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
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(Exact name of registrant as specified in charter)
6803 South Tucson Way, Centennial, Colorado 80112-3924
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(Address of principal executive offices) (Zip code)
Robert G. Zack, Esq.
OppenheimerFunds, Inc.
Two World Financial Center, New York, New York 10281-1008
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(Name and address of agent for service)
Registrant's telephone number, including area code: (303) 768-3200
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Date of fiscal year end: December 31
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Date of reporting period: 12/31/2007
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ITEM 1. REPORTS TO STOCKHOLDERS.
DECEMBER 31, 2007
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Oppenheimer Management
Strategic Bond Fund/VA Commentaries
A Series of Oppenheimer Variable Account Funds and
Annual Report
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MANAGEMENT COMMENTARIES
Listing of Top Holdings
ANNUAL REPORT [GRAPHIC]
Fund Performance Discussion
Listing of Investments
Financial Statements
[LOGO] OPPENHEIMERFUNDS(R)
The Right Way to Invest
FUND PERFORMANCE DISCUSSION
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MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. For the 12-month period ended
December 31, 2007, Oppenheimer Strategic Bond Fund/VA's Non-Service shares
provided a total return of 9.69%. In comparison, the Fund's benchmark, the
Lehman Brothers Aggregate Bond Index, provided a total return of 6.97% during
the period.
We attribute the Fund's strong results primarily to the Fund's
international portfolio, where our emphasis on currencies and securities from
emerging markets fared particularly well. U.S. high yield bonds produced less
attractive returns, primarily due to economic and credit concerns arising from
turmoil in the bond market's sub-prime mortgage sector, while U.S. government
securities generally benefited from a "flight to quality" among investors.
After several years of steady expansion, U.S. economic growth began to
slow during 2007 when housing markets softened and consumers pared back on
spending. Yet, corporate earnings remained strong and default rates among high
yield bonds continued to hover near historical lows. A combination of robust
global economic growth, moderating U.S. economic growth and persistent
inflationary pressures kept the Federal Reserve Board (the "Fed") on the
sidelines over the first half of the year, and the overnight federal funds rate
stayed at 5.25%. As a result of these factors, U.S. government securities traded
within a relatively narrow range, and high yield corporate bonds rallied through
the spring of 2007.
During the summer, however, a credit crisis in the U.S. sub-prime mortgage
sector spread to other parts of the financial markets, causing investors to
reassess their attitudes toward risk. A number of highly leveraged hedge funds
were forced to liquidate even their more creditworthy holdings to raise cash for
redemption requests and margin calls, leading to challenging liquidity
conditions in several market sectors. As a result, high yield bonds erased many
of their previous gains by year-end. Conversely, prices of U.S. Treasury
securities rallied as investors engaged in a "flight to quality." The Fed
intervened in the credit crisis with several reductions in key interest rates,
including three cuts in the overnight federal funds rate, which ended the year
at 4.25%.
Market conditions in international markets diverged from those in the
United States. Robust economic growth in Europe caused the European Central Bank
to raise short-term interest rates early in the year, making yields from
European bonds more attractive. Bond yields in many Latin American and Asian
emerging markets also remained higher than those in the United States. These
factors contributed to a steady deterioration in the value of the U.S. dollar,
which further enhanced the attractiveness of assets denominated in foreign
currencies. Over the summer, in the midst of the U.S. credit crisis, selling
pressure increased in the non-government sectors of the international bond
markets, leading to sharp declines during July and parts of August. However,
international markets generally rebounded as investors recognized that credit
problems among U.S. homeowners had little bearing on other parts of the world.
Emerging-market bonds represented the primary contributors to the Fund's
relative performance. In Latin America, Brazil produced attractive returns over
most of the year as its government drew down debt, reduced budget deficits and
became more a significant participant in world trade. In Eastern Europe, Turkey
prospered through reforms designed to help it qualify for membership in the
European Union. Among developed markets, we maintained relatively light exposure
to Japan, where bond yields remained very low. Otherwise, we have attempted to
diversify holdings across the developed nations of Europe. The Fund also
benefited from unhedged currency exposure as the U.S. dollar continued to
deteriorate relative to most foreign currencies.
We maintained a slightly shorter-than-average duration posture with regard
to U.S. Treasury securities over most of the reporting period, as narrow yield
differences along the market's maturity range provided little incentive to incur
the risks of longer-term bonds. However, because the Fund's U.S. government
securities portfolio included an allocation to mortgage-backed securities, its
performance suffered in the final months of the year due to spillover from the
troubled sub-prime mortgage sector. In the high yield bond portfolio, an
underweighted position helped the Fund weather market volatility, but an
emphasis on longer-duration bonds from banks and other financial companies
detracted from relative performance.
As of year-end, we expect economic growth to remain stronger in
international markets than in the United States. However, we are aware that some
emerging markets already have posted impressive rallies, and to reduce risks we
recently trimmed the Fund's positions in some emerging markets. U.S. government
securities should hold up well if the Fed reduces short-term interest rates
further. We are more cautious regarding high yield bonds, primarily because we
3 | OPPENHEIMER STRATEGIC BOND FUND/VA
FUND PERFORMANCE DISCUSSION
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expect default rates to rise in the event of a more severe economic slowdown. In
our judgment, the Fund is well positioned for these developments. Indeed,
enabling investors to participate in fixed-income opportunities wherever they
arise is central to what makes Oppenheimer Strategic Bond Fund/VA part of THE
RIGHT WAY TO INVEST.
COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that follow show the
performance of a hypothetical $10,000 investment in each share class of the Fund
held until December 31, 2007. 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 assumed 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
FUND PERFORMANCE DISCUSSION
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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.]
Citigroup World
Oppenheimer Strategic Bond Lehman Brothers Government Bond
Fund/VA (Non-Service) Aggregate Bond Index Index
12/31/1997 $10,000 $10,000 $10,000
03/31/1998 $10,249 $10,156 $10,079
06/30/1998 $10,330 $10,393 $10,279
09/30/1998 $10,109 $10,832 $11,135
12/31/1998 $10,290 $10,869 $11,531
03/31/1999 $10,304 $10,815 $11,085
06/30/1999 $10,304 $10,720 $10,703
09/30/1999 $10,325 $10,793 $11,188
12/31/1999 $10,580 $10,779 $11,039
03/31/2000 $10,697 $11,017 $11,058
06/30/2000 $10,766 $11,209 $11,042
09/30/2000 $10,882 $11,547 $10,752
12/31/2000 $10,859 $12,033 $11,214
03/31/2001 $11,080 $12,398 $10,873
06/30/2001 $10,991 $12,468 $10,702
09/30/2001 $10,917 $13,043 $11,468
12/31/2001 $11,385 $13,049 $11,103
03/31/2002 $11,564 $13,061 $10,924
06/30/2002 $11,617 $13,543 $12,197
09/30/2002 $11,671 $14,164 $12,668
12/31/2002 $12,233 $14,387 $13,268
03/31/2003 $12,670 $14,587 $13,680
06/30/2003 $13,442 $14,952 $14,211
09/30/2003 $13,843 $14,930 $14,491
12/31/2003 $14,443 $14,977 $15,246
03/31/2004 $14,732 $15,375 $15,530
06/30/2004 $14,461 $15,000 $15,013
09/30/2004 $14,973 $15,479 $15,506
12/31/2004 $15,696 $15,627 $16,824
03/31/2005 $15,484 $15,552 $16,390
06/30/2005 $15,957 $16,020 $16,156
09/30/2005 $16,083 $15,912 $15,974
12/31/2005 $16,115 $16,007 $15,667
03/31/2006 $16,333 $15,903 $15,603
06/30/2006 $16,103 $15,891 $16,098
09/30/2006 $16,729 $16,496 $16,331
12/31/2006 $17,321 $16,700 $16,625
03/31/2007 $17,770 $16,951 $16,817
06/30/2007 $18,009 $16,863 $16,558
09/30/2007 $18,521 $17,343 $17,751
12/31/2007 $19,000 $17,864 $18,446
AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/07
1-Year 9.69% 5-Year 9.21% 10-Year 6.63%
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.]
Citigroup World
Oppenheimer Strategic Bond Lehman Brothers Government Bond
Fund/VA (Service) Aggregate Bond Index 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
03/31/2007 $15,593 $13,673 $15,467
06/30/2007 $15,830 $13,602 $15,229
09/30/2007 $16,243 $13,989 $16,326
12/31/2007 $16,686 $14,409 $16,965
AVERAGE ANNUAL TOTAL RETURNS OF SERVICE SHARES OF THE FUND AT 12/31/07
1-Year 9.55% 5-Year 8.87% Since Inception (3/19/01) 7.84%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, CALL US AT 1.800.981.2871. THE FUND'S
TOTAL RETURNS SHOULD NOT BE EXPECTED TO BE THE SAME AS THE RETURNS OF OTHER
FUNDS, WHETHER OR NOT BOTH FUNDS HAVE THE SAME PORTFOLIO MANAGERS AND/OR SIMILAR
NAMES. THE FUND'S TOTAL RETURNS DO NOT INCLUDE THE CHARGES ASSOCIATED WITH THE
SEPARATE ACCOUNT PRODUCTS THAT OFFER THIS FUND. SUCH PERFORMANCE WOULD HAVE BEEN
LOWER IF SUCH CHARGES WERE TAKEN INTO ACCOUNT.
5 | OPPENHEIMER STRATEGIC BOND FUND/VA
FUND EXPENSES
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FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1)
transaction costs, which may include redemption fees (if applicable); 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, 2007.
ACTUAL EXPENSES. The first section of the table provides information about
actual account values and actual expenses. You may use the information in this
section for the class of shares you hold, together with the amount you invested,
to estimate the expense that you paid over the period. Simply divide your
account value by $1,000.00 (for example, an $8,600.00 account value divided by
$1,000.00 = 8.60), then multiply the result by the number in the first section
under the heading entitled "Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The second section of the table
provides information about hypothetical account values and hypothetical expenses
based on the Fund's actual expense ratio for each class of shares, and an
assumed rate of return of 5% per year for each class before expenses, which is
not the actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of investing
in the Fund and other funds. To do so, compare this 5% hypothetical example for
the class of shares you hold with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any charges associated with the separate
accounts that offer this Fund. Therefore, the "hypothetical" lines of the table
are useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these separate
account charges were included your costs would have been higher.
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BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
ACTUAL JULY 1, 2007 DECEMBER 31, 2007 DECEMBER 31, 2007
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Non-Service Shares $ 1,000.00 $ 1,055.00 $ 2.85
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Service Shares 1,000.00 1,054.10 4.15
HYPOTHTICAL
(5% return before expenses)
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Non-Service Shares 1,000.00 1,022.43 2.81
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Service Shares 1,000.00 1,021.17 4.08
Expenses are equal to the Fund's annualized expense ratio for that class,
multiplied by the average account value over the period, multiplied by 184/365
(to reflect the one-half year period). Those annualized expense ratios,
excluding indirect expenses from affiliated fund, based on the 6-month period
ended December 31, 2007 are as follows:
CLASS EXPENSE RATIOS
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Non-Service Shares 0.55%
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Service Shares 0.80
The expense ratios reflect reduction to custodian expenses and 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 and reduction to
custodian expenses, if applicable.
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6 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS December 31, 2007
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PRINCIPAL
AMOUNT VALUE
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ASSET-BACKED SECURITIES--1.7%
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Ace Securities Corp. Home
Equity Loan Trust Series 2005-
HE7, Asset-Backed Pass-Through
Certificates, Series 2005-HE7,
Cl. A2B, 5.045%, 11/25/35 1 $ 389,298 $ 387,735
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Aesop Funding II LLC,
Automobile Asset-Backed
Certificates, Series 2005-1A,
Cl. A2, 5.009%, 4/20/09 1,2 133,333 133,322
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Argent Securities Trust 2004-W8,
Asset-Backed Pass-Through
Certificates, Series 2004-W8,
Cl. A2, 5.345%, 5/25/34 1 924,857 871,300
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Argent Securities Trust 2006-
M3, Asset-Backed Pass-Through
Certificates, Series 2006-M3,
Cl. A2B, 4.965%, 9/25/36 1 530,000 511,871
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Argent Securities Trust 2006-W5,
Asset-Backed Pass-Through
Certificates, Series 2006-W5,
Cl. A2B, 4.965%, 5/26/36 1 810,000 789,144
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BMW Vehicle Owner Trust
2006-A, Automobile Asset-
Backed Securities, Series 2006-A,
Cl. A2, 5.30%, 5/26/09 228,520 228,653
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Capital Auto Receivables Asset
Trust 2006-1, Automobile
Asset-Backed Securities, Series
2006-1, Cl. A3, 5.03%, 10/15/09 3,217,943 3,220,135
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Capital One Prime Auto
Receivables Trust, Automobile
Asset-Backed Certificates,
Series 2005-1, Cl. A4,
5.048%, 4/15/11 1 8,120,000 8,090,517
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Centex Home Equity Loan Trust
2006-A, Asset-Backed Certificates,
Series 2006-A, Cl. AV2, 4.965%,
5/16/36 1 1,180,000 1,159,622
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Citibank Credit Card Issuance
Trust, Credit Card Receivable
Nts., Series 2001-A1, Cl. A1,
5.045%, 2/7/10 1 5,660,000 5,661,521
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Citigroup Mortgage Loan Trust,
Inc. 2005-WF2, Asset-Backed
Pass-Through Certificates, Series
2005-WF2, Cl. AF2, 4.922%,
8/25/35 1 8,600 8,580
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Citigroup Mortgage Loan Trust,
Inc. 2006-WFH3, Asset-Backed
Pass-Through Certificates, Series
2006-WFH3, Cl. A2, 4.965%,
10/31/36 1 730,000 695,295
PRINCIPAL
AMOUNT VALUE
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ASSET-BACKED SECURITIES Continued
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CWABS Asset-Backed Certificates
Trust 2005-16, Asset-Backed
Certificates, Series 2005-16,
Cl. 2AF2, 5.382%, 5/25/36 1 $ 1,530,000 $ 1,474,687
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CWABS Asset-Backed Certificates
Trust 2005-17, Asset-Backed
Certificates:
Series 2005-17, Cl.
1AF1, 5.096%, 5/25/36 1 82,395 82,271
Series 2005-17, Cl. 1AF2, 5.363%,
5/25/36 1 250,000 248,086
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CWABS Asset-Backed Certificates
Trust 2006-25, Asset-Backed
Certificates, Series 2006-25, Cl.
2A2, 4.985%, 12/25/29 1 1,050,000 982,801
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DaimlerChrysler Auto Trust,
Automobile Loan Pass-Through
Certificates, Series 2006-C, Cl. A2,
5.33%, 5/8/09 438,624 439,009
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Embarcadero Aircraft
Securitization Trust, Airplane
Receivable Nts., Series 2000-A,
Cl. B, 8/15/25 3,4,5 1,820,063 18,201
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First Franklin Mortgage Loan
Trust 2005-FF10, Mtg.
Pass-Through Certificates,
Series 2005-FF10,
Cl. A3, 5.075%, 11/25/35 1 1,068,718 1,061,972
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First Franklin Mortgage Loan
Trust 2006-FF10, Mtg.
Pass-Through Certificates,
Series 2006-FF10, Cl. A3, 4.955%,
7/25/36 1 1,000,000 953,637
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First Franklin Mortgage Loan
Trust 2006-FF5, Mtg.
Pass-Through Certificates, Series
2006-FF5, Cl. 2A1, 4.915%, 5/15/36 1 206,975 204,763
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First Franklin Mortgage Loan
Trust 2006-FF9, Mtg.
Pass-Through Certificates, Series
2006-FF9, Cl. 2A2, 4.975%, 7/7/36 1 430,000 410,469
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Harley-Davidson Motorcycle
Trust, Motorcycle Receivable
Nts., Series 2007-3, Cl. A3, 5.378%,
6/15/12 1,5 1,500,000 1,493,426
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Household Home Equity Loan
Trust, Home Equity Loan
Pass-Through Certificates:
Series 2005-3, Cl. A1, 5%, 1/20/35 1 282,334 275,916
Series 2006-4, Cl. A2V, 5.059%,
3/20/36 1 440,000 414,583
7 | OPPENHEIMER STRATEGIC BOND FUND/VA
STAEMENT OF INVESTMENTS Continued
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PRINCIPAL
AMOUNT VALUE
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ASSET-BACKED SECURITIES Continued
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Ice Em CLO, Collateralized Loan
Obligations:
Series 2007-1A, Cl. B,
7.10%, 8/15/22 1,5 $ 7,870,000 $ 6,689,500
Series 2007-1A, Cl. C, 8.40%,
8/15/22 1,5 5,270,000 4,479,500
Series 2007-1A, Cl. D, 10.40%,
8/15/22 1,5 5,270,000 4,479,500
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Lehman XS Trust, Mtg.
Pass-Through Certificates:
Series 2005-10, Cl. 2A3B,
5.55%, 1/25/36 327,515 328,104
Series 2005-2, Cl. 2A1B, 5.18%,
8/25/35 1 197,511 198,125
Series 2005-4, Cl. 2A1B, 5.17%,
10/25/35 176,950 177,227
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Mastr Asset-Backed Securities
Trust 2006-WMC3, Mtg.
Pass-Through Certificates,
Series 2006-WMC3, Cl. A3,
4.965%, 8/25/36 1 1,310,000 1,224,401
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NC Finance Trust, CMO
Pass-Through Certificates,
Series 1999-I, Cl. ECFD, 0.491%,
1/25/29 5,23 66,744 11,346
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Option One Mortgage Loan
Trust, Asset-Backed Certificates,
Series 2006-2, Cl. 2A2, 4.965%, 7/1/36 1 3,480,000 3,388,701
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Popular ABS Mortgage
Pass-Through Trust 2005-6,
Mtg. Pass-Through Certificates,
Series 2005-6, Cl. A3, 5.68%,
1/25/36 1 400,000 396,584
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RAMP Series 2006-RS4 Trust,
Mtg. Asset-Backed Pass-Through
Certificates, Series 2006-RS4,
Cl. A1, 4.945%, 7/25/36 1 248,487 244,049
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RASC Series 2006-KS7 Trust:
Home Equity Mtg. Asset-Backed
Pass-Through Certificates, Series
2006-KS7, Cl. A1, 4.839%, 9/25/36 1 4,384,639 4,346,791
Home Equity Mtg. Asset-Backed
Pass-Through Certificates, Series
2006-KS7, Cl. A2, 4.965%, 9/25/36 1 1,070,000 1,046,629
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Specialty Underwriting &
Residential Finance Trust, Home
Equity Asset-Backed Obligations:
Series 2005-BC3, Cl. A2B, 5.115%,
6/25/36 1 1,160,650 1,157,253
Series 2006-BC1, Cl. A2B, 5.015%,
12/25/36 1 1,000,000 976,190
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Start CLO Ltd., Asset-Backed
Credit Linked Securities, Series
2006-3A, Cl. F, 22.151%, 6/7/11 1,5 950,000 921,500
PRINCIPAL
AMOUNT VALUE
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ASSET-BACKED SECURITIES Continued
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Structured Asset Investment Loan
Trust, Mtg. Pass-Through
Certificates, Series 2006-2,
Cl. A1, 4.925%, 4/25/36 1 $ 480,683 $ 477,494
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Structured Asset Securities Corp.,
Mtg. Pass-Through Certificates,
Series 2005-4XS, Cl. 3A1, 5.18%,
3/26/35 80,382 80,472
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Taganka Car Loan Finance plc,
Automobile Asset-Backed
Certificates, Series 2006-1A, Cl. C,
8.403%, 11/14/13 1,5 655,000 635,350
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Wells Fargo Home Equity
Asset-Backed Securities 2006-2
Trust, Home Equity Asset-Backed
Certificates, Series 2006-2,
Cl. A2, 4.965%, 7/25/36 1 1,000,000 974,609
--------------
Total Asset-Backed Securities
(Cost $66,277,199) 62,050,841
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MORTGAGE-BACKED OBLIGATIONS--23.8%
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GOVERNMENT AGENCY--20.4%
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FHLMC/FNMA/SPONSORED--20.1%
Federal Home Loan Mortgage
Corp.:
4.50%, 12/15/18-7/15/19 3,915,554 3,851,111
5%, 9/15/33 3,410,742 3,333,484
5.50%, 5/1/34 18,132,981 18,119,666
6%, 5/15/18-3/15/33 6,008,530 6,132,913
6.50%, 3/15/18-6/15/35 6,921,810 7,165,013
7%, 3/15/31-10/15/31 474,170 497,646
7.50%, 4/25/36 1,511,976 1,618,898
11%, 11/15/14 5,213 5,361
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Federal Home Loan Mortgage
Corp., CMO Gtd. Multiclass Mtg.
Participation Certificates:
Series 1897, Cl. K, 7%, 9/15/26 3,350,903 3,482,392
Series 2410, Cl. PF, 6.008%,
2/15/32 1,6 3,444,225 3,524,717
Series 2453, Cl. BD, 6%, 5/15/17 297,779 307,731
Series 2736, Cl. DB, 3.30%, 11/15/26 3,786,130 3,721,012
Series 2934, Cl. NA, 5%, 4/15/24 1,243,918 1,246,020
Series 3105, Cl. BD, 5.50%, 1/15/26 1,500,000 1,528,128
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage
Corp., Gtd. Real Estate Mtg.
Investment Conduit Multiclass
Pass-Through Certificates:
Series 1360, Cl.PZ, 7.50%, 9/15/22 1,827,597 1,946,488
Series 151, Cl. F, 9%, 5/15/21 45,590 45,513
Series 1674, Cl. Z, 6.75%, 2/15/24 1,362,650 1,440,276
Series 2002-66, Cl. FG, 5.865%,
9/25/32 1 2,454,154 2,479,324
8 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal Home Loan Mortgage
Corp., Gtd. Real Estate Mtg.
Investment Conduit Multiclass
Pass-Through Certificates: Continued
Series 2002-84, Cl. FB, 5.865%,
12/25/32 1 $ 2,454,086 $ 2,476,826
Series 2003-11, Cl. FA, 5.865%,
9/25/32 1 2,449,476 2,473,857
Series 2006-11, Cl. PS, 6.728%,
3/25/36 1 798,894 886,752
Series 2043, Cl. ZP, 6.50%, 4/15/28 963,079 1,000,864
Series 2055, Cl. ZM, 6.50%, 5/15/28 169,255 175,013
Series 2080, Cl. Z, 6.50%, 8/15/28 108,608 113,311
Series 2106, Cl. FG, 5.478%,
12/15/28 1 2,403,135 2,408,800
Series 2116, Cl. ZA, 6%, 1/15/29 1,084,396 1,115,723
Series 2122, Cl. F, 5.478%, 2/15/29 1 78,490 78,409
Series 2135, Cl. OH, 6.50%, 3/15/29 1,384,836 1,452,797
Series 2148, Cl. ZA, 6%, 4/15/29 2,340,338 2,386,424
Series 2173, Cl. Z, 6.50%, 7/15/29 825,135 866,642
Series 2195, Cl. LH, 6.50%, 10/15/29 1,004,637 1,040,819
Series 2326, Cl. ZP, 6.50%, 6/15/31 173,354 181,532
Series 2344, Cl. FP, 5.978%, 8/15/31 1 727,916 735,659
Series 2351, Cl. PZ, 6.50%, 8/15/31 1,191,048 1,233,236
Series 2368, Cl. PR, 6.50%, 10/15/31 698,475 731,844
Series 2412, Cl. GF, 5.978%, 2/15/32 1 1,698,579 1,733,304
Series 2435, Cl. EQ, 6%, 5/15/31 1,716,232 1,741,406
Series 2449, Cl. FL, 5.578%, 1/15/32 1 960,373 970,056
Series 2451, Cl. FD, 6.028%, 3/15/32 1 529,650 540,529
Series 2461, Cl. PZ, 6.50%, 6/15/32 1,656,911 1,731,869
Series 2464, Cl. FI, 6.028%, 2/15/32 1 550,636 559,372
Series 2470, Cl. AF, 6.028%, 3/15/32 1 909,066 931,470
Series 2470, Cl. LF, 6.028%, 2/15/32 1 563,496 573,952
Series 2471, Cl. FD, 6.028%, 3/15/32 1 1,014,720 1,033,099
Series 2477, Cl. FZ, 5.578%, 6/15/31 1 2,083,661 2,104,514
Series 2500, Cl. FD, 5.528%, 3/15/32 1 52,579 52,637
Series 2517, Cl. GF, 6.028%, 2/15/32 1 489,931 498,998
Series 2526, Cl. FE, 5.428%, 6/15/29 1 77,865 77,672
Series 2551, Cl. FD, 5.428%, 1/15/33 1 60,277 60,545
Series 2641, Cl. CE, 3.50%, 9/15/25 831,138 820,307
Series 2676, Cl. KY, 5%, 9/15/23 3,843,000 3,738,002
Series 2691, Cl. MG, 4.50%,
10/15/33 6,806,400 6,211,687
Series 2727, Cl. UA, 3.50%,
10/15/22 401,673 398,508
Series 2750, Cl. XG, 5%, 2/1/34 6,037,000 5,651,702
Series 2777, Cl. PJ, 4%, 5/15/24 426,882 424,357
Series 2890, Cl. PE, 5%, 11/1/34 6,120,000 5,795,957
Series 2936, Cl. PE, 5%, 2/1/35 4,858,000 4,577,147
Series 2939, Cl. PE, 5%, 2/15/35 1,585,000 1,495,826
Series 3025, Cl. SJ, 6.316%, 8/15/35 1 994,828 1,131,995
Series 3035, Cl. DM, 5.50%, 11/15/25 3,845,567 3,873,492
Series 3094, Cl. HS, 5.949%, 6/15/34 1 551,265 601,410
Series 3138, Cl. PA, 5.50%, 2/15/27 5,395,048 5,459,468
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal Home Loan Mortgage
Corp., Interest-Only Stripped
Mtg.-Backed Security:
Series 177, Cl. IO, 5.715%, 7/1/26 7 $ 199,942 $ 45,072
Series 192, Cl. IO, 8.088%, 2/1/28 7 52,088 12,641
Series 200, Cl. IO, 7.17%, 1/1/29 7 62,955 14,631
Series 2003-13, Cl. IO, 7.995%,
3/25/33 7 1,134,526 255,836
Series 2003-26, Cl. DI, 9.526%,
4/25/33 7 910,588 189,854
Series 205, Cl. IO, 2.72%, 9/1/29 7 268,713 63,288
Series 2074, Cl. S, 3.027%, 7/17/28 7 67,200 7,502
Series 2079, Cl. S, 2.872%, 7/17/28 7 107,625 12,764
Series 208, Cl. IO, (23.489)%,
6/1/30 7 299,601 67,098
Series 2136, Cl. SG, 17.406%,
3/15/29 7 2,887,223 269,438
Series 216, Cl. IO, 9.04%, 12/1/31 7 291,545 70,641
Series 2177, Cl. S, 9.249%, 8/15/29 7 3,192,921 320,533
Series 224, Cl. IO, 5.645%, 3/1/33 7 1,386,272 325,412
Series 2399, Cl. SG, 4.671%,
12/15/26 7 1,754,941 182,378
Series 243, Cl. 6, 15.199%, 12/15/32 7 855,690 180,521
Series 2437, Cl. SB, 11.164%,
4/15/32 7 4,943,263 431,875
Series 2526, Cl. SE, (1.023)%,
6/15/29 7 145,574 9,805
Series 2802, Cl. AS, 5.232%,
4/15/33 7 1,440,437 97,235
Series 2920, Cl. S, (4.89)%, 1/15/35 7 1,178,170 83,785
Series 2989, Cl. TS, 7.582%,
6/15/25 7 26,213,014 2,082,299
Series 3000, Cl. SE, 10.658%,
7/15/25 7 1,370,253 73,498
Series 3110, Cl. SL, 24.356%,
2/15/26 7 759,958 38,838
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage
Corp., Principal-Only Stripped
Mtg.-Backed Security, Series 192,
Cl. PO, 7.631%, 2/1/28 8 52,088 41,194
- --------------------------------------------------------------------------------
Federal National Mortgage Assn.:
4.50%, 5/25/18-8/25/20 38,644,965 38,029,961
4.50%, 6/25/18 6 3,193,606 3,143,261
5%, 12/25/17-8/25/34 113,983,701 112,437,137
5%, 4/25/18 9 14,586,660 14,625,410
5%, 1/1/37 10 22,028,000 21,494,504
5.296%, 10/1/36 27,859,280 28,062,766
5.50%, 4/25/21-11/1/34 132,360,401 132,554,294
5.50%, 12/25/32 6 40,664,385 40,743,145
5.50%, 1/1/22 10 1,870,000 1,894,252
6%, 10/25/16-4/1/35 35,025,385 35,729,959
6%, 4/25/33-12/25/33 6 7,288,654 7,417,275
6%, 1/1/22-1/1/37 10 41,372,000 42,147,335
6.50%, 4/25/17-1/25/34 8,212,149 8,514,987
6.50%, 3/25/17 6 6,718,058 6,951,707
7%, 11/25/17-4/1/37 8,567,955 9,016,141
7.50%, 2/25/27-3/25/33 5,345,471 5,719,345
8.50%, 7/25/32 7,123 7,673
9 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal National Mortgage Assn.,
Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates:
Trust 1999-54, Cl. LH, 6.50%,
11/25/29 $ 1,031,008 $ 1,083,497
Trust 2001-44, Cl. QC, 6%, 9/25/16 2,148,988 2,223,914
Trust 2001-50, Cl. NE, 6%, 8/25/30 1,720 1,714
Trust 2001-51, Cl. OD, 6.50%,
10/25/31 531,508 553,157
Trust 2001-69, Cl. PF, 5.865%,
12/25/31 1 1,231,655 1,249,315
Trust 2001-70, Cl. LR, 6%, 9/25/30 36,954 37,074
Trust 2001-74, Cl. QE, 6%, 12/25/31 6,387,073 6,538,414
Trust 2001-80, Cl. ZB, 6%, 1/25/32 1,345,646 1,382,555
Trust 2001-82, Cl. ZA, 6.50%,
1/25/32 496,209 506,697
Trust 2002-12, Cl. PG, 6%, 3/25/17 907,718 939,316
Trust 2002-29, Cl. F, 5.865%,
4/25/32 1 601,123 616,328
Trust 2002-56, Cl. KW, 6%, 4/25/23 3,980,000 4,039,764
Trust 2002-60, Cl. FH, 5.865%,
8/25/32 1 1,240,665 1,269,667
Trust 2002-64, Cl. FJ, 5.865%,
4/25/32 1 185,105 188,233
Trust 2002-68, Cl. FH, 5.496%,
10/18/32 1 420,393 424,621
Trust 2002-9, Cl. PC, 6%, 3/25/17 947,757 980,760
Trust 2002-9, Cl. PR, 6%, 3/25/17 1,160,484 1,200,894
Trust 2002-90, Cl. FH, 5.365%,
9/25/32 1 1,373,068 1,379,892
Trust 2003-116, Cl. FA, 5.265%,
11/25/33 1 151,491 151,223
Trust 2003-130, Cl. CS, 4.37%,
12/25/33 1 3,185,820 3,012,526
Trust 2003-17, Cl. EQ, 5.50%,
3/25/23 1,452,000 1,466,691
Trust 2003-23, Cl. EQ, 5.50%,
4/25/23 2,883,000 2,888,300
Trust 2003-81, Cl. NB, 4.50%,
11/25/14 3,160,000 3,163,947
Trust 2003-81, Cl. PW, 4%, 3/25/25 954,713 947,178
Trust 2003-84, Cl. AJ, 3%, 4/25/13 856,502 849,346
Trust 2003-84, Cl. GC, 4.50%,
5/25/15 3,790,000 3,794,147
Trust 2003-84, Cl. PW, 3%, 6/25/22 1,364,963 1,356,194
Trust 2004-101, Cl. BG, 5%, 1/25/20 630,000 632,094
Trust 2004-52, Cl. JR, 4.50%,
7/25/24 1,742,816 1,735,733
Trust 2005-100, Cl. BQ, 5.50%,
11/25/25 520,000 522,394
Trust 2005-109, Cl. AH, 5.50%,
12/25/25 2,160,000 2,140,776
Trust 2005-31, Cl. PB, 5.50%,
4/25/35 560,000 555,522
Trust 2005-59, Cl. NQ, 4.713%,
5/25/35 1 1,172,488 1,172,642
Trust 2005-71, Cl. DB, 4.50%, 8/25/25 480,000 455,110
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal National Mortgage Assn.,
Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates: Continued
Trust 2006-29, Cl. PA, 5.50%, 8/25/26 $ 6,927,999 $ 6,971,058
Trust 2006-44, Cl. OA, 5.50%,
12/25/26 1,868,404 1,888,355
Trust 2006-46, Cl. SW, 6.362%,
6/25/36 1 1,365,695 1,498,585
Trust 2006-50, Cl. KS, 6.362%,
6/25/36 1 588,947 626,882
Trust 2006-50, Cl. SA, 6.362%,
6/25/36 1 401,672 428,117
Trust 2006-50, Cl. SK, 6.362%,
6/25/36 1 1,455,916 1,548,778
Trust 2006-57, Cl. PA, 5.50%,
8/25/27 2,096,662 2,118,829
- --------------------------------------------------------------------------------
Federal National Mortgage Assn.,
Interest-Only Stripped Mtg.-Backed
Security:
Trust 2001-61, Cl. SH, 11.44%,
11/18/31 7 685,439 64,112
Trust 2001-63, Cl. SD, 4.86%,
12/18/31 7 157,542 21,127
Trust 2001-68, Cl. SC, 3.745%,
11/25/31 7 108,373 11,235
Trust 2001-81, Cl. S, 3.713%, 1/25/32 7 126,886 13,666
Trust 2002-28, Cl. SA, 3.632%,
4/25/32 7 74,838 9,352
Trust 2002-38, Cl. IO, (0.994)%,
4/25/32 7 360,573 37,915
Trust 2002-48, Cl. S, 3.808%, 7/25/32 7 120,333 12,956
Trust 2002-52, Cl. SL, 3.84%, 9/25/32 7 75,201 8,204
Trust 2002-56, Cl. SN, 4.913%,
7/25/32 7 165,353 17,774
Trust 2002-77, Cl. IS, 2.732%,
12/18/32 7 614,309 103,085
Trust 2002-77, Cl. SH, 5.015%,
12/18/32 7 166,269 16,395
Trust 2002-9, Cl. MS, 3.676%,
3/25/32 7 159,424 17,231
Trust 2003-118, Cl. S, 9.431%,
12/25/33 7 1,355,271 232,945
Trust 2003-33, Cl. SP, 9.135%,
5/25/33 7 1,105,350 143,501
Trust 2003-4, Cl. S, 12.143%,
2/25/33 7 337,828 41,207
Trust 2005-105, Cl. S, 17.377%,
12/25/35 7 3,267,094 240,561
Trust 2005-40, Cl. SA, 0.806%,
5/25/35 7 3,278,639 225,604
Trust 2005-40, Cl. SB, 9.918%,
5/25/35 7 5,308,554 264,701
Trust 2005-63, Cl. SA, 14.891%,
10/25/31 7 262,465 18,702
Trust 2005-71, Cl. SA, 8.893%,
8/25/25 7 868,776 67,594
Trust 2005-83, Cl. SL, 11.659%,
10/25/35 7 4,767,886 348,679
10 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal National Mortgage Assn.,
Interest-Only Stripped Mtg.-Backed
Security: Continued
Trust 2005-85, Cl. SA, 15.956%,
10/25/35 7 $ 13,062,432 $ 834,635
Trust 2005-87, Cl. SE, 14.517%,
10/25/35 7 12,653,811 882,759
Trust 2005-87, Cl. SG, 14.11%,
10/25/35 7 3,396,825 318,288
Trust 2006-119, Cl. MS, 22.861%,
12/25/36 7 2,596,784 196,368
Trust 2006-33, Cl. SP, 15.444%,
5/25/36 7 3,064,185 283,018
Trust 2006-34, Cl. SK, 14.651%,
5/25/36 7 5,535,716 507,769
Trust 2006-90, Cl. SX, 28.943%,
9/25/36 7 3,237,033 315,929
Trust 214, Cl. 2, 19.694%, 3/1/23 7 825,814 187,839
Trust 221, Cl. 2, 15.321%, 5/1/23 7 90,408 20,835
Trust 240, Cl. 2, 21.863%, 9/1/23 7 172,958 39,769
Trust 254, Cl. 2, 8.533%, 1/1/24 7 1,396,260 345,328
Trust 2682, Cl. TQ, 12.29%,
10/15/33 7 1,233,362 94,630
Trust 2981, Cl. BS, 12.367%,
5/15/35 7 2,297,723 171,744
Trust 301, Cl. 2, 5.644%, 4/1/29 7 376,694 84,666
Trust 313, Cl. 2, (13.534)%, 6/1/31 7 397,339 95,781
Trust 319, Cl. 2, 11.094%, 2/1/32 7 121,617 28,252
Trust 321, Cl. 2, 10.866%, 4/1/32 7 541,214 125,446
Trust 324, Cl. 2, 5.303%, 7/1/32 7 945,698 216,814
Trust 331, Cl. 5, 15.576%, 2/1/33 7 2,082,987 456,659
Trust 334, Cl. 12, 11.497%, 2/1/33 7 1,771,803 386,832
Trust 334, Cl. 5, 13.838%, 5/1/33 7 1,212,475 281,620
Trust 339, Cl. 7, 9.7%, 7/1/33 7 8,417,624 1,989,212
Trust 342, Cl. 2, 7.216%, 9/1/33 7 1,806,438 422,951
Trust 344, Cl. 2, 5.331%, 12/1/33 7 5,983,299 1,371,933
Trust 345, Cl. 9, 8.864%, 1/1/34 7 2,107,825 501,506
Trust 351, Cl. 9, 8.812%, 10/1/34 7 18,786,237 4,474,857
Trust 362, Cl. 12, 9.38%, 8/1/35 7 1,292,067 299,079
Trust 362, Cl. 13, 9.362%, 8/1/35 7 770,952 177,042
- --------------------------------------------------------------------------------
Federal National Mortgage Assn.,
Principal-Only Stripped
Mtg.-Backed Security, Trust 324,
Cl. 1, 6.135%, 7/1/32 8 236,148 193,578
----------------
727,720,696
- --------------------------------------------------------------------------------
GNMA/GUARANTEED--0.3%
Government National Mortgage
Assn.:
6.125%, 12/9/25 1 8,054 8,161
7%, 3/29/28-7/29/28 407,290 432,352
7.50%, 3/1/27 33,321 35,594
8%, 11/29/25-5/29/26 105,408 114,001
- --------------------------------------------------------------------------------
Government National Mortgage
Assn., CMO, Series 2001-62, Cl.
KZ, 6.50%, 12/16/31 2,748,721 2,884,185
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
GNMA/GUARANTEED Continued
Government National Mortgage
Assn., Gtd. Real Estate Mtg.
Investment Conduit Pass-Through
Certificates, Series 2000-12, Cl.
ZA, 8%, 2/16/30 $ 4,010,627 $ 4,304,698
- --------------------------------------------------------------------------------
Government National Mortgage
Assn., Gtd. Real Estate Mtg.
Investment ConduitPass-Through
Certificates, Series 1999-32,
Cl. ZB, 8%, 9/16/29 1,703,594 1,826,745
- --------------------------------------------------------------------------------
Government National Mortgage
Assn., Interest-Only Stripped
Mtg.-Backed Security:
Series 1998-19, Cl. SB, 5.833%,
7/16/28 7 217,194 23,465
Series 1998-6, Cl. SA, 8.843%,
3/16/28 7 134,101 15,077
Series 2001-21, Cl. SB, 8.455%,
1/16/27 7 1,018,600 102,509
Series 2006-47, Cl. SA, 31.192%,
8/16/36 7 2,021,498 159,412
----------------
9,906,199
- --------------------------------------------------------------------------------
NON-AGENCY--3.4%
- --------------------------------------------------------------------------------
COMMERCIAL--2.4%
Banc of America Commercial
Mortgage, Inc., Commercial Mtg.
Pass-Through Certificates:
Series 2005-3, Cl. A2, 4.501%,
7/10/43 690,000 681,936
Series 2006-5, Cl. A2, 5.348%,
10/10/11 3,160,000 3,173,529
- --------------------------------------------------------------------------------
Banc of America Funding Corp.,
CMO Pass-Through Certificates,
Series 2004-2, Cl. 2A1, 6.50%,
7/20/32 392,308 398,990
- --------------------------------------------------------------------------------
Banc of America Mortgage
Securities, Inc., CMO
Pass-Through Certificates,
Series 2004-8, Cl. 5A1, 6.50%,
5/25/32 333,078 339,464
- --------------------------------------------------------------------------------
ChaseFlex Trust 2006-2, Multiclass
Mtg. Pass-Through Certificates,
Series 2006-2, Cl. A1B, 4.965%,
8/25/08 1 346,499 346,181
- --------------------------------------------------------------------------------
Citigroup Mortgage Loan Trust,
Inc. 2006-WF1, Asset-Backed
Pass-Through Certificates, Series
2006-WF1, Cl. A2B, 5.536%, 3/1/36 260,000 259,945
- --------------------------------------------------------------------------------
Citigroup/Deutsche Bank 2007-
CD4 Commercial Mortgage Trust,
Commercial Mtg. Pass-Through
Certificates, Series 2007-CD4, Cl.
A2B, 5.205%, 12/11/49 7,030,000 7,028,890
11 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
COMMERCIAL Continued
CitiMortgage Alternative Loan
Trust 2006-A5, Real Estate
Mtg. Investment Conduit Pass-
Through Certificates, Series
2006-A5, Cl. 1A13, 5.315%,
10/25/36 1 $ 2,730,457 $ 2,669,775
- --------------------------------------------------------------------------------
Countrywide Alternative Loan
Trust, Mtg. Pass-Through
Certificates, Series 2007-8CB,
Cl. A1, 5.50%, 5/25/37 5,794,347 5,696,721
- --------------------------------------------------------------------------------
Countrywide Asset-Backed
Certificates, Inc., Home Equity
Asset-Backed Certificates, Series
2006-8, Cl. 2A1, 4.895%, 1/25/46 1 2,264,994 2,236,406
- --------------------------------------------------------------------------------
Deutsche Alt-A Securities Mortgage
Loan Trust, Mtg. Pass-Through
Certificates:
Series 2006-AB1, Cl. A2A, 5.50%,
2/25/36 1,013,487 1,009,970
Series 2006-AB2, Cl. A1, 5.888%,
6/25/36 1,935,324 1,932,321
Series 2006-AB2, Cl. A7, 5.961%,
6/25/36 630,109 629,997
Series 2006-AB3, Cl. A7, 6.36%,
7/1/36 213,601 213,777
Series 2006-AB4, Cl. A1A, 6.005%,
10/25/36 2,671,704 2,671,563
- --------------------------------------------------------------------------------
DLJ Commercial Mortgage Corp.,
Commercial Mtg. Pass-Through
Certificates, Series 1998-CF2, Cl.
A1B, 6.24%, 11/12/31 1,432,788 1,440,132
- --------------------------------------------------------------------------------
First Horizon Alternative Mortgage
Securities Trust 2007-FA2, Mtg.
Pass-Through Certificates, Series
2007-FA2, Cl. 1A1, 5.50%, 4/25/37 1,390,455 1,373,568
- --------------------------------------------------------------------------------
First Union National Bank/Lehman
Brothers/Bank of America
Commercial Mtg. Trust, Pass-
Through Certificates, Series
1998-C2, Cl. A2, 6.56%, 11/18/35 2,179,345 2,177,854
- --------------------------------------------------------------------------------
GE Capital Commercial Mortgage
Corp., Commercial Mtg.
Obligations:
Series 2004-C3,
Cl. A2, 4.433%, 7/10/39 390,000 388,645
Series 2005-C3, Cl. A2, 4.853%,
7/10/45 430,000 428,517
- --------------------------------------------------------------------------------
GMAC Commercial Mortgage
Securities, Inc., Commercial Mtg.
Pass-Through Certificates, Series
1998-C1, Cl. F, 7.035%, 5/15/30 1 1,567,000 1,579,536
- --------------------------------------------------------------------------------
Greenwich Capital Commercial
Funding Corp., Commercial Mtg.
Pass-Through Certificates:
Series 2005-GG3, Cl. A2, 4.305%,
8/10/42 500,000 494,032
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
COMMERCIAL Continued
Greenwich Capital Commercial
Funding Corp., Commercial Mtg.
Pass-Through Certificates:
Continued
Series 2005-GG5, Cl. A2, 5.117%,
4/10/37 $ 1,725,000 $ 1,729,088
Series 2007-GG9, Cl. A2, 5.381%,
3/10/39 1,990,000 2,002,312
- --------------------------------------------------------------------------------
GS Mortgage Securities Corp. II,
Commercial Mtg. Obligations,
Series 2006-GG8, Cl. A2, 5.479%,
11/10/39 1 1,702,000 1,720,358
- --------------------------------------------------------------------------------
GSR Mortgage Loan Trust
2005-4F, CMO, Series 2005-4F,
Cl. 6A1, 6.50%,
2/25/35 3,542,476 3,585,133
- --------------------------------------------------------------------------------
JPMorgan Chase Commercial
Mortgage Securities Corp.,
Commercial Mtg. Pass-Through
Certificates:
Series 2005-LDP2, Cl. A2, 4.575%,
7/15/42 160,000 158,361
Series 2005-LDP4, Cl. A2, 4.79%,
10/15/42 2,225,000 2,211,492
Series 2007-LD12, Cl. A2, 5.827%,
2/15/51 5,682,000 5,803,218
Series 2007-LDPX, Cl. A2S, 5.305%,
1/15/49 2,380,000 2,383,469
- --------------------------------------------------------------------------------
JPMorgan Chase Commercial
Mortgage Securities Trust
2007-LDP11, Commercial Mtg.
Pass-Through Certificates, Series
2007-LD11, Cl. A2, 5.992%, 6/15/49 1 3,640,000 3,724,344
- --------------------------------------------------------------------------------
LB-UBS Commercial Mortgage
Trust, Commercial Mtg. Pass-
Through Certificates:
Series 2005-C5, Cl. A2, 4.885%,
9/15/30 520,000 519,222
Series 2007-C1, Cl. A2, 5.318%,
1/15/12 2,210,000 2,220,717
- --------------------------------------------------------------------------------
Mastr Alternative Loan Trust,
CMO Pass-Through Certificates:
Series 2004-6, Cl. 10A1, 6%,
7/25/34 460,306 455,885
Series 2004-9, Cl. A3, 4.70%,
8/25/34 1 10,575 10,538
- --------------------------------------------------------------------------------
Mastr Asset Securitization Trust
2006-3, Mtg. Pass-Through
Certificates, Series 2006-3, Cl.
2A1, 5.239%, 10/25/36 1 7,194,448 7,088,464
- --------------------------------------------------------------------------------
Nomura Asset Securities Corp.,
Commercial Mtg. Pass-Through
Certificates, Series 1998-D6, Cl.
A1B, 6.59%, 3/15/30 3,911,361 3,920,718
12 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
COMMERCIAL Continued
Prudential Mortgage Capital
Co. II LLC, Commercial Mtg.
Pass-Through Certificates, Series
PRU-HTG 2000-C1, Cl. A2, 7.306%,
10/6/15 $ 556,000 $ 589,618
- --------------------------------------------------------------------------------
RALI Series 2007-QS6 Trust, Mtg.
Asset-Backed Pass-Through
Certificates, Series 2007-QS6,
Cl. A114, 5.75%, 4/25/37 1,873,693 1,852,150
- --------------------------------------------------------------------------------
Residential Asset Securitization
Trust 2006-A9CB, CMO Pass-
Through Certificates, Series
2006-A9CB, Cl. A5, 6%, 9/25/36 1,284,485 1,282,116
- --------------------------------------------------------------------------------
Wachovia Bank Commercial
Mortgage Trust 2005-C17,
Commercial Mtg. Pass-Through
Certificates, Series 2005-C17, Cl.
A2, 4.782%, 3/15/42 820,000 816,480
- --------------------------------------------------------------------------------
Wachovia Bank Commercial
Mortgage Trust 2006-C29,
Commercial Mtg. Pass-Through
Certificates, Series 2006-C29,
Cl. A2, 5.272%, 11/15/48 2,997,000 3,004,013
- --------------------------------------------------------------------------------
WaMu, Mtg. Pass-Through
Certificates, Series 2003-AR9,
Cl. 2A, 4.047%, 9/25/33 1 2,391,428 2,377,706
- --------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed
Securities 2004-V Trust, Mtg.
Pass-Through Certificates, Series
2004-V, Cl. 1A1, 3.836%, 10/1/34 1 4,631,134 4,583,915
----------------
89,211,066
- --------------------------------------------------------------------------------
MULTIFAMILY--0.3%
Banc of America Mortgage
Securities, Inc., CMO Pass-Through
Certificates, Series 2003-E, Cl. 2A2,
4.35%, 6/25/33 1 3,832,415 3,818,571
- --------------------------------------------------------------------------------
Countrywide Home Loans
Servicing LP, Mtg. Pass-Through
Certificates, Series 2003-46, Cl.
1A2, 4.122%, 1/19/34 1 6,185,721 6,261,472
- --------------------------------------------------------------------------------
WaMu, Mtg. Pass-Through
Certificates, Series 2005-AR8,
Cl. 2AB1, 5.115%, 7/25/45 1 14,641 14,609
----------------
10,094,652
- --------------------------------------------------------------------------------
OTHER--0.1%
JPMorgan Mortgage Trust, CMO
Pass-Through Certificates, Series
2005-S2, Cl. 3A1, 6.756%, 2/25/32 1 1,835,823 1,866,473
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
RESIDENTIAL--0.6%
Countrywide Alternative Loan
Trust, CMO, Series 2005-J1, Cl.
3A1, 6.50%, 8/25/32 $ 6,047,888 $ 6,179,387
- --------------------------------------------------------------------------------
RALI Series 2006-QS13 Trust:
Mtg. Asset-Backed Pass-Through
Certificates, Series 2006-QS13, Cl.
1A5, 6%, 9/25/36 4,329,729 4,341,768
Mtg. Asset-Backed Pass-Through
Certificates, Series 2006-QS13, Cl.
1A8, 6%, 9/25/36 1,094,376 1,093,913
- --------------------------------------------------------------------------------
RALI Series 2006-QS5 Trust, Mtg.
Asset-Backed Pass-Through
Certificates, Series 2006-QS5,
Cl. 2A2, 6%, 4/25/08 706,958 706,169
- --------------------------------------------------------------------------------
RALI Series 2007-QS6 Trust, Mtg.
Asset-Backed Pass-Through
Certificates, Series 2007-QS6, Cl.
A28, 5.75%, 4/25/37 1,765,074 1,748,992
- --------------------------------------------------------------------------------
Washington Mutual Mortgage
Loan Trust, Mtg. Pass-Through
Certificates, 2007-A, Cl. 1A8, 6%,
2/25/37 5,510,492 5,527,578
- --------------------------------------------------------------------------------
Wells Fargo Mortgage Backed
Securities 2006-12 Trust, Mtg. Pass-
Through Certificates, Series
2006-12, Cl. A1, 6%, 10/25/36 2,372,638 2,398,492
----------------
21,996,299
----------------
Total Mortgage-Backed
Obligations (Cost $846,593,739) 860,795,385
- --------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--5.4%
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage
Corp. Unsec. Nts.:
5.208%, 2/4/08 11 10,880,000 10,839,156
3.375%, 4/15/09 12 38,125,000 37,939,331
4.625%, 10/25/12 13 20,570,000 21,204,153
5.25%, 5/21/09 13 37,250,000 38,029,456
- --------------------------------------------------------------------------------
Federal National Mortgage Assn.
Nts., Series 1, 4.75%, 11/19/12 13 22,690,000 23,506,590
- --------------------------------------------------------------------------------
Federal National Mortgage Assn.
Unsec. Nts., 3.875%, 12/10/09 9 50,485,000 50,796,694
- --------------------------------------------------------------------------------
Resolution Funding Corp. Bonds,
Residual Funding STRIPS, 5.155%,
1/15/21 11,13 5,667,000 3,082,672
- --------------------------------------------------------------------------------
U.S. Treasury Bills, 3.619%, 2/7/08 13,14 6,185,000 6,162,213
- --------------------------------------------------------------------------------
U.S. Treasury Bonds:
STRIPS, 4.201%, 2/15/11 6,11,13 900,000 814,820
STRIPS, 4.808%, 2/15/16 6,11,13 4,491,000 3,224,700
----------------
Total U.S. Government Obligations
(Cost $192,233,903) 195,599,785
13 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS--23.8%
- --------------------------------------------------------------------------------
ARGENTINA--0.5%
Argentina (Republic of) Bonds:
5.374%, 8/3/12 1 $ 4,755,000 $ 4,187,405
7%, 10/3/15 1,270,000 1,051,560
Series GDP, 0.971%, 12/15/35 1 8,600,000 993,300
Series V, 7%, 3/28/11 6,312,000 5,820,804
Series VII, 7%, 9/12/13 6,265,000 5,448,114
- --------------------------------------------------------------------------------
Neuquen (Province Del) Sr. Sec.
Nts., 8.656%, 10/18/14 2 1,810,000 1,819,050
----------------
19,320,233
- --------------------------------------------------------------------------------
AUSTRALIA--0.9%
New South Wales Treasury Corp.
Sr. Unsec. Nts., 6%, 10/1/09 [AUD] 34,985,000 30,093,996
- --------------------------------------------------------------------------------
Queensland Treasury Corp. Unsec.
Nts., Series 09G, 6%, 7/14/09 [AUD] 1,905,000 1,642,992
----------------
31,736,988
- --------------------------------------------------------------------------------
AUSTRIA--0.2%
Austria (Republic of) Unsec. Unsub.
Nts., Series E, 4%, 9/15/16 [EUR] 5,067,000 7,198,779
- --------------------------------------------------------------------------------
BELGIUM--0.7%
Belgium (Kingdom of) Bonds,
Series 44, 5%, 3/28/35 [EUR] 4,720,000 7,141,316
- --------------------------------------------------------------------------------
Belgium (Kingdom of) Treasury
Bills, 4.03%, 9/18/08 11 [EUR] 12,220,000 17,329,554
----------------
24,470,870
- --------------------------------------------------------------------------------
BRAZIL--1.3%
Brazil (Federal Republic of) Bonds:
6%, 1/17/17 9,480,000 9,655,380
8%, 1/15/18 13,660,000 15,319,690
8.75%, 2/4/25 2,950,000 3,746,500
8.875%, 10/14/19 9,085,000 11,265,400
10.50%, 7/14/14 6,288,000 8,017,200
- --------------------------------------------------------------------------------
Brazil (Federal Republic of) Nts.,
7.875%, 3/7/15 130,000 147,095
----------------
48,151,265
- --------------------------------------------------------------------------------
BULGARIA--0.0%
Bulgaria (Republic of) Bonds:
8.25%, 1/15/15 740,000 863,950
8.25%, 1/15/15 2 710,000 828,925
----------------
1,692,875
- --------------------------------------------------------------------------------
CANADA--0.9%
Canada (Government of) Nts.:
3.75%, 6/1/12 [CAD] 17,150,000 17,175,885
4.25%, 12/1/09 [CAD] 16,790,000 17,051,531
----------------
34,227,416
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
COLOMBIA--0.7%
Bogota Distrio Capital Sr. Bonds,
9.75%, 7/26/28 2 [COP] 3,058,000,000 $ 1,443,458
- --------------------------------------------------------------------------------
Colombia (Republic of) Bonds:
7.375%, 9/18/37 3,805,000 4,242,575
10.75%, 1/15/13 3,900,000 4,806,750
12%, 10/22/15 [COP] 17,234,000,000 9,501,331
- --------------------------------------------------------------------------------
Colombia (Republic of) Nts.,
8.25%, 12/22/14 1,713,000 1,961,385
- --------------------------------------------------------------------------------
EEB International Ltd., Sr. Unsec.
Bonds, 8.75%, 10/31/14 5 3,330,000 3,417,413
----------------
25,372,912
- --------------------------------------------------------------------------------
COSTA RICA--0.1%
Costa Rica (Republic of) Unsec.
Bonds, 9.995%, 8/1/20 1,498,000 1,953,954
- --------------------------------------------------------------------------------
DENMARK--0.2%
Denmark (Kingdom of) Bonds:
4%, 11/15/10 [DKK] 9,445,000 1,835,968
4%, 11/15/15 [DKK] 6,880,000 1,312,725
7%, 11/10/24 [DKK] 2,495,000 623,408
- --------------------------------------------------------------------------------
Denmark (Kingdom of) Nts., 4%,
8/15/08 [DKK] 9,965,000 1,952,506
----------------
5,724,607
- --------------------------------------------------------------------------------
DOMINICAN REPUBLIC--0.1%
Dominican Republic Unsec.
Unsub. Bonds, Series REG S,
9.04%, 1/23/18 1,721,439 1,958,136
- --------------------------------------------------------------------------------
Dominican Republic Unsec.
Unsub. Nts., 9.50%, 9/27/11 5 351,312 374,147
----------------
2,332,283
- --------------------------------------------------------------------------------
EGYPT--0.1%
Egypt (The Arab Republic of)
Unsec. Unsub. Bonds, 8.75%,
7/15/12 2 [EGP] 10,100,000 1,868,984
- --------------------------------------------------------------------------------
EL SALVADOR--0.2%
El Salvador (Republic of) Bonds:
7.625%, 9/21/34 2 590,000 687,350
7.65%, 6/15/35 2 4,570,000 5,289,775
----------------
5,977,125
- --------------------------------------------------------------------------------
FRANCE--1.5%
France (Government of)
Obligations Assimilables du
Tresor Bonds:
3.25%, 4/25/16 [EUR] 17,910,000 24,163,828
4%, 10/25/38 [EUR] 15,430,000 20,105,932
- --------------------------------------------------------------------------------
France (Government of) Treasury
Bills, 3.935%, 1/17/08 11 [EUR] 6,470,000 9,429,084
----------------
53,698,844
14 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
GERMANY--2.5%
Germany (Federal Republic of)
Bonds:
Series 03, 3.75%, 7/4/13 [EUR] 10,520,000 $ 15,023,063
Series 05, 4%, 1/4/37 [EUR] 18,635,000 24,638,199
Series 07, 4.25%, 7/4/17 [EUR] 1,900,000 2,761,237
- --------------------------------------------------------------------------------
Germany (Federal Republic of)
Treasury Bills, Series 0707, 4.064%,
1/16/08 11 [EUR] 33,415,000 48,703,354
----------------
91,125,853
- --------------------------------------------------------------------------------
GHANA--0.1%
Ghana (Republic of) Bonds, 8.50%,
10/4/17 5 3,500,000 3,701,250
- --------------------------------------------------------------------------------
GREECE--0.4%
Greece (Republic of) Bonds, 4.60%,
5/20/13 [EUR] 10,965,000 16,189,137
- --------------------------------------------------------------------------------
GUATEMALA--0.1%
Guatemala (Republic of) Nts.:
10.25%, 11/8/11 2 250,000 289,375
10.25%, 11/8/11 1,660,000 1,921,450
----------------
2,210,825
- --------------------------------------------------------------------------------
INDONESIA--0.4%
Indonesia (Republic of) Nts.:
6.75%, 3/10/14 2 7,620,000 7,896,225
7.25%, 4/20/15 2 4,870,000 5,162,200
- --------------------------------------------------------------------------------
Indonesia (Republic of) Unsec.
Nts., 8.50%, 10/12/35 2 2,430,000 2,846,138
----------------
15,904,563
- --------------------------------------------------------------------------------
ISRAEL--0.2%
Israel (State of) Bonds, Series
2682, 7.50%, 3/31/14 [ILS] 25,080,000 6,983,440
- --------------------------------------------------------------------------------
ITALY--1.4%
Italy (Republic of) Nts., Certificati
di Credito del Tesoro, 4.40%,
7/1/09 1 [EUR] 34,505,000 50,496,020
- --------------------------------------------------------------------------------
JAPAN--2.2%
Japan (Government of) Bonds:
2 yr., Series 252, 0.80%, 1/15/09 [JPY] 3,495,000,000 31,402,045
10 yr., Series 245, 0.90%, 12/20/12 [JPY] 1,631,000,000 14,527,949
10 yr., Series 288, 1.70%, 9/20/17 [JPY] 1,441,000,000 13,178,032
30 yr., Series 25, 2.30%, 12/20/36
[JPY] 2,348,000,000 20,807,398
----------------
79,915,424
- --------------------------------------------------------------------------------
MALAYSIA--0.1%
Johor Corp. Malaysia
(Government of) Bonds, Series
P3, 1%, 7/31/12 5 [MYR] 7,980,000 2,833,207
- --------------------------------------------------------------------------------
Malaysia (Government of)
Bonds, Series 2/05, 4.72%, 9/30/15
[MYR] 8,950,000 2,824,192
----------------
5,657,399
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
MEXICO--1.5%
Mexican Cetes Treasury Bills:
Series BI, 7.764%, 8/28/08 11 [MXN] 70,300,000 $ 6,126,193
Series BI, 7.734%, 10/23/08 11 [MXN] 141,950,000 12,232,680
- --------------------------------------------------------------------------------
United Mexican States Bonds:
Series M7, 8%, 12/24/08 1 [MXN] 320,890,000 29,466,058
Series M20, 10%, 12/5/24 1 [MXN] 45,000,000 4,808,213
----------------
52,633,144
- --------------------------------------------------------------------------------
NIGERIA--0.5%
Nigeria (Federal Republic of)
Bonds, Series 5Y, 13.50%, 9/11/11
[NGN] 184,190,000 1,593,501
- --------------------------------------------------------------------------------
Nigeria (Federal Republic of) Nts.,
Series 3Y2S, 12.50%, 2/24/09 [NGN] 60,500,000 536,238
- --------------------------------------------------------------------------------
Nigeria (Federal Republic of)
Promissory Nts., Series RC, 5.092%,
1/5/10 108,201 94,148
- --------------------------------------------------------------------------------
Nigeria (Federal Republic of)
Treasury Bonds:
Series 3Y, 9.23%, 5/25/12 [NGN] 346,000,000 2,867,193
Series 5Y, 9.50%, 8/31/12 [NGN] 623,000,000 5,257,718
Series 5Y13, 12.99%, 9/29/11 [NGN] 142,800,000 1,383,186
Series 7Y16, 11.99%, 12/22/13
[NGN] 236,500,000 2,146,353
Series 7YR, 12.74%, 10/27/13 [NGN] 317,100,000 2,971,972
----------------
16,850,309
- --------------------------------------------------------------------------------
PANAMA--0.5%
Panama (Republic of) Bonds:
6.70%, 1/26/36 8,540,000 9,052,400
7.25%, 3/15/15 5,855,000 6,484,413
8.875%, 9/30/27 1,375,000 1,790,938
9.375%, 4/1/29 655,000 898,988
----------------
18,226,739
- --------------------------------------------------------------------------------
PERU--1.1%
Peru (Republic of) Bonds:
7.84%, 8/12/20 [PEN] 28,080,000 10,500,496
9.91%, 5/5/15 [PEN] 8,101,000 3,274,575
Series 7, 8.60%, 8/12/17 [PEN] 22,570,000 8,718,698
Series 8-1, 12.25%, 8/10/11 [PEN] 46,095,000 18,421,241
- --------------------------------------------------------------------------------
Peru (Republic of) Sr. Nts.,
4.533%, 2/28/16 11 379,181 241,698
----------------
41,156,708
- --------------------------------------------------------------------------------
PHILIPPINES--0.4%
Philippines (Republic of the) Unsec. Bonds:
7.75%, 1/14/31 5,762,000 6,676,718
9%, 2/15/13 7,625,000 8,721,094
----------------
15,397,812
15 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
POLAND--0.2%
Poland (Republic of) Bonds:
Series DS1013, 5%, 10/24/13 [PLZ] 20,240,000 $ 7,801,042
Series WS0922, 5.75%, 9/23/22
[PLZ] 1,000,000 401,057
----------------
8,202,099
- --------------------------------------------------------------------------------
SPAIN--0.6%
Spain (Government of) Bonds,
3.80%, 1/31/17 [EUR] 3,385,000 4,719,843
- --------------------------------------------------------------------------------
Spain (Government of) Treasury
Bills, 4.001%, 3/20/08 11 [EUR] 12,855,000 18,616,843
----------------
23,336,686
- --------------------------------------------------------------------------------
THE NETHERLANDS--0.3%
Netherlands (Kingdom of the)
Bonds, 5%, 7/15/11 [EUR] 6,850,000 10,280,506
- --------------------------------------------------------------------------------
TURKEY--2.0%
Turkey (Republic of) Bonds:
6.75%, 4/3/18 15,635,000 16,115,776
7%, 9/26/16 9,710,000 10,316,875
- --------------------------------------------------------------------------------
Turkey (Republic of) Nts.:
7.25%, 3/15/15 7,285,000 7,831,375
16%, 3/7/12 1 [TRY] 37,395,000 31,835,292
18.163%, 8/13/08 11 [TRY] 6,630,000 5,161,759
----------------
71,261,077
- --------------------------------------------------------------------------------
UNITED KINGDOM--1.4%
United Kingdom Treasury Bonds:
5.75%, 12/7/09 15,16 [GBP] 13,885,000 28,283,060
6%, 12/7/28 [GBP] 8,760,000 20,997,349
----------------
49,280,409
- --------------------------------------------------------------------------------
URUGUAY--0.5%
Uruguay (Oriental Republic of)
Bonds:
4.25%, 4/5/27 [UYU] 48,300,000 2,341,026
7.625%, 3/21/36 3,525,000 3,859,875
- --------------------------------------------------------------------------------
Uruguay (Oriental Republic of)
Unsec. Bonds:
5%, 9/14/18 [UYU] 54,110,000 2,980,321
8%, 11/18/22 7,030,000 7,908,750
----------------
17,089,972
----------------
Total Foreign Government
Obligations
(Cost $820,957,303) 859,626,507
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
LOAN PARTICIPATIONS--0.1%
- --------------------------------------------------------------------------------
Credit Suisse First Boston
International, Export-Import
Bank of Ukraine Loan
Participation Nts., 8.40%, 2/9/16 $ 1,740,000 $ 1,692,150
- --------------------------------------------------------------------------------
Dali Capital plc/Bank of Moscow
Loan Participation Nts., Series 28,
Tranche 1, 7.25%, 11/25/09 [RUR] 37,000,000 1,529,113
- --------------------------------------------------------------------------------
Dali Capital SA (ROSBANK)
Loan Participation Nts., Series 23,
Tranche 1, 8%, 9/30/09 [RUR] 36,400,000 1,465,592
----------------
Total Loan Participations
(Cost $4,464,342) 4,686,855
- --------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES--15.3%
- --------------------------------------------------------------------------------
AAC Group Holding Corp.,
0%/10.25% Sr. Unsec. Disc. Nts.,
10/1/12 17 100,000 86,500
- --------------------------------------------------------------------------------
Ace Cash Express, Inc., 10.25%
Sr. Nts., 10/1/14 5 250,000 242,500
- --------------------------------------------------------------------------------
AES Corp. (The), 8.75% Sr. Sec.
Nts., 5/15/13 2 1,309,000 1,372,814
- --------------------------------------------------------------------------------
AES Dominicana Energia Finance
SA, 11% Sr. Nts., 12/13/15 2 2,758,000 2,758,000
- --------------------------------------------------------------------------------
AES Panama SA, 6.35% Sr. Nts.,
12/21/16 2 1,100,000 1,087,240
- --------------------------------------------------------------------------------
AES Red Oak LLC, 8.54% Sr. Sec.
Bonds, Series A, 11/30/19 248,382 267,011
- --------------------------------------------------------------------------------
African Development Bank,
9.25% Bonds, 1/18/08 [NGN] 218,200,000 2,015,620
- --------------------------------------------------------------------------------
Albertson's, Inc., 8% Sr. Unsec.
Debs., 5/1/31 2,558,000 2,607,809
- --------------------------------------------------------------------------------
Allbritton Communications Co.,
7.75% Sr. Unsec. Sub. Nts., 12/15/12 1,100,000 1,094,500
- --------------------------------------------------------------------------------
Alliant Techsystems, Inc., 6.75%
Sr. Sub. Nts., 4/1/16 1,335,000 1,341,675
- --------------------------------------------------------------------------------
Allied Waste North America, Inc.,
7.375% Sr. Sec. Nts., Series B,
4/15/14 1,300,000 1,303,250
- --------------------------------------------------------------------------------
Alrosa Finance SA, 8.875% Nts.,
11/17/14 2 13,025,000 14,034,438
- --------------------------------------------------------------------------------
AmBev International Finance Co.
Ltd., 9.50% Bonds, 7/24/17 2 [BRR] 5,050,000 2,417,629
- --------------------------------------------------------------------------------
AMC Entertainment, Inc., 8% Sr.
Unsec. Sub. Nts., 3/1/14 760,000 718,200
- --------------------------------------------------------------------------------
America Movil SAB de CV, 8.46%
Sr. Unsec. Unsub. Bonds, 12/18/36
[MXN] 52,700,000 4,564,065
- --------------------------------------------------------------------------------
American Casino &
Entertainment Properties LLC,
7.85% Sr. Sec. Nts., 2/1/12 500,000 515,375
16 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES Continued
- --------------------------------------------------------------------------------
American Media Operations,
Inc.:
8.875% Sr. Unsec. Sub. Nts.,
1/15/11 $ 150,000 $ 127,688
10.25% Sr. Unsec. Sub. Nts.,
Series B, 5/1/09 1,250,000 1,070,313
- --------------------------------------------------------------------------------
American Tower Corp.:
7.125% Sr. Unsec. Nts., 10/15/12 555,000 573,038
7.50% Sr. Nts., 5/1/12 2,485,000 2,571,975
- --------------------------------------------------------------------------------
Angiotech Pharmaceuticals, Inc.,
7.75% Sr. Sub. Nts., 4/1/14 325,000 273,813
- --------------------------------------------------------------------------------
Aramark Services, Inc., 8.50% Sr.
Unsec. Nts., 2/1/15 685,000 696,988
- --------------------------------------------------------------------------------
Ashtead Capital, Inc., 9% Nts.,
8/15/16 2 385,000 342,650
- --------------------------------------------------------------------------------
ATA Holdings Corp., 13% Sr.
Unsec. Nts., 2/1/09 3,4,5 735,000 --
- --------------------------------------------------------------------------------
Atlas Pipeline Partners LP, 8.125%
Sr. Unsec. Nts., 12/15/15 290,000 288,550
- --------------------------------------------------------------------------------
Autopistas del Nordeste Cayman
Ltd., 9.39% Nts., 1/15/26 2 4,712,705 4,795,178
- --------------------------------------------------------------------------------
Avis Budget Car Rental LLC:
7.369% Sr. Unsec. Unsub. Nts.,
5/15/14 1 135,000 124,875
7.75% Sr. Unsec. Unsub. Nts.,
5/15/16 335,000 316,575
- --------------------------------------------------------------------------------
BA Covered Bond Issuer, 4.25%
Sec. Nts., 4/5/17 [EUR] 3,545,000 4,948,474
- --------------------------------------------------------------------------------
Ball Corp., 6.625% Sr. Nts., 3/15/18 1,200,000 1,194,000
- --------------------------------------------------------------------------------
Banco Bilbao Vizcaya Argentaria
SA, 4.25% Sec. Bonds, 7/15/14 [EUR] 3,340,000 4,738,676
- --------------------------------------------------------------------------------
Banco BMG SA, 9.15% Nts., 1/15/16 2 3,520,000 3,578,080
- --------------------------------------------------------------------------------
Banco de Credito del Peru, 6.95%
Sub. Nts., 11/7/21 1,2 1,345,000 1,250,850
- --------------------------------------------------------------------------------
Banco Hipotecario SA, 9.75% Sr.
Unsec. Nts., 4/27/16 2 2,605,000 2,442,188
- --------------------------------------------------------------------------------
Banco Invex SA, 25.352% Mtg.
Backed Certificates, Series 062U,
3/13/34 1 [MXN] 5,226,776 1,977,014
- --------------------------------------------------------------------------------
Bank of Scotland plc:
4.375% Sr. Sec. Nts., 7/13/16 [EUR] 15,950,000 22,405,945
4.50% Sr. Sec. Nts., 7/13/21 [EUR] 8,135,000 11,127,347
- --------------------------------------------------------------------------------
Barclays Bank plc, 6.278%
Perpetual Bonds 18 4,940,000 4,307,087
- --------------------------------------------------------------------------------
Bausch & Lomb, Inc., 9.875% Sr.
Unsec. Nts., 11/1/15 2 865,000 880,138
- --------------------------------------------------------------------------------
Belden & Blake Corp., 8.75% Sec.
Nts., 7/15/12 325,000 329,875
- --------------------------------------------------------------------------------
Berry Petroleum Co., 8.25% Sr.
Sub. Nts., 11/1/16 370,000 380,175
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES Continued
- --------------------------------------------------------------------------------
Berry Plastics Holding Corp.,
8.875% Sr. Sec. Nts., 9/15/14 $ 1,830,000 $ 1,747,650
- --------------------------------------------------------------------------------
Bombardier, Inc., 8% Sr. Nts.,
11/15/14 2 400,000 420,000
- --------------------------------------------------------------------------------
C10 Capital SPV Ltd., 6.722%
Unsec. Perpetual Debs. 2,18 4,630,000 4,275,254
- --------------------------------------------------------------------------------
Case New Holland, Inc., 7.125%
Sr. Unsec. Nts., 3/1/14 2,585,000 2,591,463
- --------------------------------------------------------------------------------
CCH I Holdings LLC/CCH I
Holdings Capital Corp., 11% Sr.
Sec. Nts., 10/1/15 1,645,000 1,348,900
- --------------------------------------------------------------------------------
CCM Merger, Inc., 8% Unsec.
Nts., 8/1/13 2 1,040,000 985,400
- --------------------------------------------------------------------------------
CellNet Data Systems, Inc., Sr.
Unsec. Disc. Nts., 10/1/07 3,4,5 400,000 --
- --------------------------------------------------------------------------------
Centex Corp., 5.80% Sr. Unsec.
Nts., 9/15/09 1,250,000 1,151,733
- --------------------------------------------------------------------------------
Cenveo Corp., 7.875% Sr. Sub.
Nts., 12/1/13 1,500,000 1,344,375
- --------------------------------------------------------------------------------
Chesapeake Energy Corp.:
6.375% Sr. Unsec. Nts., 6/15/15 835,000 812,038
6.875% Sr. Unsec. Nts., 1/15/16 2,635,000 2,621,825
- --------------------------------------------------------------------------------
Church & Dwight Co., Inc., 6%
Sr. Unsec. Sub. Nts., 12/15/12 350,000 343,875
- --------------------------------------------------------------------------------
Cinemark, Inc., 0%/9.75% Sr.
Unsec. Disc. Nts., 3/15/14 17 1,500,000 1,404,375
- --------------------------------------------------------------------------------
Citizens Communications Co.,
6.25% Sr. Nts., 1/15/13 4,430,000 4,313,713
- --------------------------------------------------------------------------------
Claire's Stores, Inc., 10.50% Sr.
Sub. Nts., 6/1/17 2 2,290,000 1,236,600
- --------------------------------------------------------------------------------
Cloverie plc, 9.176% Sec. Nts.,
Series 2005-93, 12/20/10 1 1,100,000 1,186,790
- --------------------------------------------------------------------------------
CMS Energy Corp.:
7.75% Sr. Nts., 8/1/10 200,000 210,882
8.50% Sr. Nts., 4/15/11 250,000 270,553
- --------------------------------------------------------------------------------
Compton Petroleum Finance
Corp., 7.625% Sr. Nts., 12/1/13 770,000 719,950
- --------------------------------------------------------------------------------
Constellation Brands, Inc.:
8.125% Sr. Sub. Nts., 1/15/12 1,245,000 1,254,338
8.375% Sr. Nts., 12/15/14 870,000 876,525
- --------------------------------------------------------------------------------
Copano Energy LLC, 8.125% Sr.
Unsec. Nts., 3/1/16 180,000 182,250
- --------------------------------------------------------------------------------
Coriolanus Ltd.:
3.359% Sec. Nts., 12/31/17 5,11 [BRR] 25,700,000 9,973,134
10.62% Sec. Nts., 8/10/10 5 3,300,000 3,146,550
- --------------------------------------------------------------------------------
Corrections Corp. of America:
6.25% Sr. Unsec. Sub. Nts., 3/15/13 460,000 455,400
7.50% Sr. Nts., 5/1/11 200,000 203,500
- --------------------------------------------------------------------------------
Countrywide Financial Corp.,
5.128% Unsec. Unsub. Nts, 5/5/08 1 820,000 749,100
17 | OPPENHEIMER STRATEGIC BOND FUND/VA
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES Continued
- --------------------------------------------------------------------------------
Countrywide Home Loans, Inc.,
3.25% Nts., Series L, 5/21/08 $ 5,750,000 $ 5,196,534
- --------------------------------------------------------------------------------
Crown Americas, Inc., 7.75% Sr.
Nts., 11/15/15 1,900,000 1,966,500
- --------------------------------------------------------------------------------
D.R. Horton, Inc., 9.75% Sr. Sub.
Nts., 9/15/10 400,000 391,914
- --------------------------------------------------------------------------------
DaVita, Inc.:
6.625% Sr. Unsec. Nts., 3/15/13 765,000 765,000
7.25% Sr. Unsec. Sub. Nts., 3/15/15 2,405,000 2,423,038
- --------------------------------------------------------------------------------
Dayton Superior Corp., 13% Sr.
Unsec. Sub. Nts., 6/15/09 5 200,000 187,000
- --------------------------------------------------------------------------------
Del Monte Corp.:
6.75% Sr. Unsec. Sub. Nts., 2/15/15 180,000 171,000
8.625% Sr. Sub. Nts., 12/15/12 400,000 405,000
- --------------------------------------------------------------------------------
Delhaize America, Inc., 9% Unsub.
Debs., 4/15/31 3,799,000 4,411,308
- --------------------------------------------------------------------------------
Depfa ACS Bank, 3.875% Sec. Nts.,
11/14/16 [EUR] 1,110,000 1,527,281
- --------------------------------------------------------------------------------
Dex Media West LLC/Dex Media
West Finance Co.:
8.50% Sr. Nts., 8/15/10 300,000 305,625
9.875% Sr. Sub. Nts., 8/15/13 586,000 610,905
- --------------------------------------------------------------------------------
Dex Media, Inc.:
0%/9% Unsec. Disc. Nts.,
11/15/13 17 300,000 274,500
0%/9% Unsec. Disc. Nts., 11/15/13 17 400,000 366,000
8% Unsec. Nts., 11/15/13 605,000 571,725
- --------------------------------------------------------------------------------
DI Finance/DynCorp International
LLC, 9.50% Sr. Unsec. Sub. Nts.,
Series B, 2/15/13 5 607,000 635,074
- --------------------------------------------------------------------------------
Dillard's, Inc., 6.625% Unsec.
Nts., 11/15/08 5 790,000 789,013
- --------------------------------------------------------------------------------
Dole Food Co., Inc.:
7.25% Sr. Unsec. Nts., 6/15/10 100,000 91,500
8.625% Sr. Nts., 5/1/09 306,000 296,820
8.875% Sr. Unsec. Nts., 3/15/11 71,000 66,030
- --------------------------------------------------------------------------------
Douglas Dynamics LLC, 7.75%
Sr. Nts., 1/15/12 2 700,000 609,000
- --------------------------------------------------------------------------------
DRS Technologies, Inc.:
6.625% Sr. Nts., 2/1/16 970,000 962,725
7.625% Sr. Sub. Nts., 2/1/18 205,000 208,588
- --------------------------------------------------------------------------------
E*TRADE Financial Corp.:
7.375% Sr. Unsec. Nts., 9/15/13 1,146,000 888,150
8% Sr. Nts., 6/15/11 410,000 357,725
- --------------------------------------------------------------------------------
Eastman Kodak Co., 3.625%
Nts., Series A, 5/15/08 385,000 381,150
- --------------------------------------------------------------------------------
EchoStar DBS Corp., 6.375% Sr.
Unsec. Nts., 10/1/11 2,135,000 2,114,718
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES Continued
- --------------------------------------------------------------------------------
Edison Mission Energy:
7% Sr. Unsec. Nts., 5/15/17 $ 3,440,000 $ 3,397,000
7.50% Sr. Unsec. Nts., 6/15/13 360,000 370,800
7.75% Sr. Unsec. Nts., 6/15/16 500,000 517,500
- --------------------------------------------------------------------------------
Education Management
LLC/Education Management
Corp., 10.25% Sr. Unsec. Sub.
Nts., 6/1/16 1,140,000 1,179,900
- --------------------------------------------------------------------------------
Eirles Two Ltd.:
6.482% Sec. Nts., Series 335,
4/30/12 1,5 6,300,000 5,607,000
8.279% Sec. Nts., Series 324,
4/30/12 1,5 4,100,000 3,452,200
- --------------------------------------------------------------------------------
Eletropaulo Metropolitana SA,
19.125% Nts., 6/28/10 2 [BRR] 1,115,000 704,921
- --------------------------------------------------------------------------------
Elizabeth Arden, Inc., 7.75% Sr.
Unsec. Sub. Nts., 1/15/14 1,175,000 1,157,375
- --------------------------------------------------------------------------------
Enterprise Products Operating
LP, 8.375% Jr. Sub. Nts., 8/1/66 1 3,185,000 3,265,889
- --------------------------------------------------------------------------------
Exodus Communications, Inc.,
10.75% Sr. Nts., 12/15/09 3,4,5 [EUR] 338,620 --
- --------------------------------------------------------------------------------
Felcor Lodging LP, 8.50% Sr. Nts.,
6/1/11 1 925,000 968,938
- --------------------------------------------------------------------------------
Fiserv, Inc., 6.125% Sr. Unsec.
Unsub. Nts., 11/20/12 3,015,000 3,067,362
- --------------------------------------------------------------------------------
Forest Oil Corp., 7.75% Sr. Nts.,
5/1/14 300,000 306,000
- --------------------------------------------------------------------------------
Freeport-McMoRan Copper &
Gold, Inc., 8.375% Sr. Nts., 4/1/17 3,510,000 3,773,250
- --------------------------------------------------------------------------------
Freescale Semiconductor, Inc.,
10.125% Sr. Unsec. Sub. Nts.,
12/15/16 2 2,100,000 1,743,000
- --------------------------------------------------------------------------------
Fresenius Medical Care Capital
Trust II, 7.875% Nts., 2/1/08 900,000 902,250
- --------------------------------------------------------------------------------
Fresenius Medical Care Capital
Trust III, 7.375% Nts., 2/1/08 [DEM] 25,000 18,656
- --------------------------------------------------------------------------------
Fresenius Medical Care Capital
Trust IV, 7.875% Trust Preferred
Securities, 6/15/11 315,000 327,600
- --------------------------------------------------------------------------------
Frontier Oil Corp., 6.625% Sr.
Unsec. Nts., 10/1/11 700,000 700,000
- --------------------------------------------------------------------------------
FTI Consulting, Inc., 7.75% Sr.
Unsec. Nts., 10/1/16 535,000 559,075
- --------------------------------------------------------------------------------
Gamestop Corp., 8% Sr. Unsec.
Nts., 10/1/12 300,000 313,875
- --------------------------------------------------------------------------------
Gaylord Entertainment Co., 8%
Sr. Nts., 11/15/13 900,000 900,000
- --------------------------------------------------------------------------------
Gaz Capital (Gazprom), 7.288%
Sr. Unsec. Bonds, 8/16/37 2 14,680,000 14,863,500
- --------------------------------------------------------------------------------
General Motors Acceptance
Corp., 8% Bonds, 11/1/31 1,860,000 1,564,020
18 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES Continued
- --------------------------------------------------------------------------------
Goldman Sachs Capital, Inc.
(The), 6.345% Sub. Bonds, 2/15/34 $ 3,805,000 $ 3,446,710
- --------------------------------------------------------------------------------
Goodman Global Holding Co.,
Inc., 7.875% Sr. Unsec. Sub. Nts.,
12/15/12 2,675,000 2,768,625
- --------------------------------------------------------------------------------
Goodyear Tire & Rubber Co. (The):
7.857% Nts., 8/15/11 1,125,000 1,144,688
9% Sr. Unsec. Nts., 7/1/15 746,000 794,490
- --------------------------------------------------------------------------------
Graham Packaging Co., Inc.,
9.875% Sr. Unsec. Sub. Nts.,
10/15/14 1,235,000 1,142,375
- --------------------------------------------------------------------------------
Graphic Packaging International
Corp.: 8.50% Sr. Nts., 8/15/11 1,115,000 1,109,425
9.50% Sr. Sub. Nts., 8/15/13 595,000 590,538
- --------------------------------------------------------------------------------
Great Lakes Dredge & Dock Co.,
7.75% Sr. Unsec. Sub. Nts., 12/15/13 120,000 112,800
- --------------------------------------------------------------------------------
Greektown Holdings, Inc., 10.75%
Sr. Nts., 12/1/13 2 1,335,000 1,304,963
- --------------------------------------------------------------------------------
Greenbrier Cos., Inc., 8.375% Sr.
Unsec. Nts., 5/15/15 380,000 364,800
- --------------------------------------------------------------------------------
H&E Equipment Services, Inc.,
8.375% Sr. Unsec. Nts., 7/15/16 420,000 390,600
- --------------------------------------------------------------------------------
HBOS plc, 6.413% Sub. Perpetual
Bonds, Series A 2,18 7,200,000 5,875,070
- --------------------------------------------------------------------------------
HCA, Inc., 6.375% Nts., 1/15/15 3,320,000 2,822,000
- --------------------------------------------------------------------------------
HealthSouth Corp., 10.75% Sr.
Unsec. Nts., 6/15/16 1,550,000 1,627,500
- --------------------------------------------------------------------------------
Helix Energy Solutions Group, Inc.,
9.50% Sr. Unsec. Nts., 1/15/16 5 1,225,000 1,246,438
- --------------------------------------------------------------------------------
Hertz Corp.:
8.875% Sr. Unsec. Nts., 1/1/14 610,000 621,438
10.50% Sr. Unsec. Sub. Nts., 1/1/16 1,135,000 1,180,400
- --------------------------------------------------------------------------------
Host Hotels & Resorts LP, 6.875%
Sr. Unsub. Nts., 11/1/14 375,000 375,000
- --------------------------------------------------------------------------------
Host Marriott LP:
6.375% Sr. Nts., Series O, 3/15/15 730,000 715,400
6.75% Sr. Nts., Series Q, 6/1/16 500,000 495,000
- --------------------------------------------------------------------------------
HSBC Bank plc:
11.601% Sr. Unsec. Nts., 1/12/10 11 2,510,000 2,165,427
12.278% Sr. Unsec. Nts., 3/9/09 11 1,960,000 1,864,117
9.751% Sr. Unsec. Nts., 7/8/09 11 1,960,000 1,977,914
- --------------------------------------------------------------------------------
HSBC Finance Capital Trust IX,
5.911% Nts., 11/30/35 1 3,700,000 3,428,794
- --------------------------------------------------------------------------------
Huntsman International LLC:
7.375% Sr. Unsub. Nts., 1/15/15 5 790,000 833,450
7.875% Sr. Unsec. Sub. Nts.,
11/15/14 375,000 399,375
- --------------------------------------------------------------------------------
Huntsman LLC:
11.50% Sr. Unsec. Nts., 7/15/12 1,5 198,000 216,810
11.625% Sr. Unsec. Nts., 10/15/10 5 13,000 13,813
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES Continued
- --------------------------------------------------------------------------------
ICICI Bank Ltd.:
6.375% Bonds, 4/30/22 1,2 $ 6,960,000 $ 6,310,994
6.625% Nts., 10/3/12 2 6,620,000 6,520,038
- --------------------------------------------------------------------------------
Idearc, Inc., 8% Sr. Unsec. Nts.,
11/15/16 1,930,000 1,780,425
- --------------------------------------------------------------------------------
IIRSA Norte Finance Ltd., 8.75%
Sr. Nts., 5/30/24 5 7,988,981 9,087,466
- --------------------------------------------------------------------------------
Inergy LP/Inergy Finance Corp.,
8.25% Sr. Unsec. Nts., 3/1/16 880,000 915,200
- --------------------------------------------------------------------------------
Intelsat Subsidiary Holding Co.
Ltd., 8.25% Sr. Nts., 1/15/13 330,000 333,300
- --------------------------------------------------------------------------------
Inter-American Development Bank:
6.26% Nts., 12/8/09 1 [BRR] 920,000 515,573
9.891% Nts., 1/25/12 1,5 [COP] 795,214,295 466,986
- --------------------------------------------------------------------------------
Interline Brands, Inc., 8.125% Sr.
Sub. Nts., 6/15/14 570,000 567,150
- --------------------------------------------------------------------------------
International Utility Structures,
Inc., 13% Unsec. Sub. Nts.,
2/1/08 3,4,5 71,000 --
- --------------------------------------------------------------------------------
Invista, Inc., 9.25% Sr. Nts., 5/1/12 2 960,000 998,400
- --------------------------------------------------------------------------------
ION Media Networks, Inc., 11%
Sr. Unsec. Sub. Nts., Series A,
7/31/13 766,290 386,976
- --------------------------------------------------------------------------------
iPayment Holdings, Inc., 9.75%
Sr. Unsec. Sub. Nts., 5/15/14 5 415,000 390,100
- --------------------------------------------------------------------------------
Iron Mountain, Inc., 8.625% Sr.
Unsec. Sub. Nts., 4/1/13 1,415,000 1,439,763
- --------------------------------------------------------------------------------
ISA Capital do Brasil SA:
7.875% Sr. Nts., 1/30/12 2 1,130,000 1,155,425
8.80% Sr. Nts., 1/30/17 2 1,410,000 1,455,825
- --------------------------------------------------------------------------------
Isle of Capri Casinos, Inc., 7% Sr.
Unsec. Sub. Nts., 3/1/14 3,085,000 2,545,125
- --------------------------------------------------------------------------------
Ispat Inland ULC, 9.75% Sr. Sec.
Nts., 4/1/14 1,015,000 1,100,038
- --------------------------------------------------------------------------------
JP Morgan Hipotecaria su
Casita, 6.47% Sec. Nts., 8/26/35 5
[MXN] 7,112,700 641,417
- --------------------------------------------------------------------------------
JPMorgan, Red Square Capital
Ltd., 9% CDO Nts., 11/20/08 2 [RUR] 62,000,000 2,397,398
- --------------------------------------------------------------------------------
JPMorgan Hipotecaria su Casita,
20.181% Mtg. Backed Certificates,
Series 06U, 9/25/35 1 [MXN] 4,110,000 1,268,240
- --------------------------------------------------------------------------------
JSC Astana Finance, 9.16% Nts.,
3/14/12 5 7,200,000 6,759,011
- --------------------------------------------------------------------------------
K. Hovnanian Enterprises, Inc.:
7.75% Sr. Unsec. Sub. Nts., 5/15/13 495,000 279,675
8.875% Sr. Sub. Nts., 4/1/12 890,000 511,750
- --------------------------------------------------------------------------------
Kansas City Southern Railway
Co. (The), 7.50% Sr. Nts., 6/15/09 400,000 402,500
- --------------------------------------------------------------------------------
KB Home, 8.625% Sr. Sub. Nts.,
12/15/08 250,000 246,250
19 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES Continued
- --------------------------------------------------------------------------------
Key Energy Services, Inc., 8.375%
Sr. Nts., 12/1/14 2 $ 1,580,000 $ 1,623,450
- --------------------------------------------------------------------------------
Kinder Morgan Energy Partners
LP, 7.30% Sr. Unsec. Nts., 8/15/33 4,327,000 4,617,476
- --------------------------------------------------------------------------------
Koppers Industry, Inc., 9.875% Sr.
Sec. Nts., 10/15/13 510,000 539,325
- --------------------------------------------------------------------------------
L-3 Communications Corp.:
5.875% Sr. Sub. Nts., 1/15/15 583,000 565,510
6.125% Sr. Unsec. Sub. Nts., 1/15/14 400,000 394,000
6.375% Sr. Unsec. Sub. Nts.,
Series B, 10/15/15 515,000 509,850
7.625% Sr. Sub. Nts., 6/15/12 500,000 514,375
- --------------------------------------------------------------------------------
Lamar Media Corp., 6.625% Sr.
Unsec. Sub. Nts., 8/15/15 1,275,000 1,246,313
- --------------------------------------------------------------------------------
Lear Corp., 8.75% Sr. Unsec. Nts.,
Series B, 12/1/16 3,370,000 3,083,550
- --------------------------------------------------------------------------------
Leslie's Poolmart, Inc., 7.75% Sr.
Unsec. Nts., 2/1/13 825,000 787,875
- --------------------------------------------------------------------------------
Levi Strauss & Co., 9.75% Sr. Unsec.
Unsub. Nts., 1/15/15 1,780,000 1,784,450
- --------------------------------------------------------------------------------
Lin Television Corp., 6.50% Sr. Sub.
Nts., 5/15/13 550,000 520,438
- --------------------------------------------------------------------------------
Majapahit Holding BV:
7.25% Nts., 10/17/11 2 1,990,000 1,999,950
7.75% Nts., 10/17/16 2 4,230,000 4,261,725
- --------------------------------------------------------------------------------
Marquee Holdings, Inc., 0%/12%
Sr. Disc. Nts., 8/15/14 17 1,600,000 1,288,000
- --------------------------------------------------------------------------------
Mashantucket Pequot Tribe,
8.50% Bonds, Series A, 11/15/15 2 2,620,000 2,646,200
- --------------------------------------------------------------------------------
Massey Energy Co., 6.625% Sr. Nts.,
11/15/10 300,000 294,750
- --------------------------------------------------------------------------------
MediaNews Group, Inc.:
6.375% Sr. Sub. Nts., 4/1/14 1,300,000 786,500
6.875% Sr. Unsec. Sub. Nts., 10/1/13 700,000 441,000
- --------------------------------------------------------------------------------
MGM Mirage, Inc.:
6.75% Sr. Unsec. Nts., 4/1/13 650,000 633,750
8.375% Sr. Unsec. Sub. Nts., 2/1/11 2,300,000 2,363,250
- --------------------------------------------------------------------------------
MHP SA, 10.25% Sr. Sec. Sub.
Bonds, 11/30/11 2 1,360,000 1,346,400
- --------------------------------------------------------------------------------
Mirant Americas Generation LLC,
9.125% Sr. Unsec. Nts., 5/1/31 150,000 141,000
- --------------------------------------------------------------------------------
Mirant Mid-Atlantic LLC, 8.625%
Sec. Pass-Through Certificates,
Series A, 6/30/12 547,727 575,113
- --------------------------------------------------------------------------------
Mohegan Tribal Gaming Authority:
6.125% Sr. Unsec. Sub. Nts., 2/15/13 505,000 496,163
6.875% Sr. Unsec. Sub. Nts., 2/15/15 515,000 486,675
8% Sr. Sub. Nts., 4/1/12 1,200,000 1,224,000
- --------------------------------------------------------------------------------
Momentive Performance
Materials, Inc., 9.75% Sr. Unsec.
Nts., 12/1/14 2 2,840,000 2,627,000
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES Continued
- --------------------------------------------------------------------------------
Morgan Stanley:
6.25% Sr. Nts., 3/23/17 5 [PEN] 4,885,000 $ 1,523,507
10.09% Sr. Unsec. Nts., 5/3/17 5,6
[BRR] 9,460,000 4,848,550
- --------------------------------------------------------------------------------
Mosaic Global Holdings, Inc.,
7.375% Sr. Nts., 12/1/14 5 830,000 892,250
- --------------------------------------------------------------------------------
National Gas Co., 6.05% Nts.,
1/15/36 2 3,470,000 3,316,112
- --------------------------------------------------------------------------------
National Power Corp.:
5.875% Unsec. Unsub. Bonds,
12/19/16 [PHP] 109,600,000 2,633,481
6.875% Nts., 11/2/16 2 1,474,000 1,501,711
9.625% Unsec. Bonds, 5/15/28 2,550,000 3,091,875
- --------------------------------------------------------------------------------
NCL Corp., 10.625% Sr. Unsub.
Nts., 7/15/14 800,000 799,000
- --------------------------------------------------------------------------------
Nell AF Sarl, 8.375% Sr. Nts.,
8/15/15 2 2,988,000 2,427,750
- --------------------------------------------------------------------------------
Newfield Exploration Co.,
6.625% Sr. Unsec. Sub. Nts., 9/1/14 1,900,000 1,890,500
- --------------------------------------------------------------------------------
NewPage Corp., 10% Sr. Sec. Nts.,
5/1/12 1,665,000 1,681,650
- --------------------------------------------------------------------------------
Nextel Communications, Inc.,
7.375% Sr. Nts., Series D, 8/1/15 10,930,000 10,770,192
- --------------------------------------------------------------------------------
Nielsen Finance LLC, 10% Sr.
Unsec. Nts., 8/1/14 2,195,000 2,255,363
- --------------------------------------------------------------------------------
Nielsen Finance LLC/Nielsen
Finance Co., 0%/12.50% Sr. Unsec.
Sub. Disc. Nts., 8/1/16 17 1,725,000 1,220,438
- --------------------------------------------------------------------------------
Nortek, Inc., 8.50% Sr. Unsec.
Unsub. Nts., 9/1/14 685,000 551,425
- --------------------------------------------------------------------------------
NorthPoint Communications
Group, Inc., 12.875% Nts.,
2/15/10 3,4,5 200,173 --
- --------------------------------------------------------------------------------
NorthWestern Corp., 5.875% Sr.
Sec. Nts., 11/1/14 90,000 88,830
- --------------------------------------------------------------------------------
Novelis, Inc., 7.25% Sr. Unsec. Nts.,
2/15/15 1 1,620,000 1,530,900
- --------------------------------------------------------------------------------
NRG Energy, Inc.:
7.375% Sr. Nts., 1/15/17 1,280,000 1,251,200
7.375% Sr. Nts., 2/1/16 3,000,000 2,932,500
- --------------------------------------------------------------------------------
NTK Holdings, Inc., 0%/10.75%
Sr. Unsec. Nts., 3/1/14 17 1,755,000 1,035,450
- --------------------------------------------------------------------------------
NTL Cable plc, 9.125% Sr. Nts.,
8/15/16 355,000 353,225
- --------------------------------------------------------------------------------
NXP BV/NXP Funding LLC, 9.50%
Sr. Unsec. Unsub. Nts., 10/15/15 1,950,000 1,791,563
- --------------------------------------------------------------------------------
Omnicare, Inc.:
6.75% Sr. Sub. Nts., 12/15/13 230,000 217,350
6.875% Sr. Sub. Nts., 12/15/15 285,000 266,475
- --------------------------------------------------------------------------------
Ongko International Finance Co.
BV, 10.50% Sec. Nts., 3/29/10 3,4,5 90,000 --
20 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES Continued
- --------------------------------------------------------------------------------
Orion Network Systems, Inc.,
12.50% Sr. Unsub. Disc. Nts.,
1/15/07 4,5 $ 675,000 $ 7
- --------------------------------------------------------------------------------
Owens-Brockway Glass Container,
Inc., 8.875% Sr. Sec. Nts., 2/15/09 176,000 176,880
- --------------------------------------------------------------------------------
Oxford Industries, Inc., 8.875% Sr.
Nts., 6/1/11 150,000 150,000
- --------------------------------------------------------------------------------
Pacific Energy Partners LP/Pacific
Energy Finance Corp., 6.25% Sr.
Unsec. Nts., 9/15/15 100,000 100,326
- --------------------------------------------------------------------------------
Panama Canal Railway Co., 7% Sr.
Sec. Nts., 11/1/26 2 3,360,000 3,276,000
- --------------------------------------------------------------------------------
PanAmSat Corp., 9% Sr. Unsec.
Nts., 8/15/14 840,000 848,400
- --------------------------------------------------------------------------------
Park Place Entertainment Corp.,
7.875% Sr. Sub. Nts., 3/15/10 800,000 756,000
- --------------------------------------------------------------------------------
Peabody Energy Corp., 6.875% Sr.
Unsec. Nts., Series B, 3/15/13 3,140,000 3,171,400
- --------------------------------------------------------------------------------
Penn National Gaming, Inc.:
6.75% Sr. Unsec. Sub. Nts., 3/1/15 230,000 234,313
6.875% Sr. Sub. Nts., 12/1/11 500,000 507,500
- --------------------------------------------------------------------------------
Petrobras International Finance
Co., 5.785% Sr. Unsec. Nts., 3/1/18 10,040,000 10,040,000
- --------------------------------------------------------------------------------
Petroleum Export Ltd. Cayman
SPV, 5.265% Sr. Nts., Cl. A3,
6/15/11 2 2,989,177 2,957,369
- --------------------------------------------------------------------------------
PHI, Inc., 7.125% Sr. Unsec. Nts.,
4/15/13 400,000 386,000
- --------------------------------------------------------------------------------
Piazza Vittoria Finance SrL,
6.033% Asset-Backed Nts.,
7/20/10 1 [EUR] 2,631,732 3,837,172
- --------------------------------------------------------------------------------
Pinnacle Entertainment, Inc.,
8.25% Sr. Unsec. Sub. Nts., 3/15/12 1,480,000 1,502,200
- --------------------------------------------------------------------------------
Pinnacle Foods Finance
LLC/Pinnacle Foods Finance
Corp., 10.625% Sr. Sub. Nts., 4/1/17 2 2,090,000 1,807,850
- --------------------------------------------------------------------------------
Pokagon Gaming Authority,
10.375% Sr. Nts., 6/15/14 2 525,000 567,000
- --------------------------------------------------------------------------------
Premcor Refining Group, Inc.,
9.50% Sr. Nts., 2/1/13 835,000 876,498
- --------------------------------------------------------------------------------
Premier Cruise Ltd., 11% Sr. Nts.,
3/15/08 3,4,5 250,000 --
- --------------------------------------------------------------------------------
PSINet, Inc., 10.50% Sr. Unsec.
Nts., 12/1/06 3,4,5 [EUR] 100,000 --
- --------------------------------------------------------------------------------
Psychiatric Solutions, Inc., 7.75%
Sr. Unsec. Sub. Nts., 7/15/15 220,000 220,550
- --------------------------------------------------------------------------------
Quebecor World Capital Corp.,
8.75% Sr. Nts., 3/15/16 2 315,000 233,494
- --------------------------------------------------------------------------------
Quicksilver Resources, Inc.,
7.125% Sr. Sub. Nts., 4/1/16 1,340,000 1,323,250
- --------------------------------------------------------------------------------
Quiksilver, Inc., 6.875% Sr. Unsec.
Nts., 4/15/15 610,000 526,125
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES Continued
- --------------------------------------------------------------------------------
Qwest Corp., 8.875% Unsec.
Unsub. Nts., 3/15/12 $ 3,790,000 $ 4,074,250
- --------------------------------------------------------------------------------
R.H. Donnelley Corp.:
6.875% Sr. Disc. Nts., Series A-1,
1/15/13 2,730,000 2,457,000
6.875% Sr. Disc. Nts., Series A-2,
1/15/13 1,865,000 1,678,500
6.875% Sr. Nts., 1/15/13 1,300,000 1,170,000
8.875% Sr. Unsec. Nts., Series A-3,
1/15/16 405,000 380,700
- --------------------------------------------------------------------------------
Radio One, Inc., 8.875% Sr.
