,147,862 2,586
- --------------------------------------------------------------------------------
MONEY MARKET FUND--1.8%
- --------------------------------------------------------------------------------
Oppenheimer Institutional Money
Market Fund, Cl. E, 5.25% 3,4
(Cost $19,997,273) 19,997,273 19,997,273
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $841,036,413) 99.9% 1,100,600,706
- --------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 0.1 1,339,250
------------------------------
NET ASSETS 100.0% $1,101,939,956
==============================
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, 2006 was $2,586, which represents less
than 0.01% of the Fund's net assets, all of which is considered restricted. See
Note 5 of accompanying Notes.
3. 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, 2006. Transactions during the period in
which the issuer was an affiliate are as follows:
SHARES GROSS GROSS SHARES
DECEMBER 31, 2005 ADDITIONS REDUCTIONS DECEMBER 31, 2006
- ---------------------------------------------------------------------------------------------------------------------------------
Blaze Network Products, Inc., 8% Cv., Series D 1,147,862 -- -- 1,147,862
Oppenheimer Institutional Money Market Fund, Cl. E, 5.25% * -- 53,045,644 33,048,371 19,997,273
VALUE DIVIDEND
SEE NOTE 1 INCOME
- ---------------------------------------------------------------------------------------------------------------------------------
Blaze Network Products, Inc., 8% Cv., Series D $ 2,586 $ --
Oppenheimer Institutional Money Market Fund, Cl. E, 5.25% * 19,997,273 140,372
---------------------------------
$19,999,859 $ 140,372
=================================
* The money market fund and the Fund are affiliated by having the same
investment advisor.
4. Rate shown is the 7-day yield as of December 31, 2006.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
8 | OPPENHEIMER MIDCAP FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 31, 2006
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments:
Unaffiliated companies (cost $813,692,823) $ 1,080,600,847
Affiliated companies (cost $27,343,590) 19,999,859
----------------
1,100,600,706
- -------------------------------------------------------------------------------------------------------------------
Cash 11,650
- -------------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 2,241,653
Dividends 392,955
Shares of beneficial interest sold 317,239
Other 32,018
----------------
Total assets 1,103,596,221
- -------------------------------------------------------------------------------------------------------------------
LIABILITIES
- -------------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Shares of beneficial interest redeemed 1,473,001
Shareholder communications 89,507
Distribution and service plan fees 29,734
Trustees' compensation 23,075
Transfer and shareholder servicing agent fees 1,745
Other 39,203
----------------
Total liabilities 1,656,265
- -------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 1,101,939,956
================
- -------------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- -------------------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 21,681
- -------------------------------------------------------------------------------------------------------------------
Additional paid-in capital 1,491,459,911
- -------------------------------------------------------------------------------------------------------------------
Accumulated net investment loss (23,075)
- -------------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (649,082,854)
- -------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 259,564,293
----------------
NET ASSETS $ 1,101,939,956
================
- -------------------------------------------------------------------------------------------------------------------
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 $1,054,808,536 and 20,742,140 shares of beneficial interest outstanding) $ 50.85
- -------------------------------------------------------------------------------------------------------------------
Service Shares:
Net asset value, redemption price per share and offering price per share
(based on net assets of $47,131,420 and 939,068 shares of beneficial interest outstanding) $ 50.19
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
9 | OPPENHEIMER MIDCAP FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 31, 2006
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- -------------------------------------------------------------------------------------------------------------------
Dividends:
Unaffiliated companies $ 6,871,657
Affiliated companies 140,372
- -------------------------------------------------------------------------------------------------------------------
Interest 656,764
----------------
Total investment income 7,668,793
- -------------------------------------------------------------------------------------------------------------------
EXPENSES
- -------------------------------------------------------------------------------------------------------------------
Management fees 7,923,282
- -------------------------------------------------------------------------------------------------------------------
Distribution and service plan fees -- Service shares 110,612
- -------------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service shares 10,150
Service shares 9,994
- -------------------------------------------------------------------------------------------------------------------
Shareholder communications:
Non-Service shares 161,039
Service shares 6,577
- -------------------------------------------------------------------------------------------------------------------
Trustees' compensation 21,796
- -------------------------------------------------------------------------------------------------------------------
Administration service fees 1,500
- -------------------------------------------------------------------------------------------------------------------
Other 68,097
----------------
Total expenses 8,313,047
Less waivers and reimbursements of expenses (2,708)
----------------
Net expenses 8,310,339
- -------------------------------------------------------------------------------------------------------------------
NET INVESTMENT LOSS (641,546)
- -------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- -------------------------------------------------------------------------------------------------------------------
Net realized gain on investments 123,157,163
- -------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation on investments (84,577,802)
- -------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 37,937,815
================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
10 | OPPENHEIMER MIDCAP FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2006 2005
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment loss $ (641,546) $ (3,256,397)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain 123,157,163 16,088,109
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (84,577,802) 126,872,800
-----------------------------------
Net increase in net assets resulting from operations 37,937,815 139,704,512
- ------------------------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from beneficial interest transactions:
Non-Service shares (210,102,500) (117,803,338)
Service shares 9,672,618 8,921,013
-----------------------------------
(200,429,882) (108,882,325)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) (162,492,067) 30,822,187
- ------------------------------------------------------------------------------------------------------------------------------------
Beginning of period 1,264,432,023 1,233,609,836
-----------------------------------
End of period (including accumulated net investment loss of $23,075 and $19,505, respectively) $ 1,101,939,956 $ 1,264,432,023
===================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11 | OPPENHEIMER MIDCAP FUND/VA
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2006 2005 2004 2003 2002
- ----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 49.39 $ 43.97 $ 36.71 $ 29.23 $ 40.72
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (.02) 1 (.12) 1 (.15) 1 (.15) (.10)
Net realized and unrealized gain (loss) 1.48 5.54 7.41 7.63 (11.16)
--------------------------------------------------------------------------------
Total from investment operations 1.46 5.42 7.26 7.48 (11.26)
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income -- -- -- -- (.23)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 50.85 $ 49.39 $ 43.97 $ 36.71 $ 29.23
================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 2.96% 12.33% 19.78% 25.59% (27.79)%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 1,054,809 $ 1,227,881 $ 1,209,459 $ 1,113,743 $ 979,919
- ----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 1,135,831 $ 1,177,979 $ 1,124,874 $ 1,041,584 $ 1,240,435
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment loss (0.04)% (0.26)% (0.39)% (0.43)% (0.29)%
Total expenses 0.69% 4,5 0.69% 6 0.69% 6 0.70% 6 0.68% 6
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 56% 32% 53% 154% 54%
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. Expenses including indirect expenses from affiliated fund were as follows:
Year Ended December 31, 2006 0.69%
5. Voluntary waiver of management fees less than 0.01%.
6. Reduction to custodian expenses less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
12 | OPPENHEIMER MIDCAP FUND/VA
SERVICE SHARES YEAR ENDED DECEMBER 31, 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 48.87 $ 43.64 $ 36.54 $ 29.13 $ 40.70
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.16) 1 (.25) 1 (.27) 1 -- 2 .16
Net realized and unrealized gain (loss) 1.48 5.48 7.37 7.41 (11.53)
-------------------------------------------------------------------------------
Total from investment operations 1.32 5.23 7.10 7.41 (11.37)
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income -- -- -- -- (.20)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 50.19 $ 48.87 $ 43.64 $ 36.54 $ 29.13
===============================================================================
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 2.70% 11.99% 19.43% 25.44% (28.05)%
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 47,131 $ 36,551 $ 24,151 $ 11,698 $ 144
- ---------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 44,273 $ 28,798 $ 17,579 $ 3,858 $ 72
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment loss (0.33)% (0.54)% (0.68)% (0.72)% (0.56)%
Total expenses 0.97% 5 0.97% 0.99% 0.95% 1.55%
Expenses after payments and waivers and
reduction to custodian expenses 0.97% 0.97% 0.99% 0.95% 0.98%
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 56% 32% 53% 154% 54%
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. Expenses including indirect expenses from affiliated fund were as follows:
Year Ended December 31, 2006 0.97%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
13 | OPPENHEIMER MIDCAP FUND/VA
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer MidCap Fund/VA (the Fund), formerly Oppenheimer Aggressive Growth
Fund/VA, is a separate series of Oppenheimer Variable Account Funds, an open-end
management investment company registered under the Investment Company Act of
1940, as amended. The Fund's investment objective is to seek capital
appreciation 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(R) 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, as 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. Options are
valued daily based upon the last sale price on the principal exchange on which
the option is traded. 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. Investments in
open-end registered investment companies (including affiliated funds) are valued
at that fund's net asset value. Short-term "money market type" debt securities
with remaining maturities of sixty days or less are valued at amortized cost
(which approximates market value).
- --------------------------------------------------------------------------------
AFFILIATED FUNDS. The Fund is permitted to invest daily available cash balances
in affiliated money market funds. Each day, the Fund invests the available cash
in Class E shares of Oppenheimer Institutional Money Market Fund ("IMMF") which
seeks current income and stability of principal. IMMF is a registered open-end
management investment company, regulated as a money market fund under the
Investment Company Act of 1940, as amended. The Manager is also the investment
advisor of IMMF. The Fund's investment in IMMF is included in the Statement of
Investments. As a shareholder, the Fund is subject to its proportional share of
IMMF's Class E expenses, including its management fee. The Manager will waive
fees and/or reimburse Fund expenses in an amount equal to the indirect
management fees incurred through the Fund's investment in IMMF.
14 | OPPENHEIMER MIDCAP FUND/VA
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
$-- $-- $648,795,754 $259,277,184
1. As of December 31, 2006, the Fund had $648,795,754 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, 2006,
details of the capital loss carryforwards were as follows:
EXPIRING
----------------------------
2009 $ 418,570,932
2010 230,224,822
-------------
Total $ 648,795,754
=============
2. During the fiscal year ended December 31, 2006, the Fund utilized
$104,242,991 of capital loss carryforward to offset capital gains realized in
that fiscal year.
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.
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, 2006. Net assets of
the Fund were unaffected by the reclassifications.
REDUCTION TO
REDUCTION TO ACCUMULATED
PAID-IN CAPITAL INVESTMENT LOSS
-----------------------------------------------
$637,976 $637,976
No distributions were paid during the years ended December 31, 2006 and December
31, 2005.
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, 2006 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 $ 841,323,522
==============
Gross unrealized appreciation $ 278,397,342
Gross unrealized depreciation (19,120,158)
--------------
Net unrealized appreciation $ 259,277,184
==============
15 | OPPENHEIMER MIDCAP FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a compensation
deferral plan for independent trustees that enables trustees to elect to defer
receipt of all or a portion of the annual compensation they are entitled to
receive from the Fund. For purposes of determining the amount owed to the
Trustee under the plan, deferred amounts are treated as though equal dollar
amounts had been invested in shares of the Fund or in other Oppenheimer funds
selected by the Trustee. The Fund purchases shares of the funds selected for
deferral by the Trustee in amounts equal to his or her deemed investment,
resulting in a Fund asset equal to the deferred compensation liability. Such
assets are included as a component of "Other" within the asset section of the
Statement of Assets and Liabilities. Deferral of trustees' fees under the plan
will not affect the net assets of the Fund, and will not materially affect the
Fund's assets, liabilities or net investment income per share. Amounts will be
deferred until distributed in accordance 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, at a rate equal to the
Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line item,
if applicable, represents earnings on cash balances maintained by the Fund
during the period. Such interest expense and other custodian fees may be paid
with these earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Fund's organizational documents provide current and former
trustees and officers with a limited indemnification against liabilities arising
in connection with the performance of their duties to the Fund. In the normal
course of business, the Fund may also enter into contracts that provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would be dependent on future claims that may be made against the
Fund. The risk of material loss from such claims is considered remote.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with 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.
16 | OPPENHEIMER MIDCAP 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, 2006 YEAR ENDED DECEMBER 31, 2005
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------
NON-SERVICE SHARES
Sold 1,908,858 $ 96,341,176 2,464,320 $ 113,044,647
Redeemed (6,030,134) (306,443,676) (5,107,185) (230,847,985)
------------------------------------------------------------
Net decrease (4,121,276) $(210,102,500) (2,642,865) $(117,803,338)
============================================================
- --------------------------------------------------------------------------------
SERVICE SHARES
Sold 330,109 $ 16,552,889 298,427 $ 13,509,067
Redeemed (138,912) (6,880,271) (103,986) (4,588,054)
------------------------------------------------------------
Net increase 191,197 $ 9,672,618 194,441 $ 8,921,013
============================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations and money market funds, for the year ended December
31, 2006, were as follows:
PURCHASES SALES
-----------------------------------------------------------------
Investment securities $659,164,230 $867,380,315
- --------------------------------------------------------------------------------
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 average net assets as shown in the following table:
FEE SCHEDULE
------------------------------------------
Up to $200 million 0.75%
Next $200 million 0.72
Next $200 million 0.69
Next $200 million 0.66
Next $700 million 0.60
Over $1.5 billion 0.58
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the year ended December 31, 2006, the Fund paid
$20,184 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.
17 | OPPENHEIMER MIDCAP 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.
The Manager will waive fees and/or reimburse Fund expenses in an amount
equal to the indirect management fees incurred through the Fund's investment in
IMMF. During the year ended December 31, 2006, the Manager waived $2,708 for
IMMF management fees.
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5. ILLIQUID OR RESTRICTED SECURITIES
As of December 31, 2006, 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, 2006 DEPRECIATION
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Blaze Network Products, Inc., 8% Cv., Series D 10/17/00 $ 7,346,317 $ 2,586 $ 7,343,731
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6. RECENT ACCOUNTING PRONOUNCEMENTS
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48 ("FIN 48"), ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES.