Unsec. Sub. Nts., Series B, 7/1/11 600,000 563,250
- --------------------------------------------------------------------------------
Rainbow National Services LLC,
8.75% Sr. Nts., 9/1/12 2 670,000 692,613
- --------------------------------------------------------------------------------
Range Resources Corp.:
6.375% Sr. Sub. Nts., 3/15/15 430,000 421,400
7.375% Sr. Sub. Nts., 7/15/13 200,000 204,000
7.50% Sr. Sub. Nts., 5/15/16 1,505,000 1,542,625
- --------------------------------------------------------------------------------
RBS Global & Rexnord Corp.,
11.75% Sr. Unsec. Sub. Nts., 8/1/16 1,285,000 1,262,513
- --------------------------------------------------------------------------------
ReAble Therapeutics Finance
LLC, 10.875% Sr. Unsec. Nts.,
11/15/14 2 1,365,000 1,344,525
- --------------------------------------------------------------------------------
Real Time Data Co., 11% Disc.
Nts., 5/31/09 4,5,19 142,981 --
- --------------------------------------------------------------------------------
Reliant Energy, Inc., 6.75% Sr. Sec.
Nts., 12/15/14 410,000 413,075
- --------------------------------------------------------------------------------
Rent-A-Center, Inc., 7.50% Sr.
Unsec. Sub. Nts., Series B, 5/1/10 550,000 515,625
- --------------------------------------------------------------------------------
Reynolds American, Inc., 7.25%
Sr. Sec. Nts., 6/1/13 1,805,000 1,918,235
- --------------------------------------------------------------------------------
Rite Aid Corp., 8.125% Sr. Sec.
Nts., 5/1/10 450,000 443,250
- --------------------------------------------------------------------------------
Rural Cellular Corp., 9.875% Sr.
Nts., 2/1/10 5 1,400,000 1,459,500
- --------------------------------------------------------------------------------
Sabine Pass LNG LP:
7.25% Sr. Sec. Nts., 11/30/13 1,335,000 1,281,600
7.50% Sr. Sec. Nts., 11/30/16 2,770,000 2,659,200
- --------------------------------------------------------------------------------
Salisbury International Investments
Ltd., 9.33% Sec. Nts., Series
2006-003, Tranche E, 7/20/11 1 1,100,000 1,115,950
- --------------------------------------------------------------------------------
Sally Holdings LLC:
9.25% Sr. Unsec. Nts., 11/15/14 1,531,000 1,523,345
10.50% Sr. Unsec. Sub. Nts.,
11/15/16 936,000 926,640
- --------------------------------------------------------------------------------
Select Medical Corp., 7.625%
Sr. Unsec. Sub. Nts., 2/1/15 1,865,000 1,603,900
- --------------------------------------------------------------------------------
SGS International, Inc., 12% Sr.
Unsec. Sub. Nts., 12/15/13 5 170,000 169,363
- --------------------------------------------------------------------------------
Shaw Communications, Inc.,
8.54% Debs., 9/30/27 [CAD] 340,000 356,596
- --------------------------------------------------------------------------------
Sierra Pacific Resources, 6.75%
Sr. Unsec. Nts., 8/15/17 1,777,000 1,806,482
21 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES Continued
- --------------------------------------------------------------------------------
Sinclair Broadcast Group, Inc.,
8% Sr. Unsec. Sub. Nts., 3/15/12 $ 1,267,000 $ 1,297,091
- --------------------------------------------------------------------------------
SLM Corp., 4.50% Nts., Series A,
7/26/10 3,445,000 3,161,604
- --------------------------------------------------------------------------------
Smithfield Foods, Inc., 7.625% Sr.
Unsec. Sub. Nts., 2/15/08 400,000 401,000
- --------------------------------------------------------------------------------
Standard Pacific Corp., 9.25% Sr.
Sub. Nts., 4/15/12 120,000 58,200
- --------------------------------------------------------------------------------
Station Casinos, Inc.:
6.50% Sr. Unsec. Sub. Nts., 2/1/14 2,203,000 1,663,265
6.875% Sr. Unsec. Sub. Nts., 3/1/16 235,000 172,725
- --------------------------------------------------------------------------------
Stena AB:
7% Sr. Unsec. Nts., 12/1/16 5 150,000 144,938
7.50% Sr. Unsec. Nts., 11/1/13 387,000 383,614
- --------------------------------------------------------------------------------
Stone Energy Corp., 6.75% Sr.
Unsec. Sub. Nts., 12/15/14 1,020,000 951,150
- --------------------------------------------------------------------------------
Stoneridge, Inc., 11.50% Sr. Nts.,
5/1/12 1,200,000 1,242,000
- --------------------------------------------------------------------------------
Targa Resources, Inc., 8.50% Sr.
Nts., 11/1/13 2 525,000 509,250
- --------------------------------------------------------------------------------
Telefonica del Peru SA, 8% Sr.
Unsec. Bonds, 4/11/16 2 [PEN] 3,290,100 1,182,483
- --------------------------------------------------------------------------------
Teligent, Inc., 11.50% Sr. Nts.,
12/1/08 3,4,5 500,000 --
- --------------------------------------------------------------------------------
Tengizchevroil LLP, 6.124% Nts.,
11/15/14 2 2,123,000 2,011,543
- --------------------------------------------------------------------------------
Tenneco Automotive, Inc., 10.25%
Sr. Sec. Nts., Series B, 7/15/13 343,000 367,010
- --------------------------------------------------------------------------------
Tesoro Corp.:
6.25% Sr. Unsec. Nts., 11/1/12 405,000 407,025
6.625% Sr. Unsec. Nts., 11/1/15 905,000 900,475
- --------------------------------------------------------------------------------
TGI International Ltd., 9.50% Nts.,
10/3/17 2 6,100,000 6,405,000
- --------------------------------------------------------------------------------
Tiers-BSP, 0%/8.60% Collateralized
Trust, Cl. A, 6/15/97 17 2,695,000 1,307,428
- --------------------------------------------------------------------------------
Toll Corp., 8.25% Sr. Sub. Nts.,
12/1/11 490,000 470,400
- --------------------------------------------------------------------------------
Travelport LLC, 11.875% Sr.
Unsec. Sub. Nts., 9/1/16 1,000,000 1,071,250
- --------------------------------------------------------------------------------
TriMas Corp., 9.875% Sr. Unsec.
Sub. Nts., 6/15/12 1,002,000 981,960
- --------------------------------------------------------------------------------
Trinity Industries, Inc., 6.50% Sr.
Nts., 3/15/14 300,000 296,250
- --------------------------------------------------------------------------------
Trump Entertainment Resorts,
Inc., 8.50% Sec. Nts., 6/1/15 3,100,000 2,375,375
- --------------------------------------------------------------------------------
UCAR Finance, Inc., 10.25% Sr.
Nts., 2/15/12 137,000 141,966
- --------------------------------------------------------------------------------
United Rentals North America,
Inc., 6.50% Sr. Unsec. Nts., 2/15/12 100,000 91,250
- --------------------------------------------------------------------------------
United Rentals, Inc., 7% Sr. Sub.
Nts., 2/15/14 4,000,000 3,370,000
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES Continued
- --------------------------------------------------------------------------------
Universal City Development
Partners Ltd., 11.75% Sr. Nts.,
4/1/10 $ 500,000 $ 518,750
- --------------------------------------------------------------------------------
Universal City Florida:
8.375% Sr. Unsec. Nts., 5/1/10 130,000 131,300
9.661% Sr. Unsec. Nts., 5/1/10 1 130,000 130,650
- --------------------------------------------------------------------------------
US Oncology, Inc.:
9% Sr. Unsec. Nts., 8/15/12 300,000 297,375
10.75% Sr. Unsec. Sub. Nts.,
8/15/14 300,000 297,750
- --------------------------------------------------------------------------------
Vail Resorts, Inc., 6.75% Sr. Sub.
Nts., 2/15/14 5 1,100,000 1,089,000
- --------------------------------------------------------------------------------
Valeant Pharmaceuticals
International, Inc., 7% Sr. Nts.,
12/15/11 350,000 338,188
- --------------------------------------------------------------------------------
Vanguard Health Holding Co. I
LLC, 0%/11.25% Sr. Disc. Nts.,
10/1/15 17 2,540,000 1,892,300
- --------------------------------------------------------------------------------
Ventas Realty LP/Ventas Capital
Corp., 6.75% Sr. Nts., 4/1/17 450,000 447,750
- --------------------------------------------------------------------------------
Verso Paper Holdings LLC, 8.66
1% Sr. Sec. Nts., Series B, 8/1/14 1 305,000 298,900
- --------------------------------------------------------------------------------
Vertis, Inc.:
9.75% Sr. Sec. Nts., 4/1/09 700,000 647,500
10.875% Sr. Unsec. Nts., Series B,
6/15/09 800,000 491,000
- --------------------------------------------------------------------------------
Vitro SAB de CV:
8.625% Sr. Unsec. Unsub. Nts., 2/1/12 1,415,000 1,337,175
9.125% Sr. Unsec. Unsub. Nts., 2/1/17 2,405,000 2,224,625
- --------------------------------------------------------------------------------
Warner Music Group Corp.,
7.375% Sr. Sub. Bonds, 4/15/14 500,000 387,500
- --------------------------------------------------------------------------------
West Corp.:
9.50% Sr. Unsec. Nts., 10/15/14 1,080,000 1,063,800
11% Sr. Unsec. Sub. Nts., 10/15/16 470,000 468,825
- --------------------------------------------------------------------------------
Whiting Petroleum Corp.,
7.25% Sr. Sub. Nts., 5/1/12 1,500,000 1,485,000
- --------------------------------------------------------------------------------
William Lyon Homes, Inc.:
7.50% Sr. Unsec. Nts., 2/15/14 160,000 96,800
10.75% Sr. Nts., 4/1/13 1,140,000 689,700
- --------------------------------------------------------------------------------
Williams Cos., Inc., 8.125% Sr.
Unsec. Nts., 3/15/12 2,370,000 2,592,188
- --------------------------------------------------------------------------------
Windstream Corp.:
8.125% Sr. Unsec. Unsub. Nts., 8/1/13 2,290,000 2,381,600
8.625% Sr. Unsec. Unsub. Nts., 8/1/16 1,450,000 1,529,750
- --------------------------------------------------------------------------------
Winstar Communications, Inc.,
12.75% Sr. Nts., 4/15/10 3,4,5 250,000 --
- --------------------------------------------------------------------------------
WM Covered Bond Program:
3.875% Sec. Nts., Series1,
9/27/11 [EUR] 9,915,000 13,787,842
4% Sec. Mtg. Nts., Series 2,
9/27/16 [EUR] 9,690,000 12,837,127
22 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES Continued
- --------------------------------------------------------------------------------
WMG Holdings Corp., 0%/9.50%
Sr. Disc. Nts., 12/15/14 17 $ 2,057,000 $ 1,326,765
- --------------------------------------------------------------------------------
Wynn Las Vegas LLC/Wynn Las
Vegas Capital Corp., 6.625% Nts.,
12/1/14 3,125,000 3,085,938
----------------
Total Corporate Bonds
and Notes (Cost $559,354,530) 550,522,416
SHARES
- --------------------------------------------------------------------------------
PREFERRED STOCKS--0.1%
- --------------------------------------------------------------------------------
AmeriKing, Inc., 13% Cum. Sr.
Exchangeable, Non-Vtg. 3,5,19 4,253 --
- --------------------------------------------------------------------------------
Eagle-Picher Holdings, Inc.,
11.75% Cum. Exchangeable,
Series B, Non-Vtg. 3,5 5,000 --
- --------------------------------------------------------------------------------
Federal National Mortgage Assn.,
8.25% Non-Cum. Sub., Series S,
Non Vtg. 3 141,680 3,648,260
- --------------------------------------------------------------------------------
ICG Holdings, Inc., 14.25%
Exchangeable, Non-Vtg. 3,5,19 151 --
- --------------------------------------------------------------------------------
ION Media Networks, Inc.:
12% Cum., Series B, Non-Vtg. 3 20 119,064
14.25% Cum. Jr. Exchangeable,
Non-Vtg. 3,5,19 1 5,414
9.75% Cv., Series AI 3,5,19 1 5,371
- --------------------------------------------------------------------------------
Sovereign Real Estate
Investment Trust, 12%
Non-Cum., Series A 2 4,600 601,450
----------------
Total Preferred Stocks (Cost $4,616,971) 4,379,559
- --------------------------------------------------------------------------------
COMMON STOCKS--0.9%
- --------------------------------------------------------------------------------
Arco Capital Corp. Ltd. 3,5 690,638 10,359,570
- --------------------------------------------------------------------------------
AT&T, Inc. 86,358 3,589,038
- --------------------------------------------------------------------------------
Comcast Corp., Cl. A 3 253,387 4,626,847
- --------------------------------------------------------------------------------
Constellation Energy Group, Inc. 36,866 3,779,871
- --------------------------------------------------------------------------------
Global Aero Logistics, Inc. 3,5 2,168 16,260
- --------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The) 3,157 678,913
- --------------------------------------------------------------------------------
Mediacom Communications
Corp. 3 345,431 1,585,528
- --------------------------------------------------------------------------------
Premier Holdings Ltd. 3,5 18,514 --
- --------------------------------------------------------------------------------
Public Service Enterprise Group,
Inc. 36,386 3,574,561
- --------------------------------------------------------------------------------
Revlon, Inc., Cl. A 3 1,374,658 1,622,096
- --------------------------------------------------------------------------------
Telus Corp. 56,816 2,826,507
- --------------------------------------------------------------------------------
Telus Corp., Non-Vtg. 144 6,957
----------------
Total Common Stocks (Cost $33,395,177) 32,666,148
UNITS VALUE
- --------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- --------------------------------------------------------------------------------
Global Aero Logistics, Inc. Wts.,
Exp. 2/28/11 3 266 $ 353
- --------------------------------------------------------------------------------
Long Distance International, Inc.
Wts., Exp. 4/13/08 3,5 200 --
----------------
Total Rights, Warrants
and Certificates (Cost $2,025) 353
PRINCIPAL
AMOUNT
- --------------------------------------------------------------------------------
STRUCTURED SECURITIES--9.0%
- --------------------------------------------------------------------------------
Aiolos Ltd. Catastrophe Linked
Nts., 9.525%, 4/8/09 1,2 [EUR] 800,000 1,178,546
- --------------------------------------------------------------------------------
Akibare Ltd. Catastrophe Linked
Nts., Cl. A, 7.965%, 5/22/12 1,2 738,000 747,779
- --------------------------------------------------------------------------------
Calabash Re Ltd. Catastrophe
Linked Nts., Cl. A-1, 13.53%,
6/1/09 1,2 1,750,000 1,830,150
- --------------------------------------------------------------------------------
Cascadia Ltd. Catastrophe
Linked Nts.:
8.271%, 6/13/08 1,2 500,000 500,875
9.081%, 8/31/09 1,5 1,130,000 1,143,786
- --------------------------------------------------------------------------------
Cat-Mex Ltd. Catastrophe
Linked Nts., Cl. A, 7.229%,
5/19/09 1,2 1,950,000 1,924,163
- --------------------------------------------------------------------------------
Champlain Ltd. Catastrophe
Linked Nts., Series A, 17.993%,
1/7/09 1,2 940,000 953,818
- --------------------------------------------------------------------------------
Citigroup Global Markets
Holdings, Inc.:
Argentina (Republic of) Credit
Linked Nts., 11.673%, 5/22/08 1,14
[ARP] 660,000 600,129
Argentina (Republic of) Credit
Linked Nts., 11.265%, 5/18/09 1,5
[ARP] 1,334,000 1,144,788
Argentina (Republic of) Unsec.
Credit Linked Nts., 9.423%,
4/16/10 1,5,14 [ARP] 2,139,098 1,806,324
Brazil (Federal Republic of)
Credit Linked Nts., 10%, 1/5/10 1
[BRR] 10,670,000 5,687,949
Brazil (Federal Republic of) Unsec.
Credit Linked Nts., 10%, 1/5/10 [BRR] 2,927,000 1,638,498
Brazil (Federal Republic of) Unsec.
Credit Linked Nts., 10%, 1/5/10 [BRR] 4,619,000 2,585,658
Brazil (Federal Republic of) Unsec.
Credit Linked Nts., 14.809%,
1/5/10 11 [BRR] 2,480,096 1,093,716
Brazil (Federal Republic of) Unsec.
Credit Linked Nts., 15.427%,
1/2/09 11 [BRR] 2,231,957 1,120,543
Colombia (Republic of) Credit
Linked Bonds, 11%, 7/27/20 [COP] 1,060,000,000 549,480
23 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
STRUCTURED SECURITIES Continued
- --------------------------------------------------------------------------------
Citigroup Global Markets
Holdings, Inc.: Continued
Colombia (Republic of)
Credit Linked Nts., Series II, 15%,
4/27/12 [COP] 552,359,546 $ 316,569
Colombia (Republic of)
Unsec. Credit Linked Nts., 15%,
4/27/12 [COP] 1,200,000,000 687,746
Colombia (Republic of) Unsec.
Credit Linked Nts., 15%, 4/27/12
[COP] 1,034,000,000 592,608
Colombia (Republic of) Unsec.
Credit Linked Nts., 15%, 4/27/12
[COP] 927,000,000 531,284
Dominican Republic Credit
Linked Bonds, 9.85%, 11/10/08 10,11
[DOP] 22,620,000 622,164
Dominican Republic Credit
Linked Nts., 10.086%, 3/20/08 5,11
[DOP] 22,900,000 629,555
Dominican Republic Credit
Linked Nts., 22%, 10/3/11 [DOP] 25,600,000 969,927
Dominican Republic Credit
Linked Nts., 8.452%, 3/24/08 11
[DOP] 50,960,000 1,504,101
Dominican Republic Credit
Linked Nts., 9.522%, 5/12/08 11
[DOP] 19,900,000 578,294
Dominican Republic Credit
Linked Nts., 9.826%, 3/20/08 11
[DOP] 21,220,000 626,156
Dominican Republic Unsec.
Credit Linked Nts., 14.802%,
3/10/08 11 [DOP] 33,430,000 989,995
Dominican Republic Unsec.
Credit Linked Nts., 15%, 3/12/12
[DOP] 49,300,000 1,602,587
Dominican Republic Unsec.
Credit Linked Nts., 9.347%,
8/11/08 11 [DOP] 57,100,000 1,616,045
Dominican Republic Unsec.
Credit Linked Nts., Series 007,
9.302%, 5/12/08 11 [DOP] 40,900,000 1,187,610
Egypt (The Arab Republic of)
Credit Linked Nts., 7.364%,
1/10/08 5,11 [EGP] 10,180,000 1,837,719
Egypt (The Arab Republic of)
Unsec. Credit Linked Nts.,
8.376%, 2/28/08 5,11 [EGP] 9,260,000 1,656,102
Egypt (The Arab Republic of)
Unsec. Credit Linked Nts., 8.50%,
2/16/08 [EGP] 4,450,000 871,173
Ghana (Republic of) Credit
Linked Nts., 13.50%, 4/2/10 [GHS] 2,990,000 3,102,457
Nigeria (Federal Republic of)
Credit Linked Nts., 14.50%, 3/1/11 2
[NGN] 347,000,000 3,355,834
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
STRUCTURED SECURITIES Continued
- --------------------------------------------------------------------------------
Citigroup Global Markets
Holdings, Inc.: Continued
Nigeria (Federal Republic of)
Credit Linked Nts., Series II,
14.50%, 4/4/11 2 [NGN] 265,000,000 $ 2,571,399
Renins Nonlife Ltd. Credit
Linked Nts., 12.50%, 5/30/12 5 4,586,858 4,586,858
Russian Federation Credit
Linked Nts., 7.65%, 12/4/08 1,5
[RUR] 21,350,000 856,132
Russian Federation Credit
Linked Nts., Series 2, 7.50%,
12/4/08 1,5 [RUR] 50,900,000 2,041,082
Ukraine Hryvnia Unsec. Credit
Linked Nts., 11.94%, 1/4/10 [UAH] 880,000 186,696
Zambia (Republic of) Credit
Linked Nts., 8.833%, 2/21/08 11
[ZMK] 6,515,000,000 1,662,965
- --------------------------------------------------------------------------------
Credit Suisse First Boston
International:
Boryspil Airport Total Return
Linked Nts., 10%, 4/19/10 1 [UAH] 4,840,000 982,903
EES Total Return Linked Nts.,
7.10%, 12/12/08 1 [RUR] 37,100,000 1,533,246
EESRRU Total Return Linked Nts.,
8.25%, 6/22/10 1 [RUR] 93,500,000 3,919,586
Gazprom Total Return Linked
Nts., 6.79%, 10/29/09 [RUR] 73,800,000 3,053,887
Gazprom Total Return Linked
Nts., Series 002, 6.95%, 8/6/09
[RUR] 72,600,000 3,057,821
Indonesia (Republic of) Total
Return Linked Nts., 12%, 9/16/11 5
[IDR] 14,800,000,000 1,746,542
Moitk Total Return Linked Nts.,
8.966%, 3/26/11 1,5 [RUR] 59,900,000 2,352,960
NAK Naftogaz of Ukraine Credit
Linked Nts., 5%, 1/20/09 3,890,000 3,763,034
Orenburgskaya IZHK Total Return
Linked Nts., 9.24%, 2/21/12 1,5 [RUR] 116,835,000 4,541,645
Rurail Total Return Linked Nts.,
6.67%, 1/22/09 1,5 [RUR] 49,210,000 2,010,564
Ukraine (Republic of) Credit
Linked Nts., Series EMG 13,
11.94%, 12/30/09 [UAH] 2,195,000 488,585
Vietnam Shipping Industry
Group Total Return Linked Nts.,
10.50%, 1/19/17 5 [VND] 14,609,000,000 903,001
- --------------------------------------------------------------------------------
Credit Suisse First Boston, Inc.
(Nassau Branch):
Russian Specialized Construction
and Installation Administration
Credit Linked Nts., 8.59%,
5/20/10 1,5 [RUR] 97,250,000 3,800,227
Ukraine (Republic of) Credit
Linked Nts., 11.94%, 12/30/09 2
[UAH] 5,650,000 1,257,634
24 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
STRUCTURED SECURITIES Continued
- --------------------------------------------------------------------------------
Credit Suisse First Boston, Inc.
(Nassau Branch): Continued
Ukraine (Republic of) Credit
Linked Nts., Series EMG 11,
11.94%, 12/30/09 [UAH] 661,000 $ 147,132
Ukraine (Republic of) Credit
Linked Nts., Series NPC 12,
11.94%, 12/30/09 2 [UAH] 4,170,000 928,201
- --------------------------------------------------------------------------------
Credit Suisse Group, Russian
Moscoblgaz Finance Total Return
Linked Nts., 9.25%, 6/24/12 5 [RUR] 106,500,000 4,161,688
- --------------------------------------------------------------------------------
Credit Suisse International, FSK
EES RRU Total Return Linked Nts.,
8.25%, 6/22/10 1 [RUR] 54,200,000 2,272,102
- --------------------------------------------------------------------------------
Deutsche Bank AG:
Argentina (Republic of)
Credit Linked Nts., 11.673%,
12/21/11 5,14 [ARP] 2,990,000 2,429,968
Arrendadora Capita Corp. SA de
CV/Capita Corp. (The) de Mexico
SA de CV Credit Linked Nts.,
9.09%, 1/5/11 5 [MXN] 12,838,271 1,182,573
Arrendadora Capita Corp. SA de
CV/Capita Corp. (The) de Mexico
SA de CV Credit Linked Nts.,
9.65%, 1/5/11 5 [MXN] 8,500,402 782,998
Brazil Real Credit Linked Nts.,
13.882%, 3/3/10 11 [BRR] 4,580,760 1,992,135
Brazil Real Credit Linked Nts., 6%,
8/18/10 [BRR] 2,065,000 1,886,506
Colombia (Republic of) Credit
Linked Nts., 13.50%, 9/15/14 [COP] 2,002,000,000 1,139,741
Colombia (Republic of) Total
Return Linked Bonds, Series 002,
11%, 7/28/20 [COP] 6,840,000,000 3,551,817
Egypt (The Arab Republic of)
Credit Linked Nts., 9.381%,
2/5/08 5,11 [EGP] 6,230,000 1,116,917
Egypt (The Arab Republic of)
Total Return Linked Nts., 7.725%,
9/16/08 11 [EGP] 17,350,000 2,968,102
European Investment Bank,
Russian Federation Credit Linked
Nts., 5.502%, 1/19/10 5,11 705,000 612,434
Grupo TMM SA Credit Linked
Nts., 6%, 9/7/12 5 2,283,832 2,295,251
Halyk Bank of Kazakhstan Total
Return Linked Nts., Series I, 7.25%,
3/20/09 [KZT] 258,990,000 2,020,328
Indonesia (Republic of) Credit
Linked Nts., 9.50%, 6/22/15 820,000 810,012
Indonesia (Republic of) Credit
Linked Nts., Series III, 14.25%,
6/22/13 873,600 1,058,393
Nigeria (Federal Republic of)
Credit Linked Nts., 12.50%,
2/24/09 5 [NGN] 67,900,000 615,650
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
STRUCTURED SECURITIES Continued
- --------------------------------------------------------------------------------
Deutsche Bank AG: Continued
Nigeria (Federal Republic of)
Credit Linked Nts., 15%,
1/27/09 5 [NGN] 91,000,000 $ 858,750
Opic Reforma Credit Linked
Nts., 9.205%, 10/3/15 5,14 [MXN] 14,850,000 1,361,074
Peru (Republic of) Credit Linked
Nts., 6.659%, 2/20/11 1 875,000 887,308
RosSelkhoz Bank Total Return
Linked Nts., 6.926%, 2/22/08 11 [RUR] 57,640,000 2,326,025
Russian Federation Credit Linked
Nts., 0%, 12/2/09 11 [RUR] 19,221,000 813,937
Russian Federation Credit Linked
Nts., 6.942%, 2/22/08 11 [RUR] 82,600,000 3,334,182
Russian Federation Credit Linked
Nts., 7.176%, 2/21/08 11 [RUR] 39,800,000 1,606,103
Russian Federation Total Return
Linked Nts., Series II, 9%, 4/22/11
[RUR] 21,590,000 953,656
Russian Railways Total Return
Linked Bonds, 6.67%, 1/26/09 1 [RUR] 75,090,000 3,072,548
Russian Unified Energy Systems
Total Return Linked Nts., Series
FSK3, 7.10%, 12/16/08 1 [RUR] 50,530,000 2,077,542
Sberbank Total Return Linked
Nts., 6.588%, 2/27/08 11 [RUR] 76,860,000 3,097,453
Sberbank Total Return Linked
Nts., 6.593%, 2/20/08 11 [RUR] 57,640,000 2,327,275
Ukraine (Republic of) 5 yr. Credit
Linked Nts., 4.05%, 8/25/10 885,000 897,726
Ukraine (Republic of) 5.5 yr.
Credit Linked Nts., 4.05%, 2/25/11 885,000 893,939
Ukraine (Republic of) 6 yr.
Credit Linked Nts., 4.05%, 8/25/11 885,000 889,416
Ukraine (Republic of) 6.5 yr.
Credit Linked Nts., 4.05%, 2/27/12 885,000 885,257
Ukraine (Republic of) 7 yr. Credit
Linked Nts., 4.05%, 8/28/12 885,000 881,920
Ukraine (Republic of) Credit
Linked Nts., 11.94%, 12/30/09 [UAH] 269,000 60,213
Ukraine (Republic of) Credit
Linked Nts., 11.94%, 12/30/09 [UAH] 955,000 213,769
United Mexican States Credit
Linked Nts., 9.52%, 1/5/11 5 [MXN] 8,501,476 783,097
Videocon International Ltd.
Credit Linked Nts., 6.26%, 12/29/09 1,630,000 1,633,293
- --------------------------------------------------------------------------------
Deutsche Bank AG Singapore,
Vietnam Shipping Industry Group
Total Return Linked Nts., 9%,
4/20/17 5 [VND] 36,800,000,000 2,114,050
- --------------------------------------------------------------------------------
Dresdner Bank AG, Lukoil Credit
Linked Nts., Series 3, 7.04%,
12/8/11 1,2 [RUR] 34,190,000 1,501,540
- --------------------------------------------------------------------------------
Eurus Ltd. Catastrophe Linked
Nts., 11.261%, 4/8/09 1,2 1,400,000 1,411,900
- --------------------------------------------------------------------------------
Fhu-Jin Ltd. Catastrophe Linked
Nts., Cl. B, 8.778%, 8/10/11 1,2 1,630,000 1,665,616
25 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
STRUCTURED SECURITIES Continued
- --------------------------------------------------------------------------------
Foundation Re II Ltd. Catastrophe
Linked Nts., 14.705%, 1/8/09 1,2 $ 926,000 $ 926,463
- --------------------------------------------------------------------------------
Foundation Re Ltd. Catastrophe
Linked Nts., 9.005%, 11/24/08 1,2 1,000,000 981,150
- --------------------------------------------------------------------------------
Fusion 2007 Ltd. Catastrophe
Linked Nts., 10.905%, 5/19/09 1,2 2,600,000 2,603,770
- --------------------------------------------------------------------------------
GlobeCat Ltd. Catastrophe
Linked Nts., 7.01%, 12/30/08 1 2,150,000 2,154,730
- --------------------------------------------------------------------------------
Goldman Sachs & Co., Turkey
(Republic of) Credit Linked Nts.,
14.802%, 3/29/17 2,11 [TRY] 21,980,000 4,570,304
- --------------------------------------------------------------------------------
Goldman Sachs Capital Markets
LP, Colombia (Republic of)
Credit Linked Nts., 10.476%,
2/8/37 2,11 [COP] 63,720,800,000 1,209,369
- --------------------------------------------------------------------------------
Goldman Sachs International,
Russian Federation Total Return
Linked Nts., 8%, 5/13/09 1 [RUR] 84,500,000 3,458,198
- --------------------------------------------------------------------------------
Hallertau SPC 2007-01, Philippines
(Republic of) Credit Linked Nts.,
12/20/17 1,5,10 14,290,000 14,174,251
- --------------------------------------------------------------------------------
ING Bank NV, Ukraine (Republic
of) Credit Linked Nts., Series 725,
11.89%, 12/30/09 5 [UAH] 4,689,000 1,036,770
- --------------------------------------------------------------------------------
JPMorgan Chase Bank:
Argentina (Republic of) Credit
Linked Nts., 11.625%,
12/19/11 1,5,14 [ARP] 4,355,000 3,394,411
Brazil (Federal Republic of)
Credit Linked Nts., 14.35%,
2/20/12 5 [BRR] 5,770,000 3,107,448
Brazil (Federal Republic of)
Credit Linked Nts., 15.326%,
1/2/15 11 [BRR] 10,948,600 2,578,992
Brazil (Federal Republic of)
Credit Linked Nts., 2.731%,
11/30/12 2,11 [ARP] 4,550,000 1,292,489
Brazil (Federal Republic of)
Credit Linked Nts., 6%,
5/16/45 5 [BRR] 1,445,000 1,277,102
Brazil (Federal Republic of)
Credit Linked Nts., Series III,
12.184%, 1/2/15 5,11 [BRR] 5,245,000 1,235,483
Colombia (Republic of)
Credit Linked Bonds, 10.19%,
1/5/16 2,11 [COP] 20,100,000,000 4,144,504
Colombia (Republic of) Credit
Linked Bonds, 10.218%,
10/31/16 5,11 [COP] 12,177,000,000 2,286,959
Colombia (Republic of) Credit
Linked Bonds, Series A, 10.218%,
10/31/16 5,11 [COP] 12,125,000,000 2,277,193
Peru (Republic of) Credit
Linked Nts., 8.115%,
9/2/15 2,11 [PEN] 3,470,000 646,777
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
STRUCTURED SECURITIES Continued
- --------------------------------------------------------------------------------
JPMorgan Chase Bank: Continued
Swaziland (Kingdom of) Credit
Linked Nts., 7.25%, 6/20/10 2 $ 1,120,000 $ 1,106,784
- --------------------------------------------------------------------------------
Lakeside Re Ltd. Catastrophe
Linked Nts., 11.33%, 12/31/09 1,2 2,000,000 2,053,200
- --------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc.,
High Yield Targeted Return Index
Securities, Series 2006-1, 7.631%,
5/1/16 5,14 6,300,000 6,282,675
- --------------------------------------------------------------------------------
Lehman Brothers International,
Romania (Republic of) Total
Return Linked Nts., 7.90%,
2/9/10 [RON] 821,400 351,423
- --------------------------------------------------------------------------------
Lehman Brothers Special
Financing, Inc.:
CMS 10 yr. Curve Credit Linked
Nts., 6%, 2/5/17 13,350,000 14,446,035
Microvest Capital Management
LLC Credit Linked Nts., 10.75%,
5/24/12 5 8,650,000 8,650,000
Romania (Republic of) Total
Return Linked Nts., 6.50%,
3/9/10 [RON] 2,228,300 912,811
Romania (Republic of) Total
Return Linked Nts., 6.75%,
3/11/08 [RON] 2,600,000 1,104,299
Romania (Republic of) Total
Return Linked Nts., 7.25%,
4/19/10 [RON] 213,000 88,167
Romania (Republic of) Total
Return Linked Nts., 7.75%,
4/21/08 [RON] 199,000 84,604
Romania (Republic of) Total
Return Linked Nts., 7.75%,
4/21/08 [RON] 512,000 217,675
Romania (Republic of) Total
Return Linked Nts., 7.90%,
2/12/08 [RON] 1,885,100 814,624
- --------------------------------------------------------------------------------
Medquake Ltd. Catastrophe
Linked Nts., 9.969%, 5/31/10 1,2 1,250,000 1,251,750
- --------------------------------------------------------------------------------
Merrill Lynch:
Colombia (Republic of) Credit
Linked Nts., 10%, 11/17/16 5 [COP] 1,784,000,000 809,872
Renaissance Capital International
Services Ltd. Total Return Linked
Nts., 10.50%, 10/7/08 5 [RUR] 80,000,000 3,158,885
- --------------------------------------------------------------------------------
Midori Ltd. Catastrophe Linked
Nts., 7.998%, 10/24/12 1,2 1,600,000 1,609,600
- --------------------------------------------------------------------------------
Morgan Stanley, Russian
Federation Total Return Linked
Securities, Series 007, Cl. VR, 5%,
8/22/34 [RUR] 106,432,109 3,598,215
- --------------------------------------------------------------------------------
Morgan Stanley & Co.
International Ltd./Red Arrow
International Leasing plc:
Total Return Linked Nts.,
Series A, 8.375%, 6/30/12 5 [RUR] 26,906,013 1,095,441
26 | OPPENHEIMER STRATEGIC BOND FUND/VA
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
STRUCTURED SECURITIES Continued
- --------------------------------------------------------------------------------
Morgan Stanley & Co.
International Ltd./Red Arrow
International Leasing plc: Continued
Total Return Linked Nts.,
Series B, 11%, 6/30/12 5 [RUR] 19,729,959 $ 833,552
- --------------------------------------------------------------------------------
Morgan Stanley Capital Services,
Inc.:
Bank Center Credit Total
Return Linked Nts., 7.52%,
6/6/08 [KZT] 482,000,000 3,850,029
Brazil (Federal Republic of)
Linked Nts., 12.551%, 1/5/22 2,11 [BRR] 28,914,000 2,752,163
Brazil (Federal Republic of) Sr.
Linked Nts., 14.40%, 8/4/16 5 [BRR] 5,793,682 4,284,486
Brazil (Federal Republic of)
Total Return Nts., 8/2/10 [BRR] 5,364,574 2,334,971
Eurokommerz Total Return
Linked Nts., Series 1, 13.90%,
10/19/09 1 [RUR] 319,000,000 13,052,907
Ukraine (Republic of) Credit
Linked Nts., 6.653%, 10/15/17 1,2 8,300,000 8,187,950
United Mexican States Credit
Linked Nts., 5.64%, 11/20/15 2 2,000,000 2,052,700
WTI Trading Ltd. Total Return
Linked Nts., Series A, 13.50%,
2/9/09 5 3,630,000 3,484,800
WTI Trading Ltd. Total Return
Linked Nts., Series B, 13.50%,
2/9/09 5 4,850,000 4,656,000
- --------------------------------------------------------------------------------
Nelson Re Ltd. Catastrophe
Linked Nts., Series 2007-I, Cl. A,
16.769%, 6/21/10 1,2 2,290,000 2,307,690
- --------------------------------------------------------------------------------
Osiris Capital plc Catastrophe
Linked Combined Mortality
Index Nts., Series D, 10.243%,
1/15/10 1,2 890,000 937,971
- --------------------------------------------------------------------------------
Redwood Capital X Ltd.
Catastrophe Linked Nts., Series
C, 9.58%, 1/9/09 1,5 360,000 360,342
- --------------------------------------------------------------------------------
Residential Reinsurance Ltd.
Catastrophe Linked Nts.:
Series B, 13.574%, 6/6/08 1,2 1,300,000 1,294,150
Series CL3, 17.374%, 6/7/10 1,2 1,000,000 1,018,875
- --------------------------------------------------------------------------------
Successor Euro Wind Ltd.
Catastrophe Linked Nts.:
Cl. A-I, 10.40%, 6/6/08 1,2 1,040,000 1,042,392
Cl. A-I, 22.65%, 6/6/08 1,2 1,700,000 1,739,695
- --------------------------------------------------------------------------------
Successor Japan Quake Ltd.
Catastrophe Linked Nts., Cl. A-I,
9.40%, 6/6/08 1,2 2,450,000 2,463,843
- --------------------------------------------------------------------------------
UBS AG, Ghana (Republic of)
Credit Linked Nts., 14.47%,
12/28/11 5 [GHS] 1,222,052 1,352,124
- --------------------------------------------------------------------------------
VASCO Re 2006 Ltd. Catastrophe
Linked Nts., 13.641%, 6/5/09 1,2 1,550,000 1,598,515
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
STRUCTURED SECURITIES Continued
- --------------------------------------------------------------------------------
Willow Re Ltd. Catastrophe
Linked Nts., 10.085%, 6/16/10 1,2 $ 2,480,000 $ 2,533,878
----------------
Total Structured Securities
(Cost $304,844,727) 324,751,888
EXPIRATION STRIKE
DATE PRICE CONTRACTS
- --------------------------------------------------------------------------------
OPTIONS PURCHASED--0.0%
- --------------------------------------------------------------------------------
Japanese Yen (JPY)
Put 3 (Cost $331,738) 2/12/08 $112.35 3,132,000,000 377,688
SHARES
- --------------------------------------------------------------------------------
INVESTMENT COMPANIES--20.2%
- --------------------------------------------------------------------------------
Oppenheimer Master
Loan Fund, LLC 3,20 14,194,313 140,588,443
- --------------------------------------------------------------------------------
Oppenheimer Institutional
Money Market Fund, Cl. E,
5.03% 20,21 587,306,313 587,306,313
----------------
Total Investment Companies
(Cost $729,095,393) 727,894,756
- --------------------------------------------------------------------------------
Total Investments, at Value
(excluding Investments
Purchased with Cash
Collateral from Securities
Loaned) (Cost $3,562,167,047) 3,623,352,181
PRINCIPAL
AMOUNT
- --------------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED--1.7% 22
- --------------------------------------------------------------------------------
Metropolitan Life Global
Funding, 4.89%, 1/22/08 $ 750,000 750,000
- --------------------------------------------------------------------------------
Undivided interest of 5.96% in joint
repurchase agreement (Principal Amount/
Value $1,000,000,000, with a maturity
value of $1,000,250,000) with Bank of
America NA, 4.50%, dated 12/31/07, to be
repurchased at $59,585,793 on 1/2/08,
collateralized by U.S. Agency Mortgages,
5%, 5/1/35, with a value of
$1,020,000,000 59,570,900 59,570,900
----------------
Total Investments Purchased with
Cash Collateral from Securities
Loaned (Cost $60,320,900) 60,320,900
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS,
AT VALUE
(COST $3,622,487,947) 102.0% 3,683,673,081
- --------------------------------------------------------------------------------
LIABILITIES IN EXCESS
OF OTHER ASSETS (2.0) (73,045,672)
-----------------------------------
NET ASSETS 100.0% $ 3,610,627,409
===================================
INDUSTRY CLASSIFICATIONS ARE UNAUDITED.
27 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
FOOTNOTES TO STATEMENT OF INVESTMENTS
PRINCIPAL AMOUNT IS REPORTED IN U.S. DOLLARS, EXCEPT FOR THOSE DENOTED IN THE
FOLLOWING CURRENCIES:
ARP Argentine Peso
AUD Australian Dollar
BRR Brazilian Real
CAD Canadian Dollar
COP Colombian Peso
DEM German Mark
DKK Danish Krone
DOP Dominican Republic Peso
EGP Egyptian Pounds
EUR Euro
GBP British Pound Sterling
GHS 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
VND Vietnam Dong
ZMK Zambian Kwacha
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 $227,572,107 or 6.30% of the Fund's net
assets as of December 31, 2007.
3. Non-income producing security.
4. Issue is in default. See Note 1 of accompanying Notes.
5. Illiquid or restricted security. The aggregate value of illiquid or
restricted securities as of December 31, 2007 was $206,385,561, which represents
5.72% of the Fund's net assets, of which $1,361,074 is considered restricted.
See Note 9 of accompanying Notes. Information concerning restricted securities
is as follows:
ACQUISITION UNREALIZED
SECURITY DATE COST VALUE DEPRECIATION
- -------------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG, Opic Reforma Credit Linked Nts., 9.205%, 10/3/15 12/27/07 $1,364,764 $1,361,074 $3,690
6. 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 $37,577,023. See Note 6 of accompanying Notes.
7. 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 $22,163,514 or 0.61% of the Fund's net assets
as of December 31, 2007.
8. 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 $234,772 or 0.01% of the Fund's net assets as of
December 31, 2007.
9. All or a portion of the security was segregated by the Fund in the amount of
$62,547,000, which represented 100.27% of the market value of securities sold
short. See Note 1 of accompanying Notes.
10. When-issued security or delayed delivery to be delivered and settled after
December 31, 2007. See Note 1 of accompanying Notes.
11. Zero coupon bond reflects effective yield on the date of purchase.
12. A sufficient amount of securities has been designated to cover outstanding
foreign currency contracts. See Note 5 of accompanying Notes.
13. Partial or fully-loaned security. See Note 10 of accompanying Notes.
14. Represents the current interest rate on a security whose interest rate is
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. See Note
1 of accompanying Notes.
15. A sufficient amount of liquid assets has been designated to cover
outstanding written put options.
16. A sufficient amount of liquid assets has been designated to cover
outstanding written call options.
17. Denotes a step bond: a zero coupon bond that converts to a fixed or variable
interest rate at a designated future date.
18. 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.
19. Interest or dividend is paid-in-kind, when applicable.
28 | OPPENHEIMER STRATEGIC BOND FUND/VA
20. Is or was an affiliate, as defined in the Investment Company Act of 1940, at
or during the period ended December 31, 2007, by virtue of the Fund owning at
least 5% of the voting securities of the issuer or as a result of the Fund and
the issuer having the same investment adviser. Transactions during the period in
which the issuer was an affiliate are as follows:
SHARES GROSS GROSS SHARES
DECEMBER 31, 2006 ADDITIONS REDUCTIONS DECEMBER 31, 2007
- ----------------------------------------------------------------------------------------------------------------------------
Oppenheimer Master Loan Fund, LLC -- 14,194,313 -- 14,194,313
Oppenheimer Institutional Money Market Fund, Cl. E 349,023,806 2,444,888,836 2,206,606,329 587,306,313
DIVIDEND REALIZED
VALUE INCOME LOSS
- ----------------------------------------------------------------------------------------------------------------------------
Oppenheimer Master Loan Fund, LLC $ 140,588,443 $ 1,113,128 $ 14,048
Oppenheimer Institutional Money Market Fund, Cl. E 587,306,313 23,751,284 --
--------------------------------------------------
$ 727,894,756 $ 24,864,412 $ 14,048
==================================================
21. Rate shown is the 7-day yield as of December 31, 2007.
22. 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.
23. Short-fall security.
PRINCIPAL
AMOUNT
SOLD SHORT VALUE
- -----------------------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS SOLD SHORT--(1.7)%
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 4.50%, 1/1/22 10 $ (7,500,000) $ (7,382,813)
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5%, 1/1/22 10 (3,562,000) (3,565,897)
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5.50%, 1/1/37 10 (51,485,000) (51,428,675)
--------------
Total Mortgage-Backed Obligations Sold Short (Proceeds $61,937,320) $ (62,377,385)
==============
- -----------------------------------------------------------------------------------------------------
WRITTEN OPTIONS AS OF DECEMBER 31, 2007 ARE AS FOLLOWS:
- -----------------------------------------------------------------------------------------------------
NUMBER OF EXERCISE EXPIRATION PREMIUM
DESCRIPTION TYPE CONTRACTS PRICE DATE RECEIVED VALUE
- -----------------------------------------------------------------------------------------------------
British Pound Sterling (GBP) Call 525,000 $ 1.9830 1/2/08 $ 4,503 $ 3,123
British Pound Sterling (GBP) Put 525,000 1.9830 1/2/08 4,685 3,436
British Pound Sterling (GBP) Call 525,000 1.9910 1/3/08 4,129 2,137
British Pound Sterling (GBP) Put 525,000 1.9910 1/3/08 4,129 6,746
British Pound Sterling (GBP) Call 575,000 1.9940 1/4/08 5,260 5,343
British Pound Sterling (GBP) Put 575,000 1.9940 1/4/08 5,260 5,343
British Pound Sterling (GBP) Call 545,000 2.0090 1/7/08 5,234 1,177
British Pound Sterling (GBP) Put 545,000 2.0090 1/7/08 5,343 15,767
Euro (EUR) Call 2,395,000 1.4685 1/4/08 16,442 8,083
Euro (EUR) Put 2,395,000 1.4685 1/4/08 16,530 28,080
Euro (EUR) Call 2,395,000 1.4715 1/7/08 16,564 16,564
Euro (EUR) Put 2,395,000 1.4715 1/7/08 16,564 16,564
Japanese Yen (JPY) Call 2,872,000,000 102.9000 2/12/08 332,136 21,166
--------------------
$436,779 $133,529
====================
29 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
FOREIGN CURRENCY EXCHANGE CONTRACTS AS OF DECEMBER 31, 2007 ARE AS FOLLOWS:
- -----------------------------------------------------------------------------------------------------------------------------
CONTRACTS
AMOUNT EXPIRATION UNREALIZED UNREALIZED
CONTRACT DESCRIPTION BUY/SELL (000S) DATE VALUE APPRECIATION DEPRECIATION
- -----------------------------------------------------------------------------------------------------------------------------
Argentine Peso (ARP) Buy 42,850 ARP 1/22/08-1/24/08 $ 13,568,315 $ -- $ 63,292
Australian Dollar (AUD) Sell 20,695 AUD 1/8/08-4/10/08 18,047,659 322,814 68,233
Brazilian Real (BRR) Buy 186,907 BRR 2/6/08-1/5/10 103,988,499 4,563,353 --
Brazilian Real (BRR) Sell 18,250 BRR 2/6/08 10,223,272 -- 178,137
British Pound Sterling (GBP) Buy 2,195 GBP 1/2/08-2/29/08 4,354,521 -- 132,791
British Pound Sterling (GBP) Sell 25,875 GBP 1/2/08-5/14/08 51,292,606 1,305,919 --
Canadian Dollar (CAD) Sell 35,890 CAD 1/8/08-4/10/08 36,138,100 660,872 150,252
Chilean Peso (CLP) Buy 4,459,000 CLP 1/16/08 8,949,922 -- 78,545
Chinese Renminbi (Yuan) (CNY) Sell 96,700 CNY 1/11/08 13,257,983 -- 95,253
Colombian Peso (COP) Sell 21,759,000 COP 2/6/08-3/4/08 10,697,063 -- 106,901
Czech Koruna (CZK) Buy 427,500 CZK 1/30/08 23,535,565 602,388 --
Dominican Republic Peso (DOP) Buy 20,867 DOP 1/8/08 628,528 9,325 --
Euro (EUR) Buy 53,670 EUR 1/2/08-5/14/08 78,381,235 1,297,617 47,315
Euro (EUR) Sell 228,906 EUR 1/2/08-5/21/08 334,318,913 1,247,724 4,121,878
Hungarian Forint (HUF) Buy 5,558,000 HUF 1/30/08-1/31/08 31,987,448 277,504 --
Indian Rupee (INR) Buy 5,173 INR 1/2/08 131,190 199 --
Indonesia Rupiah (IDR) Buy 236,690,000 IDR 1/31/08-2/29/08 25,179,789 64,432 253,061
Israeli Shekel (ILS) Buy 83,680 ILS 1/30/08-5/2/08 21,677,404 544,976 --
Japanese Yen (JPY) Buy 15,834,000 JPY 4/10/08 143,499,473 4,742,572 --
Japanese Yen (JPY) Sell 16,962,000 JPY 1/8/08-5/14/08 153,048,407 1,049,387 1,404,288
Malaysian Ringgit (MYR) Buy 136,770 MYR 1/30/08-4/10/08 41,571,361 252,758 --
Mexican Nuevo Peso (MXN) Buy 226,900 MXN 2/25/08-3/7/08 20,711,308 135,794 14,170
Mexican Nuevo Peso (MXN) Sell 8,050 MXN 3/31/08 732,862 3,272 --
New Taiwan Dollar (TWD) Sell 442,000 TWD 1/17/08 13,629,138 72,041 --
New Turkish Lira (TRY) Buy 46,540 TRY 1/17/08-1/28/08 39,569,656 1,290,527 --
New Zealand Dollar (NZD) Buy 29,025 NZD 1/17/08-5/14/08 22,080,598 204,111 244,683
New Zealand Dollar (NZD) Sell 14,390 NZD 1/8/08-4/10/08 10,942,692 15,076 65,405
Norwegian Krone (NOK) Buy 31,150 NOK 5/14/08 5,707,811 -- 4,599
Norwegian Krone (NOK) Sell 31,150 NOK 4/10/08 5,715,199 -- 73,136
Peruvian New Sol (PEN) Buy 86,105 PEN 1/22/08 28,805,457 -- 255,924
Philippines Peso (PHP) Buy 1,439,000 PHP 1/30/08-2/29/08 34,893,748 1,720,745 --
Polish Zloty (PLZ) Buy 56,570 PLZ 1/30/08-4/10/08 22,889,985 341,481 103,829
Russian Ruble (RUR) Buy 271,430 RUR 2/21/08 11,103,097 723,365 --
Singapore Dollar (SGD) Buy 3,490 SGD 2/5/08 2,427,776 10,893 --
Singapore Dollar (SGD) Sell 20,375 SGD 2/11/08 14,178,262 -- 43,680
Slovak Koruna (SKK) Buy 413,530 SKK 1/30/08 17,975,892 22,828 --
South African Rand (ZAR) Buy 219,870 ZAR 1/18/08-2/29/08 31,907,291 799,045 --
South Korean Won (KRW) Buy 40,705,000 KRW 1/30/08-4/30/08 43,826,680 -- 956,780
South Korean Won (KRW) Sell 13,060,000 KRW 2/11/08 14,052,547 -- 77,907
Swedish Krona (SEK) Buy 77,310 SEK 4/10/08 11,964,009 53,013 30,950
Swedish Krona (SEK) Sell 29,990 SEK 5/14/08 4,640,440 51,143 --
Swiss Franc (CHF) Buy 6,985 CHF 4/10/08 6,198,056 25,235 10,532
Swiss Franc (CHF) Sell 5,919 CHF 1/8/08-2/29/08 5,228,612 23,934 64,975
----------------------------
Total unrealized appreciation and depreciation $ 22,434,343 $ 8,646,516
============================
30 | OPPENHEIMER STRATEGIC BOND FUND/VA
- ------------------------------------------------------------------------------------------------------------------------
FUTURES CONTRACTS AS OF DECEMBER 31, 2007 ARE AS FOLLOWS:
- ------------------------------------------------------------------------------------------------------------------------
UNREALIZED
NUMBER OF EXPIRATION APPRECIATION
CONTRACT DESCRIPTION BUY/SELL CONTRACTS DATE VALUE (DEPRECIATION)
- ------------------------------------------------------------------------------------------------------------------------
Amsterdam Exchange Index Buy 24 1/18/08 $ 3,621,545 $ 84,671
Australia (Commonwealth of) Bonds, 10 yr. Sell 69 3/17/08 5,908,179 17,653
CAC 40 10 Index Sell 83 1/18/08 6,808,589 (90,932)
Canada (Government of) Bonds, 10 yr. Buy 76 3/19/08 8,788,408 (16,274)
DAX Index Buy 32 3/20/08 9,509,518 252,898
DAX Index Sell 33 3/20/08 9,806,691 (260,802)
Euro-Bundesobligation, 5 yr. Buy 441 3/6/08 69,474,448 (1,034,390)
Euro-Bundesobligation, 10 yr. Buy 52 3/6/08 8,584,370 (4,450)
Euro-Bundesobligation, 10 yr. Sell 345 3/6/08 56,953,996 (27,298)
Euro-Schatz Buy 1,328 3/6/08 200,324,315 (1,324,346)
FTSE 100 Index Sell 94 3/20/08 12,052,273 (212,477)
Japan (Government of) Bonds, 10 yr. Buy 41 3/11/08 50,288,775 187,989
Japan (Government of) Mini Bonds, 10 yr. Buy 44 3/10/08 5,394,872 17,291
Mexican Bolsa Index Sell 135 3/19/08 3,692,471 27,363
NASDAQ 100 Index Sell 279 3/20/08 11,744,505 121,343
Nikkei 225 Index Buy 8 3/13/08 1,093,778 (45,042)
Nikkei 225 Index Sell 107 3/13/08 14,629,281 459,253
OMXS30 Index Sell 196 1/25/08 3,285,666 (53,641)
Standard & Poor's 500 E-Mini Buy 48 3/20/08 3,545,280 (2,520)
Standard & Poor's 500 E-Mini Sell 735 3/20/08 54,287,100 37,344
Standard & Poor's/MIB Index, 10 yr. Buy 11 3/20/08 3,124,366 16,144
Standard & Poor's/Toronto Stock Exchange 60 Index Buy 20 3/19/08 3,274,301 46,975
U.S. Long Bonds Buy 2,240 3/19/08 260,680,000 (1,112,300)
U.S. Long Bonds Sell 7 3/19/08 814,625 (1,737)
U.S. Treasury Nts., 2 yr. Buy 674 3/31/08 141,708,500 204,335
U.S. Treasury Nts., 2 yr. Sell 399 3/31/08 83,889,750 (86,917)
U.S. Treasury Nts., 5 yr. Buy 6,785 3/31/08 748,258,281 1,449,863
U.S. Treasury Nts., 5 yr. Sell 911 3/31/08 100,466,219 (199,044)
U.S. Treasury Nts., 10 yr. Buy 1,611 3/19/08 182,672,297 174,312
U.S. Treasury Nts., 10 yr. Sell 1,496 3/19/08 169,632,375 (836,294)
United Kingdom Long Gilt Buy 9 3/27/08 1,970,549 38,353
---------------
$ (2,172,677)
===============
- -----------------------------------------------------------------------------------------------------------------------------------
CREDIT DEFAULT SWAPS AS OF DECEMBER 31, 2007 ARE AS FOLLOWS:
- -----------------------------------------------------------------------------------------------------------------------------------
BUY/SELL NOTIONAL PAY/ PREMIUM
CREDIT AMOUNT RECEIVE TERMINATION PAID/
SWAP COUNTERPARTY REFERENCE ENTITY PROTECTION (000S) FIXED RATE DATE (RECEIVED) VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
Barclays Bank plc:
Beazer Homes USA, Inc. Sell $ 1,000 4.7000% 9/20/08 $ -- $ (61,167)
Citigroup, Inc. Sell 6,550 3.2500 9/20/08 -- (85,894)
Republic of Turkey Sell 3,120 1.6200 4/20/12 -- 28,366
Republic of Turkey Sell 915 1.8100 4/20/12 -- 15,346
Residential Capital LLC Sell 1,807 1.2200 3/20/08 -- (159,268)
Residential Capital LLC Sell 905 1.2000 3/20/08 -- (79,808)
Residential Capital LLC Sell 942 1.7500 3/20/08 -- (81,864)
Six Flags, Inc. Sell 780 7.0000 9/20/08 -- 6,879
Smithfield Foods, Inc. Sell 855 1.5000 3/20/12 -- (41,278)
The Mosaic Co. Sell 490 1.5000 9/20/12 -- 14,867
31 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
CREDIT DEFAULT SWAPS: Continued
- ----------------------------------------------------------------------------------------------------------------------------------
BUY/SELL NOTIONAL PAY/ PREMIUM
CREDIT AMOUNT RECEIVE TERMINATION PAID/
SWAP COUNTERPARTY REFERENCE ENTITY PROTECTION (000S) FIXED RATE DATE (RECEIVED) VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
Citibank NA, New York:
Allied Waste North
America, Inc. Sell $ 2,300 1.8800% 3/20/12 $ -- $ (101,017)
Amkor Technology, Inc. Sell 335 2.0500 9/20/08 -- 1,006
Cablevision Systems Corp. Sell 100 3.1000 12/20/10 -- (2,554)
Capmark Financial Group,
Inc. Sell 2,480 7.1250 12/20/12 -- 18,073
El Paso Corp. Sell 936 0.7200 6/20/11 -- (22,822)
El Paso Corp. Sell 850 0.7800 6/20/11 -- (19,092)
El Paso Corp. Sell 870 0.8200 6/20/11 -- (18,426)
Ford Motor Credit Co. Sell 1,800 2.3200 3/20/12 -- (239,374)
Georgia-Pacific LLC Sell 395 3.4500 12/20/12 -- (1,436)
Georgia-Pacific LLC Sell 535 3.6000 12/20/12 -- 1,351
Intelsat Ltd. Sell 415 4.3000 12/20/08 -- 1,864
Nalco Co. Sell 595 3.6000 9/20/12 -- (7,172)
Nortel Networks Corp. Sell 1,120 1.8900 9/20/08 -- 2,021
Pakistan Sell 1,570 5.1000 1/20/13 -- --
Reliant Energy, Inc. Sell 500 2.4500 9/20/11 -- (14,710)
Reliant Energy, Inc. Sell 1,200 2.6000 9/20/11 -- (29,458)
Republic of Hungary Buy 2,300 0.4000 12/20/15 -- 35,032
Republic of Indonesia Sell 1,720 2.1000 9/20/12 -- 45,296
Republic of Turkey Sell 2,340 2.4700 4/20/17 -- 26,639
Russian Federation Sell 10,000 0.3600 1/20/11 -- (106,464)
Tribune Co. Sell 520 7.6000 9/20/08 -- (11,435)
Tribune Co. Sell 740 7.5000 9/20/08 -- (16,805)
Univision
Communications, Inc. Sell 468 1.1000 6/20/08 -- (5,083)
- ----------------------------------------------------------------------------------------------------------------------------------
Credit Suisse International:
ArvinMeritor, Inc. Sell 995 1.4000 9/20/08 -- (13,428)
ArvinMeritor, Inc. Sell 1,420 1.6000 9/20/08 -- (17,076)
Capmark Financial Group,
Inc. Sell 790 5.2000 12/20/12 -- (52,580)
Capmark Financial Group,
Inc. Sell 415 6.2500 12/20/12 -- (12,587)
CDX.NA.HY.8 Index Sell 2,905 2.7500 6/20/12 (144,826) (143,235)
CenturyTel, Inc. Buy 1,540 0.3775 9/20/12 -- 11,615
Charter Communications
Holdings LLC Buy 235 7.0000 9/20/10 -- 69,880
Charter Communications
Holdings LLC Sell 235 5.0000 9/20/17 (47,000) (112,247)
Charter Communications
Holdings LLC Buy 285 5.0000 9/20/10 18,169 95,428
Charter Communications
Holdings LLC Sell 285 5.0000 9/20/17 (57,000) (136,129)
Dean Foods Co. Sell 515 1.0200 6/20/11 -- (36,644)
Dean Foods Co. Sell 475 1.0000 6/20/11 -- (34,089)
Dow Jones CDX.NA.HY.7 Index Sell 1,280 3.2500 12/20/11 47,467 (18,949)
El Paso Corp. Sell 475 0.7400 6/20/11 -- (13,051)
El Paso Corp. Sell 495 0.7700 6/20/11 -- (13,127)
Embarq Corp. Buy 760 0.5700 9/20/12 -- 11,326
Ford Motor Credit Co. Sell 3,750 2.3850 3/20/12 -- (487,690)
Ford Motor Credit Co. Sell 1,150 2.5500 3/20/12 -- (144,196)
GMAC LLC Sell 1,690 1.3900 3/20/17 -- (370,128)
Intelsat Ltd. Sell 425 4.4000 3/20/09 -- (85)
NJSC Naftogaz Sell 2,570 3.2500 4/20/11 -- (344,747)
Residential Capital LLC Sell 900 1.3000 3/20/08 -- (55,446)
Smithfield Foods, Inc. Sell 865 1.4900 3/20/12 -- (42,408)
Tenet Healthcare Corp. Sell 1,365 4.0500 12/20/08 -- 13,138
Toys "R" Us, Inc. Sell 995 2.8000 9/20/08 -- (26,420)
Tribune Co. Sell 370 6.3500 12/20/08 -- (19,438)
32 | OPPENHEIMER STRATEGIC BOND FUND/VA
BUY/SELL NOTIONAL PAY/ PREMIUM
CREDIT AMOUNT RECEIVE TERMINATION PAID/
SWAP COUNTERPARTY REFERENCE ENTITY PROTECTION (000S) FIXED RATE DATE (RECEIVED) VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
Credit Suisse International:
Continued
TXU Corp. Sell $ 940 1.5300% 6/20/11 $ -- $ (80,426)
TXU Corp. Sell 490 1.6100 6/20/11 -- (40,746)
- ----------------------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG:
ABX.HE.AA.06-2 Index Sell 720 0.1700 5/25/46 (86,393) (274,430)
ABX.HE.AAA.06-2 Index Sell 1,720 0.1100 5/25/46 (85,989) (215,753)
ABX.HE.AAA.06-2 Index Sell 1,720 0.1100 5/25/46 (85,974) (215,753)
CDX.NA.HY.9 Index Sell 7,665 3.7500 12/20/12 15,170 (333,244)
CenturyTel, Inc. Buy 1,595 0.4250 9/20/12 -- 5,701
Countrywide Home Loans,
Inc. Sell 1,305 8.5000 12/20/08 -- (152,272)
Countrywide Home Loans,
Inc. Sell 2,990 9.0000 12/20/08 -- (339,269)
Countrywide Home Loans,
Inc. Sell 2,990 9.7500 12/20/08 -- (318,742)
Countrywide Home Loans,
Inc. Sell 6,540 2.5500 9/20/08 -- (877,254)
CVRD Inco Ltd. Buy 995 0.6300 3/20/17 -- (5,389)
Dow Jones CDX.NA.HY.7
Index Sell 3,615 3.2500 12/20/11 134,056 (42,226)
Embarq Corp. Buy 2,375 0.6100 9/20/12 -- 30,032
Ford Motor Co. Sell 2,065 6.0000 12/20/16 -- (173,575)
Ford Motor Co. Sell 3,180 5.8500 12/20/16 -- (288,497)
Ford Motor Co. Sell 2,540 5.8000 12/20/16 -- (236,079)
Ford Motor Credit Co. Sell 2,760 2.3900 3/20/12 -- (341,465)
Ford Motor Credit Co. Sell 1,300 2.3400 3/20/12 -- (162,915)
General Motors Corp. Sell 1,650 4.7500 12/20/16 -- (190,831)
General Motors Corp. Sell 2,035 4.6800 12/20/16 -- (241,881)
GMAC LLC Sell 1,750 1.3700 3/20/17 -- (373,680)
Intelsat Ltd. Sell 175 4.4000 3/20/09 -- (174)
iStar Financial, Inc. Sell 2,085 2.9250 12/20/08 -- (39,770)
iStar Financial, Inc. Sell 1,215 3.0000 12/20/08 -- (22,301)
iStar Financial, Inc. Sell 1,790 5.8500 12/20/08 -- 16,114
iStar Financial, Inc. Sell 560 4.3200 12/20/12 -- 6,289
iStar Financial, Inc. Sell 770 4.5000 12/20/12 -- 16,172
Republic of Peru Buy 1,900 1.7100 12/20/16 -- (32,805)
Republic of Peru Sell 405 1.3200 4/20/17 -- (4,081)
Republic of Peru Sell 440 1.5000 4/20/17 -- 1,399
Vale Overseas Ltd. Sell 995 1.0500 3/20/17 -- (11,826)
Washington Mutual, Inc. Sell 415 4.5000 12/20/08 -- (2,214)
- ----------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Capital
Markets LP General Motors Corp. Sell 1,650 4.9500 12/20/16 -- (190,621)
- ----------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs
International:
ABX.HE.AA.06-2 Index Sell 970 0.1700 5/25/46 (383,127) (368,577)
ABX.HE.AA.06-2 Index Sell 240 0.1700 5/25/46 (19,774) (91,194)
ABX.HE.AAA.06-2 Index Sell 1,000 0.1100 5/25/46 (110,607) (134,985)
Amkor Technology, Inc. Sell 395 2.6500 9/20/08 -- 3,415
ArvinMeritor, Inc. Sell 1,025 1.6000 9/20/08 -- (14,152)
Beazer Homes USA, Inc. Sell 940 2.5000 6/20/08 -- (50,638)
Beazer Homes USA, Inc. Sell 1,300 2.6500 9/20/08 -- (107,746)
Beazer Homes USA, Inc. Sell 1,000 4.8000 9/20/08 -- (68,730)
First Data Corp. Sell 230 3.0000 9/20/08 -- 1,411
GMAC LLC Sell 850 1.3900 3/20/17 -- (188,035)
GMAC LLC Sell 1,040 1.3900 3/20/17 -- (230,066)
GMAC LLC Sell 1,200 1.3700 3/20/17 -- (266,442)
GMAC LLC Sell 2,190 1.3900 3/20/17 -- (484,466)
33 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
CREDIT DEFAULT SWAPS: Continued
- ------------------------------------------------------------------------------------------------------------------------------------
BUY/SELL NOTIONAL PAY/ PREMIUM
CREDIT AMOUNT RECEIVE TERMINATION PAID/
SWAP COUNTERPARTY REFERENCE ENTITY PROTECTION (000S) FIXED RATE DATE (RECEIVED) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs
International:
Continued
iStar Financial, Inc. Sell $ 2,060 3.9500% 12/20/12 $ -- $ 1,450
K. Hovnanian Enterprises, Inc. Sell 2,950 2.0000 6/20/08 -- (210,392)
K. Hovnanian Enterprises, Inc. Sell 1,875 2.0000 6/20/08 -- (133,724)
K. Hovnanian Enterprises, Inc. Sell 1,880 1.8000 6/20/08 -- (135,775)
Lennar Corp. Sell 550 2.9000 12/20/08 -- (23,783)
Nalco Co. Sell 660 3.7000 9/20/12 -- (8,904)
Residential Capital LLC Sell 903 1.1800 3/20/08 -- (67,748)
Residential Capital LLC Sell 1,350 1.3600 3/20/08 -- (100,714)
Standard Pacific Corp. Sell 5,450 2.2000 6/20/08 -- (487,575)
The Mosaic Co. Sell 535 2.0000 9/20/12 -- 18,003
- ------------------------------------------------------------------------------------------------------------------------------------
JPMorgan Chase
Bank NA,
NY Branch:
CDX.NA.HY.8 Index Sell 3,495 2.7500 6/20/12 (174,240) (172,934)
CDX.NA.HY.9 Index Sell 6,455 3.7500 12/20/12 (6,724) (277,642)
Dean Foods Co. Sell 915 1.0300 6/20/11 -- (52,396)
Dean Foods Co. Sell 915 1.0600 6/20/11 -- (51,550)
Dean Foods Co. Sell 500 1.0500 6/20/11 -- (28,323)
Dean Foods Co. Sell 1,250 1.0800 6/20/11 -- (69,652)
Dole Food Co., Inc. Sell 1,155 2.3800 9/20/08 -- (16,707)
Ford Motor Co. Sell 2,065 6.0000 12/20/16 -- (177,342)
General Motors Corp. Sell 2,545 4.7500 12/20/16 -- (298,717)
Lehman Brothers Holdings, Inc. Sell 3,710 1.5500 9/20/08 -- 975
Merrill Lynch & Co., Inc. Sell 3,710 0.8000 9/20/08 -- (21,327)
Morgan Stanley Sell 1,195 0.7500 9/20/08 -- (3,674)
Morgan Stanley Sell 3,265 0.7500 9/20/08 -- (10,037)
Rite Aid Corp. Sell 1,135 1.4000 9/20/08 -- (32,700)
The Mosaic Co. Sell 500 1.5000 9/20/12 -- 16,213
Toys "R" Us, Inc. Sell 510 1.9200 9/20/08 -- (8,735)
- ------------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers
Special
Financing, Inc.:
ABX.HE.AA.06-2 Index Sell 180 0.1700 5/25/46 (44,090) (68,301)
Allied Waste North America, Inc. Sell 640 1.8800 3/20/12 -- (33,683)
Allied Waste North America, Inc. Sell 330 1.8800 3/20/12 -- (17,368)
Amkor Technology, Inc. Sell 650 2.5000 9/20/08 -- 4,795
Arvinmeritor, Inc. Sell 1,025 1.1500 9/20/08 -- (16,422)
Arvinmeritor, Inc. Sell 1,260 2.2000 9/20/08 -- (10,535)
Arvinmeritor, Inc. Sell 840 3.0000 9/20/08 -- (2,121)
Beazer Homes USA, Inc. Sell 1,900 2.6500 6/20/08 -- (151,333)
Beazer Homes USA, Inc. Sell 465 2.3300 6/20/08 -- (37,695)
Beazer Homes USA, Inc. Sell 1,600 5.4000 9/20/08 -- (122,791)
Cablevision Systems Corp. Sell 150 3.4000 12/20/10 -- (2,226)
Cablevision Systems Corp. Sell 590 3.1300 12/20/10 -- (12,970)
CDX.NA.HY.8 Index Sell 4,070 2.7500 6/20/12 (202,906) (210,623)
CDX.NA.HY.8 Index Sell 2,905 2.7500 6/20/12 (141,195) (150,334)
CDX.NA.HY.9 Index Sell 12,780 3.7500 12/20/12 41,269 (560,392)
Charter Communications Holdings LLC Sell 595 5.0000 9/20/12 (89,250) (250,318)
Charter Communications Holdings LLC Buy 595 7.2500 9/20/10 -- 162,957
Charter Communications Holdings LLC Sell 595 5.0000 9/20/12 (95,200) (250,317)
Charter Communications Holdings LLC Buy 595 7.6000 9/20/10 -- 158,826
Dillard's, Inc. Sell 675 2.2500 12/20/08 -- (170)
Dillard's, Inc. Sell 1,965 2.2500 12/20/08 -- (495)
34 | OPPENHEIMER STRATEGIC BOND FUND/VA
BUY/SELL NOTIONAL PAY/ PREMIUM
CREDIT AMOUNT RECEIVE TERMINATION PAID/
SWAP COUNTERPARTY REFERENCE ENTITY PROTECTION (000S) FIXED RATE DATE (RECEIVED) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers
Special
Financing, Inc.:
Continued
Dole Food Co., Inc. Sell $ 1,305 3.2000% 9/20/08 $ -- $ (7,127)
Dole Food Co., Inc. Sell 900 5.2500 9/20/08 -- 8,587
El Paso Corp. Sell 1,404 0.7300 6/20/11 -- (31,598)
El Paso Corp. Sell 530 0.8000 6/20/11 -- (10,738)
First Data Corp. Sell 1,145 2.7500 9/20/08 -- 1,103
First Data Corp. Sell 1,145 3.5000 9/20/08 -- 7,427
First Data Corp. Sell 689 3.0000 9/20/08 -- 1,932
First Data Corp. Sell 700 3.0000 9/20/08 -- 1,963
GMAC LLC Sell 970 1.4000 3/20/17 -- (215,749)
GMAC LLC Sell 850 1.4000 3/20/17 -- (189,059)
Itraxx Europe Crossover Series 8
Version 1 Buy 25,610 3.7500 12/20/12 (1,418,789) (769,003)
K. Hovnanian Enterprises, Inc. Sell 2,880 4.2200 9/20/08 -- (343,345)
Lennar Corp. Sell 2,220 2.9000 12/20/08 -- (92,651)
MBIA, Inc. Sell 6,515 1.9500 9/20/08 -- (359,743)
Nalco Co. Sell 355 3.4000 9/20/12 -- (8,505)
Nortel Networks Corp. Sell 560 1.8500 9/20/08 -- (1,377)
Reliant Energy, Inc. Sell 455 2.5000 9/20/11 -- (14,874)
Rite Aid Corp. Sell 500 1.3500 9/20/08 -- (13,571)
Rite Aid Corp. Sell 1,255 1.3500 9/20/08 -- (34,064)
Rite Aid Corp. Sell 75 1.4500 9/20/08 -- (1,981)
Six Flags, Inc. Sell 2,350 5.2200 9/20/08 -- (82,155)
Six Flags, Inc. Sell 370 7.0000 9/20/08 -- (8,286)
Six Flags, Inc. Sell 520 5.0000 9/20/08 -- (18,987)
Smithfield Foods, Inc. Sell 1,130 1.5800 3/20/12 -- (50,871)
The Bear Stearns Cos., Inc. Sell 3,720 1.6000 9/20/08 -- (13,355)
Toys "R" Us, Inc. Sell 985 1.8500 9/20/08 -- (17,378)
Toys "R" Us, Inc. Sell 1,360 1.9500 9/20/08 -- (23,001)
Toys "R" Us, Inc. Sell 690 4.3000 9/20/08 -- 169
Tribune Co. Sell 215 6.4000 12/20/08 -- (13,298)
Tribune Co. Sell 445 6.0000 12/20/08 -- (29,159)
Tribune Co. Sell 595 7.4500 9/20/08 -- (21,838)
Tribune Co. Sell 375 7.5500 9/20/08 -- (13,497)
Tribune Co. Sell 150 7.5500 9/20/08 -- (5,399)
Univision Communications, Inc. Sell 941 1.1500 6/20/08 -- (9,749)
Univision Communications, Inc. Sell 2,079 1.2000 6/20/08 -- (21,026)
Univision Communications, Inc. Sell 468 1.1000 6/20/08 -- (4,964)
Washington Mutual, Inc. Sell 965 4.4000 12/20/08 -- (8,790)
Washington Mutual, Inc. Sell 2,060 5.1500 12/20/08 -- 4,332
- ------------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch
International:
Ford Motor Co. Sell 2,450 5.3000 12/20/12 -- (209,096)
General Motors Corp. Sell 1,635 4.0500 12/20/12 -- (178,547)
Georgia-Pacific LLC Sell 385 3.2500 12/20/12 -- (4,668)
Georgia-Pacific LLC Sell 385 3.3500 12/20/12 -- (3,092)
Reliant Energy, Inc. Sell 595 2.0500 9/20/11 -- (28,970)
Republic of Turkey Sell 1,570 2.4700 4/20/17 -- 18,753
TXU Corp. Sell 935 1.5300 6/20/11 -- (81,569)
TXU Corp. Sell 960 1.5800 6/20/11 -- (82,317)
TXU Corp. Sell 960 1.5900 6/20/11 -- (82,031)
TXU Corp. Sell 1,210 1.6200 6/20/11 -- (102,310)
TXU Corp. Sell 1,405 2.0600 6/20/11 -- (100,347)
35 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
CREDIT DEFAULT SWAPS: Continued
- ------------------------------------------------------------------------------------------------------------------------------------
BUY/SELL NOTIONAL PAY/ PREMIUM
CREDIT AMOUNT RECEIVE TERMINATION PAID/
SWAP COUNTERPARTY REFERENCE ENTITY PROTECTION (000S) FIXED RATE DATE (RECEIVED) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley & Co.
International Ltd. Smithfield Foods, Inc. Sell $ 1,500 1.5100% 3/20/12 $ -- $ (60,020)
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley
Capital Services,
Inc.:
ABX.HE.AA.06-2 Index Sell 240 0.1700 5/25/46 (19,174) (91,068)
ABX.HE.AA.06-2 Index Sell 480 0.1700 5/25/46 (47,998) (180,046)
Capmark Financial Group, Inc. Sell 460 7.4000 12/20/12 -- 14,104
Capmark Financial Group, Inc. Sell 415 7.1500 12/20/12 -- 8,699
CDX North America Investment
Grade Index Sell 10,300 3.0000 3/23/13 -- (131,655)
CDX.NA.HY.9 Index Sell 5,885 3.7500 12/20/12 (31,264) (251,024)
Dean Foods Co. Sell 920 0.9500 6/20/11 -- (58,642)
Ford Motor Co. Sell 2,065 6.1500 12/20/16 -- (154,684)
Ford Motor Co. Sell 520 5.9000 12/20/16 -- (46,074)
General Motors Corp. Sell 1,650 4.9000 12/20/16 -- (190,648)
General Motors Corp. Sell 420 4.6200 12/20/16 -- (55,012)
Istanbul Bond Co. SA for Finansbank Sell 5,180 1.3000 3/24/13 -- (5,585)
Lennar Corp. Sell 410 2.9000 12/20/08 -- (15,608)
Republic of Indonesia Sell 3,450 2.2300 9/20/12 -- 113,255
Republic of Peru Sell 2,330 1.0400 6/20/17 -- (68,738)
Republic of Turkey Sell 1,145 2.7500 11/20/16 -- 39,062
Republic of Turkey Sell 3,140 1.6000 4/20/12 -- 22,730
Republic of Turkey Sell 690 2.8500 11/20/16 -- 28,244
Residential Capital LLC Sell 3,460 6.1700 9/20/08 -- (564,750)
Residential Capital LLC Sell 1,185 6.2500 9/20/08 -- (192,856)
Smithfield Foods, Inc. Sell 1,000 1.7700 3/20/12 -- (30,394)
- ------------------------------------------------------------------------------------------------------------------------------------
UBS AG:
iStar Financial, Inc. Sell 410 4.5600 12/20/12 -- 18,242
Lehman Brothers Holdings, Inc. Sell 1,490 1.5500 9/20/08 -- (59)
Massey Energy Co. Sell 360 5.0500 9/20/12 -- 10,940
Massey Energy Co. Sell 600 5.1000 9/20/12 -- 19,389
Republic of Indonesia Sell 375 2.3000 9/20/11 -- 13,349
Republic of The Philippines Sell 3,095 1.4500 6/20/17 -- (126,776)
Republic of The Philippines Sell 1,870 2.5000 6/20/17 -- 62,734
The Mosaic Co. Sell 560 1.7800 9/20/12 -- 24,428
--------------------------
$(3,035,389) $(18,970,925)
==========================
36 | OPPENHEIMER STRATEGIC BOND FUND/VA
- ------------------------------------------------------------------------------------------------------------------------------------
INTEREST RATE SWAPS AS OF DECEMBER 31, 2007 ARE AS FOLLOWS:
- ------------------------------------------------------------------------------------------------------------------------------------
SWAP NOTIONAL PAID BY RECEIVED BY TERMINATION
COUNTERPARTY AMOUNT THE FUND THE FUND DATE VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
Banco Santander
Central Hispano SA:
1,188,000,000 CLP Six-Month Tasa Nominal Annual 6.6000% 8/21/17 $ 23,901
(TNA-Chile)
56,000,000 BRR BZDI 12.2900 1/4/10 (142,686)
4,420,000 BRR BZDI 14.0000 1/3/12 81,736
- ------------------------------------------------------------------------------------------------------------------------------------
Barclays Bank plc 90,750,000 NOK Six-Month NOK NIBOR 5.5400 11/5/17 (12,868)
- ------------------------------------------------------------------------------------------------------------------------------------
Citibank NA, London:
1,260,000 PLZ Six-Month WIBOR 5.5200 3/24/10 3,284
2,016,000 PLZ Six-Month WIBOR 5.5500 3/25/10 5,578
- ------------------------------------------------------------------------------------------------------------------------------------
Citibank NA, New York:
73,200,000 TWD 2.3200% TWD-Telerate 6/27/11 12,350
546,000,000 TWD 2.9400 Three-Month TWD 11/6/17 (343,025)
950,000,000 CLP Six-Month Tasa Nominal Annual
(TNA) 6.5300 8/25/17 11,172
- ------------------------------------------------------------------------------------------------------------------------------------
Credit Suisse First Boston, Inc. 3,640,000 PLZ Six-Month WIBOR 4.4800 7/1/10 (59,629)
- ------------------------------------------------------------------------------------------------------------------------------------
Credit Suisse International:
22,480,000 MXN MXN TIIE 8.3000 12/17/26 (94,099)
950,000,000 CLP Six-Month Tasa Nominal Annual 6.5800 8/21/17 15,654
(TNA-Chile)
Three-Month
46,600,000 ZAR 10.6400 ZAR-JIBAR-SAFEX 11/7/08 7,450
- ------------------------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG:
73,400,000 INR 7.1750 INR MIBOR-OIS Compound 6/27/11 (242)
21,950,000 NZD Three-Month NZD-BBR-FRA 7.8200 11/5/17 (80,737)
360,000,000 HUF 8.4400 Six-Month BUBOR 7/4/11 (80,917)
62,210,000 SEK Three-Month SEK-STIBOR 4.7875 11/14/17 (90,948)
2,928,000,000 HUF 6.5700 Six-Month HUF-BUBOR 11/6/17 365,120
- ------------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Capital
Markets LP 21,000,000 BRR BZDI 14.5500 1/4/10 494,172
- ------------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc.
(The) 23,010,000 MXN MXN TIIE 9.8400 12/31/09 64,206
- ------------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs International 18,300,000 CNY 4.0000 CNY-CFXSREPOFIX01 2/16/17 98,069
- ------------------------------------------------------------------------------------------------------------------------------------
J Aron & Co.:
43,800,000 BRR BZDI 10.6700 1/2/12 (1,391,611)
22,300,000 MXN MXN TIIE 9.1500 8/27/26 73,803
9,700,000 MXN MXN TIIE 9.3300 9/16/26 47,091
8,790,000 BRR BZDI 12.9200 1/2/14 7,051
4,390,000 BRR BZDI 12.8700 1/2/14 (315)
8,750,000 BRR BZDI 12.7100 1/4/10 19,012
15,140,000 BRR BZDI 12.6100 1/4/10 14,556
19,400,000 BRR BZDI 12.3900 1/2/12 (118,039)
25,560,000 BRR BZDI 14.8900 1/4/10 738,499
6,910,000 BRR BZDI 12.2600 1/2/15 (82,844)
3,160,000 BRR BZDI 12.2900 1/2/15 (36,139)
4,420,000 BRR BZDI 14.0500 1/2/12 88,331
- ------------------------------------------------------------------------------------------------------------------------------------
JPMorgan Chase Bank $ 82,000,000 Three-Month USD BBA LIBOR 5.5700 5/26/16 5,419,139
- ------------------------------------------------------------------------------------------------------------------------------------
JPMorgan Chase Bank NA:
19,400,000 BRR BZDI 12.3800 1/2/12 (108,802)
8,750,000 BRR BZDI 13.9100 1/2/12 143,100
- ------------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers
Special Financing, Inc.:
4,680,000 PLZ Six-Month WIBOR 4.5300 7/5/10 (35,266)
The greater of 0% and 8 times
(-0.0031375 minus (10 yr. CMS
13,350,000 Index plus 2 yr. CMS Index)) $ 400,500 2/5/17 (31,566)
quarterly
37 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
INTEREST RATE SWAPS: Continued
- ------------------------------------------------------------------------------------------------------------------------------------
SWAP NOTIONAL PAID BY RECEIVED BY TERMINATION
COUNTERPARTY AMOUNT THE FUND THE FUND DATE VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital
Services, Inc. 14,260,000 EUR 4.7130% Six-Month EURIBOR 8/22/17 $ (2,395)
- ------------------------------------------------------------------------------------------------------------------------------------
Westpac Banking Corp.:
31,510,000 EUR Six-Month EUR-EURIBOR-Telerate 4.2400% 11/29/10 (118,087)
20,460,000 NZD 7.9700 Three-Month NZD-BBR-FRA 11/29/10 18,065
20,410,000 NZD 7.8400 Three-Month NZD-BBR-FRA 10/13/10 41,049
20,410,000 NZD 7.9075 Three-Month NZD-BBR-FRA 10/19/10 31,675
-----------
$4,993,848
===========
Notional amount is reported in U.S. Dollars (USD), except for those denoted in
the following currencies:
BRR Brazilian Real
CLP Chilean Peso
CNY Chinese Renminbi (Yuan)
EUR Euro
HUF Hungarian Forint
INR Indian Rupee
MXN Mexican Nuevo Peso
NOK Norwegian Krone
NZD New Zealand Dollar
PLZ Polish Zloty
SEK Swedish Krone
TWD New Taiwan Dollar
ZAR South African Rand
Index abbreviations are as follows:
BBA LIBOR British Bankers' Association London-Interbank Offered Rate
BUBOR Budapest Interbank Offered Rate
BZDI Brazil Interbank Deposit Rate
CMS Constant Maturity Swap
CNY-CFXSREPOFIX01 Chinese Renminbi 7 Days Repurchase Fixing Rates
EURIBOR Euro 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
NIBOR Norwegian Interbank Offered Rate
NZD-BBR-FRA New Zealand Dollar-Bank Bill Rate-Forward Rate Agreement
STIBOR Stockholm Interbank Offered Rate
WIBOR Poland Warsaw Interbank Offer Bid Rate
ZAR-JIBAR-SAFEX South African Rand-Johannesburg Interbank Agreed Rate-South
African Futures Exchange
38 | OPPENHEIMER STRATEGIC BOND FUND/VA
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN SWAPS AS OF DECEMBER 31, 2007 ARE AS FOLLOWS:
- ----------------------------------------------------------------------------------------------------------------------------------
SWAP NOTIONAL RECEIVED BY THE TERMINATION
COUNTERPARTY AMOUNT PAID BY THE FUND FUND DATE VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
If positive, the
If negative, the Total Return of the
absolute value of Lehman Brothers
the Lehman U.S. CMBS AAA
Brothers U.S. CMBS 8.5+ Index minus
Barclays Bank plc $ 1,100,000 AAA 8.5+ Index 25 basis points 5/1/08 $ 18,413
- ----------------------------------------------------------------------------------------------------------------------------------
Citibank NA, New York:
Twelve-Month JPY
BBA LIBOR plus 40
basis points and if
negative, the
absolute value of
the Total Return of If positive, the Total
a custom basket of Return of a custom
1,170,257,964 JPY securities basket of securities 4/8/08 (449,321)
Twelve-Month
GBP BBA LIBOR
plus 35 basis points
and if negative, the
absolute value of
the Total Return of If positive, the Total
a custom basket of Return of a custom
5,041,620 GPB securities basket of securities 5/7/08 221,744
- ----------------------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG:
If positive, the
If negative, the Total Return of the
absolute value of Lehman Brothers
the Lehman U.S. CMBS AAA
Brothers U.S. CMBS 8.5+ Index plus 60
10,740,000 AAA 8.5+ Index basis points 2/1/08 196,691
Six-Month USD
1,620,000 BBA LIBOR 5.46% times UDI 5/13/15 379,712
Six-Month USD
930,000 LIBOR 5.25% times UDI 6/23/15 185,715
- ----------------------------------------------------------------------------------------------------------------------------------
Deutsche Bank
AG, London:
One-Month BBA
EURIBOR plus 10
basis points and if
negative, the
absolute value of
the Total Return of If positive, the
a custom equity Total Return of a
4,770,897 EUR basket custom equity basket 10/7/08 98,720
One-Month USD
BBA LIBOR plus 20
basis points and if
negative, the
absolute value of
the Total Return of If positive, the
a custom equity Total Return of a
8,771,141 basket custom equity basket 9/15/08 255,087
39 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN SWAPS: Continued
- ----------------------------------------------------------------------------------------------------------------------------------
SWAP NOTIONAL RECEIVED BY THE TERMINATION
COUNTERPARTY AMOUNT PAID BY THE FUND FUND DATE VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs
Group, Inc. (The):
Six-Month BBA
$ 920,000 LIBOR 5.10% times UDI 1/14/15 $ 217,283
Six-Month BBA
920,000 LIBOR 5.08% times UDI 1/20/15 235,852
- ----------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs
International:
One-Month USD
BBA LIBOR plus 30
basis points and if
negative, the
absolute value of If positive, the
the Total Return of Total Return of
a custom equity acustom equity
33,790,540 basket basket 12/9/08 500,623
One-Month USD
BBA LIBOR and if
negative, the
absolute value of If positive, the Total
the MSCI Daily Return of the MSCI
Total Return New Daily Total Return
Belgium USD New Belgium USD
2,714,359 Market Index Market Index 10/8/08 (35,823)
One-Month USD
BBA LIBOR and if
negative, the If positive, the
absolute value of Total Return of the
the MSCI Daily MSCI Daily Total
Total Return New Return New
Belgium USD Belgium USD
592,754 Market Index Market Index 10/8/08 (8,255)
One-Month USD
BBA LIBOR and if
negative, the If positive, the
absolute value of Total Return of the
the MSCI Daily MSCI Daily Total
Total Return New Return New
Belgium USD Belgium USD
459,776 Market Index Market Index 10/8/08 (5,749)
If negative, the
absolute value of If positive, the
the Total Return of Total Return ofthe
the BOVESPA 02/08 BOVESPA 02/08
6,103,035 BRR Index Index 2/14/08 (104,894)
If negative, the
If positive, the absolute value of
Total Return of the the Total Return of
INDF/S&P CNX the INDF/S&P CNX
NSE NIFTY Index NSE NIFTY Index
(135,712,500) INR 01/08 Future 01/08 Future 2/7/08 (163,979)
If negative, the
absolute value of
If positive, the Total the Total Return of
Return of the the EURX SMI
(3,853,800) CHF EURX SMI Index Index 3/25/08 31,581
40 | OPPENHEIMER STRATEGIC BOND FUND/VA
SWAP NOTIONAL RECEIVED BY THE TERMINATION
COUNTERPARTY AMOUNT PAID BY THE FUND FUND DATE VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers
Special Financing, Inc.:
If positive, the
If negative, the Total Return of the
absolute value of Lehman Brothers
the Lehman U.S. CMBS AAA
Brothers U.S. CMBS 8.5+ Index minus
$ 16,600,000 AAA 8.5+ Index 42.5 basis points 6/1/08 $ 287,816
If negative, the If positive, the
absolute value of Total Return of the
the Lehman Lehman Brothers
Brothers U.S. CMBS U.S. CMBS AAA
8,300,000 AAA 8.5+ Index 8.5+ Index 6/1/08 146,647
If positive, the
If negative, the Total Return of the
absolute value of Lehman Brothers
the Lehman U.S. CMBS AAA
Brothers U.S. CMBS 8.5+ Index minus
5,000,000 AAA 8.5+ Index 20 basis points 5/1/08 87,778
If positive, the
If negative, the Total Return of the
absolute value of Lehman Brothers
the Lehman U.S. CMBS AAA
Brothers U.S. CMBS 8.5+ Index plus 60
3,906,000 AAA 8.5+ Index basis points 2/1/08 70,730
If positive, the
If negative, the Total Return of the
absolute value of Lehman Brothers
the Lehman U.S. CMBS AAA
Brothers U.S. CMBS 8.5+ Index plus 55
12,002,000 AAA 8.5+ Index basis points 5/1/08 216,883
If negative, the If positive, the
absolute value of Total Return of the
the Lehman Lehman Brothers
Brothers U.S. CMBS U.S. CMBS AAA
8,300,000 AAA 8.5+ Index 8.5+ Index 6/1/08 146,647
If positive, the
If negative, the Total Return of the
absolute value of Lehman Brothers
the Lehman U.S. CMBS AAA
Brothers U.S. CMBS 8.5+ Index minus
3,760,000 AAA 8.5+ Index 25 basis points 3/1/08 65,689
If positive, the
If negative, the Total Return of the
absolute value of Lehman Brothers
the Lehman U.S. CMBS AAA
Brothers U.S. CMBS 8.5+ Index plus 45
15,909,000 AAA 8.5+ Index basis points 5/1/08 286,291
41 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN SWAPS: Continued
- ----------------------------------------------------------------------------------------------------------------------------------
SWAP NOTIONAL RECEIVED BY THE TERMINATION
COUNTERPARTY AMOUNT PAID BY THE FUND FUND DATE VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch Capital
Services, Inc.:
The Constant
Maturity Option
Price divided by
$ 15,380,000 5.33% 10,000 8/13/17 $ (296,373)
The Constant
Maturity Option
Price divided by
54,700,000 4.66 10,000 6/11/17 1,315,211
If negative, the If positive, the
absolute value of Total Return of the
the Lehman Lehman Brothers
Brothers U.S. U.S. CMBS AAA
CMBS AAA 8.5+ 8.5+ Index minus
1,100,000 Index 25 basis points 5/1/08 16,931
If negative, the
absolute value of If positive, the
the Lehman Total Return of the
Brothers U.S. Lehman Brothers
CMBS AAA 8.5+ U.S. CMBS AAA
8,300,000 Index 8.5+ Index 6/1/08 128,645
If negative, the If positive, the
absolute value of Total Return of the
the Lehman Lehman Brothers
Brothers U.S. U.S. CMBS AAA
CMBS AAA 8.5+ 8.5+ Index plus
4,900,000 Index 110 basis points 1/31/08 79,814
7.75% from debt
obligations of JSC
Rushydro and
Three-Month OJSC Saratovskaya
271,430,000 RUR USD BBA LIBOR HPP 12/26/13 17,698
- ----------------------------------------------------------------------------------------------------------------------------------
One-Month EUR
BBA LIBOR plus 30
basis points and if
negative, the
absolute value of If positive, the
the Total Return of Total Return of a
a custom basket of custom basket of
Morgan Stanley International 4,804,400 EUR securities securities 10/7/08 (228,037)
- ----------------------------------------------------------------------------------------------------------------------------------
UBS AG:
If negative, the If positive, the
absolute value of Total Return of the
the Lehman Lehman Brothers
Brothers U.S. U.S. CMBS AAA
CMBS AAA 8.5+ 8.5+ Index minus
3,400,000 Index 20 basis points 5/1/08 60,104
If negative, the If positive, the
absolute value of Total Return of the
the Lehman Lehman Brothers
Brothers U.S. U.S. CMBS AAA
CMBS AAA 8.5+ 8.5+ Index plus 60
4,882,000 Index basis points 2/1/08 89,666
------------
$ 4,065,540
============
42 | OPPENHEIMER STRATEGIC BOND FUND/VA
Notional amount is reported in U.S. Dollars (USD), except for those denoted in
the following currencies:
BRR Brazilian Real
CHF Swiss Franc
EUR Euro
GBP British Pound Sterling
INR Indian Rupee
JPY Japanese Yen
RUR Russian Ruble
Index abbreviations are as follows:
BBA British Bankers' Association
BBA LIBOR British Bankers' Association London-Interbank Offered Rate
BOVESPA Sao Paulo Stock Exchange
CMBS Commercial Mortgage Backed Securities
EURIBOR Euro Interbank Offered Rate
EURX SMI Europeon Stock Exchange
INDF/S&P CNX NSE
NIFTY Index Indian S&P National Stock Exchange Nifty Index
LIBOR London-Interbank Offered Rate
MSCI Morgan Stanley Capital International
UDI Unidad de Inversion (Unit of Investment)
- --------------------------------------------------------------------------------------------------------------------------------
CURRENCY SWAPS AS OF DECEMBER 31, 2007 ARE AS FOLLOWS:
- --------------------------------------------------------------------------------------------------------------------------------
SWAP NOTIONAL PAID BY THE RECEIVED BY THE TERMINATION
COUNTERPARTY AMOUNT FUND FUND DATE VALUE
- --------------------------------------------------------------------------------------------------------------------------------
Credit Suisse International:
Three Month USD
3,170,000 TRY BBA LIBOR 16.75% 2/26/12 $ 789,174
Three-Month
1,255,000 TRY USD BBA LIBOR 17.25 2/7/12 348,803
Three-Month
1,890,000 TRY USD BBA LIBOR 17.30 2/9/12 524,355
- --------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch International: Three-Month
1,960,000 TRY BBA LIBOR 17.10 2/6/12 627,127
------------
$ 2,289,459
============
Notional amount is reported in U.S. Dollars (USD), except for those denoted in
the following currency:
TRY New Turkish Lira
Index abbreviation is as follows:
BBA LIBOR British Bankers' Association London-Interbank Offered Rate
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
43 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 31, 2007
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments:
Unaffiliated companies (cost $2,893,392,554) $ 2,955,778,325
Affiliated companies (cost $729,095,393) 727,894,756
------------------
3,683,673,081
- --------------------------------------------------------------------------------------------------------------------------
Cash 5,737,788
- --------------------------------------------------------------------------------------------------------------------------
Cash--foreign currencies (cost $822,479) 944,426
- --------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation on foreign currency contracts 22,434,343
- --------------------------------------------------------------------------------------------------------------------------
Swaps, at value (net premiums received $2,102,813) 15,279,065
- --------------------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold (including $88,688,225 sold on a when-issued or delayed delivery basis) 89,193,333
Interest, dividends and principal paydowns 39,942,843
Closed foreign currency contracts 13,183,837
Futures margins 4,245,333
Shares of beneficial interest sold 3,743,702
Other 37,728
------------------
Total assets 3,878,415,479
- --------------------------------------------------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------------------------------------------------
Short positions, at value (proceeds of $61,937,320)--see accompanying statement of investments 62,377,385
- --------------------------------------------------------------------------------------------------------------------------
Options written, at value (premiums received $436,779)--see accompanying statement of investments 133,529
- --------------------------------------------------------------------------------------------------------------------------
Return of collateral for securities loaned 60,320,900
- --------------------------------------------------------------------------------------------------------------------------
Unrealized depreciation on foreign currency contracts 8,646,516
- --------------------------------------------------------------------------------------------------------------------------
Swaps, at value (net premiums received $932,576) 22,901,143
- --------------------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased (including $92,117,428 purchased on a when-issued or delayed delivery basis) 94,952,427
Shares of beneficial interest redeemed 12,225,467
Closed foreign currency contracts 4,042,549
Distribution and service plan fees 1,696,605
Due to Custodian 162,658
Trustees' compensation 16,139
Transfer and shareholder servicing agent fees 1,752
Other 311,000
------------------
Total liabilities 267,788,070
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 3,610,627,409
==================
- --------------------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- --------------------------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 641,359
- --------------------------------------------------------------------------------------------------------------------------
Additional paid-in capital 3,326,010,180
- --------------------------------------------------------------------------------------------------------------------------
Accumulated net investment income 174,553,620
- --------------------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 41,100,121
- --------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets and liabilities denominated in
foreign currencies 68,322,129
------------------
NET ASSETS $ 3,610,627,409
==================
- --------------------------------------------------------------------------------------------------------------------------
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 $734,611,556 and 132,010,644 shares of beneficial interest outstanding) $ 5.56
- --------------------------------------------------------------------------------------------------------------------------
Service Shares:
Net asset value, redemption price per share and offering price per share
(based on net assets of $2,876,015,853 and 509,348,837 shares of beneficial interest outstanding) $ 5.65
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
44 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 31, 2007
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- -----------------------------------------------------------------------------------------------------
Interest (net of foreign withholding taxes of $138,170) $ 135,910,506
- -----------------------------------------------------------------------------------------------------
Dividends:
Unaffiliated companies (net of foreign withholding taxes of $8,837) 414,463
Affiliated companies 23,751,284
- -----------------------------------------------------------------------------------------------------
Net investment income allocated from Oppenheimer Master Loan Fund, LLC 1,113,128
- -----------------------------------------------------------------------------------------------------
Portfolio lending fees 294,934
- -----------------------------------------------------------------------------------------------------
Fee income 211,749
---------------
Total investment income 161,696,064
- -----------------------------------------------------------------------------------------------------
EXPENSES
- -----------------------------------------------------------------------------------------------------
Management fees 15,516,248
- -----------------------------------------------------------------------------------------------------
Distribution and service plan fees--Service shares 5,175,409
- -----------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service shares 10,046
Service shares 10,106
- -----------------------------------------------------------------------------------------------------
Shareholder communications:
Non-Service shares 51,353
Service shares 137,831
- -----------------------------------------------------------------------------------------------------
Custodian fees and expenses 127,918
- -----------------------------------------------------------------------------------------------------
Trustees' compensation 42,245
- -----------------------------------------------------------------------------------------------------
Administration service fees 1,500
- -----------------------------------------------------------------------------------------------------
Other 223,417
---------------
Total expenses 21,296,073
Less reduction to custodian expenses (2,906)
Less waivers and reimbursements of expenses (501,695)
---------------
Net expenses 20,791,472
- -----------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 140,904,592
- -----------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- -----------------------------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments from unaffiliated companies (including premiums on options exercised) 18,477,431
Allocated from Oppenheimer Master Loan Fund, LLC (14,048)
Closing and expiration of option contracts written 2,973,089
Closing and expiration of futures contracts 43,842,911
Foreign currency transactions 32,021,417
Short positions (198,721)
Swap contracts (3,192,451)
---------------
Net realized gain 93,909,628
- -----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments (24,550,826)
Translation of assets and liabilities denominated in foreign currencies 56,554,939
Futures contracts 996,291
Option contracts written 199,332
Short positions (440,065)
Swap contracts (13,226,820)
---------------
Net change in unrealized appreciation 19,532,851
- -----------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 254,347,071
===============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
45 | OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2007 2006
- -----------------------------------------------------------------------------------------------
OPERATIONS
- -----------------------------------------------------------------------------------------------
Net investment income $ 140,904,592 $ 77,566,732
- -----------------------------------------------------------------------------------------------
Net realized gain 93,909,628 3,360,150
- -----------------------------------------------------------------------------------------------
Net change in unrealized appreciation 19,532,851 36,763,035
------------------------------------
Net increase in net assets resulting from operations 254,347,071 117,689,917
- -----------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------
Dividends from net investment income:
Non-Service shares (22,674,018) (23,204,298)
Service shares (53,839,537) (32,674,854)
------------------------------------
(76,513,555) (55,879,152)
- -----------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from beneficial
interest transactions: 88,509,398 50,531,351
Non-Service shares 1,341,464,972 694,229,148
------------------------------------
Service shares 1,429,974,370 744,760,499
- -----------------------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------------------
Total increase 1,607,807,886 806,571,264
- -----------------------------------------------------------------------------------------------
Beginning of period 2,002,819,523 1,196,248,259
------------------------------------
End of period (including accumulated net investment
income of $174,553,620 and $71,431,376, respectively) $ 3,610,627,409 $ 2,002,819,523
====================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
46 | OPPENHEIMER STRATEGIC BOND FUND/VA
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2007 2006 2005 2004 2003
- --------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 5.26 $ 5.11 $ 5.21 $ 5.05 $ 4.57
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .28 1 .26 1 .25 1 .22 1 .22
Net realized and unrealized gain (loss) .21 .11 (.12) .20 .56
---------------------------------------------------------------------
Total from investment operations .49 .37 .13 .42 .78
- --------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.19) (.22) (.23) (.26) (.30)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.56 $ 5.26 $ 5.11 $ 5.21 $ 5.05
=====================================================================
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 9.69% 7.49% 2.67% 8.67% 18.07%
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 734,611 $ 606,632 $ 538,141 $ 614,915 $571,445
- --------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 664,668 $ 564,248 $ 550,201 $ 584,878 $472,213
- --------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 5.34% 5.05% 4.91% 4.50% 5.61%
Total expenses 0.59% 4 0.64% 4 0.71% 0.74% 0.75%
Expenses after waivers, payments and/or
reimbursements and reduction to custodian expenses 0.57% 0.63% 0.71% 0.74% 0.75%
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 76% 5 93% 5 98% 5 88% 5 117%
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 less than one full year.
4. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended December 31, 2007 0.61%
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, 2007 $ 1,061,009,472 $ 1,120,098,096
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.
47 | OPPENHEIMER STRATEGIC BOND FUND/VA
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SERVICE SHARES YEAR ENDED DECEMBER 31, 2007 2006 2005 2004 2003
- --------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 5.34 $ 5.19 $ 5.29 $ 5.13 $ 4.67
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .28 1 .25 1 .21 1 .19 .27
Net realized and unrealized gain (loss) .22 .11 (.08) .22 .49
---------------------------------------------------------------------
Total from investment operations .50 .36 .13 .41 .76
- --------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.19) (.21) (.23) (.25) (.30)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.65 $ 5.34 $ 5.19 $ 5.29 $ 5.13
=====================================================================
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 9.55% 7.23% 2.48% 8.43% 17.16%
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 2,876,016 $ 1,396,188 $ 658,107 $ 242,705 $ 79,782
- --------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 2,075,028 $ 1,016,582 $ 408,515 $ 150,040 $ 34,744
- --------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 5.08% 4.83% 4.20% 3.82% 4.57%
Total expenses 0.84% 4 0.89% 4 0.96% 0.99% 1.02%
Expenses after waivers, payments and/or
reimbursements and reduction to custodian expenses 0.82% 0.88% 0.96% 0.99% 1.02%
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 76% 5 93% 5 98% 5 88% 5 117%
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. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended December 31, 2007 0.86%
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, 2007 $ 1,061,009,472 $ 1,120,098,096
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.
48 | 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 adviser is
OppenheimerFunds, Inc. (the "Manager").
The Fund offers two classes of shares. Both classes are sold at their
offering price, which is the net asset value per share, to separate investment
accounts of participating insurance companies as an underlying investment for
variable life insurance policies, variable annuity contracts or other investment
products. The class of shares designated as Service shares is subject to a
distribution and service plan. Both classes of shares have identical rights and
voting privileges with respect to the Fund in general and exclusive voting
rights on matters that affect that class alone. Earnings, net assets and net
asset value per share may differ due to each class having its own expenses, such
as transfer and shareholder servicing agent fees and shareholder communications,
directly attributable to that class.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of the New York Stock Exchange (the "Exchange"), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for trading. Securities may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. Securities traded on a registered U.S.
securities exchange 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 whose principal exchange is NASDAQ(R) are valued based on the closing
price reported by NASDAQ prior to the time when the Fund's assets are valued. In
the absence of a sale, the security is valued at the last sale price on the
prior trading day, if it is within the spread of the 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, collateralized
mortgage obligations and other asset-backed securities will be valued at the
mean between the "bid" and "asked" prices. Securities for which market
quotations are not readily available are valued at their fair value. 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. Shares of a registered investment company
that are not traded on an exchange are valued at the acquired investment
company's net asset value per share. "Money market-type" debt instruments with
remaining maturities of sixty days or less are valued at cost adjusted by the
amortization of discount or premium to maturity (amortized cost), which
approximates market value.
- --------------------------------------------------------------------------------
STRUCTURED SECURITIES. The Fund invests in structured securities whose market
values, interest rates and/or redemption prices are linked to the performance of
underlying foreign currencies, interest rate spreads, stock market indices,
prices of individual securities, commodities or other financial instruments or
the occurrence of other specific events. The structured securities are often
leveraged, increasing the volatility of each note's market value relative to the
change in the underlying linked financial element or event. Fluctuations in
value of these securities are recorded as unrealized gains and losses in the
accompanying Statement of Operations. The Fund records a realized gain or loss
when a structured security is sold or matures.
- --------------------------------------------------------------------------------
SECURITIES ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS. The Fund may purchase
securities on a "when-issued" basis, and may purchase or sell securities on a
"delayed delivery" basis. "When-issued" or "delayed delivery" refers to
securities whose terms and indenture are available and for which a market
exists, but which are not available for immediate delivery. Delivery and payment
for securities that have been purchased by the Fund on a when-issued basis
normally
49 | OPPENHEIMER STRATEGIC BOND FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
takes place within six months and possibly as long as two years or more after
the trade date. During this period, such securities do not earn interest, are
subject to market fluctuation and may increase or decrease in value prior to
their delivery. The purchase of securities on a when-issued basis may increase
the volatility of the Fund's net asset value to the extent the Fund executes
such transactions while remaining substantially fully invested. When the Fund
engages in when-issued or delayed delivery transactions, it relies on the buyer
or seller, as the case may be, to complete the transaction. Their failure to do
so may cause the Fund to lose the opportunity to obtain or dispose of the
security at a price and yield it considers advantageous. The Fund maintains
internally designated assets with a market value equal to or greater than the
amount of its purchase commitments. 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, 2007, the Fund had purchased securities issued on a
when-issued or delayed delivery basis and sold securities issued on a delayed
delivery basis as follows:
WHEN-ISSUED OR DELAYED
DELIVERY BASIS TRANSACTIONS
--------------------------------------------------
Purchased securities $92,117,428
Sold securities 88,688,225
The Fund may enter into "forward roll" transactions with respect to
mortgage-related securities. In this type of transaction, the Fund sells a
mortgage-related security to a buyer and simultaneously agrees to repurchase a
similar security (same type, coupon and maturity) at a later date at a set
price. During the period between the sale and the repurchase, the Fund will not
be entitled to receive interest and principal payments on the securities that
have been sold. The Fund records the incremental difference between the forward
purchase and sale of each forward roll as realized gain (loss) on investments or
as fee income in the case of such transactions that have an associated fee in
lieu of a difference in the forward purchase and sale price.
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. To assure its
future payment of the purchase price, the Fund maintains internally designated
assets with a market value equal to or greater than the payment obligation under
the roll.
- --------------------------------------------------------------------------------
SECURITIES SOLD SHORT. The Fund may short sale when-issued securities for future
settlement. The value of the open short position is recorded as a liability, and
the Fund records an unrealized gain or loss for the value of the open short
position. The Fund records a realized gain or loss when the short position is
closed out.
- --------------------------------------------------------------------------------
CREDIT RISK. The Fund invests in high-yield, non-investment-grade bonds, which
may be subject to a greater degree of credit risk. Credit risk relates to the
ability of the issuer to meet interest or principal payments or both as they
become due. The Fund may acquire securities in default, and is not obligated to
dispose of securities whose issuers subsequently default. As of December 31,
2007, securities with an aggregate market value of $18,208, representing less
than 0.001% 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
Exchange, normally 4:00 P.M. Eastern time, on each day the Exchange is open for
trading. Foreign exchange rates may be valued primarily using a reliable bank,
dealer or service authorized by the Board of Trustees.
Reported net realized gains and losses from foreign currency transactions
arise from sales of portfolio securities, sales and maturities of short-term
securities, sales of foreign currencies, exchange rate fluctuations between the
trade and settlement dates on securities transactions, and the difference
between the amounts of dividends, interest, and foreign withholding taxes
recorded on the Fund's books and the U.S. dollar equivalent of the amounts
actually received
50 | OPPENHEIMER STRATEGIC BOND FUND/VA
or paid. Net unrealized appreciation and depreciation on the translation of
assets and liabilities denominated in foreign currencies arise from changes in
the values of assets and liabilities, including investments in securities at
fiscal period end, resulting from changes in exchange rates.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
INVESTMENT IN OPPENHEIMER INSTITUTIONAL MONEY MARKET FUND. The Fund is permitted
to invest daily available cash balances in an affiliated money market fund. The
Fund may invest the available cash in Class E shares of Oppenheimer
Institutional Money Market Fund ("IMMF") to seek current income while preserving
liquidity. IMMF is a registered open-end management investment company,
regulated as a money market fund under the Investment Company Act of 1940, as
amended. The Manager is also the investment adviser of IMMF. 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.
- --------------------------------------------------------------------------------
INVESTMENTS IN OPPENHEIMER MASTER LOAN FUND, LLC. The Fund is permitted to buy
interests in trusts and other pooled entities that invest primarily or
exclusively in loan obligations, including entities sponsored and/or advised by
the Manager or an affiliate. The loans underlying these investments may include
loans to foreign or U.S. borrowers, may be collateralized or uncollateralized
and may be rated above or below investment grade or unrated. Oppenheimer Master
Loan Fund, LLC ("Master Loan") is a mutual fund registered under the Investment
Company Act of 1940, which seeks as high a level of current income and
preservation of capital as is consistent with investing primarily in loans and
other debt securities. The Manager is also the investment adviser of Master
Loan. The Manager expects at certain times that the investment in Master Loan
may exceed 15% of the Fund's net assets. The Fund's investment in Master Loan is
included in the Statement of Investments. As a shareholder, the Fund is subject
to its proportional share of Master Loan's 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
Master Loan.
- --------------------------------------------------------------------------------
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. If the seller of the agreement defaults and the value of the
collateral declines, or if the seller enters an insolvency proceeding,
realization of the value of the collateral by the Fund may be delayed or
limited.
- --------------------------------------------------------------------------------
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. Therefore, no federal income or excise tax provision is
required. The Fund files income tax returns in U.S. federal and applicable state
jurisdictions. The statute of limitations on the Fund's tax return filings
remain open for the three preceding fiscal reporting period ends.
51 | OPPENHEIMER STRATEGIC BOND FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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
--------------------------------------------------------------------------
$184,340,397 $34,897,538 $215,406 $65,401,348
1. The Fund had $19,681 of post-October passive foreign investment company
losses which were deferred.
2. The Fund had $195,725 of straddle losses which were deferred.
3. During the fiscal year ended December 31, 2007, the Fund utilized $13,349,869
of capital loss carryforward to offset capital gains realized in that fiscal
year.
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.
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, 2007.
Net assets of the Fund were unaffected by the reclassifications.
INCREASE TO REDUCTION TO
ACCUMULATED ACCUMULATED NET
INCREASE TO NET INVESTMENT REALIZED GAIN
PAID-IN CAPITAL INCOME ON INVESTMENTS 5
---------------------------------------------------
$852,441 $38,731,207 $39,583,648
5. $852,441, including $706,504 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, 2007
and December 31, 2006 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2007 DECEMBER 31, 2006
----------------------------------------------------------------
Distributions paid from:
Ordinary income $76,513,555 $55,879,152
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, 2007 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 $ 3,622,409,725
Federal tax cost of other investments 1,196,530,981
---------------
Total federal tax cost $ 4,818,940,706
===============
Gross unrealized appreciation $ 120,054,052
Gross unrealized depreciation (54,652,704)
---------------
Net unrealized appreciation $ 65,401,348
===============
52 | OPPENHEIMER STRATEGIC BOND FUND/VA
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a compensation
deferral plan for independent trustees that enables trustees to elect to defer
receipt of all or a portion of the annual compensation they are entitled to
receive from the Fund. For purposes of determining the amount owed to the
Trustee under the plan, deferred amounts are treated as though equal dollar
amounts had been invested in shares of the Fund or in other Oppenheimer funds
selected by the Trustee. The Fund purchases shares of the funds selected for
deferral by the Trustee in amounts equal to his or her deemed investment,
resulting in a Fund asset equal to the deferred compensation liability. Such
assets are included as a component of "Other" within the asset section of the
Statement of Assets and Liabilities. Deferral of trustees' fees under the plan
will not affect the net assets of the Fund, and will not materially affect the
Fund's assets, liabilities or net investment income per share. Amounts will be
deferred until distributed in accordance to the compensation deferral plan.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations and
may differ from U.S. generally accepted accounting principles, are recorded on
the ex-dividend date. Income and capital gain distributions, if any, are
declared and paid annually or at other times as deemed necessary by the Manager.
- --------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income is recognized on an accrual basis. Market discount and
premium, which are included in interest income on the Statement of Operations,
are amortized or accreted daily.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. "Custodian fees and expenses" in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts, to the extent they are not
offset by positive cash balances maintained by the Fund, at a rate equal to the
Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line item,
if applicable, represents earnings on cash balances maintained by the Fund
during the period. Such interest expense and other custodian fees may be paid
with these earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Fund's organizational documents provide current and former
trustees and officers with a limited indemnification against liabilities arising
in connection with the performance of their duties to the Fund. In the normal
course of business, the Fund may also enter into contracts that provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would be dependent on future claims that may be made against the
Fund. The risk of material loss from such claims is considered remote.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period. Actual
results could differ from those estimates.
53 | OPPENHEIMER STRATEGIC BOND FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
YEAR ENDED DECEMBER 31, 2007 YEAR ENDED DECEMBER 31, 2006
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------
NON-SERVICE SHARES
Sold 27,845,638 $ 149,207,278 21,634,226 $ 109,527,181
Dividends and/or distributions reinvested 4,394,189 22,674,018 4,678,286 23,204,298
Redeemed (15,524,784) (83,371,898) (16,241,080) (82,200,128)
-------------------------------------------------------------------
Net increase 16,715,043 $ 88,509,398 10,071,432 $ 50,531,351
===================================================================
- ----------------------------------------------------------------------------------------------------------------------
SERVICE SHARES
Sold 244,861,091 $ 1,327,141,100 149,725,536 $ 769,804,954
Dividends and/or distributions reinvested 10,255,150 53,839,537 6,483,106 32,674,854
Redeemed (7,224,289) (39,515,665) (21,471,021) (108,250,660)
--------------------------------------------------------------------
Net increase 247,891,952 $ 1,341,464,972 134,737,621 $ 694,229,148
===================================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations and investments in IMMF, for the year ended December
31, 2007, were as follows:
PURCHASES SALES
- ----------------------------------------------------------------------------------
Investment securities $1,922,238,603 $ 988,310,939
U.S. government and government agency obligations 521,138,010 417,042,547
To Be Announced (TBA) mortgage-related securities 1,061,009,472 1,120,098,096
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Under the investment advisory agreement, the Fund pays the
Manager a management fee based on the daily net assets of the Fund at an annual
rate as shown in the following table:
FEE SCHEDULE
---------------------------------
Up to $200 million 0.75%
Next $200 million 0.72
Next $200 million 0.69
Next $200 million 0.66
Next $200 million 0.60
Over $1 billion 0.50
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services ("OFS"), a division of the
Manager, acts as the transfer and shareholder servicing agent for the Fund. The
Fund pays OFS a per account fee. For the year ended December 31, 2007, the Fund
paid $20,132 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.
54 | OPPENHEIMER STRATEGIC BOND FUND/VA
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN FOR SERVICE SHARES. The Fund has adopted a
Distribution and Service Plan (the "Plan") in accordance with Rule 12b-1 under
the Investment Company Act of 1940 for Service shares to pay OppenheimerFunds
Distributor, Inc. (the "Distributor"), for distribution related services,
personal service and account maintenance for the Fund's Service shares. Under
the Plan, payments are made periodically at an annual rate of 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. These
fees are paid out of the Fund's assets on an on-going basis and increase
operating expenses of the Service shares, which results in lower performance
compared to the Fund's shares that are not subject to a service fee. Fees
incurred by the Fund under the Plan are detailed in the Statement of Operations.
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. 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 and Master Loan. During the year ended December 31, 2007, the Manager
waived $501,695 for management fees.
- --------------------------------------------------------------------------------
5. FOREIGN CURRENCY EXCHANGE CONTRACTS
The Fund may enter into foreign currency exchange contracts ("forward
contracts") for the purchase or sale of a foreign currency at a negotiated rate
at a future date.
Foreign currency exchange contracts are reported on a schedule following
the Statement of Investments. Forward contracts will be valued daily based upon
the closing prices of the forward currency rates determined at the close of the
Exchange as provided by a bank, dealer or pricing service. The resulting
unrealized appreciation (depreciation) is reported in the Statement of Assets
and Liabilities as a receivable or payable and in the Statement of Operations
within the change in unrealized appreciation (depreciation). At contract close,
the difference between the original cost of the contract and the value at the
close date is recorded as a realized gain (loss) in the Statement of Operations.
Risks to the Fund include both market and credit risk. Market risk is the
risk that the value of the forward contract will depreciate due to unfavorable
changes in the exchange rates. 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 payments that the Fund has not yet
received.
- --------------------------------------------------------------------------------
6. FUTURES CONTRACTS
A futures contract is a commitment to buy or sell a specific amount of a
financial instrument at a negotiated price on a stipulated future date. The Fund
may buy and sell futures contracts that relate to broadly based securities
indices (financial futures), debt securities (interest rate futures) and various
commodities (commodity index futures). The Fund may also buy or write put or
call options on these futures contracts.
Futures contracts traded on a commodities or futures exchange will be
valued at the final settlement price or official closing price on the principal
exchange as reported by such principal exchange at its trading session ending
at, or most recently prior to, the time when the Fund's assets are valued.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities (initial margin) in an amount equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Fund each day. The variation margin payments are equal
to the daily changes in the contract value and are recorded as unrealized gains
and losses.
55 | OPPENHEIMER STRATEGIC BOND FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. FUTURES CONTRACTS Continued
Futures contracts are reported on a schedule following the Statement of
Investments. Securities held in collateralized accounts to cover initial margin
requirements on open futures contracts are noted in the Statement of
Investments. Cash held by the broker to cover initial margin requirements on
open futures contracts and the receivable and/or payable for the daily mark to
market for the variation margin are noted in the Statement of Assets and
Liabilities. The net change in unrealized appreciation and depreciation is
reported in the Statement of Operations. Realized gains (losses) are reported in
the Statement of Operations at the closing or expiration of futures contracts.
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market where the Fund is unable to
liquidate the contract or enter into an offsetting position and, if used for
hedging purposes, the risk that the price of the contract will correlate
imperfectly with the prices of the Fund's securities.
- --------------------------------------------------------------------------------
7. OPTION ACTIVITY
The Fund may buy and sell put and call options, or write put and covered call
options. When an option is written, the Fund receives a premium and becomes
obligated to sell or purchase the underlying security at a fixed price, upon
exercise of the option.
Options are valued daily based upon the last sale price on the principal
exchange on which the option is traded. The difference between the premium
received or paid, and market value of the option, is recorded as unrealized
appreciation or depreciation. The net change in unrealized appreciation or
depreciation is reported in the Statement of Operations. When an option is
exercised, the cost of the security purchased or the proceeds of the security
sale are adjusted by the amount of premium received or paid. Upon the expiration
or closing of the option transaction, a gain or loss is reported in the
Statement of Operations.
Securities designated to cover outstanding call or put options are noted
in the Statement of Investments where applicable. Options written are reported
in a schedule following the Statement of Investments and as a liability in the
Statement of Assets and Liabilities.
The risk in writing a call option is that the Fund gives up the
opportunity for profit if the market price of the security increases and the
option is exercised. The risk in writing a put option is that the Fund may incur
a loss if the market price of the security decreases and the option is
exercised. The risk in buying an option is that the Fund pays a premium whether
or not the option is exercised. The Fund also has the additional risk that there
may be an illiquid market where the Fund is unable to close the contract.
CALL OPTIONS PUT OPTIONS
-------------------------------- ------------------------------
NUMBER OF AMOUNT OF NUMBER OF AMOUNT OF
CONTRACTS PREMIUMS CONTRACTS PREMIUMS
- ---------------------------------------------------------------------------------------------------------------
Options outstanding as of December 31, 2006 -- $ -- 25,680,000 $ 253,204
Options written 22,628,405,000 3,116,377 19,756,405,000 2,784,871
Options closed or expired (10,383,785,000) (1,232,131) (9,570,780,000) (1,764,600)
Options exercised (9,365,660,000) (1,499,978) (10,204,345,000) (1,220,964)
------------------------------------------------------------------
Options outstanding as of December 31, 2007 2,878,960,000 $ 384,268 6,960,000 $ 52,511
==================================================================
- --------------------------------------------------------------------------------
8. SWAP CONTRACTS
The Fund may enter into swap contract agreements with a counterparty to exchange
a series of cash flows based on either specified reference rates, or the
occurrence of a credit event, over a specified period. Such contracts may
include interest rate, equity, debt, index, total return, credit and currency
swaps.
56 | OPPENHEIMER STRATEGIC BOND FUND/VA
Swaps are marked to market daily using primarily quotations from pricing
services, counterparties and brokers. Swap contracts are reported on a schedule
following the Statement of Investments. The value of the contracts is separately
disclosed on the Statement of Assets and Liabilities. The unrealized
appreciation (depreciation) related to the change in the valuation of the
notional amount of the swap is combined with the accrued interest due to (owed
by) the Fund at termination or settlement. The net change in this amount during
the period is included on the Statement of Operations. The Fund also records any
periodic payments received from (paid to) the counterparty, including at
termination, under such contracts as realized gain (loss) on the Statement of
Operations.
Risks of entering into swap contracts include credit, market and liquidity
risk. 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 payments that the Fund has not yet received. Market risk
is the risk that the value of the contract will depreciate due to unfavorable
changes in the reference asset. If there is an illiquid market for the
agreement, the Fund may be unable to close the contract prior to contract
termination.
- --------------------------------------------------------------------------------
CREDIT DEFAULT SWAP CONTRACTS. A credit default swap is a bilateral contract
that enables an investor to buy or sell protection against a defined-issuer
credit event. The Fund may enter into credit default swaps on a single security,
or a basket of securities.
In a credit default swap contract, the purchaser of the contract will pay
a periodic interest fee, similar to an insurance premium, on the notional amount
of the swap contract to the counterparty (the seller of the contract). If there
is a credit event (for example, bankruptcy or a failure to timely pay interest
or principal), the purchaser will exercise the contract and will receive a
payment from the seller of the contract equal to the notional value of the
credit default swap contract less the value of the underlying security. In the
event that the credit default swap is exercised due to a credit event, the
difference between the value of the underlying security and the notional amount
is recorded as realized gain (loss) and is included on the Statement of
Operations.
Risks of credit default swaps include, but are not limited to, the cost of
paying for credit protection if there are no credit events.
- --------------------------------------------------------------------------------
INTEREST RATE SWAP CONTRACTS. An interest rate swap is an agreement between
counterparties to exchange periodic interest payments on the notional amount of
the contract. One cash flow stream will typically be a floating rate payment
based upon a specified index while the other is typically a fixed rate.
Interest rate swap agreements include interest rate 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.
- --------------------------------------------------------------------------------
TOTAL RETURN SWAP CONTRACTS. A total return swap is an agreement between
counterparties to exchange a set of future cash flows on the notional amount of
the contract. One cash flow is typically 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.
- --------------------------------------------------------------------------------
CURRENCY SWAPS. A currency swap is an agreement between counterparties to
exchange different currencies equivalent to the notional value at contract
inception and reverse the exchange of the same notional values of those
currencies at contract termination. The contract may also include periodic
exchanges of cash flows based on a specified index or interest rate.
Currency swap agreements include exchange rate risk. Due to the exchange
of currency at contract termination, changes in currency exchange rates may
result in the Fund paying an amount greater than the amount received. There is a
risk, based on movements of interest rates or indexes that the periodic payments
made by the Fund will be greater than the payments received.
57 | OPPENHEIMER STRATEGIC BOND FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9. ILLIQUID OR RESTRICTED SECURITIES
As of December 31, 2007, investments in securities included issues that are
illiquid or restricted. Investments may be illiquid because they do not have an
active trading market, making it difficult to value them or dispose of them
promptly at an acceptable price. A restricted security may have a contractual
restriction on its resale and is valued under methods approved by the Board of
Trustees as reflecting fair value. The Fund will not invest more than 15% of its
net assets (determined at the time of purchase and reviewed periodically) in
illiquid and restricted securities. Certain restricted securities, eligible for
resale to qualified institutional purchasers, may not be subject to that
limitation. Securities that are illiquid or restricted are marked with an
applicable footnote on the Statement of Investments. Restricted securities are
reported on a schedule following the Statement of Investments.
- --------------------------------------------------------------------------------
10. SECURITIES LENDING
The Fund lends portfolio securities from time to time in order to earn
additional income in the form of fees or interest on securities received as
collateral or the investment of any cash received as collateral. The loans are
secured by collateral (either securities, letters of credit, or cash) 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 each business day and any additional required collateral is
delivered to the Fund on the next business day. If the borrower defaults on its
obligation to return the securities loaned because of insolvency or other
reasons, the Fund could experience delays and cost in recovering the securities
loaned or in gaining access to the collateral. 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 and recognizes the gain
or loss in the fair value of the securities loaned that may occur during the
term of the loan. The Fund has the right under the lending agreement to recover
the securities from the borrower on demand. As of December 31, 2007, the Fund
had on loan securities valued at $91,536,243. Collateral of $92,840,546 was
received for the loans, of which $60,320,900 was received in cash and
subsequently invested in approved instruments. In addition, collateral of
$32,519,646 was also received in the form of securities.
- --------------------------------------------------------------------------------
11. LOAN COMMITMENTS
Pursuant to the terms of certain indenture agreements, the Fund has unfunded
loan commitments of $13,500,000 at December 31, 2007. The Fund generally will
maintain with its custodian, liquid investments having an aggregate value at
least equal to the amount of unfunded loan commitments. The following
commitments are subject to funding based on the borrower's discretion. The Fund
is obligated to fund these commitments at the time of the request by the
borrower. These commitments have been excluded from the Statement of
Investments.
As of December 31, 2007, the Fund had unfunded loan commitments as follows:
COMMITMENT
TERMINATION UNFUNDED
DATE AMOUNT
--------------------------------------------
Deutsche Bank
AG, Optic
Reforma Credit
Linked Nts. 10/20/13 $ 13,500,000
58 | OPPENHEIMER STRATEGIC BOND FUND/VA
- --------------------------------------------------------------------------------
12. RECENT ACCOUNTING PRONOUNCEMENT
In September 2006, Financial Accounting Standards Board ("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, 2007, 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.
59 | 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, 2007, 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, 2007, 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, 2007, 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 13, 2008
60 | OPPENHEIMER STRATEGIC BOND FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2008, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2007. 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, 2007 which are not designated as capital gain distributions should be
multiplied by 0.13% 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.
61 | OPPENHEIMER STRATEGIC BOND FUND/VA
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file Form N-PX, with its complete proxy voting record for the 12 months ended
June 30th, no later than August 31st of each year. The Fund's voting record is
available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at
www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC
for the first quarter and the third quarter of each fiscal year on Form N-Q. The
Fund's Form N-Q filings are available on the SEC's website at
http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public
Reference Room in Washington, D.C. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
62 | OPPENHEIMER STRATEGIC BOND FUND/VA
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew the Fund's
investment advisory agreement (the "Agreement"). The Investment Company Act of
1940, as amended, requires that the Board request and evaluate, and that the
Manager provide, such information as may be reasonably necessary to evaluate the
terms of the Agreement. The Board employs an independent consultant to prepare a
report that provides information, including comparative information, that the
Board requests for that purpose. In addition, the Board receives information
throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager 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 P. 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.
63 | 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
considered the comparability of the fees charged and the services provided to
the Fund to the fees and services for other clients or accounts advised by the
Manager. The independent consultant provided comparative data in regard to the
fees and expenses of the Fund and other general bond funds underlying variable
insurance products. The Board noted that the Fund's actual management fees are
equal to its peer group median although its contractual management fees are
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. The Board noted that the
Fund currently has management fee breakpoints, which are intended to share with
Fund shareholders economies of scale that may exist as the Fund's assets grow.
OTHER BENEFITS TO THE MANAGER. In addition to considering the profits
realized by the Manager, the Board considered information that was provided
regarding the direct and indirect benefits the Manager receives as a result of
its relationship with the Fund, including compensation paid to the Manager's
affiliates. The Board also considered that the Manager must be able to pay and
retain experienced professional personnel at competitive rates to provide
quality services to the Fund 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 considered all of the above information, and considered the
terms and conditions of the Agreement, including the management fee, in light of
all of the surrounding circumstances.
64 | OPPENHEIMER STRATEGIC BOND FUND/VA
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) HELD PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS HELD; NUMBER OF
WITH 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, Cherry Creek Mortgage Company (since
Chairman of the Board of 1991), Chairman, Centennial State Mortgage Company (since 1994), Chairman, The El Paso Mortgage
Trustees (since 2003), Company (since 1993); Chairman, Ambassador Media Corporation (since 1984); Chairman, Broadway
Trustee (since 1999) Ventures (since 1984); Director of Helmerich & Payne, Inc. (oil and gas drilling/production company)
Age: 70 (since 1992), Campus Crusade for Christ (non-profit) (since 1991); Former Director, The Lynde and
Harry Bradley Foundation, Inc. (non-profit organization) (2002-2006); former Chairman of: Transland
Financial Services, Inc. (private mortgage banking company) (1997-2003), Great Frontier Insurance
(1995-2000), Frontier Real Estate, Inc. (residential real estate brokerage) (1994-2000) and Frontier
Title (title insurance agency) (1995-2000); former Director of the following: UNUMProvident
(insurance company) (1991-2004), Storage Technology Corporation (computer equipment company)
(1991-2003) and International Family Entertainment (television channel) (1992-1997); U.S. Senator
(January 1979-January 1991). Oversees 39 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: 71 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 39 portfolios in the OppenheimerFunds complex.
EDWARD L. CAMERON, Member of The Life Guard of Mount Vernon (George Washington historical site) (June 2000-May 2006);
Trustee (since 1999) Partner of PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price
Age: 69 Waterhouse LLP Global Investment Management Industry Services Group (financial services firm) (July
1994-June 1998). Oversees 39 portfolios in the OppenheimerFunds complex.
JON S. FOSSEL, Director of UNUMProvident (insurance company) (since June 2002); Director of Northwestern Energy
Trustee (since 1993) Corp. (public utility corporation) (since November 2004); Director of P.R. Pharmaceuticals (October
Age: 66 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 39 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: 67 (until October 1994). Oversees 39 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: 61 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 39 portfolios in the
OppenheimerFunds complex.
65 | OPPENHEIMER STRATEGIC BOND FUND/VA
TRUSTEES AND OFFICERS Unaudited/Continued
- --------------------------------------------------------------------------------
ROBERT J. MALONE, Director of Jones Knowledge, Inc. (since 2006); Director of Jones International University
Trustee (since 2002) (educational organization) (since August 2005); Chairman, Chief Executive Officer and Director of
Age: 63 Steele Street State Bank (commercial banking) (since August 2003); Director of Colorado UpLIFT
(charitable organization) (since 1986); Trustee of the Gallagher Family Foundation (non-profit
organization) (since 2000); Former Chairman of U.S. Bank-Colorado (subsidiary of U.S. Bancorp and
formerly Colorado National Bank) (July 1996-April 1999); Director of Commercial Assets, Inc. (real
estate investment trust) (1993-2000); Director of Jones Knowledge, Inc. (2001-July 2004); and
Director of U.S. Exploration, Inc. (oil and gas exploration) (1997-February 2004). Oversees 39
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 of Worcester
Age: 65 Polytech Institute (since 1985); Chairman (since 1994) 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 41 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 of the Manager (since June 2001); President of the
Trustee, President and Manager (September 2000-March 2007); President and director or trustee of other Oppenheimer funds;
Principal Executive Officer President and Director of Oppenheimer Acquisition Corp. ("OAC") (the Manager's parent holding
(since 2001) company) and of Oppenheimer Partnership Holdings, Inc. (holding company subsidiary of the Manager)
Age: 58 (since July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of the Manager)
(November 2001-December 2006); 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); Chairman (since October 2007)
and Member of the Investment Company Institute's Board of Governors (since October 2003). Oversees
102 portfolios in the OppenheimerFunds complex.
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS OF THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. STEINMETZ, 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.
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). A portfolio manager and officer of 4 portfolios in the
Manager (since 1993) OppenheimerFunds complex.
Age: 49
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Chief
Vice President and Chief Compliance Officer of OppenheimerFunds Distributor, Inc., Centennial Asset Management and
Compliance Officer Shareholder Services, Inc. (since March 2004); Vice President of OppenheimerFunds Distributor,
(since 2004) Inc., Centennial Asset Management Corporation and Shareholder Services, Inc. (since June 1983);
Age: 57 Former Vice President and Director of Internal Audit of the Manager (1997-February 2004). An
officer of 102 portfolios in the OppenheimerFunds complex.
66 | OPPENHEIMER STRATEGIC BOND FUND/VA
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, Inc. and Oppenheimer Partnership Holdings, Inc.
Officer (since 1999) (since March 1999), OFI Private Investments, Inc. (since March 2000), OppenheimerFunds
Age: 48 International Ltd. and OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management,
Inc. (since November 2000), and OppenheimerFunds Legacy Program (charitable trust program
established by the Manager) (since June 2003); Treasurer and Chief Financial Officer of OFI Trust
Company (trust company subsidiary of the Manager) (since May 2000); Assistant Treasurer of the
following: OAC (since March 1999), Centennial Asset Management Corporation (March 1999-October
2003) and OppenheimerFunds Legacy Program (April 2000-June 2003). An officer of 102 portfolios in
the OppenheimerFunds complex.
BRIAN S. PETERSEN, Vice President of the Manager (since February 2007); Assistant Vice President of the Manager
Assistant Treasurer (August 2002-February 2007); Manager/Financial Product Accounting of the Manager (November
(since 2004) 1998-July 2002). An officer of 102 portfolios in the OppenheimerFunds complex.
Age: 37
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). An officer of 102 portfolios in the OppenheimerFunds
Age: 37 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: 59 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). An officer of 102 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) of UBS Financial Services,
(since 2004) Inc. An officer of 102 portfolios in the OppenheimerFunds complex.
Age: 40
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 102 portfolios in the OppenheimerFunds complex.
Age: 44
KATHLEEN T. IVES, Vice President (since June 1998) and Senior Counsel and Assistant Secretary (since October 2003) of
Assistant Secretary 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: 42 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 102
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.
67 | OPPENHEIMER STRATEGIC BOND FUND/VA
DECEMBER 31, 2007
- --------------------------------------------------------------------------------
Management
Oppenheimer Commentaries
Global Securities Fund/VA and
A Series of Oppenheimer Variable Account Funds Annual Report
- --------------------------------------------------------------------------------
MANAGEMENT COMMENTARIES
Listing of Top Holdings
ANNUAL REPORT [GRAPHIC]
Fund Performance Discussion
Listing of Investments
Financial Statements
[LOGO] OPPENHEIMERFUNDS(R)
The Right Way to Invest
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. In a period of choppy global
markets and a credit crunch in the U.S., the Fund's Non-Service shares returned
6.32% during the reporting period, underperforming its benchmark, the MSCI World
Index, which returned 9.04% over the same period.
The most significant contribution to the underperformance of the Fund was
the Fund's lack of holdings of metals and materials stocks and its relative
underweight in energy and utilities stocks. Its substantial position in
technology stocks hurt its relative performance too. Our relative underweight in
financials, especially U.S.-based companies, helped returns, as we partially
anticipated a more difficult economic environment for financial stocks.
Given the strategic orientation of the Fund, which focuses on long-term
sustainable competitive advantage and away from commodities, the past year's
environment was somewhat unfavorable for our long-term strategy. We had some
success in the past year from our investments in our second-largest holding
Siemens AG, the German conglomerate, where restructuring continues to deliver
value. Also, Nintendo Co. Ltd., which had a blockbuster release of its new Wii
gaming platform and continued its dominance of the handheld electronic games
business, more than doubled in the past year. Juniper Networks, Inc., one of the
world's leading network equipment providers, gained as evidence of the need to
increase network capacity in telecom networks mounted. Among our long-term
holdings, Vodafone Group plc, our third-largest holding, and Porsche Automobil
Holding, also had good years. Our lack of oil orientation notwithstanding, our
investments in the increased complexity of the oil business also proved to be
excellent investments. Transocean, Inc., the world's largest driller and Hyundai
Heavy Industries Co. Ltd., the world's largest shipbuilder (whose stock we sold
and took profits), both had stellar years.
Our largest holding, Telefonaktiebolaget LM Ericsson, the leading wireless
network equipment producer in the world, had a terrible year, falling
considerably, as order shortfalls played havoc with the stock price. We continue
to believe that its world leading technology, significant barriers to entry and
a compelling valuation presage excellent long term prospects for the company.
Japan was the location of many of our poor performers. The lack of growth in the
Japanese domestic economy hurt our holdings of Japanese banks. A dramatic
reduction in the maximum interest chargeable by finance companies in Japan
through a change in regulation hurt our holding in Credit Saison Co. Ltd.
Regulatory changes in gaming laws affected the sales of pachinko and pachislot
machines which substantially reduced Sega Sammy Holdings, Inc.'s profit and
stock price. We are confident that the credit card opportunity in Japan is vast
and that Credit Saison Co. Ltd.'s fortunes, while temporarily affected, will be
restored and enhanced in the future. One of our most trying holdings has been
Advanced Micro Devices, Inc., which declined sharply as a result of missteps and
delays. We still believe that the company has much to look forward to if it can
execute better.
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, 2007. 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 (MSCI) World 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.
3 | 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
12/31/1997 $10,000 $10,000
03/31/1998 $11,007 $11,443
06/30/1998 $11,219 $11,685
09/30/1998 $ 9,466 $10,295
12/31/1998 $11,410 $12,480
03/31/1999 $11,810 $12,936
06/30/1999 $12,985 $13,564
09/30/1999 $13,207 $13,374
12/31/1999 $18,084 $15,642
03/31/2000 $20,696 $15,814
06/30/2000 $20,019 $15,264
09/30/2000 $19,693 $14,508
12/31/2000 $19,004 $13,621
03/31/2001 $16,160 $11,881
06/30/2001 $17,412 $12,211
09/30/2001 $14,301 $10,464
12/31/2001 $16,716 $11,371
03/31/2002 $17,039 $11,441
06/30/2002 $15,517 $10,393
09/30/2002 $12,671 $ 8,491
12/31/2002 $13,016 $ 9,149
03/31/2003 $12,032 $ 8,697
06/30/2003 $14,541 $10,196
09/30/2003 $15,929 $10,700
12/31/2003 $18,616 $12,238
03/31/2004 $19,432 $12,570
06/30/2004 $19,237 $12,701
09/30/2004 $19,079 $12,587
12/31/2004 $22,183 $14,103
03/31/2005 $21,453 $13,961
06/30/2005 $22,113 $14,047
09/30/2005 $24,233 $15,042
12/31/2005 $25,357 $15,517
03/31/2006 $27,256 $16,559
06/30/2006 $26,339 $16,505
09/30/2006 $27,499 $17,259
12/31/2006 $29,843 $18,722
03/31/2007 $30,169 $19,209
06/30/2007 $32,388 $20,497
09/30/2007 $33,229 $21,001
12/31/2007 $31,730 $20,513
AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/07
1-Year 6.32% 5-Year 19.51% 10-Year 12.24%
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 $ 9,146
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
03/31/2007 $14,537 $12,584
06/30/2007 $15,597 $13,428
09/30/2007 $15,988 $13,758
12/31/2007 $15,260 $13,438
AVERAGE ANNUAL TOTAL RETURNS OF SERVICE SHARES OF THE FUND AT 12/31/07
1-Year 6.08% 5-Year 19.25% Since Inception (7/13/00) 5.82%
4 | 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 Securities Morgan Stanley Capital
Fund/VA (Class 3) International 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 $14,738
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 $23,021 $19,763
03/31/2007 $23,277 $20,277
06/30/2007 $24,986 $21,637
09/30/2007 $25,631 $22,169
12/31/2007 $24,481 $21,653
AVERAGE ANNUAL TOTAL RETURNS OF CLASS 3 SHARES OF THE FUND AT 12/31/07
1-Year 6.34% 5-Year N/A Since Inception (5/1/03) 21.15%
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 Securities Morgan Stanley Capital
Fund/VA (Class 4) International World Index
05/03/2004 $10,000 $10,000
06/30/2004 $10,111 $10,310
09/30/2004 $10,020 $10,216
12/31/2004 $11,642 $11,448
03/31/2005 $11,255 $11,332
06/30/2005 $11,591 $11,402
09/30/2005 $12,697 $12,209
12/31/2005 $13,278 $12,595
03/31/2006 $14,263 $13,441
06/30/2006 $13,776 $13,397
09/30/2006 $14,374 $14,009
12/31/2006 $15,588 $15,196
03/31/2007 $15,748 $15,592
06/30/2007 $16,897 $16,638
09/30/2007 $17,320 $17,046
12/31/2007 $16,532 $16,650
AVERAGE ANNUAL TOTAL RETURNS OF CLASS 4 SHARES OF THE FUND AT 12/31/07
1-Year 6.06% 5-Year N/A Since Inception (5/3/04) 14.72%
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 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 applicable); 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, 2007.
ACTUAL EXPENSES. The first section of the table provides information about
actual account values and actual expenses. You may use the information in this
section for the class of shares you hold, together with the amount you invested,
to estimate the expense that you paid over the period. Simply divide your
account value by $1,000.00 (for example, an $8,600.00 account value divided by
$1,000.00 = 8.60), then multiply the result by the number in the first section
under the heading entitled "Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The second section of the table
provides information about hypothetical account values and hypothetical expenses
based on the Fund's actual expense ratio for each class of shares, and an
assumed rate of return of 5% per year for each class before expenses, which is
not the actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of investing
in the Fund and other funds. To do so, compare this 5% hypothetical example for
the class of shares you hold with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any charges associated with the separate
accounts that offer this Fund. Therefore, the "hypothetical" lines of the table
are useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these separate
account charges were included your costs would have been higher.
6 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
- --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
ACTUAL JULY 1, 2007 DECEMBER 31, 2007 DECEMBER 31, 2007
- --------------------------------------------------------------------------------------
Non-Service Shares $ 1,000.00 $ 979.70 $ 3.15
- --------------------------------------------------------------------------------------
Service Shares 1,000.00 978.40 4.40
- --------------------------------------------------------------------------------------
Class 3 Shares 1,000.00 979.80 3.20
- --------------------------------------------------------------------------------------
Class 4 Shares 1,000.00 978.40 4.45
HYPOTHETICAL
(5% return before expenses)
- --------------------------------------------------------------------------------------
Non-Service Shares 1,000.00 1,022.03 3.22
- --------------------------------------------------------------------------------------
Service Shares 1,000.00 1,020.77 4.49
- --------------------------------------------------------------------------------------
Class 3 Shares 1,000.00 1,021.98 3.27
- --------------------------------------------------------------------------------------
Class 4 Shares 1,000.00 1,020.72 4.54
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 indirect expenses from affiliated fund, based on the 6-month period
ended December 31, 2007 are as follows:
CLASS EXPENSE RATIOS
- -------------------------------------
Non-Service Shares 0.63%
- -------------------------------------
Service Shares 0.88
- -------------------------------------
Class 3 Shares 0.64
- -------------------------------------
Class 4 Shares 0.89
The expense ratios reflect reduction to custodian expenses and 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 and reduction to
custodian expenses, if applicable.
- --------------------------------------------------------------------------------
7 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
STATEMENT OF INVESTMENTS December 31, 2007
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS--97.9%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--18.6%
- --------------------------------------------------------------------------------
AUTOMOBILES--2.7%
Bayerische Motoren Werke
(BMW) AG 658,139 $ 41,044,467
- --------------------------------------------------------------------------------
Bayerische Motoren Werke
(BMW) AG, Preference 205,513 10,806,294
- --------------------------------------------------------------------------------
Porsche Automobil Holding 15,255 30,582,122
- --------------------------------------------------------------------------------
Toyota Motor Corp. 459,300 24,760,667
----------------
107,193,550
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--2.8%
Aristocrat Leisure Ltd. 201,581 1,979,495
- --------------------------------------------------------------------------------
Carnival Corp. 1,067,500 47,493,075
- --------------------------------------------------------------------------------
International Game Technology 593,900 26,090,027
- --------------------------------------------------------------------------------
McDonald's Corp. 570,700 33,619,937
- --------------------------------------------------------------------------------
Shuffle Master, Inc. 1 296,600 3,556,234
----------------
112,738,768
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES--1.7%
Sony Corp. 1,228,900 66,794,675
- --------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS--0.2%
Sega Sammy Holdings, Inc. 520,600 6,501,666
- --------------------------------------------------------------------------------
MEDIA--4.5%
Dish TV India Ltd. 1 2,397,922 6,197,872
- --------------------------------------------------------------------------------
Grupo Televisa SA, Sponsored GDR 1,583,996 37,651,585
- --------------------------------------------------------------------------------
Pearson plc 1,104,328 16,056,616
- --------------------------------------------------------------------------------
Sirius Satellite Radio, Inc. 1 9,748,010 29,536,470
- --------------------------------------------------------------------------------
Walt Disney Co. (The) 1,240,100 40,030,428
- --------------------------------------------------------------------------------
Wire & Wireless India Ltd. 1 2,278,650 5,679,315
- --------------------------------------------------------------------------------
WPP Group plc 1,445,940 18,471,955
- --------------------------------------------------------------------------------
Zee Entertainment Enterprises Ltd. 2,988,910 24,791,352
----------------
178,415,593
- --------------------------------------------------------------------------------
SPECIALTY RETAIL--3.7%
H&M Hennes & Mauritz AB, Cl. B 1,188,000 71,783,098
- --------------------------------------------------------------------------------
Industria de Diseno Textil SA 638,300 38,742,191
- --------------------------------------------------------------------------------
Tiffany & Co. 810,600 37,311,918
----------------
147,837,207
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS--3.0%
Bulgari SpA 1,363,818 18,942,200
- --------------------------------------------------------------------------------
Burberry Group plc 1,383,058 15,535,997
- --------------------------------------------------------------------------------
Coach, Inc. 1 296,000 9,051,680
- --------------------------------------------------------------------------------
LVMH Moet Hennessey
Louis Vuitton 493,570 59,218,893
- --------------------------------------------------------------------------------
Tod's SpA 249,197 17,385,005
----------------
120,133,775
SHARES VALUE
- --------------------------------------------------------------------------------
CONSUMER STAPLES--8.5%
- --------------------------------------------------------------------------------
BEVERAGES--2.4%
Companhia de Bebidas das
Americas, ADR, Preference 412,015 $ 29,265,425
- --------------------------------------------------------------------------------
Diageo plc 967,745 20,670,275
- --------------------------------------------------------------------------------
Fomento Economico Mexicano
SA de CV, UBD 7,752,900 29,674,268
- --------------------------------------------------------------------------------
Grupo Modelo SA de CV, Series C 3,449,300 16,436,378
----------------
96,046,346
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--2.3%
Seven & I Holdings Co. Ltd. 431,053 12,554,887
- --------------------------------------------------------------------------------
Tesco plc 4,176,435 39,351,599
- --------------------------------------------------------------------------------
Wal-Mart Stores, Inc. 767,200 36,465,016
----------------
88,371,502
- --------------------------------------------------------------------------------
FOOD PRODUCTS--1.0%
Cadbury Schweppes plc 3,248,644 40,408,299
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS--2.8%
Colgate-Palmolive Co. 467,600 36,454,096
- --------------------------------------------------------------------------------
Hindustan Unilever Ltd. 4,157,500 22,532,532
- --------------------------------------------------------------------------------
Reckitt Benckiser Group plc 904,138 52,118,229
----------------
111,104,857
- --------------------------------------------------------------------------------
ENERGY--6.0%
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--2.4%
Technip SA 527,480 41,645,804
- --------------------------------------------------------------------------------
Transocean, Inc. 362,672 51,916,497
----------------
93,562,301
- --------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS--3.6%
BP plc, ADR 454,169 33,231,546
- --------------------------------------------------------------------------------
Chevron Corp. 367,644 34,312,215
- --------------------------------------------------------------------------------
Husky Energy, Inc. 1,160,630 52,075,359
- --------------------------------------------------------------------------------
Total SA 298,440 24,753,624
----------------
144,372,744
- --------------------------------------------------------------------------------
FINANCIALS--13.4%
- --------------------------------------------------------------------------------
CAPITAL MARKETS--2.8%
3i Group plc 477,710 9,473,526
- --------------------------------------------------------------------------------
Credit Suisse Group 949,296 57,048,233
- --------------------------------------------------------------------------------
Northern Trust Corp. 598,900 45,863,762
----------------
112,385,521
8 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
SHARES VALUE
- --------------------------------------------------------------------------------
COMMERCIAL BANKS--4.2%
BNP Paribas SA 133,760 $ 14,353,447
- --------------------------------------------------------------------------------
HSBC Holdings plc 2,158,687 36,097,181
- --------------------------------------------------------------------------------
ICICI Bank Ltd., Sponsored ADR 236,450 14,541,675
- --------------------------------------------------------------------------------
Royal Bank of Scotland
Group plc (The) 5,006,409 44,911,058
- --------------------------------------------------------------------------------
Societe Generale, Cl. A 236,128 33,687,352
- --------------------------------------------------------------------------------
Sumitomo Mitsui Financial
Group, Inc. 3,015 22,470,183
----------------
166,060,896
- --------------------------------------------------------------------------------
CONSUMER FINANCE--0.5%
Credit Saison Co. Ltd. 725,900 19,838,443
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--0.7%
Investor AB, B Shares 1,350,954 30,392,610
- --------------------------------------------------------------------------------
INSURANCE--5.2%
ACE Ltd. 416,871 25,754,290
- --------------------------------------------------------------------------------
AFLAC, Inc. 491,200 30,763,856
- --------------------------------------------------------------------------------
Allianz SE 242,969 51,923,742
- --------------------------------------------------------------------------------
American International Group, Inc. 655,900 38,238,970
- --------------------------------------------------------------------------------
Prudential plc 2,544,557 35,689,975
- --------------------------------------------------------------------------------
Sony Financial Holdings, Inc. 1 1,598 6,083,059
- --------------------------------------------------------------------------------
XL Capital Ltd., Cl. A 340,600 17,135,586
----------------
205,589,478
- --------------------------------------------------------------------------------
HEALTH CARE--6.5%
- --------------------------------------------------------------------------------
BIOTECHNOLOGY--2.3%
Acadia Pharmaceuticals, Inc. 1 302,500 3,348,675
- --------------------------------------------------------------------------------
Basilea Pharmaceutica AG 1 22,275 4,308,128
- --------------------------------------------------------------------------------
Genentech, Inc. 1 200,200 13,427,414
- --------------------------------------------------------------------------------
Gilead Sciences, Inc. 1 863,420 39,725,954
- --------------------------------------------------------------------------------
InterMune, Inc. 1 271,600 3,620,428
- --------------------------------------------------------------------------------
NicOx SA 1 212,570 3,378,513
- --------------------------------------------------------------------------------
Pharmion Corp. 1 92,200 5,795,692
- --------------------------------------------------------------------------------
Regeneron Pharmaceuticals, Inc. 1 176,802 4,269,768
- --------------------------------------------------------------------------------
Seattle Genetics, Inc. 1 423,328 4,825,939
- --------------------------------------------------------------------------------
Theravance, Inc. 1 409,000 7,975,500
----------------
90,676,011
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--0.6%
Hospira, Inc. 1 105,000 4,477,200
- --------------------------------------------------------------------------------
Smith & Nephew plc 1,688,877 19,375,016
----------------
23,852,216
SHARES VALUE
- --------------------------------------------------------------------------------
LIFE SCIENCES TOOLS & SERVICES--0.1%
Nektar Therapeutics 1 314,361 $ 2,109,362
- --------------------------------------------------------------------------------
PHARMACEUTICALS--3.5%
Chugai Pharmaceutical Co. Ltd. 647,500 9,288,148
- --------------------------------------------------------------------------------
Johnson & Johnson 148,300 9,891,610
- --------------------------------------------------------------------------------
Roche Holding AG 279,312 48,211,637
- --------------------------------------------------------------------------------
Sanofi-Aventis SA 475,455 43,381,008
- --------------------------------------------------------------------------------
Shionogi & Co. Ltd. 1,787,000 31,641,788
----------------
142,414,191
- --------------------------------------------------------------------------------
INDUSTRIALS--13.8%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE--4.4%
Boeing Co. 217,500 19,022,550
- --------------------------------------------------------------------------------
Empresa Brasileira de
Aeronautica SA, ADR 864,083 39,393,544
- --------------------------------------------------------------------------------
European Aeronautic
Defense & Space Co. 1,291,510 40,928,752
- --------------------------------------------------------------------------------
Lockheed Martin Corp. 244,100 25,693,966
- --------------------------------------------------------------------------------
Northrop Grumman Corp. 270,700 21,287,848
- --------------------------------------------------------------------------------
Raytheon Co. 447,600 27,169,320
----------------
173,495,980
- --------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS--0.8%
TNT NV 508,500 21,123,081
- --------------------------------------------------------------------------------
United Parcel Service, Inc., Cl. B 134,700 9,525,984
----------------
30,649,065
- --------------------------------------------------------------------------------
BUILDING PRODUCTS--1.1%
Assa Abloy AB, Cl. B 2,132,485 42,414,547
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--0.8%
Experian Group Ltd. 1,221,419 9,686,266
- --------------------------------------------------------------------------------
Secom Co. Ltd. 419,000 22,952,214
----------------
32,638,480
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--1.7%
Emerson Electric Co. 897,600 50,858,016
- --------------------------------------------------------------------------------
Mitsubishi Electric Corp. 1,497,000 15,485,053
----------------
66,343,069
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--4.8%
3M Co. 483,500 40,768,720
- --------------------------------------------------------------------------------
Koninklijke (Royal) Philips
Electronics NV 1,183,600 51,205,199
- --------------------------------------------------------------------------------
Siemens AG 645,521 100,754,231
----------------
192,728,150
9 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
MACHINERY--0.2%
Fanuc Ltd. 104,500 $ 10,193,294
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--25.4%
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--6.7%
Cisco Systems, Inc. 1 662,400 17,931,168
- --------------------------------------------------------------------------------
Corning, Inc. 1,919,800 46,056,002
- --------------------------------------------------------------------------------
Juniper Networks, Inc. 1 2,112,900 70,148,280
- --------------------------------------------------------------------------------
Tandberg ASA 1,056,150 21,746,945
- --------------------------------------------------------------------------------
Telefonaktiebolaget LM
Ericsson, B Shares 47,982,400 112,151,210
----------------
268,033,605
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--2.7%
Hoya Corp. 886,800 28,303,819
- --------------------------------------------------------------------------------
Keyence Corp. 87,440 21,454,724
- --------------------------------------------------------------------------------
Kyocera Corp. 203,700 17,851,285
- --------------------------------------------------------------------------------
Murata Manufacturing Co. Ltd. 522,200 30,337,601
- --------------------------------------------------------------------------------
Nidec Corp. 138,200 10,259,064
----------------
108,206,493
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--1.6%
eBay, Inc. 1 1,914,700 63,548,893
- --------------------------------------------------------------------------------
IT SERVICES--2.4%
Automatic Data Processing, Inc. 1,019,000 45,376,070
- --------------------------------------------------------------------------------
Infosys Technologies Ltd. 1,075,726 48,017,842
----------------
93,393,912
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--5.5%
Advanced Micro Devices, Inc. 1 2,459,400 18,445,500
- --------------------------------------------------------------------------------
Altera Corp. 1,227,600 23,717,232
- --------------------------------------------------------------------------------
Cree, Inc. 1 821,900 22,577,593
- --------------------------------------------------------------------------------
Linear Technology Corp. 515,496 16,408,238
- --------------------------------------------------------------------------------
Maxim Integrated Products, Inc. 1,139,165 30,165,089
- --------------------------------------------------------------------------------
MediaTek, Inc. 2,899,335 37,223,504
- --------------------------------------------------------------------------------
Samsung Electronics Co. 34,698 20,488,249
- --------------------------------------------------------------------------------
Taiwan Semiconductor
Manufacturing Co. Ltd. 11,926,176 22,629,389
- --------------------------------------------------------------------------------
Taiwan Semiconductor
Manufacturing Co. Ltd., ADR 1 947,412 9,436,224
- --------------------------------------------------------------------------------
Xilinx, Inc. 824,700 18,036,189
----------------
219,127,207
SHARES VALUE
- --------------------------------------------------------------------------------
SOFTWARE--6.5%
Adobe Systems, Inc. 1 1,141,163 $ 48,761,895
- --------------------------------------------------------------------------------
Enix Corp. 579,200 17,759,225
- --------------------------------------------------------------------------------
Intuit, Inc. 1 1,418,800 44,848,268
- --------------------------------------------------------------------------------
Microsoft Corp. 2,103,600 74,888,160
- --------------------------------------------------------------------------------
Nintendo Co. Ltd. 40,200 24,445,630
- --------------------------------------------------------------------------------
SAP AG 947,674 49,001,646
----------------
259,704,824
- --------------------------------------------------------------------------------
MATERIALS--0.3%
- --------------------------------------------------------------------------------
CHEMICALS--0.3%
Praxair, Inc. 150,600 13,359,726
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--4.4%
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--4.4%
KDDI Corp. 5,583 41,644,755
- --------------------------------------------------------------------------------
SK Telecom Co. Ltd. ADR 1,275,660 38,065,694
- --------------------------------------------------------------------------------
Vodafone Group plc 25,617,052 95,268,828
----------------
174,979,277
- --------------------------------------------------------------------------------
UTILITIES--1.0%
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES--1.0%
Fortum Oyj 869,500 38,855,627
----------------
Total Common Stocks (Cost $2,714,937,936) 3,894,472,160
- --------------------------------------------------------------------------------
INVESTMENT COMPANIES--1.7%
- --------------------------------------------------------------------------------
Oppenheimer Institutional
Money Market Fund,
Cl. E, 5.03% 2,3
(Cost $68,796,760) 68,796,760 68,796,760
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $2,783,734,696) 99.6% 3,963,268,920
- --------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 0.4 16,520,743
-----------------------------
NET ASSETS 100.0% $ 3,979,789,663
=============================
INDUSTRY CLASSIFICATIONS ARE UNAUDITED.
10 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
2. Rate shown is the 7-day yield as of December 31, 2007.
3. Is or was an affiliate, as defined in the Investment Company Act of 1940, at
or during the period ended December 31, 2007, by virtue of the Fund owning at
least 5% of the voting securities of the issuer or as a result of the Fund and
the issuer having the same investment adviser. Transactions during the period in
which the issuer was an affiliate are as follows:
SHARES SHARES
DECEMBER 31, GROSS GROSS DECEMBER 31,
2006 ADDITIONS REDUCTIONS 2007
- --------------------------------------------------------------------------------
Oppenheimer
Institutional
Money Market
Fund, Cl. E 51,475,095 608,411,950 591,090,285 68,796,760
DIVIDEND
VALUE INCOME
- --------------------------------------------------------------------------------
Oppenheimer Institutional
Money Market Fund, Cl. E $68,796,760 $3,871,188
DISTRIBUTION OF INVESTMENTS REPRESENTING GEOGRAPHIC HOLDINGS, AS A PERCENTAGE OF
TOTAL INVESTMENTS AT VALUE, IS AS FOLLOWS:
GEOGRAPHIC HOLDINGS (UNAUDITED) VALUE PERCENT
- --------------------------------------------------------------------------------
United States $ 1,365,646,693 34.5%
United Kingdom 476,660,100 12.0
Japan 440,620,180 11.1
Germany 284,112,502 7.2
Sweden 256,741,465 6.5
France 220,418,641 5.6
India 121,760,588 3.1
The Netherlands 113,257,032 2.9
Switzerland 109,567,998 2.8
Cayman Islands 94,806,373 2.4
Mexico 83,762,231 2.1
Taiwan 69,289,117 1.7
Brazil 68,658,969 1.7
Korea, Republic of South 58,553,943 1.5
Canada 52,075,359 1.3
Finland 38,855,627 1.0
Spain 38,742,191 1.0
Italy 36,327,205 0.9
Norway 21,746,945 0.5
Jersey, Channel Islands 9,686,266 0.2
Australia 1,979,495 0.0
--------------------------
Total $ 3,963,268,920 100.0%
==========================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 31, 2007
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments:
Unaffiliated companies (cost $2,714,937,936) $ 3,894,472,160
Affiliated companies (cost $68,796,760) 68,796,760
----------------
3,963,268,920
- -------------------------------------------------------------------------------------------------------------
Cash 254,069
- -------------------------------------------------------------------------------------------------------------
Cash--foreign currencies (cost $7,178,561) 7,236,257
- -------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Shares of beneficial interest sold 7,485,203
Dividends 4,192,501
Other 427,272
----------------
Total assets 3,982,864,222
- -------------------------------------------------------------------------------------------------------------
LIABILITIES
- -------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Shares of beneficial interest redeemed 1,658,015
Distribution and service plan fees 899,204
Shareholder communications 262,082
Custodian fees 111,150
Foreign capital gains tax 51,389
Trustees' compensation 42,099
Transfer and shareholder servicing agent fees 3,579
Other 47,041
----------------
Total liabilities 3,074,559
- -------------------------------------------------------------------------------------------------------------
NET ASSETS $ 3,979,789,663
================
- -------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- -------------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 109,031
- -------------------------------------------------------------------------------------------------------------
Additional paid-in capital 2,563,131,425
- -------------------------------------------------------------------------------------------------------------
Accumulated net investment income 31,615,758
- -------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 205,232,329
- -------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets and liabilities
denominated in foreign currencies 1,179,701,120
----------------
NET ASSETS $ 3,979,789,663
================
- -------------------------------------------------------------------------------------------------------------
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 $2,193,637,711 and 59,930,639 shares of beneficial interest outstanding) $ 36.60
- -------------------------------------------------------------------------------------------------------------
Service Shares:
Net asset value, redemption price per share and offering price per share (based on net
assets of $1,300,989,249 and 35,873,741 shares of beneficial interest outstanding) $ 36.27
- -------------------------------------------------------------------------------------------------------------
Class 3 Shares:
Net asset value, redemption price per share and offering price per share (based on net
assets of $361,620,862 and 9,821,987 shares of beneficial interest outstanding) $ 36.82
- -------------------------------------------------------------------------------------------------------------
Class 4 Shares:
Net asset value, redemption price per share and offering price per share (based on net
assets of $123,541,841 and 3,405,122 shares of beneficial interest outstanding) $ 36.28
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
12 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 31, 2007
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- -------------------------------------------------------------------------------------------------------------
Dividends:
Unaffiliated companies (net of foreign withholding taxes of $2,041,193) $ 67,344,202
Affiliated companies 3,871,188
- -------------------------------------------------------------------------------------------------------------
Portfolio lending fees 2,403,377
- -------------------------------------------------------------------------------------------------------------
Interest 30,583
----------------
Total investment income 73,649,350
- -------------------------------------------------------------------------------------------------------------
EXPENSES
- -------------------------------------------------------------------------------------------------------------
Management fees 24,819,247
- -------------------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Service shares 2,949,468
Class 4 shares 305,898
- -------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service shares 10,475
Service shares 10,245
Class 3 shares 10,094
Class 4 shares 10,040
- -------------------------------------------------------------------------------------------------------------
Shareholder communications:
Non-Service shares 142,950
Service shares 67,462
Class 3 shares 24,636
Class 4 shares 7,349
- -------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 498,749
- -------------------------------------------------------------------------------------------------------------
Trustees' compensation 70,860
- -------------------------------------------------------------------------------------------------------------
Administration service fees 1,500
- -------------------------------------------------------------------------------------------------------------
Other 123,094
----------------
Total expenses 29,052,067
Less reduction to custodian expenses (3,494)
Less waivers and reimbursements of expenses (73,870)
----------------
Net expenses 28,974,703
- -------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 44,674,647
- -------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- -------------------------------------------------------------------------------------------------------------
Net realized gain on:
Investments from unaffiliated companies 221,716,272
Foreign currency transactions 18,683,486
----------------
Net realized gain 240,399,758
- -------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments (net of foreign capital gains tax of $147,715) (129,163,618)
Translation of assets and liabilities denominated in foreign currencies 80,556,896
----------------
Net change in unrealized appreciation (48,606,722)
- -------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 236,467,683
================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
13 | OPPENHEIMER GLOBAL SECURITIES FUND/ VA
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2007 2006
- ---------------------------------------------------------------------------------------------------------------------
OPERATIONS
- ---------------------------------------------------------------------------------------------------------------------
Net investment income $ 44,674,647 $ 40,843,985
- ---------------------------------------------------------------------------------------------------------------------
Net realized gain 240,399,758 202,740,034
- ---------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (48,606,722) 316,441,660
----------------------------------
Net increase in net assets resulting from operations 236,467,683 560,025,679
- ---------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Non-Service shares (30,881,671) (22,390,271)
Service shares (12,491,101) (5,586,912)
Class 3 shares (5,291,097) (3,732,415)
Class 4 shares (1,330,580) (875,877)
----------------------------------
(49,994,449) (32,585,475)
- ---------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Non-Service shares (112,256,514) (116,956,054)
Service shares (52,238,025) (34,605,939)
Class 3 shares (19,263,594) (19,539,725)
Class 4 shares (5,788,329) (5,424,732)
----------------------------------
(189,546,462) (176,526,450)
- ---------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from beneficial interest
transactions:
Non-Service shares (104,231,544) (44,482,210)
Service shares 321,202,694 340,074,365
Class 3 shares (34,573,579) 12,707,608
Class 4 shares 9,459,510 13,427,523
----------------------------------
191,857,081 321,727,286
- ---------------------------------------------------------------------------------------------------------------------
NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------
Total increase 188,783,853 672,641,040
- ---------------------------------------------------------------------------------------------------------------------
Beginning of period 3,791,005,810 3,118,364,770
----------------------------------
End of period (including accumulated net investment income of
$31,615,758 and $32,036,968, respectively) $ 3,979,789,663 $ 3,791,005,810
==================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2007 2006 2005 2004 2003
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 36.79 $ 33.38 $ 29.51 $ 25.08 $ 17.70
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .45 1 .43 1 .32 1 .26 1 .19
Net realized and unrealized gain 1.69 5.20 3.85 4.49 7.34
--------------------------------------------------------------------------------------
Total from investment operations 2.14 5.63 4.17 4.75 7.53
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to
shareholders:
Dividends from net investment income (.50) (.36) (.30) (.32) (.15)
Distributions from net realized gain (1.83) (1.86) -- -- --
--------------------------------------------------------------------------------------
Total dividends and/or distributions to
shareholders (2.33) (2.22) (.30) (.32) (.15)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 36.60 $ 36.79 $ 33.38 $ 29.51 $ 25.08
======================================================================================
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 6.32% 17.69% 14.31% 19.16% 43.02%
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 2,193,638 $ 2,297,315 $ 2,124,413 $ 2,518,867 $ 2,280,752
- -----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 2,302,726 $ 2,189,511 $ 2,123,523 $ 2,451,188 $ 1,751,226
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 1.21% 1.27% 1.08% 1.01% 0.99%
Total expenses 0.65% 4,5,6 0.66% 4,5,6 0.67% 5 0.66% 5 0.67% 5
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 18% 21% 35% 30% 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 less than one full year.
4. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended December 31, 2007 0.65%
Year Ended December 31, 2006 0.66%
5. Reduction to custodian expenses less than 0.005%.
6. Voluntary waiver or reimbursement of indirect management fees less than
0.005%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
15 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SERVICE SHARES YEAR ENDED DECEMBER 31, 2007 2006 2005 2004 2003
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 36.49 $ 33.16 $ 29.33 $ 24.96 $ 17.61
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .33 1 .33 1 .24 1 .20 1 .12
Net realized and unrealized gain 1.72 5.16 3.84 4.46 7.36
--------------------------------------------------------------------------------------
Total from investment operations 2.05 5.49 4.08 4.66 7.48
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to
shareholders:
Dividends from net investment income (.44) (.30) (.25) (.29) (.13)
Distributions from net realized gain (1.83) (1.86) -- -- --
--------------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (2.27) (2.16) (.25) (.29) (.13)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 36.27 $ 36.49 $ 33.16 $ 29.33 $ 24.96
======================================================================================
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 6.08% 17.36% 14.06% 18.88% 42.86%
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 1,300,989 $ 983,558 $ 557,284 $ 346,403 $ 168,739
- -----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 1,180,656 $ 750,499 $ 413,849 $ 247,490 $ 91,800
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 0.91% 0.98% 0.79% 0.77% 0.68%
Total expenses 0.89% 4,5,6 0.91% 4,5,6 0.92% 5 0.91% 5 0.93% 5
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 18% 21% 35% 30% 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 less than one full year.
4. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended December 31, 2007 0.89%
Year Ended December 31, 2006 0.91%
5. Reduction to custodian expenses less than 0.005%.
6. Voluntary waiver or reimbursement of indirect management fees less than
0.005%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
16 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
CLASS 3 SHARES YEAR ENDED DECEMBER 31, 2007 2006 2005 2004 2003 1
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 36.99 $ 33.55 $ 29.65 $ 25.19 $ 17.55
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .45 2 .43 2 .32 2 .26 2 .07
Net realized and unrealized gain 1.71 5.23 3.88 4.52 7.57
--------------------------------------------------------------------------------------
Total from investment operations 2.16 5.66 4.20 4.78 7.64
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to
shareholders:
Dividends from net investment income (.50) (.36) (.30) (.32) --
Distributions from net realized gain (1.83) (1.86) -- -- --
--------------------------------------------------------------------------------------
Total dividends and/or distributions to
shareholders (2.33) (2.22) (.30) (.32) --
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 36.82 $ 36.99 $ 33.55 $ 29.65 $ 25.19
======================================================================================
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 6.34% 17.69% 14.34% 19.19% 43.53%
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 361,621 $ 395,901 $ 346,064 $ 265,044 $ 147,576
- -----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 391,270 $ 369,406 $ 296,252 $ 199,388 $ 80,579
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 1.22% 1.26% 1.06% 1.00% 0.73%
Total expenses 0.65% 5,6,7 0.66% 5,6,7 0.67% 6 0.66% 6 0.68% 6
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 18% 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 less than one full year.
5. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended December 31, 2007 0.65%
Year Ended December 31, 2006 0.66%
6. Reduction to custodian expenses less than 0.005%.
7. Voluntary waiver or reimbursement of indirect management fees less than
0.005%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
17 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS 4 SHARES YEAR ENDED DECEMBER 31, 2007 2006 2005 2004 1
- ------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 36.49 $ 33.15 $ 29.35 $ 25.21
- ------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .34 .34 .24 .09
Net realized and unrealized gain 1.70 5.16 3.84 4.05
----------------------------------------------------------------------
Total from investment operations 2.04 5.50 4.08 4.14
- ------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.42) (.30) (.28) --
Distributions from net realized gain (1.83) (1.86) -- --
----------------------------------------------------------------------
Total dividends and/or distributions to shareholders (2.25) (2.16) (.28) --
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 36.28 $ 36.49 $ 33.15 $ 29.35
======================================================================
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 6.06% 17.40% 14.05% 16.42%
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 123,542 $ 114,232 $ 90,604 $ 37,384
- ------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 122,385 $ 100,973 $ 61,380 $ 19,774
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 0.93% 1.00% 0.79% 0.53%
Total expenses 0.90% 5,6,7 0.91% 5,6,7 0.93% 6 0.94% 6
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 18% 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 less than one full year.
5. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended December 31, 2007 0.90%
Year Ended December 31, 2006 0.91%
6. Reduction to custodian expenses less than 0.005%.
7. Voluntary waiver or reimbursement of indirect management fees less than
0.005%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
18 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Global Securities Fund/VA (the "Fund") is a separate series of
Oppenheimer Variable Account Funds, an open-end management investment company
registered under the Investment Company Act of 1940, as amended. The Fund's
investment objective is to seek long-term capital appreciation by investing a
substantial portion of its assets in securities of foreign issuers,
"growth-type" companies, cyclical industries and special situations that are
considered to have appreciation possibilities. The Fund's investment adviser is
OppenheimerFunds, Inc. (the "Manager").
The Fund offers Non-Service, Service, Class 3 and Class 4 shares. All
classes are sold at their offering price, which is the net asset value per
share, to separate investment accounts of participating insurance companies as
an underlying investment for variable life insurance policies, variable annuity
contracts or other investment products. The class of shares being designated as
Service shares and Class 4 shares are subject to a distribution and service
plan. All classes of shares have identical rights and voting privileges with
respect to the Fund in general and exclusive voting rights on matters that
affect that class alone. Earnings, net assets and net asset value per share may
differ due to each class having its own expenses, such as transfer and
shareholder servicing agent fees and shareholder communications, directly
attributable to that class. The Fund assesses a 1% fee on the proceeds of Class
3 and Class 4 shares that are redeemed (either by selling or exchanging to
another Oppenheimer fund or other investment option offered through your
variable life insurance or variable annuity contract) within 60 days of their
purchase. The fee, which is retained by the Fund, is accounted for as an
addition to paid-in capital.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of the New York Stock Exchange (the "Exchange"), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for trading. Securities may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. Securities traded on a registered U.S.
securities exchange 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 whose principal exchange is NASDAQ(R) are valued based on the closing
price reported by NASDAQ prior to the time when the Fund's assets are valued. In
the absence of a sale, the security is valued at the last sale price on the
prior trading day, if it is within the spread of the 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, collateralized
mortgage obligations and other asset-backed securities will be valued at the
mean between the "bid" and "asked" prices. Securities for which market
quotations are not readily available are valued at their fair value. 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. Shares of a registered investment company
that are not traded on an exchange are valued at the acquired investment
company's net asset value per share. "Money market-type" debt instruments with
remaining maturities of sixty days or less are valued at cost adjusted by the
amortization of discount or premium to maturity (amortized cost), which
approximates market value.
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in
U.S. dollars. The values of securities denominated in foreign currencies and
amounts related to the purchase and sale of foreign securities and foreign
investment income are translated into U.S. dollars as of the close of the
Exchange, normally 4:00 P.M. Eastern time, on each day the Exchange is open for
trading. Foreign exchange rates may be valued primarily using a reliable bank,
dealer or service authorized by the Board of Trustees.
19 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
Reported net realized gains and losses from foreign currency transactions
arise from sales of portfolio securities, sales and maturities of short-term
securities, sales of foreign currencies, exchange rate fluctuations between the
trade and settlement dates on securities transactions, and the difference
between the amounts of dividends, interest, and foreign withholding taxes
recorded on the Fund's books and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized appreciation and depreciation on the
translation of assets and liabilities denominated in foreign currencies arise
from changes in the values of assets and liabilities, including investments in
securities at fiscal period end, resulting from changes in exchange rates.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
INVESTMENT IN OPPENHEIMER INSTITUTIONAL MONEY MARKET FUND. The Fund is permitted
to invest daily available cash balances in an affiliated money market fund. The
Fund may invest the available cash in Class E shares of Oppenheimer
Institutional Money Market Fund ("IMMF") to seek current income while preserving
liquidity. IMMF is a registered open-end management investment company,
regulated as a money market fund under the Investment Company Act of 1940, as
amended. The Manager is also the investment adviser of IMMF. 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. Therefore, no federal income or excise tax provision is
required. The Fund files income tax returns in U.S. federal and applicable state
jurisdictions. The statute of limitations on the Fund's tax return filings
remain open for the three preceding fiscal reporting period ends.
The tax components of capital shown in the table below represent distribution
requirements the Fund must satisfy under the income tax regulations, losses the
Fund may be able to offset against income and gains realized in future years and
unrealized appreciation or depreciation of securities and other investments for
federal income tax purposes.
NET UNREALIZED
APPRECIATION
BASED ON COST OF
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED SECURITIES AND OTHER
NET INVESTMENT LONG-TERM LOSS INVESTMENTS FOR FEDERAL
INCOME GAIN CARRYFORWARD 1,2,3 INCOMETAX PURPOSES
-----------------------------------------------------------------------------
$ 52,207,964 $ 208,139,535 $ 2,192,980 $ 1,158,436,633
1. The Fund had $2,192,980 of post-October passive foreign investment company
losses which were deferred.
2. During the fiscal year ended December 31, 2007, the Fund did not utilize any
capital loss carryforward.
3. During the fiscal year ended December 31, 2006, 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.
20 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
Accordingly, the following amounts have been reclassified for December 31, 2007.
Net assets of the Fund were unaffected by the reclassifications.
REDUCTION TO
INCREASE TO ACCUMULATED NET
INCREASE TO ACCUMULATED NET REALIZED GAIN
PAID-IN CAPITAL INVESTMENT INCOME ON INVESTMENTS 4
--------------------------------------------------------------
$19,582,006 $4,898,592 $24,480,598
4. $19,582,006, including $18,977,345 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, 2007
and December 31, 2006 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2007 DECEMBER 31, 2006
-----------------------------------------------------------------
Distributions paid from:
Ordinary income $ 64,685,816 $ 32,585,475
Long-term capital gain 174,855,095 176,526,450
-------------------------------------
Total $ 239,540,911 $ 209,111,925
=====================================
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, 2007 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 $ 2,804,999,183
Federal tax cost of other investments 7,177,673
---------------
Total federal tax cost $ 2,812,176,856
===============
Gross unrealized appreciation $ 1,243,541,203
Gross unrealized depreciation (85,104,570)
---------------
Net unrealized appreciation $ 1,158,436,633
===============
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 compensation deferral plan.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations and
may differ from U.S. generally accepted accounting principles, are recorded on
the ex-dividend date. Income and capital gain distributions, if any, are
declared and paid annually or at other times as deemed necessary by the Manager.
- --------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income is recognized on an accrual basis. Market discount and
premium, which are included in interest income on the Statement of Operations,
are amortized or accreted daily.
21 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
CUSTODIAN FEES. "Custodian fees and expenses" in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts, to the extent they are not
offset by positive cash balances maintained by the Fund, at a rate equal to the
Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line item,
if applicable, represents earnings on cash balances maintained by the Fund
during the period. Such interest expense and other custodian fees may be paid
with these earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Fund's organizational documents provide current and former
trustees and officers with a limited indemnification against liabilities arising
in connection with the performance of their duties to the Fund. In the normal
course of business, the Fund may also enter into contracts that provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would be dependent on future claims that may be made against the
Fund. The risk of material loss from such claims is considered remote.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period. Actual
results could differ from those estimates.
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
YEAR ENDED DECEMBER 31, 2007 YEAR ENDED DECEMBER 31, 2006
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------
NON-SERVICE SHARES
Sold 6,411,129 $ 236,447,298 6,575,899 $ 223,540,908
Dividends and/or distributions reinvested 4,207,471 143,138,185 4,267,881 139,346,325
Redeemed (13,131,133) (483,817,027) (12,034,584) (407,369,443)
----------------------------------------------------------------
Net decrease (2,512,533) $ (104,231,544) (1,190,804) $ (44,482,210)
================================================================
- -----------------------------------------------------------------------------------------------------------------
SERVICE SHARES
Sold 10,073,670 $ 368,640,666 11,801,332 $ 396,822,488
Dividends and/or distributions reinvested 1,916,196 64,729,126 1,238,609 40,192,851
Redeemed (3,068,408) (112,167,098) (2,895,139) (96,940,974)
----------------------------------------------------------------
Net increase 8,921,458 $ 321,202,694 10,144,802 $ 340,074,365
================================================================
- -----------------------------------------------------------------------------------------------------------------
CLASS 3 SHARES
Sold 404,332 $ 14,980,587 1,146,143 $ 39,045,508
Dividends and/or distributions reinvested 717,554 24,554,691 708,868 23,272,140
Redeemed (2,002,496) (74,108,857) 1 (1,466,336) (49,610,040) 2
----------------------------------------------------------------
Net increase (decrease) (880,610) $ (34,573,579) 388,675 $ 12,707,608
================================================================
22 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
YEAR ENDED DECEMBER 31, 2007 YEAR ENDED DECEMBER 31, 2006
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------
CLASS 4 SHARES
Sold 392,793 $ 14,359,772 850,052 $ 28,652,172
Dividends and/or distributions reinvested 210,681 7,118,909 194,164 6,300,609
Redeemed (328,721) (12,019,171) 1 (646,862) (21,525,258) 2
----------------------------------------------------------------
Net increase 274,753 $ 9,459,510 397,354 $ 13,427,523
================================================================
1. Net of redemption fees of $11,158 and $4,865 for Class 3 and Class 4,
respectively.
2. Net of redemption fees of $22,231 and $22,178 for Class 3 and Class 4,
respectively.
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations and investments in IMMF, for the year ended December
31, 2007, were as follows:
PURCHASES SALES
-------------------------------------------------------------
Investment securities $ 705,242,553 $ 720,602,850
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Under the investment advisory agreement, the Fund pays the
Manager a management fee based on the daily net assets of the Fund at an annual
rate as shown in the following table:
FEE SCHEDULE
------------------------------------------
Up to $200 million 0.75%
Next $200 million 0.72
Next $200 million 0.69
Next $200 million 0.66
Over $800 million 0.60
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services ("OFS"), a division of the
Manager, acts as the transfer and shareholder servicing agent for the Fund. The
Fund pays OFS a per account fee. For the year ended December 31, 2007, the Fund
paid $40,766 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 AND CLASS 4 SHARES. The Fund
has adopted a Distribution and Service Plan (the "Plan") in accordance with Rule
12b-1 under the Investment Company Act of 1940 for Service shares and Class 4
shares to pay OppenheimerFunds Distributor, Inc. (the "Distributor"), for
distribution related services, personal service and account maintenance for the
Fund's Service shares and Class 4 shares. Under the Plan, payments are made
periodically at an annual rate of up to 0.25% of the average annual net assets
of Service shares and Class 4 shares of the Fund. The Distributor currently uses
all of those fees to compensate sponsor(s) of the insurance product that offers
Fund shares, for providing personal service and maintenance of accounts of their
variable contract owners that hold Service shares and Class 4 shares. These fees
are paid out of the Fund's assets on an on-going basis and increase operating
expenses of the Service shares and Class 4 shares, which results in lower
performance compared to the Fund's shares that are not subject to a service fee.
Fees incurred by the Fund under the Plan are detailed in the Statement of
Operations.
23 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit
transfer and shareholder servicing agent fees for all classes to 0.35% of
average annual net assets per class. This undertaking may be amended or
withdrawn at any time.
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, 2007, the Manager waived $73,870 for
IMMF management fees.
- --------------------------------------------------------------------------------
5. FOREIGN CURRENCY EXCHANGE CONTRACTS
The Fund may enter into foreign currency exchange contracts ("forward
contracts") for the purchase or sale of a foreign currency at a negotiated rate
at a future date.
Foreign currency exchange contracts are reported on a schedule following
the Statement of Investments. Forward contracts will be valued daily based upon
the closing prices of the forward currency rates determined at the close of the
Exchange as provided by a bank, dealer or pricing service. The resulting
unrealized appreciation (depreciation) is reported in the Statement of Assets
and Liabilities as a receivable or payable and in the Statement of Operations
within the change in unrealized appreciation (depreciation). At contract close,
the difference between the original cost of the contract and the value at the
close date is recorded as a realized gain (loss) in the Statement of Operations.
Risks to the Fund include both market and credit risk. Market risk is the
risk that the value of the forward contract will depreciate due to unfavorable
changes in the exchange rates. 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 payments that the Fund has not yet
received.
As of December 31, 2007, the Fund had no outstanding forward contracts.
- --------------------------------------------------------------------------------
6. SECURITIES LENDING
The Fund lends portfolio securities from time to time in order to earn
additional income in the form of fees or interest on securities received as
collateral or the investment of any cash received as collateral. The loans are
secured by collateral (either securities, letters of credit, or cash) 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 each business day and any additional required collateral is
delivered to the Fund on the next business day. If the borrower defaults on its
obligation to return the securities loaned because of insolvency or other
reasons, the Fund could experience delays and cost in recovering the securities
loaned or in gaining access to the collateral. 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 and recognizes the gain
or loss in the fair value of the securities loaned that may occur during the
term of the loan. The Fund has the right under the lending agreement to recover
the securities from the borrower on demand.
As of December 31, 2007, the Fund had no securities on loan.
- --------------------------------------------------------------------------------
7. RECENT ACCOUNTING PRONOUNCEMENT
In September 2006, Financial Accounting Standards Board ("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, 2007, 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.
24 | 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, 2007, 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, 2007, by correspondence with the
custodian and brokers. 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, 2007, 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 13, 2008
25 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2008, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2007. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
Capital gain distributions of $1.6911 per share were paid to Non-Service,
Service, Class 3 and Class 4 shareholders, respectively, on March 12, 2007.
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, 2007 which are not designated as capital gain distributions should be
multiplied by 27.48% 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
$1,604,597 of foreign income taxes paid by the Fund during the fiscal year ended
December 31, 2007. 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 $35,314,190 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.
26 | 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.
27 | 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 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.
28 | OPPENHEIMER GLOBAL SECURITIES 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 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
considered the comparability of the fees charged and the services provided to
the Fund to the fees and services for other clients or accounts advised by the
Manager. The independent consultant provided comparative data in regard to the
fees and expenses of the Fund, other global growth, global core, and global
value funds underlying variable insurance products funds. 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. The Board noted that the
Fund currently has management fee breakpoints, which are intended to share with
Fund shareholders economies of scale that may exist as the Fund's assets grow.
OTHER BENEFITS TO THE MANAGER. In addition to considering the profits
realized by the Manager, the Board considered information that was provided
regarding the direct and indirect benefits the Manager receives as a result of
its relationship with the Fund, including compensation paid to the Manager's
affiliates and research provided to the Manager in connection with permissible
brokerage arrangements (soft dollar arrangements). The Board also considered
that the Manager must be able to pay and retain experienced professional
personnel at competitive rates to provide quality services to the Fund 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 considered all of the above information, and considered the
terms and conditions of the Agreement, including the management fee, in light of
all of the surrounding circumstances.
29 | OPPENHEIMER GLOBAL SECURITIES 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, Cherry Creek Mortgage
Chairman of the Board Company (since 1991), Chairman, Centennial State Mortgage Company (since 1994),
of Trustees (since 2003), Chairman, The El Paso Mortgage Company (since 1993); Chairman, Ambassador Media
Trustee (since 1999) Corporation (since 1984); Chairman, Broadway Ventures (since 1984); Director of
Age: 70 Helmerich & Payne, Inc. (oil and gas drilling/production company) (since 1992), Campus
Crusade for Christ (non-profit) (since 1991); Former Director, The Lynde and Harry
Bradley Foundation, Inc. (non-profit organization) (2002-2006); former Chairman of:
Transland Financial Services, Inc. (private mortgage banking company) (1997-2003),
Great Frontier Insurance (1995-2000), Frontier Real Estate, Inc. (residential real
estate brokerage) (1994-2000) and Frontier Title (title insurance agency)
(1995-2000); former Director of the following: UNUMProvident (insurance company)
(1991-2004), Storage Technology Corporation (computer equipment company) (1991-2003)
and International Family Entertainment (television channel) (1992-1997); U.S. Senator
(January 1979-January 1991). Oversees 39 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: 71 (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 39 portfolios in the OppenheimerFunds complex.
EDWARD L. CAMERON, Member of The Life Guard of Mount Vernon (George Washington historical site) (June
Trustee (since 1999) 2000-May 2006); Partner of PricewaterhouseCoopers LLP (accounting firm) (July 1974-June
Age: 69 1999); Chairman of Price Waterhouse LLP Global Investment Management Industry Services
Group (financial services firm) (July 1994-June 1998). Oversees 39 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); Director
Age: 66 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 39 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: 67 companies of the Manager (until October 1994). Oversees 39 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: 61 (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 39 portfolios in the
OppenheimerFunds complex.
30 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
ROBERT J. MALONE, Director of Jones Knowledge, Inc. (since 2006); Director of Jones International
Trustee (since 2002) University (educational organization) (since August 2005); Chairman, Chief Executive
Age: 63 Officer and Director of Steele Street State Bank (commercial banking) (since August
2003); Director of Colorado UpLIFT (charitable organization) (since 1986); Trustee of
the Gallagher Family Foundation (non-profit organization) (since 2000); Former Chairman
of U.S. Bank-Colorado (subsidiary of U.S. Bancorp and formerly Colorado National Bank)
(July 1996-April 1999); Director of Commercial Assets, Inc. (real estate investment
trust) (1993-2000); Director of Jones Knowledge, Inc. (2001-July 2004); and Director of
U.S. Exploration, Inc. (oil and gas exploration) (1997-February 2004). Oversees 39
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: 65 (since 1996); Trustee of Worcester Polytech Institute (since 1985); Chairman (since
1994) 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 41
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 of the Manager (since June 2001);
Trustee, President and President of the Manager (September 2000-March 2007); President and director or trustee
Principal Executive Officer of other Oppenheimer funds; President and Director of Oppenheimer Acquisition Corp.
(since 2001) ("OAC") (the Manager's parent holding company) and of Oppenheimer Partnership Holdings,
Age: 58 Inc. (holding company subsidiary of the Manager) (since July 2001); Director of
OppenheimerFunds Distributor, Inc. (subsidiary of the Manager) (November 2001-December
2006); 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); Chairman (since
October 2007) and Member of the Investment Company Institute's Board of Governors
(since October 2003). Oversees 102 portfolios in the OppenheimerFunds complex.
- -------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS OF THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. BHAMAN,
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.
RAJEEV BHAMAN, Senior Vice President of the Manager (since May 2006); Vice President of the Manager
Vice President and Portfolio (January 1997-May 2006). A portfolio manager and officer of 2 portfolios in the
Manager (since 2004) OppenheimerFunds complex.
Age: 44
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March 2004);
Vice President and Chief Chief Compliance Officer of OppenheimerFunds Distributor, Inc., Centennial Asset
Compliance Officer Management and Shareholder Services, Inc. (since March 2004); Vice President of
(since 2004) OppenheimerFunds Distributor, Inc., Centennial Asset Management Corporation and
Age: 57 Shareholder Services, Inc. (since June 1983); Former Vice President and Director of
Internal Audit of the Manager (1997-February 2004). An officer of 102 portfolios in the
OppenheimerFunds complex.
31 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
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, Inc. and
Officer (since 1999) Oppenheimer Partnership Holdings, Inc. (since March 1999), OFI Private Investments,
Age: 48 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 (charitable trust program established by the Manager)
(since June 2003); Treasurer and Chief Financial Officer of OFI Trust Company (trust
company subsidiary of the Manager) (since May 2000); Assistant Treasurer of the
following: OAC (since March 1999), Centennial Asset Management Corporation (March
1999-October 2003) and OppenheimerFunds Legacy Program (April 2000-June 2003). An
officer of 102 portfolios in the OppenheimerFunds complex.
BRIAN S. PETERSEN, Vice President of the Manager (since February 2007); Assistant Vice President of the
Assistant Treasurer Manager (August 2002-February 2007); Manager/Financial Product Accounting of the
(since 2004) Manager (November 1998-July 2002). An officer of 102 portfolios in the OppenheimerFunds
Age: 37 complex.
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). An officer of 102
Age: 37 portfolios in the OppenheimerFunds complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March 2002) of
Vice President and the Manager; General Counsel and Director of the Distributor (since December 2001);
Secretary (since 2001) General Counsel of Centennial Asset Management Corporation (since December 2001);
Age: 59 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). An officer of 102 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 2004)
(since 2004) of UBS Financial Services, Inc. An officer of 102 portfolios in the OppenheimerFunds
Age: 40 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 102
Age: 44 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: 42 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 102 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.
32 | OPPENHEIMER GLOBAL SECURITIES FUND/VA
DECEMBER 31, 2007
- --------------------------------------------------------------------------------
Oppenheimer Management
Capital Appreciation Commentaries
Fund/VA and
A Series of Oppenheimer Variable Account Funds Annual Report
- --------------------------------------------------------------------------------
MANAGEMENT COMMENTARIES
Listing of Top Holdings
ANNUAL REPORT [GRAPHIC]
Fund Performance Discussion
Listing of Investments
Financial Statements
[LOGO] OPPENHEIMERFUNDS(R)
The Right Way to Invest
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. We are pleased that the Fund
reported strong results during the 12-month period ended December 31, 2007, with
its Non-Service shares earning a 14.15% return versus the 5.49% return of the
S&P 500 Index and the 11.81% return of the Russell 1000 Growth Index for the
same time period. However, a greater allocation to financials and consumer
discretionary stocks, most notably during the second half of the reporting
period, detracted from results. While stock prices were generally supported by a
growing global economy, mounting difficulties surrounding the sub-prime lending
markets resulted in an especially volatile investment environment.
The Fund's best relative performance stemmed from its holdings in the
energy, materials, information technology and health care areas. Within energy,
the Fund's more prominent gains stemmed from its overweight position in
Schlumberger Ltd., one of the world's largest oil field services companies.
Smith International, Inc., another broad-based services company, also fared
especially well. We are encouraged by Smith International's ability to generate
what we believe are superior returns over multiple cycles. Other positive
contributors include oil giant Occidental Petroleum Corp., an exploration
development production company, that benefited from its strong domestic and
international properties.
Materials stocks also posted solid gains for the Fund, where the bulk of
the sector's gains stemmed from our holdings in Monsanto Co., an agricultural
company that helps farmers grow more crops by applying biotechnology and
genomics to seeds and herbicides. We are optimistic with regard to Monsanto's
plans to launch a new line of drought-tolerant corn seeds, which should yield
the same amount of crops, using less water. Praxair, Inc., an industrial gases
company with worldwide sales, also contributed positively to the Fund's
performance. We like this company due to the management's ability to generate
positive returns over a consistent number of cycles. It is also worth noting
that the Fund was able to produce strong results from materials stocks despite
its lack of exposure to the better-performing metals and mining companies, most
of which do not fit our investment discipline.
A number of information technology stocks also aided performance, an area
that may have been overlooked by investors in their rush to commodities stocks
during the reporting period. Top contributors for the Fund included Research in
Motion Ltd. (RIM), whose primary product line includes the popular Blackberry
(R) used by thousands of individuals and corporations around the world. We
believe that RIM offers a differentiated product over its competitors because of
its extensive network operating system. Google, Inc. also fared especially well
due its ability to lock in a lion's share of Internet advertising. Other
positive contributors were Apple, Inc., which benefited from its core Mac
computer business, robust sales from its iPod portable players, its iTunes
online store, and most recently, its iPhone. EMC Corp., a developer and provider
of information infrastructure technology and solutions, also gained value from
its virtual infrastructure software division.
Within the health care sector, some of the Fund's better performance
stemmed from Medco Health Solutions, Inc., a pharmacy benefit management company
that benefited from the growing wave of online generic drug sales. We also fared
well with Covance, Inc., a contract research organization that gained value due
to a trend of outsourced drug trials.
On the other hand, the Fund received disappointing results from its
financials stocks, including UBS AG, CB Richard Ellis Group, Inc., E*Trade
Financial Corp. and Ambac Financial Group, Inc. The stock price of UBS fell
sharply due to losses within its fixed-income trading business. However, we
continue to like the stock and view these recent losses as overstated due to new
management changes and the company's ability to produce strong gains in its
wealth management group. Commercial real estate services company CB Richard
Ellis suffered due to investors' concerns regarding the overall real estate
markets. In the case of E*Trade, the company's stock price faltered due to
losses experienced within its home equity loan portfolio. Ambac Financial, which
provides credit guarantees for all sorts of bonds including mortgages and
collateralized debt obligations, also experienced difficulties as investors
became concerned about potential bond losses. We have since exited our positions
in the latter two stocks.
Virtually all of the Fund's industrials losses can be traced to (The)
Corporate Executive Board Co., an information provider to large corporations and
nonprofit organizations that experienced some sales problems. The Fund's lack of
exposure to utilities companies, which do not fit its growth investment
discipline, also modestly hindered returns.
As of the end of the reporting period, we have continued to adhere to our
bottom-up investment approach where we favor companies with a wind at their back
that we believe have the ability to boost their share prices over the next
three-to-five year period.
3 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
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, 2007. In the case of Non-Service shares, performance is
measured over a ten-year period. In the case of Service shares, performance is
measured from inception of the class on September 18, 2001. Performance
information does not reflect charges that apply to separate accounts investing
in the Fund. If these charges were taken into account, performance would be
lower. The graph assumes that all dividends and capital gains distributions were
reinvested in additional shares.
The Fund's performance is compared to the performance of the 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.
4 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
NON-SERVICE SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Capital Appreciation Fund/VA (Non-Service)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Capital Appreciation
Fund/VA (Non-Service) S&P 500 Index
12/31/1997 $ 10,000 $ 10,000
03/31/1998 $ 11,274 $ 11,394
06/30/1998 $ 11,703 $ 11,772
09/30/1998 $ 9,783 $ 10,604
12/31/1998 $ 12,400 $ 12,860
03/31/1999 $ 13,213 $ 13,500
06/30/1999 $ 14,362 $ 14,450
09/30/1999 $ 13,671 $ 13,550
12/31/1999 $ 17,565 $ 15,565
03/31/2000 $ 20,129 $ 15,921
06/30/2000 $ 19,220 $ 15,498
09/30/2000 $ 19,118 $ 15,348
12/31/2000 $ 17,525 $ 14,148
03/31/2001 $ 15,710 $ 12,472
06/30/2001 $ 16,669 $ 13,201
09/30/2001 $ 13,260 $ 11,264
12/31/2001 $ 15,321 $ 12,468
03/31/2002 $ 14,877 $ 12,502
06/30/2002 $ 12,380 $ 10,828
09/30/2002 $ 10,415 $ 8,959
12/31/2002 $ 11,206 $ 9,713
03/31/2003 $ 10,838 $ 9,408
06/30/2003 $ 12,593 $ 10,855
09/30/2003 $ 13,147 $ 11,142
12/31/2003 $ 14,673 $ 12,498
03/31/2004 $ 14,813 $ 12,710
06/30/2004 $ 15,021 $ 12,928
09/30/2004 $ 14,448 $ 12,686
12/31/2004 $ 15,691 $ 13,857
03/31/2005 $ 15,262 $ 13,559
06/30/2005 $ 15,335 $ 13,745
09/30/2005 $ 15,896 $ 14,240
12/31/2005 $ 16,491 $ 14,537
03/31/2006 $ 17,261 $ 15,148
06/30/2006 $ 16,470 $ 14,930
09/30/2006 $ 17,020 $ 15,775
12/31/2006 $ 17,802 $ 16,831
03/31/2007 $ 18,288 $ 16,939
06/30/2007 $ 19,472 $ 18,002
09/30/2007 $ 20,902 $ 18,367
12/31/2007 $ 20,321 $ 17,755
AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/07
1-Year 14.15% 5-Year 12.64% 10-Year 7.35%
SERVICE SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Capital Appreciation Fund/VA (Service)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Capital Appreciation
Fund/VA (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 $ 13,255
09/30/2006 $ 12,677 $ 14,005
12/31/2006 $ 13,251 $ 14,942
03/31/2007 $ 13,603 $ 15,038
06/30/2007 $ 14,474 $ 15,982
09/30/2007 $ 15,526 $ 16,306
12/31/2007 $ 15,087 $ 15,762
AVERAGE ANNUAL TOTAL RETURNS OF SERVICE SHARES OF THE FUND AT 12/31/07
1-Year 13.86% 5-Year 12.37% Since Inception (9/18/01) 6.76%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, CALL US AT 1.800.981.2871. THE FUND'S
TOTAL RETURNS SHOULD NOT BE EXPECTED TO BE THE SAME AS THE RETURNS OF OTHER
FUNDS, WHETHER OR NOT BOTH FUNDS HAVE THE SAME PORTFOLIO MANAGERS AND/OR SIMILAR
NAMES. THE FUND'S TOTAL RETURNS DO NOT INCLUDE THE CHARGES ASSOCIATED WITH THE
SEPARATE ACCOUNT PRODUCTS THAT OFFER THIS FUND. SUCH PERFORMANCE WOULD HAVE BEEN
LOWER IF SUCH CHARGES WERE TAKEN INTO ACCOUNT.
5 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
FUND EXPENSES
- --------------------------------------------------------------------------------
FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1)
transaction costs, which may include redemption fees (if applicable); 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, 2007.
ACTUAL EXPENSES. The first section of the table provides information about
actual account values and actual expenses. You may use the information in this
section for the class of shares you hold, together with the amount you invested,
to estimate the expense that you paid over the period. Simply divide your
account value by $1,000.00 (for example, an $8,600.00 account value divided by
$1,000.00 = 8.60), then multiply the result by the number in the first section
under the heading entitled "Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The second section of the table
provides information about hypothetical account values and hypothetical expenses
based on the Fund's actual expense ratio for each class of shares, and an
assumed rate of return of 5% per year for each class before expenses, which is
not the actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of investing
in the Fund and other funds. To do so, compare this 5% hypothetical example for
the class of shares you hold with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any charges associated with the separate
accounts that offer this Fund. Therefore, the "hypothetical" lines of the table
are useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these separate
account charges were included your costs would have been higher.
- --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
ACTUAL JULY 1, 2007 DECEMBER 31, 2007 DECEMBER 31, 2007
- --------------------------------------------------------------------------------
Non-Service Shares $1,000.00 $1,043.60 $3.30
- --------------------------------------------------------------------------------
Service Shares 1,000.00 1,042.40 4.64
HYPOTHETICAL
(5% return before
expenses)
- --------------------------------------------------------------------------------
Non-Service Shares 1,000.00 1,021.98 3.27
- --------------------------------------------------------------------------------
Service Shares 1,000.00 1,020.67 4.59
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 indirect expenses from affiliated fund, based on the 6-month period
ended December 31, 2007 are as follows:
CLASS EXPENSE RATIOS
- -----------------------------------
Non-Service Shares 0.64%
- -----------------------------------
Service Shares 0.90
The expense ratios reflect reduction to custodian expenses and 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 and reduction to
custodian expenses, if applicable.