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with FASB Statement No. 109,
ACCOUNTING FOR INCOME TAXES. FIN 48 requires the evaluation of tax positions
taken in the course of preparing the Fund's tax returns to determine whether it
is "more-likely-than-not" that tax positions taken in the Fund's tax return will
be ultimately sustained. A tax liability and expense must be recorded in respect
of any tax position that, in Management's judgment, will not be fully realized.
FIN 48 is effective for fiscal years beginning after December 15, 2006. As of
December 31, 2006, the Manager has evaluated the implications of FIN 48 and does
not currently anticipate a material impact to the Fund's financial statements.
The Manager will continue to monitor the Fund's tax positions prospectively for
potential future impacts.
18 | OPPENHEIMER MIDCAP FUND/VA
In September 2006, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 157, FAIR VALUE MEASUREMENTS. This standard establishes a
single authoritative definition of fair value, sets out a framework for
measuring fair value and expands disclosures about fair value measurements. SFAS
No. 157 applies to fair value measurements already required or permitted by
existing standards. SFAS No. 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. As of December 31, 2006, the Manager does not believe the
adoption of SFAS No. 157 will materially impact the financial statement amounts;
however, additional disclosures may be required about the inputs used to develop
the measurements and the effect of certain of the measurements on changes in net
assets for the period.
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7. LITIGATION
A consolidated amended complaint was filed as a putative class action against
the Manager and the Transfer Agent and other defendants (including 51 of the
Oppenheimer funds excluding the Fund) in the U.S. District Court for the
Southern District of New York on January 10, 2005 and was amended on March 4,
2005. The complaint alleged, among other things, that the Manager charged
excessive fees for distribution and other costs, and that by permitting and/or
participating in those actions, the Directors/Trustees and the Officers of the
funds breached their fiduciary duties to fund shareholders under the Investment
Company Act of 1940 and at common law. The plaintiffs sought unspecified
damages, an accounting of all fees paid, and an award of attorneys' fees and
litigation expenses.
In response to the defendants' motions to dismiss the suit, seven of the
eight counts in the complaint, including the claims against certain of the
Oppenheimer funds, as nominal defendants, and against certain present and former
Directors, Trustees and Officers of the funds, and the Distributor, as
defendants, were dismissed with prejudice, by court order dated March 10, 2006,
and the remaining count against the Manager and the Transfer Agent was dismissed
with prejudice by court order dated April 5, 2006. The plaintiffs filed an
appeal of those dismissals on May 11, 2006.
The Manager believes that the allegations contained in the complaint are
without merit and that there are substantial grounds to sustain the district
court's rulings. The Manager also believes that it is premature to render any
opinion as to the likelihood of an outcome unfavorable to it, the funds, the
Directors/Trustees or the Officers on the appeal of the decisions of the
district court, 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 MIDCAP FUND/VA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF
OPPENHEIMER MIDCAP FUND/VA:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer MidCap Fund/VA (the "Fund"), formerly Aggressive Growth Fund/VA, a
series of Oppenheimer Variable Account Funds, including the statement of
investments, as of December 31, 2006, 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 period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
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 audits included 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, 2006, 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 the
Fund as of December 31, 2006, 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
period then ended, in conformity with accounting principles generally accepted
in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
February 8, 2007
20 | OPPENHEIMER MIDCAP FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
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In early 2007, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2006. 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 MIDCAP FUND/VA
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
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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 MIDCAP FUND/VA
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
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Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew the Fund's
investment advisory agreement (the "Agreement"). The Investment Company Act of
1940, as amended, requires that the Board request and evaluate, and that the
Manager provide, such information as may be reasonably necessary to evaluate the
terms of the Agreement. The Board employs an independent consultant to prepare a
report that provides information, including comparative information, that the
Board requests for that purpose. In addition, the Board receives information
throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager and its affiliates, including
an analysis of the cost of providing services, (v) whether economies of scale
are realized as the Fund grows and whether fee levels reflect these economies of
scale for Fund investors and (vi) other benefits to the Manager from its
relationship with the Fund. Outlined below is a summary of the principal
information considered by the Board as well as the Board's conclusions.
The Board was aware that there are alternatives to retaining the Manager.
NATURE, QUALITY AND EXTENT OF SERVICES. The Board considered information
about the nature and extent of the services provided to the Fund and information
regarding the Manager's key personnel who provide such services. The Manager's
duties include providing the Fund with the services of the portfolio manager and
the Manager's investment team, who provide research, analysis and other advisory
services in regard to the Fund's investments; securities trading services;
oversight of third party service providers; monitoring compliance with
applicable Fund policies and procedures and adherence to the Fund's investment
restrictions. The Manager is responsible for providing certain administrative
services to the Fund as well. Those services include providing and supervising
all administrative and clerical personnel who are necessary in order to provide
effective corporate administration for the Fund; compiling and maintaining
records with respect to the Fund's operations; preparing and filing reports
required by the Securities and Exchange Commission; preparing periodic reports
regarding the operations of the Fund for its shareholders; preparing proxy
materials for shareholder meetings; and preparing the registration statements
required by Federal and state securities laws for the sale of the Fund's shares.
The Manager also provides the Fund with office space, facilities and equipment.
The Board also considered the quality of the services provided and the
quality of the Manager's resources that are available to the Fund. The Board
took account of the fact that the Manager has had over 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. 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 been a portfolio manager of the Fund since October 2003. 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 investment performance of the Fund and the
Manager at each Board meeting, including comparative performance
23 | OPPENHEIMER MIDCAP FUND/VA
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited / Continued
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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 all mid-cap growth funds
underlying variable insurance products. The Board noted that the Fund's
one-year, three-year and ten-year performance were below its peer group median.
However its five-year performance was better than its peer group median. The
Board also considered the Manager's observation that performance should improve
over the next 12 months. The Board concluded to continue to closely monitor the
performance of the Fund and to allow the Manager time to improve the Fund's
performance over the next year.
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 and other mid-cap growth funds underlying variable
insurance products. The Board noted that the Fund's contractual and actual
management fees are lower than its peer group median.
ECONOMIES OF SCALE. The Board reviewed 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
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 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 Agreement, including the management fee,
in light of all of the surrounding circumstances.
24 | OPPENHEIMER MIDCAP FUND/VA
TRUSTEES AND OFFICERS Unaudited
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NAME, POSITION(S) HELD WITH THE PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS HELD;
FUNDS, LENGTH OF SERVICE, AGE NUMBER OF PORTFOLIOS IN THE FUND COMPLEX CURRENTLY OVERSEEN
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, President, Colorado Christian University (since 2006); Chairman of the following private
Chairman of the Board of mortgage banking companies: Cherry Creek Mortgage Company (since 1991), Centennial State
Trustees (since 2003), Mortgage Company (since 1994), and The El Paso Mortgage Company (since 1993); Chairman of the
Trustee (since 1999) following private companies: Ambassador Media Corporation (since 1984) and Broadway Ventures
Age: 69 (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 37 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
Age: 75 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 37 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: 70 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 37 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: 68 PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price
Waterhouse LLP Global Investment Management Industry Services Group (accounting firm) (July
1994-June 1998). Oversees 37 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: 65 Pharmaceuticals (October 1999-October 2003); Director of Rocky Mountain Elk Foundation
(non-profit organization) (February 1998-February 2003 and since February 2005); 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 37 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: 66 Manager (until October 1994). Oversees 37 portfolios in the OppenheimerFunds complex.
BEVERLY L. HAMILTON, Trustee of Monterey Institute for International Studies (educational organization) (since
Trustee (since 2002) February 2000); Board Member of Middlebury College (educational organization) (since December
Age: 60 2005); Director of The California Endowment (philanthropic organization) (since April 2002);
Director (February 2002-2005) and Chairman of Trustees (since 2006) of the Community Hospital
of Monterey Peninsula; Director (October 1991-2005) and Vice Chairman (since 2006) of American
Funds' Emerging Markets Growth Fund, Inc. (mutual fund); President of ARCO Investment
Management Company (February 1991-April 2000); Member of the investment committees of The
25 | OPPENHEIMER MIDCAP FUND/VA
TRUSTEES AND OFFICERS Unaudited/Continued
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BEVERLY L. HAMILTON, Rockefeller Foundation (since 2001) and The University of Michigan (since 2000); Advisor at
Continued 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 37 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: 62 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 37
portfolios in the OppenheimerFunds complex.
F. WILLIAM MARSHALL, JR., Trustee of MassMutual Select Funds (formerly MassMutual Institutional Funds) (investment
Trustee (since 2001) company) (since 1996) and MML Series Investment Fund (investment company) (since 1996);
Age: 64 Trustee (since 1987) and Chairman (1994-2005) of the Investment Committee 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); and Executive Vice President of Peoples
Heritage Financial Group, Inc. (commercial bank) (January 1999-July 1999). Oversees 39
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 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
Trustee, President and September 2000) of the Manager; President and director or trustee of other Oppenheimer funds;
Principal Executive Officer President and Director of OAC and of Oppenheimer Partnership Holdings, Inc. (holding company
(since 2001) subsidiary of the Manager) (since July 2001); Director of OppenheimerFunds Distributor, Inc.
Age: 57 (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 96 portfolios in the OppenheimerFunds complex.
26 | OPPENHEIMER MIDCAP FUND/VA
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OTHER OFFICERS OF THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. O'HARE, ZACK,
THE FUND GILLESPIE AND MS. BLOOMBERG, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, NEW YORK, NEW
YORK 10281 1008, FOR MESSRS. VANDEHEY, WIXTED, PETERSEN, SZILAGYI AND MS. IVES, 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 2003); Executive Vice President and Portfolio
Vice President and Manager (June 2000-August 2003) and Portfolio Manager and Senior Vice President (August
Portfolio Manager 1997-June 2000) at Geneva Capital Management, Ltd. (an investment advisor). Mr. O'Hare holds
(since 2003) a BBA in Finance and Economics from the University of Wisconsin and is a Chartered Financial
Age: 48 Analyst. An officer of 2 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 96 portfolios in the OppenheimerFunds
Age: 56 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 & Accounting Shareholder Services, Inc., Oppenheimer Real Asset Management Corporation, and Oppenheimer
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: 47 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
96 portfolios in the OppenheimerFunds complex.
BRIAN S. PETERSEN, Assistant Vice President of the Manager (since August 2002); Manager/Financial Product
Assistant Treasurer Accounting of the Manager (November 1998-July 2002). An officer of 96 portfolios in the
(since 2004) OppenheimerFunds complex.
Age: 36
BRIAN C. SZILAGYI, Assistant Vice President of the Manager (since July 2004); Director of Financial Reporting
Assistant Treasurer and Compliance of First Data Corporation (April 2003-July 2004); Manager of Compliance of
(since 2005) Berger Financial Group LLC (May 2001-March 2003); Director of Mutual Fund Operations at
Age: 36 American Data Services, Inc. (September 2000-May 2001). An officer of 96 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 Counsel of Centennial Asset Management Corporation (since December 2001); Senior Vice
(since 2001) President and General Counsel of HarbourView Asset Management Corporation (since December
Age: 58 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 96 portfolios in the OppenheimerFunds complex.
27 | OPPENHEIMER MIDCAP FUND/VA
TRUSTEES AND OFFICERS Unaudited/Continued
- --------------------------------------------------------------------------------
LISA I. BLOOMBERG, Vice President and Associate Counsel of the Manager (since May 2004); First Vice President
Assistant Secretary (April 2001-April 2004), Associate General Counsel (December 2000-April 2004), Corporate Vice
(since 2004) President (May 1999-April 2001) and Assistant General Counsel (May 1999-December 2000) of UBS
Age: 39 Financial Services Inc. (formerly, PaineWebber Incorporated). An officer of 96 portfolios in
the OppenheimerFunds complex.
KATHLEEN T. IVES, Vice President (since June 1998) and Senior Counsel and Assistant Secretary (since October
Assistant Secretary 2003) of the Manager; Vice President (since 1999) and Assistant Secretary (since October
(since 2001) 2003) of the Distributor; Assistant Secretary of Centennial Asset Management Corporation
Age: 41 (since October 2003); Vice President and Assistant Secretary of Shareholder Services, Inc.
(since 1999); Assistant Secretary of OppenheimerFunds Legacy Program and Shareholder
Financial Services, Inc. (since December 2001); Assistant Counsel of the Manager (August
1994-October 2003). An officer of 96 portfolios in the OppenheimerFunds complex.
PHILLIP S. GILLESPIE, Senior Vice President and Deputy General Counsel of the Manager (since September 2004); First
Assistant Secretary Vice President (2000-September 2004), Director (2000-September 2004) and Vice President
(since 2004) (1998-2000) of Merrill Lynch Investment Management. An officer of 96 portfolios in the
Age: 43 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.
28 | OPPENHEIMER MIDCAP FUND/VA
OPPENHEIMER MAIN STREET FUND/VA
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. Although we are never satisfied
with underperformance relative to the Fund's benchmark, the S&P 500 Index, we
are nonetheless pleased that the Fund produced higher returns than its Lipper
category average. Indeed, 2006 proved to be a relatively difficult year for
actively managed equity funds, and we attribute our success compared to our peer
group to our broadly diversified investment approach. Because our highly
disciplined investment process avoids large "bets" on any particular security or
market sector, the Fund was able to participate more fully in the market's
broad-based rally.
Our emphasis on mega-cap stocks also helped the Fund outperform its peer
group average. Stocks with market capitalizations of approximately $47.3 billion
or more constitute 40% of the total U.S. stock market capitalization, but they
comprise 53% of the S&P 500 Index. Because our market capitalization models had
indicated in the spring that the long cycle of small-cap outperformance was
coming to an end, we repositioned the Fund to exhibit characteristics similar to
those of the S&P 500 Index, enabling the Fund to benefit during the ongoing
transition in market leadership to mega-cap companies.