- --------------------------------------------------------------------------------
6 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
STATEMENT OF INVESTMENTS December 31, 2007
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS--99.0%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--8.6%
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--2.0%
Las Vegas Sands Corp. 1 414,320 $ 42,695,676
- --------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL--0.6%
Amazon.com, Inc. 1 136,300 12,626,832
- --------------------------------------------------------------------------------
MEDIA--2.1%
Focus Media Holding Ltd., ADR 1 176,500 10,026,965
- --------------------------------------------------------------------------------
Liberty Global, Inc., Series A 1 508,890 19,943,399
- --------------------------------------------------------------------------------
XM Satellite Radio Holdings, Inc.,
Cl. A 1 1,271,200 15,559,488
----------------
45,529,852
- --------------------------------------------------------------------------------
MULTILINE RETAIL--1.0%
J.C. Penney Co., Inc. (Holding Co.) 517,400 22,760,426
- --------------------------------------------------------------------------------
SPECIALTY RETAIL--1.5%
Abercrombie & Fitch Co., Cl. A 230,340 18,420,290
- --------------------------------------------------------------------------------
Tiffany & Co. 320,200 14,738,806
----------------
33,159,096
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS--1.4%
Polo Ralph Lauren Corp., Cl. A 490,600 30,314,174
- --------------------------------------------------------------------------------
CONSUMER STAPLES--6.8%
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--2.7%
Costco Wholesale Corp. 594,600 41,479,296
- --------------------------------------------------------------------------------
Sysco Corp. 570,410 17,802,496
----------------
59,281,792
- --------------------------------------------------------------------------------
FOOD PRODUCTS--3.1%
Cadbury Schweppes plc 2,553,580 31,762,737
- --------------------------------------------------------------------------------
Nestle SA 78,684 36,106,318
----------------
67,869,055
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS--1.0%
Reckitt Benckiser Group plc 378,360 21,810,225
- --------------------------------------------------------------------------------
ENERGY--8.2%
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--3.8%
Schlumberger Ltd. 525,400 51,683,598
- --------------------------------------------------------------------------------
Smith International, Inc. 415,800 30,706,830
----------------
82,390,428
- --------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS--4.4%
Occidental Petroleum Corp. 501,700 38,625,883
- --------------------------------------------------------------------------------
Range Resources Corp. 560,580 28,791,389
- --------------------------------------------------------------------------------
XTO Energy, Inc. 569,200 29,234,112
----------------
96,651,384
- --------------------------------------------------------------------------------
FINANCIALS--11.8%
- --------------------------------------------------------------------------------
CAPITAL MARKETS--7.0%
Charles Schwab Corp. (The) 802,500 20,503,875
- --------------------------------------------------------------------------------
Fortress Investment Group LLC, Cl. A 978,790 15,249,548
SHARES VALUE
- --------------------------------------------------------------------------------
CAPITAL MARKETS Continued
Franklin Resources, Inc. 137,900 $ 15,779,897
- --------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The) 191,200 41,117,560
- --------------------------------------------------------------------------------
Northern Trust Corp. 229,800 17,598,084
- --------------------------------------------------------------------------------
Och-Ziff Capital Management
Group, Cl. A 442,420 11,626,798
- --------------------------------------------------------------------------------
UBS AG 674,435 31,291,343
----------------
153,167,105
- --------------------------------------------------------------------------------
CONSUMER FINANCE--0.4%
American Express Co. 163,500 8,505,270
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--2.1%
CME Group, Inc. 65,900 45,207,400
- --------------------------------------------------------------------------------
INSURANCE--1.4%
Prudential Financial, Inc. 319,500 29,726,280
- --------------------------------------------------------------------------------
REAL ESTATE MANAGEMENT & DEVELOPMENT--0.9%
CB Richard Ellis Group, Inc., Cl. A 1 669,850 14,435,268
- --------------------------------------------------------------------------------
Jones Lang LaSalle, Inc. 71,260 5,070,862
----------------
19,506,130
- --------------------------------------------------------------------------------
HEALTH CARE--14.0%
- --------------------------------------------------------------------------------
BIOTECHNOLOGY--1.9%
Celgene Corp. 1 342,220 15,813,986
- --------------------------------------------------------------------------------
Gilead Sciences, Inc. 1 535,000 24,615,350
----------------
40,429,336
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--1.2%
Bard (C.R.), Inc. 121,690 11,536,212
- --------------------------------------------------------------------------------
St. Jude Medical, Inc. 1 376,900 15,317,216
----------------
26,853,428
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--3.5%
Express Scripts, Inc. 1 181,300 13,234,900
- --------------------------------------------------------------------------------
Medco Health Solutions, Inc. 1 162,620 16,489,668
- --------------------------------------------------------------------------------
Schein (Henry), Inc. 1 296,690 18,216,766
- --------------------------------------------------------------------------------
WellPoint, Inc. 1 333,900 29,293,047
----------------
77,234,381
- --------------------------------------------------------------------------------
LIFE SCIENCES TOOLS & SERVICES--2.0%
Covance, Inc. 1 158,727 13,748,933
- --------------------------------------------------------------------------------
Thermo Fisher Scientific, Inc. 1 503,380 29,034,958
----------------
42,783,891
- --------------------------------------------------------------------------------
PHARMACEUTICALS--5.4%
Abbott Laboratories 416,000 23,358,400
- --------------------------------------------------------------------------------
Allergan, Inc. 212,600 13,657,424
- --------------------------------------------------------------------------------
Merck & Co., Inc. 401,780 23,347,436
- --------------------------------------------------------------------------------
Roche Holding AG 222,912 38,476,515
- --------------------------------------------------------------------------------
Shire plc 806,450 18,487,362
----------------
117,327,137
7 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
INDUSTRIALS--9.3%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE--4.6%
General Dynamics Corp. 322,000 $ 28,654,780
- --------------------------------------------------------------------------------
Lockheed Martin Corp. 149,120 15,696,371
- --------------------------------------------------------------------------------
Precision Castparts Corp. 126,650 17,566,355
- --------------------------------------------------------------------------------
United Technologies Corp. 505,900 38,721,586
----------------
100,639,092
- --------------------------------------------------------------------------------
AIRLINES--0.4%
Ryanair Holdings Ltd. plc, Sponsored
ADR 1 199,500 7,868,280
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--1.0%
Corporate Executive Board Co. (The) 254,650 15,304,465
- --------------------------------------------------------------------------------
Robert Half International, Inc. 267,060 7,221,302
----------------
22,525,767
- --------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING--0.5%
Foster Wheeler Ltd. 1 31,300 4,852,126
- --------------------------------------------------------------------------------
Shaw Group, Inc. (The) 1 86,800 5,246,192
----------------
10,098,318
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--1.4%
ABB Ltd. 1,047,546 30,154,386
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--0.7%
McDermott International, Inc. 1 264,500 15,613,435
- --------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS--0.7%
Fastenal Co. 387,400 15,658,708
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--31.1%
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--9.0%
Cisco Systems, Inc. 1 2,482,100 67,190,447
- --------------------------------------------------------------------------------
Corning, Inc. 1,615,500 38,755,845
- --------------------------------------------------------------------------------
F5 Networks, Inc. 1 354,560 10,112,051
- --------------------------------------------------------------------------------
QUALCOMM, Inc. 745,700 29,343,295
- --------------------------------------------------------------------------------
Research in Motion Ltd. 1 445,500 50,519,700
----------------
195,921,338
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--6.4%
Apple, Inc. 1 345,300 68,397,024
- --------------------------------------------------------------------------------
EMC Corp. 1 1,734,100 32,132,873
- --------------------------------------------------------------------------------
Hewlett-Packard Co. 501,650 25,323,292
- --------------------------------------------------------------------------------
Network Appliance, Inc. 1 529,000 13,203,840
- --------------------------------------------------------------------------------
Seagate Technology International,
Inc. 1 325,000 32,500
----------------
139,089,529
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--5.4%
eBay, Inc. 1 920,100 30,538,119
- --------------------------------------------------------------------------------
Google, Inc., Cl. A 1 126,500 87,472,220
----------------
118,010,339
SHARES VALUE
- --------------------------------------------------------------------------------
IT SERVICES--2.3%
Affiliated Computer Services, Inc.,
Cl. A 1 664,950 $ 29,989,245
- --------------------------------------------------------------------------------
Cognizant Technology Solutions
Corp. 1 607,700 20,625,338
----------------
50,614,583
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--2.5%
ASML Holding NV 1 571,799 17,891,591
- --------------------------------------------------------------------------------
Broadcom Corp., Cl. A 1 903,800 23,625,332
- --------------------------------------------------------------------------------
Microchip Technology, Inc. 413,000 12,976,460
----------------
54,493,383
- --------------------------------------------------------------------------------
SOFTWARE--5.5%
Adobe Systems, Inc. 1 604,900 25,847,377
- --------------------------------------------------------------------------------
Amdocs Ltd. 1 683,180 23,549,215
- --------------------------------------------------------------------------------
Autodesk, Inc. 1 526,700 26,208,592
- --------------------------------------------------------------------------------
Microsoft Corp. 789,000 28,088,400
- --------------------------------------------------------------------------------
Salesforce.com, Inc. 1 237,000 14,857,530
----------------
118,551,114
- --------------------------------------------------------------------------------
MATERIALS--5.3%
- --------------------------------------------------------------------------------
CHEMICALS--4.8%
Monsanto Co. 588,000 65,673,720
- --------------------------------------------------------------------------------
Praxair, Inc. 439,900 39,023,529
----------------
104,697,249
- --------------------------------------------------------------------------------
METALS & MINING--0.5%
Allegheny Technologies, Inc. 124,010 10,714,464
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--3.9%
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--3.9%
America Movil SAB de CV, ADR,
Series L 469,500 28,822,605
- --------------------------------------------------------------------------------
Crown Castle International Corp. 1 811,100 33,741,760
- --------------------------------------------------------------------------------
NII Holdings, Inc. 1 480,460 23,215,827
----------------
85,780,192
----------------
Total Common Stocks (Cost $1,620,560,586) 2,156,259,475
- --------------------------------------------------------------------------------
INVESTMENT COMPANIES--1.1%
- --------------------------------------------------------------------------------
Oppenheimer Institutional Money Market
Fund, Cl. E, 5.03% 2,3
(Cost $24,161,830) 24,161,830 24,161,830
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $1,644,722,416) 100.1% 2,180,421,305
- --------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (0.1) (1,742,826)
-------------------------------
NET ASSETS 100.0% $ 2,178,678,479
===============================
INDUSTRY CLASSIFICATIONS ARE UNAUDITED.
8 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
2. Rate shown is the 7-day yield as of December 31, 2007.
3. Is or was an affiliate, as defined in the Investment Company Act of 1940, at
or during the period ended December 31, 2007, by virtue of the Fund owning at
least 5% of the voting securities of the issuer or as a result of the Fund and
the issuer having the same investment adviser.Transactions during the period in
which the issuer was an affiliate are as follows:
SHARES GROSS GROSS SHARES
DECEMBER 31, 2006 ADDITIONS REDUCTIONS DECEMBER 31, 2007
- ----------------------------------------------------------------------------------------------------------------------
Oppenheimer Institutional Money Market Fund, Cl. E 15,177,546 333,232,908 324,248,624 24,161,830
DIVIDEND
VALUE INCOME
- ----------------------------------------------------------------------------------------------------------------------
Oppenheimer Institutional Money Market Fund, Cl. E $24,161,830 $ 1,032,604
- --------------------------------------------------------------------------------
FOREIGN CURRENCY EXCHANGE CONTRACTS AS OF DECEMBER 31, 2007 WERE AS FOLLOWS:
- --------------------------------------------------------------------------------
CONTRACT
AMOUNT EXPIRATION UNREALIZED
CONTRACT DESCRIPTION BUY/SELL (000S) DATE VALUE DEPRECIATION
- ----------------------------------------------------------------------------------------------------------------------
Swiss Franc (CHF) Buy 2,874CHF 1/4/08 $ 2,537,166 $ 11,425
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
9 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 31, 2007
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
ASSETS
- ----------------------------------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments: $2,156,259,475
Unaffiliated companies (cost $1,620,560,586) 24,161,830
---------------
Affiliated companies (cost $24,161,830) 2,180,421,305
- ----------------------------------------------------------------------------------------------------------
Cash 66,089
- ----------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 9,389,749
Shares of beneficial interest sold 5,080,884
Dividends 1,491,238
Other 33,743
---------------
Total assets 2,196,483,008
- ----------------------------------------------------------------------------------------------------------
LIABILITIES
- ----------------------------------------------------------------------------------------------------------
Unrealized depreciation on foreign currency contracts 11,425
- ----------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 16,283,931
Shares of beneficial interest redeemed 896,328
Distribution and service plan fees 344,292
Shareholder communications 204,557
Trustees' compensation 24,523
Transfer and shareholder servicing agent fees 1,806
Other 37,667
---------------
Total liabilities 17,804,529
- ----------------------------------------------------------------------------------------------------------
NET ASSETS $2,178,678,479
===============
- ----------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- ----------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 46,273
- ----------------------------------------------------------------------------------------------------------
Additional paid-in capital 1,781,791,179
- ----------------------------------------------------------------------------------------------------------
Accumulated net investment income 511,377
- ----------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions (139,393,424)
- ----------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets and liabilities
denominated in foreign currencies 535,723,074
---------------
NET ASSETS $2,178,678,479
===============
- ----------------------------------------------------------------------------------------------------------
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$1,631,791,679 and 34,583,013 shares of beneficial
interest outstanding) $ 47.18
- ----------------------------------------------------------------------------------------------------------
Service Shares:
Net asset value, redemption price per share and offering price per share
(based on net assets of $546,886,800 and 11,690,144 shares of beneficial
interest outstanding) $ 46.78
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
10 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 31, 2007
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- ----------------------------------------------------------------------------------------------------------
Dividends:
Unaffiliated companies (net of foreign withholding taxes of $408,906) $ 16,094,599
Affiliated companies 1,032,604
- ----------------------------------------------------------------------------------------------------------
Interest 6,761
- ----------------------------------------------------------------------------------------------------------
Portfolio lending fees 15,676
---------------
Total investment income 17,149,640
- ----------------------------------------------------------------------------------------------------------
EXPENSES
- ----------------------------------------------------------------------------------------------------------
Management fees 13,693,507
- ----------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Service shares 1,276,613
- ----------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service shares 10,389
Service shares 10,131
- ----------------------------------------------------------------------------------------------------------
Shareholder communications:
Non-Service shares 120,781
Service shares 36,373
- ----------------------------------------------------------------------------------------------------------
Trustees' compensation 41,030
- ----------------------------------------------------------------------------------------------------------
Custodian fees and expenses 32,208
- ----------------------------------------------------------------------------------------------------------
Administration service fees 1,500
- ----------------------------------------------------------------------------------------------------------
Other 81,227
---------------
Total expenses 15,303,759
Less reduction to custodian expenses (589)
Less waivers and reimbursements of expenses (19,755)
---------------
Net expenses 15,283,415
- ----------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 1,866,225
- ----------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
- ----------------------------------------------------------------------------------------------------------
Net realized gain on:
Investments from unaffiliated companies 146,947,745
Foreign currency transactions 1,578,248
---------------
Net realized gain 148,525,993
- ----------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation on:
Investments 123,612,766
Translation of assets and liabilities denominated in foreign currencies 6,666,623
---------------
Net change in unrealized appreciation 130,279,389
- ----------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 280,671,607
===============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2007 2006
- -----------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 1,866,225 $ 2,413,546
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized gain 148,525,993 29,967,822
- -----------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation 130,279,389 123,054,073
-------------------------------
Net increase in net assets resulting from operations 280,671,607 155,435,441
- -----------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Non-Service shares (3,712,463) (6,085,308)
Service shares ( 46,654) (772,510)
-------------------------------
(3,759,117) (6,857,818)
- -----------------------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from beneficial interest transactions:
Non-Service shares (179,103,584) (169,765,856)
Service shares 18,763,021 49,160,827
-------------------------------
(160,340,563) (120,605,029)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
Total increase 116,571,927 27,972,594
- -----------------------------------------------------------------------------------------------------------------------------------
Beginning of period 2,062,106,552 2,034,133,958
-------------------------------
End of period (including accumulated net investment income of
$511,377 and $2,398,470, respectively) $2,178,678,479 $2,062,106,552
===============================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
12 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2007 2006 2005 2004 2003
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 41.43 $ 38.52 $ 36.99 $ 34.70 $ 26.62
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .07 1 .07 1 .18 1 .35 1,2 .12
Net realized and unrealized gain 5.78 2.98 1.68 2.05 8.07
-----------------------------------------------------------------------------------------
Total from investment operations 5.85 3.05 1.86 2.40 8.19
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to
shareholders:
Dividends from net investment income (.10) (.14) (.33) (.11) (.11)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 47.18 $ 41.43 $ 38.52 $ 36.99 $ 34.70
=========================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 14.15% 7.95% 5.10% 6.93% 30.94%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 1,631,791 $ 1,598,967 $ 1,652,282 $ 1,770,273 $ 1,715,240
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 1,631,686 $ 1,615,352 $ 1,658,910 $ 1,708,511 $ 1,468,297
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 0.15% 0.17% 0.47% 0.99% 2 0.39%
Total expenses 0.65% 5,6,7 0.67% 5,6,7 0.66% 6 0.66% 6 0.67% 6
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 59% 47% 70% 44% 48%
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 less than one full year.
5. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended December 31, 2007 0.65%
Year Ended December 31, 2006 0.67%
6. Reduction to custodian expenses less than 0.005%.
7. Voluntary waiver or reimbursement of indirect management fees less than
0.005%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
13 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SERVICE SHARES YEAR ENDED DECEMBER 31, 2007 2006 2005 2004 2003
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 41.09 $ 38.23 $ 36.73 $ 34.53 $ 26.53
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.05) 1 (.03) 1 .08 1 .29 1,2 .08
Net realized and unrealized gain 5.74 2.96 1.69 1.99 8.02
---------------------------------------------------------------------------------------
Total from investment operations 5.69 2.93 1.77 2.28 8.10
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to
shareholders:
Dividends from net investment income -- 3 (.07) (.27) (.08) (.10)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 46.78 $ 41.09 $ 38.23 $ 36.73 $ 34.53
=======================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 4 13.86% 7.68% 4.87% 6.62% 30.69%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 546,887 $ 463,140 $ 381,852 $ 248,649 $ 119,699
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 510,874 $ 426,539 $ 301,780 $ 184,273 $ 48,178
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 5
Net investment income (loss) (0.10)% (0.08)% 0.20% 0.85% 2 0.14%
Total expenses 0.91% 6,7,8 0.92% 6,7,8 0.91% 7 0.91% 7 0.94% 7
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 59% 47% 70% 44% 48%
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. Less than $0.005 per share.
4. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Total returns are not annualized for
periods less than one full year. Total return information does not reflect
expenses that apply at the separate account level or to related insurance
products. Inclusion of these charges would reduce the total return figures for
all periods shown. Returns do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund shares.
5. Annualized for periods less than one full year.
6. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended December 31, 2007 0.91%
Year Ended December 31, 2006 0.92%
7. Reduction to custodian expenses less than 0.005%.
8. Voluntary waiver or reimbursement of indirect management fees less than
0.005%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Capital Appreciation Fund/VA (the "Fund") is a separate series of
Oppenheimer Variable Account Funds, an open-end management investment company
registered under the Investment Company Act of 1940, as amended. The Fund's
investment objective is to seek capital appreciation by investing in securities
of well-known, established companies. The Fund's investment adviser is
OppenheimerFunds, Inc. (the "Manager").
The Fund offers two classes of shares. Both classes are sold at their
offering price, which is the net asset value per share, to separate investment
accounts of participating insurance companies as an underlying investment for
variable life insurance policies, variable annuity contracts or other investment
products. The class of shares designated as Service shares is subject to a
distribution and service plan. Both classes of shares have identical rights and
voting privileges with respect to the Fund in general and exclusive voting
rights on matters that affect that class alone. Earnings, net assets and net
asset value per share may differ due to each class having its own expenses, such
as transfer and shareholder servicing agent fees and shareholder communications,
directly attributable to that class.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of the New York Stock Exchange (the "Exchange"), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for trading. Securities may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. Securities traded on a registered U.S.
securities exchange 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 whose principal exchange is NASDAQ(R) are valued based on the
closing price reported by NASDAQ prior to the time when the Fund's assets are
valued. In the absence of a sale, the security is valued at the last sale price
on the prior trading day, if it is within the spread of the 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,
collateralized mortgage obligations and other asset-backed securities will be
valued at the mean between the "bid" and "asked" prices. Securities for which
market quotations are not readily available are valued at their fair value.
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. Shares of a registered investment
company that are not traded on an exchange are valued at the acquired investment
company's net asset value per share. "Money market-type" debt instruments with
remaining maturities of sixty days or less are valued at cost adjusted by the
amortization of discount or premium to maturity (amortized cost), which
approximates market value.
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in
U.S. dollars. The values of securities denominated in foreign currencies and
amounts related to the purchase and sale of foreign securities and foreign
investment income are translated into U.S. dollars as of the close of the
Exchange, normally 4:00 P.M. Eastern time, on each day the Exchange is open for
trading. Foreign exchange rates may be valued primarily using a reliable bank,
dealer or service authorized by the Board of Trustees.
Reported net realized gains and losses from foreign currency transactions
arise from sales of portfolio securities, sales and maturities of short-term
securities, sales of foreign currencies, exchange rate fluctuations between the
trade and settlement dates on securities transactions, and the difference
between the amounts of dividends, interest, and foreign withholding taxes
recorded on the Fund's books and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized appreciation and depreciation on the
translation of assets and liabilities denominated in foreign currencies arise
from changes in the values of assets and liabilities, including investments in
securities at fiscal period end, resulting from changes in exchange rates.
15 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
INVESTMENT IN OPPENHEIMER INSTITUTIONAL MONEY MARKET FUND. The Fund is permitted
to invest daily available cash balances in an affiliated money market fund. The
Fund may invest the available cash in Class E shares of Oppenheimer
Institutional Money Market Fund ("IMMF") to seek current income while preserving
liquidity. IMMF is a registered open-end management investment company,
regulated as a money market fund under the Investment Company Act of 1940, as
amended. The Manager is also the investment adviser of IMMF. 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. Therefore, no federal income or excise tax provision is
required. The Fund files income tax returns in U.S. federal and applicable state
jurisdictions. The statute of limitations on the Fund's tax return filings
remain open for the three preceding fiscal reporting period ends.
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
- -------------------------------------------------------------------------------
$1,846,717 $-- $130,981,285 $527,182,723
1. As of December 31, 2007, the Fund had $130,948,710 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, 2007,
details of the capital loss carryforwards were as follows:
EXPIRING
-------------------------
2011 $ 96,270,872
2012 34,677,838
--------------
Total $ 130,948,710
==============
2. The Fund had $32,575 of post-October foreign currency losses which were
deferred.
3. During the fiscal year ended December 31, 2007, the Fund utilized
$151,992,802 of capital loss carryforward to offset capital gains realized in
that fiscal year.
4. 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.
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.
16 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
Accordingly, the following amounts have been reclassified for December 31, 2007.
Net assets of the Fund were unaffected by the reclassifications.
INCREASE TO ACCUMULATED
INCREASE TO ACCUMULATED NET REALIZED LOSS
NET INVESTMENT INCOME ON INVESTMENTS
-------------------------------------------------
$5,799 $5,799
The tax character of distributions paid during the years ended December 31, 2007
and December 31, 2006 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2007 DECEMBER 31, 2006
----------------------------------------------------------------
Distributions paid from:
Ordinary income $3,759,117 $6,857,818
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, 2007 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 $ 1,653,274,192
Federal tax cost of other investments 2,548,591
-----------------
Total federal tax cost $ 1,655,822,783
=================
Gross unrealized appreciation $ 587,477,378
Gross unrealized depreciation (60,294,655)
-----------------
Net unrealized appreciation $ 527,182,723
=================
- --------------------------------------------------------------------------------
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 compensation deferral plan.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations and
may differ from U.S. generally accepted accounting principles, are recorded on
the ex-dividend date. Income and capital gain distributions, if any, are
declared and paid annually or at other times as deemed necessary by the Manager.
- --------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income is recognized on an accrual basis. Market discount and
premium, which are included in interest income on the Statement of Operations,
are amortized or accreted daily.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. "Custodian fees and expenses" in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts, to the extent they are not
offset by positive
17 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
cash balances maintained by the Fund, at a rate equal to the Federal Funds Rate
plus 0.50%. The "Reduction to custodian expenses" line item, if applicable,
represents earnings on cash balances maintained by the Fund during the period.
Such interest expense and other custodian fees may be paid with these earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Fund's organizational documents provide current and former
trustees and officers with a limited indemnification against liabilities arising
in connection with the performance of their duties to the Fund. In the normal
course of business, the Fund may also enter into contracts that provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would be dependent on future claims that may be made against the
Fund. The risk of material loss from such claims is considered remote.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period. Actual
results could differ from those estimates.
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
YEAR ENDED DECEMBER 31, 2007 YEAR ENDED DECEMBER 31, 2006
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------
NON-SERVICE SHARES
Sold 3,540,352 $ 160,454,788 4,072,357 $ 160,034,277
Dividends and/or distributions reinvested 88,964 3,712,463 154,136 6,085,308
Redeemed (7,638,575) (343,270,835) (8,524,929) (335,885,441)
--------------------------------------------------------------
Net decrease (4,009,259) $(179,103,584) (4,298,436) $(169,765,856)
==============================================================
- ------------------------------------------------------------------------------------------------------------
SERVICE SHARES
Sold 2,132,039 $ 95,722,464 3,206,477 $ 125,342,151
Dividends and/or distributions reinvested 1,121 46,477 19,641 770,510
Redeemed (1,714,792) (77,005,920) (1,942,425) (76,951,834)
--------------------------------------------------------------
Net increase 418,368 $ 18,763,021 1,283,693 $ 49,160,827
==============================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations and investments in IMMF, for the year ended December
31, 2007, were as follows:
PURCHASES SALES
-------------------------------------------------------------
Investment securities $ 1,247,463,113 $ 1,402,031,332
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Under the investment advisory agreement, the Fund pays the
Manager a management fee based on the daily net assets of the Fund at an annual
rate as shown in the following table:
18 | OPPENHEIMER CAPITAL APPRECIATION 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
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, 2007, the Fund
paid $20,484 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 (the "Plan") in accordance with Rule 12b-1 under
the Investment Company Act of 1940 for Service shares to pay OppenheimerFunds
Distributor, Inc. (the "Distributor"), for distribution related services,
personal service and account maintenance for the Fund's Service shares. Under
the Plan, payments are made periodically at an annual rate of 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. These
fees are paid out of the Fund's assets on an on-going basis and increase
operating expenses of the Service shares, which results in lower performance
compared to the Fund's shares that are not subject to a service fee. Fees
incurred by the Fund under the Plan are detailed in the Statement of Operations.
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. 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, 2007, the Manager waived $19,755 for
IMMF management fees.
- --------------------------------------------------------------------------------
5. FOREIGN CURRENCY EXCHANGE CONTRACTS
The Fund may enter into foreign currency exchange contracts ("forward
contracts") for the purchase or sale of a foreign currency at a negotiated rate
at a future date.
Foreign currency exchange contracts are reported on a schedule following
the Statement of Investments. Forward contracts will be valued daily based upon
the closing prices of the forward currency rates determined at the close of the
Exchange as provided by a bank, dealer or pricing service. The resulting
unrealized appreciation (depreciation) is reported in the Statement of Assets
and Liabilities as a receivable or payable and in the Statement of Operations
within the change in unrealized appreciation (depreciation). At contract close,
the difference between the original cost of the contract and the value at the
close date is recorded as a realized gain (loss) in the Statement of Operations.
Risks to the Fund include both market and credit risk. Market risk is the
risk that the value of the forward contract will depreciate due to unfavorable
changes in the exchange rates. 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 payments that the Fund has not yet
received.
19 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. SECURITIES LENDING
The Fund lends portfolio securities from time to time in order to earn
additional income in the form of fees or interest on securities received as
collateral or the investment of any cash received as collateral. The loans are
secured by collateral (either securities, letters of credit, or cash) 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 each business day and any additional required collateral is
delivered to the Fund on the next business day. If the borrower defaults on its
obligation to return the securities loaned because of insolvency or other
reasons, the Fund could experience delays and cost in recovering the securities
loaned or in gaining access to the collateral. 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 and recognizes the gain
or loss in the fair value of the securities loaned that may occur during the
term of the loan. The Fund has the right under the lending agreement to recover
the securities from the borrower on demand.
As of December 31, 2007, the Fund had no securities on loan.
- --------------------------------------------------------------------------------
7. RECENT ACCOUNTING PRONOUNCEMENT
In September 2006, Financial Accounting Standards Board ("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, 2007, 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.
20 | 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, 2007, 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, 2007, 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, 2007, 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 13, 2008
21 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2008, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2007. 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, 2007 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.
22 | 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.
23 | 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 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 Marc Baylin and the Manager's Growth investment team and analysts. Mr. Baylin
has been the portfolio manager 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.
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
24 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
funds underlying variable insurance products. The Board noted that the Fund's
one-year, five-year and ten-year performance were better than its peer group
median although its three-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
considered the comparability of the fees charged and the services provided to
the Fund to the fees and services for other clients or accounts advised by the
Manager. The independent consultant provided comparative data in regard to the
fees and expenses of the Fund and other large-cap growth funds underlying
variable insurance products. The Board noted that the Fund's contractual and
actual management fees are 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. The Board noted that the
Fund currently has management fee breakpoints, which are intended to share with
Fund shareholders economies of scale that may exist as the Fund's assets grow.
OTHER BENEFITS TO THE MANAGER. In addition to considering the profits
realized by the Manager, the Board considered information that was provided
regarding the direct and indirect benefits the Manager receives as a result of
its relationship with the Fund, including compensation paid to the Manager's
affiliates and research provided to the Manager in connection with permissible
brokerage arrangements (soft dollar arrangements). The Board also considered
that the Manager must be able to pay and retain experienced professional
personnel at competitive rates to provide quality services to the Fund 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 considered all of the above information, and considered the
terms and conditions of the Agreement, including the management fee, in light of
all of the surrounding circumstances.
25 | 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, Cherry Creek Mortgage Company
Chairman of the Board (since 1991), Chairman, Centennial State Mortgage Company (since 1994), Chairman, The El Paso
of Trustees (since 2003), Mortgage Company (since 1993); Chairman, Ambassador Media Corporation (since 1984); Chairman,
Trustee (since 1999) Broadway Ventures (since 1984); Director of Helmerich & Payne, Inc. (oil and gas drilling/production
Age: 70 company) (since 1992), Campus Crusade for Christ (non-profit) (since 1991); Former Director, The
Lynde and Harry Bradley Foundation, Inc. (non-profit organization) (2002-2006); former Chairman of:
Transland Financial Services, Inc. (private mortgage banking company) (1997-2003), Great Frontier
Insurance (1995-2000), Frontier Real Estate, Inc. (residential real estate brokerage) (1994-2000)
and Frontier Title (title insurance agency) (1995-2000); former Director of the following:
UNUMProvident (insurance company) (1991-2004), Storage Technology Corporation (computer equipment
company) (1991-2003) and International Family Entertainment (television channel) (1992-1997); U.S.
Senator (January 1979-January 1991). Oversees 39 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: 71 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 39 portfolios in the OppenheimerFunds complex.
EDWARD L. CAMERON, Member of The Life Guard of Mount Vernon (George Washington historical site) (June 2000-May 2006);
Trustee (since 1999) Partner of PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price
Age: 69 Waterhouse LLP Global Investment Management Industry Services Group (financial services firm) (July
1994-June 1998). Oversees 39 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: 66 (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 39 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: 67 (until October 1994). Oversees 39 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); Director
Age: 61 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 39 portfolios in the
OppenheimerFunds complex.
26 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
ROBERT J. MALONE, Director of Jones Knowledge, Inc. (since 2006); Director of Jones International University
Trustee (since 2002) (educational organization) (since August 2005); Chairman, Chief Executive Officer and Director of
Age: 63 Steele Street State Bank (commercial banking) (since August 2003); Director of Colorado UpLIFT
(charitable organization) (since 1986); Trustee of the Gallagher Family Foundation (non-profit
organization) (since 2000); Former Chairman of U.S. Bank-Colorado (subsidiary of U.S. Bancorp and
formerly Colorado National Bank) (July 1996-April 1999); Director of Commercial Assets, Inc. (real
estate investment trust) (1993-2000); Director of Jones Knowledge, Inc. (2001-July 2004); and
Director of U.S. Exploration, Inc. (oil and gas exploration) (1997-February 2004). Oversees 39
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 of Worcester
Age: 65 Polytech Institute (since 1985); Chairman (since 1994) 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 41 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 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 of the Manager (since June 2001); President of the
Trustee, President and Manager (September 2000-March 2007); President and director or trustee of other Oppenheimer funds;
Principal Executive Officer President and Director of Oppenheimer Acquisition Corp. ("OAC") (the Manager's parent holding
(since 2001) company) and of Oppenheimer Partnership Holdings, Inc. (holding company subsidiary of the Manager)
Age: 58 (since July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of the Manager)
(November 2001-December 2006); 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); Chairman (since October 2007) and Member of the
Investment Company Institute's Board of Governors (since October 2003). Oversees 102 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. BAYLIN, ZACK, GILLESPIE
THE FUND 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 (since September
Vice President and Portfolio 2005); Managing Director and Lead Portfolio Manager at JP Morgan Fleming Investment Management (June
Manager (since 2005) 2002 to August 2005); Vice President of T. Rowe Price and a portfolio manager (March 1999 to June
Age: 40 2002) and an analyst (from June 1993). A portfolio manager and officer of 4 portfolios in the
OppenheimerFunds complex.
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Chief
Vice President and Chief Compliance Officer of OppenheimerFunds Distributor, Inc., Centennial Asset Management and
Compliance Officer Shareholder Services, Inc. (since March 2004); Vice President of OppenheimerFunds Distributor, Inc.,
(since 2004) Centennial Asset Management Corporation and Shareholder Services, Inc. (since June 1983); Former
Age: 57 Vice President and Director of Internal Audit of the Manager (1997-February 2004). An officer of 102
portfolios in the OppenheimerFunds complex.
27 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
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, Inc. and Oppenheimer Partnership Holdings, Inc.
Officer (since 1999) (since March 1999), OFI Private Investments, Inc. (since March 2000), OppenheimerFunds International
Age: 48 Ltd. and OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management, Inc. (since
November 2000), and OppenheimerFunds Legacy Program (charitable trust program established by the
Manager) (since June 2003); Treasurer and Chief Financial Officer of OFI Trust Company (trust
company subsidiary of the Manager) (since May 2000); Assistant Treasurer of the following: OAC
(since March 1999), Centennial Asset Management Corporation (March 1999-October 2003) and
OppenheimerFunds Legacy Program (April 2000-June 2003). An officer of 102 portfolios in the
OppenheimerFunds complex.
BRIAN S. PETERSEN, Vice President of the Manager (since February 2007); Assistant Vice President of the Manager (August
Assistant Treasurer 2002-February 2007); Manager/Financial Product Accounting of the Manager (November 1998-July 2002).
(since 2004) An officer of 102 portfolios in the OppenheimerFunds complex.
Age: 37
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). An officer of 102 portfolios in the OppenheimerFunds
Age: 37 complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March 2002) of the Manager;
Vice President and Secretary General Counsel and Director of the Distributor (since December 2001); General Counsel of Centennial
(since 2001) Asset Management Corporation (since December 2001); Senior Vice President and General Counsel of
Age: 59 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). An officer of 102 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) of UBS Financial Services,
(since 2004) Inc. An officer of 102 portfolios in the OppenheimerFunds complex.
Age: 40
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 102 portfolios in the OppenheimerFunds complex.
Age: 44
KATHLEEN T. IVES, Vice President (since June 1998) and Senior Counsel and Assistant Secretary (since October 2003) of
Assistant Secretary 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: 42 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 102
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.
28 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
DECEMBER 31, 2007
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Oppenheimer Management
MidCap Fund/VA Commentaries
A Series of Oppenheimer Variable Account Funds and
Annual Report
- --------------------------------------------------------------------------------
MANAGEMENT COMMENTARIES
Listing of Top Holdings
ANNUAL REPORT [GRAPHIC]
Fund Performance Discussion
Listing of Investments
Financial Statements
[LOGO] OPPENHEIMERFUNDS(R)
The Right Way to Invest
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. Oppenheimer MidCap Fund/VA posted
positive results and outperformed its benchmark, the S&P 500 Index, which
returned 5.49% for the 12-month reporting period ending December 31, 2007. We
attribute the Fund's relative outperformance to favorable stock selection in the
consumer discretionary, financials and health care sectors. By contrast,
disappointing stock performance in the materials and information technology
sectors slightly hampered results.
Bolstered by the economy's strength, the U.S. stock market continued its
steady rise from the start of the period through the end of February. At that
point, the market environment quickly changed due to a confluence of negative
events, which included new concerns over a slowdown in the economy and a brief
but sharp stock market sell-off in China.
By the start of the second quarter, the market had resumed its upward
momentum, buoyed by strong economic growth, tame inflation and high levels of
liquidity. However, market volatility increased by mid-summer. Despite strong
earnings growth and contained inflation, turmoil in the debt markets sent stock
prices down. Concern that higher borrowing costs would slow the buyout boom,
spur defaults, raise corporate borrowing costs and dampen consumer spending,
caused a significant sell-off in the equity and bond markets, as investors'
appetite for risk diminished. The volatility continued through the end of the
period as economic data remained mixed and commodity prices continued to rise.
Against this backdrop, the Federal Reserve Bank (the "Fed") moved aggressively
to stop the spreading credit crunch from sinking the economy by cutting its
target for the federal funds rate a full percentage point, over its last three
meetings of the year, to 4.25%.
The Fund's best relative gains were achieved in the consumer
discretionary, financials and health care sectors. Within the consumer
discretionary sector, a variety of factors helped drive the Fund's relative
outperformance, the primary factor being strong stock selection. In addition,
the Fund's underweight position in broad retailing stocks during the volatile
summer months, combined with our selective approach to the sector, helped
performance. Top individual contributors included GameStop Corp., one of the
largest retailers of new and used video games, hardware and entertainment
software, which benefited from growth in new video game hardware platforms as
well as continued dominance in the used game business. Las Vegas Sands Corp., a
hotel, gaming and resort development company, also contributed to Fund
performance. Concern over Las Vegas Sands' new property in Macao, China,
prevented the market from fully recognizing the value in the company's other
properties, which, in our view, resulted in an under-valuation of its stock
price. However, as Las Vegas Sands' strong fundamentals became apparent to
investors and confidence grew over the strength of the Chinese market, the
company's stock price increased.
Within the financials sector, favorable stock selection and an underweight
position drove performance. Top contributors included CME Group, Inc. and
Affiliated Managers Group, Inc. CME, the world's largest futures exchange,
continued to gain value from the growth of sophisticated strategies used to
hedge financial risk. Affiliated Managers, an asset management company, advanced
on its success in acquiring and integrating a diverse group of mid-sized
investment management firms.
Strong stock selection also drove the Fund's relative outperformance in
the health care sector. Top performers included Covance, Inc. and Cerner Corp.
Covance, a contract research organization that develops and carries out
pre-clinical and clinical trials of potential commercial drugs for
pharmaceutical companies, benefited from a continued trend within the industry
to outsource such work. Cerner, a U.S. supplier of health care information
technology solutions, gained on an industry trend to increase the use of
information to optimize clinical and financial outcomes.
On a relative basis, the Fund's weakest performing sectors were materials
and information technology. Within the materials sector, the Fund's
underperformance can be attributed to poor stock selection, and more
specifically due to a preference for companies with greater exposure to titanium
than to steel, copper or aluminum. Top detractors included Vulcan Materials Co.
and Titanium Metals Corp.
In the information technology sector, weak stock selection drove the
Fund's relative underperformance. Top detractors included Digital River, Inc.
and Cognizant Technologies Solutions Corp. Digital River, a provider of global
e-commerce solutions, suffered due to multiple reasons, which included
heightened competition, issues with its biggest customer and market share loss.
Information technology services company, Cognizant Technology Solutions,
declined due to its significant exposure to the weakened financial services
sector and a weakened dollar. We exited our position in Digital River.
3 | OPPENHEIMER MIDCAP FUND/VA
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
Over the period we made a few adjustments to the Fund's sector weightings.
We increased the Fund's exposure to the consumer discretionary and energy
sectors and reduced the Fund's exposure to the financials sector.
Looking forward, we anticipate that economic growth will decelerate in the
near term as the effects of the sub-prime mortgage lending markets fallout
continue to work their way through the economy. However, we remain encouraged by
the Fed's pro-active posture. Ultimately, we believe that continuing to follow
our investment process, regardless of the market environment, is the best
approach to serving our shareholders over the long term.
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, 2007. 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, and the Russell Midcap(R) Growth Index, an unmanaged
index that measures the performance of those Russell Midcap companies with
higher price-to-book ratios and higher forecasted growth values. The stocks in
this index are also members of the Russell 1000(R) Growth Index. 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
Russell Midcap(R) Growth Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer MidCap Russell Midcap(R)
Fund/VA (Non-Service) S&P 500 Index Growth Index
12/31/1997 $10,000 $10,000 $10,000
03/31/1998 $11,304 $11,394 $11,194
06/30/1998 $11,740 $11,772 $11,187
09/30/1998 $ 9,010 $10,604 $ 9,319
12/31/1998 $11,236 $12,860 $11,786
03/31/1999 $12,326 $13,500 $12,189
06/30/1999 $13,597 $14,450 $13,459
09/30/1999 $14,146 $13,550 $12,785
12/31/1999 $20,630 $15,565 $17,832
03/31/2000 $25,921 $15,921 $21,599
06/30/2000 $25,005 $15,498 $19,999
09/30/2000 $26,545 $15,348 $20,504
12/31/2000 $18,311 $14,148 $15,737
03/31/2001 $13,430 $12,472 $11,789
06/30/2001 $13,368 $13,201 $13,697
09/30/2001 $11,575 $11,264 $ 9,889
12/31/2001 $12,586 $12,468 $12,566
03/31/2002 $11,936 $12,502 $12,344
06/30/2002 $10,416 $10,828 $10,090
09/30/2002 $ 8,836 $ 8,959 $ 8,357
12/31/2002 $ 9,088 $ 9,713 $ 9,122
03/31/2003 $ 8,948 $ 9,408 $ 9,121
06/30/2003 $10,335 $10,855 $10,831
09/30/2003 $10,904 $11,142 $11,607
12/31/2003 $11,414 $12,498 $13,018
03/31/2004 $12,030 $12,710 $13,648
06/30/2004 $12,564 $12,928 $13,791
09/30/2004 $12,154 $12,686 $13,194
12/31/2004 $13,671 $13,857 $15,033
03/31/2005 $13,578 $13,559 $14,782
06/30/2005 $14,001 $13,745 $15,290
09/30/2005 $14,741 $14,240 $16,291
12/31/2005 $15,357 $14,537 $16,852
03/31/2006 $16,578 $15,148 $18,135
06/30/2006 $15,680 $14,930 $17,283
09/30/2006 $15,475 $15,775 $17,437
12/31/2006 $15,810 $16,831 $18,648
03/31/2007 $16,159 $16,939 $19,386
06/30/2007 $17,039 $18,002 $20,693
09/30/2007 $17,903 $18,367 $21,138
12/31/2007 $16,812 $17,755 $20,779
AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/07
1-Year 6.33% 5-Year 13.09% 10-Year 5.33%
SERVICE SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer MidCap Fund/VA (Service)
S&P 500 Index
Russell Midcap(R)Growth Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer MidCap Russell Midcap(R)
Fund/VA (Service) S&P 500 Index Growth Index
10/16/2000 $10,000 $10,000 $10,000
12/31/2000 $ 7,240 $ 9,257 $ 8,239
03/31/2001 $ 5,311 $ 8,161 $ 6,172
06/30/2001 $ 5,285 $ 8,638 $ 7,171
09/30/2001 $ 4,575 $ 7,370 $ 5,178
12/31/2001 $ 4,973 $ 8,158 $ 6,579
03/31/2002 $ 4,713 $ 8,181 $ 6,463
06/30/2002 $ 4,110 $ 7,085 $ 5,283
09/30/2002 $ 3,484 $ 5,862 $ 4,375
12/31/2002 $ 3,578 $ 6,356 $ 4,776
03/31/2003 $ 3,521 $ 6,156 $ 4,775
06/30/2003 $ 4,067 $ 7,103 $ 5,671
09/30/2003 $ 4,290 $ 7,291 $ 6,077
12/31/2003 $ 4,489 $ 8,178 $ 6,816
03/31/2004 $ 4,728 $ 8,316 $ 7,145
06/30/2004 $ 4,936 $ 8,459 $ 7,220
09/30/2004 $ 4,769 $ 8,301 $ 6,908
12/31/2004 $ 5,361 $ 9,067 $ 7,871
03/31/2005 $ 5,320 $ 8,872 $ 7,739
06/30/2005 $ 5,481 $ 8,994 $ 8,005
09/30/2005 $ 5,767 $ 9,318 $ 8,529
12/31/2005 $ 6,003 $ 9,512 $ 8,823
03/31/2006 $ 6,477 $ 9,912 $ 9,494
06/30/2006 $ 6,122 $ 9,769 $ 9,049
09/30/2006 $ 6,038 $10,322 $ 9,129
12/31/2006 $ 6,165 $11,013 $ 9,763
03/31/2007 $ 6,297 $11,084 $10,150
06/30/2007 $ 6,635 $11,779 $10,834
09/30/2007 $ 6,968 $12,018 $11,067
12/31/2007 $ 6,537 $11,618 $10,879
AVERAGE ANNUAL TOTAL RETURNS OF SERVICE SHARES OF THE FUND AT 12/31/07
1-Year 6.04% 5-Year 12.81% Since Inception (10/16/00) -5.73%
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 applicable); 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, 2007.
ACTUAL EXPENSES. The first section of the table provides information about
actual account values and actual expenses. You may use the information in this
section for the class of shares you hold, together with the amount you invested,
to estimate the expense that you paid over the period. Simply divide your
account value by $1,000.00 (for example, an $8,600.00 account value divided by
$1,000.00 = 8.60), then multiply the result by the number in the first section
under the heading entitled "Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The second section of the table
provides information about hypothetical account values and hypothetical expenses
based on the Fund's actual expense ratio for each class of shares, and an
assumed rate of return of 5% per year for each class before expenses, which is
not the actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of investing
in the Fund and other funds. To do so, compare this 5% hypothetical example for
the class of shares you hold with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any charges associated with the separate
accounts that offer this Fund. Therefore, the "hypothetical" lines of the table
are useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these separate
account charges were included your costs would have been higher.
- --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
ACTUAL JULY 1, 2007 DECEMBER 31, 2007 DECEMBER 31, 2007
- --------------------------------------------------------------------------------
Non-Service Shares $1,000.00 $ 986.70 $3.41
- --------------------------------------------------------------------------------
Service Shares 1,000.00 985.40 4.77
HYPOTHETICAL
(5% return before expenses)
- --------------------------------------------------------------------------------
Non-Service Shares 1,000.00 1,021.78 3.47
- --------------------------------------------------------------------------------
Service Shares 1,000.00 1,020.42 4.85
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 indirect expenses from affiliated fund, based on the 6-month period
ended December 31, 2007 are as follows:
CLASS EXPENSE RATIOS
- -----------------------------------------
Non-Service Shares 0.68%
- -----------------------------------------
Service Shares 0.95
The expense ratios reflect reduction to custodian expenses and 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 and reduction to
custodian expenses, if applicable.
- --------------------------------------------------------------------------------
6 | OPPENHEIMER MIDCAP FUND/VA
STATEMENT OF INVESTMENTS December 31, 2007
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS--96.4%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--20.0%
- --------------------------------------------------------------------------------
DIVERSIFIED CONSUMER SERVICES--1.6%
ITT Educational Services, Inc. 1 116,400 $ 9,925,428
- --------------------------------------------------------------------------------
New Oriental Education & Technology
Group, Inc., Sponsored ADR 1 84,000 6,769,560
---------------
16,694,988
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--3.7%
Burger King Holdings, Inc. 526,000 14,996,260
- --------------------------------------------------------------------------------
Las Vegas Sands Corp. 1 235,100 24,227,055
---------------
39,223,315
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES--0.6%
Harman International Industries, Inc. 90,700 6,685,497
- --------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL--1.8%
Liberty Media Holding
Corp.-Interactive, Series A 1 959,400 18,305,352
- --------------------------------------------------------------------------------
MEDIA--4.7%
Cablevision Systems Corp.
New York Group, Cl. A 1 621,500 15,226,750
- --------------------------------------------------------------------------------
Focus Media Holding Ltd., ADR 1 290,900 16,526,029
- --------------------------------------------------------------------------------
Liberty Global, Inc., Series C 1 476,800 17,446,112
---------------
49,198,891
- --------------------------------------------------------------------------------
SPECIALTY RETAIL--5.0%
Abercrombie & Fitch Co., Cl. A 141,400 11,307,758
- --------------------------------------------------------------------------------
CarMax, Inc. 1 618,300 12,211,425
- --------------------------------------------------------------------------------
GameStop Corp., Cl. A 1 186,400 11,577,304
- --------------------------------------------------------------------------------
Tiffany & Co. 374,200 17,224,426
---------------
52,320,913
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS--2.6%
Polo Ralph Lauren Corp., Cl. A 447,300 27,638,667
- --------------------------------------------------------------------------------
ENERGY--8.2%
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--3.9%
Cameron International Corp. 1 439,400 21,148,322
- --------------------------------------------------------------------------------
Smith International, Inc. 272,700 20,138,895
---------------
41,287,217
- --------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS--4.3%
Murphy Oil Corp. 271,700 23,051,028
- --------------------------------------------------------------------------------
Range Resources Corp. 395,700 20,323,152
- --------------------------------------------------------------------------------
SandRidge Communications, Inc. 1 45,940 1,647,408
---------------
45,021,588
SHARES VALUE
- --------------------------------------------------------------------------------
FINANCIALS--8.4%
- --------------------------------------------------------------------------------
CAPITAL MARKETS--3.9%
Affiliated Managers Group, Inc. 1 157,900 $ 18,546,934
- --------------------------------------------------------------------------------
Charles Schwab Corp. (The) 425,300 10,866,415
- --------------------------------------------------------------------------------
Fortress Investment Group LLC, Cl. A 709,801 11,058,700
---------------
40,472,049
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--0.9%
CME Group, Inc. 13,000 8,918,000
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS--1.5%
Boston Properties, Inc. 176,100 16,167,741
- --------------------------------------------------------------------------------
REAL ESTATE MANAGEMENT & DEVELOPMENT--2.1%
CB Richard Ellis Group, Inc., Cl. A 1 343,320 7,398,546
- --------------------------------------------------------------------------------
Jones Lang LaSalle, Inc. 199,000 14,160,840
---------------
21,559,386
- --------------------------------------------------------------------------------
HEALTH CARE--16.0%
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--4.1%
Bard (C.R.), Inc. 166,300 15,765,240
- --------------------------------------------------------------------------------
IDEXX Laboratories, Inc. 1 464,400 27,227,772
---------------
42,993,012
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--4.4%
Coventry Health Care, Inc. 1 337,575 20,001,319
- --------------------------------------------------------------------------------
Schein (Henry), Inc. 1 275,700 16,927,980
- --------------------------------------------------------------------------------
VCA Antech, Inc. 1 204,900 9,062,727
---------------
45,992,026
- --------------------------------------------------------------------------------
HEALTH CARE TECHNOLOGY--2.5%
Cerner Corp. 1 471,700 26,603,880
- --------------------------------------------------------------------------------
LIFE SCIENCES TOOLS & SERVICES--3.3%
Covance, Inc. 1 403,800 34,977,156
- --------------------------------------------------------------------------------
PHARMACEUTICALS--1.7%
Shire Pharmaceuticals
Group plc, ADR 263,200 18,147,640
- --------------------------------------------------------------------------------
INDUSTRIALS--15.2%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE--4.3%
Alliant Techsystems, Inc. 1 43,200 4,914,432
- --------------------------------------------------------------------------------
Curtiss-Wright Corp. 185,700 9,322,140
- --------------------------------------------------------------------------------
Precision Castparts Corp. 72,500 10,055,750
- --------------------------------------------------------------------------------
Rockwell Collins, Inc. 145,200 10,450,044
- --------------------------------------------------------------------------------
Spirit Aerosystems Holdings,
Inc., Cl. A 1 299,400 10,329,300
---------------
45,071,666
7 | OPPENHEIMER MIDCAP FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS--1.5%
C.H. Robinson Worldwide, Inc. 151,600 $ 8,204,592
- --------------------------------------------------------------------------------
Expeditors International of
Washington, Inc. 169,400 7,568,792
--------------
15,773,384
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--5.6%
EnergySolutions, Inc. 1 365,500 9,864,845
- --------------------------------------------------------------------------------
FTI Consulting, Inc. 1 104,800 6,459,872
- --------------------------------------------------------------------------------
IHS, Inc., Cl. A 1 212,500 12,869,000
- --------------------------------------------------------------------------------
Robert Half International, Inc. 306,300 8,282,352
- --------------------------------------------------------------------------------
Stericycle, Inc. 1 361,800 21,490,920
---------------
58,966,989
- --------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING--1.3%
Foster Wheeler Ltd. 1 20,400 3,162,408
- --------------------------------------------------------------------------------
Quanta Services, Inc. 1 386,200 10,133,888
---------------
13,296,296
- --------------------------------------------------------------------------------
MACHINERY--1.4%
Oshkosh Truck Corp. 318,700 15,061,762
- --------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS--1.1%
Fastenal Co. 287,200 11,608,624
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--22.4%
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--2.9%
F5 Networks, Inc. 1 372,300 10,617,996
- --------------------------------------------------------------------------------
QUALCOMM, Inc. 266,500 10,486,775
- --------------------------------------------------------------------------------
Research in Motion Ltd. 1 77,600 8,799,840
---------------
29,904,611
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--1.1%
Network Appliance, Inc. 1 465,300 11,613,888
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--3.2%
Amphenol Corp., Cl. A 385,100 17,857,087
- --------------------------------------------------------------------------------
Trimble Navigation Ltd. 1 515,800 15,597,792
---------------
33,454,879
- --------------------------------------------------------------------------------
IT SERVICES--6.3%
Affiliated Computer Services, Inc., Cl. A 1 448,400 20,222,840
- --------------------------------------------------------------------------------
Cognizant Technology Solutions Corp. 1 572,600 19,434,044
- --------------------------------------------------------------------------------
SAIC, Inc. 1 897,900 18,065,748
- --------------------------------------------------------------------------------
VeriFone Holdings, Inc. 1 373,400 8,681,550
---------------
66,404,182
SHARES VALUE
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--3.3%
FormFactor, Inc. 1 385,800 $ 12,769,980
- --------------------------------------------------------------------------------
KLA-Tencor Corp. 278,900 13,431,824
- --------------------------------------------------------------------------------
Varian Semiconductor
Equipment Associates, Inc. 1 226,750 8,389,750
---------------
34,591,554
- --------------------------------------------------------------------------------
SOFTWARE--5.6%
Amdocs Ltd. 1 472,800 16,297,416
- --------------------------------------------------------------------------------
Ansys, Inc. 1 263,700 10,933,002
- --------------------------------------------------------------------------------
Autodesk, Inc. 1 286,400 14,251,264
- --------------------------------------------------------------------------------
FactSet Research Systems, Inc. 307,950 17,152,815
---------------
58,634,497
- --------------------------------------------------------------------------------
MATERIALS--2.3%
- --------------------------------------------------------------------------------
CHEMICALS--0.5%
PPG Industries, Inc. 75,200 5,281,296
- --------------------------------------------------------------------------------
CONSTRUCTION MATERIALS--0.5%
Vulcan Materials Co. 64,600 5,109,214
- --------------------------------------------------------------------------------
METALS & MINING--1.3%
Allegheny Technologies, Inc. 81,200 7,015,680
- --------------------------------------------------------------------------------
Titanium Metals Corp. 236,600 6,258,070
---------------
13,273,750
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--2.6%
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--2.6%
Crown Castle International Corp. 1 666,760 27,737,216
- --------------------------------------------------------------------------------
UTILITIES--1.3%
- --------------------------------------------------------------------------------
GAS UTILITIES--1.3%
Questar Corp. 247,400 13,384,340
---------------
Total Common Stocks (Cost $869,013,824) 1,011,375,466
- --------------------------------------------------------------------------------
INVESTMENT COMPANIES--3.4%
- --------------------------------------------------------------------------------
Oppenheimer Institutional
Money Market Fund,
Cl. E, 5.03% 2,3
(Cost $35,791,815) 35,791,815 35,791,815
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $904,805,639) 99.8% 1,047,167,281
- --------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 0.2 2,544,220
----------------------------------
NET ASSETS 100.0% $1,049,711,501
==================================
INDUSTRY CLASSIFICATIONS ARE UNAUDITED.
8 | OPPENHEIMER MIDCAP FUND/VA
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
2. Rate shown is the 7-day yield as of December 31, 2007.
3. Is or was an affiliate, as defined in the Investment Company Act of 1940, at
or during the period ended December 31, 2007, by virtue of the Fund owning at
least 5% of the voting securities of the issuer or as a result of the Fund and
the issuer having the same investment adviser. Transactions during the period in
which the issuer was an affiliate are as follows:
SHARES GROSS GROSS SHARES
DECEMBER 31, 2006 ADDITIONS REDUCTIONS DECEMBER 31, 2007
- ----------------------------------------------------------------------------------------------------------------------------
Blaze Network Products, Inc., 8% Cv., Series D 1,147,862 -- 1,147,862 --
Oppenheimer Institutional Money Market Fund, Cl. E 19,997,273 493,691,450 477,896,908 35,791,815
DIVIDEND REALIZED
VALUE INCOME LOSS
- ----------------------------------------------------------------------------------------------------------------------------
Blaze Network Products, Inc., 8% Cv., Series D $ -- $ -- $ 7,343,506
Oppenheimer Institutional Money Market Fund, Cl. E 35,791,815 1,164,775 --
---------------------------------------------------
$ 35,791,815 $ 1,164,775 $ 7,343,506
===================================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
9 | OPPENHEIMER MIDCAP FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 31, 2007
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------
Investments, at value--see accompanying statement of
investments:
Unaffiliated companies (cost $869,013,824) $ 1,011,375,466
Affiliated companies (cost $35,791,815) 35,791,815
----------------
1,047,167,281
- --------------------------------------------------------------------------------
Cash 46,743
- --------------------------------------------------------------------------------
Receivables and other assets:
Shares of beneficial interest sold 7,379,277
Dividends 1,601,641
Other 25,706
----------------
Total assets 1,056,220,648
- --------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 5,960,244
Shares of beneficial interest redeemed 332,943
Shareholder communications 138,049
Distribution and service plan fees 31,125
Trustees' compensation 16,629
Transfer and shareholder servicing agent fees 1,760
Other 28,397
----------------
Total liabilities 6,509,147
- --------------------------------------------------------------------------------
NET ASSETS $ 1,049,711,501
================
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- --------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 19,427
- --------------------------------------------------------------------------------
Additional paid-in capital 1,369,552,661
- --------------------------------------------------------------------------------
Accumulated net investment loss (16,629)
- --------------------------------------------------------------------------------
Accumulated net realized loss on investments (462,205,600)
- --------------------------------------------------------------------------------
Net unrealized appreciation on investments 142,361,642
----------------
NET ASSETS $ 1,049,711,501
================
- --------------------------------------------------------------------------------
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 $1,002,441,469 and
18,538,421 shares of beneficial interest outstanding) $ 54.07
- --------------------------------------------------------------------------------
Service Shares:
Net asset value, redemption price per share and offering
price per share (based on net assets of $47,270,032 and
888,124 shares of beneficial interest outstanding) $ 53.22
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
10 | OPPENHEIMER MIDCAP FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 31, 2007
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends:
Unaffiliated companies $ 5,961,493
Affiliated companies 1,164,775
- --------------------------------------------------------------------------------
Interest 828
----------------
Total investment income 7,127,096
- --------------------------------------------------------------------------------
EXPENSES
- --------------------------------------------------------------------------------
Management fees 7,411,075
- --------------------------------------------------------------------------------
Distribution and service plan fee--Service shares 123,553
- --------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service shares 10,159
Service shares 10,022
- --------------------------------------------------------------------------------
Shareholder communications:
Non-Service shares 73,863
Service shares 3,414
- --------------------------------------------------------------------------------
Trustees' compensation 25,204
- --------------------------------------------------------------------------------
Custodian fees and expenses 6,065
- --------------------------------------------------------------------------------
Administration service fees 1,500
- --------------------------------------------------------------------------------
Other 55,404
----------------
Total expenses 7,720,259
Less reduction to custodian expenses (178)
Less waivers and reimbursements of expenses (22,246)
----------------
Net expenses 7,697,835
- --------------------------------------------------------------------------------
NET INVESTMENT LOSS (570,739)
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- --------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments:
Unaffiliated companies 194,220,760
Affiliated companies (7,343,506)
----------------
Net realized gain 186,877,254
- --------------------------------------------------------------------------------
Net change in unrealized appreciation on investments (117,202,651)
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 69,103,864
================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11 | OPPENHEIMER MIDCAP FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2007 2006
- -------------------------------------------------------------------------------------------
OPERATIONS
- -------------------------------------------------------------------------------------------
Net investment loss $ (570,739) $ (641,546)
- -------------------------------------------------------------------------------------------
Net realized gain 186,877,254 123,157,163
- -------------------------------------------------------------------------------------------
Net change in unrealized appreciation (117,202,651) (84,577,802)
----------------------------------
Net increase in net assets resulting from operations 69,103,864 37,937,815
- -------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- -------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
beneficial interest transactions:
Non-Service shares (118,530,501) (210,102,500)
Service shares (2,801,818) 9,672,618
----------------------------------
(121,332,319) (200,429,882)
- -------------------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------------------
Total decrease (52,228,455) (162,492,067)
- -------------------------------------------------------------------------------------------
Beginning of period 1,101,939,956 1,264,432,023
----------------------------------
End of period (including accumulated net investment
loss of $16,629 and $23,075, respectively) $ 1,049,711,501 $ 1,101,939,956
==================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
12 | OPPENHEIMER MIDCAP FUND/VA
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2007 2006 2005 2004 2003
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 50.85 $ 49.39 $ 43.97 $ 36.71 $ 29.23
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.02) 1 (.02) 1 (.12) 1 (.15) 1 (.15)
Net realized and unrealized gain 3.24 1.48 5.54 7.41 7.63
------------------------------------------------------------------------------------
Total from investment operations 3.22 1.46 5.42 7.26 7.48
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 54.07 $ 50.85 $ 49.39 $ 43.97 $ 36.71
====================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 6.33% 2.96% 12.33% 19.78% 25.59%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 1,002,442 $ 1,054,809 $1,227,881 $ 1,209,459 $ 1,113,743
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 1,045,592 $ 1,135,831 $1,177,979 $ 1,124,874 $ 1,041,584
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income (loss) (0.04)% (0.04)% (0.26)% (0.39)% (0.43)%
Total expenses 0.69% 4,5,6 0.69% 4,5 0.69% 6 0.69% 6 0.70% 6
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 112% 56% 32% 53% 154%
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 less than one full year.
4. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended December 31, 2007 0.69%
Year Ended December 31, 2006 0.69%
5. Voluntary waiver or reimbursement of indirect management fees less than
0.005%.
6. Reduction to custodian expenses less than 0.005%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
13 | OPPENHEIMER MIDCAP FUND/VA
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SERVICE SHARES YEAR ENDED DECEMBER 31, 2007 2006 2005 2004 2003
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 50.19 $ 48.87 $ 43.64 $ 36.54 $ 29.13
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.17) 1 (.16) 1 (.25) 1 (.27) 1 -- 2
Net realized and unrealized gain 3.20 1.48 5.48 7.37 7.41
-----------------------------------------------------------------------------------
Total from investment operations 3.03 1.32 5.23 7.10 7.41
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 53.22 $ 50.19 $ 48.87 $ 43.64 $ 36.54
===================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 6.04% 2.70% 11.99% 19.43% 25.44%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 47,270 $ 47,131 $ 36,551 $ 24,151 $ 11,698
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 49,421 $ 44,273 $ 28,798 $ 17,579 $ 3,858
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment loss (0.31)% (0.33)% (0.54)% (0.68)% (0.72)%
Total expenses 0.96% 5,6,7 0.97% 5,6 0.97% 7 0.99% 7 0.95% 7
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 112% 56% 32% 53% 154%
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 less than one full year.
5. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended December 31, 2007 0.96%
Year Ended December 31, 2006 0.97%
6. Voluntary waiver or reimbursement of indirect management fees less than
0.005%.
7. Reduction to custodian expenses less than 0.005%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14 | OPPENHEIMER MIDCAP FUND/VA
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer MidCap Fund/VA (the "Fund"), is a separate series of Oppenheimer
Variable Account Funds, an open-end management investment company registered
under the Investment Company Act of 1940, as amended. The Fund's investment
objective is to seek capital appreciation by investing in "growth type"
companies. The Fund's investment adviser is OppenheimerFunds, Inc. (the
"Manager").
The Fund offers two classes of shares. Both classes are sold at their
offering price, which is the net asset value per share, to separate investment
accounts of participating insurance companies as an underlying investment for
variable life insurance policies, variable annuity contracts or other investment
products. The class of shares designated as Service shares is subject to a
distribution and service plan. Both classes of shares have identical rights and
voting privileges with respect to the Fund in general and exclusive voting
rights on matters that affect that class alone. Earnings, net assets and net
asset value per share may differ due to each class having its own expenses, such
as transfer and shareholder servicing agent fees and shareholder communications,
directly attributable to that class.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of the New York Stock Exchange (the "Exchange"), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for trading. Securities may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. Securities traded on a registered U.S.
securities exchange 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 whose principal exchange is NASDAQ(R) are valued based on the closing
price reported by NASDAQ prior to the time when the Fund's assets are valued. In
the absence of a sale, the security is valued at the last sale price on the
prior trading day, if it is within the spread of the 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, collateralized
mortgage obligations and other asset-backed securities will be valued at the
mean between the "bid" and "asked" prices. Securities for which market
quotations are not readily available are valued at their fair value. 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. Shares of a registered investment company
that are not traded on an exchange are valued at the acquired investment
company's net asset value per share. "Money market-type" debt instruments with
remaining maturities of sixty days or less are valued at cost adjusted by the
amortization of discount or premium to maturity (amortized cost), which
approximates market value.
- --------------------------------------------------------------------------------
INVESTMENT IN OPPENHEIMER INSTITUTIONAL MONEY MARKET FUND. The Fund is permitted
to invest daily available cash balances in an affiliated money market fund. The
Fund may invest the available cash in Class E shares of Oppenheimer
Institutional Money Market Fund ("IMMF") to seek current income while preserving
liquidity. IMMF is a registered open-end management investment company,
regulated as a money market fund under the Investment Company Act of 1940, as
amended. The Manager is also the investment adviser of IMMF. 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.
15 | OPPENHEIMER MIDCAP 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. Therefore, no federal income or excise tax provision is
required. The Fund files income tax returns in U.S. federal and applicable state
jurisdictions. The statute of limitations on the Fund's tax return filings
remain open for the three preceding fiscal reporting period ends.
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
-----------------------------------------------------------------------------
$-- $-- $459,692,448 $139,848,481
1. As of December 31, 2007, the Fund had $459,692,448 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, 2007,
details of the capital loss carryforwards were as follows:
EXPIRING
--------------------------
2009 $229,467,626
2010 230,224,822
------------
Total $459,692,448
============
2. During the fiscal year ended December 31, 2007, the Fund utilized
$189,103,306 of capital loss carryforward to offset capital gains realized in
that fiscal year.
3. 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.
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, 2007.
Net assets of the Fund were unaffected by the reclassifications.
REDUCTION TO
ACCUMULATED NET
REDUCTION TO INVESTMENT LOSS
PAID-IN CAPITAL ON INVESTMENTS
--------------------------------------
$577,185 $577,185
No distributions were paid during the years ended December 31, 2007 and December
31, 2006.
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, 2007 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.
16 | OPPENHEIMER MIDCAP FUND/VA
Federal tax cost of securities $907,318,800
=============
Gross unrealized appreciation $186,226,450
Gross unrealized depreciation (46,377,969)
-------------
Net unrealized appreciation $139,848,481
=============
- --------------------------------------------------------------------------------
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 compensation deferral plan.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations and
may differ from U.S. generally accepted accounting principles, are recorded on
the ex-dividend date. Income and capital gain distributions, if any, are
declared and paid annually or at other times as deemed necessary by the Manager.
- --------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income is recognized on an accrual basis. Market discount and
premium, which are included in interest income on the Statement of Operations,
are amortized or accreted daily.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. "Custodian fees and expenses" in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts, to the extent they are not
offset by positive cash balances maintained by the Fund, at a rate equal to the
Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line item,
if applicable, represents earnings on cash balances maintained by the Fund
during the period. Such interest expense and other custodian fees may be paid
with these earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Fund's organizational documents provide current and former
trustees and officers with a limited indemnification against liabilities arising
in connection with the performance of their duties to the Fund. In the normal
course of business, the Fund may also enter into contracts that provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would be dependent on future claims that may be made against the
Fund. The risk of material loss from such claims is considered remote.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period. Actual
results could differ from those estimates.
17 | OPPENHEIMER MIDCAP FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
YEAR ENDED DECEMBER 31, 2007 YEAR ENDED DECEMBER 31, 2006
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------
NON-SERVICE SHARES
Sold 1,842,068 $ 99,805,796 1,908,858 $ 96,341,176
Redeemed (4,045,787) (218,336,297) (6,030,134) (306,443,676)
-------------------------------------------------------------
Net decrease (2,203,719) $(118,530,501) (4,121,276) $ (210,102,500)
=============================================================
- -----------------------------------------------------------------------------------------------
SERVICE SHARES
Sold 158,587 $ 8,425,522 330,109 $ 16,552,889
Redeemed (209,531) (11,227,340) (138,912) (6,880,271)
-------------------------------------------------------------
Net increase (decrease) (50,944) $ (2,801,818) 191,197 $ 9,672,618
=============================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations and investments in IMMF, for the year ended December
31, 2007, were as follows:
PURCHASES SALES
---------------------------------------------------------------
Investment securities $1,202,093,624 $1,340,184,548
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Under the investment advisory agreement, the Fund pays the
Manager a management fee based on the daily net assets of the Fund at an annual
rate as shown in the following table:
FEE SCHEDULE
--------------------------------------
Up to $200 million 0.75%
Next $200 million 0.72
Next $200 million 0.69
Next $200 million 0.66
Next $700 million 0.60
Over $1.5 billion 0.58
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services ("OFS"), a division of the
Manager, acts as the transfer and shareholder servicing agent for the Fund. The
Fund pays OFS a per account fee. For the year ended December 31, 2007, the Fund
paid $20,166 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 (the "Plan") in accordance with Rule 12b-1 under
the Investment Company Act of 1940 for Service shares to pay OppenheimerFunds
Distributor, Inc. (the "Distributor"), for distribution related services,
personal service and account maintenance for the Fund's Service shares. Under
the Plan, payments are made periodically at an annual rate of 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
18 | OPPENHEIMER MIDCAP FUND/VA
owners that hold Service shares. These fees are paid out of the Fund's assets on
an on-going basis and increase operating expenses of the Service shares, which
results in lower performance compared to the Fund's shares that are not subject
to a service fee. Fees incurred by the Fund under the Plan are detailed in the
Statement of Operations.
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. 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, 2007, the Manager waived $22,246 for
IMMF management fees.
- --------------------------------------------------------------------------------
5. RECENT ACCOUNTING PRONOUNCEMENT
In September 2006, Financial Accounting Standards Board ("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, 2007, 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.
19 | OPPENHEIMER MIDCAP FUND/VA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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"), a series of Oppenheimer Variable
Account Funds, including the statement of investments, as of December 31, 2007,
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, 2007, 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, 2007, 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 13, 2008
20 | OPPENHEIMER MIDCAP FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2008, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2007. 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
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 Richard Royce and the Manager's Growth investment team and analysts. Mr.
Royce has been a portfolio manager of the Fund since June 2007. 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.
23 | OPPENHEIMER MIDCAP 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 mid-cap growth funds underlying
variable insurance products. The Board noted that the Fund's three-year
performance was better than its peer group median although its one-year,
five-year and ten-year performance were below its peer group median. The Board
also noted, however, that the Manager recently changed the portfolio management
team responsible for the investment performance of the Fund and that the Fund's
underperformance is not attributable to the new management team. 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
considered the comparability of the fees charged and the services provided to
the Fund to the fees and services for other clients or accounts advised by the
Manager. The independent consultant provided comparative data in regard to the
fees and expenses of the Fund and other mid-cap growth funds underlying variable
insurance products. 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. The Board noted that the
Fund currently has management fee breakpoints, which are intended to share with
Fund shareholders economies of scale that may exist as the Fund's assets grow.
OTHER BENEFITS TO THE MANAGER. In addition to considering the profits
realized by the Manager, the Board considered information that was provided
regarding the direct and indirect benefits the Manager receives as a result of
its relationship with the Fund, including compensation paid to the Manager's
affiliates and research provided to the Manager in connection with permissible
brokerage arrangements (soft dollar arrangements). The Board also considered
that the Manager must be able to pay and retain experienced professional
personnel at competitive rates to provide quality services to the Fund 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 considered all of the above information, and considered the
terms and conditions of the Agreement, including the management fee, in light of
all of the surrounding circumstances.
24 | OPPENHEIMER MIDCAP FUND/VA
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) HELD WITH THE Principal Occupation(s) During the Past 5 Years; Other Trusteeships/Directorships Held; Number of
FUND, LENGTH OF SERVICE, AGE Portfolios in the Fund Complex Currently Overseen
INDEPENDENT TRUSTEES THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL, COLORADO
80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER RESIGNATION,
RETIREMENT, DEATH OR REMOVAL.
WILLIAM L. ARMSTRONG, President, Colorado Christian University (since 2006); Chairman, Cherry Creek Mortgage Company
Chairman of the Board of (since 1991), Chairman, Centennial State Mortgage Company (since 1994), Chairman, The El Paso
Trustees (since 2003), Mortgage Company (since 1993); Chairman, Ambassador Media Corporation (since 1984); Chairman,
Trustee (since 1999) Broadway Ventures (since 1984); Director of Helmerich & Payne, Inc. (oil and gas
Age: 70 drilling/production company) (since 1992), Campus Crusade for Christ (non-profit) (since 1991);
Former Director, The Lynde and Harry Bradley Foundation, Inc. (non-profit organization)
(2002-2006); former Chairman of: Transland Financial Services, Inc. (private mortgage banking
company) (1997-2003), Great Frontier Insurance (1995-2000), Frontier Real Estate, Inc.
(residential real estate brokerage) (1994-2000) and Frontier Title (title insurance agency)
(1995-2000); former Director of the following: UNUMProvident (insurance company) (1991-2004),
Storage Technology Corporation (computer equipment company) (1991-2003) and International Family
Entertainment (television channel) (1992-1997); U.S. Senator (January 1979-January 1991). Oversees
39 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: 71 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 39 portfolios in the OppenheimerFunds complex.
EDWARD L. CAMERON, Member of The Life Guard of Mount Vernon (George Washington historical site) (June 2000-May 2006);
Trustee (since 1999) Partner of PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price
Age: 69 Waterhouse LLP Global Investment Management Industry Services Group (financial services firm)
(July 1994-June 1998). Oversees 39 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: 66 (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 39 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: 67 (until October 1994). Oversees 39 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: 61 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 39
portfolios in the OppenheimerFunds complex.
25 | OPPENHEIMER MIDCAP FUND/VA
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
ROBERT J. MALONE, Director of Jones Knowledge, Inc. (since 2006); Director of Jones International University
Trustee (since 2002) (educational organization) (since August 2005); Chairman, Chief Executive Officer and Director
Age: 63 of Steele Street State Bank (commercial banking) (since August 2003); Director of Colorado
UpLIFT (charitable organization) (since 1986); Trustee of the Gallagher Family Foundation
(non-profit organization) (since 2000); Former Chairman of U.S. Bank- Colorado (subsidiary of U.S.
Bancorp and formerly Colorado National Bank) (July 1996-April 1999); Director of Commercial
Assets, Inc. (real estate investment trust) (1993-2000); Director of Jones Knowledge, Inc.
(2001-July 2004); and Director of U.S. Exploration, Inc. (oil and gas exploration) (1997-February
2004). Oversees 39 portfolios in the OppenheimerFunds complex.
F. WILLIAM MARSHALL, JR., Trustee of MassMutual Select Funds (formerly MassMutual Institutional Funds) (investment company)
Trustee (since 2001) (since 1996) and MML Series Investment Fund (investment company) (since 1996); Trustee of
Age: 65 Worcester Polytech Institute (since 1985); Chairman (since 1994) 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 41 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 of the Manager (since June 2001); President of the
Trustee, President and Manager (September 2000-March 2007); President and director or trustee of other Oppenheimer funds;
Principal Executive Officer President and Director of Oppenheimer Acquisition Corp. ("OAC") (the Manager's parent holding
(since 2001) company) and of Oppenheimer Partnership Holdings, Inc. (holding company subsidiary of the Manager)
Age: 58 (since July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of the Manager)
(November 2001-December 2006); 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); Chairman (since October 2007)
and Member of the Investment Company Institute's Board of Governors (since October 2003). Oversees
102 portfolios in the OppenheimerFunds complex.
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS OF THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. ROYCE, 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.
RICHARD ROYCE, Prior to joining the Manager in 2007, Vice President, co-portfolio manager and technology and
Vice President and Portfolio media analyst at JP Morgan Asset Management (November 1998-April 2007). Prior to that, an
Manager (since 2007) investment analyst at Mark Asset Management. A portfolio manager and officer of 2 portfolios in
Age: 42 the OppenheimerFunds complex.
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Chief
Vice President and Chief Compliance Officer of OppenheimerFunds Distributor, Inc., Centennial Asset Management and
Compliance Officer Shareholder Services, Inc. (since March 2004); Vice President of OppenheimerFunds Distributor,
(since 2004) Inc., Centennial Asset Management Corporation and Shareholder Services, Inc. (since June 1983);
Age: 57 Former Vice President and Director of Internal Audit of the Manager (1997-February 2004). An
officer of 102 portfolios in the OppenheimerFunds complex.
26 | OPPENHEIMER MIDCAP FUND/VA
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, Inc. and Oppenheimer Partnership Holdings, Inc.
Officer (since 1999) (since March 1999), OFI Private Investments, Inc. (since March 2000), OppenheimerFunds
Age: 48 International Ltd. and OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management,
Inc. (since November 2000), and OppenheimerFunds Legacy Program (charitable trust program
established by the Manager) (since June 2003); Treasurer and Chief Financial Officer of OFI Trust
Company (trust company subsidiary of the Manager) (since May 2000); Assistant Treasurer of the
following: OAC (since March 1999), Centennial Asset Management Corporation (March 1999-October
2003) and OppenheimerFunds Legacy Program (April 2000-June 2003). An officer of 102 portfolios in
the OppenheimerFunds complex.
BRIAN S. PETERSEN, Vice President of the Manager (since February 2007); Assistant Vice President of the Manager
Assistant Treasurer (August 2002-February 2007); Manager/Financial Product Accounting of the Manager (November
(since 2004) 1998-July 2002). An officer of 102 portfolios in the OppenheimerFunds complex.
Age: 37
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). An officer of 102 portfolios in the OppenheimerFunds
Age: 37 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: 59 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). An officer of 102 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) of UBS Financial Services,
(since 2004) Inc. An officer of 102 portfolios in the OppenheimerFunds complex.
Age: 40
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 102 portfolios in the OppenheimerFunds complex.
Age: 44
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: 42 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 102
portfolios in the OppenheimerFunds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION
ABOUT THE FUND'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT CHARGE, UPON
REQUEST, BY CALLING 1.800.981.2871.
27 | OPPENHEIMER MIDCAP FUND/VA
DECEMBER 31, 2007
- --------------------------------------------------------------------------------
Management
Oppenheimer Commentaries
High Income Fund/VA and
A Series of Oppenheimer Variable Account Funds Annual Report
- --------------------------------------------------------------------------------
MANAGEMENT COMMENTARIES
Listing of Top Holdings
ANNUAL REPORT [GRAPHIC]
Fund Performance Discussion
Listing of Investments
Financial Statements
[LOGO] OPPENHEIMERFUNDS(R)
The Right Way to Invest
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. For the fiscal year ended December
31, 2007, Oppenheimer High Income Fund/VA fell short of expectations and
underperformed its benchmark, the Merrill Lynch High Yield Master Index. While
we attribute these disappointing short-term results to a few factors, the most
significant detractor to the Fund's performance stemmed from the adverse market
conditions that defined the second half of the Fund's fiscal year.
While the year began with reasonably good returns in the high-yield
sector, performance deteriorated as investors became increasingly concerned over
growing troubles in the sub-prime mortgage market. By July, investors responded
by demanding ever-widening risk premiums, showing little or no interest in
riskier fixed-income assets. Liquidity conditions worsened, and investors'
overall aversion to risk drove values in the high-yield sector lower. By
year-end, the spread, or difference, between yields on high-yield bonds and
those of like-maturity Treasuries widened to a historic high of approximately
600 basis points, or 6%. For the reporting period, the lowest-rated high-yield
bonds underperformed, but not much performance advantage could be found in
higher-quality high-yield issues. Instead, investors focused on whether a bond
was associated with the financial sector--the area of the market hardest hit by
the sub-prime mortgage collapse. These adverse conditions placed sufficient
pressure on the Fund's core universe of eligible securities to compress our
returns as well. Although the Fund had performed quite well through mid-October,
2007, outranking the majority of its peers, the pressure we faced late in the
period was significant enough to eradicate many of our previous gains.
Next, our decision to emphasize longer-duration financials presented a
disproportionate level of risk due to market conditions that we could not have
foreseen, and thus detracted from returns. The spread widening that occurred in
financials, especially in longer-dated names, resulted in such price pressure it
was difficult, if not impossible, to recoup those losses through other holdings
over such a concentrated period of time. Ironically, many of the financial names
we owned this period were of superior credit quality within the high-yield bond
arena. In fact, most of the risk relative to the benchmark we added to the
Fund's portfolio this year was through the highest quality high-yield
securities. However, in an environment where a bond's credit quality had less of
an impact on market perception than its sector affiliation, our exposure to
financial bonds--regardless of their higher credit-quality profiles--hurt us.
Similarly, our decision to significantly increase our exposure to commercial
mortgage-backed securities (CMBS), where we perceived adequate compensation
relative to risk, detracted from returns.
While returns overall were disappointing, a few factors worked in our
favor, thereby curbing the Fund's losses. Our decision to hold bonds issued in
the metals and minerals sector supported returns, as these companies benefited
from a global infrastructure boom, rising commodity prices and favorable
industry consolidation. Our long position in health care securities, an area of
the market which tends to benefit from its low sensitivity to changes in
economic fundamentals, also helped. Our overweighted exposure to chemicals,
which continue to benefit from industry consolidation, made a positive impact to
returns. Meanwhile, our underweight in housing, which suffered significant
write-downs, land-impairment charges, cancellations and increasing inventories
during this reporting period, also helped the Fund.
Although returns suffered in the final weeks of the Fund's fiscal year, we
maintain a decidedly optimistic outlook for the Fund. First, while the Fund's
losses late in the period were pronounced, they occurred over a concentrated,
short timeframe. Because we manage the portfolio's securities based on a
long-term investment horizon, we are confident that the Fund's potential to
deliver consistent, competitive performance over time has not been materially
impaired by this recent dislocation in the markets.
Next, we believe that our active management strategies over the fiscal
year position the Fund favorably for the long term. We successfully improved the
Fund's overall credit quality over the course of the reporting period, a
decision that we believe will benefit the Fund over time regardless of macro
trends. Similarly, this year we effectively rotated the portfolio's sector
exposures so as to allocate risk to those sectors that appear undervalued
currently and that offer potential for healthy appreciation.
Overall, we are convinced that as the credit cycle continues to play out
over the next 12 to 18 months, our overall emphasis on higher credit quality
will reward us, particularly given the current level of uncertainty in the
markets and investors' overall aversion to risk, which is not likely to unravel
overnight. Our focus remains on very short-dated cash flows that, in our
opinion, offer the potential for lower price volatility, lower refinancing risk
and attractive coupons. We trust that our unwavering focus on higher quality
credits, driven by our disciplined, bottom-up security-analysis and selection
process, engender an optimistic long-term outlook for the Fund and, together,
form a keystone of THE RIGHT WAY TO INVEST.
3 | OPPENHEIMER HIGH INCOME FUND/VA
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
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, 2007. 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. In the case of Class
3 and Class 4 shares, performance is measured from inception of the classes on
May 1, 2007. Performance information does not reflect charges that apply to
separate accounts investing in the Fund. If these charges were taken into
account, performance would be lower. The graphs assume that all dividends and
capital gains distributions were reinvested in additional shares.
The Fund's performance is compared to the performance of the Merrill Lynch
High Yield Master Index, an unmanaged index of U.S. corporate and government
bonds that is a measure of the performance of the high-yield corporate bond
market. Index performance reflects the reinvestment of income but does not
consider the effect of transaction costs, and none of the data in the graphs
shows the effect of taxes. The Fund's performance reflects the effects of the
Fund's business and operating expenses. While index comparisons may be useful to
provide a benchmark for the Fund's performance, it must be noted that the Fund's
investments are not limited to the investments in the index.
4 | OPPENHEIMER HIGH INCOME FUND/VA
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 Merrill Lynch High
Fund/VA (Non-Service) Yield Master Index
12/31/1997 $10,000 $10,000
03/31/1998 $10,395 $10,279
06/30/1998 $10,476 $10,451
09/30/1998 $ 9,730 $10,077
12/31/1998 $10,030 $10,366
03/31/1999 $10,382 $10,478
06/30/1999 $10,412 $10,549
09/30/1999 $10,295 $10,417
12/31/1999 $10,461 $10,529
03/31/2000 $10,319 $10,339
06/30/2000 $10,395 $10,404
09/30/2000 $10,526 $10,545
12/31/2000 $10,069 $10,130
03/31/2001 $10,496 $10,759
06/30/2001 $10,268 $10,623
09/30/2001 $ 9,678 $10,188
12/31/2001 $10,268 $10,759
03/31/2002 $10,329 $10,960
06/30/2002 $ 9,902 $10,292
09/30/2002 $ 9,541 $ 9,971
12/31/2002 $10,022 $10,636
03/31/2003 $10,561 $11,369
06/30/2003 $11,499 $12,469
09/30/2003 $11,802 $12,784
12/31/2003 $12,423 $13,531
03/31/2004 $12,614 $13,834
06/30/2004 $12,629 $13,712
09/30/2004 $13,060 $14,348
12/31/2004 $13,537 $14,988
03/31/2005 $13,341 $14,773
06/30/2005 $13,604 $15,171
09/30/2005 $13,718 $15,308
12/31/2005 $13,850 $15,409
03/31/2006 $14,215 $15,852
06/30/2006 $14,180 $15,876
09/30/2006 $14,605 $16,514
12/31/2006 $15,155 $17,206
03/31/2007 $15,501 $17,663
06/30/2007 $15,634 $17,722
09/30/2007 $15,692 $17,775
12/31/2007 $15,140 $17,580
AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/07
1-Year -0.10% 5-Year 8.60% 10-Year 4.23%
SERVICE SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer High Income Fund/VA (Service)
Merrill Lynch High Yield Master Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer High Income Merrill Lynch High
Fund/VA (Service) Yield Master Index
09/18/2001 $10,000 $10,000
09/30/2001 $ 9,583 $10,000
12/31/2001 $10,167 $10,560
03/31/2002 $10,225 $10,758
06/30/2002 $ 9,789 $10,103
09/30/2002 $ 9,432 $ 9,787
12/31/2002 $ 9,895 $10,440
03/31/2003 $10,436 $11,160
06/30/2003 $11,350 $12,239
09/30/2003 $11,649 $12,549
12/31/2003 $12,249 $13,282
03/31/2004 $12,437 $13,579
06/30/2004 $12,437 $13,459
09/30/2004 $12,862 $14,083
12/31/2004 $13,319 $14,712
03/31/2005 $13,116 $14,500
06/30/2005 $13,359 $14,891
09/30/2005 $13,472 $15,026
12/31/2005 $13,586 $15,125
03/31/2006 $13,931 $15,560
06/30/2006 $13,896 $15,583
09/30/2006 $14,298 $16,210
12/31/2006 $14,839 $16,889
03/31/2007 $15,163 $17,337
06/30/2007 $15,275 $17,395
09/30/2007 $15,331 $17,447
12/31/2007 $14,769 $17,256
AVERAGE ANNUAL TOTAL RETURNS OF SERVICE SHARES OF THE FUND AT 12/31/07
1-Year -0.47% 5-Year 8.34% Since Inception (9/18/01) 6.40%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, CALL US AT 1.800.981.2871. THE FUND'S
TOTAL RETURNS SHOULD NOT BE EXPECTED TO BE THE SAME AS THE RETURNS OF OTHER
FUNDS, WHETHER OR NOT BOTH FUNDS HAVE THE SAME PORTFOLIO MANAGERS AND/OR SIMILAR
NAMES. THE FUND'S TOTAL RETURNS DO NOT INCLUDE THE CHARGES ASSOCIATED WITH THE
SEPARATE ACCOUNT PRODUCTS THAT OFFER THIS FUND. SUCH PERFORMANCE WOULD HAVE BEEN
LOWER IF SUCH CHARGES WERE TAKEN INTO ACCOUNT.
5 | OPPENHEIMER HIGH INCOME FUND/VA
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
CLASS 3 SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer High Income Fund/VA (Class 3)
Merrill Lynch High Yield Master Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer High Income Merrill Lynch High
Fund/VA (Class 3) Yield Master Index
05/01/2007 $10,000 $10,000
06/30/2007 $ 9,952 $ 9,900
09/30/2007 $10,000 $ 9,930
12/31/2007 $ 9,661 $ 9,821
ANNUAL TOTAL RETURNS OF CLASS 3 SHARES OF THE FUND AT 12/31/07
1-Year N/A 5-Year N/A Since Inception (5/1/07) -3.39%
CLASS 4 SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer High Income Fund/VA (Class 4)
Merrill Lynch High Yield Master Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer High Income Merrill Lynch High
Fund/VA (Class 4) Yield Master Index
05/01/2007 $10,000 $10,000
06/30/2007 $ 9,939 $ 9,900
09/30/2007 $10,012 $ 9,930
12/31/2007 $ 9,649 $ 9,821
AVERAGE ANNUAL TOTAL RETURNS OF CLASS 4 SHARES OF THE FUND AT 12/31/07
1-Year N/A 5-Year N/A Since Inception (5/1/07) -3.51%
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 applicable); 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, 2007.
ACTUAL EXPENSES. The first section of the table provides information about
actual account values and actual expenses. You may use the information in this
section for the class of shares you hold, together with the amount you invested,
to estimate the expense that you paid over the period. Simply divide your
account value by $1,000.00 (for example, an $8,600.00 account value divided by
$1,000.00 = 8.60), then multiply the result by the number in the first section
under the heading entitled "Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The second section of the table
provides information about hypothetical account values and hypothetical expenses
based on the Fund's actual expense ratio for each class of shares, and an
assumed rate of return of 5% per year for each class before expenses, which is
not the actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of investing
in the Fund and other funds. To do so, compare this 5% hypothetical example for
the class of shares you hold with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any charges associated with the separate
accounts that offer this Fund. Therefore, the "hypothetical" lines of the table
are useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these separate
account charges were included your costs would have been higher.
- ------------------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
ACTUAL JULY 1, 2007 DECEMBER 31, 2007 DECEMBER 31, 2007
- ------------------------------------------------------------------------------------------
Non-Service Shares $1,000.00 $ 968.30 $3.68
- ------------------------------------------------------------------------------------------
Service Shares 1,000.00 966.90 4.92
- ------------------------------------------------------------------------------------------
Class 3 Shares 1,000.00 970.80 3.68
- ------------------------------------------------------------------------------------------
Class 4 Shares 1,000.00 970.80 5.18
HYPOTHETICAL
(5% return before expenses)
- ------------------------------------------------------------------------------------------
Non-Service Shares 1,000.00 1,021.48 3.78
- ------------------------------------------------------------------------------------------
Service Shares 1,000.00 1,020.21 5.05
- ------------------------------------------------------------------------------------------
Class 3 Shares 1,000.00 1,021.48 3.78
- ------------------------------------------------------------------------------------------
Class 4 Shares 1,000.00 1,019.96 5.31
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 indirect expenses from affiliated fund, based on the 6-month period
ended December 31, 2007 are as follows:
CLASS EXPENSE RATIOS
- ---------------------------------------
Non-Service Shares 0.74%
- ---------------------------------------
Service Shares 0.99
- ---------------------------------------
Class 3 Shares 0.74
- ---------------------------------------
Class 4 Shares 1.04
The expense ratios reflect reduction to custodian expenses and 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 and reduction to
custodian expenses, if applicable.
- --------------------------------------------------------------------------------
7 | OPPENHEIMER HIGH INCOME FUND/VA
STATEMENT OF INVESTMENTS December 31, 2007
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--1.1%
- --------------------------------------------------------------------------------
Ameriquest Mortgage Securities, Inc.,
Home Equity Mtg. Obligations, Series
2005-R10, Cl. A2B, 5.085%, 12/25/35 1 $ 344,238 $ 338,388
- --------------------------------------------------------------------------------
Mastr Asset-Backed Securities Trust
2005-WF1, Mtg. Pass-Through
Certificates, Series 2005-WF1,
Cl. A2C, 5.105%, 6/25/35 1 210,341 205,390
- --------------------------------------------------------------------------------
Soundview Home Loan Trust
2006-OPT5, Asset-Backed Certificates,
Series 2006-OPT5, Cl. 2A2, 4.955%,
7/25/36 1 4,730,782 4,653,803
--------------
Total Asset-Backed Securities
(Cost $5,252,682) 5,197,581
- --------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS--9.3%
- --------------------------------------------------------------------------------
Bear Stearns ARM Trust 2006-4, Mtg.
Pass-Through Certificates, Series 2006-4,
Cl. 2A1, 5.802%, 10/25/36 1 116,415 117,310
- --------------------------------------------------------------------------------
Citigroup/Deutsche Bank 2007-CD4
Commercial Mortgage Trust,
Commercial Mtg. Pass-Through
Certificates, Series 2007-CD4, Cl. A4,
5.322%, 12/1/49 670,000 669,290
- --------------------------------------------------------------------------------
CitiMortgage Alternative Loan Trust
2006-A5, Real Estate Mtg. Investment
Conduit Pass-Through Certificates:
Series 2006-A5, Cl. 1A1, 5.265%,
10/25/36 1 358,627 340,196
Series 2006-A5, Cl. 1A13, 5.315%,
10/25/36 1 187,464 183,298
- --------------------------------------------------------------------------------
Countrywide Alternative Loan Trust,
CMO:
Series 2004-28CB, Cl. 2A4, 5.75%,
1/25/35 810,000 774,280
Series 2005-18CB, Cl. A8, 5.50%, 5/25/36 280,000 270,222
Series 2005-J1, Cl. 3A1, 6.50%, 8/25/32 326,010 333,099
Series 2008-85CB, Cl. 2A3, 5.50%,
2/25/36 210,000 199,472
- --------------------------------------------------------------------------------
Countrywide Home Loans Servicing
LP, Mtg. Pass-Through Certificates:
Series 2005-HYB1, Cl. 5A1, 4.995%,
3/25/35 1 937,330 915,948
Series 2007-HY1, Cl. 1A1, 5.695%,
4/25/37 1 327,212 328,630
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
Gtd. Real Estate Mtg. Investment
Conduit Multiclass Pass-Through
Certificates:
Series 2319, Cl. PZ, 6.50%, 5/15/31 569,369 598,113
Series 2338, Cl. ZC, 6.50%, 7/15/31 493,480 517,287
Series 2344, Cl. ZD, 6.50%, 8/15/31 300,344 309,433
Series 2363, Cl. BZ, 6.50%, 9/15/31 599,001 615,504
Series 2457, Cl. PE, 6.50%, 6/15/32 513,846 533,188
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS Continued
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
Interest-Only Stripped Mtg.-Backed
Security:
Series 2520, Cl. SE, 5.923%, 5/15/22 2 $ 359,239 $ 30,526
Series 2574, Cl. IN, 4.759%, 12/15/22 2 1,750,169 318,831
Series 2989, Cl. TS, 7.582%, 6/15/25 2 1,803,998 143,305
- --------------------------------------------------------------------------------
Federal National Mortgage Assn.:
4.50%, 3/25/20 2,681,688 2,639,413
5%, 12/25/17-3/25/18 2,451,404 2,457,851
5%, 1/1/22 3 423,000 423,463
5%, 11/25/33 4 1,295,293 1,265,969
5.50%, 11/25/33-7/25/34 4,039,022 4,040,850
5.50%, 1/1/37 3 2,615,000 2,612,139
5.50%, 5/25/34 4 2,203,978 2,205,957
6%, 1/1/22 3 1,160,000 1,187,006
6%, 12/25/33 5 2,007,012 2,042,429
- --------------------------------------------------------------------------------
Federal National Mortgage Assn.,
Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates,
Trust 2001-74, Cl. QE, 6%, 12/25/31 922,882 944,749
- --------------------------------------------------------------------------------
Federal National Mortgage Assn.,
Interest-Only Stripped Mtg.-Backed
Security:
Trust 2003-14, Cl. OI, 8.765%, 3/25/33 2 320,018 73,272
Trust 2003-23, Cl. ES, 5.27%, 10/25/22 2 716,961 53,118
Trust 2003-52, Cl. NS, 7.228%, 6/25/23 2 754,133 75,523
Trust 2004-65, Cl. SA, 6.455%, 5/25/23 2 1,415,359 94,638
Trust 2005-86, Cl. AI, 7.418%, 10/1/35 2 324,368 67,070
Trust 2006-33, Cl. SP, 9.425%, 5/25/36 2 491,852 45,429
Trust 2006-43, Cl. SJ, 6.146%, 6/25/36 2 998,712 74,135
Trust 334, Cl. 4, 10.696%, 7/1/33 2 518,203 117,075
Trust 342, Cl. 2, 3.515%, 9/1/33 2 1,208,878 283,041
- --------------------------------------------------------------------------------
First Horizon Alternative Mortgage
Securities Trust 2004-FA2, Mtg. Pass-
Through Certificates, Series 2004-FA2,
Cl. 3A1, 6%, 1/25/35 96,358 92,750
- --------------------------------------------------------------------------------
GMAC Mortgage Corp. Loan Trust,
Mtg. Pass-Through Certificates, Series
2004-J4, Cl. A7, 5.50%, 9/25/34 190,000 181,860
- --------------------------------------------------------------------------------
GSR Mortgage Loan Trust 2005-4F,
CMO, Series 2005-4F, Cl. 6A1, 6.50%,
2/25/35 238,026 240,892
- --------------------------------------------------------------------------------
GSR Mortgage Loan Trust 2005-AR7,
Mtg. Pass-Through Certificates,
Series 2005-AR7, Cl. 3A1, 5.152%,
11/25/35 1 1,512,508 1,511,307
- --------------------------------------------------------------------------------
LB-UBS Commercial Mortgage Trust,
Commercial Mtg. Pass-Through
Certificates:
Series 2003-C5, Cl. A2, 3.478%, 7/15/27 2,189,000 2,169,106
Series 2007-C1, Cl. A4, 5.424%, 2/11/40 570,000 573,569
- --------------------------------------------------------------------------------
Mastr Asset Securitization Trust 2006-3,
Mtg. Pass-Through Certificates, Series
2006-3, Cl. 2A1, 5.239%, 10/25/36 1 4,567,903 4,500,612
8 | OPPENHEIMER HIGH INCOME FUND/VA
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS Continued
- --------------------------------------------------------------------------------
Merrill Lynch Mortgage Investors
Trust 2007-2, Mtg. Pass-Through
Certificates, Series 2007-2, Cl. 2A1,
6.007%, 6/25/37 1 $ 442,986 $ 445,443
- --------------------------------------------------------------------------------
Morgan Stanley Mortgage Loan Trust
2006-AR, Mtg. Pass-Through
Certificates, Series 2006-AR, Cl. 5A3,
5.427%, 6/25/36 1 130,000 130,601
- --------------------------------------------------------------------------------
WaMu, Mtg. Pass-Through Certificates:
Series 2006-AR12, Cl. 2A1, 5.75%,
10/25/36 1 487,577 484,625
Series 2006-AR8, Cl. 2A1, 6.133%,
8/25/36 1 505,121 505,029
- --------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed
Securities 2005-AR2 Trust, Mtg.
Pass-Through Certificates, Series
2005-AR2, Cl. 2A2, 4.547%, 3/25/35 1 66,065 65,537
- --------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed
Securities 2005-AR4 Trust, Mtg.
Pass-Through Certificates, Series
2005-AR4, Cl. 2A2, 4.524%, 4/25/35 1 107,467 106,603
- --------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed
Securities 2006-AR10 Trust, Mtg.
Pass-Through Certificates, Series
2006-AR10, Cl. 4A1, 5.56%, 7/25/36 1 220,274 221,517
- --------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed
Securities 2006-AR12 Trust, Mtg.
Pass-Through Certificates, Series
2006-AR12, Cl. 2A1, 6.102%, 9/25/36 1 395,737 396,611
- --------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed
Securities 2006-AR2 Trust, Mtg.
Pass-Through Certificates, Series
2006-AR2, Cl. 2A5, 5.10%, 3/25/36 1 457,124 453,733
- --------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed
Securities 2006-AR8 Trust, Mtg.
Pass-Through Certificates, Series
2006-AR8, Cl. 1A3, 5.505%, 4/25/36 1 3,423,472 3,431,714
--------------
Total Mortgage-Backed Obligations
(Cost $42,845,064) 43,412,568
- --------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES--84.4%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--25.5%
- --------------------------------------------------------------------------------
AUTO COMPONENTS--1.7%
Goodyear Tire & Rubber Co. (The):
7.857% Nts., 8/15/11 1,250,000 1,271,875
9% Sr. Unsec. Nts., 7/1/15 302,000 321,630
- --------------------------------------------------------------------------------
Lear Corp., 8.75% Sr. Unsec. Nts.,
Series B, 12/1/16 5,045,000 4,616,175
- --------------------------------------------------------------------------------
Stoneridge, Inc., 11.50% Sr. Nts., 5/1/12 900,000 931,500
- --------------------------------------------------------------------------------
Tenneco Automotive, Inc., 10.25% Sr.
Sec. Nts., Series B, 7/15/13 543,000 581,010
--------------
7,722,190
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
AUTOMOBILES--2.7%
Ford Motor Credit Co., 9.75% Sr.
Unsec. Nts., 9/15/10 $ 10,000,000 $ 9,547,500
- --------------------------------------------------------------------------------
General Motors Acceptance Corp.,
8% Bonds, 11/1/31 3,390,000 2,850,553
--------------
12,398,053
- --------------------------------------------------------------------------------
DISTRIBUTORS--0.0%
SGS International, Inc., 12% Sr. Unsec.
Sub. Nts., 12/15/13 6 220,000 219,175
- --------------------------------------------------------------------------------
DIVERSIFIED CONSUMER SERVICES--0.2%
Education Management LLC/Education
Management Corp., 10.25% Sr. Unsec.
Sub. Nts., 6/1/16 830,000 859,050
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--7.3%
CCM Merger, Inc., 8% Unsec. Nts.,
8/1/13 7 1,340,000 1,269,650
- --------------------------------------------------------------------------------
Gaylord Entertainment Co.:
6.75% Sr. Unsec. Unsub. Nts., 11/15/14 500,000 473,750
8% Sr. Nts., 11/15/13 700,000 700,000
- --------------------------------------------------------------------------------
Greektown Holdings, Inc., 10.75% Sr.
Nts., 12/1/13 7 1,435,000 1,402,713
- --------------------------------------------------------------------------------
Isle of Capri Casinos, Inc., 7% Sr.
Unsec. Sub. Nts., 3/1/14 4,070,000 3,357,750
- --------------------------------------------------------------------------------
Mandalay Resort Group, 9.375% Sr.
Sub. Nts., 2/15/10 41,000 42,640
- --------------------------------------------------------------------------------
Mashantucket Pequot Tribe, 8.50%
Bonds, Series A, 11/15/15 7 3,460,000 3,494,600
- --------------------------------------------------------------------------------
MGM Mirage, Inc.:
6.75% Sr. Unsec. Nts., 4/1/13 510,000 497,250
8.375% Sr. Unsec. Sub. Nts., 2/1/11 3,200,000 3,288,000
- --------------------------------------------------------------------------------
Mohegan Tribal Gaming Authority:
6.125% Sr. Unsec. Sub. Nts., 2/15/13 780,000 766,350
6.875% Sr. Unsec. Sub. Nts., 2/15/15 915,000 864,675
8% Sr. Sub. Nts., 4/1/12 1,700,000 1,734,000
- --------------------------------------------------------------------------------
NCL Corp., 10.625% Sr. Unsub. Nts.,
7/15/14 800,000 799,000
- --------------------------------------------------------------------------------
Park Place Entertainment Corp.,
7.875% Sr. Sub. Nts., 3/15/10 1,000,000 945,000
- --------------------------------------------------------------------------------
Penn National Gaming, Inc.:
6.75% Sr. Unsec. Sub. Nts., 3/1/15 145,000 147,719
6.875% Sr. Sub. Nts., 12/1/11 150,000 152,250
- --------------------------------------------------------------------------------
Pinnacle Entertainment, Inc., 8.25%
Sr. Unsec. Sub. Nts., 3/15/12 1,835,000 1,862,525
- --------------------------------------------------------------------------------
Pokagon Gaming Authority, 10.375%
Sr. Nts., 6/15/14 7 610,000 658,800
- --------------------------------------------------------------------------------
Station Casinos, Inc.:
6.50% Sr. Unsec. Sub. Nts., 2/1/14 1,800,000 1,359,000
6.875% Sr. Unsec. Sub. Nts., 3/1/16 480,000 352,800
- --------------------------------------------------------------------------------
Travelport LLC, 11.875% Sr. Unsec.
Sub. Nts., 9/1/16 1,800,000 1,928,250
- --------------------------------------------------------------------------------
Trump Entertainment Resorts, Inc.,
8.50% Sec. Nts., 6/1/15 1,500,000 1,149,375
9 | OPPENHEIMER HIGH INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE Continued
Universal City Development Partners
Ltd., 11.75% Sr. Nts., 4/1/10 $ 1,000,000 $ 1,037,500
- --------------------------------------------------------------------------------
Vail Resorts, Inc., 6.75% Sr. Sub. Nts.,
2/15/14 6 1,100,000 1,089,000
- --------------------------------------------------------------------------------
Wynn Las Vegas LLC/Wynn Las Vegas
Capital Corp., 6.625% Nts., 12/1/14 4,645,000 4,586,938
--------------
33,959,535
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES--1.4%
American Casino & Entertainment
Properties LLC, 7.85% Sr. Sec. Nts.,
2/1/12 1,300,000 1,339,975
- --------------------------------------------------------------------------------
Centex Corp., 5.80% Sr. Unsec. Nts.,
9/15/09 1,890,000 1,741,420
- --------------------------------------------------------------------------------
D.R. Horton, Inc., 9.75% Sr. Sub. Nts.,
9/15/10 300,000 293,935
- --------------------------------------------------------------------------------
K. Hovnanian Enterprises, Inc.:
7.75% Sr. Unsec. Sub. Nts., 5/15/13 655,000 370,075
8.875% Sr. Sub. Nts., 4/1/12 1,165,000 669,875
- --------------------------------------------------------------------------------
KB Home, 8.625% Sr. Sub. Nts.,
12/15/08 150,000 147,750
- --------------------------------------------------------------------------------
Meritage Homes Corp., 6.25% Sr.
Unsec. Nts., 3/15/15 300,000 210,000
- --------------------------------------------------------------------------------
Standard Pacific Corp., 9.25% Sr. Sub.
Nts., 4/15/12 580,000 281,300
- --------------------------------------------------------------------------------
Toll Corp., 8.25% Sr. Sub. Nts., 12/1/11 640,000 614,400
- --------------------------------------------------------------------------------
William Lyon Homes, Inc.:
7.50% Sr. Unsec. Nts., 2/15/14 220,000 133,100
10.75% Sr. Nts., 4/1/13 1,510,000 913,550
--------------
6,715,380
- --------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS--0.4%
Eastman Kodak Co., 3.625% Nts.,
Series A, 5/15/08 575,000 569,250
- --------------------------------------------------------------------------------
Leslie's Poolmart, Inc., 7.75% Sr.
Unsec. Nts., 2/1/13 1,245,000 1,188,975
--------------
1,758,225
- --------------------------------------------------------------------------------
MEDIA--9.2%
Allbritton Communications Co.,
7.75% Sr. Unsec. Sub. Nts., 12/15/12 700,000 696,500
- --------------------------------------------------------------------------------
AMC Entertainment, Inc., 8% Sr.
Unsec. Sub. Nts., 3/1/14 990,000 935,550
- --------------------------------------------------------------------------------
American Media Operations, Inc.:
8.875% Sr. Unsec. Sub. Nts., 1/15/11 900,000 766,125
10.25% Sr. Unsec. Sub. Nts., Series B,
5/1/09 1,450,000 1,241,563
- --------------------------------------------------------------------------------
CCH I Holdings LLC/CCH I Holdings
Capital Corp., 11% Sr. Sec. Nts., 10/1/15 2,485,000 2,037,700
- --------------------------------------------------------------------------------
Cinemark, Inc., 0%/9.75% Sr. Unsec.
Disc. Nts., 3/15/14 8 2,700,000 2,527,875
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
MEDIA Continued
Dex Media West LLC/Dex Media
West Finance Co.:
8.50% Sr. Nts., 8/15/10 $ 700,000 $ 713,125
9.875% Sr. Sub. Nts., 8/15/13 1,772,000 1,847,310
- --------------------------------------------------------------------------------
Dex Media, Inc.:
0%/9% Unsec. Disc. Nts., 11/15/13 8 500,000 457,500
8% Unsec. Nts., 11/15/13 380,000 359,100
- --------------------------------------------------------------------------------
EchoStar DBS Corp., 6.375% Sr.
Unsec. Nts., 10/1/11 3,200,000 3,169,600
- --------------------------------------------------------------------------------
Idearc, Inc., 8% Sr. Unsec. Nts., 11/15/16 2,300,000 2,121,750
- --------------------------------------------------------------------------------
ION Media Networks, Inc., 11% Sr.
Unsec. Sub. Nts., Series A, 7/31/13 1,420,440 717,322
- --------------------------------------------------------------------------------
Lamar Media Corp.:
6.625% Sr. Unsec. Sub. Nts., 8/15/15 1,357,000 1,326,468
7.25% Sr. Unsec. Sub. Nts., 1/1/13 200,000 201,000
- --------------------------------------------------------------------------------
Lin Television Corp., 6.50% Sr. Sub.
Nts., 5/15/13 785,000 742,806
- --------------------------------------------------------------------------------
Marquee Holdings, Inc., 0%/12% Sr.
Disc. Nts., 8/15/14 8 2,200,000 1,771,000
- --------------------------------------------------------------------------------
MediaNews Group, Inc.:
6.375% Sr. Sub. Nts., 4/1/14 1,400,000 847,000
6.875% Sr. Unsec. Sub. Nts., 10/1/13 800,000 504,000
- --------------------------------------------------------------------------------
Nielsen Finance LLC, 10% Sr. Unsec.
Nts., 8/1/14 3,230,000 3,318,825
- --------------------------------------------------------------------------------
Nielsen Finance LLC/Nielsen Finance
Co., 0%/12.50% Sr. Unsec. Sub. Disc.
Nts., 8/1/16 8 1,090,000 771,175
- --------------------------------------------------------------------------------
Quebecor World Capital Corp., 8.75%
Sr. Nts., 3/15/16 7 460,000 340,975
- --------------------------------------------------------------------------------
R.H. Donnelley Corp.:
6.875% Sr. Disc. Nts., Series A-1, 1/15/13 4,135,000 3,721,500
6.875% Sr. Disc. Nts., Series A-2, 1/15/13 1,960,000 1,764,000
6.875% Sr. Nts., 1/15/13 2,700,000 2,430,000
8.875% Sr. Unsec. Nts., Series A-3,
1/15/16 325,000 305,500
- --------------------------------------------------------------------------------
Radio One, Inc., 8.875% Sr. Unsec.
Sub. Nts., Series B, 7/1/11 800,000 751,000
- --------------------------------------------------------------------------------
Rainbow National Services LLC,
8.75% Sr. Nts., 9/1/12 7 1,040,000 1,075,100
- --------------------------------------------------------------------------------
Sinclair Broadcast Group, Inc., 8% Sr.
Unsec. Sub. Nts., 3/15/12 1,907,000 1,952,291
- --------------------------------------------------------------------------------
Vertis, Inc.:
9.75% Sr. Sec. Nts., 4/1/09 1,400,000 1,295,000
10.875% Sr. Unsec. Nts., Series B,
6/15/09 400,000 245,500
- --------------------------------------------------------------------------------
Warner Music Group Corp., 7.375%
Sr. Sub. Bonds, 4/15/14 800,000 620,000
- --------------------------------------------------------------------------------
WMG Holdings Corp., 0%/9.50% Sr.
Disc. Nts., 12/15/14 8 2,365,000 1,525,425
--------------
43,099,585
10 | OPPENHEIMER HIGH INCOME FUND/VA
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
MULTILINE RETAIL--0.2%
Dillard's, Inc., 6.625% Unsec. Nts.,
11/15/08 6 $ 1,125,000 $ 1,123,594$
- --------------------------------------------------------------------------------
SPECIALTY RETAIL--1.2%
Claire's Stores, Inc., 10.50% Sr. Sub.
Nts., 6/1/17 7 3,575,000 1,930,500
- --------------------------------------------------------------------------------
Gamestop Corp., 8% Sr. Unsec. Nts.,
10/1/12 900,000 941,625
- --------------------------------------------------------------------------------
Rent-A-Center, Inc., 7.50% Sr. Unsec.
Sub. Nts., Series B, 5/1/10 350,000 328,125
- --------------------------------------------------------------------------------
Sally Holdings LLC:
9.25% Sr. Unsec. Nts., 11/15/14 1,630,000 1,621,850
10.50% Sr. Unsec. Sub. Nts., 11/15/16 1,002,000 991,980
--------------
5,814,080
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY
GOODS--1.2%
Invista, Inc., 9.25% Sr. Nts., 5/1/12 7 1,535,000 1,596,400
- --------------------------------------------------------------------------------
Levi Strauss & Co., 9.75% Sr. Unsec.
Unsub. Nts., 1/15/15 2,770,000 2,776,925
- --------------------------------------------------------------------------------
Oxford Industries, Inc., 8.875% Sr.
Nts., 6/1/11 300,000 300,000
- --------------------------------------------------------------------------------
Quiksilver, Inc., 6.875% Sr. Unsec.
Nts., 4/15/15 975,000 840,938
--------------
5,514,263
- --------------------------------------------------------------------------------
CONSUMER STAPLES--4.8%
- --------------------------------------------------------------------------------
BEVERAGES--0.6%
Constellation Brands, Inc.:
8.125% Sr. Sub. Nts., 1/15/12 1,655,000 1,667,413
8.375% Sr. Nts., 12/15/14 1,155,000 1,163,663
--------------
2,831,076
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--1.8%
Albertson's, Inc., 8% Sr. Unsec. Debs.,
5/1/31 2,530,000 2,579,264
- --------------------------------------------------------------------------------
Delhaize America, Inc., 9% Unsub.
Debs., 4/15/31 4,040,000 4,691,151
- --------------------------------------------------------------------------------
Real Time Data Co., 11% Disc. Nts.,
5/31/09 6,9,10 476,601 --
- --------------------------------------------------------------------------------
Rite Aid Corp., 8.125% Sr. Sec. Nts.,
5/1/10 900,000 886,500
--------------
8,156,915
- --------------------------------------------------------------------------------
FOOD PRODUCTS--1.5%
Del Monte Corp.:
6.75% Sr. Unsec. Sub. Nts., 2/15/15 350,000 332,500
8.625% Sr. Sub. Nts., 12/15/12 1,000,000 1,012,500
- --------------------------------------------------------------------------------
Dole Food Co., Inc.:
7.25% Sr. Unsec. Nts., 6/15/10 420,000 384,300
8.625% Sr. Nts., 5/1/09 687,000 666,390
8.875% Sr. Unsec. Nts., 3/15/11 146,000 135,780
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
FOOD PRODUCTS Continued
Pinnacle Foods Finance LLC/Pinnacle
Foods Finance Corp., 10.625% Sr. Sub.
Nts., 4/1/17 7 $ 3,275,000 $ 2,832,875
- --------------------------------------------------------------------------------
Smithfield Foods, Inc.:
7.625% Sr. Unsec. Sub. Nts., 2/15/08 925,000 927,313
8% Sr. Nts., Series B, 10/15/09 900,000 913,500
--------------
7,205,158
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS--0.2%
Church & Dwight Co., Inc., 6% Sr.
Unsec. Sub. Nts., 12/15/12 900,000 884,250
- --------------------------------------------------------------------------------
PERSONAL PRODUCTS--0.2%
Elizabeth Arden, Inc., 7.75% Sr. Unsec.
Sub. Nts., 1/15/14 1,150,000 1,132,750
- --------------------------------------------------------------------------------
TOBACCO--0.5%
Reynolds American, Inc., 7.25% Sr. Sec.
Nts., 6/1/13 2,265,000 2,407,093
- --------------------------------------------------------------------------------
ENERGY--10.4%
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--0.9%
Helix Energy Solutions Group, Inc.,
9.50% Sr. Unsec. Nts., 1/15/16 6 1,605,000 1,633,088
- --------------------------------------------------------------------------------
Key Energy Services, Inc., 8.375%
Sr. Nts., 12/1/14 7 2,095,000 2,152,613
- --------------------------------------------------------------------------------
PHI, Inc., 7.125% Sr. Unsec. Nts.,
4/15/13 545,000 525,925
--------------
4,311,626
- --------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS--9.5%
Atlas Pipeline Partners LP, 8.125% Sr.
Unsec. Nts., 12/15/15 450,000 447,750
- --------------------------------------------------------------------------------
Berry Petroleum Co., 8.25% Sr. Sub.
Nts., 11/1/16 260,000 267,150
- --------------------------------------------------------------------------------
Chesapeake Energy Corp.:
6.375% Sr. Unsec. Nts., 6/15/15 1,100,000 1,069,750
6.875% Sr. Unsec. Nts., 1/15/16 3,500,000 3,482,500
- --------------------------------------------------------------------------------
Compton Petroleum Finance Corp.,
7.625% Sr. Nts., 12/1/13 825,000 771,375
- --------------------------------------------------------------------------------
Copano Energy LLC, 8.125% Sr.
Unsec. Nts., 3/1/16 425,000 430,313
- --------------------------------------------------------------------------------
Enterprise Products Operating LP,
8.375% Jr. Sub. Nts., 8/1/66 1 4,645,000 4,762,969
- --------------------------------------------------------------------------------
Forest Oil Corp., 7.75% Sr. Nts., 5/1/14 1,000,000 1,020,000
- --------------------------------------------------------------------------------
Frontier Oil Corp., 6.625% Sr. Unsec.
Nts., 10/1/11 450,000 450,000
- --------------------------------------------------------------------------------
Inergy LP/Inergy Finance Corp.,
8.25% Sr. Unsec. Nts., 3/1/16 1,165,000 1,211,600
- --------------------------------------------------------------------------------
Kinder Morgan Energy Partners LP,
7.30% Sr. Unsec. Nts., 8/15/33 4,612,000 4,921,608
- --------------------------------------------------------------------------------
Massey Energy Co., 6.625% Sr. Nts.,
11/15/10 460,000 451,950
- --------------------------------------------------------------------------------
Newfield Exploration Co., 6.625% Sr.
Unsec. Sub. Nts., 9/1/14 1,600,000 1,592,000
11 | OPPENHEIMER HIGH INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS Continued
Pacific Energy Partners LP/Pacific
Energy Finance Corp., 6.25% Sr. Unsec.
Nts., 9/15/15 $ 195,000 $ 195,636
- --------------------------------------------------------------------------------
Peabody Energy Corp., 6.875% Sr.
Unsec. Nts., Series B, 3/15/13 4,710,000 4,757,100
- --------------------------------------------------------------------------------
Premcor Refining Group, Inc., 9.50%
Sr. Nts., 2/1/13 1,000,000 1,049,698
- --------------------------------------------------------------------------------
Quicksilver Resources, Inc., 7.125% Sr.
Sub. Nts., 4/1/16 1,515,000 1,496,063
- --------------------------------------------------------------------------------
Range Resources Corp.:
6.375% Sr. Sub. Nts., 3/15/15 745,000 730,100
7.375% Sr. Sub. Nts., 7/15/13 400,000 408,000
7.50% Sr. Sub. Nts., 5/15/16 1,760,000 1,804,000
- --------------------------------------------------------------------------------
Sabine Pass LNG LP:
7.25% Sr. Sec. Nts., 11/30/13 1,300,000 1,248,000
7.50% Sr. Sec. Nts., 11/30/16 2,600,000 2,496,000
- --------------------------------------------------------------------------------
Stone Energy Corp.:
6.75% Sr. Unsec. Sub. Nts., 12/15/14 860,000 801,950
8.25% Sr. Unsec. Sub. Nts., 12/15/11 1,300,000 1,306,500
- --------------------------------------------------------------------------------
Targa Resources, Inc., 8.50% Sr. Nts.,
11/1/13 7 950,000 921,500
- --------------------------------------------------------------------------------
Tesoro Corp.:
6.25% Sr. Unsec. Nts., 11/1/12 515,000 517,575
6.625% Sr. Unsec. Nts., 11/1/15 515,000 512,425
- --------------------------------------------------------------------------------
Whiting Petroleum Corp.:
7.25% Sr. Sub. Nts., 5/1/12 800,000 792,000
7.25% Sr. Unsec. Sub. Nts., 5/1/13 350,000 346,500
- --------------------------------------------------------------------------------
Williams Cos., Inc., 8.125% Sr. Unsec.
Nts., 3/15/12 3,145,000 3,439,844
- --------------------------------------------------------------------------------
Williams Holdings of Delaware, Inc.,
6.50% Nts., 12/1/08 300,000 302,250
--------------
44,004,106
- --------------------------------------------------------------------------------
FINANCIALS--9.6%
- --------------------------------------------------------------------------------
CAPITAL MARKETS--2.0%
Berry Plastics Holding Corp., 8.875%
Sr. Sec. Nts., 9/15/14 2,425,000 2,315,875
- --------------------------------------------------------------------------------
E*TRADE Financial Corp.:
7.375% Sr. Unsec. Nts., 9/15/13 691,000 535,525
8% Sr. Nts., 6/15/11 825,000 719,813
- --------------------------------------------------------------------------------
Goldman Sachs Capital, Inc. (The),
6.345% Sub. Bonds, 2/15/34 6,225,000 5,638,835
--------------
9,210,048
- --------------------------------------------------------------------------------
COMMERCIAL BANKS--4.3%
Barclays Bank plc, 6.278% Perpetual
Bonds 11 7,820,000 6,818,102
- --------------------------------------------------------------------------------
HBOS plc, 6.413% Sub. Perpetual
Bonds, Series A7,11 8,500,000 6,935,847
- --------------------------------------------------------------------------------
HSBC Finance Capital Trust IX,
5.911% Nts., 11/30/35 1 6,900,000 6,394,237
--------------
20,148,186
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
CONSUMER FINANCE--0.8%
Ace Cash Express, Inc., 10.25% Sr. Nts.,
10/1/14 6 $ 785,000 $ 761,450
- --------------------------------------------------------------------------------
SLM Corp., 4.50% Nts., Series A, 7/26/10 3,335,000 3,060,653
--------------
3,822,103
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--0.7%
AAC Group Holding Corp., 0%/10.25%
Sr. Unsec. Disc. Nts., 10/1/12 8 200,000 173,000
- --------------------------------------------------------------------------------
Citigroup, Inc., 8.30% Jr. Sub. Bonds,
12/21/57 1 265,000 277,496
- --------------------------------------------------------------------------------
Nell AF Sarl, 8.375% Sr. Nts., 8/15/15 7 2,535,000 2,059,688
- --------------------------------------------------------------------------------
Universal City Florida:
8.375% Sr. Unsec. Nts., 5/1/10 270,000 272,700
9.661% Sr. Unsec. Nts., 5/1/10 1 270,000 271,350
--------------
3,054,234
- --------------------------------------------------------------------------------
INSURANCE--0.3%
MetLife, Inc., 6.40% Jr. Unsec. Sub.
Bonds, 12/15/66 1 1,210,000 1,112,417
- --------------------------------------------------------------------------------
Prudential Holdings LLC, 8.695%
Bonds, Series C, 12/18/23 7 110,000 132,069
- --------------------------------------------------------------------------------
Prudential Insurance Co. of America,
8.30% Nts., 7/1/25 7 160,000 189,142
--------------
1,433,628
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS--0.9%
Felcor Lodging LP, 8.50% Sr. Nts.,
6/1/11 1 837,000 876,758
- --------------------------------------------------------------------------------
Host Hotels & Resorts LP, 6.875% Sr.
Unsub. Nts., 11/1/14 260,000 260,000
- --------------------------------------------------------------------------------
Host Marriott LP:
6.375% Sr. Nts., Series O, 3/15/15 2,025,000 1,984,500
6.75% Sr. Nts., Series Q, 6/1/16 500,000 495,000
- --------------------------------------------------------------------------------
Ventas Realty LP/Ventas Capital
Corp., 6.75% Sr. Nts., 4/1/17 550,000 547,250
--------------
4,163,508
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE--0.6%
Countrywide Financial Corp., 5.128%
Unsec. Unsub. Nts, 5/5/08 1 460,000 420,227
- --------------------------------------------------------------------------------
Countrywide Home Loans, Inc., 3.25%
Nts., Series L, 5/21/08 2,650,000 2,394,924
--------------
2,815,151
- --------------------------------------------------------------------------------
HEALTH CARE--5.2%
- --------------------------------------------------------------------------------
BIOTECHNOLOGY--0.1%
Angiotech Pharmaceuticals, Inc.,
7.75% Sr. Sub. Nts., 4/1/14 455,000 383,338
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--0.2%
Bausch & Lomb, Inc., 9.875% Sr.
Unsec. Nts., 11/1/15 7 1,150,000 1,170,125
12 | OPPENHEIMER HIGH INCOME FUND/VA
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--4.3%
DaVita, Inc.:
6.625% Sr. Unsec. Nts., 3/15/13 $ 1,150,000 $ 1,150,000
7.25% Sr. Unsec. Sub. Nts., 3/15/15 3,140,000 3,163,550
- --------------------------------------------------------------------------------
Fresenius Medical Care Capital Trust
II, 7.875% Nts., 2/1/08 1,600,000 1,604,000
- --------------------------------------------------------------------------------
Fresenius Medical Care Capital Trust
IV, 7.875% Trust Preferred Securities,
6/15/11 470,000 488,800
- --------------------------------------------------------------------------------
HCA, Inc., 6.375% Nts., 1/15/15 5,190,000 4,411,500
- --------------------------------------------------------------------------------
HealthSouth Corp., 10.75% Sr. Unsec.
Nts., 6/15/16 2,185,000 2,294,250
- --------------------------------------------------------------------------------
Omnicare, Inc.:
6.75% Sr. Sub. Nts., 12/15/13 185,000 174,825
6.875% Sr. Sub. Nts., 12/15/15 285,000 266,475
- --------------------------------------------------------------------------------
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 2,650,000 2,279,000
- --------------------------------------------------------------------------------
US Oncology, Inc.:
9% Sr. Unsec. Nts., 8/15/12 650,000 644,313
10.75% Sr. Unsec. Sub. Nts., 8/15/14 650,000 645,125
- --------------------------------------------------------------------------------
Vanguard Health Holding Co. I LLC,
0%/11.25% Sr. Disc. Nts., 10/1/15 8 3,375,000 2,514,375
--------------
20,122,426
- --------------------------------------------------------------------------------
PHARMACEUTICALS--0.6%
ReAble Therapeutics Finance LLC,
10.875% Sr. Unsec. Nts., 11/15/14 7 1,970,000 1,940,450
- --------------------------------------------------------------------------------
Valeant Pharmaceuticals International,
Inc., 7% Sr. Nts., 12/15/11 800,000 773,000
--------------
2,713,450
- --------------------------------------------------------------------------------
INDUSTRIALS--7.5%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE--1.3%
Alliant Techsystems, Inc., 6.75% Sr.
Sub. Nts., 4/1/16 910,000 914,550
- --------------------------------------------------------------------------------
Bombardier, Inc., 8% Sr. Nts., 11/15/14 7 455,000 477,750
- --------------------------------------------------------------------------------
DRS Technologies, Inc.:
6.625% Sr. Nts., 2/1/16 735,000 729,488
6.875% Sr. Unsec. Sub. Nts., 11/1/13 300,000 300,000
7.625% Sr. Sub. Nts., 2/1/18 320,000 325,600
- --------------------------------------------------------------------------------
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 1,083,500
6.375% Sr. Unsec. Sub. Nts., Series B,
10/15/15 1,280,000 1,267,200
7.625% Sr. Sub. Nts., 6/15/12 500,000 514,375
--------------
6,275,943
- --------------------------------------------------------------------------------
AIRLINES--0.0%
ATA Holdings Corp., 13% Sr.
Unsec. Nts., 2/1/09 6,9,12 1,575,000 --
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
BUILDING PRODUCTS--0.7%
Dayton Superior Corp., 13% Sr. Unsec.
Sub. Nts., 6/15/09 6 $ 100,000 $ 93,500
- --------------------------------------------------------------------------------
Goodman Global Holding Co., Inc.,
7.875% Sr. Unsec. Sub. Nts.,
12/15/12 2,370,000 2,452,950
- --------------------------------------------------------------------------------
Nortek, Inc., 8.50% Sr. Unsec. Unsub.
Nts., 9/1/14 1,035,000 833,175
--------------
3,379,625
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--1.4%
Allied Waste North America, Inc.,
7.375% Sr. Sec. Nts., Series B, 4/15/14 2,850,000 2,857,125
- --------------------------------------------------------------------------------
American Pad & Paper Co., 13% Sr.
Sub. Nts., Series B, 11/15/05 6,9,12 200,000 --
- --------------------------------------------------------------------------------
Aramark Services, Inc., 8.50% Sr. Unsec.
Nts., 2/1/15 730,000 742,775
- --------------------------------------------------------------------------------
Cenveo Corp., 7.875% Sr. Sub. Nts.,
12/1/13 1,100,000 985,875
- --------------------------------------------------------------------------------
Corrections Corp. of America:
6.25% Sr. Unsec. Sub. Nts., 3/15/13 890,000 881,100
7.50% Sr. Nts., 5/1/11 500,000 508,750
- --------------------------------------------------------------------------------
FTI Consulting, Inc., 7.75% Sr. Unsec.
Nts., 10/1/16 640,000 668,800
--------------
6,644,425
- --------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING--0.1%
Great Lakes Dredge & Dock Co.,
7.75% Sr. Unsec. Sub. Nts., 12/15/13 250,000 235,000
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--0.2%
Belden & Blake Corp., 8.75% Sec.
Nts., 7/15/12 650,000 659,750
- --------------------------------------------------------------------------------
UCAR Finance, Inc., 10.25% Sr. Nts.,
2/15/12 184,000 190,670
--------------
850,420
- --------------------------------------------------------------------------------
MACHINERY--1.6%
Case New Holland, Inc., 7.125% Sr.
Unsec. Nts., 3/1/14 3,405,000 3,413,513
- --------------------------------------------------------------------------------
Douglas Dynamics LLC, 7.75% Sr. Nts.,
1/15/12 7 600,000 522,000
- --------------------------------------------------------------------------------
Greenbrier Cos., Inc., 8.375% Sr. Unsec.
Nts., 5/15/15 740,000 710,400
- --------------------------------------------------------------------------------
Manitowoc Co., Inc. (The), 7.125% Sr.
Nts., 11/1/13 150,000 149,250
- --------------------------------------------------------------------------------
TriMas Corp., 9.875% Sr. Unsec. Sub.
Nts., 6/15/12 1,774,000 1,738,520
- --------------------------------------------------------------------------------
Trinity Industries, Inc., 6.50% Sr. Nts.,
3/15/14 1,000,000 987,500
--------------
7,521,183
13 | OPPENHEIMER HIGH INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
ROAD & RAIL--1.0%
Avis Budget Car Rental LLC:
7.369% Sr. Unsec. Unsub. Nts., 5/15/14 1 $ 180,000 $ 166,500
7.625% Sr. Unsec. Unsub. Nts., 5/15/14 800,000 768,000
7.75% Sr. Unsec. Unsub. Nts., 5/15/16 455,000 429,975
- --------------------------------------------------------------------------------
Hertz Corp.:
8.875% Sr. Unsec. Nts., 1/1/14 90,000 91,688
10.50% Sr. Unsec. Sub. Nts., 1/1/16 1,570,000 1,632,800
- --------------------------------------------------------------------------------
Kansas City Southern Railway Co.
(The), 7.50% Sr. Nts., 6/15/09 500,000 503,125
- --------------------------------------------------------------------------------
Stena AB:
7% Sr. Unsec. Nts., 12/1/16 6 150,000 144,938
7.50% Sr. Unsec. Nts., 11/1/13 928,000 919,880
--------------
4,656,906
- --------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS--1.2%
Ashtead Capital, Inc., 9% Nts., 8/15/16 7 440,000 391,600
- --------------------------------------------------------------------------------
H&E Equipment Services, Inc., 8.375%
Sr. Unsec. Nts., 7/15/16 480,000 446,400
- --------------------------------------------------------------------------------
Interline Brands, Inc., 8.125%
Sr. Sub. Nts., 6/15/14 575,000 572,125
- --------------------------------------------------------------------------------
United Rentals North America, Inc.,
6.50% Sr. Unsec. Nts., 2/15/12 20,000 18,250
- --------------------------------------------------------------------------------
United Rentals, Inc., 7% Sr. Sub. Nts.,
2/15/14 5,000,000 4,212,500
--------------
5,640,875
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--3.0%
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--0.5%
NXP BV/NXP Funding LLC, 9.50%
Sr. Unsec. Unsub. Nts., 10/15/15 2,545,000 2,338,219
- --------------------------------------------------------------------------------
Orion Network Systems, Inc., 12.50%
Sr. Unsub. Disc. Nts., 1/15/07 6,9 1,150,000 12
--------------
2,338,231
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--0.2%
RBS Global & Rexnord Corp., 11.75%
Sr. Unsec. Sub. Nts., 8/1/16 950,000 933,375
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--0.0%
Exodus Communications, Inc., 10.75%
Sr. Nts., 12/15/09 6,9,12[EUR] 846,550 --
- --------------------------------------------------------------------------------
NorthPoint Communications Group,
Inc., 12.875% Nts., 2/15/10 6,9,12 240,208 --
- --------------------------------------------------------------------------------
PSINet, Inc., 10.50% Sr. Unsec. Nts.,
12/1/06 6,9,12[EUR] 1,000,000 --
--------------
--
- --------------------------------------------------------------------------------
IT SERVICES--1.8%
DI Finance/DynCorp International
LLC, 9.50% Sr. Unsec. Sub. Nts.,
Series B, 2/15/13 6 1,186,000 1,240,853
- --------------------------------------------------------------------------------
Fiserv, Inc., 6.125% Sr. Unsec. Unsub.
Nts., 11/20/12 3,980,000 4,049,121
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
IT SERVICES Continued
iPayment Holdings, Inc., 9.75% Sr.
Unsec. Sub. Nts., 5/15/14 6 $ 750,000 $ 705,000
- --------------------------------------------------------------------------------
Iron Mountain, Inc., 8.625% Sr.
Unsec. Sub. Nts., 4/1/13 2,195,000 2,233,413
--------------
8,228,387
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--0.5%
Freescale Semiconductor, Inc.,
10.125% Sr. Unsec. Sub. Nts., 12/15/16 7 2,740,000 2,274,200
- --------------------------------------------------------------------------------
MATERIALS--6.2%
- --------------------------------------------------------------------------------
CHEMICALS--1.2%
Huntsman International LLC:
7.375% Sr. Unsub. Nts., 1/15/15 6 420,000 443,100
7.875% Sr. Unsec. Sub. Nts., 11/15/14 260,000 276,900
- --------------------------------------------------------------------------------
Huntsman LLC:
11.50% Sr. Unsec. Nts., 7/15/12 1,6 332,000 363,540
11.625% Sr. Unsec. Nts., 10/15/10 6 37,000 39,313
- --------------------------------------------------------------------------------
Momentive Performance Materials,
Inc., 9.75% Sr. Unsec. Nts., 12/1/14 7 3,745,000 3,464,125
- --------------------------------------------------------------------------------
Mosaic Global Holdings, Inc., 7.375%
Sr. Nts., 12/1/14 6 1,100,000 1,182,500
--------------
5,769,478
- --------------------------------------------------------------------------------
CONSTRUCTION MATERIALS--0.3%
NTK Holdings, Inc., 0%/10.75% Sr.
Unsec. Nts., 3/1/14 8 2,650,000 1,563,500
- --------------------------------------------------------------------------------
CONTAINERS & PACKAGING--1.8%
Ball Corp., 6.625% Sr. Nts., 3/15/18 1,595,000 1,587,025
- --------------------------------------------------------------------------------
Crown Americas, Inc., 7.75% Sr. Nts.,
11/15/15 1,830,000 1,894,050
- --------------------------------------------------------------------------------
Graham Packaging Co., Inc., 9.875%
Sr. Unsec. Sub. Nts., 10/15/14 1,995,000 1,845,375
- --------------------------------------------------------------------------------
Graphic Packaging International Corp.:
8.50% Sr. Nts., 8/15/11 1,770,000 1,761,150
9.50% Sr. Sub. Nts., 8/15/13 945,000 937,913
- --------------------------------------------------------------------------------
Owens-Brockway Glass Container,
Inc., 8.875% Sr. Sec. Nts., 2/15/09 264,000 265,320
--------------
8,290,833
- --------------------------------------------------------------------------------
METALS & MINING--2.3%
Freeport-McMoRan Copper & Gold,
Inc., 8.375% Sr. Nts., 4/1/17 5,460,000 5,869,500
- --------------------------------------------------------------------------------
Ispat Inland ULC, 9.75% Sr. Sec. Nts.,
4/1/14 1,600,000 1,734,050
- --------------------------------------------------------------------------------
Koppers Industry, Inc., 9.875% Sr. Sec.
Nts., 10/15/13 800,000 846,000
- --------------------------------------------------------------------------------
Novelis, Inc., 7.25% Sr. Unsec. Nts.,
2/15/15 1 2,450,000 2,315,250
--------------
10,764,800
14 | OPPENHEIMER HIGH INCOME FUND/VA
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS--0.6%
NewPage Corp., 10% Sr. Sec. Nts.,
5/1/12 $ 2,200,000 $ 2,222,000
- --------------------------------------------------------------------------------
Verso Paper Holdings LLC, 8.661% Sr.
Sec. Nts., Series B, 8/1/14 1 350,000 343,000
--------------
2,565,000
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--9.1%
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--4.8%
Citizens Communications Co., 6.25%
Sr. Nts., 1/15/13 6,810,000 6,631,238
- --------------------------------------------------------------------------------
Intelsat Subsidiary Holding Co. Ltd.,
8.25% Sr. Nts., 1/15/13 430,000 434,300
- --------------------------------------------------------------------------------
NTL Cable plc, 9.125% Sr. Nts., 8/15/16 395,000 393,025
- --------------------------------------------------------------------------------
PanAmSat Corp., 9% Sr. Unsec. Nts.,
8/15/14 815,000 823,150
- --------------------------------------------------------------------------------
Qwest Corp., 8.875% Unsec. Unsub.
Nts., 3/15/12 5,755,000 6,186,625
- --------------------------------------------------------------------------------
Teligent, Inc., 11.50% Sr. Nts., 12/1/08 6,9,12 400,000 --
- --------------------------------------------------------------------------------
West Corp.:
9.50% Sr. Unsec. Nts., 10/15/14 1,040,000 1,024,400
11% Sr. Unsec. Sub. Nts., 10/15/16 935,000 932,663
- --------------------------------------------------------------------------------
Windstream Corp.:
8.125% Sr. Unsec. Unsub. Nts., 8/1/13 3,475,000 3,614,000
8.625% Sr. Unsec. Unsub. Nts., 8/1/16 2,255,000 2,379,025
- --------------------------------------------------------------------------------
Winstar Communications, Inc.,
12.75% Sr. Nts., 4/15/10 6,9,12 1,000,000 --
--------------
22,418,426
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--4.3%
American Tower Corp.:
7.125% Sr. Unsec. Nts., 10/15/12 865,000 893,113
7.50% Sr. Nts., 5/1/12 3,880,000 4,015,800
- --------------------------------------------------------------------------------
CellNet Data Systems, Inc., Sr. Unsec.
Disc. Nts., 10/1/07 6,9,12 1,834,000 --
- --------------------------------------------------------------------------------
Nextel Communications, Inc., 7.375%
Sr. Nts., Series D, 8/1/15 14,715,000 14,499,852
- --------------------------------------------------------------------------------
Rural Cellular Corp., 9.875% Sr. Nts.,
2/1/10 6 600,000 625,500
--------------
20,034,265
- --------------------------------------------------------------------------------
UTILITIES--3.1%
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES--1.2%
Edison Mission Energy:
7% Sr. Unsec. Nts., 5/15/17 2,991,000 2,953,613
7.50% Sr. Unsec. Nts., 6/15/13 445,000 458,350
7.75% Sr. Unsec. Nts., 6/15/16 525,000 543,375
- --------------------------------------------------------------------------------
Reliant Energy, Inc., 6.75% Sr. Sec.
Nts., 12/15/14 635,000 639,763
- --------------------------------------------------------------------------------
Sierra Pacific Resources, 6.75% Sr.
Unsec. Nts., 8/15/17 1,081,000 1,098,935
--------------
5,694,036
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
ENERGY TRADERS--1.7%
AES Corp. (The):
7.75% Sr. Unsec. Unsub. Nts., 3/1/14 $ 200,000 $ 202,500
8.75% Sr. Sec. Nts., 5/15/13 7 979,000 1,026,726
- --------------------------------------------------------------------------------
AES Red Oak LLC, 8.54% Sr. Sec.
Bonds, Series A, 11/30/19 351,161 377,499
- --------------------------------------------------------------------------------
Mirant Americas Generation LLC,
9.125% Sr. Unsec. Nts., 5/1/31 370,000 347,800
- --------------------------------------------------------------------------------
Mirant Mid-Atlantic LLC, 8.625% Sec.
Pass-Through Certificates, Series A,
6/30/12 884,223 928,434
- --------------------------------------------------------------------------------
NRG Energy, Inc.:
7.375% Sr. Nts., 1/15/17 1,470,000 1,436,925
7.375% Sr. Nts., 2/1/16 3,365,000 3,289,288
--------------
7,609,172
- --------------------------------------------------------------------------------
MULTI-UTILITIES--0.2%
CMS Energy Corp., 7.75% Sr. Nts., 8/1/10 400,000 421,765
- --------------------------------------------------------------------------------
NorthWestern Corp., 5.875% Sr. Sec.
Nts., 11/1/14 580,000 572,459
--------------
994,224
--------------
Total Corporate Bonds and Notes
(Cost $412,399,396) 393,834,605
SHARES
- --------------------------------------------------------------------------------
PREFERRED STOCKS--1.4%
- --------------------------------------------------------------------------------
AmeriKing, Inc., 13% Cum. Sr.
Exchangeable, Non-Vtg. 6,10,12 13,764 --
- --------------------------------------------------------------------------------
Eagle-Picher Holdings, Inc., 11.75% Cum.
Exchangeable, Series B, Non-Vtg. 6,12 8,000 --
- --------------------------------------------------------------------------------
Federal National Mortgage Assn., 8.25%
Non-Cum. Sub., Series S, Non Vtg. 12 186,160 4,793,620
- --------------------------------------------------------------------------------
ICG Holdings, Inc., 14.25%
Exchangeable, Non-Vtg. 6,10,12 342 --
- --------------------------------------------------------------------------------
ION Media Networks, Inc.:
12% Cum., Series B, Non-Vtg. 12 36 220,704
14.25% Cum. Jr. Exchangeable,
Non-Vtg. 6,10,12 1 6,236
9.75% Cv., Series AI 6,10,12 1 786
- --------------------------------------------------------------------------------
Sovereign Real Estate Investment
Trust, 12% Non-Cum., Series A 7 10,000 1,307,500
--------------
Total Preferred Stocks (Cost $6,864,854) 6,328,846
- --------------------------------------------------------------------------------
COMMON STOCKS--3.5%
- --------------------------------------------------------------------------------
AT&T, Inc. 61,377 2,550,828
- --------------------------------------------------------------------------------
Comcast Corp., Cl. A 12 187,978 3,432,478
- --------------------------------------------------------------------------------
Constellation Energy Group, Inc. 28,851 2,958,093
- --------------------------------------------------------------------------------
Global Aero Logistics, Inc. 6,12 4,647 34,853
- --------------------------------------------------------------------------------
Mediacom Communications Corp. 12 245,509 1,126,886
- --------------------------------------------------------------------------------
Public Service Enterprise Group, Inc. 28,476 2,797,482
- --------------------------------------------------------------------------------
Revlon, Inc., Cl. A 12 1,075,804 1,269,449
15 | OPPENHEIMER HIGH INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS Continued
- --------------------------------------------------------------------------------
Telus Corp. 44,464 $ 2,211,999
- --------------------------------------------------------------------------------
Telus Corp., Non-Vtg. 140 6,763
--------------
Total Common Stocks
(Cost $16,970,134) 16,388,831
UNITS
- --------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- --------------------------------------------------------------------------------
DeCrane Aircraft Holdings, Inc. Wts.,
Exp. 9/30/08 6,12 1,750 --
- --------------------------------------------------------------------------------
Global Aero Logistics, Inc. Wts.,
Exp. 2/28/11 12 570 757
- --------------------------------------------------------------------------------
Long Distance International, Inc. Wts.,
Exp. 4/13/08 6,12 800 --
--------------
Total Rights, Warrants and Certificates
(Cost $4,339) 757
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
STRUCTURED SECURITIES--0.3%
- --------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc., High
Yield Targeted Return Index Securities,
Series 2006-1, 7.631%, 5/1/16 6,13
(Cost $1,266,908) $ 1,260,000 $ 1,256,535
SHARES
- --------------------------------------------------------------------------------
INVESTMENT COMPANIES--2.3%
- --------------------------------------------------------------------------------
Oppenheimer Institutional Money
Market Fund, Cl. E, 5.03% 14,15
(Cost $10,989,620) 10,989,620 10,989,620
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $496,592,997) 102.3% 477,409,343
- --------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF
OTHER ASSETS (2.3) (10,860,490)
-------------------------------
NET ASSETS 100.0% $ 466,548,853
===============================
INDUSTRY CLASSIFICATIONS ARE UNAUDITED.
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 the current interest rate for a variable or increasing rate
security.
2. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline. Most other fixed income securities
increase in price when interest rates decline. The principal amount of the
underlying pool represents the notional amount on which current interest is
calculated. The price of these securities is typically more sensitive to changes
in prepayment rates than traditional mortgage-backed securities (for example,
GNMA pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future cash
flows. These securities amount to $1,375,963 or 0.29% of the Fund's net assets
as of December 31, 2007.
3. When-issued security or delayed delivery to be delivered and settled after
December 31, 2007. See Note 1 of accompanying Notes.
4. All or a portion of the security was segregated by the Fund in the amount of
$3,190,530, which represented 100.00% of the market value of securities sold
short. See Note 1 of accompanying Notes.
5. 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 $1,991,226. See Note 6 of accompanying Notes.
6. Illiquid security. The aggregate value of illiquid securities as of December
31, 2007 was $10,962,973, which represents 2.35% of the Fund's net assets. See
Note 8 of accompanying Notes.
7. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $39,566,948 or 8.48% of the Fund's net
assets as of December 31, 2007.
8. Denotes a step bond: a zero coupon bond that converts to a fixed or variable
interest rate at a designated future date.
9. Issue is in default. See Note 1 of accompanying Notes.
10. Interest or dividend is paid-in-kind, when applicable.
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. Non-income producing security.
13. Represents the current interest rate on a security whose interest rate is
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. See Note
1 of accompanying Notes.
14. Is or was an affiliate, as defined in the Investment Company Act of 1940, at
or during the period ended December 31, 2007, by virtue of the Fund owning at
least 5% of the voting securities of the issuer or as a result of the Fund and
the issuer having the same investment adviser. Transactions during the period in
which the issuer was an affiliate are as follows:
SHARES GROSS GROSS SHARES
DECEMBER 31, 2006 ADDITIONS REDUCTIONS DECEMBER 31, 2007
- ------------------------------------------------------------------------------------------------------------------------
Oppenheimer Institutional Money Market Fund, Cl. E 29,765,155 296,946,546 315,722,081 10,989,620
DIVIDEND
VALUE INCOME
- ------------------------------------------------------------------------------------------------------------------------
Oppenheimer Institutional Money Market Fund, Cl. E $10,989,620 $3,141,273
15. Rate shown is the 7-day yield as of December 31, 2007.
16 | OPPENHEIMER HIGH INCOME FUND/VA
PRINCIPAL AMOUNT
SOLD SHORT VALUE
- ------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS SOLD SHORT--(0.7)%
- ------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5%, 1/1/37 3 $ (1,230,000) $ (1,200,211)
- ------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6%, 1/1/37 3 (1,960,000) (1,990,319)
-------------
Total Mortgage-Backed Obligations Sold Short (Proceeds $3,166,622) $ (3,190,530)
=============
- ------------------------------------------------------------------------------------------------------
FUTURES CONTRACTS AS OF DECEMBER 31, 2007 ARE AS FOLLOWS:
- ------------------------------------------------------------------------------------------------------
UNREALIZED
NUMBER OF EXPIRATION APPRECIATION
CONTRACT DESCRIPTION BUY/SELL CONTRACTS DATE VALUE (DEPRECIATION)
- ------------------------------------------------------------------------------------------------------
U.S. Long Bonds Sell 210 3/19/08 $ 24,438,750 $ 303,979
U.S. Treasury Nts., 2 yr. Buy 63 3/31/08 13,245,750 24,446
U.S. Treasury Nts., 2 yr. Sell 150 3/31/08 31,537,500 (3,190)
U.S. Treasury Nts., 5 yr. Sell 83 3/31/08 9,153,344 (27,193)
U.S. Treasury Nts., 10 yr. Sell 346 3/19/08 39,233,156 48,582
----------
$ 346,624
==========
- ------------------------------------------------------------------------------------------------------------------------------------
CREDIT DEFAULT SWAPS AS OF DECEMBER 31, 2007 ARE AS FOLLOWS:
- ------------------------------------------------------------------------------------------------------------------------------------
NOTIONAL PAY/ PREMIUM
BUY/SELL CREDIT AMOUNT RECEIVE TERMINATION PAID/
SWAP COUNTERPARTY REFERENCE ENTITY PROTECTION (000S) FIXED RATE DATE (RECEIVED) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
Barclays Bank plc:
Beazer Homes USA, Inc. Sell $ 890 4.7000% 9/20/08 $ -- $ (54,438)
Citigroup, Inc. Sell 4,870 3.2500 9/20/08 -- (63,863)
Dillard's, Inc. Sell 745 1.9000 12/20/08 -- (4,922)
iStar Financial, Inc. Sell 345 4.4000 12/20/12 -- 5,973
Merrill Lynch & Co., Inc. Sell 1,455 0.6800 9/20/08 -- (12,384)
Residential Capital LLC Sell 1,801 1.2200 3/20/08 -- (158,739)
Residential Capital LLC Sell 901 1.2000 3/20/08 -- (79,456)
Residential Capital LLC Sell 1,328 1.7500 3/20/08 -- (115,409)
Six Flags, Inc. Sell 375 8.2500 12/20/08 -- (5,285)
Six Flags, Inc. Sell 590 7.0000 9/20/08 -- 5,203
Smithfield Foods, Inc. Sell 910 1.5000 3/20/12 -- (43,933)
The Mosaic Co. Sell 450 1.5000 9/20/12 -- 13,654
- ------------------------------------------------------------------------------------------------------------------------------------
Citibank NA, New York:
Allied Waste North America, Inc. Sell 980 1.8800 3/20/12 -- (43,042)
Amkor Technology, Inc. Sell 260 2.0500 9/20/08 -- 781
Cablevision Systems Corp. Sell 160 3.1000 12/20/10 -- (4,086)
Capmark Financial Group, Inc. Sell 3,300 7.1250 12/20/12 -- 24,049
El Paso Corp. Sell 928 0.7200 6/20/11 -- (22,627)
El Paso Corp. Sell 830 0.7800 6/20/11 -- (18,642)
El Paso Corp. Sell 795 0.8200 6/20/11 -- (16,838)
Ford Motor Credit Co. Sell 1,700 2.3200 3/20/12 -- (226,076)
Georgia-Pacific LLC Sell 565 3.4500 12/20/12 -- (2,053)
Georgia-Pacific LLC Sell 770 3.6000 12/20/12 -- 1,945
Intelsat Ltd. Sell 550 4.3000 12/20/08 -- 2,470
Nalco Co. Sell 435 3.6000 9/20/12 -- (5,243)
Nortel Networks Corp. Sell 1,735 1.8900 9/20/08 -- 3,131
Reliant Energy, Inc. Sell 465 2.4500 9/20/11 -- (13,680)
Reliant Energy, Inc. Sell 1,070 2.6000 9/20/11 -- (26,267)
Reliant Energy, Inc. Sell 1,035 3.9000 9/20/11 -- 18,291
Tribune Co. Sell 1,300 7.6000 9/20/08 -- (28,586)
Tribune Co. Sell 1,160 7.5000 9/20/08 -- (26,343)
Univision Communications, Inc. Sell 442 1.1000 6/20/08 -- (4,800)
17 | OPPENHEIMER HIGH INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
CREDIT DEFAULT SWAPS: Continued
- ------------------------------------------------------------------------------------------------------------------------------------
NOTIONAL PAY/ PREMIUM
BUY/SELL CREDIT AMOUNT RECEIVE TERMINATION PAID/
SWAP COUNTERPARTY REFERENCE ENTITY PROTECTION (000S) FIXED RATE DATE (RECEIVED) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
Credit Suisse International:
ArvinMeritor, Inc. Sell $ 900 1.4000% 9/20/08 $ -- $ (12,146)
ArvinMeritor, Inc. Sell 870 1.6000 9/20/08 -- (10,462)
Capmark Financial Group, Inc. Sell 1,060 3.5000 6/20/12 -- (126,068)
Capmark Financial Group, Inc. Sell 1,120 5.2000 12/20/12 -- (74,544)
Capmark Financial Group, Inc. Sell 550 6.2500 12/20/12 -- (16,681)
CDX.NA.HY.9 Index Sell 1,000 3.7500 12/20/12 (35,000) (42,807)
CenturyTel, Inc. Buy 1,125 0.3775 9/20/12 -- 8,485
Charter Communications Holdings LLC Buy 175 7.0000 9/20/10 -- 52,038
Charter Communications Holdings LLC Sell 175 5.0000 9/20/17 (35,000) (83,588)
Charter Communications Holdings LLC Buy 635 5.0000 9/20/10 40,481 212,620
Charter Communications Holdings LLC Sell 635 5.0000 9/20/17 (127,000) (303,306)
Dean Foods Co. Sell 455 1.0200 6/20/11 -- (32,375)
Dean Foods Co. Sell 465 1.0000 6/20/11 -- (33,371)
El Paso Corp. Sell 460 0.7400 6/20/11 -- (12,639)
El Paso Corp. Sell 465 0.7700 6/20/11 -- (12,331)
Embarq Corp. Buy 1,125 0.5700 9/20/12 -- 16,766
Embarq Corp. Buy 2,060 0.7300 9/20/12 -- 16,654
Ford Motor Credit Co. Sell 4,100 2.3850 3/20/12 -- (533,208)
Ford Motor Credit Co. Sell 875 2.5500 3/20/12 -- (109,714)
GMAC LLC Sell 1,810 1.3900 3/20/17 -- (396,409)
Intelsat Ltd. Sell 555 4.4000 3/20/09 -- (111)
Nalco Co. Sell 860 3.4000 9/20/12 -- (17,688)
Nalco Co. Sell 425 3.6000 9/20/12 -- (5,431)
Residential Capital LLC Sell 885 1.3000 3/20/08 -- (54,522)
Smithfield Foods, Inc. Sell 900 1.4900 3/20/12 -- (44,124)
Tenet Healthcare Corp. Sell 1,940 4.0500 12/20/08 -- 18,673
The Goodyear Tire & Rubber Co. Sell 580 1.5500 9/20/08 -- 1,266
Toys "R" Us, Inc. Sell 500 2.8000 9/20/08 -- (13,276)
Tribune Co. Sell 545 6.3500 12/20/08 -- (28,632)
TXU Corp. Sell 125 5.9100 12/20/12 -- 3,617
TXU Corp. Sell 115 6.0500 12/20/12 -- 3,953
TXU Corp. Sell 125 6.0000 12/20/12 -- 3,617
TXU Corp. Sell 925 1.5300 6/20/11 -- (79,143)
TXU Corp. Sell 410 1.6100 6/20/11 -- (34,094)
- ------------------------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG:
ABX.HE.AA.06-2 Index Sell 1,080 0.1700 5/25/46 (129,590) (411,645)
Capital One Bank Buy 220 1.8000 12/20/12 -- 2,821
Capital One Bank Buy 420 1.7000 12/20/12 -- 7,419
CenturyTel, Inc. Buy 1,685 0.4250 9/20/12 -- 6,023
CenturyTel, Inc. Buy 2,060 0.5300 9/20/12 -- (1,958)
Countrywide Home Loans, Inc. Sell 1,010 8.5000 12/20/08 -- (117,850)
Countrywide Home Loans, Inc. Sell 2,210 9.0000 12/20/08 -- (250,764)
Countrywide Home Loans, Inc. Sell 2,215 9.7500 12/20/08 -- (236,125)
Countrywide Home Loans, Inc. Sell 370 3.2500 9/20/08 -- (47,963)
Countrywide Home Loans, Inc. Sell 4,845 2.5500 9/20/08 -- (649,892)
CVRD Inco Ltd. Buy 840 0.6300 3/20/17 -- (4,550)
Embarq Corp. Buy 1,685 0.6100 9/20/12 -- 21,307
Ford Motor Co. Sell 2,335 6.0000 12/20/16 -- (196,270)
Ford Motor Co. Sell 3,440 5.8500 12/20/16 -- (312,085)
Ford Motor Co. Sell 2,750 5.8000 12/20/16 -- (255,597)
Ford Motor Credit Co. Sell 2,805 2.3900 3/20/12 -- (347,032)
Ford Motor Credit Co. Sell 1,360 2.3400 3/20/12 -- (170,434)
General Motors Corp. Sell 1,865 4.7500 12/20/16 -- (215,696)
General Motors Corp. Sell 2,200 4.6800 12/20/16 -- (261,493)
GMAC LLC Sell 1,820 1.3700 3/20/17 -- (388,627)
Intelsat Ltd. Sell 220 4.4000 3/20/09 -- (218)
iStar Financial, Inc. Sell 3,955 2.9250 12/20/08 -- (75,439)
iStar Financial, Inc. Sell 2,305 3.0000 12/20/08 -- (42,307)
iStar Financial, Inc. Sell 2,355 5.8500 12/20/08 -- 21,200
iStar Financial, Inc. Sell 805 4.3200 12/20/12 -- 9,041
18 | OPPENHEIMER HIGH INCOME FUND/VA
NOTIONAL PAY/ PREMIUM
BUY/SELL CREDIT AMOUNT RECEIVE TERMINATION PAID/
SWAP COUNTERPARTY REFERENCE ENTITY PROTECTION (000S) FIXED RATE DATE (RECEIVED) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG: Continued
iStar Financial, Inc. Sell $ 1,020 4.5000% 12/20/12 $ -- $ 21,423
Lehman Brothers Holdings, Inc. Sell 735 1.4100 9/20/08 -- 131
MBIA, Inc. Sell 1,090 4.9000 12/20/12 -- (49,686)
MBIA, Inc. Sell 730 1.5200 9/20/08 -- (39,520)
Merrill Lynch & Co., Inc. Sell 195 1.8500 6/20/08 -- 629
MGM Mirage Sell 890 1.1500 12/20/09 -- (8,753)
SLM Corp. Sell 580 2.0100 9/20/09 -- (9,334)
TXU Corp. Sell 1,105 2.5500 9/20/08 -- (1,819)
Vale Overseas Ltd. Sell 840 1.0500 3/20/17 -- (9,984)
Washington Mutual, Inc. Sell 665 4.5000 12/20/08 -- (3,548)
Washington Mutual, Inc. Sell 435 4.5000 12/20/08 -- (2,321)
- ------------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Capital Markets LP:
ABX.HE.AA.06-2 Index Sell 1,810 0.1700 5/25/46 (714,907) (687,757)
ABX.HE.AA.06-2 Index Sell 380 0.1700 5/25/46 (31,309) (144,391)
General Motors Corp. Sell 1,865 4.9500 12/20/16 -- (215,460)
- ------------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs International:
Amkor Technology, Inc. Sell 295 2.6500 9/20/08 -- 2,550
ArvinMeritor, Inc. Sell 890 1.6000 9/20/08 -- (12,288)
ArvinMeritor, Inc. Sell 585 2.2500 9/20/08 -- (5,293)
Beazer Homes USA, Inc. Sell 920 2.5000 6/20/08 -- (49,561)
Beazer Homes USA, Inc. Sell 810 2.6500 9/20/08 -- (67,134)
Beazer Homes USA, Inc. Sell 890 4.8000 9/20/08 -- (61,169)
First Data Corp. Sell 175 3.0000 9/20/08 -- 1,074
First Data Corp. Sell 585 1.3500 9/20/08 -- (3,565)
Ford Motor Co. Sell 500 6.4000 12/20/17 -- (33,671)
General Mills, Inc. Sell 495 0.3800 12/20/12 -- (136)
General Motors Corp. Sell 500 5.9500 12/20/17 -- (35,963)
GMAC LLC Sell 910 1.3900 3/20/17 -- (201,308)
GMAC LLC Sell 1,095 1.3900 3/20/17 -- (242,233)
GMAC LLC Sell 1,030 1.3700 3/20/17 -- (228,696)
GMAC LLC Sell 2,290 1.3900 3/20/17 -- (506,588)
iStar Financial, Inc. Sell 2,310 3.9500 12/20/12 -- 1,626
K. Hovnanian Enterprises, Inc. Sell 1,097 2.0000 6/20/08 -- (78,237)
K. Hovnanian Enterprises, Inc. Sell 1,775 2.0000 6/20/08 -- (126,592)
K. Hovnanian Enterprises, Inc. Sell 1,775 1.8000 6/20/08 -- (128,192)
Lehman Brothers Holdings, Inc. Sell 730 0.8000 9/20/10 -- (9,436)
Lennar Corp. Sell 870 2.9000 12/20/08 -- (37,620)
Merrill Lynch & Co., Inc. Sell 435 1.8500 6/20/08 -- 1,473
Nalco Co. Sell 465 3.7000 9/20/12 -- (6,273)
Residential Capital LLC Sell 900 1.1800 3/20/08 -- (67,523)
Residential Capital LLC Sell 879 1.3600 3/20/08 -- (65,576)
Sara Lee Corp. Buy 480 0.4190 9/20/12 -- (1,666)
Six Flags, Inc. Sell 350 10.8500 12/20/08 -- 2,387
Smurfit-Stone Container
Enterprises, Inc. Sell 580 1.4500 9/20/08 -- 126
Standard Pacific Corp. Sell 3,410 2.2000 6/20/08 -- (305,070)
Standard Pacific Corp. Sell 585 6.6500 9/20/08 -- (59,766)
The Mosaic Co. Sell 250 2.0000 9/20/12 -- 8,413
- ------------------------------------------------------------------------------------------------------------------------------------
JPMorgan Chase Bank NA, NY Branch:
Citigroup, Inc. Sell 880 1.3000 9/20/08 -- (29,230)
Countrywide Home Loans, Inc. Sell 1,820 1.8000 9/20/08 -- (246,880)
Dean Foods Co. Sell 930 1.0300 6/20/11 -- (53,255)
Dean Foods Co. Sell 930 1.0600 6/20/11 -- (52,395)
Dean Foods Co. Sell 460 1.0500 6/20/11 -- (26,058)
Dean Foods Co. Sell 1,200 1.0800 6/20/11 -- (66,866)
Dole Food Co., Inc. Sell 225 2.3800 9/20/08 -- (3,255)
Ford Motor Co. Sell 2,335 6.0000 12/20/16 -- (200,530)
General Motors Corp. Sell 2,760 4.7500 12/20/16 -- (323,953)
Lehman Brothers Holdings, Inc. Sell 5,770 1.5500 9/20/08 -- 1,517
Merrill Lynch & Co., Inc. Sell 5,770 0.8000 9/20/08 -- (33,170)
Morgan Stanley Sell 860 0.7500 9/20/08 -- (2,644)
19 | OPPENHEIMER HIGH INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
CREDIT DEFAULT SWAPS: Continued
- ------------------------------------------------------------------------------------------------------------------------------------
NOTIONAL PAY/ PREMIUM
BUY/SELL CREDIT AMOUNT RECEIVE TERMINATION PAID/
SWAP COUNTERPARTY REFERENCE ENTITY PROTECTION (000S) FIXED RATE DATE (RECEIVED) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
JPMorgan Chase Bank NA, NY Branch: Continued
Morgan Stanley Sell $ 6,070 0.7500% 9/20/08 $ -- $ (18,661)
Rite Aid Corp. Sell 555 1.4000 9/20/08 -- (15,990)
The Bear Stearns Cos., Inc. Sell 1,470 2.7000 9/20/08 -- 4,687
The Mosaic Co. Sell 455 1.5000 9/20/12 -- 14,754
The Mosaic Co. Sell 895 1.5000 9/20/12 -- 29,022
Toys "R" Us, Inc. Sell 450 1.9200 9/20/08 -- (7,708)
Tribune Co. Sell 890 8.5000 9/20/08 -- (10,806)
- ------------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Special Financing, Inc.:
ABX.HE.AA.06-2 Index Sell 490 0.1700 5/25/46 (120,022) (185,930)
Allied Waste North America, Inc. Sell 840 1.8800 3/20/12 -- (44,209)
Allied Waste North America, Inc. Sell 330 1.8800 3/20/12 -- (17,368)
Amkor Technology, Inc. Sell 430 2.5000 9/20/08 -- 3,172
ArvinMeritor, Inc. Sell 890 1.1500 9/20/08 -- (14,259)
ArvinMeritor, Inc. Sell 810 2.2000 9/20/08 -- (6,773)
ArvinMeritor, Inc. Sell 445 3.0000 9/20/08 -- (1,124)
Beazer Homes USA, Inc. Sell 1,650 2.6500 6/20/08 -- (131,421)
Beazer Homes USA, Inc. Sell 465 2.3300 6/20/08 -- (37,695)
Beazer Homes USA, Inc. Sell 1,280 5.4000 9/20/08 -- (98,233)
Beazer Homes USA, Inc. Sell 585 5.0000 9/20/08 (58,500) (46,361)
Cablevision Systems Corp. Sell 230 3.4000 12/20/10 -- (3,413)
Cablevision Systems Corp. Sell 930 3.1300 12/20/10 -- (20,444)
Capital One Bank Buy 245 1.8000 12/20/12 -- 3,932
Centex Corp. Sell 590 1.7500 9/20/09 -- (24,246)
Charter Communications Holdings LLC Sell 430 5.0000 9/20/12 (64,500) (180,902)
Charter Communications Holdings LLC Buy 430 7.2500 9/20/10 -- 117,767
Charter Communications Holdings LLC Sell 435 5.0000 9/20/12 (69,600) (183,005)
Charter Communications Holdings LLC Buy 435 7.6000 9/20/10 -- 116,116
Charter Communications Holdings LLC Buy 330 7.4000 9/20/10 -- 89,397
Charter Communications Holdings LLC Sell 330 5.0000 9/20/12 (49,500) (138,831)
Dillard's, Inc. Sell 945 2.2500 12/20/08 -- (238)
Dillard's, Inc. Sell 2,735 2.2500 12/20/08 -- (690)
Dole Food Co., Inc. Sell 570 3.4500 9/20/08 -- (1,800)
Dole Food Co., Inc. Sell 845 3.2000 9/20/08 -- (4,615)
Dole Food Co., Inc. Sell 610 5.2500 9/20/08 -- 5,820
D.R. Horton, Inc. Sell 1,140 4.2000 12/20/08 -- (554)
El Paso Corp. Sell 1,392 0.7300 6/20/11 -- (31,328)
El Paso Corp. Sell 400 0.8000 6/20/11 -- (8,104)
First Data Corp. Sell 870 2.7500 9/20/08 -- 838
First Data Corp. Sell 870 3.5000 9/20/08 -- 5,643
First Data Corp. Sell 400 3.0000 9/20/08 -- 1,122
First Data Corp. Sell 477 3.0000 9/20/08 -- 1,338
General Mills, Inc. Sell 600 0.4000 12/20/12 -- (263)
Georgia-Pacific LLC Sell 600 0.8000 12/20/08 -- (3,343)
GMAC LLC Sell 975 1.4000 3/20/17 -- (216,861)
GMAC LLC Sell 910 1.4000 3/20/17 -- (202,404)
Harrah's Operating Co., Inc. Sell 1,100 2.3000 9/20/08 -- (8,828)
K. Hovnanian Enterprises, Inc. Sell 1,385 4.2200 9/20/08 -- (165,116)
K. Hovnanian Enterprises, Inc. Sell 585 7.5000 9/20/08 -- (57,719)
Lennar Corp. Sell 3,535 2.9000 12/20/08 -- (147,532)
Levi Strauss & Co. Sell 570 1.6000 9/20/08 -- (2,452)
MBIA, Inc. Sell 4,855 1.9500 9/20/08 -- (268,082)
Morgan Stanley Sell 1,460 0.6400 9/20/08 -- (6,211)
Nalco Co. Sell 260 3.4000 9/20/12 -- (6,229)
Nortel Networks Corp. Sell 865 1.8500 9/20/08 -- (2,127)
Pulte Homes, Inc. Sell 875 2.8500 9/20/09 -- (22,415)
Quebecor World, Inc. Sell 590 2.8500 9/20/08 -- (83,933)
Reliant Energy, Inc. Sell 845 2.1500 9/20/11 -- (37,180)
Reliant Energy, Inc. Sell 440 2.5000 9/20/11 -- (14,384)
Residential Capital LLC Sell 3,070 5.0000 6/20/08 (429,800) (335,992)
Residential Capital LLC Sell 340 5.0000 6/20/08 (44,200) (37,211)
20 | OPPENHEIMER HIGH INCOME FUND/VA
NOTIONAL PAY/ PREMIUM
BUY/SELL CREDIT AMOUNT RECEIVE TERMINATION PAID/
SWAP COUNTERPARTY REFERENCE ENTITY PROTECTION (000S) FIXED RATE DATE (RECEIVED) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Special Financing, Inc.: Continued
Rite Aid Corp. Sell $ 455 1.3500% 9/20/08 $ -- $ (12,350)
Rite Aid Corp. Sell 1,080 1.3500 9/20/08 -- (29,314)
Rite Aid Corp. Sell 75 1.4500 9/20/08 -- (1,981)
Rite Aid Corp. Sell 570 3.2500 9/20/08 -- (7,614)
Saks, Inc. Sell 570 1.7000 9/20/08 -- (2,317)
Six Flags, Inc. Sell 1,330 5.2200 9/20/08 -- (46,496)
Six Flags, Inc. Sell 650 7.0000 9/20/08 -- (14,557)
Six Flags, Inc. Sell 355 5.0000 9/20/08 -- (12,962)
Smithfield Foods, Inc. Sell 1,190 1.5800 3/20/12 -- (53,572)
Standard Pacific Corp. Sell 1,200 5.0000 6/20/08 (144,000) (101,194)
Tenet Healthcare Corp. Sell 585 4.9000 3/20/09 -- 10,536
The Bear Stearns Cos., Inc. Sell 5,780 1.6000 9/20/08 -- (20,751)
The Mosaic Co. Sell 910 1.2000 9/20/12 -- 17,841
Toys "R" Us, Inc. Sell 905 1.8500 9/20/08 -- (15,967)
Toys "R" Us, Inc. Sell 1,200 1.9500 9/20/08 -- (20,295)
Toys "R" Us, Inc. Sell 360 4.3000 9/20/08 -- 88
Toys "R" Us, Inc. Sell 585 3.2500 9/20/08 -- (4,341)
Tribune Co. Sell 270 6.4000 12/20/08 -- (16,700)
Tribune Co. Sell 380 6.0000 12/20/08 -- (24,900)
Tribune Co. Sell 430 7.4500 9/20/08 -- (15,782)
Tribune Co. Sell 580 7.5500 9/20/08 -- (20,875)
Tribune Co. Sell 230 7.5500 9/20/08 -- (8,278)
Univision Communications, Inc. Sell 450 3.0000 12/20/08 -- (2,775)
Univision Communications, Inc. Sell 410 3.0000 12/20/08 -- (1,548)
Univision Communications, Inc. Sell 884 1.1500 6/20/08 -- (9,158)
Univision Communications, Inc. Sell 442 1.1000 6/20/08 -- (4,688)
Washington Mutual, Inc. Sell 1,555 4.4000 12/20/08 -- (14,164)
Washington Mutual, Inc. Sell 2,875 5.1500 12/20/08 -- 6,046
- ------------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch International:
Ford Motor Co. Sell 3,825 5.3000 12/20/12 -- (326,446)
General Motors Corp. Sell 2,550 4.0500 12/20/12 -- (278,468)
Georgia-Pacific LLC Sell 575 3.2500 12/20/12 -- (6,972)
Georgia-Pacific LLC Sell 570 3.3500 12/20/12 -- (4,578)
Reliant Energy, Inc. Sell 420 2.0500 9/20/11 -- (20,449)
TXU Corp. Sell 925 1.5300 6/20/11 -- (80,697)
TXU Corp. Sell 930 1.5800 6/20/11 -- (79,745)
TXU Corp. Sell 925 1.5900 6/20/11 -- (79,040)
TXU Corp. Sell 1,150 1.6200 6/20/11 -- (97,237)
TXU Corp. Sell 1,310 2.0600 6/20/11 -- (93,562)
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital Services, Inc.:
ABX.HE.AA.06-2 Index Sell 380 0.1700 5/25/46 (30,359) (144,191)
ABX.HE.AA.06-2 Index Sell 730 0.1700 5/25/46 (72,997) (273,820)
Capmark Financial Group, Inc. Sell 530 7.4000 12/20/12 -- 16,250
Capmark Financial Group, Inc. Sell 550 7.1500 12/20/12 -- 11,529
Dean Foods Co. Sell 930 0.9500 6/20/11 -- (59,279)
Ford Motor Co. Sell 2,335 6.1500 12/20/16 -- (174,909)
Ford Motor Co. Sell 150 5.9000 12/20/16 -- (13,290)
General Motors Corp. Sell 1,865 4.9000 12/20/16 -- (215,491)
General Motors Corp. Sell 120 4.6200 12/20/16 -- (15,718)
Intelsat Ltd. Sell 550 2.7500 12/20/08 -- (7,338)
J.C. Penney Co., Inc. Sell 385 1.3000 12/20/17 -- (15,209)
J.C. Penney Co., Inc. Sell 370 1.0700 12/20/17 -- (20,782)
Kohl's Corp. Buy 575 0.8700 12/20/17 -- 9,621
Kohl's Corp. Buy 555 0.6600 12/20/17 -- 18,172
Lennar Corp. Sell 1,775 2.9000 12/20/08 -- (67,573)
Massey Energy Co. Sell 690 5.1000 9/20/12 -- 25,774
Residential Capital LLC Sell 75 5.0000 6/20/08 (10,125) (9,021)
Residential Capital LLC Sell 105 5.0000 6/20/08 (15,225) (12,630)
Residential Capital LLC Sell 190 5.0000 6/20/08 (27,550) (22,854)
Residential Capital LLC Sell 2,610 6.1700 9/20/08 -- (426,011)
21 | OPPENHEIMER HIGH INCOME FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
CREDIT DEFAULT SWAPS: Continued
- ------------------------------------------------------------------------------------------------------------------------------------
NOTIONAL PAY/ PREMIUM
BUY/SELL CREDIT AMOUNT RECEIVE TERMINATION PAID/
SWAP COUNTERPARTY REFERENCE ENTITY PROTECTION (000S) FIXED RATE DATE (RECEIVED) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital Services, Inc.: Continued
Residential Capital LLC Sell $ 845 6.2500% 9/20/08 $ -- $ (137,522)
Residential Capital LLC Sell 875 6.2000 9/20/08 -- (142,664)
Sara Lee Corp. Buy 615 0.4180 9/20/12 -- (2,892)
Smithfield Foods, Inc. Sell 140 1.5100 3/20/12 -- (5,602)
Smithfield Foods, Inc. Sell 160 1.7700 3/20/12 -- (4,863)
- ------------------------------------------------------------------------------------------------------------------------------------
UBS AG:
iStar Financial, Inc. Sell 550 4.5600 12/20/12 -- 24,471
Lehman Brothers Holdings, Inc. Sell 2,310 1.5500 9/20/08 -- (92)
Massey Energy Co. Sell 375 5.0500 9/20/12 -- 11,395
Massey Energy Co. Sell 430 5.1000 9/20/12 -- 13,895
The Mosaic Co. Sell 425 1.7800 9/20/12 -- 18,539
The Mosaic Co. Sell 595 1.6500 9/20/12 -- 22,636
----------------------------
$ (2,168,703) $ (16,615,459)
============================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN SWAPS AS OF DECEMBER 31, 2007 ARE AS FOLLOWS:
- ------------------------------------------------------------------------------------------------------------------------------------
NOTIONAL TERMINATION
SWAP COUNTERPARTY AMOUNT PAID BY THE FUND RECEIVED BY THE FUND DATE VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
If negative, the absolute If positive, the Total Return
value of the Lehman of the Lehman Brothers U.S.
Brothers U.S. CMBS CMBS AAA 8.5+ Index
Barclays Bank plc $ 2,260,000 AAA 8.5+ Index minus 20 basis points 6/1/08 $ 37,927
- ------------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers
Special Financing, Inc.:
If negative, the absolute If positive, the Total Return
value of the Lehman of the Lehman Brothers U.S.
Brothers U.S. CMBS CMBS AAA 8.5+ Index
2,700,000 AAA 8.5+ Index minus 40 basis points 6/1/08 46,674
If negative, the absolute If positive, the Total Return
value of the Lehman of the Lehman Brothers U.S.
Brothers U.S. CMBS CMBS AAA 8.5+ Index
22,100,000 AAA 8.5+ Index minus 42.5 basis points 6/1/08 383,177
If negative, the absolute
value of the Lehman If positive, the Total Return
Brothers U.S. CMBS of the Lehman Brothers U.S.
11,050,000 AAA 8.5+ Index CMBS AAA 8.5+ Index 6/1/08 195,235
If negative, the absolute If positive, the Total Return of
value of the Lehman the Lehman Brothers U.S.
Brothers U.S. CMBS CMBS AAA 8.5+ Index plus
8,200,000 AAA 8.5+ Index 37.5 basis points 2/1/08 147,102
If negative, the absolute If positive, the Total Return of
value of the Lehman the Lehman Brothers U.S.
Brothers U.S. CMBS CMBS AAA 8.5+ Index plus
2,282,000 AAA 8.5+ Index 55 basis points 5/1/08 41,237
If negative, the absolute
value of the Lehman If positive, the Total Return
Brothers U.S. CMBS of the Lehman Brothers U.S.
11,050,000 AAA 8.5+ Index CMBS AAA 8.5+ Index 6/1/08 195,235
If negative, the absolute If positive, the Total Return of
value of the Lehman the Lehman Brothers U.S.
Brothers U.S. CMBS CMBS AAA 8.5+ Index plus
3,025,000 AAA 8.5+ Index 45 basis points 5/1/08 54,437
22 | OPPENHEIMER HIGH INCOME FUND/VA
NOTIONAL TERMINATION
SWAP COUNTERPARTY AMOUNT PAID BY THE FUND RECEIVED BY THE FUND DATE VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital
Services, Inc.:
If negative, the absolute If positive, the Total Return
value of the Lehman of the Lehman Brothers U.S.
Brothers U.S. CMBS CMBS AAA 8.5+ Index
$ 1,900,000 AAA 8.5+ Index minus 40 basis points 6/1/08 $ 29,052
If negative, the absolute If positive, the Total Return
value of the Lehman of the Lehman Brothers U.S.
Brothers U.S. CMBS CMBS AAA 8.5+ Index plus
2,260,000 AAA 8.5+ Index 90 basis points 6/1/08 36,497
If negative, the absolute
value of the Lehman If positive, the Total Return
Brothers U.S. CMBS of the Lehman Brothers U.S.
11,050,000 AAA 8.5+ Index CMBS AAA 8.5+ Index 6/1/08 171,269
- ------------------------------------------------------------------------------------------------------------------------------------
If negative, the absolute If positive, the Total Return
value of the Lehman of the Lehman Brothers U.S.
Brothers U.S. CMBS CMBS AAA 8.5+ Index
UBS AG 7,300,000 AAA 8.5+ Index minus 32.5 basis points 2/1/08 128,262
-----------
$ 1,466,104
===========
Index abbreviation is as follows:
CMBS Commercial Mortgage Backed Securities
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23 | OPPENHEIMER HIGH INCOME FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 31, 2007
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments:
Unaffiliated companies (cost $485,603,377) $ 466,419,723
Affiliated companies (cost $10,989,620) 10,989,620
----------------
477,409,343
- ------------------------------------------------------------------------------------------------------
Cash 1,920,723
- ------------------------------------------------------------------------------------------------------
Swaps, at value (net premiums received $1,403,826) 1,335,831
- ------------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest, dividends and principal paydowns 8,652,225
Investments sold (including $3,166,622 sold on a when-issued or delayed delivery
basis) 3,442,522
Shares of beneficial interest sold 646,430
Other 14,469
----------------
Total assets 493,421,543
- ------------------------------------------------------------------------------------------------------
LIABILITIES
- ------------------------------------------------------------------------------------------------------
Short positions, at value (proceeds of $3,166,622)--see accompanying statement of
investments 3,190,530
- ------------------------------------------------------------------------------------------------------
Swaps, at value (premiums received $764,877) 16,485,186
- ------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased (including $4,194,896 purchased on a when-issued or delayed
delivery basis) 6,165,646
Shares of beneficial interest redeemed 395,578
Futures margins 371,846
Distribution and service plan fees 106,943
Trustees' compensation 10,707
Transfer and shareholder servicing agent fees 3,436
Other 142,818
----------------
Total liabilities 26,872,690
- ------------------------------------------------------------------------------------------------------
NET ASSETS $ 466,548,853
================
- ------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- ------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 58,838
- ------------------------------------------------------------------------------------------------------
Additional paid-in capital 564,009,084
- ------------------------------------------------------------------------------------------------------
Accumulated net investment income 38,507,913
- ------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions (104,185,588)
- ------------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments and translation of assets and
liabilities denominated in foreign currencies (31,841,394)
----------------
NET ASSETS $ 466,548,853
================
- ------------------------------------------------------------------------------------------------------
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 $294,819,286 and 37,096,280 shares of beneficial interest
outstanding) $ 7.95
- ------------------------------------------------------------------------------------------------------
Service Shares:
Net asset value, redemption price per share and offering price per share (based
on net assets of $157,332,772 and 19,936,626 shares of beneficial interest
outstanding) $ 7.89
- ------------------------------------------------------------------------------------------------------
Class 3 Shares:
Net asset value, redemption price per share and offering price per share (based
on net assets of $4,920,445 and 616,736 shares of beneficial interest outstanding) $ 7.98
- ------------------------------------------------------------------------------------------------------
Class 4 Shares:
Net asset value, redemption price per share and offering price per share (based
on net assets of $9,476,350 and 1,188,659 shares of beneficial interest
outstanding) $ 7.97
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24 | OPPENHEIMER HIGH INCOME FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 31, 2007
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- ------------------------------------------------------------------------------------------------------
Interest $ 35,952,880
- ------------------------------------------------------------------------------------------------------
Dividends:
Unaffiliated companies (net of foreign withholding taxes of $5,344) 404,522
Affiliated companies 3,141,273
- ------------------------------------------------------------------------------------------------------
Fee income 746
- ------------------------------------------------------------------------------------------------------
Portfolio lending fees 644
----------------
Total investment income 39,500,065
- ------------------------------------------------------------------------------------------------------
EXPENSES
- ------------------------------------------------------------------------------------------------------
Management fees 3,718,374
- ------------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Service shares 424,031
Class 4 shares 12,019
- ------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service shares 10,267
Service shares 10,142
Class 3 shares 177
Class 4 shares 2,485
- ------------------------------------------------------------------------------------------------------
Shareholder communications:
Non-Service shares 23,868
Service shares 12,026
Class 3 shares 122
Class 4 shares 236
- ------------------------------------------------------------------------------------------------------
Trustees' compensation 15,369
- ------------------------------------------------------------------------------------------------------
Custodian fees and expenses 2,785
- ------------------------------------------------------------------------------------------------------
Administration service fees 1,500
- ------------------------------------------------------------------------------------------------------
Other 68,997
----------------
Total expenses 4,302,398
Less reduction to custodian expenses (964)
Less waivers and reimbursements of expenses (59,627)
----------------
Net expenses 4,241,807
- ------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 35,258,258
- ------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- ------------------------------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments from unaffiliated companies 1,263,278
Closing and expiration of futures contracts (335,344)
Foreign currency transactions 97,907
Short positions (52,688)
Swap contracts 1,768,798
Increase from payment by affiliate 2,760
----------------
Net realized gain 2,744,711
- ------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments (25,681,885)
Translation of assets and liabilities denominated in foreign currencies 313,313
Futures contracts 306,956
Short positions (23,908)
Swap contracts (12,974,773)
----------------
Net change in unrealized depreciation (38,060,297)
- ------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (57,328)
================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25 | OPPENHEIMER HIGH INCOME FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2007 2006
- ----------------------------------------------------------------------------------------------------------------------
OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------
Net investment income $ 35,258,258 $ 36,670,389
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain 2,744,711 2,937,133
- ----------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) (38,060,297) 7,687,971
--------------------------------
Net increase (decrease) in net assets resulting from operations (57,328) 47,295,493
- ----------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ----------------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Non-Service shares (24,967,707) (28,179,781)
Service shares (11,831,305) (11,514,103)
Class 3 shares -- --
Class 4 shares -- --
--------------------------------
(36,799,012) (39,693,884)
- ----------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from beneficial interest
transactions:
Non-Service shares (42,430,203) (28,076,230)
Service shares (3,835,518) 14,875,665
Class 3 shares 5,091,701 --
Class 4 shares 9,835,657 --
--------------------------------
(31,338,363) (13,200,565)
- ----------------------------------------------------------------------------------------------------------------------
NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------
Total decrease (68,194,703) (5,598,956)
- ----------------------------------------------------------------------------------------------------------------------
Beginning of period 534,743,556 540,342,512
--------------------------------
End of period (including accumulated net investment income of $38,507,913 and
$36,328,896, respectively) $ 466,548,853 $ 534,743,556
================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26 | OPPENHEIMER HIGH INCOME FUND/VA
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2007 2006 2005 2004 2003
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.55 $ 8.44 $ 8.80 $ 8.61 $ 7.51
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .57 1 .58 1 .57 1 .58 1 .60
Net realized and unrealized gain (loss) (.56) .17 (.37) .15 1.09
----------------------------------------------------------------------------
Total from investment operations .01 .75 .20 .73 1.69
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.61) (.64) (.56) (.54) (.59)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 7.95 $ 8.55 $ 8.44 $ 8.80 $ 8.61
============================================================================
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 (0.10)% 9.42% 2.31% 8.97% 23.96%
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 294,819 $ 361,445 $ 384,726 $ 479,405 $ 480,112
- -----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 335,702 $ 365,154 $ 444,477 $ 460,877 $ 396,858
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 6.96% 7.05% 6.79% 6.91% 8.31%
Total expenses 0.75% 4 0.74% 4 0.75% 0.75% 0.76%
Expenses after payments, waivers and/or
reimbursements and reduction to custodian expenses 0.74% 0.74% 0.75% 0.75% 0.76%
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 67% 5 57% 64% 51% 48%
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 less than one full year.
4. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended December 31, 2007 0.76%
Year Ended December 31, 2006 0.74%
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, 2007 $30,798,147 $24,096,458
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27 | OPPENHEIMER HIGH INCOME FUND/VA
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SERVICE SHARES YEAR ENDED DECEMBER 31, 2007 2006 2005 2004 2003
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.50 $ 8.39 $ 8.76 $ 8.58 $ 7.49
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .55 1 .56 1 .55 1 .56 1 .61
Net realized and unrealized gain (loss) (.57) .17 (.38) .15 1.06
----------------------------------------------------------------
Total from investment operations (.02) .73 .17 .71 1.67
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.59) (.62) (.54) (.53) (.58)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 7.89 $ 8.50 $ 8.39 $ 8.76 $ 8.58
================================================================
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 (0.47)% 9.23% 2.01% 8.73% 23.79%
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 157,333 $ 173,299 $ 155,617 $ 134,013 $ 76,354
- -----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 169,569 $ 160,703 $ 141,287 $ 101,464 $ 41,246
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 6.71% 6.80% 6.54% 6.63% 7.84%
Total expenses 1.01% 4 1.00% 4 1.00% 1.01% 1.04%
Expenses after payments, waivers and/or
reimbursements and reduction to custodian expenses 1.00% 1.00% 1.00% 1.01% 1.04%
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 67% 5 57% 64% 51% 48%
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 less than one full year.
4. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended December 31, 2007 1.02%
Year Ended December 31, 2006 1.00%
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, 2007 $ 30,798,147 $ 24,096,458
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28 | OPPENHEIMER HIGH INCOME FUND/VA
CLASS 3 SHARES CLASS 4 SHARES
PERIOD ENDED DECEMBER 31, 2007 1 2007 1
- ----------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.26 $ 8.26
- ----------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .37 .36
Net realized and unrealized loss (.65) (.65)
-----------------------------
Total from investment operations (.28) (.29)
- ----------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income -- --
- ----------------------------------------------------------------------------------------
Net asset value, end of period $ 7.98 $ 7.97
=============================
- ----------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 (3.39)% (3.51)%
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 4,921 $ 9,476
- ----------------------------------------------------------------------------------------
Average net assets (in thousands) $ 3,750 $ 7,201
- ----------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 6.90% 6.61%
Total expenses 0.76% 5 1.05% 6
Expenses after payments, waivers and/or
reimbursements and reduction to custodian expenses 0.75% 1.04%
- ----------------------------------------------------------------------------------------
Portfolio turnover rate 7 67% 67%
1. For the period from May 1, 2007 (inception of offering) to December 31, 2007.
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 less than one full year.
5. Total expenses including indirect expenses from affiliated fund were as
follows:
Period Ended December 31, 2007 0.77%
6. Total expenses including indirect expenses from affiliated fund were as
follows:
Period Ended December 31, 2007 1.06%
7. The portfolio turnover rate excludes purchase and sale transactions of To Be
Announced (TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
-----------------------------------------------------------------------------
Year Ended December 31, 2007 $ 30,798,147 $ 24,096,458
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
29 | 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 by investing mainly in a
diversified portfolio of high-yield, lower-grade, fixed-income securities that
the Fund's investment adviser, OppenheimerFunds, Inc. (the "Manager"), believes
does not involve undue risk.
The Fund offers Non-Service, Service, Class 3 and Class 4 shares. All
classes are sold at their offering price, which is the net asset value per
share, to separate investment accounts of participating insurance companies as
an underlying investment for variable life insurance policies, variable annuity
contracts or other investment products. The class of shares being designated as
Service shares and Class 4 shares are subject to a distribution and service
plan. All classes of shares have identical rights and voting privileges with
respect to the Fund in general and exclusive voting rights on matters that
affect that class alone. Earnings, net assets and net asset value per share may
differ due to each class having its own expenses, such as transfer and
shareholder servicing agent fees and shareholder communications, directly
attributable to that class. The Fund assesses a 1% fee on the proceeds of Class
3 and Class 4 shares that are redeemed (either by selling or exchanging to
another Oppenheimer fund or other investment option offered through your
variable life insurance or variable annuity contract) within 60 days of their
purchase. The fee, which is retained by the Fund, is accounted for as an
addition to paid-in capital.
The following is a summary of significant accounting policies consistently
followed by the Fund.
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SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of the New York Stock Exchange (the "Exchange"), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for trading. Securities may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. Securities traded on a registered U.S.
securities exchange 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 whose principal exchange is NASDAQ(R) are valued based on the closing
price reported by NASDAQ prior to the time when the Fund's assets are valued. In
the absence of a sale, the security is valued at the last sale price on the
prior trading day, if it is within the spread of the 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, collateralized
mortgage obligations and other asset-backed securities will be valued at the
mean between the "bid" and "asked" prices. Securities for which market
quotations are not readily available are valued at their fair value. 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. Shares of a registered investment company
that are not traded on an exchange are valued at the acquired investment
company's net asset value per share. "Money market-type" debt instruments with
remaining maturities of sixty days or less are valued at cost adjusted by the
amortization of discount or premium to maturity (amortized cost), which
approximates market value.
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STRUCTURED SECURITIES. The Fund invests in structured securities whose market
values, interest rates and/or redemption prices are linked to the performance of
underlying foreign currencies, interest rate spreads, stock market indices,
prices of individual securities, commodities or other financial instruments or
the occurrence of other specific events. The structured securities are often
leveraged, increasing the volatility of each note's market value relative to the
change in the underlying linked financial element or event. Fluctuations in
value of these securities are recorded as unrealized gains and losses in the
accompanying Statement of Operations. The Fund records a realized gain or loss
when a structured security is sold or matures.
30 | OPPENHEIMER HIGH INCOME FUND/VA
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SECURITIES ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS. The Fund may purchase
securities on a "when-issued" basis, and may purchase or sell securities on a
"delayed delivery" basis. "When-issued" or "delayed delivery" refers to
securities whose terms and indenture are available and for which a market
exists, but which are not available for immediate delivery. Delivery and payment
for securities that have been purchased by the Fund on a when-issued basis
normally takes place within six months and possibly as long as two years or more
after the trade date. During this period, such securities do not earn interest,
are subject to market fluctuation and may increase or decrease in value prior to
their delivery. The purchase of securities on a when-issued basis may increase
the volatility of the Fund's net asset value to the extent the Fund executes
such transactions while remaining substantially fully invested. When the Fund
engages in when-issued or delayed delivery transactions, it relies on the buyer
or seller, as the case may be, to complete the transaction. Their failure to do
so may cause the Fund to lose the opportunity to obtain or dispose of the
security at a price and yield it considers advantageous. The Fund maintains
internally designated assets with a market value equal to or greater than the
amount of its purchase commitments. 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, 2007, the Fund had purchased securities issued on a
when-issued or delayed delivery basis and sold securities issued on a delayed
delivery basis as follows:
WHEN-ISSUED OR DELAYED
DELIVERY BASIS TRANSACTIONS
--------------------------------------------------
Purchased securities $4,194,896
Sold securities 3,166,622
The Fund may enter into "forward roll" transactions with respect to
mortgage-related securities. In this type of transaction, the Fund sells a
mortgage-related security to a buyer and simultaneously agrees to repurchase a
similar security (same type, coupon and maturity) at a later date at a set
price. During the period between the sale and the repurchase, the Fund will not
be entitled to receive interest and principal payments on the securities that
have been sold. The Fund records the incremental difference between the forward
purchase and sale of each forward roll as realized gain (loss) on investments or
as fee income in the case of such transactions that have an associated fee in
lieu of a difference in the forward purchase and sale price.
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. To assure its
future payment of the purchase price, the Fund maintains internally designated
assets with a market value equal to or greater than the payment obligation under
the roll.
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SECURITIES SOLD SHORT. The Fund may short sale when-issued securities for future
settlement. The value of the open short position is recorded as a liability, and
the Fund records an unrealized gain or loss for the value of the open short
position. The Fund records a realized gain or loss when the short position is
closed out.
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CREDIT RISK. The Fund invests in high-yield, non-investment-grade bonds, which
may be subject to a greater degree of credit risk. Credit risk relates to the
ability of the issuer to meet interest or principal payments or both as they
become due. The Fund may acquire securities in default, and is not obligated to
dispose of securities whose issuers subsequently default. As of December 31,
2007, securities with an aggregate market value of $12, representing less than
0.005% of the Fund's net assets, were in default.
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FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in
U.S. dollars. The values of securities denominated in foreign currencies and
amounts related to the purchase and sale of foreign securities and foreign
investment income are translated into U.S. dollars as of the close of the
Exchange, normally 4:00 P.M. Eastern time, on each day the Exchange is open for
trading. Foreign exchange rates may be valued primarily using a reliable bank,
dealer or service authorized by the Board of Trustees.
31 | OPPENHEIMER HIGH INCOME FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
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1. SIGNIFICANT ACCOUNTING POLICIES Continued
Reported net realized gains and losses from foreign currency transactions arise
from sales of portfolio securities, sales and maturities of short-term
securities, sales of foreign currencies, exchange rate fluctuations between the
trade and settlement dates on securities transactions, and the difference
between the amounts of dividends, interest, and foreign withholding taxes
recorded on the Fund's books and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized appreciation and depreciation on the
translation of assets and liabilities denominated in foreign currencies arise
from changes in the values of assets and liabilities, including investments in
securities at fiscal period end, resulting from changes in exchange rates.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
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INVESTMENT IN OPPENHEIMER INSTITUTIONAL MONEY MARKET FUND. The Fund is permitted
to invest daily available cash balances in an affiliated money market fund. The
Fund may invest the available cash in Class E shares of Oppenheimer
Institutional Money Market Fund ("IMMF") to seek current income while preserving
liquidity. IMMF is a registered open-end management investment company,
regulated as a money market fund under the Investment Company Act of 1940, as
amended. The Manager is also the investment adviser of IMMF. 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.
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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.
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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.
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FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders. Therefore, no federal income or excise tax provision is
required. The Fund files income tax returns in U.S. federal and applicable state
jurisdictions. The statute of limitations on the Fund's tax return filings
remain open for the three preceding fiscal reporting period ends.
The tax components of capital shown in the table below represent distribution
requirements the Fund must satisfy under the income tax regulations, losses the
Fund may be able to offset against income and gains realized in future years and
unrealized appreciation or depreciation of securities and other investments for
federal income tax purposes.
NET UNREALIZED
DEPRECIATION
BASED ON COST OF
SECURITIES AND
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED OTHER INVESTMENTS
NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME
INCOME GAIN CARRYFORWARD 1,2,3,4,5 TAX PURPOSES
- ----------------------------------------------------------------------------
$25,896,044 $-- $102,645,614 $20,350,910
1. As of December 31, 2007, the Fund had $97,195,563 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, 2007,
details of the capital loss carryforwards were as follows:
32 | OPPENHEIMER HIGH INCOME FUND/VA
EXPIRING
-----------------------
2008 $ 9,779,664
2009 22,696,701
2010 56,061,391
2011 8,529,303
2012 128,504
------------
Total $ 97,195,563
============
2. As of December 31, 2007, the Fund had $5,450,028 of post-October losses
available to offset future realized capital gains, if any. Such losses, if
unutilized, will expire in 2016.
3. The Fund had $23 of post-October foreign currency losses which were deferred.
4. During the fiscal year ended December 31, 2007, the Fund utilized $4,768,054
of capital loss carryforward to offset capital gains realized in that fiscal
year.
5. 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.
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, 2007.
Net assets of the Fund were unaffected by the reclassifications.
INCREASE TO INCREASE TO
ACCUMULATED ACCUMULATED NET
NET INVESTMENT REALIZED LOSS
INCOME ON INVESTMENTS
--------------------------------
$3,719,771 $3,719,771
The tax character of distributions paid during the years ended December 31, 2007
and December 31, 2006 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2007 DECEMBER 31, 2006
----------------------------------------------------------------
Distributions paid from:
Ordinary income $36,799,012 $ 39,693,884
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, 2007 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 $ 497,736,541
Federal tax cost of other investments (109,432,977)
-------------
Total federal tax cost $ 388,303,564
=============
Gross unrealized appreciation $ 3,065,030
Gross unrealized depreciation (23,415,940)
-------------
Net unrealized depreciation $ (20,350,910)
=============
33 | OPPENHEIMER HIGH INCOME FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
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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 compensation deferral plan.
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DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations and
may differ from U.S. generally accepted accounting principles, are recorded on
the ex-dividend date. Income and capital gain distributions, if any, are
declared and paid annually or at other times as deemed necessary by the Manager.
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INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income is recognized on an accrual basis. Market discount and
premium, which are included in interest income on the Statement of Operations,
are amortized or accreted daily.
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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.
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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.
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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.
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OTHER. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period. Actual
results could differ from those estimates.
34 | OPPENHEIMER HIGH INCOME FUND/VA
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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 31,2007 1 YEAR ENDED DECEMBER 31, 2006
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------
NON-SERVICE SHARES
Sold 6,787,194 $ 55,828,051 5,280,216 $ 43,432,010
Dividends and/or distributions reinvested 3,059,768 24,967,707 3,544,627 28,179,781
Redeemed (15,007,275) (123,225,961) (12,151,871) (99,688,021)
----------------------------------------------------------------------
Net decrease (5,160,313) $ (42,430,203) (3,327,028) $ (28,076,230)
======================================================================
- -----------------------------------------------------------------------------------------------------------------
SERVICE SHARES
Sold 3,742,971 $ 30,663,500 5,002,490 $ 40,899,612
Dividends and/or distributions reinvested 1,457,057 11,831,305 1,455,639 11,514,103
Redeemed (5,655,204) (46,330,323) (4,611,753) (37,538,050)
----------------------------------------------------------------------
Net increase (decrease) (455,176) $ (3,835,518) 1,846,376 $ 14,875,665
======================================================================
- -----------------------------------------------------------------------------------------------------------------
CLASS 3 SHARES
Sold 881,563 $ 7,225,930 -- $ --
Dividends and/or distributions reinvested -- -- -- --
Redeemed (264,827) (2,134,229) 2 -- --
----------------------------------------------------------------------
Net increase 616,736 $ 5,091,701 -- $ --
======================================================================
- -----------------------------------------------------------------------------------------------------------------
CLASS 4 SHARES
Sold 1,978,987 $ 16,140,299 -- $ --
Dividends and/or distributions reinvested -- -- -- --
Redeemed (790,328) (6,304,642) 2 -- --
----------------------------------------------------------------------
Net increase 1,188,659 $ 9,835,657 -- $ --
======================================================================
1. For the year ended December 31, 2007, for non-service and service shares, and
for the period from May 1, 2007 (inception of offering) to December 31, 2007 for
Class 3 and Class 4 shares.
2. Net of redemption fees of $10,660 and $30,654 for Class 3 and Class 4 shares,
respectively.
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3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations and investments in IMMF, for the year ended December
31, 2007, were as follows:
PURCHASES SALES
--------------------------------------------------------------
Investment securities $280,104,652 $ 314,388,638
U.S. government and government
agency obligations 461,640 470,397
To Be Announced (TBA)
mortgage-related securities 30,798,147 24,096,458
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4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Under the investment advisory agreement, the Fund pays the
Manager a management fee based on the daily net assets of the Fund at an annual
rate as shown in the following table:
FEE SCHEDULE
---------------------------------
Up to $200 million 0.75%
Next $200 million 0.72
Next $200 million 0.69
Next $200 million 0.66
Next $200 million 0.60
Over $1 billion 0.50
35 | OPPENHEIMER HIGH INCOME FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
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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.
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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, 2007, the Fund
paid $21,362 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.
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DISTRIBUTION AND SERVICE PLAN FOR SERVICE SHARES AND CLASS 4 SHARES. The Fund
has adopted a Distribution and Service Plan (the "Plan") in accordance with Rule
12b-1 under the Investment Company Act of 1940 for Service shares and Class 4
shares to pay OppenheimerFunds Distributor, Inc. (the "Distributor"), for
distribution related services, personal service and account maintenance for the
Fund's Service shares and Class 4 shares. Under the Plan, payments are made
periodically at an annual rate of up to 0.25% of the average annual net assets
of Service shares and Class 4 shares of the Fund. The Distributor currently uses
all of those fees to compensate sponsor(s) of the insurance product that offers
Fund shares, for providing personal service and maintenance of accounts of their
variable contract owners that hold Service shares and Class 4 shares. These fees
are paid out of the Fund's assets on an on-going basis and increase operating
expenses of the Service shares and Class 4 shares, which results in lower
performance compared to the Fund's shares that are not subject to a service fee.
Fees incurred by the Fund under the Plan are detailed in the Statement of
Operations.
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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, 2007, the Manager waived $59,627 for
IMMF management fees.
During the year ended December 31, 2007, the Manager voluntarily
reimbursed the Fund $2,760 for certain transactions. The payment increased the
Fund's total returns by less than 0.01%.
- --------------------------------------------------------------------------------
5. FOREIGN CURRENCY EXCHANGE CONTRACTS
The Fund may enter into foreign currency exchange contracts ("forward
contracts") for the purchase or sale of a foreign currency at a negotiated rate
at a future date.
Foreign currency exchange contracts are reported on a schedule following
the Statement of Investments. Forward contracts will be valued daily based upon
the closing prices of the forward currency rates determined at the close of the
Exchange as provided by a bank, dealer or pricing service. The resulting
unrealized appreciation (depreciation) is reported in the Statement of Assets
and Liabilities as a receivable or payable and in the Statement of Operations
within the change in unrealized appreciation (depreciation). At contract close,
the difference between the original cost of the contract and the value at the
close date is recorded as a realized gain (loss) in the Statement of Operations.
Risks to the Fund include both market and credit risk. Market risk is the
risk that the value of the forward contract will depreciate due to unfavorable
changes in the exchange rates. 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 payments that the Fund has not yet
received.
As of December 31, 2007, the Fund had no outstanding forward contracts.
36 | OPPENHEIMER HIGH INCOME FUND/VA
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6. FUTURES CONTRACTS
A futures contract is a commitment to buy or sell a specific amount of a
financial instrument at a negotiated price on a stipulated future date. The Fund
may buy and sell futures contracts that relate to broadly based securities
indices (financial futures), debt securities (interest rate futures) and various
commodities (commodity index futures). The Fund may also buy or write put or
call options on these futures contracts.
Futures contracts traded on a commodities or futures exchange will be
valued at the final settlement price or official closing price on the principal
exchange as reported by such principal exchange at its trading session ending
at, or most recently prior to, the time when the Fund's assets are valued.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities (initial margin) in an amount equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Fund each day. The variation margin payments are equal
to the daily changes in the contract value and are recorded as unrealized gains
and losses.
Futures contracts are reported on a schedule following the Statement of
Investments. Securities held in collateralized accounts to cover initial margin
requirements on open futures contracts are noted in the Statement of
Investments. Cash held by the broker to cover initial margin requirements on
open futures contracts and the receivable and/or payable for the daily mark to
market for the variation margin are noted in the Statement of Assets and
Liabilities. The net change in unrealized appreciation and depreciation is
reported in the Statement of Operations. Realized gains (losses) are reported in
the Statement of Operations at the closing or expiration of futures contracts.
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market where the Fund is unable to
liquidate the contract or enter into an offsetting position and, if used for
hedging purposes, the risk that the price of the contract will correlate
imperfectly with the prices of the Fund's securities.
- --------------------------------------------------------------------------------
7. SWAP CONTRACTS
The Fund may enter into swap contract agreements with a counterparty to exchange
a series of cash flows based on either specified reference rates, or the
occurrence of a credit event, over a specified period. Such contracts may
include interest rate, equity, debt, index, total return, credit and currency
swaps.
Swaps are marked to market daily using primarily quotations from pricing
services, counterparties and brokers. Swap contracts are reported on a schedule
following the Statement of Investments. The value of the contracts is separately
disclosed on the Statement of Assets and Liabilities. The unrealized
appreciation (depreciation) related to the change in the valuation of the
notional amount of the swap is combined with the accrued interest due to (owed
by) the Fund at termination or settlement. The net change in this amount during
the period is included on the Statement of Operations. The Fund also records any
periodic payments received from (paid to) the counterparty, including at
termination, under such contracts as realized gain (loss) on the Statement of
Operations.