In addition, we attempted to optimize our stock selection models for
different market environments, including seasonal factors. We employ a "Turn of
the Year" model during the fourth and first quarters of each calendar year to
position the fund for what historically has been a time of relatively strong
performance among lower quality, relatively volatile stocks. This shift helped
the fund participate more fully in a rally among "higher beta" stocks near
year-end 2006.
The success of the Fund's market capitalization and seasonal strategies
was offset by relatively disappointing results from our security selection
models in a number of industry groups. More specifically, the momentum factors
considered by our stock selection models became less predictive of performance
as market conditions evolved, and stocks that had done well over the first half
of the year fared relatively poorly over the second half. For example, a number
of energy companies had strong momentum characteristics after gaining value over
the first half of 2006, but many of those companies lagged the averages during
the second half as the U.S. economy slowed and commodity prices fell.
As of the end of the reporting period, our market capitalization models
have continued to indicate that larger companies are likely to do better than
smaller ones over the foreseeable future, and we have maintained the Fund's
focus on large- and mega-cap shares. Our stock selection models have assigned
relatively high rankings to companies in the information technology, consumer
discretionary and basic materials sectors, and generally lower rankings to
stocks in the consumer staples, utilities and energy areas.
During these relatively rare turning points in the market, we believe that
broad diversification and careful risk management are keys to success under
whatever market conditions lie ahead. Accordingly, the Fund is fully invested
and we remain committed to our quantitative investment discipline, which is
designed to produce excess returns without excessive risk. Indeed, our
disciplined investment approach is essential 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, 2006. 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 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
(Non-Service) S&P 500 Index
------------- -------------
12/31/1996 $10,000 $10,000
03/31/1997 $10,096 $10,269
06/30/1997 $11,387 $12,060
09/30/1997 $12,900 $12,963
12/31/1997 $13,248 $13,335
03/31/1998 $14,907 $15,194
06/30/1998 $14,981 $15,698
09/30/1998 $11,629 $14,140
12/31/1998 $13,871 $17,149
03/31/1999 $14,407 $18,003
06/30/1999 $15,901 $19,269
09/30/1999 $15,106 $18,069
12/31/1999 $16,882 $20,756
03/31/2000 $17,399 $21,231
06/30/2000 $16,914 $20,667
09/30/2000 $17,088 $20,467
12/31/2000 $15,400 $18,867
03/31/2001 $13,865 $16,631
06/30/2001 $14,484 $17,604
09/30/2001 $12,830 $15,021
12/31/2001 $13,836 $16,626
03/31/2002 $14,095 $16,672
06/30/2002 $12,863 $14,440
09/30/2002 $10,758 $11,946
12/31/2002 $11,235 $12,953
03/31/2003 $10,863 $12,545
06/30/2003 $12,398 $14,475
09/30/2003 $12,754 $14,858
12/31/2003 $14,237 $16,666
03/31/2004 $14,522 $16,948
06/30/2004 $14,604 $17,240
09/30/2004 $14,320 $16,917
12/31/2004 $15,583 $18,478
03/31/2005 $15,287 $18,082
06/30/2005 $15,507 $18,329
09/30/2005 $16,151 $18,989
12/31/2005 $16,515 $19,385
03/31/2006 $17,348 $20,200
06/30/2006 $17,018 $19,909
09/30/2006 $17,815 $21,036
12/31/2006 $18,996 $22,444
AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/06
1-Year 15.03% 5-Year 6.55% 10-Year 6.63%
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
(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
03/31/2006 $ 9,844 $ 9,774
06/30/2006 $ 9,647 $ 9,633
09/30/2006 $10,098 $10,179
12/31/2006 $10,759 $10,860
AVERAGE ANNUAL TOTAL RETURNS OF SERVICE SHARES OF THE FUND AT 12/31/06
1-Year 14.76% 5-Year 6.29% Since Inception (7/13/00) 1.14%
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, 2006.
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
(7/1/06) (12/31/06) DECEMBER 31, 2006
- --------------------------------------------------------------------------------
Non-Service shares Actual $1,000.00 $1,116.20 $3.58
- --------------------------------------------------------------------------------
Non-Service shares Hypothetical 1,000.00 1,021.83 3.42
- --------------------------------------------------------------------------------
Service shares Actual 1,000.00 1,115.20 4.86
- --------------------------------------------------------------------------------
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,
excluding affiliated fund indirect expenses, based on the 6-month period ended
December 31, 2006 are as follows:
CLASS EXPENSE RATIOS
- -----------------------------------
Non-Service shares 0.67%
- -----------------------------------
Service shares 0.91
The expense ratios reflect voluntary waivers or reimbursements of expenses by
the Fund's Manager that can be terminated at any time, without advance notice.
The "Financial Highlights" tables in the Fund's financial statements, included
in this report, also show the gross expense ratios, without such waivers or
reimbursements.
- --------------------------------------------------------------------------------
6 | OPPENHEIMER MAIN STREET FUND/VA
STATEMENT OF INVESTMENTS December 31, 2006
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
COMMON STOCKS--99.4%
- -------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--13.9%
- -------------------------------------------------------------------------------
AUTO COMPONENTS--0.1%
ArvinMeritor, Inc. 1 14,600 $ 266,158
- -------------------------------------------------------------------------------
Autoliv, Inc. 8,200 494,460
- -------------------------------------------------------------------------------
Goodyear Tire & Rubber Co. (The) 1,2 23,100 484,869
- -------------------------------------------------------------------------------
Johnson Controls, Inc. 5,400 463,968
- -------------------------------------------------------------------------------
Lear Corp. 1 16,400 484,292
- -------------------------------------------------------------------------------
Tenneco, Inc. 2 4,200 103,824
----------------
2,297,571
- -------------------------------------------------------------------------------
AUTOMOBILES--0.8%
Ford Motor Co. 1 312,400 2,346,124
- -------------------------------------------------------------------------------
General Motors Corp. 1 249,100 7,652,352
- -------------------------------------------------------------------------------
Harley-Davidson, Inc. 1 95,900 6,758,073
----------------
16,756,549
- -------------------------------------------------------------------------------
DIVERSIFIED CONSUMER SERVICES--0.1%
Apollo Group, Inc., Cl. A 1,2 11,300 440,361
- -------------------------------------------------------------------------------
Career Education Corp. 1,2 20,100 498,078
- -------------------------------------------------------------------------------
ITT Educational Services, Inc. 2 7,600 504,412
----------------
1,442,851
- -------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--0.7%
Brinker International, Inc. 12,100 364,936
- -------------------------------------------------------------------------------
Carnival Corp. 59,800 2,933,190
- -------------------------------------------------------------------------------
Chipotle Mexican Grill, Inc., Cl. B 2 7,419 385,788
- -------------------------------------------------------------------------------
Domino's Pizza, Inc. 7,700 215,600
- -------------------------------------------------------------------------------
Jack in the Box, Inc. 1,2 5,100 311,304
- -------------------------------------------------------------------------------
Las Vegas Sands Corp. 2 900 80,532
- -------------------------------------------------------------------------------
Starwood Hotels & Resorts
Worldwide, Inc. 36,300 2,268,750
- -------------------------------------------------------------------------------
Wendy's International, Inc. 16,900 559,221
- -------------------------------------------------------------------------------
Yum! Brands, Inc. 128,700 7,567,560
----------------
14,686,881
- -------------------------------------------------------------------------------
HOUSEHOLD DURABLES--0.0%
Snap-On, Inc. 11,100 528,804
- -------------------------------------------------------------------------------
Tempur-Pedic International, Inc. 1,2 20,400 417,384
----------------
946,188
- -------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL--0.3%
Expedia, Inc. 1,2 19,800 415,404
- -------------------------------------------------------------------------------
IAC/InterActiveCorp 1,2 85,200 3,166,032
- -------------------------------------------------------------------------------
Liberty Media Holding Corp.-
Interactive, Series A 2 88,500 1,908,945
- -------------------------------------------------------------------------------
NetFlix.com, Inc. 1,2 7,500 193,950
----------------
5,684,331
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS--0.1%
Eastman Kodak Co. 1 20,500 $ 528,900
- -------------------------------------------------------------------------------
Hasbro, Inc. 22,000 599,500
- -------------------------------------------------------------------------------
Marvel Entertainment, Inc. 1,2 16,800 452,088
- -------------------------------------------------------------------------------
Mattel, Inc. 34,600 784,036
----------------
2,364,524
- -------------------------------------------------------------------------------
MEDIA--4.6%
CBS Corp., Cl. B 53,400 1,665,012
- -------------------------------------------------------------------------------
Clear Channel Communications, Inc. 303,700 10,793,498
- -------------------------------------------------------------------------------
Comcast Corp., Cl. A 2 186,400 7,890,312
- -------------------------------------------------------------------------------
DirecTV Group, Inc. (The) 2 147,500 3,678,650
- -------------------------------------------------------------------------------
EchoStar Communications Corp.,
Cl. A 1,2 71,900 2,734,357
- -------------------------------------------------------------------------------
Gannett Co., Inc. 33,800 2,043,548
- -------------------------------------------------------------------------------
Idearc, Inc. 2 16,252 465,620
- -------------------------------------------------------------------------------
Liberty Global, Inc., Series A 1,2 39,000 1,136,850
- -------------------------------------------------------------------------------
Liberty Media Holding Corp.-Capital,
Series A 1,2 60,900 5,966,982
- -------------------------------------------------------------------------------
Live Nation, Inc. 2 3,100 69,440
- -------------------------------------------------------------------------------
McGraw-Hill Cos., Inc. (The) 122,000 8,298,440
- -------------------------------------------------------------------------------
News Corp., Inc., Cl. A 450,400 9,674,592
- -------------------------------------------------------------------------------
Omnicom Group, Inc. 1 92,700 9,690,858
- -------------------------------------------------------------------------------
Time Warner, Inc. 684,800 14,914,944
- -------------------------------------------------------------------------------
Viacom, Inc., Cl. B 2 229,573 9,419,380
- -------------------------------------------------------------------------------
Walt Disney Co. (The) 324,300 11,113,761
----------------
99,556,244
- -------------------------------------------------------------------------------
MULTILINE RETAIL--2.8%
Big Lots, Inc. 1,2 27,000 618,840
- -------------------------------------------------------------------------------
Dillard's, Inc., Cl. A 1 23,500 821,795
- -------------------------------------------------------------------------------
Dollar Tree Stores, Inc. 1,2 33,500 1,008,350
- -------------------------------------------------------------------------------
Family Dollar Stores, Inc. 28,300 830,039
- -------------------------------------------------------------------------------
Federated Department Stores, Inc. 315,300 12,022,389
- -------------------------------------------------------------------------------
J.C. Penney Co., Inc. (Holding Co.) 1 134,600 10,412,656
- -------------------------------------------------------------------------------
Kohl's Corp. 2 178,800 12,235,284
- -------------------------------------------------------------------------------
Nordstrom, Inc. 215,600 10,637,704
- -------------------------------------------------------------------------------
Sears Holdings Corp. 2 35,900 6,028,687
- -------------------------------------------------------------------------------
Target Corp. 80,600 4,598,230
----------------
59,213,974
- -------------------------------------------------------------------------------
SPECIALTY RETAIL--4.1%
Abercrombie & Fitch Co., Cl. A 1 9,800 682,374
- -------------------------------------------------------------------------------
Aeropostale, Inc. 1,2 13,800 426,006
- -------------------------------------------------------------------------------
American Eagle Outfitters, Inc. 19,950 622,640
- -------------------------------------------------------------------------------
AnnTaylor Stores Corp. 2 15,300 502,452
- -------------------------------------------------------------------------------
AutoNation, Inc. 1,2 16,700 356,044
- -------------------------------------------------------------------------------
AutoZone, Inc. 1,2 5,700 658,692
7 | OPPENHEIMER MAIN STREET FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
SPECIALTY RETAIL Continued
Barnes & Noble, Inc. 14,100 $ 559,911
- -------------------------------------------------------------------------------
Best Buy Co., Inc. 168,000 8,263,920
- -------------------------------------------------------------------------------
Charming Shoppes, Inc. 1,2 3,700 50,061
- -------------------------------------------------------------------------------
Circuit City Stores, Inc./Circuit City
Group 1 22,400 425,152
- -------------------------------------------------------------------------------
Dick's Sporting Goods, Inc. 2 9,100 445,809
- -------------------------------------------------------------------------------
Dress Barn, Inc. (The) 1,2 17,300 403,609
- -------------------------------------------------------------------------------
DSW, Inc., Cl. A 1,2 700 26,999
- -------------------------------------------------------------------------------
Gap, Inc. (The) 383,800 7,484,100
- -------------------------------------------------------------------------------
Group 1 Automotive, Inc. 1 4,500 232,740
- -------------------------------------------------------------------------------
Gymboree Corp. 2 10,800 412,128
- -------------------------------------------------------------------------------
Home Depot, Inc. 645,900 25,939,344
- -------------------------------------------------------------------------------
Limited Brands, Inc. 198,300 5,738,802
- -------------------------------------------------------------------------------
Lowe's Cos., Inc. 141,700 4,413,955
- -------------------------------------------------------------------------------
Men's Wearhouse, Inc. (The) 1 17,800 681,028
- -------------------------------------------------------------------------------
Office Depot, Inc. 2 256,100 9,775,337
- -------------------------------------------------------------------------------
OfficeMax, Inc. 11,600 575,940
- -------------------------------------------------------------------------------
Payless ShoeSource, Inc. 2 15,800 518,556
- -------------------------------------------------------------------------------
RadioShack Corp. 1 17,100 286,938
- -------------------------------------------------------------------------------
Rent-A-Center, Inc. 1,2 14,400 424,944
- -------------------------------------------------------------------------------
Ross Stores, Inc. 1 19,600 574,280
- -------------------------------------------------------------------------------
Select Comfort Corp. 1,2 7,600 132,164
- -------------------------------------------------------------------------------
Staples, Inc. 253,500 6,768,450
- -------------------------------------------------------------------------------
TJX Cos., Inc. (The) 387,000 11,037,240
----------------
88,419,615
- -------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS--0.3%
Brown Shoe Co., Inc. 5,600 267,344
- -------------------------------------------------------------------------------
Coach, Inc. 2 117,100 5,030,616
- -------------------------------------------------------------------------------