Risks of entering into swap contracts include credit, market and liquidity
risk. 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 payments that the Fund has not yet received. Market risk
is the risk that the value of the contract will depreciate due to unfavorable
changes in the reference asset. If there is an illiquid market for the
agreement, the Fund may be unable to close the contract prior to contract
termination
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CREDIT DEFAULT SWAP CONTRACTS. A credit default swap is a bilateral contract
that enables an investor to buy or sell protection against a defined-issuer
credit event. The Fund may enter into credit default swaps on a single security,
or a basket of securities.
In a credit default swap contract, the purchaser of the contract will pay
a periodic interest fee, similar to an insurance premium, on the notional amount
of the swap contract to the counterparty (the seller of the contract). If there
is
37 | OPPENHEIMER HIGH INCOME FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7. SWAP CONTRACTS Continued
a credit event (for example, bankruptcy or a failure to timely pay interest or
principal), the purchaser will exercise the contract and will receive a payment
from the seller of the contract equal to the notional value of the credit
default swap contract less the value of the underlying security. In the event
that the credit default swap is exercised due to a credit event, the difference
between the value of the underlying security and the notional amount is recorded
as realized gain (loss) and is included on the Statement of Operations.
Risks of credit default swaps include, but are not limited to, the cost of
paying for credit protection if there are no credit events.
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TOTAL RETURN SWAP CONTRACTS. A total return swap is an agreement between
counterparties to exchange a set of future cash flows on the notional amount of
the contract. One cash flow is typically 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.
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8. ILLIQUID SECURITIES
As of December 31, 2007, investments in securities included issues that are
illiquid. Investments may be illiquid because they do not have an active trading
market, making it difficult to value them or dispose of them promptly at an
acceptable price. 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 an applicable footnote
on the Statement of Investments.
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9. SECURITIES LENDING
The Fund lends portfolio securities from time to time in order to earn
additional income in the form of fees or interest on securities received as
collateral or the investment of any cash received as collateral. The loans are
secured by collateral (either securities, letters of credit, or cash) 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 each business day and any additional required collateral is
delivered to the Fund on the next business day. If the borrower defaults on its
obligation to return the securities loaned because of insolvency or other
reasons, the Fund could experience delays and cost in recovering the securities
loaned or in gaining access to the collateral. 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 and recognizes the gain
or loss in the fair value of the securities loaned that may occur during the
term of the loan. The Fund has the right under the lending agreement to recover
the securities from the borrower on demand.
As of December 31, 2007, the Fund had no securities on loan.
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10. RECENT ACCOUNTING PRONOUNCEMENT
In September 2006, Financial Accounting Standards Board ("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, 2007, 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.
38 | 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, 2007,
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, 2007, 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, 2007, 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 13, 2008
39 | OPPENHEIMER HIGH INCOME FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
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In early 2008, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2007. 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, 2007 which are not designated as capital gain distributions should be
multiplied by 0.97% 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.
40 | OPPENHEIMER HIGH INCOME FUND/VA
ORTFOLIO 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.
41 | 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 Plus investment team and analysts.
Mr. Manioudakis and the Core Plus 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.
42 | OPPENHEIMER HIGH INCOME 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 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 noted the recent transfer of the Fund's investment
management responsibilities to Angelo Manioudakis and the Core Plus team in an
effort to improve performance. The Board concluded that, in light of the recent
changes in the Fund's investment team, it was reasonable to renew the Agreement.
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
considered the comparability of the fees charged and the services provided to
the Fund to the fees and services for other clients or accounts advised by the
Manager. The independent consultant provided comparative data in regard to the
fees and expenses of the Fund and other high current yield funds underlying
variable insurance products. The Board noted that the Fund's contractual and
actual management fees are higher than its peer group median. The Board noted
the Manager's assertion that the Manager incurred certain expenses as a result
of the management changes and also noted the additional resources that the
Manager has devoted to the Fund.
ECONOMIES OF SCALE. The Board reviewed whether the Manager may realize
economies of scale in managing and supporting the Fund. The Board noted that the
Fund currently has management fee breakpoints, which are intended to share with
Fund shareholders economies of scale that may exist as the Fund's assets grow.
OTHER BENEFITS TO THE MANAGER. In addition to considering the profits
realized by the Manager, the Board considered information that was provided
regarding the direct and indirect benefits the Manager receives as a result of
its relationship with the Fund, including compensation paid to the Manager's
affiliates. The Board also considered that the Manager must be able to pay and
retain experienced professional personnel at competitive rates to provide
quality services to the Fund 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 considered all of the above information, and considered the
terms and conditions of the Agreement, including the management fee, in light of
all of the surrounding circumstances.
43 | 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 OF
THE FUNDS, LENGTH OF SERVICE, PORTFOLIOS IN THE FUNDS COMPLEX CURRENTLY OVERSEEN
AGE
INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL, COLORADO
TRUSTEES 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER RESIGNATION,
RETIREMENT, DEATH OR REMOVAL.
WILLIAM L. ARMSTRONG, President, Colorado Christian University (since 2006); Chairman, Cherry Creek Mortgage Company
Chairman of the Board (since 1991), Chairman, Centennial State Mortgage Company (since 1994), Chairman, The El Paso
of Trustees (since 2003), Mortgage Company (since 1993); Chairman, Ambassador Media Corporation (since 1984); Chairman,
Trustee (since 1999) Broadway Ventures (since 1984); Director of Helmerich & Payne, Inc. (oil and gas
Age: 70 drilling/production company) (since 1992), Campus Crusade for Christ (non-profit) (since 1991);
Former Director, The Lynde and Harry Bradley Foundation, Inc. (non-profit organization)
(2002-2006); former Chairman of: Transland Financial Services, Inc. (private mortgage banking
company) (1997-2003), Great Frontier Insurance (1995-2000), Frontier Real Estate, Inc.
(residential real estate brokerage) (1994-2000) and Frontier Title (title insurance agency)
(1995-2000); former Director of the following: UNUMProvident (insurance company) (1991-2004),
Storage Technology Corporation (computer equipment company) (1991-2003) and International Family
Entertainment (television channel) (1992-1997); U.S. Senator (January 1979-January 1991). Oversees
39 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: 71 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 39 portfolios in the OppenheimerFunds complex.
EDWARD L. CAMERON, Member of The Life Guard of Mount Vernon (George Washington historical site) (June 2000-May 2006);
Trustee (since 1999) Partner of PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price
Age: 69 Waterhouse LLP Global Investment Management Industry Services Group (financial services firm)
(July 1994-June 1998). Oversees 39 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: 66 (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 39 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: 67 (until October 1994). Oversees 39 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: 61 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 39 portfolios in the
OppenheimerFunds complex.
44 | OPPENHEIMER HIGH INCOME FUND/VA
ROBERT J. MALONE, Director of Jones Knowledge, Inc. (since 2006); Director of Jones International University
Trustee (since 2002) (educational organization) (since August 2005); Chairman, Chief Executive Officer and Director
Age: 63 of Steele Street State Bank (commercial banking) (since August 2003); Director of Colorado
UpLIFT (charitable organization) (since 1986); Trustee of the Gallagher Family Foundation
(non-profit organization) (since 2000); Former Chairman of U.S. Bank-Colorado (subsidiary of U.S.
Bancorp and formerly Colorado National Bank) (July 1996-April 1999); Director of Commercial
Assets, Inc. (real estate investment trust) (1993-2000); Director of Jones Knowledge, Inc.
(2001-July 2004); and Director of U.S. Exploration, Inc. (oil and gas exploration) (1997-February
2004). Oversees 39 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 of
Age: 65 Worcester Polytech Institute (since 1985); Chairman (since 1994) 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 41 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 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 of the Manager (since June 2001); President of the
Trustee, President and Manager (September 2000-March 2007); President and director or trustee of other Oppenheimer funds;
Principal Executive Officer President and Director of Oppenheimer Acquisition Corp. ("OAC") (the Manager's parent holding
(since 2001) company) and of Oppenheimer Partnership Holdings, Inc. (holding company subsidiary of the Manager)
Age: 58 (since July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of the Manager)
(November 2001-December 2006); 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); Chairman (since October 2007)
and Member of the Investment Company Institute's Board of Governors (since October 2003). Oversees
102 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. 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, MASSACHUSETTS 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 and of HarbourView Asset Management Corporation (since April
Vice President and Portfolio 2002) and of OFI Institutional Asset Management, Inc. (since June 2002); Vice President of
Manager (since 2002) Oppenheimer Real Asset Management, Inc. (since November 2006). Executive Director and portfolio
Age: 41 manager for MSIM/Miller, Anderson & Sherrerd (Morgan Stanley Asset Management) (August 1993-April
2002). A portfolio manager and officer of 15 portfolios in the OppenheimerFunds complex.
ANTULIO N. BOMFIM, Vice President of the Manager (since October 2003); Senior Economist at the Board of Governors of
Vice President and Portfolio the Federal Reserve System (June 1992-October 2003). A portfolio manager and officer of 12
Manager (since 2006) portfolios in the OppenheimerFunds complex.
Age: 41
45 | OPPENHEIMER HIGH INCOME FUND/VA
TRUSTEES AND OFFICERS Unaudited / Continued
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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 and officer of 12 portfolios in the OppenheimerFunds
Age: 38 complex.
BENJAMIN J. GORD, Vice President of the Manager (since April 2002) of HarbourView Asset 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: 45 Stanley Investment Management (April 1992-March 2002). A portfolio manager and officer of 12
portfolios in the OppenheimerFunds complex.
THOMAS SWANEY, Vice President of the Manager (since April 2006); senior analyst, high grade investment team (June
Vice President and Portfolio 2002-March 2006); senior fixed income analyst at Miller Anderson & Sherrerd, a division of Morgan
Manager (since 2006) Stanley Investment Management (May 1998-May 2002). A portfolio manager and officer of 12
Age: 35 portfolios in the OppenheimerFunds complex.
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Chief
Vice President and Chief Compliance Officer of OppenheimerFunds Distributor, Inc., Centennial Asset Management and
Compliance Officer Shareholder Services, Inc. (since March 2004); Vice President of OppenheimerFunds Distributor,
(since 2004) Inc., Centennial Asset Management Corporation and Shareholder Services, Inc. (since June 1983);
Age: 57 Former Vice President and Director of Internal Audit of the Manager (1997-February 2004). An
officer of 102 portfolios in the OppenheimerFunds complex.
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, Inc. and Oppenheimer Partnership Holdings, Inc.
Officer (since 1999) (since March 1999), OFI Private Investments, Inc. (since March 2000), OppenheimerFunds
Age: 48 International Ltd. and OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management,
Inc. (since November 2000), and OppenheimerFunds Legacy Program (charitable trust program
established by the Manager) (since June 2003); Treasurer and Chief Financial Officer of OFI Trust
Company (trust company subsidiary of the Manager) (since May 2000); Assistant Treasurer of the
following: OAC (since March 1999), Centennial Asset Management Corporation (March 1999-October
2003) and OppenheimerFunds Legacy Program (April 2000-June 2003). An officer of 102 portfolios in
the OppenheimerFunds complex.
BRIAN S. PETERSEN, Vice President of the Manager (since February 2007); Assistant Vice President of the Manager
Assistant Treasurer (August 2002-February 2007); Manager/Financial Product Accounting of the Manager (November
(since 2004) 1998-July 2002). An officer of 102 portfolios in the OppenheimerFunds complex.
Age: 37
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). An officer of 102 portfolios in the OppenheimerFunds
Age: 37 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: 59 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). An officer of 102 portfolios in
the OppenheimerFunds complex.
46 | OPPENHEIMER HIGH INCOME 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) of UBS Financial Services,
(since 2004) Inc. An officer of 102 portfolios in the OppenheimerFunds complex.
Age: 40
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 102 portfolios in the OppenheimerFunds complex.
Age: 44
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: 42 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 102
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.
47 | OPPENHEIMER HIGH INCOME FUND/VA
DECEMBER 31, 2007
- --------------------------------------------------------------------------------
Management
Oppenheimer Commentaries
Core Bond Fund/VA and
A Series of Oppenheimer Variable Account Funds Annual Report
- --------------------------------------------------------------------------------
MANAGEMENT COMMENTARIES
Listing of Top Holdings
ANNUAL REPORT [GRAPHIC]
Fund Performance Discussion
Listing of Investments
Financial Statements
[LOGO] OPPENHEIMERFUNDS(R)
The Right Way to Invest
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. For its fiscal year ended December
31, 2007, Oppenheimer Core Bond Fund/VA's returns lagged those of the Citigroup
Broad Investment Grade Index. The Fund's Non-Service shares returned 4.39% for
the 12-month reporting period, while the Index returned 7.22% for the same
timeframe. Although this outcome falls short of our expectations, we are
encouraged by the fact that the bulk of the Fund's difficulties occurred over a
relatively short, concentrated timeframe at year-end; these difficulties in the
Fund were caused by adverse conditions in the financial markets that we believed
diverged somewhat from fundamental drivers in the second half of 2007.
The year 2007 began with low volatility, a generally positive economic
outlook by investors and rising long-term interest rates. By mid-year, troubles
in the sub-prime mortgage market were mounting, and liquidity dried up,
increasing market turmoil substantially. The Federal Reserve (the Fed) began
lowering short-term rates as much to inject liquidity into the financial markets
as to stimulate the economy, which continued to expand at a steady, albeit
tepid, pace. In mid-October, however, the sub-prime mortgage market imploded,
and investors' flight to quality sharpened. Virtually all debt securities
perceived to have any risk or even a remote association with mortgages were
battered. For the year, Treasuries outperformed U.S. equities, while the credit,
mortgage and high-yield bond sectors significantly underperformed their equal
duration Treasury counterparts. Because shorter-term rates dropped more
dramatically than longer-term rates after June, the yield curve steepened
sharply by year-end.
Despite this challenging backdrop, the Fund had posted positive,
competitive performance that soundly outpaced the majority of its peers
year-to-date through mid-October. Unfortunately, as we added exposures in
response to the market turmoil, the market events that occurred soon after
pressured the portfolio's non-Treasury, or "spread," investments, enough to
impair year-end performance. As such, the most significant detractor to our
returns was the negative market environment that dominated the Fund's fiscal
year, in which investors fled risk and shunned even those spread products with
sound fundamentals. Because the Fund's portfolio is dominated by a diverse mix
of spread securities, our performance suffered in the final months of the year
when troublesome market conditions peaked.
Another detractor to performance was the composition of our
investment-grade credit allocation, which worked against us at year-end. In this
area of the portfolio, we had emphasized financial bonds at the expense of
industrial names, based on our belief that the wider spreads associated with
industrials at that time indicated less an opportunity than a higher level of
leveraged buyout (LBO) or "event" risk. Unfortunately, when the sub-prime
lending crisis peaked in mid-October, industrial bonds rallied while spreads on
financials widened out dramatically and their values dropped. Similarly, our
decision to increase our allocation to high-yield bonds detracted from
short-term returns after mid-October.
On the positive side, the makeup of our mortgage holdings helped mitigate
losses for the year. First, because we remained quite wary of sub-prime
mortgages throughout the year, we generally avoided this segment of the
market--a decision that helped support Fund returns given market events. Next,
what marginal exposure we did have to the sub-prime sector was comprised of
select, AAA-rated, short-term issues, which suffered less on a relative basis.
Otherwise, although the portfolio's overall mortgage allocation lagged this
year, it did so less severely than the overall market. This advantage largely
stemmed from our focus on agency mortgage-backed securities, such as Fannie Mae
and Freddie Mac issues, where minimal credit risk and sounder guarantees helped
these mortgages fare better than the rest of the mortgage market as a whole. On
the other hand, performance suffered as a result of our decision late in the
year to add to the portfolio's commercial mortgage-backed securities (CMBS) and
non-agency mortgage holdings.
Our interest rate strategy added to returns in the first half of the year,
and mildly detracted from performance during the second half. We began 2007 with
less interest-rate risk, or duration, relative to the benchmark, based on our
conviction that both current rates as well as investors' expectations for
longer-term rates were lower than warranted by actual economic fundamentals. As
rates rose significantly in the first half of the year, being short-duration
helped returns. We moved to a neutral duration in July, but as rates declined in
response to sub-prime concerns, we restored our less-than-market interest rate
sensitivity soon after, again believing that the market was projecting lower
rates too far into the future. When rates fell thereafter, our strategy
detracted from returns versus the benchmark. Fortunately, because we were only
slightly short duration, the impact of our rate strategy proved to be minimal.
3 | OPPENHEIMER CORE BOND FUND/VA
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
Overall, we believe that our active management strategies over the fiscal
year position the Fund favorably for the long term. Moving forward, we believe
economic fundamentals point toward a greater likelihood of rising long-term
rates rather than further rate declines. As such, our slightly lower exposure to
interest-rate risk should position the Fund well. Next, we believe select areas
of the market have been unduly shunned despite still-sound fundamental
underpinnings, such as AAA-rated CMBS and AAA-rated non-agency residential
mortgages backed by prime borrowers, an allocation we have increased.
Additionally, we remain confident in the cash flows of the companies backing our
high-yield holdings. High-yield spreads appear to be at or near historically
wide levels, and as uncertainty diminishes and investors once again seek
incremental yield supported by sound fundamentals, we're convinced many of these
names will regain footing. Based on our longer-term perspective, we believe that
despite the recent brief period of difficulty, our overall positioning and
strategy will serve the Fund's long-term competitive performance and remain a
vital element in 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, 2007. 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's performance is also compared
against the Lehman Brothers Aggregate Bond Index, an unmanaged index of U.S.
corporate and government bonds; and the Lehman Brothers Credit Index, an index
of non-convertible U.S. investment grade corporate bonds. 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 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.]
Oppenheimer Core Bond Citigroup Broad Investment Lehman Brothers Lehman Brothers
Fund/VA (Non-Service) Grade Bond Index Credit Index Aggregate Bond Index
12/31/1997 $ 10,000 $ 10,000 $ 10,000 $ 10,000
03/31/1998 $ 10,143 $ 10,161 $ 10,153 $ 10,156
06/30/1998 $ 10,394 $ 10,396 $ 10,415 $ 10,393
09/30/1998 $ 10,689 $ 10,827 $ 10,792 $ 10,832
12/31/1998 $ 10,680 $ 10,871 $ 10,857 $ 10,869
03/31/1999 $ 10,646 $ 10,821 $ 10,780 $ 10,815
06/30/1999 $ 10,500 $ 10,721 $ 10,611 $ 10,720
09/30/1999 $ 10,472 $ 10,798 $ 10,641 $ 10,793
12/31/1999 $ 10,518 $ 10,781 $ 10,645 $ 10,779
03/31/2000 $ 10,624 $ 11,017 $ 10,797 $ 11,017
06/30/2000 $ 10,723 $ 11,204 $ 10,930 $ 11,209
09/30/2000 $ 10,921 $ 11,546 $ 11,266 $ 11,547
12/31/2000 $ 11,159 $ 12,031 $ 11,644 $ 12,033
03/31/2001 $ 11,610 $ 12,402 $ 12,142 $ 12,398
06/30/2001 $ 11,760 $ 12,466 $ 12,271 $ 12,468
09/30/2001 $ 12,221 $ 13,053 $ 12,742 $ 13,043
12/31/2001 $ 12,028 $ 13,056 $ 12,856 $ 13,049
03/31/2002 $ 11,914 $ 13,064 $ 12,822 $ 13,061
06/30/2002 $ 12,227 $ 13,524 $ 13,193 $ 13,543
09/30/2002 $ 12,807 $ 14,147 $ 13,785 $ 14,164
12/31/2002 $ 13,120 $ 14,373 $ 14,209 $ 14,387
03/31/2003 $ 13,384 $ 14,575 $ 14,550 $ 14,587
06/30/2003 $ 13,801 $ 14,948 $ 15,247 $ 14,952
09/30/2003 $ 13,887 $ 14,923 $ 15,226 $ 14,930
12/31/2003 $ 14,010 $ 14,977 $ 15,301 $ 14,977
03/31/2004 $ 14,419 $ 15,379 $ 15,802 $ 15,375
06/30/2004 $ 14,098 $ 15,004 $ 15,261 $ 15,000
09/30/2004 $ 14,574 $ 15,493 $ 15,902 $ 15,479
12/31/2004 $ 14,779 $ 15,647 $ 16,104 $ 15,627
03/31/2005 $ 14,742 $ 15,568 $ 15,934 $ 15,552
06/30/2005 $ 15,135 $ 16,055 $ 16,503 $ 16,020
09/30/2005 $ 15,080 $ 15,946 $ 16,337 $ 15,912
12/31/2005 $ 15,162 $ 16,049 $ 16,419 $ 16,007
03/31/2006 $ 15,132 $ 15,942 $ 16,228 $ 15,903
06/30/2006 $ 15,090 $ 15,925 $ 16,164 $ 15,891
09/30/2006 $ 15,690 $ 16,537 $ 16,892 $ 16,496
12/31/2006 $ 15,962 $ 16,744 $ 17,117 $ 16,700
03/31/2007 $ 16,211 $ 16,994 $ 17,166 $ 16,951
06/30/2007 $ 16,136 $ 16,893 $ 17,256 $ 16,863
09/30/2007 $ 16,482 $ 17,405 $ 17,579 $ 17,343
12/31/2007 $ 16,663 $ 17,952 $ 17,815 $ 17,864
AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/07
1-Year 4.39% 5-Year 4.90% 10-Year 5.24%
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.]
Oppenheimer Core Bond Citigroup Broad Investment Lehman Brothers Lehman Brothers
Fund/VA (Service) Grade Bond Index Credit Index Aggregate Bond Index
05/01/2002 $ 10,000 $ 10,000 $ 10,000 $ 10,000
06/30/2002 $ 10,086 $ 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
03/31/2007 $ 13,194 $ 12,766 $ 13,205 $ 12,732
06/30/2007 $ 13,120 $ 12,690 $ 13,274 $ 12,666
09/30/2007 $ 13,404 $ 13,074 $ 13,522 $ 13,026
12/31/2007 $ 13,539 $ 13,486 $ 13,704 $ 13,417
AVERAGE ANNUAL TOTAL RETURNS OF SERVICE SHARES OF THE FUND AT 12/31/07
1-Year 4.09% 5-Year 4.62% Since Inception (5/1/02) 5.49%
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 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 applicable); 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, 2007.
ACTUAL EXPENSES. The first section of the table provides information about
actual account values and actual expenses. You may use the information in this
section for the class of shares you hold, together with the amount you invested,
to estimate the expense that you paid over the period. Simply divide your
account value by $1,000.00 (for example, an $8,600.00 account value divided by
$1,000.00 = 8.60), then multiply the result by the number in the first section
under the heading entitled "Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The second section of the table
provides information about hypothetical account values and hypothetical expenses
based on the Fund's actual expense ratio for each class of shares, and an
assumed rate of return of 5% per year for each class before expenses, which is
not the actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of investing
in the Fund and other funds. To do so, compare this 5% hypothetical example for
the class of shares you hold with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any charges associated with the separate
accounts that offer this Fund. Therefore, the "hypothetical" lines of the table
are useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these separate
account charges were included your costs would have been higher.
- --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
ACTUAL JULY 1, 2007 DECEMBER 31, 2007 DECEMBER 31, 2007
- --------------------------------------------------------------------------------
Non-Service Shares $ 1,000.00 $ 1,032.70 $ 3.18
- --------------------------------------------------------------------------------
Service Shares 1,000.00 1,032.00 4.52
HYPOTHETICAL
(5% return before expenses)
- --------------------------------------------------------------------------------
Non-Service Shares 1,000.00 1,022.08 3.16
- --------------------------------------------------------------------------------
Service Shares 1,000.00 1,020.77 4.49
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 indirect expenses from affiliated fund, based on the 6-month period
ended December 31, 2007 are as follows:
CLASS EXPENSE RATIOS
- ------------------------------------
Non-Service Shares 0.62%
- ------------------------------------
Service Shares 0.88
The expense ratios reflect reduction to custodian expenses and 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 and reduction to
custodian expenses, if applicable.
- --------------------------------------------------------------------------------
6 | OPPENHEIMER CORE BOND FUND/VA
STATEMENT OF INVESTMENTS December 31, 2007
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--5.0%
Aesop Funding II LLC, Automobile
Asset-Backed Certificates, Series
2005-1A, Cl. A2, 5.009%, 4/20/09 1,2 $ 426,667 $ 426,631
- --------------------------------------------------------------------------------
Argent Securities Trust 2004-W8,
Asset-Backed Pass-Through
Certificates, Series 2004-W8, Cl. A2,
5.345%, 5/25/34 2 1,476,940 1,391,413
- --------------------------------------------------------------------------------
Capital One Prime Auto Receivables
Trust, Automobile Asset-Backed
Certificates, Series 2005-1, Cl. A4,
5.048%, 4/15/11 2 4,930,000 4,912,100
- --------------------------------------------------------------------------------
Citibank Credit Card Issuance Trust,
Credit Card Receivable Nts., Series
2003-C4, Cl. C4, 5%, 6/10/15 310,000 292,028
- --------------------------------------------------------------------------------
Citigroup Mortgage Loan Trust,
Inc. 2005-WF2, Asset-Backed
Pass-Through Certificates,
Series 2005-WF2, Cl. AF2, 4.922%,
8/25/35 2 76,142 75,964
- --------------------------------------------------------------------------------
CWABS Asset-Backed Certificates
Trust 2002-4, Asset-Backed
Certificates, Series 2002-4, Cl. A1,
5.605%, 2/25/33 2 35,747 32,011
- --------------------------------------------------------------------------------
CWABS Asset-Backed Certificates
Trust 2005-11, Asset-Backed
Certificates, Series 2005-11, Cl. AF2,
4.657%, 2/25/36 640,000 636,149
- --------------------------------------------------------------------------------
CWABS Asset-Backed Certificates
Trust 2005-16, Asset-Backed
Certificates, Series 2005-16, Cl. 2AF2,
5.382%, 5/25/36 2 670,000 645,778
- --------------------------------------------------------------------------------
CWABS Asset-Backed Certificates
Trust 2005-17, Asset-Backed
Certificates, Series 2005-17, Cl. 1AF2,
5.363%, 5/25/36 2 440,000 436,631
- --------------------------------------------------------------------------------
Honda Auto Receivables Owner
Trust, Automobile Receivable
Obligations, Series 2005-2, Cl. A4,
4.15%, 10/15/10 920,000 917,269
- --------------------------------------------------------------------------------
Household Home Equity Loan Trust,
Home Equity Loan Pass-Through
Certificates, Series 2005-3, Cl. A1,
5%, 1/20/35 2 673,259 657,954
- --------------------------------------------------------------------------------
Lehman XS Trust, Mtg. Pass-Through
Certificates:
Series 2005-10, Cl. 2A3B, 5.55%,
1/25/36 723,981 725,282
Series 2005-4, Cl. 2A1B, 5.17%,
10/25/35 454,626 455,338
- --------------------------------------------------------------------------------
Litigation Settlement Monetized
Fee Trust, Asset-Backed Certificates,
Series 2001-1A, Cl. A1, 8.33%,
4/25/31 3 2,185,807 2,179,687
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
Merrill Lynch Mortgage Investors
Trust 2006-WMC1, Mtg. Asset-
Backed Certificates, Series 2006-
WMC1, Cl. A2B, 5.005%, 1/25/37 2 $ 731,979 $ 722,712
- --------------------------------------------------------------------------------
NC Finance Trust, CMO
Pass-Through Certificates,
Series 1999-I, Cl. ECFD, 0.491%,
1/25/29 3,14 3,370,016 572,903
- --------------------------------------------------------------------------------
Option One Mortgage Loan Trust,
Asset-Backed Certificates, Series
2006-2, Cl. 2A2, 4.965%, 7/1/36 2 1,250,000 1,217,206
- --------------------------------------------------------------------------------
Popular ABS Mortgage Pass-Through
Trust 2005-6, Mtg. Pass-Through
Certificates, Series 2005-6, Cl. A3,
5.68%, 1/25/36 2 690,000 684,107
- --------------------------------------------------------------------------------
Structured Asset Investment Loan
Trust, Mtg. Pass-Through Certificates,
Series 2006-BNC3, Cl. A2, 4.905%,
9/25/36 2 925,616 904,400
- --------------------------------------------------------------------------------
Structured Asset Securities Corp.,
Mtg. Pass-Through Certificates,
Series 2002-AL1, Cl. B2, 3.45%,
2/25/32 2,386,566 1,893,591
- --------------------------------------------------------------------------------
Tobacco Settlement Authority,
Asset-Backed Securities,
Series 2001-A, 6.79%, 6/1/10 1,570,000 1,602,138
---------------
Total Asset-Backed Securities
(Cost $24,399,232) 21,381,292
- --------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS--79.9%
- --------------------------------------------------------------------------------
GOVERNMENT AGENCY--51.2%
- --------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED--51.0%
Fannie Mae Trust 2004-W9,
Pass-Through Certificates,
Trust 2004-W9, Cl. 2A2, 7%, 2/25/44 512,837 544,075
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.:
4.50%, 5/15/19 9,570,377 9,411,788
5%, 8/15/33 4,041,662 3,950,112
6%, 7/15/17-3/15/33 8,483,965 8,673,554
6.50%, 4/15/18-4/15/34 1,218,433 1,262,085
7%, 5/15/29-3/15/35 5,796,278 6,077,447
8%, 4/15/16 557,664 591,591
9%, 8/15/22-5/15/25 161,082 173,794
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
Gtd. Real Estate Mtg. Investment
Conduit Multiclass Pass-Through
Certificates:
Series 151, Cl. F, 9%, 5/15/21 30,394 30,343
Series 2006-11, Cl. PS, 6.728%,
3/25/36 2 662,756 735,642
Series 2043, Cl. ZP, 6.50%, 4/15/28 1,083,464 1,125,972
Series 2066, Cl. Z, 6.50%, 6/15/28 2,243,785 2,316,706
Series 2195, Cl. LH, 6.50%, 10/15/29 1,256,633 1,301,891
Series 2326, Cl. ZP, 6.50%, 6/15/31 436,852 457,461
7 | OPPENHEIMER CORE BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal Home Loan Mortgage Corp.,
Gtd. Real Estate Mtg. Investment
Conduit Multiclass Pass-Through
Certificates: Continued
Series 2461, Cl. PZ, 6.50%, 6/15/32 $ 1,375,522 $ 1,437,750
Series 2500, Cl. FD, 5.528%, 3/15/32 2 313,058 313,401
Series 2526, Cl. FE, 5.428%, 6/15/29 2 510,355 509,091
Series 2538, Cl. F, 5.628%, 12/15/32 2 3,046,583 3,068,570
Series 2551, Cl. FD, 5.428%, 1/15/33 2 395,348 397,103
Series 2676, Cl. KY, 5%, 9/15/23 552,000 536,918
Series 3025, Cl. SJ, 6.316%, 8/15/35 2 140,999 160,440
Series 3094, Cl. HS, 5.949%, 6/15/34 2 413,449 451,057
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
Interest-Only Stripped Mtg.-Backed
Security:
Series 176, Cl. IO, 4.908%, 6/1/26 4 548,871 126,589
Series 183, Cl. IO, 3.481%, 4/1/27 4 855,039 195,347
Series 184, Cl. IO, 9.161%, 12/1/26 4 937,977 213,195
Series 192, Cl. IO, 8.247%, 2/1/28 4 224,461 54,475
Series 200, Cl. IO, 7.322%, 1/1/29 4 270,429 62,849
Series 206, Cl. IO, (9.554)%, 12/1/29 4 540,203 118,015
Series 2130, Cl. SC, 3.243%, 3/15/29 4 601,298 58,263
Series 216, Cl. IO, 9.04%, 12/1/31 4 359,920 87,209
Series 224, Cl. IO, 5.646%, 3/1/33 4 1,099,866 258,181
Series 243, Cl. 6, 15.199%, 12/15/32 4 679,519 143,355
Series 2796, Cl. SD, (2.121)%,7/15/26 4 962,057 85,241
Series 2802, Cl. AS, 5.232%, 4/15/33 4 1,058,066 71,423
Series 2920, Cl. S, (4.806)%,1/15/35 4 3,490,446 248,222
Series 3000, Cl. SE, 11.913%,7/15/25 4 4,171,932 223,777
Series 3110, Cl. SL, 24.356%,2/15/26 4 577,276 29,502
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
Principal-Only Stripped Mtg.-Backed
Security:
Series 176, Cl. PO, 5.939%, 6/1/26 5 223,618 184,475
Series 192, Cl. PO, 7.631%, 2/1/28 5 224,461 177,518
- --------------------------------------------------------------------------------
Federal National Mortgage Assn.:
4.50%, 9/25/18-8/25/20 14,924,845 14,687,035
5%, 12/25/17-3/25/34 36,161,501 35,876,138
5%, 1/1/22 6 9,328,000 9,338,205
5%, 6/25/33 7 4,169,738 4,078,747
5.50%, 1/25/33-1/25/34 26,884,998 26,926,720
5.50%, 1/1/22-1/1/37 6 16,308,000 16,335,583
6%, 5/25/29-11/1/33 10,568,209 10,782,719
6%, 1/1/22 6 3,752,000 3,839,350
6.50%, 3/25/11-11/25/31 10,344,203 10,734,177
7%, 11/25/17-7/25/35 3,758,629 3,946,047
7.50%, 4/25/08-1/25/33 23,026 24,612
8%, 5/25/17 5,213 5,536
8.50%, 7/25/32 47,405 51,067
- --------------------------------------------------------------------------------
Federal National Mortgage Assn.,
Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates:
Trust 1989-17, Cl. E, 10.40%, 4/25/19 53,733 58,354
Trust 1993-87, Cl. Z, 6.50%, 6/25/23 1,312,557 1,354,021
Trust 1998-58, Cl. PC, 6.50%,
10/25/28 1,109,573 1,148,973
Trust 1998-61, Cl. PL, 6%, 11/25/28 603,681 619,446
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal National Mortgage Assn.,
Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates:
Continued
Trust 1999-54, Cl. LH, 6.50%,
11/25/29 $ 821,312 $ 863,125
Trust 2001-70, Cl. LR, 6%, 9/25/30 161,391 161,915
Trust 2001-74, Cl. QE, 6%, 12/25/31 1,836,626 1,880,145
Trust 2001-82, Cl. ZA, 6.50%,
1/25/32 564,651 576,586
Trust 2002-9, Cl. PC, 6%, 3/25/17 1,344,373 1,391,187
Trust 2003-130, Cl. CS, 4.37%,
12/25/33 2 385,418 364,453
Trust 2003-28, Cl. KG, 5.50%,
4/25/23 3,964,000 3,989,854
Trust 2003-84, Cl. PW, 3%, 6/25/22 470,883 467,857
Trust 2004-101, Cl. BG, 5%, 1/25/20 1,908,000 1,914,341
Trust 2005-100, Cl. BQ, 5.50%,
11/25/25 1,120,000 1,125,157
Trust 2005-59, Cl. NQ, 4.713%,
5/25/35 2 709,166 709,259
Trust 2006-46, Cl. SW, 6.362%,
6/25/36 2 501,944 550,786
Trust 2006-50, Cl. KS, 6.362%,
6/25/36 2 1,105,284 1,176,477
Trust 2006-50, Cl. SA, 6.362%,
6/25/36 2 1,412,254 1,505,232
Trust 2006-50, Cl. SK, 6.362%,
6/25/36 2 443,782 472,087
Trust 2006-64, Cl. MD, 5.50%,
7/25/36 4,671,000 4,636,857
- --------------------------------------------------------------------------------
Federal National Mortgage Assn.,
Interest-Only Stripped Mtg.-Backed
Security:
Trust 2001-65, Cl. S, 11.769%,
11/25/31 4 1,871,817 241,756
Trust 2001-81, Cl. S, 3.721%,
1/25/32 4 450,815 48,555
Trust 2002-47, Cl. NS, 2.892%,
4/25/32 4 1,172,221 129,147
Trust 2002-51, Cl. S, 3.029%,
8/25/32 4 1,076,103 120,851
Trust 2002-52, Cl. SD, (0.737)%,
9/25/32 4 1,192,052 194,050
Trust 2002-77, Cl. SH, 5.015%,
12/18/32 4 559,799 55,199
Trust 2002-84, Cl. SA, 12.932%,
12/25/32 4 1,646,089 191,140
Trust 2003-118, Cl. S, 9.431%,
12/25/33 4 3,354,181 576,518
Trust 2003-33, Cl. SP, 9.135%,
5/25/33 4 1,696,241 220,214
Trust 2003-4, Cl. S, 12.143%,
2/25/33 4 1,089,260 132,862
Trust 2004-54, Cl. DS, (2.17)%,
11/25/30 4 894,916 71,925
Trust 2005-19, Cl. SA, 1.188%,
3/25/35 4 8,834,864 628,244
8 | OPPENHEIMER CORE BOND FUND/VA
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal National Mortgage Assn.,
Interest-Only Stripped Mtg.-Backed
Security: Continued
Trust 2005-40, Cl. SA, 0.806%,
5/25/35 4 $ 1,944,233 $ 133,783
Trust 2005-6, Cl. SE, 3.271%,
2/25/35 4 2,494,298 216,490
Trust 2005-71, Cl. SA, 8.893%,
8/25/25 4 2,630,460 204,660
Trust 2005-87, Cl. SE, 12.322%,
10/25/35 4 4,911,349 342,627
Trust 2005-87, Cl. SG, 14.11%,
10/25/35 4 4,935,612 462,475
Trust 2006-33, Cl. SP, 15.444%,
5/25/36 4 3,844,364 355,078
Trust 222, Cl. 2, 14.682%, 6/1/23 4 1,876,620 444,446
Trust 240, Cl. 2, 17.248%, 9/1/23 4 2,263,896 520,540
Trust 252, Cl. 2, 14.948%, 11/1/23 4 1,462,654 360,804
Trust 273, Cl. 2, 13.207%, 8/1/26 4 425,316 96,575
Trust 303, Cl. IO, (3.329)%, 11/1/29 4 237,177 56,623
Trust 319, Cl. 2, 11.251%, 2/1/32 4 397,161 92,260
Trust 321, Cl. 2, 6.373%, 4/1/32 4 4,386,049 1,016,624
Trust 331, Cl. 9, 15.578%, 2/1/33 4 1,012,132 250,941
Trust 334, Cl. 17, 22.98%, 2/1/33 4 699,455 161,474
Trust 339, Cl. 7, 10.442%, 7/1/33 4 3,576,381 845,153
Trust 342, Cl. 2, 6.635%, 9/1/33 4 246,604 57,739
Trust 344, Cl. 2, 4.743%, 12/1/33 4 7,002,459 1,605,620
Trust 345, Cl. 9, 8.864%, 1/1/34 4 1,446,102 344,065
Trust 362, Cl. 12, 9.377%, 8/1/35 4 1,932,348 447,288
Trust 362, Cl. 13, 9.359%, 8/1/35 4 1,071,421 246,042
- --------------------------------------------------------------------------------
Federal National Mortgage Assn.,
Principal-Only Stripped Mtg.-Backed
Security, Trust 1993-184, Cl. M,
5.585%, 9/25/23 5 543,801 444,444
----------------
218,772,687
- --------------------------------------------------------------------------------
GNMA/GUARANTEED--0.2%
Government National Mortgage
Assn.:
7%, 1/30/09-5/29/09 9,056 9,225
8.50%, 8/15/17-12/29/17 237,240 256,015
- --------------------------------------------------------------------------------
Government National Mortgage
Assn., Interest-Only Stripped
Mtg.-Backed Security:
Series 2001-21, Cl. SB, 8.438%,
1/16/27 4 945,026 95,105
Series 2002-15, Cl. SM, 5.989%,
2/16/32 4 1,174,606 181,141
Series 2004-11, Cl. SM, 1.721%,
1/17/30 4 787,867 127,698
Series 2006-47, Cl. SA, 31.192%,
8/16/36 4 5,903,623 465,549
----------------
1,134,733
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
NON-AGENCY--28.7%
- --------------------------------------------------------------------------------
COMMERCIAL--11.5%
Asset Securitization Corp.,
Commercial Interest-Only Stripped
Mtg.-Backed Security, Series 1997-D4,
Cl. PS1, 2.706%, 4/14/29 4 $ 13,797,762 $ 564,607
- --------------------------------------------------------------------------------
Banc of America Commercial
Mortgage, Inc., Commercial Mtg.
Pass-Through Certificates,
Series 2005-3, Cl. A2, 4.501%, 7/10/43 2,100,000 2,075,456
- --------------------------------------------------------------------------------
Banc of America Funding Corp.,
CMO Pass-Through Certificates,
Series 2004-2, Cl. 2A1, 6.50%,
7/20/32 1,441,816 1,466,373
- --------------------------------------------------------------------------------
Banc of America Mortgage
Securities, Inc., CMO Pass-Through
Certificates, Series 2004-8, Cl. 5A1,
6.50%, 5/25/32 1,146,075 1,168,049
- --------------------------------------------------------------------------------
Capital Lease Funding Securitization
LP, Interest-Only Corporate-Backed
Pass-Through Certificates,
Series 1997-CTL1, (6.498)%, 6/22/24 4 10,797,339 320,855
- --------------------------------------------------------------------------------
Citigroup Mortgage Loan Trust, Inc.
2006-WF1, Asset-Backed
Pass-Through Certificates,
Series 2006-WF1, Cl. A2B,
5.536%, 3/1/36 460,000 459,904
- --------------------------------------------------------------------------------
Citigroup/Deutsche Bank 2007-CD4
Commercial Mortgage Trust,
Commercial Mtg. Pass-Through
Certificates:
Series 2007-CD4, Cl. A2B, 5.205%,
12/11/49 1,510,000 1,509,762
Series 2007-CD4, Cl. A4, 5.322%,
12/1/49 8 1,970,000 1,967,912
- --------------------------------------------------------------------------------
CitiMortgage Alternative Loan Trust
2006-A5, Real Estate Mtg. Investment
Conduit Pass-Through Certificates:
Series 2006-A5, Cl. 1A1, 5.265%,
10/25/36 2 3,113,536 2,953,519
Series 2006-A5, Cl. 1A13, 5.315%,
10/25/36 2 1,556,768 1,522,170
- --------------------------------------------------------------------------------
Deutsche Alt-A Securities Mortgage
Loan Trust, Mtg. Pass-Through
Certificates:
Series 2006-AB2, Cl. A7, 5.961%,
6/25/36 818,876 818,730
Series 2006-AB3, Cl. A7, 6.36%, 7/1/36 262,671 262,888
- --------------------------------------------------------------------------------
First Horizon Alternative Mortgage
Securities Trust 2004-FA2, Mtg.
Pass-Through Certificates,
Series 2004-FA2, Cl. 3A1, 6%, 1/25/35 829,749 798,679
9 | OPPENHEIMER CORE BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
COMMERCIAL Continued
First Horizon Alternative Mortgage
Securities Trust 2007-FA2, Mtg.
Pass-Through Certificates,
Series 2007-FA2, Cl. 1A1, 5.50%,
4/25/37 $ 950,000 $ 938,462
- --------------------------------------------------------------------------------
GE Capital Commercial Mortgage
Corp., Commercial Mtg. Obligations,
Series 2005-C3, Cl. A2, 4.853%,
7/10/45 1,190,000 1,185,895
- --------------------------------------------------------------------------------
Greenwich Capital Commercial
Funding Corp., Commercial Mtg.
Pass-Through Certificates:
Series 2005-GG3, Cl. A2, 4.305%,
8/10/42 1,460,000 1,442,573
Series 2005-GG5, Cl. A2, 5.117%,
4/10/37 1,290,000 1,293,057
Series 2007-GG9, Cl. A2, 5.381%,
3/10/39 4,250,000 4,276,295
- --------------------------------------------------------------------------------
JPMorgan Chase Commercial
Mortgage Securities Corp.,
Commercial Mtg. Pass-Through
Certificates:
Series 2005-LDP2, Cl. A2, 4.575%,
7/15/42 510,000 504,775
Series 2005-LDP4, Cl. A2, 4.79%,
10/15/42 1,720,000 1,709,558
Series 2007-LDPX, Cl. A2S, 5.305%,
1/15/49 590,000 590,860
Series 2006-CB14, Cl. A4, 5.481%,
12/12/44 2,190,000 2,219,175
Series 2007-LD12, Cl. A2, 5.827%,
2/15/51 1,040,000 1,062,187
- --------------------------------------------------------------------------------
LB-UBS Commercial Mortgage Trust,
Commercial Mtg. Pass-Through
Certificates:
Series 2005-C5, Cl. A2, 4.885%,
9/15/30 1,430,000 1,427,860
Series 2007-C1, Cl. A2, 5.318%,
1/15/12 1,700,000 1,708,243
Series 2007-C1, Cl. A4, 5.424%,
2/11/40 1,680,000 1,690,520
- --------------------------------------------------------------------------------
Lehman Brothers Commercial
Conduit Mortgage Trust,
Interest-Only Stripped Mtg.-Backed
Security, Series 1998-C1, Cl. IO,
(0.88)%, 2/18/30 4 6,809,288 176,314
- --------------------------------------------------------------------------------
Lehman Structured Securities Corp.,
CMO, Series 2002-GE1, Cl. A,
2.514%, 7/26/24 3 272,953 210,174
- --------------------------------------------------------------------------------
Mastr Alternative Loan Trust, CMO
Pass-Through Certificates:
Series 2004-9, Cl. A3, 4.70%, 8/25/34 2 39,117 38,978
Series 2004-6, Cl. 10A1, 6%, 7/25/34 1,550,630 1,535,736
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
COMMERCIAL Continued
RALI Series 2003-QS1 Trust, Mtg.
Asset-Backed Pass-Through
Certificates, Series 2003-QS1, Cl. A2,
5.75%, 1/25/33 $ 759,305 $ 755,535
- --------------------------------------------------------------------------------
RALI Series 2007-QS6 Trust, Mtg.
Asset-Backed Pass-Through
Certificates, Series 2007-QS6, Cl.
A114, 5.75%, 4/25/37 1,312,491 1,297,400
- --------------------------------------------------------------------------------
Residential Asset Securitization
Trust 2006-A9CB, CMO
Pass-Through Certificates,
Series 2006-A9CB, Cl. A5,
6%, 9/25/36 1,882,552 1,879,081
- --------------------------------------------------------------------------------
Salomon Brothers Mortgage
Securities VII, Inc., Interest-Only
Commercial Mtg. Pass-Through
Certificates, Series 1999-C1, Cl. X,
(5.389)%, 5/18/32 4 258,810,500 398,775
- --------------------------------------------------------------------------------
Wachovia Bank Commercial
Mortgage Trust 2005-C17,
Commercial Mtg. Pass-Through
Certificates, Series 2005-C17, Cl. A2,
4.782%, 3/15/42 2,520,000 2,509,183
- --------------------------------------------------------------------------------
Wachovia Bank Commercial
Mortgage Trust 2006-C29,
Commercial Mtg. Pass-Through
Certificates, Series 2006-C29, Cl. A2,
5.272%, 11/15/48 355,000 355,831
- --------------------------------------------------------------------------------
WaMu, Mtg. Pass-Through
Certificates, Series 2006-AR8, Cl. 2A1,
6.133%, 8/25/36 2 4,379,770 4,378,975
----------------
49,474,346
- --------------------------------------------------------------------------------
MANUFACTURED HOUSING--1.7%
Wells Fargo Mortgage-Backed
Securities 2006-AR12 Trust, Mtg.
Pass-Through Certificates, Series
2006-AR12, Cl. 2A1, 6.102%, 9/25/36 2 3,419,170 3,426,716
- --------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed
Securities 2006-AR2 Trust, Mtg.
Pass-Through Certificates, Series
2006-AR2, Cl. 2A5, 5.10%, 3/25/36 2 3,969,757 3,940,316
----------------
7,367,032
- --------------------------------------------------------------------------------
MULTIFAMILY--9.0%
Banc of America Mortgage
Securities, Inc., CMO Pass-Through
Certificates, Series 2005-F, Cl. 2A3,
4.716%, 7/25/35 2 2,820,303 2,798,470
- --------------------------------------------------------------------------------
Bear Stearns ARM Trust 2006-4,
Mtg. Pass-Through Certificates,
Series 2006-4, Cl. 2A1, 5.802%,
10/25/36 2 1,571,602 1,583,678
10 | OPPENHEIMER CORE BOND FUND/VA
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
MULTIFAMILY Continued
Citigroup Mortgage Loan Trust, Inc.
2006-AR5, Mtg. Pass-Through
Certificates, Series 2006-AR5,
Cl. 1A3A, 5.894%, 7/25/36 2 $ 1,172,685 $ 1,183,115
- --------------------------------------------------------------------------------
Countrywide Alternative Loan
Trust, CMO:
Series 2008-85CB, Cl. 2A3, 5.50%,
2/25/36 1,790,000 1,700,266
Series 2004-28CB, Cl. 2A4, 5.75%,
1/25/35 2,316,000 2,213,868
- --------------------------------------------------------------------------------
Countrywide Home Loans Servicing
LP, Mtg. Pass-Through Certificates:
Series 2003-46, Cl. 1A2, 4.122%,
1/19/34 2 2,018,465 2,043,183
Series 2005-HYB1, Cl. 5A1, 4.995%,
3/25/35 2 2,687,933 2,626,614
Series 2007-HY1, Cl. 1A1, 5.695%,
4/25/37 2 2,872,197 2,884,641
- --------------------------------------------------------------------------------
GMAC Mortgage Corp. Loan Trust,
Mtg. Pass-Through Certificates:
Series 2005-AR4, Cl. 2A1, 5.292%,
7/19/35 2 3,149,052 3,159,939
Series 2004-J4, Cl. A7, 5.50%, 9/25/34 1,660,000 1,588,881
- --------------------------------------------------------------------------------
GSR Mortgage Loan Trust
2005-AR7, Mtg. Pass-Through
Certificates, Series 2005-AR7, Cl.
3A1, 5.152%, 11/25/35 2 4,573,708 4,570,077
- --------------------------------------------------------------------------------
Merrill Lynch Mortgage Investors
Trust 2007-2, Mtg. Pass-Through
Certificates, Series 2007-2, Cl. 2A1,
6.007%, 6/25/37 2 3,873,769 3,895,259
- --------------------------------------------------------------------------------
WaMu, Mtg. Pass-Through
Certificates, Series 2005-AR8, Cl.
2AB1, 5.115%, 7/25/45 2 37,267 37,186
- --------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed
Securities 2004-AA Trust, Mtg.
Pass-Through Certificates, Series
2004-AA, Cl. 2A, 4.993%, 12/25/34 2 927,973 915,011
- --------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed
Securities 2004-S Trust, Mtg. Pass-
Through Certificates, Series 2004-S,
Cl. A1, 3.54%, 9/25/34 2 771,487 759,729
- --------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed
Securities 2005-AR2 Trust, Mtg.
Pass-Through Certificates, Series
2005-AR2, Cl. 2A2, 4.547%, 3/25/35 2 574,768 570,176
- --------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed
Securities 2005-AR4 Trust, Mtg.
Pass-Through Certificates, Series
2005-AR4, Cl. 2A2, 4.524%, 4/25/35 2 953,773 946,101
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
MULTIFAMILY Continued
Wells Fargo Mortgage-Backed
Securities 2006-AR10 Trust, Mtg.
Pass-Through Certificates:
Series 2006-AR10, Cl. 4A1, 5.56%,
7/25/36 2 $ 1,892,727 $ 1,903,402
Series 2006-AR10, Cl. 2A1, 5.646%,
7/25/36 2 1,460,208 1,471,152
- --------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed
Securities 2006-AR2 Trust, Mtg.
Pass-Through Certificates, Series
2006-AR2, Cl. 2A6, 5.10%, 3/25/36 2 753,853 748,262
- --------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed
Securities 2006-AR6 Trust, Mtg.
Pass-Through Certificates, Series
2006-AR6, Cl. 3A1, 5.093%, 3/25/36 2 840,377 836,812
----------------
38,435,822
- --------------------------------------------------------------------------------
OTHER--0.0%
Salomon Brothers Mortgage
Securities VI, Inc., Interest-Only
Stripped Mtg.-Backed Security,
Series 1987-3, Cl. B, 91.826%,
10/23/17 4 8,386 1,040
- --------------------------------------------------------------------------------
Salomon Brothers Mortgage
Securities VI, Inc., Principal-Only
Stripped Mtg.-Backed Security,
Series1987-3, Cl. A, 4.037%, 10/23/17 5 12,411 11,562
----------------
12,602
- --------------------------------------------------------------------------------
RESIDENTIAL--6.5%
Chase Mortgage Finance Trust
Series 2005-S1, Multiclass Mtg.
Pass-Through Certificates, Series
2005-S1, Cl. 1A5, 5.50%, 5/25/35 1,000,000 983,269
- --------------------------------------------------------------------------------
Countrywide Alternative Loan
Trust, CMO:
Series 2005-18CB, Cl. A8, 5.50%,
5/25/36 2,420,000 2,335,488
Series 2005-J1, Cl. 3A1, 6.50%,
8/25/32 2,290,023 2,339,815
Series 2005-J3, Cl. 3A1, 6.50%,
9/25/34 2,151,269 2,158,598
- --------------------------------------------------------------------------------
Morgan Stanley Mortgage Loan
Trust 2006-AR, Mtg. Pass-Through
Certificates, Series 2006-AR, Cl.
5A3, 5.427%, 6/25/36 2 1,110,000 1,115,129
- --------------------------------------------------------------------------------
RALI Series 2006-QS5 Trust, Mtg.
Asset-Backed Pass-Through
Certificates, Series 2006-QS5, Cl.
2A2, 6%, 4/25/08 1,080,504 1,079,297
- --------------------------------------------------------------------------------
STARM Mortgage Loan Trust
2007-S1, Mtg. Pass-Through
Certificates, Series 2007-S1, Cl. 3A1,
5.004%, 8/1/22 2 4,272,338 4,214,261
11 | OPPENHEIMER CORE BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
RESIDENTIAL Continued
WaMu, Mtg. Pass-Through
Certificates:
Series 2006-AR12, Cl. 2A1, 5.75%,
10/25/36 2 $ 4,262,606 $ 4,236,800
Series 2007-HY6, Cl. 2A1, 5.702%,
6/25/37 2 2,708,071 2,674,110
- --------------------------------------------------------------------------------
Washington Mutual Mortgage
Loan Trust, Mtg. Pass-Through
Certificates, 2007-A, Cl. 1A8, 6%,
2/25/37 3,691,408 3,702,854
- --------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed
Securities 2006-AR5 Trust, Mtg.
Pass-Through Certificates, Series
2006-AR5, Cl. 2A2, 5.535%, 4/1/36 2 1,656,531 1,505,638
- --------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed
Securities 2003-6 Trust, Mtg.
Pass-Through Certificates, Series
2003-6, Cl. 1A1, 5%, 6/25/18 1,552,618 1,544,743
--------------
27,890,002
--------------
Total Mortgage-Backed Obligations
(Cost $338,516,149) 343,087,224
- --------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES--19.8%
- --------------------------------------------------------------------------------
Albertson's, Inc., 8% Sr. Unsec.
Debs., 5/1/31 8 1,675,000 1,707,616
- --------------------------------------------------------------------------------
Barclays Bank plc, 6.278% Perpetual
Bonds 9 5,160,000 4,498,901
- --------------------------------------------------------------------------------
Belo Corp., 8% Sr. Unsec. Unsub. Nts.,
11/1/08 2,825,000 2,850,837
- --------------------------------------------------------------------------------
Buckeye Partners LP, 4.625% Sr. Nts.,
7/15/13 1,955,000 1,878,939
- --------------------------------------------------------------------------------
Caesars Entertainment, Inc., 7.50%
Sr. Unsec. Nts., 9/1/09 3 2,250,000 2,391,451
- --------------------------------------------------------------------------------
Capmark Financial Group, Inc.,
5.875% Nts., 5/10/12 1 1,090,000 863,585
- --------------------------------------------------------------------------------
Centex Corp., 5.80% Sr. Unsec. Nts.,
9/15/09 1,400,000 1,289,940
- --------------------------------------------------------------------------------
Chancellor Media CCU, 8%
Sr. Unsec. Nts., 11/1/08 1,540,000 1,592,044
- --------------------------------------------------------------------------------
CIT Group Funding Co. of Canada,
4.65% Sr. Unsec. Nts., 7/1/10 1,235,000 1,175,188
- --------------------------------------------------------------------------------
Citigroup, Inc., 8.30% Jr. Sub. Bonds,
12/21/57 2 790,000 827,252
- --------------------------------------------------------------------------------
Clear Channel Communications, Inc.,
6.25% Nts., 3/15/11 1,370,000 1,240,723
- --------------------------------------------------------------------------------
Cox Enterprises, Inc., 4.375% Nts.,
5/1/08 1 2,145,000 2,138,282
- --------------------------------------------------------------------------------
CSC Holdings, Inc., 7.25% Sr. Unsec.
Nts., 7/15/08 1,635,000 1,641,131
- --------------------------------------------------------------------------------
D.R. Horton, Inc., 8% Sr. Nts., 2/1/09 615,000 597,937
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES Continued
- --------------------------------------------------------------------------------
Delhaize America, Inc., 9% Unsub.
Debs., 4/15/31 $ 1,141,000 $ 1,324,902
- --------------------------------------------------------------------------------
Dillard's, Inc., 6.625% Unsec. Nts.,
11/15/08 3 930,000 928,838
- --------------------------------------------------------------------------------
Eastman Kodak Co., 3.625% Nts.,
Series A, 5/15/08 975,000 965,250
- --------------------------------------------------------------------------------
EchoStar DBS Corp., 5.75%
Sr. Unsec. Nts., 10/1/08 2,445,000 2,448,056
- --------------------------------------------------------------------------------
El Paso Corp., 6.50% Sr. Unsec. Nts.,
6/1/08 390,000 393,703
- --------------------------------------------------------------------------------
Ford Motor Credit Co., 9.75%
Sr. Unsec. Nts., 9/15/10 3,860,000 3,685,335
- --------------------------------------------------------------------------------
Gap, Inc. (The), 10.05% Unsub. Nts.,
12/15/08 2 466,000 483,475
- --------------------------------------------------------------------------------
General Motors Acceptance Corp.,
8% Bonds, 11/1/31 1,660,000 1,395,846
- --------------------------------------------------------------------------------
Goldman Sachs Capital, Inc. (The),
6.345% Sub. Bonds, 2/15/34 8 3,595,000 3,256,484
- --------------------------------------------------------------------------------
HBOS plc, 6.413% Sub. Perpetual
Bonds, Series A 1,9 6,300,000 5,140,687
- --------------------------------------------------------------------------------
HSBC Finance Capital Trust IX,
5.911% Nts., 11/30/35 2 4,600,000 4,262,825
- --------------------------------------------------------------------------------
Hyundai Motor Manufacturing
Alabama LLC, 5.30% Sr. Unsec. Nts.,
12/19/08 1 1,115,000 1,119,099
- --------------------------------------------------------------------------------
IPALCO Enterprises, Inc., 8.375%
Sr. Sec. Nts., 11/14/08 2,3 1,180,000 1,206,550
- --------------------------------------------------------------------------------
Kaneb Pipe Line Operating
Partnership LP, 5.875% Sr. Unsec.
Nts., 6/1/13 1,560,000 1,589,376
- --------------------------------------------------------------------------------
Lennar Corp., 7.625% Sr. Unsec. Nts.,
3/1/09 1,930,000 1,839,271
- --------------------------------------------------------------------------------
Liberty Media Corp., 7.875% Sr. Nts.,
7/15/09 580,000 591,739
- --------------------------------------------------------------------------------
Liberty Media LLC, 7.75% Sr. Nts.,
7/15/09 1,840,000 1,887,305
- --------------------------------------------------------------------------------
MBIA, Inc., 5.70% Sr. Unsec. Unsub.
Nts., 12/1/34 1,055,000 839,337
- --------------------------------------------------------------------------------
MetLife, Inc., 6.40% Jr. Unsec. Sub.
Bonds, 12/15/66 2 3,565,000 3,277,493
- --------------------------------------------------------------------------------
MGM Mirage, Inc., 6% Sr. Sec. Nts.,
10/1/09 2,570,000 2,570,000
- --------------------------------------------------------------------------------
Monongahela Power Co., 7.36%
Unsec. Nts., Series A, 1/15/10 1,925,000 2,029,456
- --------------------------------------------------------------------------------
NCR Corp., 7.125% Sr. Unsec. Unsub.
Nts., 6/15/09 1,580,000 1,633,505
- --------------------------------------------------------------------------------
PF Export Receivables Master Trust,
3.748% Sr. Nts., Series B, 6/1/13 1 1,048,872 1,034,652
- --------------------------------------------------------------------------------
Popular North America, Inc., 4.70%
Nts., 6/30/09 2,485,000 2,461,383
12 | OPPENHEIMER CORE BOND FUND/VA
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES Continued
- --------------------------------------------------------------------------------
Prudential Holdings LLC, 8.695%
Bonds, Series C, 12/18/23 1 $ 2,400,000 $ 2,881,512
- --------------------------------------------------------------------------------
Prudential Insurance Co. of America,
8.30% Nts., 7/1/25 1 2,035,000 2,405,655
- --------------------------------------------------------------------------------
Pulte Homes, Inc., 4.875% Nts.,
7/15/09 825,000 768,188
- --------------------------------------------------------------------------------
Qwest Corp., 5.625% Unsec. Nts.,
11/15/08 3 250,000 250,000
- --------------------------------------------------------------------------------
SLM Corp.:
3.95% Nts., Series A, 8/15/08 220,000 214,724
4% Nts., 1/15/09 1,670,000 1,609,219
- --------------------------------------------------------------------------------
Standard Pacific Corp., 5.125%
Sr. Unsec. Unsub. Nts., 4/1/09 8 865,000 687,675
- --------------------------------------------------------------------------------
TEPPCO Partners LP, 6.125% Nts.,
2/1/13 900,000 938,548
- --------------------------------------------------------------------------------
Tribune Co., 5.50% Nts., Series E,
10/6/08 3 1,427,000 1,350,299
- --------------------------------------------------------------------------------
Univision Communications, Inc.,
3.875% Sr. Unsec. Nts., 10/15/08 590,000 578,938
- --------------------------------------------------------------------------------
Valero Logistics Operations LP,
6.05% Nts., 3/15/13 390,000 399,094
- --------------------------------------------------------------------------------
Westar Energy, Inc., 7.125% Sr. Unsec.
Nts., 8/1/09 1,820,000 1,878,517
--------------
Total Corporate Bonds and Notes
(Cost $87,712,277) 85,020,762
UNITS
- --------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- --------------------------------------------------------------------------------
Pathmark Stores, Inc. Wts., Exp.
9/19/10 3,10 (Cost $14,872) 5,408 189
SHARES VALUE
- --------------------------------------------------------------------------------
INVESTMENT COMPANIES--1.0%
- --------------------------------------------------------------------------------
Oppenheimer Institutional Money
Market Fund, Cl. E, 5.03% 11,12
(Cost $4,105,793) 4,105,793 $ 4,105,793
- --------------------------------------------------------------------------------
Total Investments, at Value (excluding
Investments Purchased with Cash
Collateral from Securities Loaned)
(Cost $454,748,323) 453,595,260
PRINCIPAL
AMOUNT
- --------------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM
SECURITIES LOANED--0.8% 13
- --------------------------------------------------------------------------------
Undivided interest of 0.18% in joint repurchase
agreement (Principal Amount/Value $1,000,000,000,
with a maturity value of $1,000,250,000) with Bank
of America NA, 4.50%, dated 12/31/07, to be
repurchased at $1,832,106 on 1/2/08,
collateralized by U.S. Agency Mortgages,
5%, 5/1/35, with a value of
$1,020,000,000 $ 1,831,648 1,831,648
- --------------------------------------------------------------------------------
Whitehawk CDO Funding Corp.,
5.041%, 3/17/08 1,500,000 1,500,000
--------------
Total Investments Purchased with
Cash Collateral from Securities
Loaned (Cost $3,331,648) 3,331,648
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $458,079,971) 106.5% 456,926,908
- --------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF
OTHER ASSETS (6.5) (27,723,727)
---------------------------
NET ASSETS 100.0% $ 429,203,181
===========================
INDUSTRY CLASSIFICATIONS ARE UNAUDITED.
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $16,010,103 or 3.73% of the Fund's net
assets as of December 31, 2007.
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, 2007 was $9,090,091, which represents 2.12% of the Fund's net assets. See
Note 8 of accompanying Notes.
4. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline. Most other fixed income securities
increase in price when interest rates decline. The principal amount of the
underlying pool represents the notional amount on which current interest is
calculated. The price of these securities is typically more sensitive to changes
in prepayment rates than traditional mortgage-backed securities (for example,
GNMA pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future cash
flows. These securities amount to $15,178,495 or 3.54% of the Fund's net assets
as of December 31, 2007.
5. 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 $817,999 or 0.19% of the Fund's net assets as of
December 31, 2007.
6. When-issued security or delayed delivery to be delivered and settled after
December 31, 2007. See Note 1 of accompanying Notes.
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 $509,125. See Note 6 of accompanying Notes.
8. Partial or fully-loaned security. See Note 9 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, 2007.
13 | OPPENHEIMER CORE BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
12. Is or was an affiliate, as defined in the Investment Company Act of 1940, at
or during the period ended December 31, 2007, by virtue of the Fund owning at
least 5% of the voting securities of the issuer or as a result of the Fund and
the issuer having the same investment adviser. Transactions during the period in
which the issuer was an affiliate are as follows:
SHARES GROSS GROSS SHARES
DECEMBER 31, 2006 ADDITIONS REDUCTIONS DECEMBER 31, 2007
- -----------------------------------------------------------------------------------------------------------------------------
Oppenheimer Institutional Money Market Fund, Cl. E 4,562,502 281,699,962 282,156,671 4,105,793
DIVIDEND
VALUE INCOME
- -----------------------------------------------------------------------------------------------------------------------------
Oppenheimer Institutional Money Market Fund, Cl. E $ 4,105,793 $ 542,042
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 9 of
accompanying Notes.
14. Short-fall security.
- --------------------------------------------------------------------------------
FUTURES CONTRACTS AS OF DECEMBER 31, 2007 ARE AS FOLLOWS:
- --------------------------------------------------------------------------------
UNREALIZED
NUMBER OF EXPIRATION APPRECIATION
CONTRACT DESCRIPTION BUY/SELL CONTRACTS DATE VALUE (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------
U.S. Long Bonds Buy 455 3/19/08 $ 52,950,625 $ (323,052)
U.S. Treasury Nts., 2 yr. Sell 531 3/31/08 111,642,750 48,676
U.S. Treasury Nts., 5 yr. Buy 218 3/31/08 24,041,313 126,459
U.S. Treasury Nts., 10 yr. Sell 206 3/19/08 23,358,469 (135,945)
-----------
$ (283,862)
===========
- --------------------------------------------------------------------------------
CREDIT DEFAULT SWAPS AS OF DECEMBER 31, 2007 ARE AS FOLLOWS:
- --------------------------------------------------------------------------------
BUY/SELL NOTIONAL PAY/ PREMIUM
CREDIT AMOUNT RECEIVE TERMINATION PAID/
SWAP COUNTERPARTY REFERENCE ENTITY PROTECTION (000S) FIXED RATE DATE (RECEIVED) VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
Barclays Bank plc:
Beazer Homes USA, Inc. Sell $ 570 2.100% 6/20/08 $ -- $ (30,486)
Capmark Financial Group, Inc. Sell 950 1.000 6/20/12 -- (189,344)
CDX.NA.IG.9 Index Sell 7,860 0.600 12/20/12 (49,117) (57,765)
CDX.NA.IG.9 Index Sell 3,930 0.600 12/20/12 (29,584) (28,882)
Countrywide Home Loans, Inc. Sell 1,250 0.750 9/20/08 -- (183,245)
Dillard's, Inc. Sell 750 1.900 12/20/08 -- (4,955)
iStar Financial, Inc. Sell 1,140 4.400 12/20/12 -- 19,736
Lehman Brothers Holdings, Inc. Sell 2,050 0.490 9/20/10 -- (51,941)
Merrill Lynch & Co., Inc. Sell 4,265 0.680 9/20/08 -- (36,301)
Six Flags, Inc. Sell 1,075 8.250 12/20/08 -- (15,151)
Toys "R" Us, Inc. Sell 1,000 1.450 9/20/08 -- (19,892)
- -----------------------------------------------------------------------------------------------------------------------------------
Credit Suisse International:
ArvinMeritor, Inc. Sell 1,635 1.550 9/20/08 -- (20,263)
Freescale Semiconductor, Inc. Sell 975 0.600 3/20/08 -- (4,060)
Freescale Semiconductor, Inc. Sell 1,085 0.750 3/20/08 -- (4,108)
Intelsat Ltd. Sell 1,075 3.450 9/20/08 -- (5,920)
Quebecor World, Inc. Sell 1,175 2.600 9/20/08 -- (105,721)
Rite Aid Corp. Sell 1,595 0.875 6/20/08 -- (35,694)
Saks, Inc. Sell 1,715 2.000 9/20/08 -- (5,280)
The Goodyear Tire & Rubber Co. Sell 1,640 1.550 9/20/08 -- 3,579
TXU Corp. Sell 365 5.910 12/20/12 -- 10,561
TXU Corp. Sell 350 6.050 12/20/12 -- 12,030
TXU Corp. Sell 365 6.000 12/20/12 -- 10,562
Univision Communications, Inc. Sell 490 0.750 3/20/08 -- (1,412)
14 | OPPENHEIMER CORE BOND FUND/VA
BUY/SELL NOTIONAL PAY/ PREMIUM
CREDIT AMOUNT RECEIVE TERMINATION PAID/
SWAP COUNTERPARTY REFERENCE ENTITY PROTECTION (000S) FIXED RATE DATE (RECEIVED) VALUE
- --------------------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG:
ABX.HE.AA.06-2 Index Sell $ 450 0.170% 5/25/46 $ (53,996) $(171,519)
Allied Waste North America, Inc. Sell 630 2.000 9/20/09 -- (3,068)
Allied Waste North America, Inc. Sell 990 2.000 9/20/09 -- (4,821)
Capital One Bank Buy 670 1.800 12/20/12 -- 8,592
Capital One Bank Buy 1,235 1.700 12/20/12 -- 21,815
CDX.NA.HY.8 Index Sell 905 2.750 6/20/12 (78,546) (44,940)
CDX.NA.HY.8 Index Sell 905 2.750 6/20/12 (54,790) (44,940)
CDX.NA.HY.8 Index Sell 280 2.750 6/20/12 (36,612) (13,904)
CDX.NA.HY.8 Index Sell 1,010 2.750 6/20/12 (69,522) (50,154)
CDX.NA.IG.9 Index Sell 15,890 0.600 12/20/12 (95,756) (119,809)
CDX.NA.IG.9 Index Sell 7,945 0.600 12/20/12 (45,270) (59,905)
Centex Corp. Sell 355 1.550 9/20/09 -- (16,050)
Countrywide Home Loans, Inc. Sell 1,150 3.250 9/20/08 -- (149,075)
Dillard's, Inc. Sell 420 0.750 9/20/08 -- (7,634)
Dow Jones CDX.NA.IG.7 Index Buy 3,600 0.400 12/20/11 370 60,013
Georgia-Pacific Corp. Sell 1,635 1.750 9/20/08 -- 10,350
Intelsat Ltd. Sell 430 2.850 9/20/08 -- (2,644)
iStar Financial, Inc. Sell 2,025 2.925 12/20/08 -- (38,625)
iStar Financial, Inc. Sell 1,175 3.000 12/20/08 -- (21,566)
iStar Financial, Inc. Sell 180 4.320 12/20/12 -- 2,022
Lehman Brothers Holdings, Inc. Sell 2,230 1.410 9/20/08 -- 398
Levi Strauss & Co. Sell 935 1.000 9/20/08 -- (9,352)
Levi Strauss & Co. Sell 700 0.900 9/20/08 -- (7,523)
MBIA, Inc. Sell 1,025 0.520 9/20/08 -- (59,861)
MBIA, Inc. Sell 1,020 0.600 9/20/08 -- (59,036)
Merrill Lynch & Co., Inc. Sell 630 1.850 6/20/08 -- 2,032
Owens-Illinois, Inc. Sell 900 1.250 9/20/08 -- 1,989
Tenet Healthcare Corp. Sell 1,635 1.600 3/20/09 -- (40,768)
The Bear Stearns Cos., Inc. Sell 4,195 2.350 9/20/08 -- 8,642
Washington Mutual, Inc. Sell 255 4.500 12/20/08 -- (1,360)
Washington Mutual, Inc. Sell 1,275 4.500 12/20/08 -- (6,802)
- --------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Capital Markets LP:
ABX.HE.AA.06-2 Index Sell 760 0.170 5/25/46 (300,182) (288,782)
ABX.HE.AA.06-2 Index Sell 155 0.170 5/25/46 (12,771) (58,896)
Capmark Financial Group, Inc. Sell 1,035 0.950 6/20/12 -- (205,997)
First Data Corp. Sell 1,020 1.150 9/20/08 -- (7,356)
- --------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs International:
Amkor Technology, Inc. Sell 155 2.650 9/20/08 -- 1,340
Citigroup, Inc. Sell 1,315 1.250 9/20/08 -- (33,531)
Dole Food Co., Inc. Sell 1,645 3.880 9/20/08 -- (7,405)
D.R. Horton, Inc. Sell 935 4.210 12/20/08 -- (1,009)
General Mills, Inc. Sell 1,415 0.380 12/20/12 -- (390)
iStar Financial, Inc. Sell 185 3.950 12/20/12 -- 130
K. Hovnanian Enterprises, Inc. Sell 635 6.750 9/20/08 -- (49,913)
Merrill Lynch & Co., Inc. Sell 1,440 1.850 6/20/08 -- 4,875
Pulte Homes, Inc. Sell 1,625 2.750 9/20/09 -- (51,110)
Quebecor World, Inc. Sell 495 3.000 9/20/08 -- (37,428)
Sara Lee Corp. Buy 1,370 0.419 9/20/12 -- (4,754)
Smurfit-Stone Container Enterprises, Inc. Sell 1,640 1.450 9/20/08 -- 356
Standard Pacific Corp. Sell 845 6.625 9/20/08 -- (86,464)
- --------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Special Financing, Inc.:
Capital One Bank Buy 730 1.800 12/20/12 -- 11,715
D.R. Horton, Inc. Sell 1,705 4.200 12/20/08 -- (829)
General Mills, Inc. Sell 1,715 0.400 12/20/12 -- (752)
Morgan Stanley Sell 4,275 0.640 9/20/08 -- (18,186)
Nortel Networks Corp. Sell 265 1.850 9/20/08 -- (652)
Residential Capital LLC Sell 1,015 5.000 6/20/08 (131,950) (111,086)
Univision Communications, Inc. Sell 155 3.000 12/20/08 -- (956)
Univision Communications, Inc. Sell 1,325 3.000 12/20/08 -- (5,003)
Washington Mutual, Inc. Sell 595 4.400 12/20/08 -- (5,420)
15 | OPPENHEIMER CORE BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CREDIT DEFAULT SWAPS: Continued
- --------------------------------------------------------------------------------
BUY/SELL NOTIONAL PAY/ PREMIUM
CREDIT AMOUNT RECEIVE TERMINATION PAID/
SWAP COUNTERPARTY REFERENCE ENTITY PROTECTION (000S) FIXED RATE DATE (RECEIVED) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital Services, Inc.:
ABX.HE.AA.06-2 Index Sell $ 155 0.170% 5/25/46 $ (12,383) $ (58,815)
ABX.HE.AA.06-2 Index Sell 300 0.170 5/25/46 (29,999) (112,529)
Beazer Homes USA, Inc. Sell 1,040 2.150 6/20/08 -- (48,160)
CDX.NA.IG.9 Index Sell 4,925 0.600 12/20/12 (38,992) (37,298)
Countrywide Home Loans, Inc. Sell 800 0.750 9/20/08 -- (105,573)
Countrywide Home Loans, Inc. Sell 3,070 0.420 6/20/09 -- (624,657)
First Data Corp. Sell 620 1.350 9/20/08 -- (4,309)
Ford Motor Co. Sell 2,065 7.150 12/20/16 -- (58,552)
Ford Motor Co. Sell 980 7.050 12/20/16 -- (32,349)
General Motors Corp. Sell 1,035 5.800 12/20/16 -- (74,895)
General Motors Corp. Sell 1,000 5.750 12/20/16 -- (74,762)
Harrah's Operating Co., Inc. Sell 720 2.200 9/20/08 -- (3,962)
Inco Ltd. Buy 1,030 0.700 3/20/17 -- (10,596)
Inco Ltd. Buy 1,015 0.630 3/20/17 -- (5,132)
J.C. Penney Co., Inc. Sell 1,095 1.300 12/20/17 -- (43,257)
J.C. Penney Co., Inc. Sell 1,060 1.070 12/20/17 -- (59,539)
K. Hovnanian Enterprises, Inc. Sell 500 1.850 6/20/08 -- (34,198)
K. Hovnanian Enterprises, Inc. Sell 500 1.850 6/20/08 -- (34,198)
Kohl's Corp. Buy 1,640 0.870 12/20/17 -- 27,441
Kohl's Corp. Buy 1,590 0.660 12/20/17 -- 52,060
Lennar Corp. Sell 1,210 2.900 12/20/08 -- (46,064)
Residential Capital LLC Sell 220 5.000 6/20/08 (29,700) (26,463)
Residential Capital LLC Sell 310 5.000 6/20/08 (44,950) (37,288)
Residential Capital LLC Sell 570 5.000 6/20/08 (82,650) (68,562)
Residential Capital LLC Sell 2,455 6.120 9/20/08 -- (401,440)
Sara Lee Corp. Buy 1,760 0.418 9/20/12 -- (8,276)
Toys "R" Us, Inc. Sell 640 2.550 9/20/08 -- (6,888)
Tribune Co. Sell 1,000 1.000 6/20/08 -- (45,050)
Vale Overseas Ltd. Sell 1,030 1.170 3/20/17 -- (12,774)
Vale Overseas Ltd. Sell 1,015 1.100 3/20/17 -- (17,771)
---------------------------
$ (1,196,400) $(4,532,814)
===========================
- --------------------------------------------------------------------------------
INTEREST RATE SWAPS AS OF DECEMBER 31, 2007 ARE AS FOLLOWS:
- --------------------------------------------------------------------------------
NOTIONAL TERMINATION
SWAP COUNTERPARTY AMOUNT PAID BY THE FUND RECEIVED BY THE FUND DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------
Three-Month
Credit Suisse International $4,580,000 USD BBA LIBOR 5.428% 8/7/17 $ 315,489
- ---------------------------------------------------------------------------------------------------------------------
Three-Month
Deutsche Bank AG 3,870,000 USD BBA LIBOR 5.445 8/8/17 295,525
----------
$ 611,014
==========
Index abbreviation is as follows:
BBA LIBOR British Bankers' Association London-Interbank Offered Rate
16 | OPPENHEIMER CORE BOND FUND/VA
- --------------------------------------------------------------------------------
TOTAL RETURN SWAPS AS OF DECEMBER 31, 2007 ARE AS FOLLOWS:
- --------------------------------------------------------------------------------
NOTIONAL TERMINATION
SWAP COUNTERPARTY AMOUNT PAID BY THE FUND RECEIVED BY THE FUND DATE VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
Barclays Bank plc: If positive, the Total Return
If negative, the absolute value of the Lehman Brothers
of the Lehman Brothers U.S. CMBS AAA 8.5+ Index
$ 6,720,000 U.S. CMBS AAA 8.5+ Index minus 20 basis points 6/1/08 $ 112,774
If positive, the Total Return
If negative, the absolute value of the Lehman Brothers
of the Lehman Brothers U.S. CMBS AAA 8.5+ Index
1,800,000 U.S. CMBS AAA 8.5+ Index minus 25 basis points 5/1/08 30,130
- ------------------------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG: If positive, the Total Return
If negative, the absolute value of the Lehman Brothers
of the Lehman Brothers U.S. CMBS AAA 8.5+ Index
4,420,000 U.S. CMBS AAA 8.5+ Index minus 45 basis points 2/1/08 77,080
If positive, the Total Return
If negative, the absolute value of the Lehman Brothers
of the Lehman Brothers U.S. CMBS AAA 8.5+ Index
13,160,000 U.S. CMBS AAA 8.5+ Index plus 60 basis points 2/1/08 241,011
If positive, the Total Return
If negative, the absolute value of the Lehman Brothers
of the Lehman Brothers U.S. CMBS AAA 8.5+ Index
1,180,000 U.S. CMBS AAA 8.5+ Index plus 25 basis points 2/1/08 21,266
- ------------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Special
Financing, Inc.: If positive, the Total Return
If negative, the absolute value of the Lehman Brothers
of the Lehman Brothers U.S. CMBS AAA 8.5+ Index
7,900,000 U.S. CMBS AAA 8.5+ Index minus 40 basis points 6/1/08 136,564
If negative, the absolute value If positive, the Total Return
of the Lehman Brothers of the Lehman Brothers
5,450,000 U.S. CMBS AAA 8.5+ Index U.S. CMBS AAA 8.5+ Index 2/1/08 96,237
If positive, the Total Return
If negative, the absolute value of the Lehman Brothers
of the Lehman Brothers U.S. CMBS AAA 8.5+ Index
5,400,000 U.S. CMBS AAA 8.5+ Index minus 20 basis points 5/1/08 94,801
If positive, the Total Return
If negative, the absolute value of the Lehman Brothers
of the Lehman Brothers U.S. CMBS AAA 8.5+ Index
4,785,000 U.S. CMBS AAA 8.5+ Index plus 60 basis points 2/1/08 86,647
If positive, the Total Return
If negative, the absolute value of the Lehman Brothers
of the Lehman Brothers U.S. CMBS AAA 8.5+ Index
6,556,000 U.S. CMBS AAA 8.5+ Index plus 55 basis points 5/1/08 118,471
If positive, the Total Return
If negative, the absolute value of the Lehman Brothers
of the Lehman Brothers U.S. CMBS AAA 8.5+ Index
2,860,000 U.S. CMBS AAA 8.5+ Index minus 25 basis points 3/1/08 49,966
If positive, the Total Return
If negative, the absolute value of the Lehman Brothers
of the Lehman Brothers U.S. CMBS AAA 8.5+ Index
8,690,000 U.S. CMBS AAA 8.5+ Index plus 45 basis points 5/1/08 156,381
17 | OPPENHEIMER CORE BOND FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN SWAPS: Continued
- --------------------------------------------------------------------------------
NOTIONAL TERMINATION
SWAP COUNTERPARTY AMOUNT PAID BY THE FUND RECEIVED BY THE FUND DATE VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital If positive, the Total Return
Services, Inc.: If negative, the absolute value of the Lehman Brothers
of the Lehman Brothers U.S. CMBS AAA 8.5+ Index
$ 5,600,000 U.S. CMBS AAA 8.5+ Index minus 40 basis points 6/1/08 $ 85,626
If positive, the Total Return
If negative, the absolute value of the Lehman Brothers
of the Lehman Brothers U.S. CMBS AAA 8.5+ Index
6,720,000 U.S. CMBS AAA 8.5+ Index plus 90 basis points 6/1/08 108,522
If positive, the Total Return
If negative, the absolute value of the Lehman Brothers
of the Lehman Brothers U.S. CMBS AAA 8.5+ Index
900,000 U.S. CMBS AAA 8.5+ Index plus 110 basis points 1/31/08 14,660
- ------------------------------------------------------------------------------------------------------------------------------------
UBS AG:
If positive, the Total Return
If negative, the absolute value of the Lehman Brothers
of the Lehman Brothers U.S. CMBS AAA 8.5+ Index
3,800,000 U.S. CMBS AAA 8.5+ Index minus 20 basis points 5/1/08 67,175
If positive, the Total Return
If negative, the absolute value of the Lehman Brothers
of the Lehman Brothers U.S. CMBS AAA 8.5+ Index
5,981,000 U.S. CMBS AAA 8.5+ Index plus 60 basis points 2/1/08 109,851
-----------
$1,607,162
===========
Index abbreviation is as follows:
CMBS Commercial Mortgage Backed Securities
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
18 | OPPENHEIMER CORE BOND FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 31, 2007
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
ASSETS
- ----------------------------------------------------------------------------------------------------------------
Investments, at value-see accompanying statement of investments:
Unaffiliated companies (cost $453,974,178) $ 452,821,115
Affiliated companies (cost $4,105,793) 4,105,793
----------------
456,926,908
- ----------------------------------------------------------------------------------------------------------------
Cash 32,272
- ----------------------------------------------------------------------------------------------------------------
Swaps, at value (premiums received $897,108) 1,736,115
- ----------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Shares of beneficial interest sold 5,209,084
Interest, dividends and principal paydowns 2,970,054
Investments sold (including $1,142,094 sold on a when-issued or delayed delivery basis) 1,542,155
Futures margins 103,077
Other 16,431
----------------
Total assets 468,536,096
- ----------------------------------------------------------------------------------------------------------------
LIABILITIES
- ----------------------------------------------------------------------------------------------------------------
Return of collateral for securities loaned 3,331,648
- ----------------------------------------------------------------------------------------------------------------
Swaps, at value (premiums received $299,292) 4,050,753
- ----------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased on a when-issued or delayed delivery basis 30,488,769
Shares of beneficial interest redeemed 1,281,505
Shareholder communications 61,953
Distribution and service plan fees 59,684
Trustees' compensation 10,734
Transfer and shareholder servicing agent fees 1,751
Other 46,118
----------------
Total liabilities 39,332,915
- ----------------------------------------------------------------------------------------------------------------
NET ASSETS $ 429,203,181
================
- ----------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- ----------------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 38,886
- ----------------------------------------------------------------------------------------------------------------
Additional paid-in capital 450,197,264
- ----------------------------------------------------------------------------------------------------------------
Accumulated net investment income 18,856,205
- ----------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions (37,334,011)
- ----------------------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments (2,555,163)
----------------
NET ASSETS $ 429,203,181
================
- ----------------------------------------------------------------------------------------------------------------
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 $325,661,015 and 29,454,744 shares of beneficial interest outstanding) $ 11.06
- ----------------------------------------------------------------------------------------------------------------
Service Shares:
Net asset value, redemption price per share and offering price per share
(based on net assets of $103,542,166 and 9,431,174 shares of beneficial interest outstanding) $ 10.98
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19 | OPPENHEIMER CORE BOND FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 31, 2007
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Interest $ 23,201,092
- --------------------------------------------------------------------------------
Dividends--affiliated companies 542,042
- --------------------------------------------------------------------------------
Fee income 106,223
- --------------------------------------------------------------------------------
Portfolio lending fees 61,792
-------------
Total investment income 23,911,149
- --------------------------------------------------------------------------------
EXPENSES
- --------------------------------------------------------------------------------
Management fees 2,674,865
- --------------------------------------------------------------------------------
Distribution and service plan fees--Service shares 174,887
- --------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service shares 10,107
Service shares 10,034
- --------------------------------------------------------------------------------
Shareholder communications:
Non-Service shares 30,649
Service shares 4,304
- --------------------------------------------------------------------------------
Trustees' compensation 14,154
- --------------------------------------------------------------------------------
Custodian fees and expenses 2,455
- --------------------------------------------------------------------------------
Administration service fees 1,500
- --------------------------------------------------------------------------------
Other 55,434
-------------
Total expenses 2,978,389
Less reduction to custodian expenses (779)
Less waivers and reimbursements of expenses (10,315)
-------------
Net expenses 2,967,295
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 20,943,854
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- --------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments from unaffiliated companies (79,713)
Closing and expiration of futures contracts (646,982)
Foreign currency transactions 298
Swap contracts (2,375,158)
-------------
Net realized loss (3,101,555)
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments 1,637,840
Futures contracts (468,091)
Swap contracts (1,180,815)
-------------
Net change in unrealized depreciation (11,066)
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 17,831,233
=============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20 | OPPENHEIMER CORE BOND FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2007 2006
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 20,943,854 $ 19,887,682
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized loss (3,101,555) (1,856,406)
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized depreciation (11,066) 2,736,740
---------------------------
Net increase in net assets resulting from operations 17,831,233 20,768,016
- ------------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Non-Service shares (18,342,384) (21,803,446)
Service shares (2,404,569) (608,147)
---------------------------
(20,746,953) (22,411,593)
- ------------------------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from beneficial interest transactions:
Non-Service shares (37,703,583) (61,099,902)
Service shares 61,525,061 29,289,033
---------------------------
23,821,478 (31,810,869)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) 20,905,758 (33,454,446)
- ------------------------------------------------------------------------------------------------------------------------------------
Beginning of period 408,297,423 441,751,869
---------------------------
End of period (including accumulated net investment income of $18,856,205 and $20,676,318, respectively) $429,203,181 $408,297,423
===========================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
21 | OPPENHEIMER CORE BOND FUND/VA
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2007 2006 2005 2004 2003
- ---------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.16 $ 11.19 $ 11.50 $ 11.42 $ 11.31
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .55 1 .53 1 .51 1 .43 1 .51
Net realized and unrealized gain (loss) (.08) .03 (.23) .18 .23
----------------------------------------------------------------------
Total from investment operations .47 .56 .28 .61 .74
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.57) (.59) (.59) (.53) (.63)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.06 $ 11.16 $ 11.19 $ 11.50 $ 11.42
======================================================================
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 4.39% 5.28% 2.59% 5.49% 6.78%
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 325,661 $ 367,106 $ 430,642 $ 504,244 $ 618,234
- ---------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 345,723 $ 391,750 $ 466,033 $ 552,293 $ 691,931
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 5.07% 4.83% 4.56% 3.82% 4.03%
Total expenses 0.68% 4,5,6 0.77% 4,5 0.76% 6 0.75% 6 0.73% 6
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 89% 7 114% 7 111% 7 95% 7 101%
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. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended December 31, 2007 0.68%
Year Ended December 31, 2006 0.77%
5. Voluntary waiver or reimbursement of indirect management fees less than
0.005%.
6. Reduction to custodian expenses less than 0.005%.
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, 2007 $ 662,784,931 $ 678,316,693
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.
22 | OPPENHEIMER CORE BOND FUND/VA
SERVICE SHARES YEAR ENDED DECEMBER 31, 2007 2006 2005 2004 2003
- ---------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.10 $ 11.15 $ 11.47 $ 11.39 $ 11.30
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .52 1 .49 1 .47 1 .40 1 .43
Net realized and unrealized gain (loss) (.08) .03 (.22) .18 .28
----------------------------------------------------------------------
Total from investment operations .44 .52 .25 .58 .71
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.56) (.57) (.57) (.50) (.62)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.98 $ 11.10 $ 11.15 $ 11.47 $ 11.39
======================================================================
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 4.09% 4.93% 2.33% 5.22% 6.56%
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 103,542 $ 41,191 $ 11,110 $ 3,505 $ 3,835
- ---------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 70,116 $ 21,265 $ 7,213 $ 3,002 $ 3,903
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 4.85% 4.56% 4.29% 3.55% 3.73%
Total expenses 0.92% 4,5,6 1.06% 4,5 1.03% 6 0.99% 6 0.98% 6
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 89% 7 114% 7 111% 7 95% 7 101%
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 less than one full year.
4. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended December 31, 2007 0.92%
Year Ended December 31, 2006 1.06%
5. Voluntary waiver or reimbursement of indirect management fees less than
0.005%.
6. Reduction to custodian expenses less than 0.005%.
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, 2007 $ 662,784,931 $ 678,316,693
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.
23 | OPPENHEIMER CORE BOND FUND/VA
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Core Bond Fund/VA (the "Fund"), is a separate series of Oppenheimer
Variable Account Funds, an open-end management investment company registered
under the Investment Company Act of 1940, as amended. The Fund's main investment
objective is to seek a high level of current income. As a secondary objective,
the Fund seeks capital appreciation when consistent with its primary objective.
The Fund's investment adviser is OppenheimerFunds, Inc. (the "Manager").
The Fund offers two classes of shares. Both classes are sold at their
offering price, which is the net asset value per share, to separate investment
accounts of participating insurance companies as an underlying investment for
variable life insurance policies, variable annuity contracts or other investment
products. The class of shares designated as Service shares is subject to a
distribution and service plan. Both classes of shares have identical rights and
voting privileges with respect to the Fund in general and exclusive voting
rights on matters that affect that class alone. Earnings, net assets and net
asset value per share may differ due to each class having its own expenses, such
as transfer and shareholder servicing agent fees and shareholder communications,
directly attributable to that class.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of the New York Stock Exchange (the "Exchange"), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for trading. Securities may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. Securities traded on a registered U.S.
securities exchange 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 whose principal exchange is NASDAQ(R) are valued based on the closing
price reported by NASDAQ prior to the time when the Fund's assets are valued. In
the absence of a sale, the security is valued at the last sale price on the
prior trading day, if it is within the spread of the 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, collateralized
mortgage obligations and other asset-backed securities will be valued at the
mean between the "bid" and "asked" prices. Securities for which market
quotations are not readily available are valued at their fair value. 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. Shares of a registered investment company
that are not traded on an exchange are valued at the acquired investment
company's net asset value per share. "Money market-type" debt instruments with
remaining maturities of sixty days or less are valued at cost adjusted by the
amortization of discount or premium to maturity (amortized cost), which
approximates market value.
- --------------------------------------------------------------------------------
SECURITIES ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS. The Fund may purchase
securities on a "when-issued" basis, and may purchase or sell securities on a
"delayed delivery" basis. "When-issued" or "delayed delivery" refers to
securities whose terms and indenture are available and for which a market
exists, but which are not available for immediate delivery. Delivery and payment
for securities that have been purchased by the Fund on a when-issued basis
normally takes place within six months and possibly as long as two years or more
after the trade date. During this period, such securities do not earn interest,
are subject to market fluctuation and may increase or decrease in value prior to
their delivery. The purchase of securities on a when-issued basis may increase
the volatility of the Fund's net asset value to the extent the Fund executes
such transactions while remaining substantially fully invested. When the Fund
engages in when-issued or delayed delivery transactions, it relies on the buyer
or seller, as the case may be, to complete the transaction. Their failure to do
so may cause the Fund to lose the opportunity to obtain or dispose of the
security at a price and yield it considers advantageous. The Fund maintains
internally designated assets with a market value equal to or
24 | OPPENHEIMER CORE BOND FUND/VA
greater than the amount of its purchase commitments. 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, 2007, the Fund had purchased securities issued on a
when-issued or delayed delivery basis and sold securities issued on a delayed
delivery basis as follows:
WHEN-ISSUED OR DELAYED
DELIVERY BASIS TRANSACTIONS
--------------------------------------------------
Purchased securities $30,488,769
Sold securities 1,142,094
The Fund may enter into "forward roll" transactions with respect to
mortgage-related securities. In this type of transaction, the Fund sells a
mortgage-related security to a buyer and simultaneously agrees to repurchase a
similar security (same type, coupon and maturity) at a later date at a set
price. During the period between the sale and the repurchase, the Fund will not
be entitled to receive interest and principal payments on the securities that
have been sold. The Fund records the incremental difference between the forward
purchase and sale of each forward roll as realized gain (loss) on investments or
as fee income in the case of such transactions that have an associated fee in
lieu of a difference in the forward purchase and sale price.
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. To assure its
future payment of the purchase price, the Fund maintains internally designated
assets with a market value equal to or greater than the payment obligation under
the roll.
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in
U.S. dollars. The values of securities denominated in foreign currencies and
amounts related to the purchase and sale of foreign securities and foreign
investment income are translated into U.S. dollars as of the close of the
Exchange, normally 4:00 P.M. Eastern time, on each day the Exchange is open for
trading. Foreign exchange rates may be valued primarily using a reliable bank,
dealer or service authorized by the Board of Trustees.
Reported net realized gains and losses from foreign currency transactions
arise from sales of portfolio securities, sales and maturities of short-term
securities, sales of foreign currencies, exchange rate fluctuations between the
trade and settlement dates on securities transactions, and the difference
between the amounts of dividends, interest, and foreign withholding taxes
recorded on the Fund's books and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized appreciation and depreciation on the
translation of assets and liabilities denominated in foreign currencies arise
from changes in the values of assets and liabilities, including investments in
securities at fiscal period end, resulting from changes in exchange rates.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
INVESTMENT IN OPPENHEIMER INSTITUTIONAL MONEY MARKET FUND. The Fund is permitted
to invest daily available cash balances in an affiliated money market fund. The
Fund may invest the available cash in Class E shares of Oppenheimer
Institutional Money Market Fund ("IMMF") to seek current income while preserving
liquidity. IMMF is a registered open-end management investment company,
regulated as a money market fund under the Investment Company Act of 1940, as
amended. The Manager is also the investment adviser of IMMF. 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
25 | OPPENHEIMER CORE BOND FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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. If the
seller of the agreement defaults and the value of the collateral declines, or if
the seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
- --------------------------------------------------------------------------------
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. Therefore, no federal income or excise tax provision is
required. The Fund files income tax returns in U.S. federal and applicable state
jurisdictions. The statute of limitations on the Fund's tax return filings
remain open for the three preceding fiscal reporting period ends.
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
--------------------------------------------------------------------------
$17,146,896 $-- $37,500,155 $668,979
1. As of December 31, 2007, the Fund had $37,269,804 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, 2007,
details of the capital loss carryforwards were as follows:
EXPIRING
------------------------------------------
2010 $ 29,885,554
2013 57,295
2014 6,081,496
2015 1,245,459
------------
Total $ 37,269,804
============
2. As of December 31, 2007, the Fund had $230,351 of post-October losses
available to offset future realized capital gains, if any. Such losses, if
unutilized, will expire in 2016.
3. During the fiscal year ended December 31, 2007, the Fund did not utilize any
capital loss carryforward.
4. During the fiscal year ended December 31, 2006, 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.
26 | OPPENHEIMER CORE BOND FUND/VA
Accordingly, the following amounts have been reclassified for December 31, 2007.
Net assets of the Fund were unaffected by the reclassifications.
REDUCTION TO REDUCTION TO
ACCUMULATED ACCUMULATED NET
NET INVESTMENT REALIZED LOSS
INCOME ON INVESTMENTS
--------------------------------------------
$2,017,014 $2,017,014
The tax character of distributions paid during the years ended December 31, 2007
and December 31, 2006 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2007 DECEMBER 31, 2006
----------------------------------------------------------------
Distributions paid from:
Ordinary income $20,746,953 $22,411,593
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, 2007 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 $ 458,197,688
Federal tax cost of other investments (60,925,720)
--------------
Total federal tax cost $ 397,271,968
==============
Gross unrealized appreciation $ 10,079,441
Gross unrealized depreciation (10,748,420)
--------------
Net unrealized depreciation $ (668,979)
==============
- --------------------------------------------------------------------------------
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 compensation deferral plan.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations and
may differ from U.S. generally accepted accounting principles, are recorded on
the ex-dividend date. Income and capital gain distributions, if any, are
declared and paid annually or at other times as deemed necessary by the Manager.
- --------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income is recognized on an accrual basis. Market discount and
premium, which are included in interest income on the Statement of Operations,
are amortized or accreted daily.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. "Custodian fees and expenses" in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder
27 | OPPENHEIMER CORE BOND FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
redemption activity. The Fund pays interest to its custodian on such cash
overdrafts, to the extent they are not offset by positive cash balances
maintained by the Fund, at a rate equal to the Federal Funds Rate plus 0.50%.
The "Reduction to custodian expenses" line item, if applicable, represents
earnings on cash balances maintained by the Fund during the period. Such
interest expense and other custodian fees may be paid with these earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Fund's organizational documents provide current and former
trustees and officers with a limited indemnification against liabilities arising
in connection with the performance of their duties to the Fund. In the normal
course of business, the Fund may also enter into contracts that provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would be dependent on future claims that may be made against the
Fund. The risk of material loss from such claims is considered remote.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period. Actual
results could differ from those estimates.
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
YEAR ENDED DECEMBER 31, 2007 YEAR ENDED DECEMBER 31, 2006
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------
NON-SERVICE SHARES
Sold 1,273,250 $ 13,904,774 953,894 $ 10,320,632
Dividends and/or distributions reinvested 1,704,683 18,342,384 2,058,871 21,803,446
Redeemed (6,416,114) (69,950,741) (8,604,369) (93,223,980)
-----------------------------------------------------------
Net decrease (3,438,181) $ (37,703,583) (5,591,604) $ (61,099,902)
===========================================================
- ----------------------------------------------------------------------------------------------------------------
SERVICE SHARES
Sold 6,555,320 $ 70,649,282 2,826,656 $ 30,522,972
Dividends and/or distributions reinvested 224,516 2,404,569 57,590 608,147
Redeemed (1,059,398) (11,528,790) (170,116) (1,842,086)
-----------------------------------------------------------
Net increase 5,720,438 $ 61,525,061 2,714,130 $ 29,289,033
===========================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations and investments in IMMF, for the year ended December
31, 2007, were as follows:
PURCHASES SALES
- --------------------------------------------------------------------------------
Investment securities $213,589,856 $ 238,809,894
U.S. government and government agency obligations 107,959,273 115,802,561
To Be Announced (TBA) mortgage-related securities 662,784,931 678,316,693
28 | OPPENHEIMER CORE BOND FUND/VA
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4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Under the investment advisory agreement, the Fund pays the
Manager a management fee based on the daily net assets of the Fund at an annual
rate as shown in the following table:
FEE SCHEDULE FOR MAY 1, 2007 TO DEC. 31, 2007 FEE SCHEDULE FOR JAN. 1, 2007 TO APRIL 30, 2007
- --------------------------------------------- -----------------------------------------------
Up to $1 billion 0.60% Up to $200 million 0.75%
Over $1 billion 0.50 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
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ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.
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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, 2007, 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.
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DISTRIBUTION AND SERVICE PLAN FOR SERVICE SHARES. The Fund has adopted a
Distribution and Service Plan (the "Plan") in accordance with Rule 12b-1 under
the Investment Company Act of 1940 for Service shares to pay OppenheimerFunds
Distributor, Inc. (the "Distributor"), for distribution related services,
personal service and account maintenance for the Fund's Service shares. Under
the Plan, payments are made periodically at an annual rate of 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. These
fees are paid out of the Fund's assets on an on-going basis and increase
operating expenses of the Service shares, which results in lower performance
compared to the Fund's shares that are not subject to a service fee. Fees
incurred by the Fund under the Plan are detailed in the Statement of Operations.
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. 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, 2007, the Manager waived $10,315 for
IMMF management fees.
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5. FOREIGN CURRENCY EXCHANGE CONTRACTS
The Fund may enter into foreign currency exchange contracts ("forward
contracts") for the purchase or sale of a foreign currency at a negotiated rate
at a future date.
Foreign currency exchange contracts are reported on a schedule following
the Statement of Investments. Forward contracts will be valued daily based upon
the closing prices of the forward currency rates determined at the close of the
Exchange as provided by a bank, dealer or pricing service. The resulting
unrealized appreciation (depreciation) is reported in the Statement of Assets
and Liabilities as a receivable or payable and in the Statement of Operations
within the change in unrealized appreciation (depreciation). At contract close,
the difference between the original cost of the contract and the value at the
close date is recorded as a realized gain (loss) in the Statement of Operations.
29 | OPPENHEIMER CORE BOND FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
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5. FOREIGN CURRENCY EXCHANGE CONTRACTS Continued
Risks to the Fund include both market and credit risk. Market risk is the
risk that the value of the forward contract will depreciate due to unfavorable
changes in the exchange rates. 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 payments that the Fund has not yet
received.