Jones Apparel Group, Inc. 11,800 394,474
- -------------------------------------------------------------------------------
Polo Ralph Lauren Corp. 1 7,700 597,982
- -------------------------------------------------------------------------------
Skechers USA, Inc., Cl. A 1,2 1,400 46,634
- -------------------------------------------------------------------------------
Wolverine World Wide, Inc. 1 7,500 213,900
----------------
6,550,950
- -------------------------------------------------------------------------------
CONSUMER STAPLES--5.5%
- -------------------------------------------------------------------------------
BEVERAGES--0.6%
Coca-Cola Co. (The) 87,600 4,226,700
- -------------------------------------------------------------------------------
Molson Coors Brewing Co., Cl. B 4,900 374,556
- -------------------------------------------------------------------------------
PepsiCo, Inc. 132,750 8,303,513
----------------
12,904,769
- -------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--1.6%
Kroger Co. (The) 305,900 7,057,113
- -------------------------------------------------------------------------------
Safeway, Inc. 249,900 8,636,544
- -------------------------------------------------------------------------------
Wal-Mart Stores, Inc. 386,900 17,867,042
----------------
33,560,699
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
FOOD PRODUCTS--0.3%
ConAgra Foods, Inc. 162,900 $ 4,398,300
- -------------------------------------------------------------------------------
Dean Foods Co. 2 4,300 181,804
- -------------------------------------------------------------------------------
Heinz (H.J.) Co. 17,300 778,673
- -------------------------------------------------------------------------------
Kraft Foods, Inc., Cl. A 1 28,600 1,021,020
- -------------------------------------------------------------------------------
Sara Lee Corp. 66,200 1,127,386
----------------
7,507,183
- -------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS--1.1%
Energizer Holdings, Inc. 1,2 5,600 397,544
- -------------------------------------------------------------------------------
Procter & Gamble Co. (The) 366,615 23,562,346
----------------
23,959,890
- -------------------------------------------------------------------------------
PERSONAL PRODUCTS--0.1%
Avon Products, Inc. 71,300 2,355,752
- -------------------------------------------------------------------------------
NBTY, Inc. 2 13,900 577,823
----------------
2,933,575
- -------------------------------------------------------------------------------
TOBACCO--1.8%
Altria Group, Inc. 414,700 35,589,554
- -------------------------------------------------------------------------------
Reynolds American, Inc. 1 22,900 1,499,263
- -------------------------------------------------------------------------------
UST, Inc. 11,800 686,760
----------------
37,775,577
- -------------------------------------------------------------------------------
ENERGY--8.3%
- -------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--0.3%
Grey Wolf, Inc. 1,2 30,300 207,858
- -------------------------------------------------------------------------------
Halliburton Co. 118,500 3,679,425
- -------------------------------------------------------------------------------
Lone Star Technologies, Inc. 2 4,400 213,004
- -------------------------------------------------------------------------------
Parker Drilling Co. 2 24,100 196,897
- -------------------------------------------------------------------------------
Seacor Holdings, Inc. 1,2 5,300 525,442
- -------------------------------------------------------------------------------
Tidewater, Inc. 1 10,100 488,436
- -------------------------------------------------------------------------------
Veritas DGC, Inc. 2 9,000 770,670
----------------
6,081,732
- -------------------------------------------------------------------------------
OIL & GAS--8.0%
Chevron Corp. 423,026 31,105,102
- -------------------------------------------------------------------------------
ConocoPhillips 363,783 26,174,187
- -------------------------------------------------------------------------------
Devon Energy Corp. 105,700 7,090,356
- -------------------------------------------------------------------------------
Exxon Mobil Corp. 1,021,316 78,263,445
- -------------------------------------------------------------------------------
Foundation Coal Holdings, Inc. 1 5,800 184,208
- -------------------------------------------------------------------------------
Frontier Oil Corp. 1 22,700 652,398
- -------------------------------------------------------------------------------
General Maritime Corp. 1 5,900 207,621
- -------------------------------------------------------------------------------
Hess Corp. 91,900 4,555,483
- -------------------------------------------------------------------------------
Holly Corp. 9,600 493,440
- -------------------------------------------------------------------------------
Marathon Oil Corp. 142,300 13,162,750
- -------------------------------------------------------------------------------
Occidental Petroleum Corp. 96,052 4,690,219
- -------------------------------------------------------------------------------
OMI Corp. 1 10,600 224,402
8 | OPPENHEIMER MAIN STREET FUND/VA
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
OIL & GAS Continued
Overseas Shipholding Group, Inc. 1 8,500 $ 478,550
- -------------------------------------------------------------------------------
Paramount Resources Ltd., Cl. A 2 103,700 2,134,202
- -------------------------------------------------------------------------------
Sunoco, Inc. 21,000 1,309,560
- -------------------------------------------------------------------------------
Tesoro Corp. 8,700 572,199
- -------------------------------------------------------------------------------
USEC, Inc. 1,2 32,100 408,312
----------------
171,706,434
- -------------------------------------------------------------------------------
FINANCIALS--20.6%
- -------------------------------------------------------------------------------
CAPITAL MARKETS--4.4%
Ameriprise Financial, Inc. 131,200 7,150,400
- -------------------------------------------------------------------------------
Bear Stearns Cos., Inc. (The) 69,100 11,248,098
- -------------------------------------------------------------------------------
BlackRock, Inc. 1 19,100 2,901,290
- -------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The) 68,800 13,715,280
- -------------------------------------------------------------------------------
Janus Capital Group, Inc. 19,000 410,210
- -------------------------------------------------------------------------------
Knight Capital Group, Inc., Cl. A 1,2 16,800 322,056
- -------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc. 191,600 14,967,792
- -------------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 281,500 26,207,650
- -------------------------------------------------------------------------------
Morgan Stanley 205,200 16,709,436
- -------------------------------------------------------------------------------
Piper Jaffray Cos., Inc. 2 3,200 208,480
----------------
93,840,692
- -------------------------------------------------------------------------------
COMMERCIAL BANKS--3.0%
M&T Bank Corp. 7,500 916,200
- -------------------------------------------------------------------------------
U.S. Bancorp 386,170 13,975,492
- -------------------------------------------------------------------------------
Wachovia Corp. 333,893 19,015,206
- -------------------------------------------------------------------------------
Wells Fargo & Co. 836,800 29,756,608
----------------
63,663,506
- -------------------------------------------------------------------------------
CONSUMER FINANCE--0.4%
AmeriCredit Corp. 1,2 47,900 1,205,643
- -------------------------------------------------------------------------------
Capital One Financial Corp. 81,000 6,222,420
- -------------------------------------------------------------------------------
First Marblehead Corp. (The) 1 9,750 532,838
- -------------------------------------------------------------------------------
World Acceptance Corp. 1,2 2,700 126,765
----------------
8,087,666
- -------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--6.5%
Bank of America Corp. 899,009 47,998,091
- -------------------------------------------------------------------------------
Chicago Mercantile Exchange (The) 6,200 3,160,450
- -------------------------------------------------------------------------------
Citigroup, Inc. 850,788 47,388,892
- -------------------------------------------------------------------------------
International Securities Exchange,
Inc., Cl. A 1 5,700 266,703
- -------------------------------------------------------------------------------
JPMorgan Chase & Co. 829,744 40,076,635
----------------
138,890,771
- -------------------------------------------------------------------------------
INSURANCE--4.3%
ACE Ltd. 83,500 5,057,595
- -------------------------------------------------------------------------------
Allstate Corp. 111,700 7,272,787
- -------------------------------------------------------------------------------
AMBAC Financial Group, Inc. 6,700 596,769
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
INSURANCE Continued
American International Group, Inc. 423,340 $ 30,336,544
- -------------------------------------------------------------------------------
Assurant, Inc. 1 16,500 911,625
- -------------------------------------------------------------------------------
CNA Financial Corp. 2 6,200 249,984
- -------------------------------------------------------------------------------
Hanover Insurance Group, Inc. 10,000 488,000
- -------------------------------------------------------------------------------
Lincoln National Corp. 85,759 5,694,398
- -------------------------------------------------------------------------------
Loews Corp. 197,500 8,190,325
- -------------------------------------------------------------------------------
MBIA, Inc. 1 14,200 1,037,452
- -------------------------------------------------------------------------------
MetLife, Inc. 1 171,700 10,132,017
- -------------------------------------------------------------------------------
Nationwide Financial Services, Inc.,
Cl. A 1 6,100 330,620
- -------------------------------------------------------------------------------
Old Republic International Corp. 200 4,656
- -------------------------------------------------------------------------------
Partnerre Holdings Ltd. 1 3,000 213,090
- -------------------------------------------------------------------------------
Principal Financial Group, Inc. (The) 139,000 8,159,300
- -------------------------------------------------------------------------------
Prudential Financial, Inc. 1 19,200 1,648,512
- -------------------------------------------------------------------------------
RenaissanceRe Holdings Ltd. 3,700 222,000
- -------------------------------------------------------------------------------
Safeco Corp. 8,200 512,910
- -------------------------------------------------------------------------------
Safety Insurance Group, Inc. 1 1,900 96,349
- -------------------------------------------------------------------------------
St. Paul Travelers Cos., Inc. (The) 222,200 11,929,918
- -------------------------------------------------------------------------------
Zenith National Insurance Corp. 3,200 150,112
----------------
93,234,963
- -------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS--0.0%
CapitalSource, Inc. 1 5,800 158,398
- -------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE--2.0%
Astoria Financial Corp. 1 1,050 31,668
- -------------------------------------------------------------------------------
Corus Bankshares, Inc. 1 3,100 71,517
- -------------------------------------------------------------------------------
Countrywide Financial Corp. 236,500 10,039,425
- -------------------------------------------------------------------------------
Fannie Mae 245,100 14,556,489
- -------------------------------------------------------------------------------
Freddie Mac 246,800 16,757,720
- -------------------------------------------------------------------------------
MGIC Investment Corp. 1 7,700 481,558
- -------------------------------------------------------------------------------
PMI Group, Inc. (The) 1 15,800 745,286
- -------------------------------------------------------------------------------
Radian Group, Inc. 1 18,300 986,553
----------------
43,670,216
- -------------------------------------------------------------------------------
HEALTH CARE--11.6%
- -------------------------------------------------------------------------------
BIOTECHNOLOGY--0.4%
Amgen, Inc. 2 85,900 5,867,829
- -------------------------------------------------------------------------------
Biogen Idec, Inc. 1,2 59,400 2,921,886
----------------
8,789,715
- -------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--0.6%
Advanced Medical Optics, Inc. 1,2 7,500 264,000
- -------------------------------------------------------------------------------
Becton, Dickinson & Co. 26,400 1,851,960
- -------------------------------------------------------------------------------
Boston Scientific Corp. 2 30,200 518,836
- -------------------------------------------------------------------------------
Edwards Lifesciences Corp. 1,2 7,300 343,392
- -------------------------------------------------------------------------------
Immucor, Inc. 1,2 14,300 417,989
- -------------------------------------------------------------------------------
Medtronic, Inc. 17,900 957,829
9 | OPPENHEIMER MAIN STREET FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES Continued
Mentor Corp. 1 9,700 $ 474,039
- -------------------------------------------------------------------------------
Stryker Corp. 13,800 760,518
- -------------------------------------------------------------------------------
Zimmer Holdings, Inc. 2 85,900 6,732,842
----------------
12,321,405
- -------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--4.2%
Aetna, Inc. 247,000 10,665,460
- -------------------------------------------------------------------------------
AMERIGROUP Corp. 1,2 12,300 441,447
- -------------------------------------------------------------------------------
AmerisourceBergen Corp. 1 45,300 2,036,688
- -------------------------------------------------------------------------------
Cardinal Health, Inc. 7,700 496,111
- -------------------------------------------------------------------------------
Caremark Rx, Inc. 235,000 13,420,850
- -------------------------------------------------------------------------------
Centene Corp. 1,2 12,800 314,496
- -------------------------------------------------------------------------------
CIGNA Corp. 44,000 5,789,080
- -------------------------------------------------------------------------------
Coventry Health Care, Inc. 2 12,200 610,610
- -------------------------------------------------------------------------------
Humana, Inc. 2 108,800 6,017,728
- -------------------------------------------------------------------------------
Laboratory Corp. of America
Holdings 1,2 15,800 1,160,826
- -------------------------------------------------------------------------------
Lincare Holdings, Inc. 1,2 1,000 39,840
- -------------------------------------------------------------------------------
McKesson Corp. 128,600 6,520,020
- -------------------------------------------------------------------------------
Medco Health Solutions, Inc. 2 13,800 737,472
- -------------------------------------------------------------------------------
UnitedHealth Group, Inc. 444,948 23,907,056
- -------------------------------------------------------------------------------
WellCare Health Plans, Inc. 1,2 5,100 351,390
- -------------------------------------------------------------------------------
WellPoint, Inc. 2 228,812 18,005,216
----------------
90,514,290
- -------------------------------------------------------------------------------
HEALTH CARE TECHNOLOGY--0.0%
Emdeon Corp. 1,2 30,900 382,851
- -------------------------------------------------------------------------------
LIFE SCIENCES TOOLS & SERVICES--0.3%
Applera Corp./Applied Biosystems
Group 38,300 1,405,227
- -------------------------------------------------------------------------------
Thermo Fisher Scientific, Inc. 2 117,100 5,303,459
----------------
6,708,686
- -------------------------------------------------------------------------------
PHARMACEUTICALS--6.1%
Abbott Laboratories 134,500 6,551,495
- -------------------------------------------------------------------------------
Eli Lilly & Co. 21,900 1,140,990
- -------------------------------------------------------------------------------
Endo Pharmaceuticals Holdings, Inc. 1,2 20,500 565,390
- -------------------------------------------------------------------------------
Forest Laboratories, Inc. 1,2 193,400 9,786,040
- -------------------------------------------------------------------------------
Johnson & Johnson 598,506 39,513,366
- -------------------------------------------------------------------------------
King Pharmaceuticals, Inc. 2 22,200 353,424
- -------------------------------------------------------------------------------
Merck & Co., Inc. 590,400 25,741,440
- -------------------------------------------------------------------------------
Mylan Laboratories, Inc. 18,400 367,264
- -------------------------------------------------------------------------------
Pfizer, Inc. 1,688,500 43,732,150
- -------------------------------------------------------------------------------
Watson Pharmaceuticals, Inc. 2 12,400 322,772
- -------------------------------------------------------------------------------
Wyeth 49,900 2,540,908
----------------
130,615,239
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
INDUSTRIALS--10.6%
- -------------------------------------------------------------------------------
AEROSPACE & DEFENSE--3.1%
Armor Holdings, Inc. 1,2 4,000 $ 219,400
- -------------------------------------------------------------------------------
General Dynamics Corp. 162,300 12,067,005
- -------------------------------------------------------------------------------
Honeywell International, Inc. 270,000 12,214,800
- -------------------------------------------------------------------------------
Lockheed Martin Corp. 166,300 15,311,241
- -------------------------------------------------------------------------------
Northrop Grumman Corp. 192,000 12,998,400
- -------------------------------------------------------------------------------
Orbital Sciences Corp. 1,2 1,200 22,128
- -------------------------------------------------------------------------------
Raytheon Co. 252,400 13,326,720
- -------------------------------------------------------------------------------
United Technologies Corp. 17,100 1,069,092
----------------
67,228,786
- -------------------------------------------------------------------------------
AIRLINES--0.1%
AMR Corp. 1,2 20,900 631,807
- -------------------------------------------------------------------------------
Continental Airlines, Inc., Cl. B 1,2 23,100 952,875
----------------
1,584,682
- -------------------------------------------------------------------------------
BUILDING PRODUCTS--0.0%
Masco Corp. 27,400 818,438
- -------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--0.2%
Administaff, Inc. 1 9,600 410,592
- -------------------------------------------------------------------------------
Corrections Corp. of America 2 5,900 266,857
- -------------------------------------------------------------------------------
Covanta Holding Corp. 1,2 14,900 328,396
- -------------------------------------------------------------------------------
Deluxe Corp. 1 14,400 362,880
- -------------------------------------------------------------------------------
Harland (John H.) Co. 1 4,400 220,880
- -------------------------------------------------------------------------------
Ikon Office Solutions, Inc. 1 7,700 126,049
- -------------------------------------------------------------------------------
Labor Ready, Inc. 1,2 22,200 406,926
- -------------------------------------------------------------------------------
Manpower, Inc. 15,700 1,176,401
- -------------------------------------------------------------------------------
Watson Wyatt & Co. Holdings 1 2,700 121,905
----------------
3,420,886
- -------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING--0.1%
Chicago Bridge & Iron Co. NV 15,000 410,100
- -------------------------------------------------------------------------------
EMCOR Group, Inc. 2 7,100 403,635
- -------------------------------------------------------------------------------
Granite Construction, Inc. 1 12,500 629,000
----------------
1,442,735
- -------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--0.1%
Acuity Brands, Inc. 1 11,900 619,276
- -------------------------------------------------------------------------------
Belden CDT, Inc. 1 6,400 250,176
- -------------------------------------------------------------------------------
Emerson Electric Co. 17,800 784,802
- -------------------------------------------------------------------------------
Regal-Beloit Corp. 1 2,700 141,777
----------------
1,796,031
- -------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--4.0%
3M Co. 86,000 6,701,980
- -------------------------------------------------------------------------------
General Electric Co. 1,598,500 59,480,185
- -------------------------------------------------------------------------------
Tyco International Ltd. 616,200 18,732,480
----------------
84,914,645
10 | OPPENHEIMER MAIN STREET FUND/VA
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
MACHINERY--2.5%
AGCO Corp. 1,2 16,700 $ 516,698
- -------------------------------------------------------------------------------
Caterpillar, Inc. 235,700 14,455,481
- -------------------------------------------------------------------------------
Cummins, Inc. 1 4,100 484,538
- -------------------------------------------------------------------------------
Danaher Corp. 1 163,300 11,829,452
- -------------------------------------------------------------------------------
Deere & Co. 111,400 10,590,798
- -------------------------------------------------------------------------------
Eaton Corp. 92,800 6,972,992
- -------------------------------------------------------------------------------
Gardner Denver, Inc. 1,2 5,800 216,398
- -------------------------------------------------------------------------------
Illinois Tool Works, Inc. 126,900 5,861,511
- -------------------------------------------------------------------------------
Ingersoll-Rand Co. Ltd., Cl. A 1 25,900 1,013,467
- -------------------------------------------------------------------------------
Kaydon Corp. 1 1,900 75,506
- -------------------------------------------------------------------------------
Manitowoc Co., Inc. (The) 6,400 380,352
- -------------------------------------------------------------------------------
SPX Corp. 16,900 1,033,604
- -------------------------------------------------------------------------------
Toro Co. (The) 1 9,700 452,311
- -------------------------------------------------------------------------------
Valmont Industries, Inc. 1 2,200 122,078
- -------------------------------------------------------------------------------
Wabtec Corp. 2,600 78,988
----------------
54,084,174
- -------------------------------------------------------------------------------
ROAD & RAIL--0.5%
CSX Corp. 236,000 8,125,480
- -------------------------------------------------------------------------------
Kansas City Southern 1,2 2,300 66,654
- -------------------------------------------------------------------------------
Laidlaw International, Inc. 12,700 386,461
- -------------------------------------------------------------------------------
Norfolk Southern Corp. 51,400 2,584,906
- -------------------------------------------------------------------------------
Swift Transportation Co., Inc. 1,2 8,200 215,414
----------------
11,378,915
- -------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--19.8%
- -------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--2.6%
ADTRAN, Inc. 1 8,800 199,760
- -------------------------------------------------------------------------------
Arris Group, Inc. 2 34,900 436,599
- -------------------------------------------------------------------------------
Avaya, Inc. 1,2 51,400 718,572
- -------------------------------------------------------------------------------
Cisco Systems, Inc. 2 983,100 26,868,123
- -------------------------------------------------------------------------------
CommScope, Inc. 1,2 13,700 417,576
- -------------------------------------------------------------------------------
InterDigital Communications Corp. 1,2 6,300 211,365
- -------------------------------------------------------------------------------
Motorola, Inc. 774,200 15,917,552
- -------------------------------------------------------------------------------
Polycom, Inc. 1,2 28,600 884,026
- -------------------------------------------------------------------------------
QUALCOMM, Inc. 242,300 9,156,517
- -------------------------------------------------------------------------------
UTStarcom, Inc. 1,2 47,000 411,250
----------------
55,221,340
- -------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--4.8%
Brocade Communications Systems,
Inc. 1,2 58,100 477,001
- -------------------------------------------------------------------------------
Dell, Inc. 2 823,700 20,666,633
- -------------------------------------------------------------------------------
Diebold, Inc. 1 11,800 549,880
- -------------------------------------------------------------------------------
EMC Corp. 1,2 896,400 11,832,480
- -------------------------------------------------------------------------------
Emulex Corp. 1,2 20,600 401,906
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS Continued
Hewlett-Packard Co. 626,200 $ 25,793,178
- -------------------------------------------------------------------------------
International Business Machines
Corp. 383,300 37,237,595
- -------------------------------------------------------------------------------
Lexmark International, Inc., Cl. A 1,2 9,800 717,360
- -------------------------------------------------------------------------------
NCR Corp. 2 13,800 590,088
- -------------------------------------------------------------------------------
Network Appliance, Inc. 2 98,500 3,869,080
- -------------------------------------------------------------------------------
QLogic Corp. 2 18,400 403,328
----------------
102,538,529
- -------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--0.5%
Agilent Technologies, Inc. 2 246,200 8,580,070
- -------------------------------------------------------------------------------
Avnet, Inc. 1,2 11,700 298,701
- -------------------------------------------------------------------------------
AVX Corp. 1 10,500 155,295
- -------------------------------------------------------------------------------
Plexus Corp. 1,2 1,800 42,984
- -------------------------------------------------------------------------------
Solectron Corp. 2 37,100 119,462
- -------------------------------------------------------------------------------
Tech Data Corp. 2 13,300 503,671
- -------------------------------------------------------------------------------
Tektronix, Inc. 10,100 294,617
- -------------------------------------------------------------------------------
Vishay Intertechnology, Inc. 1,2 21,600 292,464
----------------
10,287,264
- -------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--1.4%
Digital River, Inc. 1,2 5,800 323,582
- -------------------------------------------------------------------------------
EarthLink, Inc. 1,2 34,500 244,950
- -------------------------------------------------------------------------------
Google, Inc., Cl. A 2 57,900 26,661,792
- -------------------------------------------------------------------------------
Sohu.com, Inc. 2 2,500 60,000
- -------------------------------------------------------------------------------
United Online, Inc. 1 32,500 431,600
- -------------------------------------------------------------------------------
ValueClick, Inc. 1,2 14,400 340,272
- -------------------------------------------------------------------------------
VeriSign, Inc. 1,2 21,600 519,480
- -------------------------------------------------------------------------------
WebEx Communications, Inc. 1,2 5,700 198,873
- -------------------------------------------------------------------------------
Websense, Inc. 1,2 12,100 276,243
----------------
29,056,792
- -------------------------------------------------------------------------------
IT SERVICES--1.5%
Acxiom Corp. 8,700 223,155
- -------------------------------------------------------------------------------
Affiliated Computer Services, Inc.,
Cl. A 2 800 39,072
- -------------------------------------------------------------------------------
BISYS Group, Inc. (The) 1,2 1,900 24,529
- -------------------------------------------------------------------------------
Ceridian Corp. 1,2 15,500 433,690
- -------------------------------------------------------------------------------
Computer Sciences Corp. 2 15,000 800,550
- -------------------------------------------------------------------------------
Convergys Corp. 2 23,100 549,318
- -------------------------------------------------------------------------------
CSG Systems International, Inc. 2 7,400 197,802
- -------------------------------------------------------------------------------
DST Systems, Inc. 1,2 9,000 563,670
- -------------------------------------------------------------------------------
Electronic Data Systems Corp. 223,400 6,154,670
- -------------------------------------------------------------------------------
First Data Corp. 1 507,100 12,941,192
- -------------------------------------------------------------------------------
Fiserv, Inc. 2 11,300 592,346
- -------------------------------------------------------------------------------
Gartner, Inc., Cl. A 2 4,500 89,055
- -------------------------------------------------------------------------------
Hewitt Associates, Inc. 1,2 900 23,175
11 | OPPENHEIMER MAIN STREET FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
IT SERVICES Continued
MPS Group, Inc. 1,2 15,000 $ 212,700
- -------------------------------------------------------------------------------
Paychex, Inc. 138,400 5,472,336
- -------------------------------------------------------------------------------
Sabre Holdings Corp. 20,300 647,367
- -------------------------------------------------------------------------------
Western Union Co. 167,900 3,764,318
----------------
32,728,945
- -------------------------------------------------------------------------------
OFFICE ELECTRONICS--0.5%
Xerox Corp. 2 677,700 11,487,015
- -------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--3.8%
Agere Systems, Inc. 2 20,300 389,151
- -------------------------------------------------------------------------------
Altera Corp. 2 28,900 568,752
- -------------------------------------------------------------------------------
Amkor Technology, Inc. 1,2 42,200 394,148
- -------------------------------------------------------------------------------
Analog Devices, Inc. 322,800 10,610,436
- -------------------------------------------------------------------------------
Applied Materials, Inc. 586,600 10,822,770
- -------------------------------------------------------------------------------
Atmel Corp. 2 12,000 72,600
- -------------------------------------------------------------------------------
Cymer, Inc. 1,2 9,200 404,340
- -------------------------------------------------------------------------------
Fairchild Semiconductor
International, Inc., Cl. A 1,2 600 10,086
- -------------------------------------------------------------------------------
Hittite Microwave Corp. 1,2 6,200 200,384
- -------------------------------------------------------------------------------
Integrated Device Technology, Inc. 2 50,500 781,740
- -------------------------------------------------------------------------------
Intel Corp. 1,298,800 26,300,700
- -------------------------------------------------------------------------------
Intersil Corp., Cl. A 23,100 552,552
- -------------------------------------------------------------------------------
Linear Technology Corp. 19,200 582,144
- -------------------------------------------------------------------------------
LSI Logic Corp. 1,2 60,500 544,500
- -------------------------------------------------------------------------------
Micrel, Inc. 1,2 23,100 249,018
- -------------------------------------------------------------------------------
Micron Technology, Inc. 2 253,300 3,536,068
- -------------------------------------------------------------------------------
National Semiconductor Corp. 1 31,200 708,240
- -------------------------------------------------------------------------------
Novellus Systems, Inc. 1,2 18,000 619,560