As of December 31, 2007, the Fund had no outstanding forward contracts.
- --------------------------------------------------------------------------------
6. FUTURES CONTRACTS
A futures contract is a commitment to buy or sell a specific amount of a
financial instrument at a negotiated price on a stipulated future date. The
Portfolio may buy and sell futures contracts that relate to broadly based
securities indices (financial futures), debt securities (interest rate futures)
and various commodities (commodity index futures). The Fund may also buy or
write put or call options on these futures contracts.
Futures contracts traded on a commodities or futures exchange will be
valued at the final settlement price or official closing price on the principal
exchange as reported by such principal exchange at its trading session ending
at, or most recently prior to, the time when the Fund's assets are valued.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities (initial margin) in an amount equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Fund each day. The variation margin payments are equal
to the daily changes in the contract value and are recorded as unrealized gains
and losses.
Futures contracts are reported on a schedule following the Statement of
Investments. Securities held in collateralized accounts to cover initial margin
requirements on open futures contracts are noted in the Statement of
Investments. Cash held by the broker to cover initial margin requirements on
open futures contracts and the receivable and/or payable for the daily mark to
market for the variation margin are noted in the Statement of Assets and
Liabilities. The net change in unrealized appreciation and depreciation is
reported in the Statement of Operations. Realized gains (losses) are reported in
the Statement of Operations at the closing or expiration of futures contracts.
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market where the Fund is unable to
liquidate the contract or enter into an offsetting position and, if used for
hedging purposes, the risk that the price of the contract will correlate
imperfectly with the prices of the Fund's securities.
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7. SWAP CONTRACTS
The Fund may enter into swap contract agreements with a counterparty to exchange
a series of cash flows based on either specified reference rates, or the
occurrence of a credit event, over a specified period. Such contracts may
include interest rate, equity, debt, index, total return, credit and currency
swaps.
Swaps are marked to market daily using primarily quotations from pricing
services, counterparties and brokers. Swap contracts are reported on a schedule
following the Statement of Investments. The value of the contracts is separately
disclosed on the Statement of Assets and Liabilities. The unrealized
appreciation (depreciation) related to the change in the valuation of the
notional amount of the swap is combined with the accrued interest due to (owed
by) the Fund at termination or settlement. The net change in this amount during
the period is included on the Statement of Operations. The Fund also records any
periodic payments received from (paid to) the counterparty, including at
termination, under such contracts as realized gain (loss) on the Statement of
Operations.
Risks of entering into swap contracts include credit, market and liquidity
risk. 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 payments that the Fund has not yet received. Market risk
is the risk that the value of the contract will depreciate due to unfavorable
changes in the reference asset. If there is an illiquid market for the
agreement, the Fund may be unable to close the contract prior to contract
termination.
30 | OPPENHEIMER CORE BOND FUND/VA
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CREDIT DEFAULT SWAP CONTRACTS. A credit default swap is a bilateral contract
that enables an investor to buy or sell protection against a defined-issuer
credit event. The Fund may enter into credit default swaps on a single security,
or a basket of securities.
In a credit default swap contract, the purchaser of the contract will pay
a periodic interest fee, similar to an insurance premium, on the notional amount
of the swap contract to the counterparty (the seller of the contract). If there
is a credit event (for example, bankruptcy or a failure to timely pay interest
or principal), the purchaser will exercise the contract and will receive a
payment from the seller of the contract equal to the notional value of the
credit default swap contract less the value of the underlying security. In the
event that the credit default swap is exercised due to a credit event, the
difference between the value of the underlying security and the notional amount
is recorded as realized gain (loss) and is included on the Statement of
Operations.
Risks of credit default swaps include, but are not limited to, the cost of
paying for credit protection if there are no credit events.
- --------------------------------------------------------------------------------
INTEREST RATE SWAP CONTRACTS. An interest rate swap is an agreement between
counterparties to exchange periodic interest payments on the notional amount of
the contract. One cash flow stream will typically be a floating rate payment
based upon a specified index while the other is typically a fixed rate.
Interest rate swap agreements include interest rate 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.
- --------------------------------------------------------------------------------
TOTAL RETURN SWAP CONTRACTS. A total return swap is an agreement between
counterparties to exchange a set of future cash flows on the notional amount of
the contract. One cash flow is typically 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.
- --------------------------------------------------------------------------------
8. ILLIQUID SECURITIES
As of December 31, 2007, investments in securities included issues that are
illiquid. Investments may be illiquid because they do not have an active trading
market, making it difficult to value them or dispose of them promptly at an
acceptable price. 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 an applicable footnote
on the Statement of Investments.
- --------------------------------------------------------------------------------
9. SECURITIES LENDING
The Fund lends portfolio securities from time to time in order to earn
additional income in the form of fees or interest on securities received as
collateral or the investment of any cash received as collateral. The loans are
secured by collateral (either securities, letters of credit, or cash) 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 each business day and any additional required collateral is
delivered to the Fund on the next business day. If the borrower defaults on its
obligation to return the securities loaned because of insolvency or other
reasons, the Fund could experience delays and cost in recovering the securities
loaned or in gaining access to the collateral. 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 and recognizes the gain
or loss in the fair value of the securities loaned that may occur during the
term of the loan. The Fund has the right under the lending agreement to recover
the securities from the borrower on demand. As of December 31, 2007, the Fund
had on loan securities valued at $3,290,065. Collateral of $3,331,648 was
received for the loans, all of which was received in cash and subsequently
invested in approved instruments.
31 | OPPENHEIMER CORE BOND FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
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- --------------------------------------------------------------------------------
10. RECENT ACCOUNTING PRONOUNCEMENT
In September 2006, Financial Accounting Standards Board ("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, 2007, 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.
- --------------------------------------------------------------------------------
11. FUND REORGANIZATION
On November 30, 2007, the Board of Directors of Government Securites Portfolio
(the "Portfolio"), a series of Panorama Series Fund, Inc., determined that it is
in the best interest of the Portfolio's shareholders that the Portfolio
reorganize with and into the Fund. The Board of Directors of the Portfolio
unanimously approved an Agreement and Plan of Reorganization to be entered into
between the Portfolio and the Fund, whereby the Fund will acquire all of the
assets of the Portfolio in exchange for newly-issued shares of the Fund (the
"Reorganization"). If the Reorganization takes place, Portfolio shareholders
will receive Non-Service shares of the Fund.
The Reorganization is conditioned upon, among other things, approval by
the Portfolio's shareholders. The anticipated date for the shareholder meeting
is on or about April 25, 2008 and, if approved by shareholders, the
Reorganization would take place shortly thereafter.
32 | OPPENHEIMER CORE BOND FUND/VA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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- --------------------------------------------------------------------------------
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, 2007,
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, 2007, 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, 2007, 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 13, 2008
33 | OPPENHEIMER CORE BOND FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2008, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2007. 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.
34 | 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.
35 | 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 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 Plus 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.
36 | OPPENHEIMER CORE BOND 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 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 although its ten-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
considered the comparability of the fees charged and the services provided to
the Fund to the fees and services for other clients or accounts advised by the
Manager. The independent consultant provided comparative data in regard to the
fees and expenses of the Fund and other A-rated corporate debt funds underlying
variable insurance products. The Board noted that the Fund's contractual and
actual management fees are higher than its peer group median. The Board also
noted that effective May 1, 2007, the Fund began paying the Manager at the
following rates that decline as the Fund's assets grow: 0.60% of the first $1
billion of average annual net assets of the Fund and 0.50% of average annual net
assets in excess of $1 billion.
ECONOMIES OF SCALE. The Board reviewed whether the Manager may realize
economies of scale in managing and supporting the Fund. The Board noted that the
Fund currently has management fee breakpoints, which are intended to share with
Fund shareholders economies of scale that may exist as the Fund's assets grow.
OTHER BENEFITS TO THE MANAGER. In addition to considering the profits
realized by the Manager, the Board considered information that was provided
regarding the direct and indirect benefits the Manager receives as a result of
its relationship with the Fund, including compensation paid to the Manager's
affiliates. The Board also considered that the Manager must be able to pay and
retain experienced professional personnel at competitive rates to provide
quality services to the Fund 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 considered all of the above information, and considered the
terms and conditions of the Agreement, including the management fee, in light of
all of the surrounding circumstances.
37 | 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; NUMBER OF
THE FUNDS, LENGTH OF SERVICE, PORTFOLIOS IN THE FUNDS COMPLEX CURRENTLY OVERSEEN
AGE
INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL, COLORADO
TRUSTEES 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER RESIGNATION, RETIREMENT,
DEATH OR REMOVAL.
WILLIAM L. ARMSTRONG, President, Colorado Christian University (since 2006); Chairman, Cherry Creek Mortgage Company
Chairman of the Board of (since 1991), Chairman, Centennial State Mortgage Company (since 1994), Chairman, The El Paso
Trustees (since 2003), Mortgage Company (since 1993); Chairman, Ambassador Media Corporation (since 1984); Chairman,
Trustee (since 1999) Broadway Ventures (since 1984); Director of Helmerich & Payne, Inc. (oil and gas drilling/production
Age: 70 company) (since 1992), Campus Crusade for Christ (non-profit) (since 1991); Former Director, The
Lynde and Harry Bradley Foundation, Inc. (non-profit organization) (2002-2006); former Chairman of:
Transland Financial Services, Inc. (private mortgage banking company) (1997-2003), Great Frontier
Insurance (1995-2000), Frontier Real Estate, Inc. (residential real estate brokerage) (1994-2000)
and Frontier Title (title insurance agency) (1995-2000); former Director of the following:
UNUMProvident (insurance company) (1991-2004), Storage Technology Corporation (computer equipment
company) (1991-2003) and International Family Entertainment (television channel) (1992-1997); U.S.
Senator (January 1979-January 1991). Oversees 39 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: 71 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 39 portfolios in the OppenheimerFunds complex.
EDWARD L. CAMERON, Member of The Life Guard of Mount Vernon (George Washington historical site) (June 2000 - May 2006);
Trustee (since 1999) Partner of PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price
Age: 69 Waterhouse LLP Global Investment Management Industry Services Group (financial services firm) (July
1994-June 1998). Oversees 39 portfolios in the OppenheimerFunds complex.
JON S. FOSSEL, Director of UNUMProvident (insurance company) (since June 2002); Director of Northwestern Energy
Trustee (since 1990) Corp. (public utility corporation) (since November 2004); Director of P.R. Pharmaceuticals (October
Age: 66 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 39 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: 67 (until October 1994). Oversees 39 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); Director
Age: 61 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 39 portfolios in the
OppenheimerFunds complex.
38 | OPPENHEIMER CORE BOND FUND/VA
ROBERT J. MALONE, Director of Jones Knowledge, Inc. (since 2006); Director of Jones International University
Trustee (since 2002) (educational organization) (since August 2005); Chairman, Chief Executive Officer and Director of
Age: 63 Steele Street State Bank (commercial banking) (since August 2003); Director of Colorado UpLIFT
(charitable organization) (since 1986); Trustee of the Gallagher Family Foundation (non-profit
organization) (since 2000); Former Chairman of U.S. Bank-Colorado (subsidiary of U.S. Bancorp and
formerly Colorado National Bank) (July 1996-April 1999); Director of Commercial Assets, Inc. (real
estate investment trust) (1993-2000); Director of Jones Knowledge, Inc. (2001-July 2004); and
Director of U.S. Exploration, Inc. (oil and gas exploration) (1997-February 2004). Oversees 39
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 of Worcester
Age: 65 Polytech Institute (since 1985); Chairman (since 1994) 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 41 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 of the Manager (since June 2001); President of the
Trustee, President and Manager (September 2000-March 2007); President and director or trustee of other Oppenheimer funds;
Principal Executive Officer President and Director of Oppenheimer Acquisition Corp. ("OAC") (the Manager's parent holding
(since 2001) company) and of Oppenheimer Partnership Holdings, Inc. (holding company subsidiary of the Manager)
Age: 58 (since July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of the Manager)
(November 2001-December 2006); 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); Chairman (since October 2007) and Member of the
Investment Company Institute's Board of Governors (since October 2003). Oversees 102 portfolios in
the OppenheimerFunds complex.
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS OF THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. ZACK, GILLESPIE AND MS.
THE FUND 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, MASSACHUSETTS 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 and of HarbourView Asset Management Corporation (since April
Vice President and Portfolio 2002) and of OFI Institutional Asset Management, Inc. (since June 2002); Vice President of
Manager (since 2002) Oppenheimer Real Asset Management, Inc. (since November 2006). Executive Director and portfolio
Age: 41 manager for MSIM/Miller, Anderson & Sherrerd (Morgan Stanley Asset Management) (August 1993-April
2002). A portfolio manager and officer of 15 portfolios in the OppenheimerFunds complex.
ANTULIO N. BOMFIM, Vice President of the Manager (since October 2003); Senior Economist at the Board of Governors of
Vice President and Portfolio the Federal Reserve System (June 1992-October 2003). A portfolio manager and officer of 12
Manager (since 2006) portfolios in the OppenheimerFunds complex.
Age: 41
39 | OPPENHEIMER CORE BOND FUND/VA
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
GEOFFREY CAAN, Vice President and Portfolio Manager of the Manager (since August 2003); Vice President of ABN AMRO
Vice President and Portfolio NA, Inc. (June 2002-August 2003); Vice President of Zurich Scudder Investments (January 1999-June
Manager (since 2006) 2002). A portfolio manager and officer of 12 portfolios in the OppenheimerFunds complex.
Age: 38
BENJAMIN J. GORD, Vice President of the Manager (since April 2002) of HarbourView Asset Management Corporation (since
Vice President and Portfolio April 2002) and of OFI Institutional Asset Management, Inc. (as of June 2002); Executive Director
Manager (since 2006) and senior fixed income analyst at Miller Anderson & Sherrerd, a division of Morgan Stanley
Age: 45 Investment Management (April 1992-March 2002). A portfolio manager and officer of 12 portfolios in
the OppenheimerFunds complex.
THOMAS SWANEY, Vice President of the Manager (since April 2006); senior analyst, high grade investment team (June
Vice President and Portfolio 2002-March 2006); senior fixed income analyst at Miller Anderson & Sherrerd, a division of Morgan
Manager (since 2006) Stanley Investment Management (May 1998-May 2002). A portfolio manager and officer of 12 portfolios
Age: 35 in the OppenheimerFunds complex.
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Chief
Vice President and Chief Compliance Officer of OppenheimerFunds Distributor, Inc., Centennial Asset Management and
Compliance Officer Shareholder Services, Inc. (since March 2004); Vice President of OppenheimerFunds Distributor, Inc.,
(since 2004) Centennial Asset Management Corporation and Shareholder Services, Inc. (since June 1983); Former
Age: 57 Vice President and Director of Internal Audit of the Manager (1997-February 2004). An officer of 102
portfolios in the OppenheimerFunds complex.
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, Inc. and Oppenheimer Partnership Holdings, Inc.
Officer (since 1999) (since March 1999), OFI Private Investments, Inc. (since March 2000), OppenheimerFunds International
Age: 48 Ltd. and OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management, Inc. (since
November 2000), and OppenheimerFunds Legacy Program (charitable trust program established by the
Manager) (since June 2003); Treasurer and Chief Financial Officer of OFI Trust Company (trust
company subsidiary of the Manager) (since May 2000); Assistant Treasurer of the following: OAC
(since March 1999), Centennial Asset Management Corporation (March 1999-October 2003) and
OppenheimerFunds Legacy Program (April 2000-June 2003). An officer of 102 portfolios in the
OppenheimerFunds complex.
BRIAN S. PETERSEN, Vice President of the Manager (since February 2007); Assistant Vice President of the Manager (August
Assistant Treasurer 2002-February 2007); Manager/Financial Product Accounting of the Manager (November 1998-July 2002).
(since 2004) An officer of 102 portfolios in the OppenheimerFunds complex.
Age: 37
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). An officer of 102 portfolios in the OppenheimerFunds
Age: 37 complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March 2002) of the Manager;
Vice President and Secretary General Counsel and Director of the Distributor (since December 2001); General Counsel of Centennial
(since 2001) Asset Management Corporation (since December 2001); Senior Vice President and General Counsel of
Age: 59 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). An officer of 102 portfolios in the OppenheimerFunds complex.
40 | OPPENHEIMER CORE BOND 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) of UBS Financial Services,
(since 2004) Inc. An officer of 102 portfolios in the OppenheimerFunds complex.
Age: 40
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 102 portfolios in the OppenheimerFunds complex.
Age: 44
KATHLEEN T. IVES, Vice President (since June 1998) and Senior Counsel and Assistant Secretary (since October 2003) of
Assistant Secretary the Manager; Vice President (since 1999) and Assistant Secretary (since October 2003) of the
(since 2001) Distributor; Assistant Secretary of Shareholder Services, Inc. (since 1999); Assistant Secretary of
Age: 42 OppenheimerFunds Legacy Program and Shareholder Financial Services, Inc. (since December 2001);
Assistant Counsel of the Manager (August 1994-October 2003). An officer of 102 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 CORE BOND FUND/VA
DECEMBER 31, 2007
- --------------------------------------------------------------------------------
Oppenheimer Management
Main Street Small Cap Commentaries
Fund(R)/VA and
A Series of Oppenheimer Variable Account Funds Annual Report
- --------------------------------------------------------------------------------
MANAGEMENT COMMENTARIES
Listing of Top Holdings
ANNUAL REPORT [GRAPHIC]
Fund Performance Discussion
Listing of Investments
Financial Statements
[LOGO] OPPENHEIMERFUNDS(R)
The Right Way to Invest
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. For the 12-month period ended
December 31, 2007, the Fund's Non-Service shares produced returns that were
slightly higher than its benchmark, the Russell 2000 Index, which returned
- -1.57%. We attribute the Fund's performance primarily to our security selection
strategy during the fourth quarter of 2007, which emphasized relatively
speculative stocks that historically have tended to do well toward year-end but
proved to be sensitive to intensifying economic and credit concerns.
Stocks generally rallied over the first half of the reporting period in an
investment environment characterized by moderating U.S. economic growth, robust
corporate earnings, high levels of mergers-and-acquisitions activity and stable
short-term interest rates. However, market conditions changed dramatically near
mid-year, and the second half of 2007 proved to be a challenging period for
equities in general and small-cap stocks in particular.
Beginning in June and July, an unexpectedly high level of sub-prime
mortgage defaults and delinquencies, combined with declining home values and
surging energy costs, led to renewed concerns regarding the sustainability of
consumer spending, which has been one of the main pillars supporting the U.S.
economic expansion over the past several years. As investors became increasingly
averse to risks, the stock market gave up many of the gains it had achieved over
the first half of 2007. Small-cap stocks were particularly hard hit as investors
began to favor stocks of larger, multinational corporations with a robust
presence in growing overseas markets and a track record of consistent earnings.
In fact, after producing relatively attractive returns over the past several
years, the Russell 2000 Index produced a mildly negative absolute return in
2007.
For quite some time, our quantitative models have signaled to us that
mid-cap stocks and small-cap stocks at the larger end of the market's
capitalization range are more attractive than micro-cap stocks. As a result, our
market-capitalization allocation strategy, which emphasized mid-cap stocks and
de-emphasized micro-cap stocks, positioned the Fund well when investors
reassessed their attitudes toward risk and shifted their focus toward larger
companies.
Our sector allocation strategy had a mildly positive impact on the Fund's
performance. A comparatively light position in the financials sector helped the
Fund avoid the full brunt of weakness among banks and broker-dealers, while
relatively heavy exposure to stocks in the materials sector helped it
participate more fully in their gains. These positive results were offset to a
degree by an overweighted position in lagging consumer-oriented stocks and
underweighted position in the better-performing health care sector.
Unfortunately, disappointing results from our "bottom-up" security
selection strategy offset most of the benefits derived from our market
capitalization and sector allocation strategies. Of the various factors
considered by our stock selection model, only price momentum proved to have good
predictive power during the second half of the reporting period. Stocks that had
done well in previous months tended to continue to do so. Other measures, most
notably valuations, were much less effective, as stocks that were inexpensive
compared to historical norms continued to lose value. Earnings quality, another
key factor considered by our security selection model, also proved to be
relatively ineffective.
To a significant degree, results within the Fund's various market sectors
stemmed from the adoption of our "turn of the year" security selection model,
which tends to emphasize more cyclical and speculative small-cap stocks that
historically have tended to outperform near year-end due to seasonal factors.
For example, the Fund's individual financial holdings underperformed the
benchmark's financial components as strong results from an underweighted
position in real estate investment trusts were offset by weakness among bond
insurers. While the Fund achieved positive absolute returns in the health care
area, returns in the sector also lagged the benchmark as richly valued stocks
produced higher returns. In the technology sector, unfortunate timing in the
purchase of some stocks detracted from relative performance.
4 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
As quantitative managers, we do not manage the Fund according to
subjective views of the market or economy. However, the results of our
quantitative models have caused us to increase the Fund's weightings in the
information technology and health care areas and decrease its exposure to the
financials, materials and consumer discretionary sectors, which we believe
position it well for 2008. Finally, the Fund ended 2007 broadly diversified
across approximately 1,100 stocks, a strategy designed to help ensure that
setbacks in any individual stocks do not have a disproportionate impact on the
overall portfolio. Indeed, managing risks while remaining fully invested is key
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, 2007. 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.
5 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
NON-SERVICE SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Main Street Small Cap Fund(R)/VA (Non-Service)
Russell 2000 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Main Street
Small Cap Fund(R)/VA
(Non-Service) Russell 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
03/31/2007 $21,894 $18,552
06/30/2007 $23,104 $19,371
09/30/2007 $21,940 $18,772
12/31/2007 $20,765 $17,913
AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/07
1-Year -1.21% 5-Year 16.57% Since Inception (5/1/98) 7.85%
SERVICE SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Main Street Small Cap Fund(R)/VA (Service)
Russell 2000 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Main Street
Small Cap Fund(R)/VA
(Service) Russell 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
03/31/2007 $19,717 $17,726
06/30/2007 $20,794 $18,508
09/30/2007 $19,738 $17,936
12/31/2007 $18,671 $17,115
AVERAGE ANNUAL TOTAL RETURNS OF SERVICE SHARES OF THE FUND AT 12/31/07
1-Year -1.39% 5-Year 16.35% Since Inception (7/16/01) 10.15%
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.
6 | 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 applicable); 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, 2007.
ACTUAL EXPENSES. The first section of the table provides information about
actual account values and actual expenses. You may use the information in this
section for the class of shares you hold, together with the amount you invested,
to estimate the expense that you paid over the period. Simply divide your
account value by $1,000.00 (for example, an $8,600.00 account value divided by
$1,000.00 = 8.60), then multiply the result by the number in the first section
under the heading entitled "Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The second section of the table
provides information about hypothetical account values and hypothetical expenses
based on the Fund's actual expense ratio for each class of shares, and an
assumed rate of return of 5% per year for each class before expenses, which is
not the actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of investing
in the Fund and other funds. To do so, compare this 5% hypothetical example for
the class of shares you hold with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any charges associated with the separate
accounts that offer this Fund. Therefore, the "hypothetical" lines of the table
are useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these separate
account charges were included your costs would have been higher.
- --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
ACTUAL JULY 1, 2007 DECEMBER 31, 2007 DECEMBER 31, 2007
- --------------------------------------------------------------------------------
Non-Service Shares $1,000.00 $ 898.80 $3.45
- --------------------------------------------------------------------------------
Service Shares 1,000.00 897.90 4.60
HYPOTHETICAL
(5% return before expenses)
- --------------------------------------------------------------------------------
Non-Service Shares 1,000.00 1,021.58 3.68
- --------------------------------------------------------------------------------
Service Shares 1,000.00 1,020.37 4.90
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 indirect expenses from affiliated fund, based on the 6-month period
ended December 31, 2007 are as follows:
CLASS EXPENSE RATIOS
- -----------------------------------------
Non-Service Shares 0.72%
- -----------------------------------------
Service Shares 0.96
The expense ratios reflect reduction to custodian expenses and 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 and reduction to
custodian expenses, if applicable.
- --------------------------------------------------------------------------------
7 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
STATEMENT OF INVESTMENTS December 31, 2007
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS--99.0%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--15.0%
- --------------------------------------------------------------------------------
AUTO COMPONENTS--1.4%
Aftermarket Technology Corp. 1 27,400 $ 746,924
- --------------------------------------------------------------------------------
American Axle & Manufacturing
Holdings, Inc. 2 97,400 1,813,588
- --------------------------------------------------------------------------------
Amerigon, Inc. 1,2 27,900 589,806
- --------------------------------------------------------------------------------
Cooper Tire & Rubber Co. 2 122,400 2,029,392
- --------------------------------------------------------------------------------
Drew Industries, Inc. 1,2 42,100 1,153,540
- --------------------------------------------------------------------------------
Fuel Systems Solutions, Inc. 1,2 4,299 61,433
- --------------------------------------------------------------------------------
Goodyear Tire & Rubber Co. (The) 1 65,700 1,854,054
- --------------------------------------------------------------------------------
Hayes Lemmerz International, Inc. 1 30,300 138,471
- --------------------------------------------------------------------------------
Lear Corp. 1 60,700 1,678,962
- --------------------------------------------------------------------------------
Sauer-Danfoss, Inc. 2 10,800 270,540
- --------------------------------------------------------------------------------
Shiloh Industries, Inc. 2,900 28,565
- --------------------------------------------------------------------------------
Tenneco, Inc. 1 93,000 2,424,510
- --------------------------------------------------------------------------------
TRW Automotive Holdings Corp. 1 16,600 346,940
----------------
13,136,725
- --------------------------------------------------------------------------------
AUTOMOBILES--0.2%
Fleetwood Enterprises, Inc. 1,2 57,600 344,448
- --------------------------------------------------------------------------------
Monaco Coach Corp. 2 25,380 225,374
- --------------------------------------------------------------------------------
Thor Industries, Inc. 2 28,100 1,068,081
- --------------------------------------------------------------------------------
Winnebago Industries, Inc. 2,900 60,958
----------------
1,698,861
- --------------------------------------------------------------------------------
DISTRIBUTORS--0.0%
Core-Mark Holding Co., Inc. 1,2 6,200 178,064
- --------------------------------------------------------------------------------
DIVERSIFIED CONSUMER SERVICES--1.4%
Apollo Group, Inc., Cl. A 1 32,100 2,251,815
- --------------------------------------------------------------------------------
Capella Education Co. 1,2 16,800 1,099,728
- --------------------------------------------------------------------------------
Career Education Corp. 1 11,000 276,540
- --------------------------------------------------------------------------------
Coinstar, Inc. 1,2 53,100 1,494,765
- --------------------------------------------------------------------------------
DeVry, Inc. 32,600 1,693,896
- --------------------------------------------------------------------------------
ITT Educational Services, Inc. 1 19,200 1,637,184
- --------------------------------------------------------------------------------
K12, Inc. 1 7,340 189,959
- --------------------------------------------------------------------------------
Matthews International Corp., Cl. A 2 3,200 149,984
- --------------------------------------------------------------------------------
Noah Education Holdings Ltd., ADR 1 25,790 207,867
- --------------------------------------------------------------------------------
Pre-Paid Legal Services, Inc. 1 13,380 740,583
- --------------------------------------------------------------------------------
Regis Corp. 15,400 430,584
- --------------------------------------------------------------------------------
Sotheby's 2 10,000 381,000
- --------------------------------------------------------------------------------
Steiner Leisure Ltd. 1,2 15,700 693,312
- --------------------------------------------------------------------------------
Stewart Enterprises, Inc. 2 19,200 170,880
- --------------------------------------------------------------------------------
Strayer Education, Inc. 2 6,800 1,159,944
- --------------------------------------------------------------------------------
Weight Watchers International, Inc. 8,100 365,958
----------------
12,943,999
SHARES VALUE
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--1.0%
AFC Enterprises, Inc. 1,2 9,100 $ 103,012
- --------------------------------------------------------------------------------
Ambassadors Group, Inc. 2 9,300 170,283
- --------------------------------------------------------------------------------
Bally Technologies, Inc. 1 14,400 715,968
- --------------------------------------------------------------------------------
Bob Evans Farms, Inc. 2 67,814 1,826,231
- --------------------------------------------------------------------------------
Buffalo Wild Wings, Inc. 1,2 21,100 489,942
- --------------------------------------------------------------------------------
CBRL Group, Inc. 2 14,050 455,080
- --------------------------------------------------------------------------------
CEC Entertainment, Inc. 1 13,000 337,480
- --------------------------------------------------------------------------------
Chipotle Mexican Grill, Inc., Cl. A 1,2 3,700 544,159
- --------------------------------------------------------------------------------
Denny's Corp. 1,2 123,900 464,625
- --------------------------------------------------------------------------------
Domino's Pizza, Inc. 2 38,600 510,678
- --------------------------------------------------------------------------------
IHOP Corp. 2 28,800 1,053,504
- --------------------------------------------------------------------------------
Luby's, Inc. 1,2 2,300 23,368
- --------------------------------------------------------------------------------
Monarch Casino & Resort, Inc. 1,2 20,800 500,864
- --------------------------------------------------------------------------------
Premier Exhibitions, Inc. 1,2 41,500 454,010
- --------------------------------------------------------------------------------
Riviera Holdings Corp. 1,2 700 21,560
- --------------------------------------------------------------------------------
Vail Resorts, Inc. 1,2 3,900 209,859
- --------------------------------------------------------------------------------
Wendy's International, Inc. 15,700 405,688
- --------------------------------------------------------------------------------
WMS Industries, Inc. 1 10,500 384,720
- --------------------------------------------------------------------------------
Wyndham Worldwide Corp. 28,700 676,172
----------------
9,347,203
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES--2.6%
American Greetings Corp., Cl. A 2 110,300 2,239,090
- --------------------------------------------------------------------------------
Black & Decker Corp. 26,800 1,866,620
- --------------------------------------------------------------------------------
Blyth, Inc. 56,680 1,243,559
- --------------------------------------------------------------------------------
Centex Corp. 2,800 70,728
- --------------------------------------------------------------------------------
Champion Enterprises, Inc. 1,2 63,900 601,938
- --------------------------------------------------------------------------------
CSS Industries, Inc. 2 14,350 526,645
- --------------------------------------------------------------------------------
Ethan Allen Interiors, Inc. 2 13,800 393,300
- --------------------------------------------------------------------------------
Helen of Troy Ltd. 1 17,000 291,380
- --------------------------------------------------------------------------------
Hooker Furniture Corp. 2 10,800 217,080
- --------------------------------------------------------------------------------
KB Home 2 61,600 1,330,560
- --------------------------------------------------------------------------------
Kimball International, Inc., Cl. B 2 33,600 460,320
- --------------------------------------------------------------------------------
Lennar Corp., Cl. A 2 90,600 1,620,834
- --------------------------------------------------------------------------------
Mohawk Industries, Inc. 1,2 15,200 1,130,880
- --------------------------------------------------------------------------------
NVR, Inc. 1,2 3,200 1,676,800
- --------------------------------------------------------------------------------
Russ Berrie & Co., Inc. 1 500 8,180
- --------------------------------------------------------------------------------
Stanley Works (The) 38,200 1,851,936
- --------------------------------------------------------------------------------
Tempur-Pedic International, Inc. 2 91,500 2,376,255
- --------------------------------------------------------------------------------
Toll Brothers, Inc. 1 82,800 1,660,968
- --------------------------------------------------------------------------------
Tupperware Brands Corp. 98,000 3,236,940
- --------------------------------------------------------------------------------
Universal Electronics, Inc. 1,2 19,600 655,424
- --------------------------------------------------------------------------------
Whirlpool Corp. 5,100 416,313
----------------
23,875,750
8 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
SHARES VALUE
- --------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL--1.2%
1-800-FLOWERS.com, Inc. 1,2 46,900 $ 409,437
- --------------------------------------------------------------------------------
Audible, Inc. 1,2 17,600 156,992
- --------------------------------------------------------------------------------
Blue Nile, Inc. 1,2 24,400 1,660,664
- --------------------------------------------------------------------------------
Expedia, Inc. 1 60,100 1,900,362
- --------------------------------------------------------------------------------
Gaiam, Inc. 1,2 28,300 839,944
- --------------------------------------------------------------------------------
IAC/InterActiveCorp 1 13,800 371,496
- --------------------------------------------------------------------------------
NetFlix.com, Inc. 1,2 81,400 2,166,868
- --------------------------------------------------------------------------------
NutriSystem, Inc. 1 8,000 215,840
- --------------------------------------------------------------------------------
Overstock.com, Inc. 1,2 30,200 469,006
- --------------------------------------------------------------------------------
PetMed Express, Inc. 1,2 33,700 407,770
- --------------------------------------------------------------------------------
Priceline.com, Inc. 1,2 13,100 1,504,666
- --------------------------------------------------------------------------------
Shutterfly, Inc. 1,2 10,800 276,696
- --------------------------------------------------------------------------------
Stamps.com, Inc. 1,2 6,900 84,042
- --------------------------------------------------------------------------------
Systemax, Inc. 27,700 562,864
- --------------------------------------------------------------------------------
ValueVision Media, Inc., Cl. A 1 9,600 60,384
----------------
11,087,031
- --------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS--0.8%
Arctic Cat, Inc. 2 2,100 25,074
- --------------------------------------------------------------------------------
Brunswick Corp. 70,000 1,193,500
- --------------------------------------------------------------------------------
Callaway Golf Co. 2 119,200 2,077,656
- --------------------------------------------------------------------------------
Eastman Kodak Co. 2 3,700 80,919
- --------------------------------------------------------------------------------
JAKKS Pacific, Inc. 1,2 28,800 679,968
- --------------------------------------------------------------------------------
Polaris Industries, Inc. 2 51,700 2,469,709
- --------------------------------------------------------------------------------
RC2 Corp. 1,2 16,200 454,734
- --------------------------------------------------------------------------------
Sturm, Ruger & Co., Inc. 1,2 25,100 207,828
----------------
7,189,388
- --------------------------------------------------------------------------------
MEDIA--1.3%
Charter Communications, Inc., Cl. A 1,2 671,200 785,304
- --------------------------------------------------------------------------------
Cox Radio, Inc., Cl. A 1,2 46,300 562,545
- --------------------------------------------------------------------------------
Cumulus Media, Inc., Cl. A 1,2 24,100 193,764
- --------------------------------------------------------------------------------
DG Fastchannel, Inc. 1,2 6,800 174,352
- --------------------------------------------------------------------------------
Entravision Communications Corp. 1 168,400 1,318,572
- --------------------------------------------------------------------------------
Getty Images, Inc. 1 32,900 954,100
- --------------------------------------------------------------------------------
Global Sources Ltd. 1,2 48,400 1,365,848
- --------------------------------------------------------------------------------
Gray Television, Inc. 2 2,400 19,248
- --------------------------------------------------------------------------------
Harte-Hanks, Inc. 4,600 79,580
- --------------------------------------------------------------------------------
Idearc, Inc. 24,100 423,196
- --------------------------------------------------------------------------------
Journal Communications, Inc. 2 8,900 79,566
- --------------------------------------------------------------------------------
Lin TV Corp. 1,2 46,400 564,688
- --------------------------------------------------------------------------------
Marvel Entertainment, Inc. 1,2 66,500 1,776,215
- --------------------------------------------------------------------------------
Mediacom Communications Corp. 1,2 18,300 83,997
- --------------------------------------------------------------------------------
Scholastic Corp. 1,2 54,500 1,901,505
- --------------------------------------------------------------------------------
Sinclair Broadcast Group, Inc., Cl. A 2 139,300 1,143,653
- --------------------------------------------------------------------------------
Warner Music Group Corp. 2 89,900 544,794
----------------
11,970,927
SHARES VALUE
- --------------------------------------------------------------------------------
MULTILINE RETAIL--0.6%
Big Lots, Inc. 1,2 118,800 $ 1,899,612
- --------------------------------------------------------------------------------
Dollar Tree Stores, Inc. 1 65,000 1,684,800
- --------------------------------------------------------------------------------
Family Dollar Stores, Inc. 90,700 1,744,161
----------------
5,328,573
- --------------------------------------------------------------------------------
SPECIALTY RETAIL--3.2%
A.C. Moore Arts & Crafts, Inc. 1,2 28,700 394,625
- --------------------------------------------------------------------------------
Abercrombie & Fitch Co., Cl. A 19,600 1,567,412
- --------------------------------------------------------------------------------
Advance Auto Parts, Inc. 14,400 547,056
- --------------------------------------------------------------------------------
Aeropostale, Inc. 1,2 122,900 3,256,850
- --------------------------------------------------------------------------------
AnnTaylor Stores Corp. 1 26,400 674,784
- --------------------------------------------------------------------------------
AutoNation, Inc. 1 86,500 1,354,590
- --------------------------------------------------------------------------------
AutoZone, Inc. 1 16,000 1,918,560
- --------------------------------------------------------------------------------
Barnes & Noble, Inc. 47,000 1,619,150
- --------------------------------------------------------------------------------
Big 5 Sporting Goods Corp. 2 12,100 174,482
- --------------------------------------------------------------------------------
Blockbuster, Inc., Cl. A 1,2 347,800 1,356,420
- --------------------------------------------------------------------------------
Books-A-Million, Inc. 2 12,500 149,000
- --------------------------------------------------------------------------------
Brown Shoe Co., Inc. 77,975 1,182,881
- --------------------------------------------------------------------------------
Buckle, Inc. (The) 2 61,300 2,022,900
- --------------------------------------------------------------------------------
Build-A-Bear-Workshop, Inc. 1 2,400 33,480
- --------------------------------------------------------------------------------
Cato Corp., Cl. A 2 19,750 309,285
- --------------------------------------------------------------------------------
Chico's FAS, Inc. 1,2 46,800 422,604
- --------------------------------------------------------------------------------
Christopher & Banks Corp. 2 27,800 318,310
- --------------------------------------------------------------------------------
Conn's, Inc. 1,2 21,800 372,998
- --------------------------------------------------------------------------------
Dress Barn, Inc. (The) 1,2 106,800 1,336,068
- --------------------------------------------------------------------------------
Hibbett Sports, Inc. 1,2 31,300 625,374
- --------------------------------------------------------------------------------
Hot Topic, Inc. 1,2 46,200 268,884
- --------------------------------------------------------------------------------
Jo-Ann Stores, Inc. 1,2 15,000 196,200
- --------------------------------------------------------------------------------
Jos. A. Banks Clothiers, Inc. 1,2 20,500 583,225
- --------------------------------------------------------------------------------
Men's Wearhouse, Inc. (The) 74,450 2,008,661
- --------------------------------------------------------------------------------
Midas, Inc. 1,2 4,400 64,504
- --------------------------------------------------------------------------------
Monro Muffler Brake, Inc. 2 3,600 70,164
- --------------------------------------------------------------------------------
Office Depot, Inc. 1 42,900 596,739
- --------------------------------------------------------------------------------
Pacific Sunwear of California, Inc. 1 11,300 159,443
- --------------------------------------------------------------------------------
Pep Boys-Manny, Moe & Jack 2 23,100 265,188
- --------------------------------------------------------------------------------
Pier 1 Imports, Inc. 1,2 62,200 325,306
- --------------------------------------------------------------------------------
RadioShack Corp. 2 97,600 1,645,536
- --------------------------------------------------------------------------------
Rent-A-Center, Inc. 1 37,500 544,500
- --------------------------------------------------------------------------------
Sally Beauty Holdings, Inc. 1,2 136,800 1,238,040
- --------------------------------------------------------------------------------
Select Comfort Corp. 1,2 42,200 295,822
- --------------------------------------------------------------------------------
Sherwin-Williams Co. 2 9,800 568,792
- --------------------------------------------------------------------------------
Sonic Automotive, Inc. 9,500 183,920
- --------------------------------------------------------------------------------
Stage Stores, Inc. 2 10,475 155,030
- --------------------------------------------------------------------------------
Talbots, Inc. (The) 2 7,400 87,468
- --------------------------------------------------------------------------------
Ulta Salon, Cosmetics & Fragrance, Inc. 1,2 2,580 44,247
- --------------------------------------------------------------------------------
West Marine, Inc. 1,2 1,500 13,470
----------------
28,951,968
9 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
STATEMENT OF INVESTMENTS Continued
SHARES VALUE
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS--1.3%
Cherokee, Inc. 2 5,300 $ 171,031
- --------------------------------------------------------------------------------
Deckers Outdoor Corp. 1,2 12,200 1,891,732
- --------------------------------------------------------------------------------
Fossil, Inc. 1 54,000 2,266,920
- --------------------------------------------------------------------------------
Kellwood Co. 18,600 309,504
- --------------------------------------------------------------------------------
Maidenform Brands, Inc. 1 1,500 20,295
- --------------------------------------------------------------------------------
Movado Group, Inc. 2 26,500 670,185
- --------------------------------------------------------------------------------
Perry Ellis International, Inc. 1,2 13,900 213,782
- --------------------------------------------------------------------------------
Polo Ralph Lauren Corp., Cl. A 23,600 1,458,244
- --------------------------------------------------------------------------------
Steven Madden Ltd. 1 23,000 460,000
- --------------------------------------------------------------------------------
Warnaco Group, Inc. (The) 1 63,400 2,206,320
- --------------------------------------------------------------------------------
Wolverine World Wide, Inc. 2 87,850 2,154,082
----------------
11,822,095
- --------------------------------------------------------------------------------
CONSUMER STAPLES--2.7%
- --------------------------------------------------------------------------------
BEVERAGES--0.1%
Boston Beer Co., Inc., Cl. A 1,2 7,900 297,435
- --------------------------------------------------------------------------------
Hansen Natural Corp. 1,2 9,000 398,610
----------------
696,045
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--0.7%
Arden Group, Inc., Cl. A 2 1,505 232,808
- --------------------------------------------------------------------------------
BJ's Wholesale Club, Inc. 1 74,000 2,503,420
- --------------------------------------------------------------------------------
Casey's General Stores, Inc. 2 54,000 1,598,940
- --------------------------------------------------------------------------------
China Nepstar Chain
Drugstore Ltd., ADR 1,2 8,120 142,750
- --------------------------------------------------------------------------------
Ingles Markets, Inc., Cl. A 21,800 553,502
- --------------------------------------------------------------------------------
Nash Finch Co. 2 16,400 578,592
- --------------------------------------------------------------------------------
Performance Food Group Co. 1,2 34,000 913,580
- --------------------------------------------------------------------------------
PriceSmart, Inc. 2 9,700 291,582
- --------------------------------------------------------------------------------
SUPERVALU, Inc. 2,800 105,056
----------------
6,920,230
- --------------------------------------------------------------------------------
FOOD PRODUCTS--0.7%
Agria Corp., ADR 1 16,300 169,357
- --------------------------------------------------------------------------------
Cal-Maine Foods, Inc. 2 24,300 644,679
- --------------------------------------------------------------------------------
Chiquita Brands International, Inc. 1 28,000 514,920
- --------------------------------------------------------------------------------
Darling International, Inc. 1 88,200 1,019,592
- --------------------------------------------------------------------------------
Flowers Foods, Inc. 111,550 2,611,386
- --------------------------------------------------------------------------------
Fresh Del Monte Produce, Inc. 1 1,400 47,012
- --------------------------------------------------------------------------------
Green Mountain Coffee, Inc. 1,2 23,200 944,240
- --------------------------------------------------------------------------------
Imperial Sugar Co. 2 20,500 384,785
- --------------------------------------------------------------------------------
Reddy Ice Holdings, Inc. 13,000 329,030
- --------------------------------------------------------------------------------
Seaboard Corp. 2 150 220,500
----------------
6,885,501
SHARES VALUE
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS--0.2%
Energizer Holdings, Inc. 1 7,600 $ 852,188
- --------------------------------------------------------------------------------
WD-40 Co. 2 19,386 736,086
----------------
1,588,274
- --------------------------------------------------------------------------------
PERSONAL PRODUCTS--0.5%
American Oriental Bioengineering, Inc. 1,2 122,200 1,353,976
- --------------------------------------------------------------------------------
Elizabeth Arden, Inc. 1,2 23,900 486,365
- --------------------------------------------------------------------------------
Estee Lauder Cos., Inc. (The), Cl. A 6,000 261,660
- --------------------------------------------------------------------------------
Herbalife Ltd. 19,000 765,320
- --------------------------------------------------------------------------------
NBTY, Inc. 1 59,000 1,616,600
- --------------------------------------------------------------------------------
Nu Skin Asia Pacific, Inc., Cl. A 9,600 157,728
----------------
4,641,649
- --------------------------------------------------------------------------------
TOBACCO--0.5%
Alliance One International, Inc. 1,2 32,300 131,461
- --------------------------------------------------------------------------------
Universal Corp. 2 42,300 2,166,606
- --------------------------------------------------------------------------------
UST, Inc. 19,800 1,085,040
- --------------------------------------------------------------------------------
Vector Group Ltd. 2 51,595 1,034,996
----------------
4,418,103
- --------------------------------------------------------------------------------
ENERGY--4.0%
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--2.0%
Atwood Oceanics, Inc. 1,2 2,200 220,528
- --------------------------------------------------------------------------------
Dawson Geophysical Co. 1,2 7,500 535,950
- --------------------------------------------------------------------------------
Dresser-Rand Group, Inc. 1 41,800 1,632,290
- --------------------------------------------------------------------------------
Dril-Quip, Inc. 1 8,200 456,412
- --------------------------------------------------------------------------------
ENGlobal Corp. 1,2 10,100 114,736
- --------------------------------------------------------------------------------
Ensign Energy Services, Inc. 900 13,811
- --------------------------------------------------------------------------------
Exterran Holdings, Inc. 1 8,600 703,480
- --------------------------------------------------------------------------------
Global Industries Ltd. 1 69,800 1,495,116
- --------------------------------------------------------------------------------
Grey Wolf, Inc. 1,2 214,000 1,140,620
- --------------------------------------------------------------------------------
Gulf Island Fabrication, Inc. 2 12,900 409,059
- --------------------------------------------------------------------------------
Gulfmark Offshore, Inc. 1,2 36,600 1,712,514
- --------------------------------------------------------------------------------
Matrix Service Co. 1 22,100 482,222
- --------------------------------------------------------------------------------
NATCO Group, Inc., Cl. A 1 35,700 1,933,155
- --------------------------------------------------------------------------------
Newpark Resources, Inc. 1,2 50,700 276,315
- --------------------------------------------------------------------------------
Oil States International, Inc. 1 63,100 2,152,972
- --------------------------------------------------------------------------------
Patterson-UTI Energy, Inc. 4,700 91,744
- --------------------------------------------------------------------------------
Seacor Holdings, Inc. 1,2 17,100 1,585,854
- --------------------------------------------------------------------------------
T-3 Energy Services, Inc. 1,2 11,700 550,017
- --------------------------------------------------------------------------------
Technicoil Corp. 1 7,100 3,215
- --------------------------------------------------------------------------------
Technicoil Corp. 1 126,700 57,371
- --------------------------------------------------------------------------------
Tidewater, Inc. 9,600 526,656
- --------------------------------------------------------------------------------
Trican Well Service Ltd. 3,700 71,595
- --------------------------------------------------------------------------------
Trico Marine Services, Inc. 1 1,400 51,828
- --------------------------------------------------------------------------------
Willbros Group, Inc. 1 48,000 1,837,920
----------------
18,055,380
10 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
SHARES VALUE
- --------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS--2.0%
Alberta Clipper Energy, Inc. 1 3,287 $ 6,383
- --------------------------------------------------------------------------------
Alpha Natural Resources, Inc. 1,2 102,000 3,312,960
- --------------------------------------------------------------------------------
Berry Petroleum Co., Cl. A 2 15,100 671,195
- --------------------------------------------------------------------------------
Bois d'Arc Energy, Inc. 1 3,800 75,430
- --------------------------------------------------------------------------------
Celtic Exploration Ltd. 1 2,800 31,556
- --------------------------------------------------------------------------------
Delphi Energy Corp. 1 3,700 6,813
- --------------------------------------------------------------------------------
Foundation Coal Holdings, Inc. 2 58,600 3,076,500
- --------------------------------------------------------------------------------
Galleon Energy, Inc., Cl. A 1 8,350 130,232
- --------------------------------------------------------------------------------
Galleon Energy, Inc.,
Subscription Receipts 1 11,250 175,463
- --------------------------------------------------------------------------------
Jura Energy Corp. 1 110,300 41,066
- --------------------------------------------------------------------------------
Knightsbridge Tankers Ltd. 2 4,100 99,015
- --------------------------------------------------------------------------------
Mariner Energy, Inc. 1 51,800 1,185,184
- --------------------------------------------------------------------------------
MarkWest Hydrocarbon, Inc. 3,300 206,745
- --------------------------------------------------------------------------------
Massey Energy Co. 88,300 3,156,725
- --------------------------------------------------------------------------------
Midnight Oil Exploration Ltd. 1 45,050 48,958
- --------------------------------------------------------------------------------
Midnight Oil Exploration Ltd. 1,3 27,900 30,320
- --------------------------------------------------------------------------------
Paramount Resources Ltd., Cl. A 1 4,500 62,035
- --------------------------------------------------------------------------------
Petrohawk Energy Corp. 1 10,600 183,486
- --------------------------------------------------------------------------------
Redstar Oil & Gas, Inc. 1 35,955 22,431
- --------------------------------------------------------------------------------
Rosetta Resources, Inc. 1 32,300 640,509
- --------------------------------------------------------------------------------
Stone Energy Corp. 1 45,200 2,120,332
- --------------------------------------------------------------------------------
Tesoro Corp. 43,600 2,079,720
- --------------------------------------------------------------------------------
Tristar Oil & Gas Ltd. 1 4,800 60,568
- --------------------------------------------------------------------------------
Tusk Energy Corp. 1 43,812 62,601
- --------------------------------------------------------------------------------
Tusk Energy Corp. 1,4 21,300 30,435
- --------------------------------------------------------------------------------
Tusk Energy Corp. 77,900 111,308
- --------------------------------------------------------------------------------
USEC, Inc. 1,2 81,400 732,600
- --------------------------------------------------------------------------------
VAALCO Energy, Inc. 1,2 7,100 33,015
- --------------------------------------------------------------------------------
Vero Energy, Inc. 1 2,482 14,485
- --------------------------------------------------------------------------------
W&T Offshore, Inc. 2 7,400 221,704
----------------
18,629,774
- --------------------------------------------------------------------------------
FINANCIALS--8.6%
- --------------------------------------------------------------------------------
CAPITAL MARKETS--1.1%
Calamos Asset Management, Inc., Cl. A 25,800 768,324
- --------------------------------------------------------------------------------
FCStone Group, Inc. 1 6,600 303,798
- --------------------------------------------------------------------------------
GAMCO Investors, Inc., Cl. A 2 17,900 1,238,680
- --------------------------------------------------------------------------------
GFI Group, Inc. 1,2 8,500 813,620
- --------------------------------------------------------------------------------
Greenhill & Co., Inc. 2 1,800 119,664
- --------------------------------------------------------------------------------
Janus Capital Group, Inc. 61,600 2,023,560
- --------------------------------------------------------------------------------
Knight Capital Group, Inc., Cl. A 1 13,700 197,280
- --------------------------------------------------------------------------------
optionsXpress Holdings, Inc. 2 66,700 2,255,794
- --------------------------------------------------------------------------------
Pzena Investment Management, Inc. 2 6,500 74,100
- --------------------------------------------------------------------------------
SWS Group, Inc. 31,150 394,671
- --------------------------------------------------------------------------------
Tradestation Group, Inc. 1,2 43,300 615,293
SHARES VALUE
- --------------------------------------------------------------------------------
CAPITAL MARKETS Continued
U.S. Global Investors, Inc., Cl. A 2 25,400 $ 423,164
- --------------------------------------------------------------------------------
W.P. Carey & Co. LLC 3,900 129,480
- --------------------------------------------------------------------------------
Waddell & Reed Financial, Inc. 12,800 461,952
----------------
9,819,380
- --------------------------------------------------------------------------------
COMMERCIAL BANKS--0.3%
Amcore Financial, Inc. 2 3,500 79,450
- --------------------------------------------------------------------------------
BancFirst Corp. 800 34,280
- --------------------------------------------------------------------------------
Capital City Bank Group, Inc. 2 300 8,466
- --------------------------------------------------------------------------------
Cascade Bancorp 2 7,300 101,616
- --------------------------------------------------------------------------------
Chemical Financial Corp. 2 800 19,032
- --------------------------------------------------------------------------------
City Holding Co. 10,000 338,400
- --------------------------------------------------------------------------------
Columbia Banking System, Inc. 2 6,400 190,272
- --------------------------------------------------------------------------------
F.N.B. Corp. 1,900 27,930
- --------------------------------------------------------------------------------
First Security Group, Inc. 14,800 132,756
- --------------------------------------------------------------------------------
Independent Bank Corp.,
Massachusetts 2 2,900 78,938
- --------------------------------------------------------------------------------
NBT Bancorp, Inc. 2 10,900 248,738
- --------------------------------------------------------------------------------
Park National Corp. 2 700 45,150
- --------------------------------------------------------------------------------
Porter Bancorp, Inc. 2,400 47,400
- --------------------------------------------------------------------------------
S&T Bancorp, Inc. 2 700 19,348
- --------------------------------------------------------------------------------
Southwest Bancorp, Inc. 1,400 25,662
- --------------------------------------------------------------------------------
Sterling Bancorp 1,400 19,096
- --------------------------------------------------------------------------------
Sterling Financial Corp., Eastern US 2 2,600 42,692
- --------------------------------------------------------------------------------
SVB Financial Group 1,2 13,800 695,520
- --------------------------------------------------------------------------------
WesBanco, Inc. 2 13,800 284,280
----------------
2,439,026
- --------------------------------------------------------------------------------
CONSUMER FINANCE--0.3%
Advance America Cash
Advance Centers, Inc. 3,600 36,576
- --------------------------------------------------------------------------------
Advanta Corp., Cl. B 2 79,450 641,162
- --------------------------------------------------------------------------------
AmeriCredit Corp. 1,2 58,420 747,192
- --------------------------------------------------------------------------------
Discover Financial Services 47,800 720,824
- --------------------------------------------------------------------------------
Student Loan Corp. (The) 400 44,000
- --------------------------------------------------------------------------------
World Acceptance Corp. 1,2 18,200 491,036
----------------
2,680,790
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--0.4%
Asset Acceptance Capital Corp. 2 30,700 319,587
- --------------------------------------------------------------------------------
ASTA Funding, Inc. 2 2,900 76,676
- --------------------------------------------------------------------------------
CIT Group, Inc. 57,100 1,372,113
- --------------------------------------------------------------------------------
Financial Federal Corp. 2 12,400 276,396
- --------------------------------------------------------------------------------
MarketAxess Holdings, Inc. 1,2 29,700 381,051
- --------------------------------------------------------------------------------
NASDAQ Stock Market, Inc. 1 2,300 113,827
- --------------------------------------------------------------------------------
Portfolio Recovery Associates, Inc. 2 22,300 884,641
----------------
3,424,291
11 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
INSURANCE--3.8%
Alfa Corp. 5,500 $ 119,185
- --------------------------------------------------------------------------------
Alleghany Corp. 1 200 80,400
- --------------------------------------------------------------------------------
Ambac Financial Group, Inc. 2 40,900 1,053,993
- --------------------------------------------------------------------------------
American Equity Investment
Life Holding Co. 2 400 3,316
- --------------------------------------------------------------------------------
American Physicians Capital, Inc. 15,150 628,119
- --------------------------------------------------------------------------------
Amerisafe, Inc. 1 28,700 445,137
- --------------------------------------------------------------------------------
AmTrust Financial Services, Inc. 38,700 532,899
- --------------------------------------------------------------------------------
Argo Group International
Holdings Ltd. 1,2 18,490 778,984
- --------------------------------------------------------------------------------
Aspen Insurance Holdings Ltd. 1,400 40,376
- --------------------------------------------------------------------------------
Assurant, Inc. 33,300 2,227,770
- --------------------------------------------------------------------------------
Assured Guaranty Ltd. 18,600 493,644
- --------------------------------------------------------------------------------
Berkley (W.R.) Corp. 16,500 491,865
- --------------------------------------------------------------------------------
CNA Surety Corp. 1 26,700 528,393
- --------------------------------------------------------------------------------
CNinsure, Inc., ADR 1 6,540 103,005
- --------------------------------------------------------------------------------
Commerce Group, Inc. (The) 22,287 801,886
- --------------------------------------------------------------------------------
Darwin Professional Underwriters, Inc. 1,2 4,400 106,348
- --------------------------------------------------------------------------------
Delphi Financial Group, Inc., Cl. A 58,950 2,079,756
- --------------------------------------------------------------------------------
Donegal Group, Inc., Cl. A 2 1,666 28,605
- --------------------------------------------------------------------------------
EMC Insurance Group, Inc. 2 2,600 61,542
- --------------------------------------------------------------------------------
FBL Financial Group, Inc., Cl. A 2 26,100 901,233
- --------------------------------------------------------------------------------
Fidelity National Title Group, Inc., Cl. A 43,100 629,691
- --------------------------------------------------------------------------------
First American Corp. (The) 44,700 1,525,164
- --------------------------------------------------------------------------------
FPIC Insurance Group, Inc. 1,2 7,400 318,052
- --------------------------------------------------------------------------------
Genworth Financial, Inc., Cl. A 17,600 447,920
- --------------------------------------------------------------------------------
Hallmark Financial Services, Inc. 1 1,600 25,376
- --------------------------------------------------------------------------------
Harleysville Group, Inc. 2 10,000 353,800
- --------------------------------------------------------------------------------
HCC Insurance Holdings, Inc. 21,700 622,356
- --------------------------------------------------------------------------------
Hilb, Rogal & Hamilton Co. 9,200 373,244
- --------------------------------------------------------------------------------
Horace Mann Educators Corp. 28,700 543,578
- --------------------------------------------------------------------------------
Infinity Property & Casualty Corp. 2 23,200 838,216
- --------------------------------------------------------------------------------
IPC Holdings Ltd. 20,900 603,383
- --------------------------------------------------------------------------------
LandAmerica Financial Group, Inc. 2 5,000 167,250
- --------------------------------------------------------------------------------
Max Capital Group Ltd. 2 70,900 1,984,491
- --------------------------------------------------------------------------------
MBIA, Inc. 2 49,400 920,322
- --------------------------------------------------------------------------------
Meadowbrook Insurance Group, Inc. 1,2 6,300 59,283
- --------------------------------------------------------------------------------
Midland Co. (The) 9,900 640,431
- --------------------------------------------------------------------------------
Montpelier Re Holdings Ltd. 2 23,900 406,539
- --------------------------------------------------------------------------------
National Interstate Corp. 2 7,000 231,700
- --------------------------------------------------------------------------------
National Western Life
Insurance Co., Cl. A 2 700 145,159
- --------------------------------------------------------------------------------
Navigators Group, Inc. (The) 1 11,400 741,000
- --------------------------------------------------------------------------------
Phoenix Cos., Inc. (The) 88,558 1,051,183
- --------------------------------------------------------------------------------
Platinum Underwriters Holdings Ltd. 31,600 1,123,696
- --------------------------------------------------------------------------------
Presidential Life Corp. 600 10,506
SHARES VALUE
- --------------------------------------------------------------------------------
INSURANCE Continued
ProAssurance Corp. 1 17,600 $ 966,592
- --------------------------------------------------------------------------------
ProCentury Corp. 2 12,000 184,200
- --------------------------------------------------------------------------------
RAM Holdings Ltd. 1,2 8,900 43,966
- --------------------------------------------------------------------------------
RLI Corp. 36,700 2,084,193
- --------------------------------------------------------------------------------
Safeco Corp. 28,700 1,598,016
- --------------------------------------------------------------------------------
Safety Insurance Group, Inc. 2 400 14,648
- --------------------------------------------------------------------------------
Seabright Insurance Holdings, Inc. 1 24,200 364,936
- --------------------------------------------------------------------------------
Selective Insurance Group, Inc. 2 26,400 606,936
- --------------------------------------------------------------------------------
StanCorp Financial Group, Inc. 9,900 498,762
- --------------------------------------------------------------------------------
State Auto Financial Corp. 5,200 136,760
- --------------------------------------------------------------------------------
Torchmark Corp. 21,400 1,295,342
- --------------------------------------------------------------------------------
Transatlantic Holdings, Inc. 2 3,900 283,413
- --------------------------------------------------------------------------------
United America Indemnity Ltd., Cl. A 1,2 45,506 906,480
- --------------------------------------------------------------------------------
United Fire & Casualty Co. 14,300 415,987
- --------------------------------------------------------------------------------
Universal Insurance Holdings, Inc. 1,800 13,338
- --------------------------------------------------------------------------------
Zenith National Insurance Corp. 7,300 326,529
----------------
35,008,894
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS--2.3%
Acadia Realty Trust 2 2,200 56,342
- --------------------------------------------------------------------------------
Agree Realty Corp. 2 7,300 219,730
- --------------------------------------------------------------------------------
Alexander's, Inc. 1,2 200 70,650
- --------------------------------------------------------------------------------
Alexandria Real Estate Equities, Inc. 6,000 610,020
- --------------------------------------------------------------------------------
Arbor Realty Trust, Inc. 2 6,700 107,937
- --------------------------------------------------------------------------------
Ashford Hospitality Trust 2 43,700 314,203
- --------------------------------------------------------------------------------
Associated Estates Realty Corp. 2 5,200 49,088
- --------------------------------------------------------------------------------
BioMed Realty Trust, Inc. 2 1,300 30,121
- --------------------------------------------------------------------------------
Brandywine Realty Trust 17,114 306,854
- --------------------------------------------------------------------------------
Capital Trust, Cl. A 2 6,700 205,355
- --------------------------------------------------------------------------------
CBL & Associates Properties, Inc. 17,300 413,643
- --------------------------------------------------------------------------------
Cedar Shopping Centers, Inc. 2 9,000 92,070
- --------------------------------------------------------------------------------
Colonial Properties Trust 2 4,254 96,268
- --------------------------------------------------------------------------------
Corporate Office Properties Trust 7,300 229,950
- --------------------------------------------------------------------------------
DCT Industrial Trust, Inc. 2 300 2,793
- --------------------------------------------------------------------------------
DiamondRock Hospitality Co. 39,400 590,212
- --------------------------------------------------------------------------------
Digital Realty Trust, Inc. 2 26,300 1,009,131
- --------------------------------------------------------------------------------
DuPont Fabros Technology, Inc. 2 6,110 119,756
- --------------------------------------------------------------------------------
EastGroup Properties, Inc. 2 6,300 263,655
- --------------------------------------------------------------------------------
Entertainment Properties Trust 13,000 611,000
- --------------------------------------------------------------------------------
Equity Lifestyle Properties, Inc. 6,800 310,556
- --------------------------------------------------------------------------------
Equity One, Inc. 2 20,900 481,327
- --------------------------------------------------------------------------------
FelCor Lodging Trust, Inc. 2 41,400 645,426
- --------------------------------------------------------------------------------
First Industrial Realty Trust, Inc. 2 31,200 1,079,520
- --------------------------------------------------------------------------------
Glimcher Realty Trust 2 4,300 61,447
- --------------------------------------------------------------------------------
Gramercy Capital Corp. 2 8,300 201,773
12 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
SHARES VALUE
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS Continued
Hersha Hospitality Trust 2 9,400 $ 89,300
- --------------------------------------------------------------------------------
Highwoods Properties, Inc. 20,400 599,352
- --------------------------------------------------------------------------------
Home Properties of New York, Inc. 2 5,600 251,160
- --------------------------------------------------------------------------------
Inland Real Estate Corp. 2 40,400 572,064
- --------------------------------------------------------------------------------
Kite Realty Group Trust 2 11,300 172,551
- --------------------------------------------------------------------------------
LaSalle Hotel Properties 2 10,400 331,760
- --------------------------------------------------------------------------------
Lexington Realty Trust 2 21,300 309,702
- --------------------------------------------------------------------------------
LTC Properties, Inc. 2 12,200 305,610
- --------------------------------------------------------------------------------
Medical Properties Trust, Inc. 2 5,300 54,007
- --------------------------------------------------------------------------------
Mid-America Apartment
Communities, Inc. 2 7,300 312,075
- --------------------------------------------------------------------------------
National Health Investors, Inc. 2 5,200 145,080
- --------------------------------------------------------------------------------
National Retail Properties, Inc. 2 32,400 757,512
- --------------------------------------------------------------------------------
Nationwide Health Properties, Inc. 51,500 1,615,555
- --------------------------------------------------------------------------------
Newcastle Investment Corp. 2 16,200 209,952
- --------------------------------------------------------------------------------
Omega Healthcare Investors, Inc. 2 30,200 484,710
- --------------------------------------------------------------------------------
Parkway Properties, Inc. 2 9,500 351,310
- --------------------------------------------------------------------------------
Pennsylvania Real Estate
Investment Trust 2 21,300 632,184
- --------------------------------------------------------------------------------
PS Business Parks, Inc. 8,500 446,675
- --------------------------------------------------------------------------------
RAIT Financial Trust 2 21,600 186,192
- --------------------------------------------------------------------------------
Ramco-Gershenson Properties Trust 2 8,900 190,193
- --------------------------------------------------------------------------------
Realty Income Corp. 2 37,300 1,007,846
- --------------------------------------------------------------------------------
Redwood Trust, Inc. 2 7,000 239,680
- --------------------------------------------------------------------------------
Resource Capital Corp. 2 1,800 16,758
- --------------------------------------------------------------------------------
Saul Centers, Inc. 2 3,600 192,348
- --------------------------------------------------------------------------------
Senior Housing Properties Trust 2 43,600 988,848
- --------------------------------------------------------------------------------
Sovran Self Storage, Inc. 2 5,100 204,510
- --------------------------------------------------------------------------------
Strategic Hotels & Resorts, Inc. 2 23,200 388,136
- --------------------------------------------------------------------------------
Sunstone Hotel Investors, Inc. 2 27,400 501,146
- --------------------------------------------------------------------------------
Tanger Factory Outlet Centers, Inc. 2 21,100 795,681
- --------------------------------------------------------------------------------
Taubman Centers, Inc. 9,600 472,224
- --------------------------------------------------------------------------------
Washington Real Estate
Investment Trust 2 11,400 358,074
----------------
21,361,022
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE--0.4%
Dime Community Bancshares, Inc. 2 2,700 34,479
- --------------------------------------------------------------------------------
Downey Financial Corp. 2 18,300 569,313
- --------------------------------------------------------------------------------
Encore Bancshares, Inc. 1,2 8,400 167,916
- --------------------------------------------------------------------------------
Federal Agricultural
Mortgage Corp., Non-Vtg. 2 8,800 231,616
- --------------------------------------------------------------------------------
First Niagara Financial Group, Inc. 108,900 1,311,156
- --------------------------------------------------------------------------------
FirstFed Financial Corp. 1,2 21,700 777,294
- --------------------------------------------------------------------------------
KBNT Bancorp, Inc. 800 12,336
- --------------------------------------------------------------------------------
PMI Group, Inc. (The) 2 12,900 171,312
SHARES VALUE
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE Continued
Radian Group, Inc. 2 16,210 $ 189,333
- --------------------------------------------------------------------------------
TierOne Corp. 11,000 243,650
- --------------------------------------------------------------------------------
ViewPoint Financial Group 2 500 8,265
- --------------------------------------------------------------------------------
WSFS Financial Corp. 2 3,300 165,660
----------------
3,882,330
- --------------------------------------------------------------------------------
HEALTH CARE--11.0%
- --------------------------------------------------------------------------------
BIOTECHNOLOGY--1.0%
Acorda Therapeutics, Inc. 1 4,600 101,016
- --------------------------------------------------------------------------------
Alexion Pharmaceuticals, Inc. 1,2 2,900 217,587
- --------------------------------------------------------------------------------
Alnylam Pharmaceuticals, Inc. 1 21,600 628,128
- --------------------------------------------------------------------------------
Applera Corp./Celera
Genomics Group 1 11,100 176,157
- --------------------------------------------------------------------------------
Cubist Pharmaceuticals, Inc. 1 94,300 1,934,093
- --------------------------------------------------------------------------------
CytRx Corp. 1,2 94,800 269,232
- --------------------------------------------------------------------------------
Enzon Pharmaceuticals, Inc. 1,2 12,000 114,360
- --------------------------------------------------------------------------------
Halozyme Therapeutics, Inc. 1,2 30,600 217,566
- --------------------------------------------------------------------------------
Isis Pharmaceuticals, Inc. 1,2 6,900 108,675
- --------------------------------------------------------------------------------
Onyx Pharmaceuticals, Inc. 1 7,600 422,712
- --------------------------------------------------------------------------------
OSI Pharmaceuticals, Inc. 1,2 63,200 3,065,832
- --------------------------------------------------------------------------------
Regeneron Pharmaceuticals, Inc. 1 19,500 470,925
- --------------------------------------------------------------------------------
Savient Pharmaceuticals, Inc. 1,2 31,400 721,258
- --------------------------------------------------------------------------------
Seattle Genetics, Inc. 1,2 39,800 453,720
- --------------------------------------------------------------------------------
XOMA Ltd. 1,2 92,500 313,575
----------------
9,214,836
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--1.8%
Abaxis, Inc. 1,2 14,200 509,212
- --------------------------------------------------------------------------------
Align Technology, Inc. 1,2 34,400 573,792
- --------------------------------------------------------------------------------
Analogic Corp. 21,000 1,422,120
- --------------------------------------------------------------------------------
ArthroCare Corp. 1,2 11,800 566,990
- --------------------------------------------------------------------------------
ConMed Corp. 1,2 39,800 919,778
- --------------------------------------------------------------------------------
Cynosure, Inc., Cl. A 1,2 15,100 399,546
- --------------------------------------------------------------------------------
Datascope Corp. 2 12,000 436,800
- --------------------------------------------------------------------------------
Hansen Medical, Inc. 1,2 11,800 353,292
- --------------------------------------------------------------------------------
Hologic, Inc. 1,2 10,100 693,264
- --------------------------------------------------------------------------------
Immucor, Inc. 1 6,400 217,536
- --------------------------------------------------------------------------------
Intuitive Surgical, Inc. 1 8,400 2,725,800
- --------------------------------------------------------------------------------
Invacare Corp. 2 12,200 307,440
- --------------------------------------------------------------------------------
Inverness Medical Innovations, Inc. 1 2,487 139,720
- --------------------------------------------------------------------------------
IRIS International, Inc. 1,2 13,900 272,718
- --------------------------------------------------------------------------------
Kinetic Concepts, Inc. 1 25,800 1,381,848
- --------------------------------------------------------------------------------
Meridian Bioscience, Inc. 2 59,904 1,801,912
- --------------------------------------------------------------------------------
Merit Medical Systems, Inc. 1 1,800 25,020
- --------------------------------------------------------------------------------
OraSure Technologies, Inc. 1,2 11,100 98,679
- --------------------------------------------------------------------------------
Quidel Corp. 1,2 35,700 695,079
13 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES Continued
Regeneration Technologies, Inc. 1,2 8,300 $ 72,044
- --------------------------------------------------------------------------------
Somanetics Corp. 1,2 2,000 47,300
- --------------------------------------------------------------------------------
SonoSite, Inc. 1,2 10,300 346,801
- --------------------------------------------------------------------------------
Steris Corp. 85,200 2,457,168
- --------------------------------------------------------------------------------
Trans1, Inc. 1 9,200 151,524
----------------
16,615,383
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--3.8%
Air Methods Corp. 1,2 14,300 710,281
- --------------------------------------------------------------------------------
Alliance Imaging, Inc. 1,2 50,800 488,696
- --------------------------------------------------------------------------------
American Dental Partners, Inc. 1,2 9,800 98,294
- --------------------------------------------------------------------------------
AMERIGROUP Corp. 1,2 66,500 2,423,925
- --------------------------------------------------------------------------------
AmerisourceBergen Corp. 43,900 1,969,793
- --------------------------------------------------------------------------------
Apria Healthcare Group, Inc. 1,2 97,800 2,109,546
- --------------------------------------------------------------------------------
BioScrip, Inc. 1 9,000 69,570
- --------------------------------------------------------------------------------
Centene Corp. 1,2 81,800 2,244,592
- --------------------------------------------------------------------------------
Chemed Corp. 2 49,100 2,743,708
- --------------------------------------------------------------------------------
CorVel Corp. 1,2 1,700 39,134
- --------------------------------------------------------------------------------
Coventry Health Care, Inc. 1 36,800 2,180,400
- --------------------------------------------------------------------------------
Emergency Medical Services LP, Cl. A 1,2 39,200 1,147,776
- --------------------------------------------------------------------------------
Health Net, Inc. 1 38,400 1,854,720
- --------------------------------------------------------------------------------
Healthspring, Inc. 1 111,200 2,118,360
- --------------------------------------------------------------------------------
HMS Holdings Corp. 1 1,200 39,852
- --------------------------------------------------------------------------------
Humana, Inc. 1 28,100 2,116,211
- --------------------------------------------------------------------------------
Kindred Healthcare, Inc. 1,2 38,100 951,738
- --------------------------------------------------------------------------------
Landauer, Inc. 2 6,200 321,470
- --------------------------------------------------------------------------------
LCA-Vision, Inc. 2 26,100 521,217
- --------------------------------------------------------------------------------
Lincare Holdings, Inc. 1 39,500 1,388,820
- --------------------------------------------------------------------------------
MedCath Corp. 1,2 9,200 225,952
- --------------------------------------------------------------------------------
Molina Healthcare, Inc. 1,2 52,600 2,035,620
- --------------------------------------------------------------------------------
MWI Veterinary Supply, Inc. 1 1,600 64,000
- --------------------------------------------------------------------------------
National HealthCare Corp. 2 200 10,340
- --------------------------------------------------------------------------------
Omnicare, Inc. 39,000 889,590
- --------------------------------------------------------------------------------
PharMerica Corp. 1 15,768 218,860
- --------------------------------------------------------------------------------
Providence Service Corp. 1,2 8,400 236,376
- --------------------------------------------------------------------------------
PSS World Medical, Inc. 1,2 7,500 146,775
- --------------------------------------------------------------------------------
RehabCare Group, Inc. 1,2 25,100 566,256
- --------------------------------------------------------------------------------
Res-Care, Inc. 1,2 20,500 515,780
- --------------------------------------------------------------------------------
Sierra Health Services, Inc. 1 3,800 159,448
- --------------------------------------------------------------------------------
Skilled Healthcare Group, Inc., Cl. A 1,2 9,600 140,448
- --------------------------------------------------------------------------------
Tenet Healthcare Corp. 1 622,000 3,159,760
- --------------------------------------------------------------------------------
Universal American Corp. 1 6,500 166,335
- --------------------------------------------------------------------------------
WellCare Health Plans, Inc. 1 15,440 654,810
----------------
34,728,453
SHARES VALUE
- --------------------------------------------------------------------------------
HEALTH CARE TECHNOLOGY--0.4%
Computer Programs & Systems, Inc. 2 2,700 $ 61,398
- --------------------------------------------------------------------------------
Eclipsys Corp. 1,2 21,400 541,634
- --------------------------------------------------------------------------------
Omnicell, Inc. 1,2 62,200 1,675,046
- --------------------------------------------------------------------------------
Phase Forward, Inc. 1 57,500 1,250,625
----------------
3,528,703
- --------------------------------------------------------------------------------
LIFE SCIENCES TOOLS & SERVICES--1.5%
Albany Molecular Research, Inc. 1,2 16,800 241,584
- --------------------------------------------------------------------------------
Applera Corp./Applied
Biosystems Group 18,600 630,912
- --------------------------------------------------------------------------------
Bio-Rad Laboratories, Inc., Cl. A 1,2 1,300 134,706
- --------------------------------------------------------------------------------
Bruker BioSciences Corp. 1 3,400 45,220
- --------------------------------------------------------------------------------
Dionex Corp. 1,2 27,900 2,311,794
- --------------------------------------------------------------------------------
eResearch Technology, Inc. 1,2 51,500 608,730
- --------------------------------------------------------------------------------
Illumina, Inc. 1 3,600 213,336
- --------------------------------------------------------------------------------
Invitrogen Corp. 1 21,300 1,989,633
- --------------------------------------------------------------------------------
Kendle International, Inc. 1,2 14,900 728,908
- --------------------------------------------------------------------------------
Nektar Therapeutics 1 5,900 39,589
- --------------------------------------------------------------------------------
Parexel International Corp. 1,2 42,200 2,038,260
- --------------------------------------------------------------------------------
Pharmanet Development
Group, Inc. 1,2 20,800 815,568
- --------------------------------------------------------------------------------
Varian, Inc. 1 51,700 3,376,010
- --------------------------------------------------------------------------------
Ventana Medical Systems, Inc. 1 6,700 584,441
----------------
13,758,691
- --------------------------------------------------------------------------------
PHARMACEUTICALS--2.5%
Auxilium Pharmaceuticals, Inc. 1,2 11,100 332,889
- --------------------------------------------------------------------------------
BioMimetic Therapeutics, Inc. 1 5,900 102,483
- --------------------------------------------------------------------------------
Bradley Pharmaceuticals, Inc. 1,2 16,500 325,050
- --------------------------------------------------------------------------------
Cypress Bioscience, Inc. 1 6,700 73,901
- --------------------------------------------------------------------------------
Durect Corp. 1 5,900 37,937
- --------------------------------------------------------------------------------
Endo Pharmaceuticals Holdings, Inc. 1 54,000 1,440,180
- --------------------------------------------------------------------------------
Forest Laboratories, Inc. 1 69,900 2,547,855
- --------------------------------------------------------------------------------
K-V Pharmaceutical Co., Cl. A 1,2 34,600 987,484
- --------------------------------------------------------------------------------
King Pharmaceuticals, Inc. 1 202,800 2,076,672
- --------------------------------------------------------------------------------
Medicis Pharmaceutical Corp., Cl. A 2 80,800 2,098,376
- --------------------------------------------------------------------------------
MGI Pharma, Inc. 1 89,600 3,631,488
- --------------------------------------------------------------------------------
Noven Pharmaceuticals, Inc. 1,2 11,700 162,396
- --------------------------------------------------------------------------------
Obagi Medical Products, Inc. 1 31,500 576,135
- --------------------------------------------------------------------------------
Pain Therapeutics, Inc. 1,2 18,800 199,280
- --------------------------------------------------------------------------------
Par Pharmaceutical Cos., Inc. 1,2 7,350 176,400
- --------------------------------------------------------------------------------
Perrigo Co. 43,600 1,526,436
- --------------------------------------------------------------------------------
Pozen, Inc. 1,2 35,000 420,000
- --------------------------------------------------------------------------------
Salix Pharmaceuticals Ltd. 1 3,700 29,156
- --------------------------------------------------------------------------------
Sciele Pharma, Inc. 1,2 85,900 1,756,655
- --------------------------------------------------------------------------------
Sepracor, Inc. 1 65,100 1,708,875
14 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
SHARES VALUE
- --------------------------------------------------------------------------------
PHARMACEUTICALS Continued
Valeant Pharmaceuticals
International, Inc. 1 56,954 $ 681,739
- --------------------------------------------------------------------------------
Vivus, Inc. 1,2 4,600 23,828
- --------------------------------------------------------------------------------
Xenoport, Inc. 1 30,600 1,709,928
----------------
22,625,143
- --------------------------------------------------------------------------------
INDUSTRIALS--16.3%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE--1.6%
Aeroviroment, Inc. 1,2 11,500 278,300
- --------------------------------------------------------------------------------
American Science & Engineering, Inc. 2 10,500 595,875
- --------------------------------------------------------------------------------
Astronics Corp., Cl. B 1 650 27,463
- --------------------------------------------------------------------------------
Ceradyne, Inc. 1,2 42,100 1,975,753
- --------------------------------------------------------------------------------
Cubic Corp. 41,100 1,611,120
- --------------------------------------------------------------------------------
Curtiss-Wright Corp. 2 53,100 2,665,620
- --------------------------------------------------------------------------------
DRS Technologies, Inc. 2 44,300 2,404,161
- --------------------------------------------------------------------------------
Ducommun, Inc. 1 11,200 425,600
- --------------------------------------------------------------------------------
DynCorp International, Inc., Cl. A 1 71,600 1,924,608
- --------------------------------------------------------------------------------
HEICO Corp. 2 19,000 1,035,120
- --------------------------------------------------------------------------------
Orbital Sciences Corp. 1,2 42,409 1,039,869
- --------------------------------------------------------------------------------
Stanley, Inc. 1 9,600 307,392
- --------------------------------------------------------------------------------
Teledyne Technologies, Inc. 1 3,400 181,322
----------------
14,472,203
- --------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS--0.3%
ABX Holdings, Inc. 1,2 29,400 122,892
- --------------------------------------------------------------------------------
Atlas Air Worldwide Holdings, Inc. 1,2 22,100 1,198,262
- --------------------------------------------------------------------------------
Dynamex, Inc. 1,2 300 8,118
- --------------------------------------------------------------------------------
Hub Group, Inc., Cl. A 1,2 28,100 746,898
- --------------------------------------------------------------------------------
Pacer International, Inc. 2 30,600 446,760
----------------
2,522,930
- --------------------------------------------------------------------------------
AIRLINES--1.2%
Allegiant Travel Co. 1,2 9,200 295,688
- --------------------------------------------------------------------------------
AMR Corp. 1,2 113,900 1,598,017
- --------------------------------------------------------------------------------
Continental Airlines, Inc., Cl. B 1 72,800 1,619,800
- --------------------------------------------------------------------------------
Copa Holdings SA, Cl. A 24,900 935,493
- --------------------------------------------------------------------------------
Delta Air Lines, Inc. 1 30,300 451,167
- --------------------------------------------------------------------------------
Northwest Airlines Corp. 1 94,100 1,365,391
- --------------------------------------------------------------------------------
Pinnacle Airlines Corp. 1,2 34,500 526,125
- --------------------------------------------------------------------------------
Republic Airways Holdings, Inc. 1 47,300 926,607
- --------------------------------------------------------------------------------
SkyWest, Inc. 18,200 488,670
- --------------------------------------------------------------------------------
UAL Corp. 1,2 50,300 1,793,698
- --------------------------------------------------------------------------------
US Airways Group, Inc. 1,2 84,800 1,247,408
----------------
11,248,064
SHARES VALUE
- --------------------------------------------------------------------------------
BUILDING PRODUCTS--0.5%
Aaon, Inc. 2 6,200 $ 122,884
- --------------------------------------------------------------------------------
Ameron International Corp. 2 637 58,700
- --------------------------------------------------------------------------------
Apogee Enterprises, Inc. 2 29,600 506,456
- --------------------------------------------------------------------------------
Builders FirstSource, Inc. 1,2 8,000 57,760
- --------------------------------------------------------------------------------
Goodman Global, Inc. 1 34,500 846,630
- --------------------------------------------------------------------------------
Lennox International, Inc. 44,200 1,830,764
- --------------------------------------------------------------------------------
Simpson Manufacturing Co., Inc. 2 19,500 518,505
- --------------------------------------------------------------------------------
USG Corp. 1,2 26,500 948,435
----------------
4,890,134
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--5.2%
ABM Industries, Inc. 2 42,740 871,469
- --------------------------------------------------------------------------------
Acco Brands Corp. 1,2 35,700 572,628
- --------------------------------------------------------------------------------
Administaff, Inc. 2 59,700 1,688,316
- --------------------------------------------------------------------------------
Advisory Board Co. (The) 1,2 14,000 898,660
- --------------------------------------------------------------------------------
American Ecology Corp. 2 11,300 265,324
- --------------------------------------------------------------------------------
American Reprographics Co. 1 2,700 44,496
- --------------------------------------------------------------------------------
Barrett Business Services, Inc. 2 200 3,602
- --------------------------------------------------------------------------------
Bowne & Co., Inc. 2 37,800 665,280
- --------------------------------------------------------------------------------
Casella Waste Systems, Inc., Cl. A 1,2 14,600 190,384
- --------------------------------------------------------------------------------
CBIZ, Inc. 1,2 36,200 355,122
- --------------------------------------------------------------------------------
CDI Corp. 2 22,200 538,572
- --------------------------------------------------------------------------------
ChoicePoint, Inc. 1 41,000 1,493,220
- --------------------------------------------------------------------------------
Comfort Systems USA, Inc. 46,800 598,104
- --------------------------------------------------------------------------------
COMSYS IT Partners, Inc. 1,2 28,200 444,996
- --------------------------------------------------------------------------------
Consolidated Graphics, Inc. 1 13,500 645,570
- --------------------------------------------------------------------------------
Cornell Corrections, Inc. 1,2 24,200 564,344
- --------------------------------------------------------------------------------
Corporate Executive Board Co. (The) 21,400 1,286,140
- --------------------------------------------------------------------------------
CRA International, Inc. 1,2 8,800 418,968
- --------------------------------------------------------------------------------
Deluxe Corp. 2 85,600 2,815,384
- --------------------------------------------------------------------------------
Diamond Management &
Technology Consultants, Inc. 2 34,500 250,815
- --------------------------------------------------------------------------------
Donnelley (R.R.) & Sons Co. 12,700 479,298
- --------------------------------------------------------------------------------
EnergySolutions, Inc. 1 35,025 945,325
- --------------------------------------------------------------------------------
Ennis, Inc. 23,500 423,000
- --------------------------------------------------------------------------------
Exponent, Inc. 1,2 20,880 564,595
- --------------------------------------------------------------------------------
First Consulting Group, Inc. 1 500 6,465
- --------------------------------------------------------------------------------
FTI Consulting, Inc. 1,2 797 49,127
- --------------------------------------------------------------------------------
Fuel-Tech, Inc. NV 1,2 10,000 226,500
- --------------------------------------------------------------------------------
GeoEye, Inc. 1,2 22,700 763,855
- --------------------------------------------------------------------------------
Heidrick & Struggles
International, Inc. 2 30,660 1,137,793
- --------------------------------------------------------------------------------
HNI Corp. 2 33,200 1,163,992
- --------------------------------------------------------------------------------
Hudson Highland Group, Inc. 1 32,000 269,120
- --------------------------------------------------------------------------------
ICF International, Inc. 1,2 16,900 426,894
- --------------------------------------------------------------------------------
Ikon Office Solutions, Inc. 2 11,115 144,717
15 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES Continued
Innerworkings, Inc. 1,2 11,500 $ 198,490
- --------------------------------------------------------------------------------
Interface, Inc., Cl. A 95,800 1,563,456
- --------------------------------------------------------------------------------
Knoll, Inc. 115,700 1,900,951
- --------------------------------------------------------------------------------
Korn-Ferry International 1 92,500 1,740,850
- --------------------------------------------------------------------------------
Layne Christensen Co. 1 27,600 1,358,196
- --------------------------------------------------------------------------------
Learning Tree International, Inc. 1,2 2,500 57,400
- --------------------------------------------------------------------------------
LECG Corp. 1 2,000 30,120
- --------------------------------------------------------------------------------
Manpower, Inc. 5,200 295,880
- --------------------------------------------------------------------------------
Miller (Herman), Inc. 42,300 1,370,097
- --------------------------------------------------------------------------------
PHH Corp. 1 14,600 257,544
- --------------------------------------------------------------------------------
Pike Electric Corp. 1,2 21,906 367,145
- --------------------------------------------------------------------------------
Resources Connection, Inc. 2 42,400 769,984
- --------------------------------------------------------------------------------
Robert Half International, Inc. 57,600 1,557,504
- --------------------------------------------------------------------------------
Rollins, Inc. 76,500 1,468,800
- --------------------------------------------------------------------------------
School Specialty, Inc. 1 13,200 456,060
- --------------------------------------------------------------------------------
Spherion Corp. 1,2 75,800 551,824
- --------------------------------------------------------------------------------
Steelcase, Inc., Cl. A 85,500 1,356,885
- --------------------------------------------------------------------------------
Team, Inc. 1,2 15,900 581,622
- --------------------------------------------------------------------------------
TeleTech Holdings, Inc. 1 67,400 1,433,598
- --------------------------------------------------------------------------------
Tetra Tech, Inc. 1,2 42,800 920,200
- --------------------------------------------------------------------------------
TrueBlue, Inc. 1,2 105,300 1,524,744
- --------------------------------------------------------------------------------
United Stationers, Inc. 1,2 30,588 1,413,471
- --------------------------------------------------------------------------------
Viad Corp. 2 46,600 1,471,628
- --------------------------------------------------------------------------------
Volt Information Sciences, Inc. 1,2 7,250 132,385
- --------------------------------------------------------------------------------
VSE Corp. 2 400 19,536
- --------------------------------------------------------------------------------
Waste Connections, Inc. 1 66,250 2,047,125
- --------------------------------------------------------------------------------
Waste Industries USA, Inc. 2 5,700 206,910
- --------------------------------------------------------------------------------
Watson Wyatt & Co. Holdings 26,400 1,225,224
----------------
47,489,704
- --------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING--0.7%
Baker (Michael) Corp. 1 15,000 616,500
- --------------------------------------------------------------------------------
EMCOR Group, Inc. 1 47,500 1,122,425
- --------------------------------------------------------------------------------
Integrated Electrical Services, Inc. 1,2 18,900 355,131
- --------------------------------------------------------------------------------
Perini Corp. 1 50,400 2,087,568
- --------------------------------------------------------------------------------
Shaw Group, Inc. (The) 1 29,200 1,764,848
- --------------------------------------------------------------------------------
URS Corp. 1 4,510 245,028
----------------
6,191,500
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--2.2%
Acuity Brands, Inc. 57,700 2,596,500
- --------------------------------------------------------------------------------
AZZ, Inc. 1,2 2,200 62,370
- --------------------------------------------------------------------------------
Belden, Inc. 2 19,000 845,500
- --------------------------------------------------------------------------------
Day4 Energy, Inc. 1 82,300 570,585
- --------------------------------------------------------------------------------
Encore Wire Corp. 2 21,900 348,648
- --------------------------------------------------------------------------------
FuelCell Energy, Inc. 1 8,100 80,352
SHARES VALUE
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT Continued
Genlyte Group, Inc. (The) 1 14,200 $ 1,351,840
- --------------------------------------------------------------------------------
GrafTech International Ltd. 1,2 176,100 3,125,775
- --------------------------------------------------------------------------------
II-VI, Inc. 1,2 1,200 36,660
- --------------------------------------------------------------------------------
LSI Industries, Inc. 31,700 576,940
- --------------------------------------------------------------------------------
Orion Energy Systems, Inc. 1,2 5,900 110,094
- --------------------------------------------------------------------------------
Plug Power, Inc. 1 6,000 23,700
- --------------------------------------------------------------------------------
Powell Industries, Inc. 1,2 5,200 229,164
- --------------------------------------------------------------------------------
Power-One, Inc. 1,2 6,700 26,733
- --------------------------------------------------------------------------------
Regal-Beloit Corp. 2 25,700 1,155,215
- --------------------------------------------------------------------------------
Rockwell Automation, Inc. 33,500 2,310,160
- --------------------------------------------------------------------------------
Roper Industries, Inc. 1,800 112,572
- --------------------------------------------------------------------------------
Smith (A.O.) Corp. 2 15,600 546,780
- --------------------------------------------------------------------------------
Superior Essex, Inc. 1 17,800 427,200
- --------------------------------------------------------------------------------
Thomas & Betts Corp. 1 31,200 1,530,048
- --------------------------------------------------------------------------------
Vicor Corp. 2 15,500 241,645
- --------------------------------------------------------------------------------
Woodward Governor Co. 2 50,400 3,424,680
----------------
19,733,161
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--0.3%
Raven Industries, Inc. 2 11,100 426,129
- --------------------------------------------------------------------------------
Teleflex, Inc. 24,600 1,550,046
- --------------------------------------------------------------------------------
Tredegar Corp. 16,000 257,280
- --------------------------------------------------------------------------------
Walter Industries, Inc. 16,300 585,659
----------------
2,819,114
- --------------------------------------------------------------------------------
MACHINERY--3.3%
Accuride Corp. 1,2 15,500 121,830
- --------------------------------------------------------------------------------
Actuant Corp., Cl. A 2 51,800 1,761,718
- --------------------------------------------------------------------------------
AGCO Corp. 1 8,600 584,628
- --------------------------------------------------------------------------------
Ampco-Pittsburgh Corp. 2 15,600 594,828
- --------------------------------------------------------------------------------
Astec Industries, Inc. 1,2 30,880 1,148,427
- --------------------------------------------------------------------------------
Axsys Technologies, Inc. 1,2 9,800 359,170
- --------------------------------------------------------------------------------
Badger Meter, Inc. 2 16,420 738,079
- --------------------------------------------------------------------------------
Barnes Group, Inc. 2 38,600 1,288,854
- --------------------------------------------------------------------------------
Blount International, Inc. 1,2 33,900 417,309
- --------------------------------------------------------------------------------
Briggs & Stratton Corp. 2 2,300 52,118
- --------------------------------------------------------------------------------
Bucyrus International, Inc., Cl. A 2 2,700 268,353
- --------------------------------------------------------------------------------
Cascade Corp. 2 5,246 243,729
- --------------------------------------------------------------------------------
CIRCOR International, Inc. 2 16,100 746,396
- --------------------------------------------------------------------------------
Columbus McKinnon Corp. 1,2 19,900 649,138
- --------------------------------------------------------------------------------
Crane Co. 600 25,740
- --------------------------------------------------------------------------------
EnPro Industries, Inc. 1,2 46,300 1,419,095
- --------------------------------------------------------------------------------
Freightcar America, Inc. 2 4,700 164,500
- --------------------------------------------------------------------------------
Gardner Denver, Inc. 1 67,000 2,211,000
- --------------------------------------------------------------------------------
Gorman-Rupp Co. (The) 2 7,243 225,982
- --------------------------------------------------------------------------------
Hardinge, Inc. 2 8,800 147,664
16 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
SHARES VALUE
- --------------------------------------------------------------------------------
MACHINERY Continued
Hurco Cos., Inc. 1,2 11,900 $ 519,435
- --------------------------------------------------------------------------------
Kadant, Inc. 1 19,400 575,598
- --------------------------------------------------------------------------------
Kaydon Corp. 3,200 174,528
- --------------------------------------------------------------------------------
L.B. Foster Co., Cl. A 1,2 14,400 744,912
- --------------------------------------------------------------------------------
McCoy Corp. 3 46,600 143,017
- --------------------------------------------------------------------------------
Middleby Corp. (The) 1,2 27,100 2,076,402
- --------------------------------------------------------------------------------
Mueller Industries, Inc. 48,000 1,391,520
- --------------------------------------------------------------------------------
NACCO Industries, Inc., Cl. A 2 7,300 727,737
- --------------------------------------------------------------------------------
RBC Bearings, Inc. 1,2 20,000 869,200
- --------------------------------------------------------------------------------
Robbins & Myers, Inc. 31,900 2,412,597
- --------------------------------------------------------------------------------
SPX Corp. 20,400 2,098,140
- --------------------------------------------------------------------------------
Sun Hydraulics Corp. 2 19,550 493,247
- --------------------------------------------------------------------------------
Tecumseh Products Co., Cl. A 1 24,700 578,227
- --------------------------------------------------------------------------------
Tennant Co. 20,700 916,803
- --------------------------------------------------------------------------------
Titan International, Inc. 2 14,200 443,892
- --------------------------------------------------------------------------------
Toro Co. (The) 37,400 2,036,056
- --------------------------------------------------------------------------------
TurboChef Technologies, Inc. 1,2 8,900 146,850
- --------------------------------------------------------------------------------
Twin Disc, Inc. 2 1,600 113,232
- --------------------------------------------------------------------------------
Valmont Industries, Inc. 2 3,300 294,096
- --------------------------------------------------------------------------------
Wabtec Corp. 6,000 206,640
------------
30,130,687
- --------------------------------------------------------------------------------
MARINE--0.2%
Excel Maritime Carriers Ltd. 28,800 1,157,472
- --------------------------------------------------------------------------------
Genco Shipping & Trading Ltd. 2 5,900 323,084
- --------------------------------------------------------------------------------
Horizon Lines, Inc., Cl. A 7,300 136,072
- --------------------------------------------------------------------------------
Star Bulk Carriers Corp. 1,2 20,200 259,570
- --------------------------------------------------------------------------------
TBS International Ltd., Cl. A 1 5,800 191,748
------------
2,067,946
- --------------------------------------------------------------------------------
ROAD & RAIL--0.3%
Avis Budget Group, Inc. 1 17,400 226,200
- --------------------------------------------------------------------------------
Con-way, Inc. 15,002 623,183
- --------------------------------------------------------------------------------
Dollar Thrifty Automotive Group, Inc. 1,2 13,300 314,944
- --------------------------------------------------------------------------------
Landstar System, Inc. 37,500 1,580,625
------------
2,744,952
- --------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS--0.5%
Applied Industrial Technologies, Inc. 2 65,575 1,902,987
- --------------------------------------------------------------------------------
Houston Wire & Cable Co. 2 5,600 79,184
- --------------------------------------------------------------------------------
Kaman Corp., Cl. A 2 6,400 235,584
- --------------------------------------------------------------------------------
NuCo2, Inc. 1 6,000 149,400
- --------------------------------------------------------------------------------
UAP Holding Corp. 2 43,800 1,690,680
- --------------------------------------------------------------------------------
W.W. Grainger, Inc. 1,700 148,784
------------
4,206,619
SHARES VALUE
- --------------------------------------------------------------------------------
TRANSPORTATION INFRASTRUCTURE--0.0%
CAI International, Inc. 1 28,600 $ 300,872
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--30.2%
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--3.0%
ADC Telecommunications, Inc. 1,2 148,500 2,309,175
- --------------------------------------------------------------------------------
ADTRAN, Inc. 2 112,600 2,407,388
- --------------------------------------------------------------------------------
Anaren Microwave, Inc. 1,2 300 4,947
- --------------------------------------------------------------------------------
Arris Group, Inc. 1 13,892 138,642
- --------------------------------------------------------------------------------
Avocent Corp. 1 26,600 620,046
- --------------------------------------------------------------------------------
Bel Fuse, Inc., Cl. A 2 4,800 165,552
- --------------------------------------------------------------------------------
Blue Coat Systems, Inc. 1,2 62,400 2,051,088
- --------------------------------------------------------------------------------
CommScope, Inc. 1 32,458 1,597,258
- --------------------------------------------------------------------------------
Comtech Group, Inc. 1 29,800 480,078
- --------------------------------------------------------------------------------
Comtech Telecommunications Corp. 1,2 53,400 2,884,134
- --------------------------------------------------------------------------------
Digi International, Inc. 1 1,800 25,542
- --------------------------------------------------------------------------------
Dycom Industries, Inc. 1,2 80,100 2,134,665
- --------------------------------------------------------------------------------
EMS Technologies, Inc. 1 22,400 677,376
- --------------------------------------------------------------------------------
Extreme Networks, Inc. 1 142,700 505,158
- --------------------------------------------------------------------------------
F5 Networks, Inc. 1 40,600 1,157,912
- --------------------------------------------------------------------------------
Foundry Networks, Inc. 1 99,800 1,748,496
- --------------------------------------------------------------------------------
Globecomm Systems, Inc. 1,2 7,500 87,750
- --------------------------------------------------------------------------------
Harmonic, Inc. 1,2 123,400 1,293,232
- --------------------------------------------------------------------------------
InterDigital, Inc. 1,2 43,400 1,012,522
- --------------------------------------------------------------------------------
Ixia 1 28,700 272,076
- --------------------------------------------------------------------------------
Loral Space & Communications Ltd. 1 5,000 171,250
- --------------------------------------------------------------------------------
MasTec, Inc. 1,2 47,300 481,041
- --------------------------------------------------------------------------------
Netgear, Inc. 1,2 7,900 281,793
- --------------------------------------------------------------------------------
Network Equipment Technologies, Inc. 1,2 52,000 437,840
- --------------------------------------------------------------------------------
Performance Technologies, Inc. 1 3,200 17,600
- --------------------------------------------------------------------------------
Plantronics, Inc. 2 75,900 1,973,400
- --------------------------------------------------------------------------------
ShoreTel, Inc. 1,2 31,600 441,452
- --------------------------------------------------------------------------------
Tellabs, Inc. 1 101,200 661,848
- --------------------------------------------------------------------------------
UTStarcom, Inc. 1,2 16,800 46,200
- --------------------------------------------------------------------------------
ViaSat, Inc. 1,2 37,700 1,298,011
------------
27,383,472
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--2.2%
Brocade Communications Systems, Inc. 1 235,200 1,726,368
- --------------------------------------------------------------------------------
Diebold, Inc. 3,500 101,430
- --------------------------------------------------------------------------------
Electronics for Imaging, Inc. 1,2 61,200 1,375,776
- --------------------------------------------------------------------------------
Emulex Corp. 1 101,000 1,648,320
- --------------------------------------------------------------------------------
Hutchinson Technology, Inc. 1,2 200 5,264
- --------------------------------------------------------------------------------
Hypercom Corp. 1 1,900 9,462
- --------------------------------------------------------------------------------
Intevac, Inc. 1,2 10,700 155,578
- --------------------------------------------------------------------------------
Iomega Corp. 1,2 44,700 155,109
- --------------------------------------------------------------------------------
Lexmark International, Inc., Cl. A 1 51,200 1,784,832
- --------------------------------------------------------------------------------
NCR Corp. 1 67,100 1,684,210
17 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS Continued
Network Appliance, Inc. 1 92,800 $ 2,316,288
- --------------------------------------------------------------------------------
Novatel Wireless, Inc. 1,2 38,300 620,460
- --------------------------------------------------------------------------------
Palm, Inc. 2 138,900 880,626
- --------------------------------------------------------------------------------
QLogic Corp. 1 177,500 2,520,500
- --------------------------------------------------------------------------------
Quantum Corp. 1 26,500 71,285
- --------------------------------------------------------------------------------
Stratasys, Inc. 1 25,100 648,584
- --------------------------------------------------------------------------------
Synaptics, Inc. 1,2 44,800 1,843,968
- --------------------------------------------------------------------------------
Teradata Corp. 1 29,200 800,372
- --------------------------------------------------------------------------------
Western Digital Corp. 1 76,400 2,308,044
------------
20,656,476
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--2.6%
Acacia Research Corp. 1,2 36,600 328,668
- --------------------------------------------------------------------------------
Anixter International, Inc. 1,2 2,900 180,583
- --------------------------------------------------------------------------------
Arrow Electronics, Inc. 1 48,000 1,885,440
- --------------------------------------------------------------------------------
Avnet, Inc. 1 51,800 1,811,446
- --------------------------------------------------------------------------------
Checkpoint Systems, Inc. 1,2 73,300 1,904,334
- --------------------------------------------------------------------------------
Cognex Corp. 2 12,500 251,875
- --------------------------------------------------------------------------------
CPI International, Inc. 1 6,200 106,020
- --------------------------------------------------------------------------------
CTS Corp. 2 41,600 413,088
- --------------------------------------------------------------------------------
Dolby Laboratories, Inc., Cl. A 1 24,500 1,218,140
- --------------------------------------------------------------------------------
Electro Scientific Industries, Inc. 1,2 21,200 420,820
- --------------------------------------------------------------------------------
Excel Technology, Inc. 1 1,400 37,940
- --------------------------------------------------------------------------------
FARO Technologies, Inc. 1 15,800 429,444
- --------------------------------------------------------------------------------
FLIR Systems, Inc. 1 20,600 644,780
- --------------------------------------------------------------------------------
Gerber Scientific, Inc. 1,2 3,200 34,560
- --------------------------------------------------------------------------------
Insight Enterprises, Inc. 1,2 17,200 313,728
- --------------------------------------------------------------------------------
Littlefuse, Inc. 1,2 33,900 1,117,344
- --------------------------------------------------------------------------------
LoJack Corp. 1,2 14,300 240,383
- --------------------------------------------------------------------------------
Measurement Specialties, Inc. 1,2 10,400 229,840
- --------------------------------------------------------------------------------
Mercury Computer Systems, Inc. 1,2 7,600 122,436
- --------------------------------------------------------------------------------
Methode Electronics, Inc., Cl. A 47,190 775,804
- --------------------------------------------------------------------------------
Mettler-Toledo International, Inc. 1 6,200 705,560
- --------------------------------------------------------------------------------
MTS Systems Corp. 2 18,400 785,128
- --------------------------------------------------------------------------------
NAM TAI Electronics, Inc. 19,700 222,019
- --------------------------------------------------------------------------------
National Instruments Corp. 37,700 1,256,541
- --------------------------------------------------------------------------------
OSI Systems, Inc. 1 900 23,823
- --------------------------------------------------------------------------------
Park Electrochemical Corp. 2 24,300 686,232
- --------------------------------------------------------------------------------
PC Connection, Inc. 1,2 14,100 160,035
- --------------------------------------------------------------------------------
RadiSys Corp. 1,2 3,400 45,560
- --------------------------------------------------------------------------------
Rofin-Sinar Technologies, Inc. 1,2 76,300 3,670,793
- --------------------------------------------------------------------------------
Sanmina-SCI Corp. 1 376,700 685,594
- --------------------------------------------------------------------------------
ScanSource, Inc. 1 1,300 42,055
- --------------------------------------------------------------------------------
Smart Modular Technologies, Inc. 1 31,900 324,742
- --------------------------------------------------------------------------------
Tech Data Corp. 1 44,100 1,663,452
SHARES VALUE