- -------------------------------------------------------------------------------
NVIDIA Corp. 2 206,000 7,624,060
- -------------------------------------------------------------------------------
OmniVision Technologies, Inc. 1,2 22,200 303,030
- -------------------------------------------------------------------------------
Silicon Image, Inc. 1,2 31,800 404,496
- -------------------------------------------------------------------------------
Teradyne, Inc. 1,2 36,000 538,560
- -------------------------------------------------------------------------------
Texas Instruments, Inc. 532,400 15,333,120
- -------------------------------------------------------------------------------
Varian Semiconductor Equipment
Associates, Inc. 1,2 12,500 569,000
- -------------------------------------------------------------------------------
Verigy Ltd. 2 29,347 520,909
----------------
82,640,364
- -------------------------------------------------------------------------------
SOFTWARE--4.7%
Amdocs Ltd. 2 11,000 426,250
- -------------------------------------------------------------------------------
BEA Systems, Inc. 2 82,800 1,041,624
- -------------------------------------------------------------------------------
BMC Software, Inc. 2 39,700 1,278,340
- -------------------------------------------------------------------------------
CA, Inc. 1 201,700 4,568,505
- -------------------------------------------------------------------------------
Cadence Design Systems, Inc. 1,2 34,800 623,268
- -------------------------------------------------------------------------------
Check Point Software Technologies
Ltd. 2 7,900 173,168
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
SOFTWARE Continued
Cognos, Inc. 1,2 5,400 $ 229,284
- -------------------------------------------------------------------------------
Compuware Corp. 2 61,900 515,627
- -------------------------------------------------------------------------------
Fair Isaac Corp. 1 19,800 804,870
- -------------------------------------------------------------------------------
Hyperion Solutions Corp. 2 13,300 478,002
- -------------------------------------------------------------------------------
Intuit, Inc. 2 338,400 10,324,584
- -------------------------------------------------------------------------------
McAfee, Inc. 2 20,800 590,304
- -------------------------------------------------------------------------------
Mentor Graphics Corp. 1,2 23,500 423,705
- -------------------------------------------------------------------------------
MICROS Systems, Inc. 1,2 5,500 289,850
- -------------------------------------------------------------------------------
Microsoft Corp. 1,362,700 40,690,222
- -------------------------------------------------------------------------------
MicroStrategy, Inc., Cl. A 1,2 3,600 410,436
- -------------------------------------------------------------------------------
Novell, Inc. 2 36,700 227,540
- -------------------------------------------------------------------------------
Oracle Corp. 2 1,336,100 22,900,754
- -------------------------------------------------------------------------------
Sybase, Inc. 1,2 21,500 531,050
- -------------------------------------------------------------------------------
Symantec Corp. 1,2 627,300 13,079,205
- -------------------------------------------------------------------------------
Synopsys, Inc. 2 37,600 1,005,048
- -------------------------------------------------------------------------------
TIBCO Software, Inc. 2 6,500 61,360
----------------
100,672,996
- -------------------------------------------------------------------------------
MATERIALS--3.7%
- -------------------------------------------------------------------------------
CHEMICALS--1.3%
Air Products & Chemicals, Inc. 30,900 2,171,652
- -------------------------------------------------------------------------------
Albemarle Corp. 1 7,500 538,500
- -------------------------------------------------------------------------------
Ashland, Inc. 1 8,700 601,866
- -------------------------------------------------------------------------------
Dow Chemical Co. (The) 324,900 12,976,506
- -------------------------------------------------------------------------------
Fuller (H.B.) Co. 1 9,600 247,872
- -------------------------------------------------------------------------------
Hercules, Inc. 2 26,800 517,508
- -------------------------------------------------------------------------------
Lubrizol Corp. (The) 7,100 355,923
- -------------------------------------------------------------------------------
Lyondell Chemical Co. 1 31,000 792,670
- -------------------------------------------------------------------------------
NewMarket Corp. 1 6,700 395,635
- -------------------------------------------------------------------------------
OM Group, Inc. 2 8,800 398,464
- -------------------------------------------------------------------------------
PPG Industries, Inc. 1 60,000 3,852,600
- -------------------------------------------------------------------------------
Rohm & Haas Co. 1 88,400 4,519,008
- -------------------------------------------------------------------------------
Tronox, Inc., Cl. B 1 1,019 16,090
----------------
27,384,294
- -------------------------------------------------------------------------------
CONSTRUCTION MATERIALS--0.0%
Eagle Materials, Inc. 1 11,700 505,791
- -------------------------------------------------------------------------------
Headwaters, Inc. 1,2 17,600 421,696
----------------
927,487
- -------------------------------------------------------------------------------
CONTAINERS & PACKAGING--0.1%
Packaging Corp. of America 4,100 90,610
- -------------------------------------------------------------------------------
Pactiv Corp. 2 28,600 1,020,734
----------------
1,111,344
12 | OPPENHEIMER MAIN STREET FUND/VA
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
METALS & MINING--2.3%
AK Steel Holding Corp. 1,2 38,300 $ 647,270
- -------------------------------------------------------------------------------
Alcoa, Inc. 326,400 9,795,264
- -------------------------------------------------------------------------------
Carpenter Technology Corp. 9,300 953,436
- -------------------------------------------------------------------------------
Chaparral Steel Co. 10,600 469,262
- -------------------------------------------------------------------------------
Cleveland-Cliffs, Inc. 1 8,800 426,272
- -------------------------------------------------------------------------------
Freeport-McMoRan Copper & Gold,
Inc., Cl. B 1 80,600 4,491,838
- -------------------------------------------------------------------------------
Nucor Corp. 211,600 11,566,056
- -------------------------------------------------------------------------------
Oregon Steel Mills, Inc. 2 5,000 312,050
- -------------------------------------------------------------------------------
Phelps Dodge Corp. 110,100 13,181,172
- -------------------------------------------------------------------------------
Quanex Corp. 1 9,550 330,335
- -------------------------------------------------------------------------------
Southern Copper Corp. 1 103,000 5,550,670
- -------------------------------------------------------------------------------
Steel Dynamics, Inc. 1 20,500 665,225
- -------------------------------------------------------------------------------
United States Steel Corp. 13,000 950,820
----------------
49,339,670
- -------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS--0.0%
Louisiana-Pacific Corp. 1 14,500 312,185
- -------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--4.9%
- -------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--3.9%
AT&T, Inc. 787,178 28,141,614
- -------------------------------------------------------------------------------
BellSouth Corp. 478,000 22,518,580
- -------------------------------------------------------------------------------
CenturyTel, Inc. 1 25,500 1,113,330
- -------------------------------------------------------------------------------
Citizens Communications Co. 33,700 484,269
- -------------------------------------------------------------------------------
Embarq Corp. 10,196 535,902
- -------------------------------------------------------------------------------
Qwest Communications International,
Inc. 2 50,500 422,685
- -------------------------------------------------------------------------------
Verizon Communications, Inc. 806,656 30,039,869
----------------
83,256,249
- -------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--1.0%
Dobson Communications Corp.,
Cl. A 2 20,500 178,555
- -------------------------------------------------------------------------------
Sprint Nextel Corp. 1,084,223 20,480,972
- -------------------------------------------------------------------------------
Telephone & Data Systems, Inc. 1 12,400 673,692
----------------
21,333,219
- -------------------------------------------------------------------------------
UTILITIES--0.5%
- -------------------------------------------------------------------------------
ELECTRIC UTILITIES--0.1%
American Electric Power Co., Inc. 48,000 2,043,840
- -------------------------------------------------------------------------------
Progress Energy, Inc., Contingent
Value Obligation 2,3 32,000 9,920
----------------
2,053,760
- -------------------------------------------------------------------------------
GAS UTILITIES--0.0%
ONEOK, Inc. 13,800 595,056
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER--0.4%
Alliant Energy Corp. 2,900 $ 109,533
- -------------------------------------------------------------------------------
Avista Corp. 1 2,100 53,151
- -------------------------------------------------------------------------------
CenterPoint Energy, Inc. 1 29,600 490,768
- -------------------------------------------------------------------------------
PG&E Corp. 184,200 8,718,185
----------------
9,371,637
----------------
Total Common Stocks
(Cost $1,746,543,505) 2,132,215,373
- -------------------------------------------------------------------------------
PREFERRED STOCKS--0.0%
- -------------------------------------------------------------------------------
Wachovia Corp., Dividend Equalization
Preferred Shares (Cost $0) 6,000 15
UNITS
- -------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- -------------------------------------------------------------------------------
Dime Bancorp, Inc. Wts., Exp. 1/2/10 2 31,900 4,626
- -------------------------------------------------------------------------------
Lucent Technologies, Inc. Wts., Exp.
12/10/07 2 4,837 1,499
----------------
Total Rights, Warrants and
Certificates (Cost $0) 6,125
SHARES
- -------------------------------------------------------------------------------
MONEY MARKET FUND--0.6%
- -------------------------------------------------------------------------------
Oppenheimer Institutional Money
Market Fund, Cl. E, 5.25% 4,5
(Cost $12,793,527) 12,793,527 12,793,527
- -------------------------------------------------------------------------------
Total Investments, at Value
(excluding Investments Purchased
with Cash Collateral from Securities
Loaned) (Cost $1,759,337,032) 2,145,015,040
PRINCIPAL
AMOUNT
- -------------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED--5.2% 6
- -------------------------------------------------------------------------------
ASSET BACKED FLOATING NOTE--0.2%
Citigroup Mortgage Loan Trust, Inc.,
Series 2006-HE1, Cl. A1, 5.41%,
1/25/07 $ 1,373,669 1,373,669
- -------------------------------------------------------------------------------
Countrywide Asset-Backed Certificates,
Series 2005-17, Cl. 4AV1, 5.46%,
1/25/07 669,068 669,068
- -------------------------------------------------------------------------------
Countrywide Asset-Backed Certificates,
Series 2006-2, Cl. 2A1, 5.42%,
1/25/07 1,656,970 1,656,970
- -------------------------------------------------------------------------------
GSAA Home Equity Trust, Series
2005-15, Cl. 2A1, 5.44%, 1/25/07 1,239,628 1,239,628
- -------------------------------------------------------------------------------
Money Market Trust, Series
A-2, 5.43%, 1/16/07 1,000,000 1,000,000
----------------
5,939,335
13 | OPPENHEIMER MAIN STREET FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--2.7%
Undivided interest of 1.40% in joint repurchase
agreement (Principal Amount/Value $4,100,000,000,
with a maturity value of $4,102,437,222) with
Nomura Securities, 5.35%, dated 12/29/06, to
be repurchased at $57,509,120 on 1/2/07,
collateralized by U.S. Agency Mortgages,
0.00%-22.12%, 3/15/14-5/1/46,
with a value of $4,182,000,000 $57,474,954 $ 57,474,954
- -------------------------------------------------------------------------------
MASTER FLOATING NOTE--0.1%
Citigroup Global Markets, Inc.,
5.38%, 1/2/07 1,400,000 1,400,000
- -------------------------------------------------------------------------------
MEDIUM-TERM FLOATING NOTE--2.0%
American Express Credit Corp.,
5.36%, 1/16/07 2,000,000 2,000,000
- -------------------------------------------------------------------------------
Bear Stearns, 5.37%, 1/2/07 2,000,000 2,000,000
- -------------------------------------------------------------------------------
CC USA, Inc., 5.37%, 1/2/07 2,000,000 2,000,000
- -------------------------------------------------------------------------------
CC USA, Inc., 5.37%, 1/2/07 3,000,000 3,000,000
- -------------------------------------------------------------------------------
Citigroup Funding, Inc., 5.36%,
1/2/07 3,000,000 3,000,000
- -------------------------------------------------------------------------------
Dorada Finance, Inc., 5.37%, 1/2/07 4,000,000 4,000,000
- -------------------------------------------------------------------------------
Goldman Sachs Group, Inc., 5.47%,
1/2/07 4,000,000 4,000,000
- -------------------------------------------------------------------------------
HSBC Finance Corp., 5.34%, 1/8/07 3,000,000 3,000,000
- -------------------------------------------------------------------------------
Landsbanki Islands HF, 5.43%, 1/16/07 4,000,000 4,000,000
- -------------------------------------------------------------------------------
LINKS Finance LLC, 5.37%, 1/2/07 3,000,142 3,000,142
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------
MEDIUM-TERM FLOATING NOTE Continued
MBIA Global Funding LLC, 5.36%,
1/30/07 $ 3,000,000 $ 3,000,000
- -------------------------------------------------------------------------------
MBIA Global Funding LLC, 5.37%,
1/2/07 2,500,000 2,500,000
- -------------------------------------------------------------------------------
Sigma Finance, Inc., 5.37%, 1/2/07 3,000,000 3,000,000
- -------------------------------------------------------------------------------
Tango Finance Corp., 5.38%, 1/2/07 4,498,874 4,498,874
----------------
42,999,016
- -------------------------------------------------------------------------------
YANKEE FLOATING CERTIFICATE OF DEPOSIT--0.2%
Natexis Banques Populaires NY, 5.37%,
1/2/07 2,000,000 2,000,000
- -------------------------------------------------------------------------------
Natexis Banques Populaires NY, 5.39%,
1/2/07 1,999,758 1,999,758
----------------
3,999,758
----------------
Total Investments Purchased with Cash
Collateral from Securities Loaned
(Cost $111,813,063) 111,813,063
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $1,871,150,095) 105.2% 2,256,828,103
- -------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF
OTHER ASSETS (5.2) (111,389,376)
--------------------------------
NET ASSETS 100.0% $ 2,145,438,727
================================
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Partial or fully-loaned security. See Note 7 of accompanying Notes.
2. Non-income producing security.
3. Illiquid security. The aggregate value of illiquid securities as of December
31, 2006 was $9,920, which represents less than 0.01% of the Fund's net assets.
See Note 6 of accompanying Notes.
4. Rate shown is the 7-day yield as of December 31, 2006.
5. Represents ownership of an affiliated fund, at or during the period ended
December 31, 2006. Transactions during the period in which the issuer was an
affiliate are as follows:
SHARES GROSS GROSS SHARES
DECEMBER 31, 2005 ADDITIONS REDUCTIONS DECEMBER 31, 2006
- --------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Institutional Money Market Fund, Cl. E, 5.25%* -- 111,053,465 98,259,938 12,793,527
VALUE DIVIDEND
SEE NOTE 1 INCOME
- --------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Institutional Money Market Fund, Cl. E, 5.25%* $12,793,527 $147,643
* The money market fund and the Fund are affiliated by having the same
investment advisor.
6. The security/securities have 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
accompanying Notes.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14 | OPPENHEIMER MAIN STREET FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 31, 2006
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments:
Unaffiliated companies (cost $1,858,356,568) $ 2,244,034,576
Affiliated companies (cost $12,793,527) 12,793,527
----------------
2,256,828,103
- -----------------------------------------------------------------------------------------------------------------------------------
Cash 25,323
- -----------------------------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 18,421,998
Shares of beneficial interest sold 3,449,799
Interest and dividends 2,596,968
Other 38,243
----------------
Total assets 2,281,360,434
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
- -----------------------------------------------------------------------------------------------------------------------------------
Return of collateral for securities loaned 111,813,063
- -----------------------------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 22,193,257
Shares of beneficial interest redeemed 1,085,319
Distribution and service plan fees 638,530
Shareholder communications 124,417
Trustees' compensation 26,947
Transfer and shareholder servicing agent fees 1,771
Other 38,403
----------------
Total liabilities 135,921,707
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 2,145,438,727
================
- -----------------------------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 86,942
- -----------------------------------------------------------------------------------------------------------------------------------
Additional paid-in capital 1,807,530,899
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulated net investment income 20,132,146
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions (67,989,268)
- -----------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets and liabilities denominated
in foreign currencies 385,678,008
----------------
NET ASSETS $ 2,145,438,727
================
- -----------------------------------------------------------------------------------------------------------------------------------
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 $1,046,145,894 and 42,215,791 shares of beneficial interest outstanding) $ 24.78
- -----------------------------------------------------------------------------------------------------------------------------------
Service Shares:
Net asset value, redemption price per share and offering price per share
(based on net assets of $1,099,292,833 and 44,726,250 shares of beneficial interest outstanding) $ 24.58
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
15 | OPPENHEIMER MAIN STREET FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 31, 2006
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends:
Unaffiliated companies $ 33,648,211
Affiliated companies 147,643
- -----------------------------------------------------------------------------------------------------------------------------------
Interest 561,064
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio lending fees 302,053
----------------
Total investment income 34,658,971
- -----------------------------------------------------------------------------------------------------------------------------------
EXPENSES
- -----------------------------------------------------------------------------------------------------------------------------------
Management fees 12,021,246
- -----------------------------------------------------------------------------------------------------------------------------------
Distribution and service plan fees -- Service shares 2,022,987
- -----------------------------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service shares 10,218
Service shares 10,145
- -----------------------------------------------------------------------------------------------------------------------------------
Shareholder communications:
Non-Service shares 130,293
Service shares 102,435
- -----------------------------------------------------------------------------------------------------------------------------------
Trustees' compensation 28,190
- -----------------------------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 11,590
- -----------------------------------------------------------------------------------------------------------------------------------
Administration service fees 1,500
- -----------------------------------------------------------------------------------------------------------------------------------
Other 83,541
----------------
Total expenses 14,422,145
Less waivers and reimbursements of expenses (2,785)
----------------
Net expenses 14,419,360
- -----------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 20,239,611
- -----------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized gain on:
Investments 111,791,653
Foreign currency transactions 413,398
----------------
Net realized gain 112,205,051
- -----------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments 135,505,529
Translation of assets and liabilities denominated in foreign currencies (379,413)
----------------
Net change in unrealized appreciation 135,126,116
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 267,570,778
================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
16 | OPPENHEIMER MAIN STREET FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2006 2005
- -----------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 20,239,611 $ 19,278,527
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized gain 112,205,051 46,249,002
- -----------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation 135,126,116 29,278,464
----------------------------------
Net increase in net assets resulting from operations 267,570,778 94,805,993
- -----------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Non-Service shares (12,723,204) (16,043,833)
Service shares (6,609,246) (4,680,411)
----------------------------------
(19,332,450) (20,724,244)
- -----------------------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from beneficial interest transactions:
Non-Service shares (210,884,469) (165,951,406)
Service shares 388,260,650 199,901,024
----------------------------------
177,376,181 33,949,618
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
Total increase 425,614,509 108,031,367
- -----------------------------------------------------------------------------------------------------------------------------------
Beginning of period 1,719,824,218 1,611,792,851
----------------------------------
End of period (including accumulated net investment income of $20,132,146
and $19,275,548, respectively) $ 2,145,438,727 $ 1,719,824,218
==================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
17 | OPPENHEIMER MAIN STREET FUND/VA
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2006 2005 2004 2003 2002
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 21.79 $ 20.84 $ 19.20 $ 15.32 $ 18.99
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .27 1 .26 1 .27 1 .18 .16
Net realized and unrealized gain (loss) 2.98 .97 1.53 3.86 (3.70)
----------------------------------------------------------------------------
Total from investment operations 3.25 1.23 1.80 4.04 (3.54)
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.26) (.28) (.16) (.16) (.13)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 24.78 $ 21.79 $ 20.84 $ 19.20 $ 15.32
============================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 15.03% 5.98% 9.46% 26.72% (18.80)%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $1,046,146 $1,121,476 $1,238,948 $1,214,960 $890,740
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $1,054,522 $1,156,299 $1,216,081 $1,003,396 $999,275
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 1.19% 1.26% 1.39% 1.10% 0.94%
Total expenses 0.66% 4,5 0.67% 6 0.67% 6 0.70% 6 0.69% 6
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 100% 88% 82% 85% 98%
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. Voluntary waiver of affiliated funds management fees less than 0.01%.
5. Expenses including indirect expenses from affiliated fund were as follows:
Year Ended December 31, 2006 0.66%
6. 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, 2006 2005 2004 2003 2002
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 21.63 $ 20.70 $ 19.10 $ 15.26 $ 18.95
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .22 1 .21 1 .25 1 .14 .13
Net realized and unrealized gain (loss) 2.95 .96 1.49 3.85 (3.70)
----------------------------------------------------------------------------
Total from investment operations 3.17 1.17 1.74 3.99 (3.57)
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.22) (.24) (.14) (.15) (.12)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 24.58 $ 21.63 $ 20.70 $ 19.10 $ 15.26
============================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 14.76% 5.74% 9.15% 26.44% (18.99)%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $1,099,293 $ 598,348 $ 372,845 $ 166,717 $ 51,929
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 810,181 $ 462,272 $ 262,660 $ 98,210 $ 34,604
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 0.95% 1.02% 1.30% 0.83% 0.87%
Total expenses 0.91% 4,5 0.91% 6 0.92% 6 0.96% 6 0.84% 6
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 100% 88% 82% 85% 98%
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. Voluntary waiver of affiliated funds management fees less than 0.01%.
5. Expenses including indirect expenses from affiliated fund were as follows:
Year Ended December 31, 2006 0.91%
6. 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(R) 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, as 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. Options are
valued daily based upon the last sale price on the principal exchange on which
the option is traded. 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. Investments in
open-end registered investment companies (including affiliated funds) are valued
at that fund's net asset value. 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.
- --------------------------------------------------------------------------------
AFFILIATED FUNDS. The Fund is permitted to invest daily available cash balances
in affiliated money market funds. Each day, the Fund invests the available cash
in Class E shares of Oppenheimer Institutional Money Market Fund ("IMMF") which
seeks current income and stability of principal. IMMF is a registered open-end
management investment company, regulated as a money market fund under the
Investment Company Act of 1940, as amended. The Manager is also the investment
advisor of IMMF. The Fund's investment in IMMF is included in the Statement of
Investments. As a shareholder, the Fund is subject to its proportional share of
IMMF's Class E expenses, including its management fee. The Manager will waive
fees and/or reimburse Fund expenses in an amount equal to the indirect
management fees incurred through the Fund's investment in IMMF.
- --------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------------
$20,159,090 $-- $51,200,524 $368,889,262
1. As of December 31, 2006, the Fund had $51,195,980 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, 2006,
details of the capital loss carryforwards were as follows:
EXPIRING
------------------------
2010 $ 24,626,627
2011 26,569,353
-------------
Total $ 51,195,980
=============
2. The Fund had $4,544 of post-October foreign currency losses which were
deferred.
3. During the fiscal year ended December 31, 2006, the Fund utilized
$112,599,269 of capital loss carryforward to offset capital gains realized in
that fiscal year.
4. 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.
21 | OPPENHEIMER MAIN STREET FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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, 2006. Net assets of
the Fund were unaffected by the reclassifications.
REDUCTION
REDUCTION TO ACCUMULATED NET
TO ACCUMULATED NET REALIZED LOSS
INVESTMENT INCOME ON INVESTMENTS
-------------------------------------------
$50,563 $50,563
The tax character of distributions paid during the years ended December 31, 2006
and December 31, 2005 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2006 DECEMBER 31, 2005
-------------------------------------------------------------------------
Distributions paid from:
Ordinary income $19,332,450 $20,724,244
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, 2006 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 $1,887,938,841
===============
Gross unrealized appreciation $ 376,147,948
Gross unrealized depreciation (7,258,686)
---------------
Net unrealized appreciation $ 368,889,262
===============
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a compensation
deferral plan for independent trustees that enables trustees to elect to defer
receipt of all or a portion of the annual compensation they are entitled to
receive from the Fund. For purposes of determining the amount owed to the
Trustee under the plan, deferred amounts are treated as though equal dollar
amounts had been invested in shares of the Fund or in other Oppenheimer funds
selected by the Trustee. The Fund purchases shares of the funds selected for
deferral by the Trustee in amounts equal to his or her deemed investment,
resulting in a Fund asset equal to the deferred compensation liability. Such
assets are included as a component of "Other" within the asset section of the
Statement of Assets and Liabilities. Deferral of trustees' fees under the plan
will not affect the net assets of the Fund, and will not materially affect the
Fund's assets, liabilities or net investment income per share. Amounts will be
deferred until distributed in accordance to the Plan.
22 | OPPENHEIMER MAIN STREET 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 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, at a rate equal to the
Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line item,
if applicable, represents earnings on cash balances maintained by the Fund
during the period. Such interest expense and other custodian fees may be paid
with these earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Fund's organizational documents provide current and former
trustees and officers with a limited indemnification against liabilities arising
in connection with the performance of their duties to the Fund. In the normal
course of business, the Fund may also enter into contracts that provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would be dependent on future claims that may be made against the
Fund. The risk of material loss from such claims is considered remote.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with 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, 2006 YEAR ENDED DECEMBER 31, 2005
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------
NON-SERVICE SHARES
Sold 2,514,408 $ 57,767,133 3,666,887 $ 75,624,029
Dividends and/or distributions reinvested 570,547 12,723,204 783,008 16,043,833
Redeemed (12,341,295) (281,374,806) (12,430,546) (257,619,268)
---------------------------------------------------------------
Net decrease (9,256,340) $ (210,884,469) (7,980,651) $(165,951,406)
===============================================================
- -----------------------------------------------------------------------------------------------------------------
SERVICE SHARES
Sold 19,602,827 $ 446,509,884 10,831,089 $ 224,276,509
Dividends and/or distributions reinvested 298,058 6,604,957 229,657 4,680,411
Redeemed (2,838,200) (64,854,191) (1,404,971) (29,055,896)
---------------------------------------------------------------
Net increase 17,062,685 $ 388,260,650 9,655,775 $ 199,901,024
===============================================================
23 | OPPENHEIMER MAIN STREET FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations and money market funds, for the year ended December
31, 2006, were as follows:
PURCHASES SALES
----------------------------------------------------------------
Investment securities $2,026,301,486 $1,853,000,827
- --------------------------------------------------------------------------------
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 average net assets as shown in the following table:
FEE SCHEDULE
--------------------------
Up to $200 million 0.75%
Next $200 million 0.72
Next $200 million 0.69
Next $200 million 0.66
Over $800 million 0.60
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the year ended December 31, 2006, the Fund paid
$20,408 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.
The Manager will waive fees and/or reimburse Fund expenses in an amount
equal to the indirect management fees incurred through the Fund's investment in
IMMF. During the year ended December 31, 2006, the Manager waived $2,785 for
IMMF management fees.
- --------------------------------------------------------------------------------
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.
24 | OPPENHEIMER MAIN STREET FUND/VA
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, 2006, the Fund had no outstanding foreign currency
contracts.
- --------------------------------------------------------------------------------
6. ILLIQUID SECURITIES
As of December 31, 2006, 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
securities, letters of credit 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 each day. If the Fund is
undercollateralized at the close of business due to an increase in market value
of securities on loan, additional collateral is requested from the borrowing
counterparty and is delivered to the Fund on the next business day. Cash
collateral may be invested in approved investments and the Fund bears the risk
of any loss in value of these investments. The Fund retains a portion of the
interest earned from the collateral. 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. 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, 2006, the Fund
had on loan securities valued at $108,981,501, which are included in the
Statement of Assets and Liabilities as "Investments, at value" and, when
applicable, as "Receivable for Investments sold." Collateral of $111,813,063 was
received for the loans, all of which was received in cash and subsequently
invested in approved investments or held as cash.
- --------------------------------------------------------------------------------
8. RECENT ACCOUNTING PRONOUNCEMENTS
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48 ("FIN 48"), ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES.
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with FASB Statement No. 109,
ACCOUNTING FOR INCOME TAXES. FIN 48 requires the evaluation of tax positions
taken in the course of preparing the Fund's tax returns to determine whether it
is "more-likely-than-not" that tax positions taken in the Fund's tax return will
be ultimately sustained. A tax liability and expense must be recorded in respect
of any tax position that, in Management's judgment, will not be fully realized.
FIN 48 is effective for fiscal years beginning after December 15, 2006. As of
December 31, 2006, the Manager has evaluated the implications of FIN 48 and does
not currently anticipate a material impact to the Fund's financial statements.
The Manager will continue to monitor the Fund's tax positions prospectively for
potential future impacts.
In September 2006, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 157, FAIR VALUE MEASUREMENTS. This standard establishes
a single authoritative definition of fair value, sets out a framework for
measuring fair value and expands disclosures about fair value measurements. SFAS
No. 157 applies to fair value measurements already required or permitted by
existing standards. SFAS No. 157 is effective for financial statements issued
for fiscal years
25 | OPPENHEIMER MAIN STREET FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8. RECENT ACCOUNTING PRONOUNCEMENTS Continued
beginning after November 15, 2007, and interim periods within those fiscal
years. As of December 31, 2006, the Manager does not believe the adoption of
SFAS No. 157 will materially impact the financial statement amounts; however,
additional disclosures may be required about the inputs used to develop the
measurements and the effect of certain of the measurements on changes in net
assets for the period.
- --------------------------------------------------------------------------------
9. LITIGATION
A consolidated amended complaint was filed as a putative class action against
the Manager and the Transfer Agent and other defendants (including 51 of the
Oppenheimer funds excluding the Fund) in the U.S. District Court for the
Southern District of New York on January 10, 2005 and was amended on March 4,
2005. The complaint alleged, among other things, that the Manager charged
excessive fees for distribution and other costs, and that by permitting and/or
participating in those actions, the Directors/Trustees and the Officers of the
funds breached their fiduciary duties to fund shareholders under the Investment
Company Act of 1940 and at common law. The plaintiffs sought unspecified
damages, an accounting of all fees paid, and an award of attorneys' fees and
litigation expenses.
In response to the defendants' motions to dismiss the suit, seven of the
eight counts in the complaint, including the claims against certain of the
Oppenheimer funds, as nominal defendants, and against certain present and former
Directors, Trustees and Officers of the funds, and the Distributor, as
defendants, were dismissed with prejudice, by court order dated March 10, 2006,
and the remaining count against the Manager and the Transfer Agent was dismissed
with prejudice by court order dated April 5, 2006. The plaintiffs filed an
appeal of those dismissals on May 11, 2006.
The Manager believes that the allegations contained in the complaint are
without merit and that there are substantial grounds to sustain the district
court's rulings. The Manager also believes that it is premature to render any
opinion as to the likelihood of an outcome unfavorable to it, the funds, the
Directors/Trustees or the Officers on the appeal of the decisions of the
district court, and that no estimate can yet be made with any degree of
certainty as to the amount or range of any potential loss.
26 | 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 (the "Fund"), a series of Oppenheimer Variable
Account Funds, including the statement of investments, as of December 31, 2006,
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 period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
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 audits included 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, 2006, 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 the
Fund as of December 31, 2006, 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
period then ended, in conformity with accounting principles generally accepted
in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
February 8, 2007
27 | OPPENHEIMER MAIN STREET FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2007, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2006. 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, 2006 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.
28 | OPPENHEIMER MAIN STREET FUND/VA
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's website at 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.
29 | OPPENHEIMER MAIN STREET FUND/VA
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew the Fund's
investment advisory agreement (the "Agreement"). The Investment Company Act of
1940, as amended, requires that the Board request and evaluate, and that the
Manager provide, such information as may be reasonably necessary to evaluate the
terms of the Agreement. The Board employs an independent consultant to prepare a
report that provides information, including comparative information, that the
Board requests for that purpose. In addition, the Board receives information
throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager and its affiliates, including
an analysis of the cost of providing services, (v) whether economies of scale
are realized as the Fund grows and whether fee levels reflect these economies of
scale for Fund investors and (vi) other benefits to the Manager from its
relationship with the Fund. Outlined below is a summary of the principal
information considered by the Board as well as the Board's conclusions.
The Board was aware that there are alternatives to retaining the Manager.
NATURE, QUALITY AND EXTENT OF SERVICES. The Board considered information
about the nature and extent of the services provided to the Fund and information
regarding the Manager's key personnel who provide such services. The Manager's
duties include providing the Fund with the services of the portfolio managers
and the Manager's investment team, who provide research, analysis and other
advisory services in regard to the Fund's investments; securities trading
services; oversight of third party service providers; monitoring compliance with
applicable Fund policies and procedures and adherence to the Fund's investment
restrictions. The Manager is responsible for providing certain administrative
services to the Fund as well. Those services include providing and supervising
all administrative and clerical personnel who are necessary in order to provide
effective corporate administration for the Fund; compiling and maintaining
records with respect to the Fund's operations; preparing and filing reports
required by the Securities and Exchange Commission; preparing periodic reports
regarding the operations of the Fund for its shareholders; preparing proxy
materials for shareholder meetings; and preparing the registration statements
required by Federal and state securities laws for the sale of the Fund's shares.
The Manager also provides the Fund with office space, facilities and equipment.
The Board also considered the quality of the services provided and the
quality of the Manager's resources that are available to the Fund. The Board
took account of the fact that the Manager has had over 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. In its evaluation of the quality of
the portfolio management services provided, the Board considered the experience
of Nikolaos D. Monoyios and Dr. Marc Reinganum and the Manager's Disciplined
Strategies Equity Investment team and analysts. Mr. Monoyios has been a
portfolio manager of the Fund since May 1999 and Dr. Reinganum has been a
portfolio manager of the Fund since September 2003. 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.
30 | OPPENHEIMER MAIN STREET FUND/VA
INVESTMENT PERFORMANCE OF THE MANAGER AND THE FUND. During the year, the
Manager provided information on the investment 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 underlying
variable insurance products. The Board noted that the Fund's one-year,
three-year and five-year performance were better than its peer group median and
that its ten-year performance was equal to 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 and other large-cap core funds underlying variable
insurance products. The Board noted that the Fund's contractual management fees
are lower than its peer group median although its actual management fees are
slightly higher than its peer group median.
ECONOMIES OF SCALE. The Board reviewed 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
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 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 Agreement, including the management fee,
in light of all of the surrounding circumstances.
31 | 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 TRUSTEES THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL,
COLORADO 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER
RESIGNATION, RETIREMENT, DEATH OR REMOVAL.
WILLIAM L. ARMSTRONG, President, Colorado Christian University (since 2006); Chairman of the following
Chairman of the Board of private mortgage banking companies: Cherry Creek Mortgage Company (since 1991),
Trustees (since 2003), Centennial State Mortgage Company (since 1994), and The El Paso Mortgage Company (since
Trustee (since 1999) 1993); Chairman of the following private companies: Ambassador Media Corporation (since
Age: 69 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 37 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: 75 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 37 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: 70 (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 37 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: 68 Partner at PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman
of Price Waterhouse LLP Global Investment Management Industry Services Group
(accounting firm) (July 1994-June 1998). Oversees 37 portfolios in the OppenheimerFunds
complex.
JON S. FOSSEL, Director of UNUMProvident (insurance company) (since June 2002); Director of
Trustee (since 1995) Northwestern Energy Corp. (public utility corporation) (since November 2004); Director
Age: 65 of P.R. Pharmaceuticals (October 1999-October 2003); Director of Rocky Mountain Elk
Foundation (non-profit organization) (February 1998-February 2003 and since February
2005); 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 37 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: 66 companies of the Manager (until October 1994). Oversees 37 portfolios in the
OppenheimerFunds complex.
BEVERLY L. HAMILTON, Trustee of Monterey Institute for International Studies (educational organization)
Trustee (since 2002) (since February 2000); Board Member of Middlebury College (educational organization)
Age: 60 (since December 2005); Director of The California Endowment (philanthropic
organization) (since April 2002); Director (February 2002-2005) and Chairman of
Trustees (since 2006) of the Community Hospital of Monterey Peninsula; Director
(October 1991-2005) and Vice Chairman (since 2006) of American Funds' Emerging Markets
Growth Fund, Inc. (mutual fund); President of ARCO Investment Management Company
(February 1991-April 2000); Member of the investment committees
32 | OPPENHEIMER MAIN STREET FUND/VA
BEVERLY L. HAMILTON, of The Rockefeller Foundation (since 2001) and The University of Michigan (since 2000);
Continued 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 37
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: 62 (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 37 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: 64 (since 1996); Trustee (since 1987) and Chairman (1994-2005) of the Investment Committee
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); and
Executive Vice President of Peoples Heritage Financial Group, Inc. (commercial bank)
(January 1999-July 1999). Oversees 39 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
Trustee, President and September 2000) of the Manager; President and director or trustee of other Oppenheimer
Principal Executive Officer funds; President and Director of OAC and of Oppenheimer Partnership Holdings, Inc.
(since 2001) (holding company subsidiary of the Manager) (since July 2001); Director of
Age: 57 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 96 portfolios in the OppenheimerFunds complex.
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OTHER OFFICERS OF THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. MONOYIOS,
THE FUND REINGANUM, ZACK, GILLESPIE AND MS. BLOOMBERG, TWO WORLD FINANCIAL CENTER, 225 LIBERTY
STREET, NEW YORK, NEW YORK 10281-1008, FOR MESSRS. VANDEHEY, WIXTED, PETERSEN, SZILAGYI
AND MS. IVES, 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
Vice President and Portfolio Analyst. Formerly Vice President of the Manager (April 1998-September 2003). An officer
Manager (since 1999) of 6 portfolios in the OppenheimerFunds complex.
Age: 57
33 | OPPENHEIMER MAIN STREET FUND/VA
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
DR. MARC REINGANUM, Vice President of the Manager (since September 2002); a Director of Quantitative
Vice President and Portfolio Research and Portfolio Strategist for Equities; the Mary Jo Vaughn Rauscher Chair in
Manager (since 2003) Financial Investments at Southern Methodist University since 1995. At Southern
Age: 53 Methodist University he 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 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
(since 2004) Director of Internal Audit of the Manager (1997-February 2004). An officer of 96
Age: 56 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,
Financial & Accounting Inc., Shareholder Services, Inc., Oppenheimer Real Asset Management Corporation, and
Officer Oppenheimer Partnership Holdings, Inc. (since March 1999), OFI Private Investments,
(since 1999) Inc. (since March 2000), OppenheimerFunds International Ltd. and OppenheimerFunds plc
Age: 47 (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 96
portfolios in the OppenheimerFunds complex.
BRIAN S. PETERSEN, Assistant Vice President of the Manager (since August 2002); Manager/Financial Product
Assistant Treasurer Accounting of the Manager (November 1998-July 2002). An officer of 96 portfolios in the
(since 2004) OppenheimerFunds complex.
Age: 36
BRIAN C. SZILAGYI, Assistant Vice President of the Manager (since July 2004); Director of Financial
Assistant Treasurer Reporting and Compliance of First Data Corporation (April 2003-July 2004); Manager of
(since 2005) Compliance of Berger Financial Group LLC (May 2001-March 2003); Director of Mutual Fund
Age: 36 Operations at American Data Services, Inc. (September 2000-May 2001). An officer of 96
portfolios in the OppenheimerFunds complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March 2002) of
Vice President and Secretary the Manager; General Counsel and Director of the Distributor (since December 2001);
(since 2001) General Counsel of Centennial Asset Management Corporation (since December 2001);
Age: 58 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 96 portfolios in the OppenheimerFunds complex.
LISA I. BLOOMBERG, Vice President and Associate Counsel of the Manager (since May 2004); First Vice
Assistant Secretary President (April 2001-April 2004), Associate General Counsel (December 2000-April
(since 2004) 2004), Corporate Vice President (May 1999-April 2001) and Assistant General Counsel
Age: 39 (May 1999-December 2000) of UBS Financial Services Inc. (formerly, PaineWebber
Incorporated). An officer of 96 portfolios in the OppenheimerFunds complex.
34 | OPPENHEIMER MAIN STREET FUND/VA
KATHLEEN T. IVES, Vice President (since June 1998) and Senior Counsel and Assistant Secretary (since
Assistant Secretary October 2003) of the Manager; Vice President (since 1999) and Assistant Secretary
(since 2001) (since October 2003) of the Distributor; Assistant Secretary of Centennial Asset
Age: 41 Management Corporation (since October 2003); Vice President and Assistant Secretary of
Shareholder Services, Inc. (since 1999); Assistant Secretary of OppenheimerFunds Legacy
Program and Shareholder Financial Services, Inc. (since December 2001); Assistant
Counsel of the Manager (August 1994-October 2003). An officer of 96 portfolios in the
OppenheimerFunds complex.
PHILLIP S. GILLESPIE, Senior Vice President and Deputy General Counsel of the Manager (since September 2004);
Assistant Secretary First Vice President (2000-September 2004), Director (2000-September 2004) and Vice
(since 2004) President (1998-2000) of Merrill Lynch Investment Management. An officer of 96
Age: 43 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.
35 | OPPENHEIMER MAIN STREET 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, are audit committee financial experts and that
Messrs. Cameron and Bowen are "independent" for purposes of this Item 3.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The principal accountant for the audit of the registrant's annual financial
statements billed $230,000 in fiscal 2006 and $216,250 in fiscal 2005.
(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 $40,000 in fiscal 2006 and no such fees in fiscal 2005 to the
registrant's investment adviser or any entity controlling, controlled by, or
under common control with the adviser that provides ongoing services to the
registrant.
Such services include: Review of management's assessment of the financial
statements disclosure impacts of an IRS private letter ruling.
(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 $12,075 in fiscal 2006 and $31,136 in fiscal 2005.
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.
Such services include: Compliance reviews.
(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 $52,075 in fiscal 2006 and $31,136 in fiscal
2005 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) No such services were rendered.
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, 2006, 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 8, 2007
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 8, 2007
By: /s/ Brian W. Wixted
---------------------------
Brian W. Wixted
Principal Financial Officer
Date: February 8, 2007