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS Continued
Technitrol, Inc. 22,000 $ 628,760
- --------------------------------------------------------------------------------
TTM Technologies, Inc. 1 8,000 93,280
------------
23,460,247
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--2.6%
Ariba, Inc. 1 13,700 152,755
- --------------------------------------------------------------------------------
Art Technology Group, Inc. 1 31,900 137,808
- --------------------------------------------------------------------------------
AsiaInfo Holdings, Inc. 1,2 55,000 605,000
- --------------------------------------------------------------------------------
Bankrate, Inc. 1,2 17,600 846,384
- --------------------------------------------------------------------------------
Chordiant Software, Inc. 1 55,600 475,380
- --------------------------------------------------------------------------------
CMGI, Inc. 1,2 71,710 938,684
- --------------------------------------------------------------------------------
CNET Networks, Inc. 1,2 21,700 198,338
- --------------------------------------------------------------------------------
Digital River, Inc. 1,2 61,300 2,027,191
- --------------------------------------------------------------------------------
DivX, Inc. 1 30,300 424,200
- --------------------------------------------------------------------------------
EarthLink, Inc. 1,2 59,700 422,079
- --------------------------------------------------------------------------------
Equinix, Inc. 1,2 4,000 404,280
- --------------------------------------------------------------------------------
Greenfield Online, Inc. 1 32,200 470,442
- --------------------------------------------------------------------------------
iBasis, Inc. 2 1,500 7,695
- --------------------------------------------------------------------------------
Imergent, Inc. 2 21,500 227,685
- --------------------------------------------------------------------------------
Internet Capital Group, Inc. 1 200 2,348
- --------------------------------------------------------------------------------
Interwoven, Inc. 1 32,500 462,150
- --------------------------------------------------------------------------------
j2 Global Communications, Inc. 1,2 86,300 1,826,971
- --------------------------------------------------------------------------------
Keynote Systems, Inc. 1 2,400 33,720
- --------------------------------------------------------------------------------
LoopNet, Inc. 1,2 12,600 177,030
- --------------------------------------------------------------------------------
National Information Consortium, Inc. 5,700 48,108
- --------------------------------------------------------------------------------
NaviSite, Inc. 1,2 25,700 130,042
- --------------------------------------------------------------------------------
Omniture, Inc. 1,2 58,100 1,934,149
- --------------------------------------------------------------------------------
Open Text Corp. 1,2 54,900 1,726,605
- --------------------------------------------------------------------------------
S1 Corp. 1 83,300 608,090
- --------------------------------------------------------------------------------
SonicWALL, Inc. 1 78,500 841,520
- --------------------------------------------------------------------------------
SoundBite Communications, Inc. 1 17,200 118,680
- --------------------------------------------------------------------------------
Switch & Data Facilities Co. 1 6,800 108,936
- --------------------------------------------------------------------------------
TechTarget, Inc. 1 590 8,720
- --------------------------------------------------------------------------------
TheStreet.com, Inc. 2 39,200 624,064
- --------------------------------------------------------------------------------
Travelzoo, Inc. 1 16,100 220,248
- --------------------------------------------------------------------------------
United Online, Inc. 2 177,800 2,101,596
- --------------------------------------------------------------------------------
ValueClick, Inc. 1 98,400 2,154,960
- --------------------------------------------------------------------------------
VeriSign, Inc. 1 64,800 2,437,128
- --------------------------------------------------------------------------------
Vignette Corp. 1 31,400 458,754
- --------------------------------------------------------------------------------
Vocus, Inc. 1 19,800 683,694
- --------------------------------------------------------------------------------
Websense, Inc. 1,2 14,100 239,418
------------
24,284,852
18 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
SHARES VALUE
- --------------------------------------------------------------------------------
IT SERVICES--3.8%
Acxiom Corp. 50,100 $ 587,673
- --------------------------------------------------------------------------------
Affiliated Computer Services, Inc., Cl. A 1 40,400 1,822,040
- --------------------------------------------------------------------------------
Alliance Data Systems Corp. 1 9,300 697,407
- --------------------------------------------------------------------------------
BearingPoint, Inc. 1,2 111,900 316,677
- --------------------------------------------------------------------------------
Broadridge Financial Solutions, Inc. 50,700 1,137,201
- --------------------------------------------------------------------------------
CACI International, Inc., Cl. A 1,2 37,270 1,668,578
- --------------------------------------------------------------------------------
CIBER, Inc. 1,2 59,000 360,490
- --------------------------------------------------------------------------------
Computer Sciences Corp. 1 42,000 2,077,740
- --------------------------------------------------------------------------------
Convergys Corp. 1 51,100 841,106
- --------------------------------------------------------------------------------
CSG Systems International, Inc. 1 50,300 740,416
- --------------------------------------------------------------------------------
CyberSource Corp. 1,2 75,384 1,339,574
- --------------------------------------------------------------------------------
Deltek, Inc. 1 11,500 175,145
- --------------------------------------------------------------------------------
DST Systems, Inc. 1 22,500 1,857,375
- --------------------------------------------------------------------------------
Electronic Data Systems Corp. 117,400 2,433,702
- --------------------------------------------------------------------------------
Exlservice Holdings, Inc. 1,2 3,000 69,240
- --------------------------------------------------------------------------------
Fidelity National Information
Services, Inc. 17,800 740,302
- --------------------------------------------------------------------------------
Forrester Research, Inc. 1 1,000 28,020
- --------------------------------------------------------------------------------
Gartner, Inc., Cl. A 1,2 74,900 1,315,244
- --------------------------------------------------------------------------------
Global Cash Access, Inc. 1 6,000 36,360
- --------------------------------------------------------------------------------
Heartland Payment Systems, Inc. 2 60,000 1,608,000
- --------------------------------------------------------------------------------
Hewitt Associates, Inc. 1,2 47,800 1,830,262
- --------------------------------------------------------------------------------
ManTech International Corp. 1 56,800 2,488,976
- --------------------------------------------------------------------------------
Maximus, Inc. 2 45,800 1,768,338
- --------------------------------------------------------------------------------
MPS Group, Inc. 1 105,400 1,153,076
- --------------------------------------------------------------------------------
NCI, Inc., Cl. A 1 11,000 188,210
- --------------------------------------------------------------------------------
NeuStar, Inc., Cl. A 1,2 35,700 1,023,876
- --------------------------------------------------------------------------------
Perot Systems Corp., Cl. A 1,2 11,500 155,250
- --------------------------------------------------------------------------------
RightNow Technologies, Inc. 1,2 23,700 375,645
- --------------------------------------------------------------------------------
SAIC, Inc. 1 55,400 1,114,648
- --------------------------------------------------------------------------------
Sapient Corp. 1 119,200 1,050,152
- --------------------------------------------------------------------------------
SRA International, Inc., Cl. A 1 39,500 1,163,275
- --------------------------------------------------------------------------------
Sykes Enterprises, Inc. 1 37,100 667,800
- --------------------------------------------------------------------------------
Syntel, Inc. 2 36,900 1,421,388
- --------------------------------------------------------------------------------
TNS, Inc. 400 7,100
- --------------------------------------------------------------------------------
Unisys Corp. 1 156,671 741,054
-----------
35,001,340
- --------------------------------------------------------------------------------
OFFICE ELECTRONICS--0.1%
Zebra Technologies Corp., Cl. A 1 25,600 888,320
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--7.8%
Actel Corp. 1,2 15,300 208,998
- --------------------------------------------------------------------------------
Advanced Analogic Technologies, Inc. 1 33,300 375,624
- --------------------------------------------------------------------------------
Advanced Energy Industries, Inc. 1,2 83,400 1,090,872
- --------------------------------------------------------------------------------
AMIS Holdings, Inc. 1 93,400 935,868
- --------------------------------------------------------------------------------
Amkor Technology, Inc. 1 202,400 1,726,472
SHARES VALUE
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT Continued
Analog Devices, Inc. 58,800 $ 1,863,960
- --------------------------------------------------------------------------------
Asyst Technologies, Inc. 1,2 18,500 60,310
- --------------------------------------------------------------------------------
Atheros Communications, Inc. 1,2 16,600 506,964
- --------------------------------------------------------------------------------
Atmel Corp. 1 297,400 1,284,768
- --------------------------------------------------------------------------------
ATMI, Inc. 1,2 60,500 1,951,125
- --------------------------------------------------------------------------------
AuthenTec, Inc. 1,2 9,700 140,941
- --------------------------------------------------------------------------------
Brooks Automation, Inc. 1,2 145,400 1,920,734
- --------------------------------------------------------------------------------
Cabot Microelectronics Corp. 1,2 47,400 1,702,134
- --------------------------------------------------------------------------------
Cohu, Inc. 2 21,100 322,830
- --------------------------------------------------------------------------------
Credence Systems Corp. 1,2 110,400 267,168
- --------------------------------------------------------------------------------
Cymer, Inc. 1,2 64,600 2,514,878
- --------------------------------------------------------------------------------
DSP Group, Inc. 1 3,800 46,360
- --------------------------------------------------------------------------------
EMCORE Corp. 1,2 45,300 693,090
- --------------------------------------------------------------------------------
Entegris, Inc. 1 207,700 1,792,451
- --------------------------------------------------------------------------------
FEI Co. 1,2 81,000 2,011,230
- --------------------------------------------------------------------------------
Hittite Microwave Corp. 1,2 2,300 109,848
- --------------------------------------------------------------------------------
Integrated Device Technology, Inc. 1 137,900 1,559,649
- --------------------------------------------------------------------------------
Intellon Corp. 1,2 17,600 132,704
- --------------------------------------------------------------------------------
Intersil Corp., Cl. A 71,700 1,755,216
- --------------------------------------------------------------------------------
IXYS Corp. 1 2,500 20,050
- --------------------------------------------------------------------------------
KLA-Tencor Corp. 43,300 2,085,328
- --------------------------------------------------------------------------------
Kulicke & Soffa Industries, Inc. 1,2 66,200 454,132
- --------------------------------------------------------------------------------
Lam Research Corp. 1 37,900 1,638,417
- --------------------------------------------------------------------------------
Linear Technology Corp. 2 66,900 2,129,427
- --------------------------------------------------------------------------------
LTX Corp. 1,2 30,300 96,354
- --------------------------------------------------------------------------------
Mattson Technology, Inc. 1,2 62,600 535,856
- --------------------------------------------------------------------------------
Micrel, Inc. 2 174,600 1,475,370
- --------------------------------------------------------------------------------
Microtune, Inc. 1,2 45,300 295,809
- --------------------------------------------------------------------------------
MIPS Technologies, Inc., Cl. A 1,2 25,400 125,984
- --------------------------------------------------------------------------------
MKS Instruments, Inc. 1,2 101,900 1,950,366
- --------------------------------------------------------------------------------
Monolithic Power Systems, Inc. 1,2 32,400 695,628
- --------------------------------------------------------------------------------
National Semiconductor Corp. 84,500 1,913,080
- --------------------------------------------------------------------------------
Netlogic Microsystems, Inc. 1,2 19,800 637,560
- --------------------------------------------------------------------------------
Novellus Systems, Inc. 1 64,600 1,781,022
- --------------------------------------------------------------------------------
ON Semiconductor Corp. 1,2 185,500 1,647,240
- --------------------------------------------------------------------------------
Pericom Semiconductor Corp. 1 14,100 263,670
- --------------------------------------------------------------------------------
Photronics, Inc. 1 2,800 34,916
- --------------------------------------------------------------------------------
PMC-Sierra, Inc. 1,2 306,700 2,005,818
- --------------------------------------------------------------------------------
Rambus, Inc. 1,2 48,200 1,009,308
- --------------------------------------------------------------------------------
RF Micro Devices, Inc. 1,2 374,200 2,136,682
- --------------------------------------------------------------------------------
Rubicon Technology, Inc. 1 31,000 736,250
- --------------------------------------------------------------------------------
Rudolph Technologies, Inc. 1,2 29,300 331,676
- --------------------------------------------------------------------------------
Semtech Corp. 1 118,900 1,845,328
- --------------------------------------------------------------------------------
Sigma Designs, Inc. 1,2 37,400 2,064,480
- --------------------------------------------------------------------------------
Silicon Laboratories, Inc. 1 41,800 1,564,574
19 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT Continued
Silicon Storage Technology, Inc. 1,2 37,800 $ 113,022
- --------------------------------------------------------------------------------
SiRF Technology Holdings, Inc. 1 21,189 532,480
- --------------------------------------------------------------------------------
Skyworks Solutions, Inc. 1,2 258,300 2,195,550
- --------------------------------------------------------------------------------
Standard Microsystems Corp. 1 30,700 1,199,449
- --------------------------------------------------------------------------------
Supertex, Inc. 1,2 14,600 456,834
- --------------------------------------------------------------------------------
Techwell, Inc. 1,2 9,300 102,393
- --------------------------------------------------------------------------------
Teradyne, Inc. 1 175,800 1,817,772
- --------------------------------------------------------------------------------
Tessera Technologies, Inc. 1 18,000 748,800
- --------------------------------------------------------------------------------
TriQuint Semiconductor, Inc. 1 31,300 207,519
- --------------------------------------------------------------------------------
Ultra Clean Holdings, Inc. 1,2 17,300 211,060
- --------------------------------------------------------------------------------
Ultratech, Inc. 1 1,600 18,144
- --------------------------------------------------------------------------------
Varian Semiconductor
Equipment Associates, Inc. 1 47,150 1,744,550
- --------------------------------------------------------------------------------
Veeco Instruments, Inc. 1,2 27,300 455,910
- --------------------------------------------------------------------------------
Verigy Ltd. 1 85,900 2,333,903
- --------------------------------------------------------------------------------
Volterra Semiconductor Corp. 1,2 21,100 232,733
- --------------------------------------------------------------------------------
Xilinx, Inc. 94,200 2,060,154
- --------------------------------------------------------------------------------
Zoran Corp. 1 102,600 2,309,526
----------------
71,188,318
- --------------------------------------------------------------------------------
SOFTWARE--8.1%
Activision, Inc. 1 83,900 2,491,830
- --------------------------------------------------------------------------------
Actuate Corp. 1,2 88,700 689,199
- --------------------------------------------------------------------------------
Advent Software, Inc. 1,2 35,600 1,925,960
- --------------------------------------------------------------------------------
Ansoft Corp. 1,2 23,100 597,135
- --------------------------------------------------------------------------------
Ansys, Inc. 1 41,200 1,708,152
- --------------------------------------------------------------------------------
Aspen Technology, Inc. 1,2 161,300 2,616,286
- --------------------------------------------------------------------------------
Autodesk, Inc. 1 51,200 2,547,712
- --------------------------------------------------------------------------------
BEA Systems, Inc. 1 124,100 1,958,298
- --------------------------------------------------------------------------------
Blackbaud, Inc. 62,689 1,757,800
- --------------------------------------------------------------------------------
Blackboard, Inc. 1,2 41,400 1,666,350
- --------------------------------------------------------------------------------
BMC Software, Inc. 1 62,700 2,234,628
- --------------------------------------------------------------------------------
Cadence Design Systems, Inc. 1 112,400 1,911,924
- --------------------------------------------------------------------------------
Check Point Software
Technologies Ltd. 1 52,400 1,150,704
- --------------------------------------------------------------------------------
Citrix Systems, Inc. 1 53,400 2,029,734
- --------------------------------------------------------------------------------
Cognos, Inc. 1 28,341 1,631,591
- --------------------------------------------------------------------------------
Commvault Systems, Inc. 1 37,000 783,660
- --------------------------------------------------------------------------------
Compuware Corp. 1 190,600 1,692,528
- --------------------------------------------------------------------------------
Concur Technologies, Inc. 1,2 56,800 2,056,728
- --------------------------------------------------------------------------------
Double-Take Software, Inc. 1 28,200 612,504
- --------------------------------------------------------------------------------
EPIQ Systems, Inc. 1 25,800 449,178
- --------------------------------------------------------------------------------
Fair Isaac Corp. 2 48,900 1,572,135
- --------------------------------------------------------------------------------
FalconStor Software, Inc. 1,2 58,200 655,332
- --------------------------------------------------------------------------------
Henry (Jack) & Associates, Inc. 2 84,900 2,066,466
SHARES VALUE
- --------------------------------------------------------------------------------
SOFTWARE Continued
i2 Technologies, Inc. 1 5,800 $ 73,080
- --------------------------------------------------------------------------------
Informatica Corp. 1,2 133,700 2,409,274
- --------------------------------------------------------------------------------
Interactive Intelligence, Inc. 1,2 25,500 671,925
- --------------------------------------------------------------------------------
Intervoice, Inc. 1,2 32,700 261,273
- --------------------------------------------------------------------------------
Intuit, Inc. 1 71,900 2,272,759
- --------------------------------------------------------------------------------
JDA Software Group, Inc. 1 31,500 644,490
- --------------------------------------------------------------------------------
Lawson Software, Inc. 1 217,600 2,228,224
- --------------------------------------------------------------------------------
Magma Design Automation, Inc. 1,2 11,500 140,415
- --------------------------------------------------------------------------------
Manhattan Associates, Inc. 1 27,100 714,356
- --------------------------------------------------------------------------------
McAfee, Inc. 1 50,700 1,901,250
- --------------------------------------------------------------------------------
Mentor Graphics Corp. 1,2 1,500 16,170
- --------------------------------------------------------------------------------
MICROS Systems, Inc. 1 22,700 1,592,632
- --------------------------------------------------------------------------------
MicroStrategy, Inc., Cl. A 1,2 26,100 2,482,110
- --------------------------------------------------------------------------------
NAVTEQ Corp. 1 6,800 514,080
- --------------------------------------------------------------------------------
Net 1 UEPS Technologies, Inc. 1,2 13,800 405,168
- --------------------------------------------------------------------------------
NetScout Systems, Inc. 1 13,400 171,118
- --------------------------------------------------------------------------------
Novell, Inc. 1 246,000 1,690,020
- --------------------------------------------------------------------------------
Nuance Communications, Inc. 1 31,100 580,948
- --------------------------------------------------------------------------------
Parametric Technology Corp. 1 13,900 248,115
- --------------------------------------------------------------------------------
Progress Software Corp. 1 25,500 858,840
- --------------------------------------------------------------------------------
PROS Holdings, Inc. 1 28,000 549,360
- --------------------------------------------------------------------------------
Quality Systems, Inc. 2 2,700 82,323
- --------------------------------------------------------------------------------
Quest Software, Inc. 1,2 66,600 1,228,104
- --------------------------------------------------------------------------------
Radiant Systems, Inc. 1,2 39,700 684,031
- --------------------------------------------------------------------------------
Red Hat, Inc. 1 85,700 1,785,988
- --------------------------------------------------------------------------------
Salesforce.com, Inc. 1 21,500 1,347,835
- --------------------------------------------------------------------------------
Secure Computing Corp. 1 7,600 72,960
- --------------------------------------------------------------------------------
Sonic Solutions, Inc. 1,2 16,600 172,474
- --------------------------------------------------------------------------------
SPSS, Inc. 1,2 26,400 948,024
- --------------------------------------------------------------------------------
Sybase, Inc. 1 51,000 1,330,590
- --------------------------------------------------------------------------------
Synchronoss Technologies, Inc. 1,2 32,865 1,164,736
- --------------------------------------------------------------------------------
Synopsys, Inc. 1 68,700 1,781,391
- --------------------------------------------------------------------------------
Taleo Corp., Cl. A 1 24,500 729,610
- --------------------------------------------------------------------------------
The9 Ltd., ADR 1,2 29,200 622,544
- --------------------------------------------------------------------------------
THQ, Inc. 1,2 32,600 918,994
- --------------------------------------------------------------------------------
TIBCO Software, Inc. 1 200,000 1,614,000
- --------------------------------------------------------------------------------
Tyler Technologies, Inc. 1,2 45,700 589,073
- --------------------------------------------------------------------------------
Ultimate Software Group, Inc. (The) 1,2 20,600 648,282
- --------------------------------------------------------------------------------
Vasco Data Security International, Inc. 1 10,600 295,952
- --------------------------------------------------------------------------------
Wind River Systems, Inc. 1 99,200 885,856
----------------
74,134,208
20 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
SHARES VALUE
- --------------------------------------------------------------------------------
MATERIALS--7.6%
- --------------------------------------------------------------------------------
CHEMICALS--3.3%
American Vanguard Corp. 2,400 $ 41,640
- --------------------------------------------------------------------------------
Arch Chemicals, Inc. 44,000 1,617,000
- --------------------------------------------------------------------------------
Ashland, Inc. 29,900 1,418,157
- --------------------------------------------------------------------------------
Cabot Corp. 21,100 703,474
- --------------------------------------------------------------------------------
Calgon Carbon Corp. 1,2 47,600 756,364
- --------------------------------------------------------------------------------
Celanese Corp., Series A 45,600 1,929,792
- --------------------------------------------------------------------------------
CF Industries Holdings, Inc. 23,200 2,553,392
- --------------------------------------------------------------------------------
Eastman Chemical Co. 14,400 879,696
- --------------------------------------------------------------------------------
Ferro Corp. 40,100 831,273
- --------------------------------------------------------------------------------
Fuller (H.B.) Co. 2 80,600 1,809,470
- --------------------------------------------------------------------------------
GenTek, Inc. 1,2 4,500 131,715
- --------------------------------------------------------------------------------
ICO, Inc. 1 36,200 464,808
- --------------------------------------------------------------------------------
Innophos Holdings, Inc. 2 14,400 214,272
- --------------------------------------------------------------------------------
Innospec, Inc. 22,800 391,248
- --------------------------------------------------------------------------------
Koppers Holdings, Inc. 2 24,800 1,072,352
- --------------------------------------------------------------------------------
Landec Corp. 1,2 38,600 517,240
- --------------------------------------------------------------------------------
LSB Industries, Inc. 1 12,200 344,284
- --------------------------------------------------------------------------------
Minerals Technologies, Inc. 2 2,400 160,680
- --------------------------------------------------------------------------------
NewMarket Corp. 3,200 178,208
- --------------------------------------------------------------------------------
Olin Corp. 2 74,900 1,447,817
- --------------------------------------------------------------------------------
OM Group, Inc. 1 43,200 2,485,728
- --------------------------------------------------------------------------------
PolyOne Corp. 1 6,100 40,138
- --------------------------------------------------------------------------------
Rockwood Holdings, Inc. 1 14,800 491,656
- --------------------------------------------------------------------------------
Schulman (A.), Inc. 22,000 474,100
- --------------------------------------------------------------------------------
Scotts Miracle-Gro Co. (The), Cl. A 30,900 1,156,278
- --------------------------------------------------------------------------------
Sensient Technologies Corp. 77,000 2,177,560
- --------------------------------------------------------------------------------
Spartech Corp. 20,500 289,050
- --------------------------------------------------------------------------------
Stepan Co. 2 6,100 198,433
- --------------------------------------------------------------------------------
Terra Industries, Inc. 1,2 53,900 2,574,264
- --------------------------------------------------------------------------------
Tronox, Inc., Cl. A 2 7,100 63,190
- --------------------------------------------------------------------------------
Valhi, Inc. 2 1,600 25,504
- --------------------------------------------------------------------------------
W.R. Grace & Co. 1,2 88,200 2,309,076
- --------------------------------------------------------------------------------
Zep, Inc. 1 27,400 380,038
----------------
30,127,897
- --------------------------------------------------------------------------------
CONTAINERS & PACKAGING--0.9%
AptarGroup, Inc. 2 8,700 355,917
- --------------------------------------------------------------------------------
Crown Holdings, Inc. 1 28,900 741,285
- --------------------------------------------------------------------------------
Graphic Packaging Corp. 1,2 6,400 23,616
- --------------------------------------------------------------------------------
Myers Industries, Inc. 21,200 306,764
- --------------------------------------------------------------------------------
Owens-Illinois, Inc. 1 47,300 2,341,350
SHARES VALUE
- --------------------------------------------------------------------------------
CONTAINERS & PACKAGING Continued
Packaging Corp. of America 59,600 $ 1,680,720
- --------------------------------------------------------------------------------
Rock-Tenn Co., Cl. A 82,400 2,093,784
- --------------------------------------------------------------------------------
Silgan Holdings, Inc. 21,600 1,121,904
----------------
8,665,340
- --------------------------------------------------------------------------------
METALS & MINING--3.2%
AK Steel Holding Corp. 1 37,400 1,729,376
- --------------------------------------------------------------------------------
Amerigo Resources Ltd. 118,700 274,713
- --------------------------------------------------------------------------------
Brush Engineered Materials, Inc. 1,2 8,000 296,160
- --------------------------------------------------------------------------------
Carpenter Technology Corp. 25,300 1,901,801
- --------------------------------------------------------------------------------
Century Aluminum Co. 1,2 51,700 2,788,698
- --------------------------------------------------------------------------------
Claymont Steel Holdings, Inc. 1 4,800 112,080
- --------------------------------------------------------------------------------
Cleveland-Cliffs, Inc. 2 5,200 524,160
- --------------------------------------------------------------------------------
Commercial Metals Co. 15,300 450,585
- --------------------------------------------------------------------------------
Compass Minerals International, Inc. 2 51,000 2,091,000
- --------------------------------------------------------------------------------
Esmark, Inc. 1,2 1,033 14,596
- --------------------------------------------------------------------------------
Farallon Resources Ltd. 1 156,700 110,374
- --------------------------------------------------------------------------------
Haynes International, Inc. 1,2 5,600 389,200
- --------------------------------------------------------------------------------
Hecla Mining Co. 1,2 258,600 2,417,910
- --------------------------------------------------------------------------------
Metal Management, Inc. 2 54,500 2,481,385
- --------------------------------------------------------------------------------
Olympic Steel, Inc. 2 1,800 57,078
- --------------------------------------------------------------------------------
Quanex Corp. 52,223 2,710,374
- --------------------------------------------------------------------------------
Redcorp Ventures Ltd. 1,3 666,400 177,698
- --------------------------------------------------------------------------------
Reliance Steel & Aluminum Co. 26,100 1,414,620
- --------------------------------------------------------------------------------
Schnitzer Steel Industries, Inc. 2 27,800 1,921,814
- --------------------------------------------------------------------------------
Steel Dynamics, Inc. 35,600 2,120,692
- --------------------------------------------------------------------------------
United States Steel Corp. 25,200 3,046,932
- --------------------------------------------------------------------------------
Universal Stainless &
Alloy Products, Inc. 1,2 5,700 202,749
- --------------------------------------------------------------------------------
Worthington Industries, Inc. 2 111,000 1,984,680
- --------------------------------------------------------------------------------
Yamana Gold, Inc. 2,011 26,084
----------------
29,244,759
- --------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS--0.2%
AbitibiBowater, Inc. 2 9,780 201,566
- --------------------------------------------------------------------------------
Buckeye Technologies, Inc. 1,2 45,000 562,500
- --------------------------------------------------------------------------------
Glatfelter 2 6,500 99,515
- --------------------------------------------------------------------------------
Schweitzer-Mauduit International, Inc. 2 15,800 409,378
- --------------------------------------------------------------------------------
Wausau Paper Corp. 2 29,700 267,003
----------------
1,539,962
21 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--2.5%
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--2.0%
Alaska Communications
Systems Group, Inc. 2 48,900 $ 733,500
- --------------------------------------------------------------------------------
Atlantic Tele-Network, Inc. 2 15,200 513,456
- --------------------------------------------------------------------------------
Cbeyond, Inc. 1,2 51,900 2,023,581
- --------------------------------------------------------------------------------
CenturyTel, Inc. 33,300 1,380,618
- --------------------------------------------------------------------------------
Cincinnati Bell, Inc. 1 521,800 2,478,550
- --------------------------------------------------------------------------------
Cogent Communications Group, Inc. 1,2 75,100 1,780,621
- --------------------------------------------------------------------------------
Consolidated Communications
Holdings, Inc. 20,370 405,363
- --------------------------------------------------------------------------------
Embarq Corp. 44,100 2,184,273
- --------------------------------------------------------------------------------
FairPoint Communications, Inc. 2 11,800 153,636
- --------------------------------------------------------------------------------
Iowa Telecommunications Services, Inc. 2 30,300 492,678
- --------------------------------------------------------------------------------
North Pittsburgh Systems, Inc. 1,500 34,035
- --------------------------------------------------------------------------------
NTELOS Holdings Corp. 59,100 1,754,679
- --------------------------------------------------------------------------------
PAETEC Holding Corp. 1,2 15,200 148,200
- --------------------------------------------------------------------------------
Premiere Global Services, Inc. 1,2 142,800 2,120,580
- --------------------------------------------------------------------------------
Qwest Communications
International, Inc. 1,2 68,000 476,680
- --------------------------------------------------------------------------------
Shenandoah
Telecommunications Co. 2 1,100 26,378
- --------------------------------------------------------------------------------
SureWest Communications 2 700 11,970
- --------------------------------------------------------------------------------
Time Warner Telecom, Inc., Cl. A 1 12,400 251,596
- --------------------------------------------------------------------------------
Vonage Holdings Corp. 1 6,200 14,260
- --------------------------------------------------------------------------------
Windstream Corp. 64,600 841,092
----------------
17,825,746
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--0.5%
Centennial Communications Corp. 1 89,500 831,455
- --------------------------------------------------------------------------------
Rural Cellular Corp., Cl. A 1,2 5,700 251,313
- --------------------------------------------------------------------------------
Syniverse Holdings, Inc. 1 117,900 1,836,882
- --------------------------------------------------------------------------------
Telephone & Data Systems, Inc. 30,000 1,878,000
- --------------------------------------------------------------------------------
USA Mobility, Inc. 5,600 80,080
----------------
4,877,730
- --------------------------------------------------------------------------------
UTILITIES--1.1%
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES--0.3%
El Paso Electric Co. 1 49,400 1,263,158
- --------------------------------------------------------------------------------
Otter Tail Corp. 2 12,600 435,960
- --------------------------------------------------------------------------------
Reliant Energy, Inc. 1 16,600 435,584
- --------------------------------------------------------------------------------
UniSource Energy Corp. 26,200 826,610
----------------
2,961,312
SHARES VALUE
- --------------------------------------------------------------------------------
ENERGY TRADERS--0.0%
Canadian Hydro Developers, Inc. 1 14,000 $ 90,159
- --------------------------------------------------------------------------------
GAS UTILITIES--0.6%
New Jersey Resources Corp. 2 18,000 900,360
- --------------------------------------------------------------------------------
Northwest Natural Gas Co. 2 43,100 2,097,246
- --------------------------------------------------------------------------------
South Jersey Industries, Inc. 400 14,436
- --------------------------------------------------------------------------------
Southwest Gas Corp. 8,300 247,091
- --------------------------------------------------------------------------------
WGL Holdings, Inc. 2 68,900 2,257,164
----------------
5,516,297
- --------------------------------------------------------------------------------
MULTI-UTILITIES--0.2%
Avista Corp. 2 15,058 324,349
- --------------------------------------------------------------------------------
Black Hills Corp. 2 8,000 352,800
- --------------------------------------------------------------------------------
Energy East Corp. 10,300 280,263
- --------------------------------------------------------------------------------
Vectren Corp. 12,600 365,519
----------------
1,322,931
----------------
Total Common Stocks (Cost $890,535,048) 906,439,734
UNITS
- --------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- --------------------------------------------------------------------------------
Redcorp Ventures Ltd. Wts.,
Exp. 7/5/09 1,3 (Cost $0) 333,200 21,793
SHARES
- --------------------------------------------------------------------------------
INVESTMENT COMPANIES--1.1%
- --------------------------------------------------------------------------------
Oppenheimer Institutional Money
Market Fund, Cl. E, 5.03% 5,6
(Cost $10,327,619) 10,327,619 10,327,619
- --------------------------------------------------------------------------------
Total Investments, at Value
(excluding Investments Purchased
with Cash Collateral from
Securities Loaned)
(Cost $900,862,667) 916,789,146
PRINCIPAL
AMOUNT
- --------------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED--24.2% 7
- --------------------------------------------------------------------------------
ASSET-BACKED FLOATING NOTE--0.4%
Countrywide Asset-Backed
Certificates, Series 2006-2,
Cl. 2A1, 4.94%, 1/25/08 $ 113,881 113,711
- --------------------------------------------------------------------------------
GSAA Home Equity Trust,
Series 2005-15,
Cl. 2A1, 4.96%, 1/25/08 801,963 801,651
- --------------------------------------------------------------------------------
Specialty Underwriting &
Residential Finance Trust,
Series 2006 BC1,
Cl. A2A, 4.95%, 1/25/08 510,446 506,816
22 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
ASSET-BACKED FLOATING NOTE Continued
Structured Asset Investment
Loan Trust, Series 2005-11,
Cl. A4, 4.96%, 1/25/08 $ 215,265 $ 215,181
- --------------------------------------------------------------------------------
Whitehawk CDO Funding
Corp., 5.04%, 3/17/08 2,250,000 2,195,863
--------------
3,833,222
- --------------------------------------------------------------------------------
BANK FLOATING RATE NOTE--0.7%
Wachovia Bank NA,
4.36%, 1/2/08 6,000,000 5,984,088
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--10.6%
Undivided interest of 9.65% in joint
repurchase agreement (Principal Amount/
Value $1,000,000,000, with a maturity
value of $1,000,250,000) with Bank of
America NA, 4.50%, dated 12/31/07,
to be repurchased at $96,567,627
on 1/2/08, collateralized by U.S.
Agency Mortgages, 5%, 5/1/35,
with a value of $1,020,000,000 8 96,543,491 96,543,491
- --------------------------------------------------------------------------------
MEDIUM-TERM FLOATING NOTE--12.1%
American Express Credit Corp.,
5.04%, 1/15/08 4,000,000 4,000,136
- --------------------------------------------------------------------------------
American General Finance Corp.,
5.24%, 1/9/08 6,501,520 6,434,669
- --------------------------------------------------------------------------------
American Honda Finance Corp.,
5.16%, 3/10/08 6,503,884 6,501,872
- --------------------------------------------------------------------------------
ANZ National (Int'l) Ltd.,
4.37%, 1/2/08 7,997,376 7,983,488
- --------------------------------------------------------------------------------
Beta Finance, Inc., 4.37%, 1/2/08 2,999,893 2,991,267
- --------------------------------------------------------------------------------
Beta Finance, Inc., 4.39%, 1/2/08 4,997,769 4,900,360
- --------------------------------------------------------------------------------
Caixa Catal, 5.18%, 3/7/08 8,000,000 7,991,200
- --------------------------------------------------------------------------------
CAM US Finance SA Unipersonal,
4.96%, 2/1/08 6,000,000 5,980,308
- --------------------------------------------------------------------------------
CC USA, Inc., 4.37%, 1/2/08 3,000,000 2,998,794
- --------------------------------------------------------------------------------
CC USA, Inc., 4.37%, 1/2/08 1,000,000 998,779
- --------------------------------------------------------------------------------
CC USA, Inc., 4.39%, 1/2/08 4,497,990 4,425,457
- --------------------------------------------------------------------------------
Citigroup Funding, Inc., 4.36%, 1/2/08 5,000,000 4,998,745
- --------------------------------------------------------------------------------
Dorada Finance, Inc., 4.37%, 1/2/08 7,500,000 7,490,798
- --------------------------------------------------------------------------------
HSBC Finance Corp., 5.26%, 1/7/08 2,000,000 1,994,120
- --------------------------------------------------------------------------------
K2 (USA) LLC, 4.37%, 1/2/08 5,997,304 5,852,184
- --------------------------------------------------------------------------------
K2 (USA) LLC, 4.39%, 1/2/08 2,999,811 2,994,048
- --------------------------------------------------------------------------------
LINKS Finance LLC, 4.37%, 1/2/08 3,000,292 2,985,328
- --------------------------------------------------------------------------------
MBIA Global Funding LLC,
4.37%, 1/2/08 2,500,000 2,496,560
- --------------------------------------------------------------------------------
MBIA Global Funding LLC,
4.37%, 1/2/08 4,000,000 3,899,904
- --------------------------------------------------------------------------------
MBIA Global Funding LLC,
4.86%, 1/30/08 2,000,000 1,998,602
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
MEDIUM-TERM FLOATING NOTE Continued
Metropolitan Life Global Funding,
4.89%, 1/22/08 $ 7,250,000 $ 7,244,861
- --------------------------------------------------------------------------------
Nationwide Global Fund I,
4.99%, 3/17/08 7,004,704 7,002,366
- --------------------------------------------------------------------------------
Sigma Finance, Inc., 4.37%, 1/2/08 3,000,000 2,997,531
- --------------------------------------------------------------------------------
Tango Finance Corp., 4.37%, 1/2/08 3,499,825 3,490,599
--------------
110,651,976
- --------------------------------------------------------------------------------
YANKEE FLOATING CERTIFICATE OF DEPOSIT--0.4%
Natexis Banques Populaires NY,
4.37%, 1/2/08 2,000,000 1,999,812
- --------------------------------------------------------------------------------
Natexis Banques Populaires NY,
4.39%, 1/2/08 1,999,951 1,999,982
--------------
3,999,794
--------------
Total Investments Purchased
with Cash Collateral from
Securities Loaned (Cost $221,685,524) 221,012,571
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $1,122,548,191) 124.3% 1,137,801,717
- --------------------------------------------------------------------------------
LIABILITIES IN EXCESS
OF OTHER ASSETS (24.3) (222,220,801)
---------------------------
NET ASSETS 100.0% $ 915,580,916
===========================
INDUSTRY CLASSIFICATIONS ARE UNAUDITED.
23 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
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 $372,828 or 0.04% of the Fund's net assets
as of December 31, 2007.
4. Illiquid or restricted security. The aggregate value of illiquid or
restricted securities as of December 31, 2007 was $30,435, which represents less
than 0.005% of the Fund's net assets, all of which is considered restricted. See
Note 6 of accompanying Notes. Information concerning restricted securities is as
follows:
ACQUISITION UNREALIZED
SECURITY DATE COST VALUE DEPRECIATION
- --------------------------------------------------------------------------------
Tusk Energy Corp. 11/15/04 $ 38,148 $ 30,435 $7,713
5. Is or was an affiliate, as defined in the Investment Company Act of 1940, at
or during the period ended December 31, 2007, by virtue of the Fund owning at
least 5% of the voting securities of the issuer or as a result of the Fund and
the issuer having the same investment adviser. Transactions during the period in
which the issuer was an affiliate are as follows:
SHARES GROSS GROSS SHARES
DECEMBER 31, 2006 ADDITIONS REDUCTIONS DECEMBER 31, 2007
- -----------------------------------------------------------------------------------------------------------------------
Oppenheimer Institutional Money Market Fund, Cl. E 7,142,041 258,419,031 255,233,453 10,327,619
DIVIDEND
VALUE INCOME
- -----------------------------------------------------------------------------------------------------------------------
Oppenheimer Institutional Money Market Fund, Cl. E $10,327,619 $383,516
6. Rate shown is the 7-day yield as of December 31, 2007.
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, 2007
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments:
Unaffiliated companies (cost $1,112,220,572) $1,127,474,098
Affiliated companies (cost $10,327,619) 10,327,619
---------------
1,137,801,717
- ------------------------------------------------------------------------------------------------
Cash 140,319
- ------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 16,963,583
Shares of beneficial interest sold 3,097,771
Dividends 873,698
Other 115,480
---------------
Total assets 1,158,992,568
- ------------------------------------------------------------------------------------------------
LIABILITIES
- ------------------------------------------------------------------------------------------------
Return of collateral for securities loaned 221,745,498
- ------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 20,829,520
Distribution and service plan fees 520,157
Shares of beneficial interest redeemed 206,629
Shareholder communications 56,882
Trustees' compensation 5,928
Transfer and shareholder servicing agent fees 1,795
Other 45,243
---------------
Total liabilities 243,411,652
- ------------------------------------------------------------------------------------------------
NET ASSETS $ 915,580,916
===============
- ------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- ------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 50,731
- ------------------------------------------------------------------------------------------------
Additional paid-in capital 852,819,521
- ------------------------------------------------------------------------------------------------
Accumulated net investment income 2,449,399
- ------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 45,007,957
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets and
liabilities denominated in foreign currencies 15,253,308
---------------
NET ASSETS $ 915,580,916
===============
- ------------------------------------------------------------------------------------------------
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 $93,939,232 and 5,160,262 shares of beneficial
interest outstanding) $ 18.20
- ------------------------------------------------------------------------------------------------
Service Shares:
Net asset value, redemption price per share and offering price per share
(based on net assets of $821,641,684 and 45,570,717 shares of beneficial
interest outstanding) $ 18.03
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 31, 2007
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
INVESTMENT INCOME
- -----------------------------------------------------------------------------------------
Dividends:
Unaffiliated companies (net of foreign withholding taxes of $6,998) $ 9,038,683
Affiliated companies 383,516
- -----------------------------------------------------------------------------------------
Portfolio lending fees 950,674
- -----------------------------------------------------------------------------------------
Interest 21,102
---------------
Total investment income 10,393,975
- -----------------------------------------------------------------------------------------
EXPENSES
- -----------------------------------------------------------------------------------------
Management fees 5,996,201
- -----------------------------------------------------------------------------------------
Distribution and service plan fees--Service shares 1,913,997
- -----------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service shares 10,067
Service shares 10,421
- -----------------------------------------------------------------------------------------
Shareholder communications:
Non-Service shares 13,794
Service shares 109,141
- -----------------------------------------------------------------------------------------
Trustees' compensation 17,420
- -----------------------------------------------------------------------------------------
Custodian fees and expenses 5,083
- -----------------------------------------------------------------------------------------
Administration service fees 1,500
- -----------------------------------------------------------------------------------------
Other 72,639
---------------
Total expenses 8,150,263
Less reduction to custodian expenses (2,441)
Less waivers and reimbursements of expenses (7,393)
---------------
Net expenses 8,140,429
- -----------------------------------------------------------------------------------------
NET INVESTMENT INCOME 2,253,546
- -----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- -----------------------------------------------------------------------------------------
Net realized gain on:
Investments from unaffiliated companies 50,028,618
Foreign currency transactions 357,606
---------------
Net realized gain 50,386,224
- -----------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments (75,427,719)
Translation of assets and liabilities denominated in foreign currencies 151,255
---------------
Net change in unrealized appreciation (75,276,464)
- -----------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (22,636,694)
===============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2007 2006
- ------------------------------------------------------------------------------------------------------------------
OPERATIONS
- ------------------------------------------------------------------------------------------------------------------
Net investment income $ 2,253,546 $ 1,411,195
- ------------------------------------------------------------------------------------------------------------------
Net realized gain 50,386,224 27,049,092
- ------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (75,276,464) 41,212,121
-------------------------------
Net increase (decrease) in net assets resulting from operations (22,636,694) 69,672,408
- ------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Non-Service shares (284,891) (79,081)
Service shares (1,096,034) (90,296)
-------------------------------
(1,380,925) (169,377)
- ------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Non-Service shares (3,038,041) (1,560,912)
Service shares (23,704,364) (11,399,106)
-------------------------------
(26,742,405) (12,960,018)
- ------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- ------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from beneficial interest transactions:
Non-Service shares 17,695,373 29,898,135
Service shares 230,810,116 271,706,391
-------------------------------
248,505,489 301,604,526
- ------------------------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------------------
Total increase 197,745,465 358,147,539
- ------------------------------------------------------------------------------------------------------------------
Beginning of period 717,835,451 359,687,912
-------------------------------
End of period (including accumulated net investment income of
$2,449,399 and $1,540,319, respectively) $ 915,580,916 $ 717,835,451
===============================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2007 2006 2005 2004 2003
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 19.15 $ 17.18 $ 16.05 $ 13.44 $ 9.31
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .09 1 .08 1 .04 1 .01 1 (.03)
Net realized and unrealized gain (loss) (.30) 2.46 1.51 2.60 4.16
------------------------------------------------------------------------------
Total from investment operations (.21) 2.54 1.55 2.61 4.13
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.06) (.03) -- -- --
Distributions from net realized gain (.68) (.54) (.42) -- --
------------------------------------------------------------------------------
Total dividends and/or distributions to shareholders (.74) (.57) (.42) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 18.20 $ 19.15 $ 17.18 $ 16.05 $ 13.44
==============================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 (1.21)% 15.00% 9.92% 19.42% 44.36%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 93,939 $ 81,405 $ 44,820 $ 38,636 $ 27,551
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 94,815 $ 62,659 $ 39,708 $ 30,871 $ 20,271
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income (loss) 0.48% 0.46% 0.23% 0.06% (0.30)%
Total expenses 0.73% 4,5,6 0.77% 4,5 0.81% 6 0.83% 6 1.01% 6
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 115% 110% 110% 147% 130%
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 less than one full year.
4. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended December 31, 2007 0.73%
Year Ended December 31, 2006 0.77%
5. Voluntary waiver or reimbursement of indirect management fees less than
0.005%.
6. Reduction to custodian expenses less than 0.005%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
SERVICE SHARES YEAR ENDED DECEMBER 31, 2007 2006 2005 2004 2003
- ---------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 18.98 $ 17.06 $ 15.97 $ 13.40 $ 9.29
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .05 1 .04 1 -- 1,2 (.02) 1 (.02)
Net realized and unrealized gain (loss) (.29) 2.42 1.51 2.59 4.13
----------------------------------------------------------------------------
Total from investment operations (.24) 2.46 1.51 2.57 4.11
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.03) -- 2 -- -- --
Distributions from net realized gain (.68) (.54) (.42) -- --
----------------------------------------------------------------------------
Total dividends and/or distributions to shareholders (.71) (.54) (.42) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 18.03 $ 18.98 $ 17.06 $ 15.97 $ 13.40
============================================================================
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 (1.39)% 14.66% 9.71% 19.18% 44.24%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 821,642 $ 636,430 $ 314,868 $ 173,612 $ 62,660
- ----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 766,102 $ 479,456 $ 221,324 $ 112,279 $ 25,018
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income (loss) 0.23% 0.23% 0.02% (0.14)% (0.43)%
Total expenses 0.97% 5,6,7 1.00% 5,6 1.04% 7 1.06% 7 1.23% 7
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 115% 110% 110% 147% 130%
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 less than one full year.
5. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended December 31, 2007 0.97%
Year Ended December 31, 2006 1.00%
6. Voluntary waiver or reimbursement of indirect management fees less than
0.005%.
7. Reduction to custodian expenses less than 0.005%.
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
adviser is OppenheimerFunds, Inc. (the "Manager").
The Fund offers two classes of shares. Both classes are sold at their
offering price, which is the net asset value per share, to separate investment
accounts of participating insurance companies as an underlying investment for
variable life insurance policies, variable annuity contracts or other investment
products. The class of shares designated as Service shares is subject to a
distribution and service plan. Both classes of shares have identical rights and
voting privileges with respect to the Fund in general and exclusive voting
rights on matters that affect that class alone. Earnings, net assets and net
asset value per share may differ due to each class having its own expenses, such
as transfer and shareholder servicing agent fees and shareholder communications,
directly attributable to that class.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of the New York Stock Exchange (the "Exchange"), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for trading. Securities may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. Securities traded on a registered U.S.
securities exchange 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 whose principal exchange is NASDAQ(R) are valued based on the closing
price reported by NASDAQ prior to the time when the Fund's assets are valued. In
the absence of a sale, the security is valued at the last sale price on the
prior trading day, if it is within the spread of the 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, collateralized
mortgage obligations and other asset-backed securities will be valued at the
mean between the "bid" and "asked" prices. Securities for which market
quotations are not readily available are valued at their fair value. 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. Shares of a registered investment company
that are not traded on an exchange are valued at the acquired investment
company's net asset value per share. "Money market-type" debt instruments with
remaining maturities of sixty days or less are valued at cost adjusted by the
amortization of discount or premium to maturity (amortized cost), which
approximates market value.
- --------------------------------------------------------------------------------
CONCENTRATION OF RISKS. The Fund from time to time may have elements of
concentration risk due to the value of certain securities held compared to the
overall net investments value of the Fund. Such concentrations may subject the
Fund to additional risks.
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in
U.S. dollars. The values of securities denominated in foreign currencies and
amounts related to the purchase and sale of foreign securities and foreign
investment income are translated into U.S. dollars as of the close of the
Exchange, normally 4:00 P.M. Eastern time, on each day the Exchange is open for
trading. Foreign exchange rates may be valued primarily using a reliable bank,
dealer or service authorized by the Board of Trustees.
30 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
Reported net realized gains and losses from foreign currency transactions
arise from sales of portfolio securities, sales and maturities of short-term
securities, sales of foreign currencies, exchange rate fluctuations between the
trade and settlement dates on securities transactions, and the difference
between the amounts of dividends, interest, and foreign withholding taxes
recorded on the Fund's books and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized appreciation and depreciation on the
translation of assets and liabilities denominated in foreign currencies arise
from changes in the values of assets and liabilities, including investments in
securities at fiscal period end, resulting from changes in exchange rates.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
INVESTMENT IN OPPENHEIMER INSTITUTIONAL MONEY MARKET FUND. The Fund is permitted
to invest daily available cash balances in an affiliated money market fund. The
Fund may invest the available cash in Class E shares of Oppenheimer
Institutional Money Market Fund ("IMMF") to seek current income while preserving
liquidity. IMMF is a registered open-end management investment company,
regulated as a money market fund under the Investment Company Act of 1940, as
amended. The Manager is also the investment adviser of IMMF. 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. If the seller of the agreement defaults and the value of the
collateral declines, or if the seller enters an insolvency proceeding,
realization of the value of the collateral by the Fund may be delayed or
limited.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders. Therefore, no federal income or excise tax provision is
required. The Fund files income tax returns in U.S. federal and applicable state
jurisdictions. The statute of limitations on the Fund's tax return filings
remain open for the three preceding fiscal reporting period ends.
The tax components of capital shown in the following table represent
distribution requirements the Fund must satisfy under the income tax
regulations, losses the Fund may be able to offset against income and gains
realized in future years and unrealized appreciation or depreciation of
securities and other investments for federal income tax purposes.
31 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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
--------------------------------------------------------------------------
$7,547,318 $42,946,708 $21,937 $12,244,504
1. The Fund had $1,265 of post-October foreign currency losses which were
deferred.
2. The Fund had $20,672 of post-October passive foreign investment company
losses which were deferred.
3. During the fiscal year ended December 31, 2007, the Fund did not utilize any
capital loss carryforward.
4. During the fiscal year ended December 31, 2006, 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, 2007.
Net assets of the Fund were unaffected by the reclassifications.
REDUCTION TO
INCREASE TO ACCUMULATED NET
INCREASE ACCUMULATED NET REALIZED GAIN
TO PAID-IN CAPITAL INVESTMENT INCOME ON INVESTMENTS 5
---------------------------------------------------------
$3,247,498 $36,459 $3,283,957
5. $3,247,498, including $2,905,691 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, 2007
and December 31, 2006 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2007 DECEMBER 31, 2006
----------------------------------------------------------------
Distributions paid from:
Ordinary income $ 2,813,251 $ 848,573
Long-term capital gain 25,310,079 12,280,822
-------------------------------
Total $28,123,330 $13,129,395
===============================
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, 2007 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 $1,125,556,995
==============
Gross unrealized appreciation $ 91,049,437
Gross unrealized depreciation (78,804,933)
--------------
Net unrealized appreciation $ 12,244,504
==============
32 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a compensation
deferral plan for independent trustees that enables trustees to elect to defer
receipt of all or a portion of the annual compensation they are entitled to
receive from the Fund. For purposes of determining the amount owed to the
Trustee under the plan, deferred amounts are treated as though equal dollar
amounts had been invested in shares of the Fund or in other Oppenheimer funds
selected by the Trustee. The Fund purchases shares of the funds selected for
deferral by the Trustee in amounts equal to his or her deemed investment,
resulting in a Fund asset equal to the deferred compensation liability. Such
assets are included as a component of "Other" within the asset section of the
Statement of Assets and Liabilities. Deferral of trustees' fees under the plan
will not affect the net assets of the Fund, and will not materially affect the
Fund's assets, liabilities or net investment income per share. Amounts will be
deferred until distributed in accordance to the compensation deferral plan.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations and
may differ from U.S. generally accepted accounting principles, are recorded on
the ex-dividend date. Income and capital gain distributions, if any, are
declared and paid annually or at other times as deemed necessary by the Manager.
- --------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income is recognized on an accrual basis. Market discount and
premium, which are included in interest income on the Statement of Operations,
are amortized or accreted daily.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. "Custodian fees and expenses" in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts, to the extent they are not
offset by positive cash balances maintained by the Fund, at a rate equal to the
Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line item,
if applicable, represents earnings on cash balances maintained by the Fund
during the period. Such interest expense and other custodian fees may be paid
with these earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Fund's organizational documents provide current and former
trustees and officers with a limited indemnification against liabilities arising
in connection with the performance of their duties to the Fund. In the normal
course of business, the Fund may also enter into contracts that provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would be dependent on future claims that may be made against the
Fund. The risk of material loss from such claims is considered remote.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period. Actual
results could differ from those estimates.
33 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
YEAR ENDED DECEMBER 31, 2007 YEAR ENDED DECEMBER 31, 2006
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
NON-SERVICE SHARES
Sold 1,931,787 $ 37,725,561 2,252,265 $ 40,943,154
Dividends and/or distributions reinvested 177,034 3,322,932 91,722 1,639,993
Redeemed (1,200,537) (23,353,120) (700,330) (12,685,012)
-------------------------------------------------------------
Net increase 908,284 $ 17,695,373 1,643,657 $ 29,898,135
=============================================================
- ----------------------------------------------------------------------------------------------------------
SERVICE SHARES
Sold 15,587,096 $ 300,314,601 17,621,426 $ 317,270,866
Dividends and/or distributions reinvested 1,328,184 24,744,065 639,766 11,362,246
Redeemed (4,874,156) (94,248,550) (3,189,608) (56,926,721)
-------------------------------------------------------------
Net increase 12,041,124 $ 230,810,116 15,071,584 $ 271,706,391
=============================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations and investments in IMMF, for the year ended December
31, 2007, were as follows:
PURCHASES SALES
--------------------------------------------------------
Investment securities $ 1,198,139,130 $ 980,835,656
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Under the investment advisory agreement, the Fund pays the
Manager a management fee based on the daily net assets of the Fund at an annual
rate as shown in the following table:
FEE SCHEDULE
---------------------------------
Up to $200 million 0.75%
Next $200 million 0.72
Next $200 million 0.69
Next $200 million 0.66
Over $800 million 0.60
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services ("OFS"), a division of the
Manager, acts as the transfer and shareholder servicing agent for the Fund. The
Fund pays OFS a per account fee. For the year ended December 31, 2007, the Fund
paid $20,460 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 (the "Plan") in accordance with Rule 12b-1 under
the Investment Company Act of 1940 for Service shares to pay OppenheimerFunds
Distributor, Inc. (the "Distributor"), for distribution related services,
personal service and account maintenance for the Fund's Service shares. Under
the Plan, payments are made periodically at an annual rate of 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
34 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
variable contract owners that hold Service shares. These fees are paid out of
the Fund's assets on an on-going basis and increase operating expenses of the
Service shares, which results in lower performance compared to the Fund's shares
that are not subject to a service fee. Fees incurred by the Fund under the Plan
are detailed in the Statement of Operations.
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. 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, 2007, the Manager waived $7,393 for
IMMF management fees.
- --------------------------------------------------------------------------------
5. FOREIGN CURRENCY EXCHANGE CONTRACTS
The Fund may enter into foreign currency exchange contracts ("forward
contracts") for the purchase or sale of a foreign currency at a negotiated rate
at a future date.
Foreign currency exchange contracts are reported on a schedule following
the Statement of Investments. Forward contracts will be valued daily based upon
the closing prices of the forward currency rates determined at the close of the
Exchange as provided by a bank, dealer or pricing service. The resulting
unrealized appreciation (depreciation) is reported in the Statement of Assets
and Liabilities as a receivable or payable and in the Statement of Operations
within the change in unrealized appreciation (depreciation). At contract close,
the difference between the original cost of the contract and the value at the
close date is recorded as a realized gain (loss) in the Statement of Operations.
Risks to the Fund include both market and credit risk. Market risk is the
risk that the value of the forward contract will depreciate due to unfavorable
changes in the exchange rates. Credit risk arises from the possibility that the
coun-terparty will default. If the counterparty defaults, the Fund's loss will
consist of the net amount of contractual payments that the Fund has not yet
received.
As of December 31, 2007, the Fund had no outstanding forward contracts.
- --------------------------------------------------------------------------------
6. ILLIQUID OR RESTRICTED SECURITIES
As of December 31, 2007, investments in securities included issues that are
illiquid or restricted. Investments may be illiquid because they do not have an
active trading market, making it difficult to value them or dispose of them
promptly at an acceptable price. A restricted security may have a contractual
restriction on its resale and is valued under methods approved by the Board of
Trustees as reflecting fair value. The Fund will not invest more than 10% of its
net assets (determined at the time of purchase and reviewed periodically) in
illiquid and restricted securities. Certain restricted securities, eligible for
resale to qualified institutional purchasers, may not be subject to that
limitation. Securities that are illiquid or restricted are marked with an
applicable footnote on the Statement of Investments. Restricted securities are
reported on a schedule following the Statement of Investments.
- --------------------------------------------------------------------------------
7. SECURITIES LENDING
The Fund lends portfolio securities from time to time in order to earn
additional income in the form of fees or interest on securities received as
collateral or the investment of any cash received as collateral. The loans are
secured by collateral (either securities, letters of credit, or cash) 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 each business day and any additional required collateral is
delivered to the Fund on the next business day. If the borrower defaults on its
obligation to return the securities loaned because of insolvency or other
reasons, the Fund could experience delays and cost in recovering the securities
loaned or in gaining access to the collateral. 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 and recognizes the gain
or loss in the fair value of the securities loaned that may occur
35 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7. SECURITIES LENDING Continued
during the term of the loan. The Fund has the right under the lending agreement
to recover the securities from the borrower on demand. As of December 31, 2007,
the Fund had on loan securities valued at $214,747,576. Collateral of
$221,919,567 was received for the loans, of which $221,745,498 was received in
cash and subsequently invested in approved instruments.
- --------------------------------------------------------------------------------
8. RECENT ACCOUNTING PRONOUNCEMENT
In September 2006, Financial Accounting Standards Board ("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, 2007, 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.
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, 2007, 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, 2007, 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, 2007, 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 13, 2008
37 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2008, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2007. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
Capital gain distributions of $0.6411 per share were paid to Non-Service
and Service shareholders, respectively, on March 12, 2007. 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, 2007 which are not designated as capital gain distributions should be
multiplied by 62.61% 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
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 three-year and
five-year performance were better than its peer group median although its
one-year performance was below its peer group median. The Board also noted that
the Fund's short-term performance had improved based on its year-to-date
performance as of April 30, 2007.
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
considered the comparability of the fees charged and the services provided to
the Fund to the fees and services for other clients or accounts advised by the
Manager. The independent consultant provided comparative data in regard to the
fees and expenses of the Fund and other small-cap core funds underlying variable
insurance products. 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. The Board noted that the
Fund currently has management fee breakpoints, which are intended to share with
Fund shareholders economies of scale that may exist as the Fund's assets grow.
OTHER BENEFITS TO THE MANAGER. In addition to considering the profits
realized by the Manager, the Board considered information that was provided
regarding the direct and indirect benefits the Manager receives as a result of
its relationship with the Fund, including compensation paid to the Manager's
affiliates and research provided to the Manager in connection with permissible
brokerage arrangements (soft dollar arrangements). The Board also considered
that the Manager must be able to pay and retain experienced professional
personnel at competitive rates to provide quality services to the Fund 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 considered all of the above information, and considered the
terms and conditions of the Agreement, including the management fee, in light of
all of the surrounding circumstances.
41 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS 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, Cherry Creek Mortgage Company (since
Chairman of the Board 1991), Chairman, Centennial State Mortgage Company (since 1994), Chairman, The El Paso Mortgage
of Trustees (since 2003), Company (since 1993); Chairman, Ambassador Media Corporation (since 1984); Chairman, Broadway
Trustee (since 1999) Ventures (since 1984); Director of Helmerich & Payne, Inc. (oil and gas drilling/production company)
Age: 70 (since 1992), Campus Crusade for Christ (non-profit) (since 1991); Former Director, The Lynde and
Harry Bradley Foundation, Inc. (non-profit organization) (2002-2006); former Chairman of: Transland
Financial Services, Inc. (private mortgage banking company) (1997-2003), Great Frontier Insurance
(1995-2000), Frontier Real Estate, Inc. (residential real estate brokerage) (1994-2000) and
Frontier Title (title insurance agency) (1995-2000); former Director of the following: UNUMProvident
(insurance company) (1991-2004), Storage Technology Corporation (computer equipment company)
(1991-2003) and International Family Entertainment (television channel) (1992-1997); U.S. Senator
(January 1979-January 1991). Oversees 39 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: 71 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 39 portfolios in the OppenheimerFunds complex.
EDWARD L. CAMERON, Member of The Life Guard of Mount Vernon (George Washington historical site) (June 2000-May 2006);
Trustee (since 1999) Partner of PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price
Age: 69 Waterhouse LLP Global Investment Management Industry Services Group (financial services firm) (July
1994-June 1998). Oversees 39 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 (October
Age: 66 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 39 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 (until
Age: 67 October 1994). Oversees 39 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); Director
Age: 61 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 39 portfolios in the
OppenheimerFunds complex.
42 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
ROBERT J. MALONE, Director of Jones Knowledge, Inc. (since 2006); Director of Jones International University
Trustee (since 2002) (educational organization) (since August 2005); Chairman, Chief Executive Officer and Director of
Age: 63 Steele Street State Bank (commercial banking) (since August 2003); Director of Colorado UpLIFT
(charitable organization) (since 1986); Trustee of the Gallagher Family Foundation (non-profit
organization) (since 2000); Former Chairman of U.S. Bank- Colorado (subsidiary of U.S. Bancorp and
formerly Colorado National Bank) (July 1996-April 1999); Director of Commercial Assets, Inc. (real
estate investment trust) (1993-2000); Director of Jones Knowledge, Inc. (2001-July 2004); and
Director of U.S. Exploration, Inc. (oil and gas exploration) (1997-February 2004). Oversees 39
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 of Worcester
Age: 65 Polytech Institute (since 1985); Chairman (since 1994) 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 41 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 of the Manager (since June 2001); President of the
Trustee, President and Manager (September 2000-March 2007); President and director or trustee of other Oppenheimer funds;
Principal Executive Officer President and Director of Oppenheimer Acquisition Corp. ("OAC") (the Manager's parent holding
(since 2001) company) and of Oppenheimer Partnership Holdings, Inc. (holding company subsidiary of the Manager)
Age: 58 (since July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of the Manager)
(November 2001-December 2006); 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); Chairman (since October 2007) and Member of the Investment Company
Institute's Board of Governors (since October 2003). Oversees 102 portfolios in the OppenheimerFunds
complex.
- ------------------------------------------------------------------------------------------------------------------------------------
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 Chartered Financial Analyst. Formerly
Vice President and Portfolio Vice President of the Manager (April 1998-September 2003). A portfolio manager and officer of 6
Manager (since 2003) portfolios in the OppenheimerFunds complex.
Age: 58
MARK ZAVANELLI, Vice President of the Manager (since November 2000); a Chartered Financial Analyst. Prior to joining
Vice President (since 2001) the Manager in May 1998, President of Waterside Capital Management, a registered investment advisor
Age: 37 (August 1995-April 1998). A portfolio manager and officer of 3 portfolios in the OppenheimerFunds
complex.
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Chief
Vice President and Chief Compliance Officer of OppenheimerFunds Distributor, Inc., Centennial Asset Management and Shareholder
Compliance Officer Services, Inc. (since March 2004); Vice President of OppenheimerFunds Distributor, Inc., Centennial
(since 2004) Asset Management Corporation and Shareholder Services, Inc. (since June 1983); Former Vice President
Age: 57 and Director of Internal Audit of the Manager (1997-February 2004). An officer of 102 portfolios in
the OppenheimerFunds complex.
43 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer of the following:
Treasurer and Principal HarbourView Asset Management Corporation, Shareholder Financial Services, Inc., Shareholder Services,
Financial & Accounting Inc., Oppenheimer Real Asset Management, Inc. and Oppenheimer Partnership Holdings, Inc. (since March
Officer (since 1999) 1999), OFI Private Investments, Inc. (since March 2000), OppenheimerFunds International Ltd. and
Age: 48 OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management, Inc. (since November
2000), and OppenheimerFunds Legacy Program (charitable trust program established by the Manager)
(since June 2003); Treasurer and Chief Financial Officer of OFI Trust Company (trust company
subsidiary of the Manager) (since May 2000); Assistant Treasurer of the following: OAC (since March
1999), Centennial Asset Management Corporation (March 1999- October 2003) and OppenheimerFunds Legacy
Program (April 2000-June 2003). An officer of 102 portfolios in the OppenheimerFunds complex.
BRIAN S. PETERSEN, Vice President of the Manager (since February 2007); Assistant Vice President of the Manager (August
Assistant Treasurer 2002-February 2007); Manager/Financial Product Accounting of the Manager (November 1998-July 2002).
(since 2004) An officer of 102 portfolios in the OppenheimerFunds complex.
Age: 37
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). An officer of 102 portfolios in the OppenheimerFunds
Age: 37 complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March 2002) of the Manager;
Vice President and General Counsel and Director of the Distributor (since December 2001); General Counsel of Centennial
Secretary (since 2001) Asset Management Corporation (since December 2001); Senior Vice President and General Counsel of
Age: 59 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). An officer of 102 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) of UBS Financial Services,
(since 2004) Inc. An officer of 102 portfolios in the OppenheimerFunds complex.
Age: 40
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 102 portfolios in the OppenheimerFunds complex.
Age: 44
KATHLEEN T. IVES, Vice President (since June 1998) and Senior Counsel and Assistant Secretary (since October 2003) of
Assistant Secretary 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: 42 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 102 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.
44 | OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
DECEMBER 31, 2007
- --------------------------------------------------------------------------------
Oppenheimer Management
Value Fund/VA Commentaries
A Series of Oppenheimer Variable Account Fund and
Annual Report
- --------------------------------------------------------------------------------
MANAGEMENT COMMENTARIES
Listing of Top Holdings
ANNUAL REPORT [GRAPHIC]
Fund Performance Discussion
Listing of Investments
Financial Statements
[LOGO] OPPENHEIMERFUNDS(R)
The Right Way to Invest
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. We are pleased that the Fund
reported positive results during the 12-month period ended December 31, 2007
with its Non-Service shares earning a 5.89% return versus the -0.17% return of
its primary benchmark, the Russell 1000 Value Index, for the same time period.
The Fund's best relative performance stemmed from its holdings in the
industrials, consumer discretionary and utilities sectors. Within the
industrials sector, the Fund benefited from its holdings in Siemens AG, one of
the world's largest electrical, engineering and electronics companies and a
large position for the Fund. We view Siemens as a turnaround story, a stock that
was one of the Fund's laggards only a short time ago and one in which we had
faith in its ability to successfully implement its margin improvement
strategies. The Fund's holdings in Navistar International Corp., a trucking
firm, also flourished as the stock was discovered by other investors during the
reporting period. When we initiated our stock purchase in Navistar, we knew that
the trucking business is often volatile because it is closely linked to
regulatory changes mandated by the Environmental Protection Agency (EPA) due to
ongoing emissions standards. However, in our view, the stock was selling at an
attractive price, especially considering the potential long-term earnings power
of the business. The stock has performed well for the Fund and has been a large
contributor to its overall return. The Fund also benefited from its holdings in
Deere & Co.
The lion's share of the Fund's consumer discretionary relative
outperformance can be traced to its holdings in Liberty Global, Inc., a cable
company that primarily services Europe and Japan. The company has continued to
grow its cash flow through strength in its penetration of telephone and
high-speed data services. In addition, Liberty Global has created value through
a number of shrewd capital management decisions where it divested itself of
select individual properties at attractive valuations and then used the proceeds
to buy back stock at cheap valuations.
Among the Fund's utilities holdings, Exelon Corp., FirstEnergy Corp. and
Reliant Energy, Inc. ranked among its better performers (we exited our position
in Reliant and took profits). All three companies advanced on growing investor
optimism regarding a tightening power market in the areas they served. In
addition, because Exelon's power generation fleet is largely nuclear, there
appears to be optimism that the company will benefit from any type of carbon
constraints that would raise marginal costs of power for its non-nuclear
competitors.
On the other hand, the Fund received disappointing results from its
financials stocks, most notably E*Trade Financial Corp., Freddie Mac, UBS AG,
Wachovia Corp. and Ambac Financial Group, Inc. In the case of E*Trade, the
company's stock price faltered due to losses experienced within its home equity
loan portfolio. We exited our position. Freddie Mac, also known as the Federal
Home Loan Mortgage Corp., underperformed due to growing housing market risks and
we have since exited the position. UBS's stock price fell sharply due to losses
within its fixed-income trading business. However, we continue to like the stock
and view the recent stock price weakness as overdone given the recent management
changes and the company's ability to produce strong gains in its wealth
management group. Wachovia, like many other banks, suffered due to consumer
credit fears and as a result of investor concerns regarding its purchase of
Golden West Financial, a thrift company. Ambac Financial Group, which provides
credit guarantees for all sorts of bonds, including mortgages and collateralized
debt obligations, also experienced difficulties as investors became concerned
about potential bond losses. We have since sold the stock. Otherwise, the Fund's
relative performance was hurt by underweighting the telecommunications services
sector during a time when the sector did well.
As of December 31, 2007, the Fund's most significant overweight position
relative to the Russell 1000 Value Index was in the information technology area.
Conversely, the Fund's most prominent relative underweight positions were within
the financials and energy sectors.
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, 2007. 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.
3 | OPPENHEIMER VALUE FUND/VA
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
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 Value
(Non-Service) 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 $17,834 $19,824
03/31/2007 $18,605 $20,070
06/30/2007 $20,129 $21,058
09/30/2007 $20,314 $21,007
12/31/2007 $18,885 $19,789
AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/07
1-Year 5.89% 5-Year N/A Since Inception (1/2/03) 13.57%
SERVICE SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Value Fund/VA (Service)
Russell 1000 Value Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Value Fund/VA Russell 1000 Value
(Service) Index
09/18/2006 $10,000 $10,000
09/30/2006 $10,076 $10,000
12/31/2006 $10,680 $10,800
03/31/2007 $11,151 $10,934
06/30/2007 $12,056 $11,473
09/30/2007 $12,157 $11,445
12/31/2007 $11,290 $10,781
AVERAGE ANNUAL TOTAL RETURNS OF SERVICE SHARES OF THE FUND AT 12/31/07
1-Year 5.70% 5-Year N/A Since Inception (9/18/06) 9.89%
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
4 | 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 applicable); 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, 2007.
ACTUAL EXPENSES. The first section of the table provides information about
actual account values and actual expenses. You may use the information in this
section for the class of shares you hold, together with the amount you invested,
to estimate the expense that you paid over the period. Simply divide your
account value by $1,000.00 (for example, an $8,600.00 account value divided by
$1,000.00 = 8.60), then multiply the result by the number in the first section
under the heading entitled "Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The second section of the table
provides information about hypothetical account values and hypothetical expenses
based on the Fund's actual expense ratio for each class of shares, and an
assumed rate of return of 5% per year for each class before expenses, which is
not the actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of investing
in the Fund and other funds. To do so, compare this 5% hypothetical example for
the class of shares you hold with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any charges associated with the separate
accounts that offer this Fund. Therefore, the "hypothetical" lines of the table
are useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these separate
account charges were included your costs would have been higher.
- ------------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
ACTUAL JULY 1, 2007 DECEMBER 31, 2007 DECEMBER 31, 2007
- ------------------------------------------------------------------------------------
Non-Service Shares $ 1,000.00 $ 938.20 $ 6.13
- ------------------------------------------------------------------------------------
Service Shares 1,000.00 936.40 7.35
HYPOTHETICAL
(5% return before expenses)
- ------------------------------------------------------------------------------------
Non-Service Shares 1,000.00 1,018.90 6.38
- ------------------------------------------------------------------------------------
Service Shares 1,000.00 1,017.64 7.66
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 indirect expenses from affiliated fund, based on the 6-month period
ended December 31, 2007 are as follows:
CLASS EXPENSE RATIOS
- ---------------------------------------
Non-Service Shares 1.25%
- ---------------------------------------
Service Shares 1.50
The expense ratios reflect reduction to custodian expenses and 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 and reduction to
custodian expenses, if applicable.
- --------------------------------------------------------------------------------
5 | OPPENHEIMER VALUE FUND/VA
STATEMENT OF INVESTMENTS December 31, 2007
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS--98.2%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--7.0%
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--0.6%
Starwood Hotels & Resorts Worldwide, Inc. 1,070 $ 47,112
- --------------------------------------------------------------------------------
MEDIA--6.0%
Cinemark Holdings, Inc. 5,020 85,340
- --------------------------------------------------------------------------------
Liberty Global, Inc., Series C 1 6,748 246,909
- --------------------------------------------------------------------------------
News Corp., Inc., Cl. A 8,042 164,781
----------------
497,030
- --------------------------------------------------------------------------------
SPECIALTY RETAIL--0.4%
OfficeMax, Inc. 1,640 33,882
- --------------------------------------------------------------------------------
CONSUMER STAPLES--9.2%
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--3.2%
Costco Wholesale Corp. 2,579 179,911
- --------------------------------------------------------------------------------
Walgreen Co. 2,160 82,253
----------------
262,164
- --------------------------------------------------------------------------------
FOOD PRODUCTS--2.6%
ConAgra Foods, Inc. 8,940 212,683
- --------------------------------------------------------------------------------
TOBACCO--3.4%
Altria Group, Inc. 3,671 277,454
- --------------------------------------------------------------------------------
ENERGY--12.2%
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--1.7%
Halliburton Co. 3,410 129,273
- --------------------------------------------------------------------------------
ION Geophysical Corp. 1 640 10,099
----------------
139,372
- --------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS--10.5%
Exxon Mobil Corp. 4,776 447,463
- --------------------------------------------------------------------------------
Murphy Oil Corp. 3,230 274,033
- --------------------------------------------------------------------------------
Total SA, Sponsored ADR 1,667 137,694
----------------
859,190
- --------------------------------------------------------------------------------
FINANCIALS--23.9%
- --------------------------------------------------------------------------------
CAPITAL MARKETS--10.0%
Credit Suisse Group, ADR 6,870 412,887
- --------------------------------------------------------------------------------
UBS AG 8,836 406,456
----------------
819,343
- --------------------------------------------------------------------------------
COMMERCIAL BANKS--4.7%
Wachovia Corp. 10,054 382,354
- --------------------------------------------------------------------------------
CONSUMER FINANCE--2.5%
American Express Co. 3,970 206,519
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--3.0%
Bank of America Corp. 5,930 244,672
- --------------------------------------------------------------------------------
INSURANCE--3.7%
Everest Re Group Ltd. 1,327 133,231
- --------------------------------------------------------------------------------
National Financial Partners Corp. 3,840 175,142
----------------
308,373
SHARES VALUE
- --------------------------------------------------------------------------------
HEALTH CARE--8.5%
- --------------------------------------------------------------------------------
BIOTECHNOLOGY--0.1%
Vanda Pharmaceuticals, Inc. 1 715 $ 4,919
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--1.8%
DaVita, Inc. 1 1,100 61,985
- --------------------------------------------------------------------------------
Medco Health Solutions, Inc. 1 840 85,176
----------------
147,161
- --------------------------------------------------------------------------------
PHARMACEUTICALS--6.6%
Johnson & Johnson 4,670 311,489
- --------------------------------------------------------------------------------
Novartis AG, ADR 2,165 117,581
- --------------------------------------------------------------------------------
Schering-Plough Corp. 4,480 119,347
----------------
548,417
- --------------------------------------------------------------------------------
INDUSTRIALS--8.1%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE--1.3%
Alliant Techsystems, Inc. 1 169 19,225
- --------------------------------------------------------------------------------
United Technologies Corp. 1,099 84,117
----------------
103,342
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--3.8%
- --------------------------------------------------------------------------------
Siemens AG, Sponsored ADR 1,994 313,776
- --------------------------------------------------------------------------------
MACHINERY--3.0%
Deere & Co. 930 86,602
- --------------------------------------------------------------------------------
Navistar International Corp. 1 3,033 164,389
----------------
250,991
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--9.8%
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--1.4%
Sun Microsystems, Inc. 1 6,560 118,933
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--6.5%
Broadcom Corp., Cl. A 1 6,240 163,114
- --------------------------------------------------------------------------------
KLA-Tencor Corp. 3,460 166,634
- --------------------------------------------------------------------------------
Lam Research Corp. 1 4,710 203,613
----------------
533,361
- --------------------------------------------------------------------------------
SOFTWARE--1.9%
- --------------------------------------------------------------------------------
Take-Two Interactive Software, Inc. 1 8,260 152,397
- --------------------------------------------------------------------------------
MATERIALS--5.2%
- --------------------------------------------------------------------------------
CHEMICALS--3.4%
BASF AG, Sponsored ADR 640 94,336
- --------------------------------------------------------------------------------
FMC Corp. 1,690 92,190
- --------------------------------------------------------------------------------
Lubrizol Corp. (The) 1,687 91,368
----------------
277,894
- --------------------------------------------------------------------------------
METALS & MINING--1.8%
Carpenter Technology Corp. 1,930 145,078
6 | OPPENHEIMER VALUE FUND/VA
SHARES VALUE
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--6.5%
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--5.6%
AT&T, Inc. 11,070 $ 460,069
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--0.9%
Sprint Nextel Corp. 5,470 71,821
- --------------------------------------------------------------------------------
UTILITIES--7.8%
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES--7.5%
Exelon Corp. 3,576 291,945
- --------------------------------------------------------------------------------
FirstEnergy Corp. 4,470 323,361
----------------
615,306
- --------------------------------------------------------------------------------
ENERGY TRADERS--0.3%
Dynegy, Inc., Cl. A 1 3,823 27,296
----------------
Total Common Stocks (Cost $7,628,960) 8,060,909
SHARES VALUE
- --------------------------------------------------------------------------------
INVESTMENT COMPANIES--2.2%
- --------------------------------------------------------------------------------
Oppenheimer Institutional
Money Market Fund, Cl. E, 5.03% 2,3
(Cost $177,433) 177,433 $ 177,433
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $7,806,393) 100.4% 8,238,342
- --------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (0.4) (29,245)
--------------------------
NET ASSETS 100.0% $ 8,209,097
==========================
INDUSTRY CLASSIFICATIONS ARE UNAUDITED.
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
2. Rate shown is the 7-day yield as of December 31, 2007.
3. Is or was an affiliate, as defined in the Investment Company Act of 1940, at
or during the period ended December 31, 2007, by virtue of the Fund owning at
least 5% of the voting securities of the issuer or as a result of the Fund and
the issuer having the same investment adviser. Transactions during the period in
which the issuer was an affiliate are as follows:
SHARES GROSS GROSS SHARES
DECEMBER 31, 2006 ADDITIONS REDUCTIONS DECEMBER 31, 2007
- -----------------------------------------------------------------------------------------------------------------------
Oppenheimer Institutional Money Market Fund, Cl. E 183,179 6,213,322 6,219,068 177,433
DIVIDEND
VALUE INCOME
- -----------------------------------------------------------------------------------------------------------------------
Oppenheimer Institutional Money Market Fund, Cl. E $ 177,433 $ 14,962
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
7 | OPPENHEIMER VALUE FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 31, 2007
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments:
Unaffiliated companies (cost $7,628,960) $ 8,060,909
Affiliated companies (cost $177,433) 177,433
---------------
8,238,342
- -------------------------------------------------------------------------------------------------------------
Cash 26,069
- -------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Shares of beneficial interest sold 26,198
Investments sold 11,745
Dividends 8,567
Other 3,421
---------------
Total assets 8,314,342
- -------------------------------------------------------------------------------------------------------------
LIABILITIES
- -------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Shares of beneficial interest redeemed 79,022
Legal, auditing and other professional fees 18,892
Distribution and service plan fees 3,805
Trustees' compensation 2,761
Other 765
---------------
Total liabilities 105,245
- -------------------------------------------------------------------------------------------------------------
NET ASSETS $ 8,209,097
===============
- -------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- -------------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 699
- -------------------------------------------------------------------------------------------------------------
Additional paid-in capital 8,082,503
- -------------------------------------------------------------------------------------------------------------
Accumulated net investment loss (2,761)
- -------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (303,293)
- -------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 431,949
---------------
NET ASSETS $ 8,209,097
===============
- -------------------------------------------------------------------------------------------------------------
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 $1,727,735 and 147,344 shares of beneficial interest outstanding) $ 11.73
- -------------------------------------------------------------------------------------------------------------
Service Shares:
Net asset value, redemption price per share and offering price per share
(based on net assets of $6,481,362 and 551,777 shares of beneficial interest outstanding) $ 11.75
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
8 | OPPENHEIMER VALUE FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 31, 2007
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- -------------------------------------------------------------------------------------------------------------
Dividends:
Unaffiliated companies (net of foreign withholding taxes of $2,998) $ 111,453
Affiliated companies 14,962
- -------------------------------------------------------------------------------------------------------------
Interest 16
---------------
Total investment income 126,431
- -------------------------------------------------------------------------------------------------------------
EXPENSES
- -------------------------------------------------------------------------------------------------------------
Management fees 46,993
- -------------------------------------------------------------------------------------------------------------
Distribution and service plan fee--Service shares 8,775
- -------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fee--Service shares 57
- -------------------------------------------------------------------------------------------------------------
Shareholder communications:
Non-Service shares 2,778
Service shares 2,201
- -------------------------------------------------------------------------------------------------------------
Legal, auditing and other professional fees 26,698
- -------------------------------------------------------------------------------------------------------------
Trustees' compensation 6,118
- -------------------------------------------------------------------------------------------------------------
Administration service fees 1,500
- -------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 222
- -------------------------------------------------------------------------------------------------------------
Other 3,081
---------------
Total expenses 98,423
Less reduction to custodian expenses (7)
Less waivers and reimbursements of expenses (11,387)
---------------
Net expenses 87,029
- -------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 39,402
- -------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- -------------------------------------------------------------------------------------------------------------
Net realized loss on investments from unaffiliated companies (87,194)
- -------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation on investments 7,138
- -------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (40,654)
===============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
9 | OPPENHEIMER VALUE FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2007 2006
- -------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) $ 39,402 $ (8,861)
- -------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) (87,194) 359,434
- -------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation 7,138 23,864
--------------------------------
Net increase (decrease) in net assets resulting from operations (40,654) 374,437
- -------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Non-Service shares (14,051) (1,194)
Service shares (22,582) --
--------------------------------
(36,633) (1,194)
- -------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Non-Service shares (64,829) (263,215)
Service shares (232,359) (37,589)
--------------------------------
(297,188) (300,804)
- -------------------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- -------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from beneficial interest transactions:
Non-Service shares (1,050,500) --
Service shares 6,521,885 477,488
--------------------------------
5,471,385 477,488
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------------------------------------------------------
Total increase 5,096,910 549,927
- -------------------------------------------------------------------------------------------------------------------------------
Beginning of period 3,112,187 2,562,260
--------------------------------
End of period (including accumulated net investment loss of $2,761 and $5,081, respectively) $ 8,209,097 $ 3,112,187
================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
10 | OPPENHEIMER VALUE FUND/ VA
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2007 2006 2005 2004 2003 1
- -----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.58 $ 11.16 $ 12.26 $ 12.90 $ 10.00
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .10 2 (.03) 2 .02 2 (.01) 2 .03
Net realized and unrealized gain .59 1.61 .71 1.82 2.87
----------------------------------------------------------------
Total from investment operations .69 1.58 .73 1.81 2.90
- -----------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.10) (.01) (.02) (.03) --
Distributions from net realized gain (.44) (1.15) (1.81) (2.42) --
----------------------------------------------------------------
Total dividends and/or distributions to shareholders (.54) (1.16) (1.83) (2.45) --
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.73 $ 11.58 $ 11.16 $ 12.26 $ 12.90
================================================================
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 5.89% 14.03% 5.88% 14.50% 29.00%
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 1,728 $ 2,657 $ 2,562 $ 2,815 $ 3,871
- -----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 2,753 $ 2,695 $ 2,878 $ 3,370 $ 3,205
- -----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income (loss) 0.80% (0.29)% 0.15% (0.08)% 0.27%
Total expenses 1.49% 5 2.14% 5 1.78% 1.82% 1.39%
Expenses after payments, waivers and/or
reimbursements and reduction to custodian expenses 1.25% 2.14% 1.78% 1.82% 1.39%
- -----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 142% 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 less than one full year.
5. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended December 31, 2007 1.49%
Year Ended December 31, 2006 2.14%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11 | OPPENHEIMER VALUE FUND/VA
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SERVICE SHARES YEAR ENDED DECEMBER 31, 2007 2006 1
- ------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.57 $ 11.89
- ------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) 2 .06 (.05)
Net realized and unrealized gain .60 .88
-------------------
Total from investment operations .66 .83
- ------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.04) --
Distributions from net realized gain (.44) (1.15)
-------------------
Total dividends and/or distributions to shareholders (.48) (1.15)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.75 $ 11.57
===================
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 5.70% 6.81%
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 6,481 $ 455
- ------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 3,527 $ 268
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income (loss) 0.49% (1.30)%
Total expenses 5 1.63% 2.89%
Expenses after payments, waivers and/or
reimbursements and reduction to custodian expenses 1.50% 2.88%
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 142% 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 less than one full year.
5. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended December 31, 2006 1.63%
Year Ended December 31, 2007 2.89%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
12 | OPPENHEIMER VALUE FUND/VA
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Value Fund/VA (the "Fund") is a separate series of Oppenheimer
Variable Account Funds, an open-end management investment company registered
under the Investment Company Act of 1940, as amended. The Fund's investment
objective is to seek long-term growth of capital by investing primarily in
common stocks with low price-earnings ratios and better-than-anticipated
earnings. Realization of current income is a secondary consideration. The Fund's
investment adviser is OppenheimerFunds, Inc. (the "Manager"). As of December 31,
2007, 100% of the Fund's Non-Service 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 trading. Securities may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. Securities traded on a registered U.S.
securities exchange 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 whose principal exchange is NASDAQ(R) are valued based on the closing
price reported by NASDAQ prior to the time when the Fund's assets are valued. In
the absence of a sale, the security is valued at the last sale price on the
prior trading day, if it is within the spread of the 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, collateralized
mortgage obligations and other asset-backed securities will be valued at the
mean between the "bid" and "asked" prices. Securities for which market
quotations are not readily available are valued at their fair value. 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. Shares of a registered investment company
that are not traded on an exchange are valued at the acquired investment
company's net asset value per share. "Money market-type" debt instruments with
remaining maturities of sixty days or less are valued at cost adjusted by the
amortization of discount or premium to maturity (amortized cost), which
approximates market value.
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in
U.S. dollars. The values of securities denominated in foreign currencies and
amounts related to the purchase and sale of foreign securities and foreign
investment income are translated into U.S. dollars as of the close of the
Exchange, normally 4:00 P.M. Eastern time, on each day the Exchange is open for
trading. Foreign exchange rates may be valued primarily using a reliable bank,
dealer or service authorized by the Board of Trustees.
Reported net realized gains and losses from foreign currency transactions
arise from sales of portfolio securities, sales and maturities of short-term
securities, sales of foreign currencies, exchange rate fluctuations between the
trade and settlement dates on securities transactions, and the difference
between the amounts of dividends, interest, and foreign withholding taxes
recorded on the Fund's books and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized appreciation and depreciation on the
translation of assets and liabilities denominated in foreign
13 | OPPENHEIMER VALUE FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
currencies arise from changes in the values of assets and liabilities, including
investments in securities at fiscal period end, resulting from changes in
exchange rates.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
INVESTMENT IN OPPENHEIMER INSTITUTIONAL MONEY MARKET FUND. The Fund is permitted
to invest daily available cash balances in an affiliated money market fund. The
Fund may invest the available cash in Class E shares of Oppenheimer
Institutional Money Market Fund ("IMMF") to seek current income while preserving
liquidity. IMMF is a registered open-end management investment company,
regulated as a money market fund under the Investment Company Act of 1940, as
amended. The Manager is also the investment adviser of IMMF. 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. Therefore, no federal income or excise tax provision is
required. The Fund files income tax returns in U.S. federal and applicable state
jurisdictions. The statute of limitations on the Fund's tax return filings
remain open for the three preceding fiscal reporting period ends.
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
---------------------------------------------------------------------------
$-- $-- $291,907 $420,561
1. As of December 31, 2007, the Fund had $291,449 of post-October losses
available to offset future realized capital gains, if any. Such losses, if
unutilized, will expire in 2016.
2. The Fund had $458 of straddle losses which were deferred.
3. During the fiscal year ended December 31, 2007, the Fund did not utilize any
capital loss carryforward.
4. During the fiscal year ended December 31, 2006, 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.
14 | OPPENHEIMER VALUE FUND/VA
Accordingly, the following amounts have been reclassified for December 31, 2007.
Net assets of the Fund were unaffected by the reclassifications.
REDUCTION TO
INCREASE TO ACCUMULATED NET
REDUCTION TO PAID-IN ACCUMULATED NET REALIZED LOSS ON
CAPITAL INVESTMENT LOSS INVESTMENTS
------------------------------------------------------------------
$ 202 $ 449 $ 651
The tax character of distributions paid during the years ended December 31, 2007
and December 31, 2006 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2007 DECEMBER 31, 2006
------------------------------------------------------------------
Distributions paid from:
Ordinary income $ 113,473 $ 14,671
Long-term capital gain 220,348 287,327
------------------------------
Total $ 333,821 $ 301,998
==============================
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, 2007 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 $ 7,817,781
============
Gross unrealized appreciation $ 865,593
Gross unrealized depreciation (445,032)
------------
Net unrealized appreciation $ 420,561
============
- --------------------------------------------------------------------------------
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 compensation deferral plan.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations and
may differ from U.S. generally accepted accounting principles, are recorded on
the ex-dividend date. Income and capital gain distributions, if any, are
declared and paid annually or at other times as deemed necessary by the Manager.
- --------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income is recognized on an accrual basis. Market discount and
premium, which are included in interest income on the Statement of Operations,
are amortized or accreted daily.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. "Custodian fees and expenses" in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts, to the extent they are not
offset by positive cash balances maintained by the Fund, at a rate equal to the
Federal Funds Rate plus 0.50%. The "Reduction
15 | OPPENHEIMER VALUE FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
to custodian expenses" line item, if applicable, represents earnings on cash
balances maintained by the Fund during the period. Such interest expense and
other custodian fees may be paid with these earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Fund's organizational documents provide current and former
trustees and officers with a limited indemnification against liabilities arising
in connection with the performance of their duties to the Fund. In the normal
course of business, the Fund may also enter into contracts that provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would be dependent on future claims that may be made against the
Fund. The risk of material loss from such claims is considered remote.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period. Actual
results could differ from those estimates.
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
YEAR ENDED DECEMBER 31, 2007 YEAR ENDED DECEMBER 31, 2006 1
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------
NON-SERVICE SHARES
Sold -- $ -- -- $ --
Dividends and/or distributions reinvested -- -- -- --
Redeemed (82,215) (1,050,500) -- --
-----------------------------------------------------------
Net decrease (82,215) $ (1,050,500) -- $ --
===========================================================
- ------------------------------------------------------------------------------------------------------------------------
SERVICE SHARES
Sold 525,491 $ 6,694,320 41,097 $ 500,936
Dividends and/or distributions reinvested 21,569 254,941 3,229 37,589
Redeemed (34,566) (427,376) (5,043) (61,037)
-----------------------------------------------------------
Net increase 512,494 $ 6,521,885 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.
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations and investments in IMMF, for the year ended December
31, 2007, were as follows:
PURCHASES SALES
---------------------------------------------------------------
Investment securities $13,452,355 $8,468,515
16 | OPPENHEIMER VALUE FUND/VA
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Under the investment advisory agreement, the Fund pays the
Manager a management fee based on the daily net assets of the Fund at an annual
rate as shown in the following table:
FEE SCHEDULE
-------------------------------------
Up to $200 million 0.75%
Next $200 million 0.72
Next $200 million 0.69
Next $200 million 0.66
Over $800 million 0.60
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services ("OFS"), a division of the
Manager, acts as the transfer and shareholder servicing agent for the Fund. The
Fund pays OFS a per account fee. For the year ended December 31, 2007, the Fund
paid $57 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 (the "Plan") in accordance with Rule 12b-1 under
the Investment Company Act of 1940 for Service shares to pay OppenheimerFunds
Distributor, Inc. (the "Distributor"), for distribution related services,
personal service and account maintenance for the Fund's Service shares. Under
the Plan, payments are made periodically at an annual rate of 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. These
fees are paid out of the Fund's assets on an on-going basis and increase
operating expenses of the Service shares, which results in lower performance
compared to the Fund's shares that are not subject to a service fee. Fees
incurred by the Fund under the Plan are detailed in the Statement of Operations.
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. Effective January 1, 2007, the Manager
voluntarily agreed to an expense waiver of any total expenses over 1.25% of
average annual net assets for Non-Service shares and 1.50% of average annual net
assets for Service shares. During the year ended December 31, 2007, OFS waived
$6,545 and $4,556 for Non-Service and Service shares, respectively. The expense
waiver is a voluntary undertaking and may be terminated by the Manager at any
time.
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, 2007, the Manager waived $286 for IMMF
management fees.
- --------------------------------------------------------------------------------
5. RECENT ACCOUNTING PRONOUNCEMENT
In September 2006, Financial Accounting Standards Board ("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, 2007, 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.
17 | 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, 2007, 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, 2007, by correspondence with the
custodian and brokers. 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, 2007, 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 13, 2008
18 | OPPENHEIMER VALUE FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2008, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2007. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
Capital gain distributions of $0.3262 per share were paid to Non-Service
and Service shareholders, respectively, on December 31, 2007. 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, 2007 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.
19 | 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.
20 | 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.
21 | OPPENHEIMER VALUE 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 multi-cap value funds underlying
variable insurance products. The Board noted that the Fund's one-year,
three-year and since inception performance were below its peer group median. The
Board also noted the Manager's assertion that the Fund one-year underperformance
was largely due to the Manager's stock selection within the information
technology sector and that, as of April 30, 2007, the Fund's performance was in
the first percentile for the year-to-date period.
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
considered the comparability of the fees charged and the services provided to
the Fund to the fees and services for other clients or accounts advised by the
Manager. The independent consultant provided comparative data in regard to the
fees and expenses of the Fund and other multi-cap value funds underlying
variable insurance products. The Board considered the Manager's assertion that
the expenses are expected to decrease as the Fund's assets increase. The Board
noted that the Manager has agreed to voluntarily cap expenses at 1.25% of the
average annual net assets for Non-service shares and 1.50% of the average annual
net assets of Service shares effective January 1, 2007. The Board noted that the
Fund's contractual management fees are equal to its peer group median although
its actual management fees are 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. The Board noted that the
Fund currently has management fee breakpoints, which are intended to share with
Fund shareholders economies of scale that may exist as the Fund's assets grow.
OTHER BENEFITS TO THE MANAGER. In addition to considering the profits
realized by the Manager, the Board considered information that was provided
regarding the direct and indirect benefits the Manager receives as a result of
its relationship with the Fund, including compensation paid to the Manager's
affiliates and research provided to the Manager in connection with permissible
brokerage arrangements (soft dollar arrangements). The Board also considered
that the Manager must be able to pay and retain experienced professional
personnel at competitive rates to provide quality services to the Fund 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 considered all of the above information, and considered the
terms and conditions of the Agreement, including the management fee, in light of
all of the surrounding circumstances.
22 | 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; 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, Cherry Creek Mortgage Company
Chairman of the Board (since 1991), Chairman, Centennial State Mortgage Company (since 1994), Chairman, The El Paso
of Trustees and Trustee Mortgage Company (since 1993); Chairman, Ambassador Media Corporation (since 1984); Chairman,
(since 2003) Broadway Ventures (since 1984); Director of Helmerich & Payne, Inc. (oil and gas
Age: 70 drilling/production company) (since 1992), Campus Crusade for Christ (non-profit) (since 1991);
Former Director, The Lynde and Harry Bradley Foundation, Inc. (non-profit organization)
(2002-2006); former Chairman of: Transland Financial Services, Inc. (private mortgage banking
company) (1997-2003), Great Frontier Insurance (1995-2000), Frontier Real Estate, Inc.
(residential real estate brokerage) (1994-2000) and Frontier Title (title insurance agency)
(1995-2000); former Director of the following: UNUMProvident (insurance company) (1991-2004),
Storage Technology Corporation (computer equipment company) (1991-2003) and International Family
Entertainment (television channel) (1992-1997); U.S. Senator (January 1979-January 1991). Oversees
39 portfolios in the OppenheimerFunds complex.
GEORGE C. BOWEN, Assistant Secretary and Director of Centennial Asset Management Corporation (December 1991-April
Trustee (since 2003) 1999); President, Treasurer and Director of Centennial Capital Corporation (June 1989-April 1999);
Age: 71 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 39 portfolios in the OppenheimerFunds complex.
EDWARD L. CAMERON, Member of The Life Guard of Mount Vernon (George Washington historical site) (June 2000-May 2006);
Trustee (since 2003) Partner of PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price
Age: 69 Waterhouse LLP Global Investment Management Industry Services Group (financial services firm)
(July 1994-June 1998). Oversees 39 portfolios in the OppenheimerFunds complex.
JON S. FOSSEL, Director of UNUMProvident (insurance company) (since June 2002); Director of Northwestern Energy
Trustee (since 2003) Corp. (public utility corporation) (since November 2004); Director of P.R. Pharmaceuticals
Age: 66 (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 39 portfolios in the OppenheimerFunds complex.
SAM FREEDMAN, Director of Colorado UpLIFT (charitable organization) (since September 1984). Mr. Freedman held
Trustee (since 2003) several positions with the Manager and with subsidiary or affiliated companies of the Manager
Age: 67 (until October 1994). Oversees 39 portfolios in the OppenheimerFunds complex.
BEVERLY L. HAMILTON, Trustee of Monterey Institute for International Studies (educational organization) (since February
Trustee (since 2003) 2000); Board Member of Middlebury College (educational organization) (since December 2005);
Age: 61 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 39
portfolios in the OppenheimerFunds complex.
23 | OPPENHEIMER VALUE FUND/VA
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
ROBERT J. MALONE, Director of Jones Knowledge, Inc. (since 2006); Director of Jones International University
Trustee (since 2003) (educational organization) (since August 2005); Chairman, Chief Executive Officer and Director of
Age: 63 Steele Street State Bank (commercial banking) (since August 2003); Director of Colorado UpLIFT
(charitable organization) (since 1986); Trustee of the Gallagher Family Foundation (non-profit
organization) (since 2000); Former Chairman of U.S. Bank-Colorado (subsidiary of U.S. Bancorp
and formerly Colorado National Bank) (July 1996-April 1999); Director of Commercial Assets, Inc.
(real estate investment trust) (1993-2000); Director of Jones Knowledge, Inc. (2001-July 2004);
and Director of U.S. Exploration, Inc. (oil and gas exploration) (1997-February 2004). Oversees 39
portfolios in the OppenheimerFunds complex.
F. WILLIAM MARSHALL, JR., Trustee of MassMutual Select Funds (formerly MassMutual Institutional Funds) (investment company)
Trustee (since 2003) (since 1996) and MML Series Investment Fund (investment company) (since 1996); Trustee of
Age: 65 Worcester Polytech Institute (since 1985); Chairman (since 1994) 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 41 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 of the Manager (since June 2001); President of the
President and Principal Manager (September 2000-March 2007); President and director or trustee of other Oppenheimer funds;
Executive Officer President and Director of Oppenheimer Acquisition Corp. ("OAC") (the Manager's parent holding
(since 2001) and company) and of Oppenheimer Partnership Holdings, Inc. (holding company subsidiary of the Manager)
Trustee (since 2003) (since July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of the Manager)
Age: 58 (November 2001-December 2006); 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); Chairman (since October 2007)
and Member of the Investment Company Institute's Board of Governors (since October 2003). Oversees
102 portfolios in the OppenheimerFunds complex.
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS OF THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. LEAVY, 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.
CHRISTOPHER LEAVY, Director of Equities of the Manager (since January 2007); Senior Vice President of the Manager
Vice President and Portfolio (since September 2000). Portfolio manager of Morgan Stanley Dean Witter Investment Management
Manager (since 2002) (1997-September 2000). A portfolio manager and officer of 12 portfolios in the OppenheimerFunds
Age: 36 complex.
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Chief
Vice President and Chief Compliance Officer of OppenheimerFunds Distributor, Inc., Centennial Asset Management and
Compliance Officer Shareholder Services, Inc. (since March 2004); Vice President of OppenheimerFunds Distributor,
(since 2004) Inc., Centennial Asset Management Corporation and Shareholder Services, Inc. (since June 1983);
Age: 57 Former Vice President and Director of Internal Audit of the Manager (1997-February 2004). An
officer of 102 portfolios in the OppenheimerFunds complex. Senior Vice President and Treasurer of
the Manager (since March 1999); Treasurer of the following: HarbourView
24 | OPPENHEIMER VALUE FUND/VA
BRIAN W. WIXTED, Asset Management Corporation, Shareholder Financial Services, Inc., Shareholder Services, Inc.,
Treasurer and Principal Oppenheimer Real Asset Management, Inc. and Oppenheimer Partnership Holdings, Inc. (since March
Financial & Accounting 1999), OFI Private Investments, Inc. (since March 2000), OppenheimerFunds International Ltd. and
Officer (since 2003) OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management, Inc. (since November
Age: 48 2000), and OppenheimerFunds Legacy Program (charitable trust program established by the Manager)
(since June 2003); Treasurer and Chief Financial Officer of OFI Trust Company (trust company
subsidiary of the Manager) (since May 2000); Assistant Treasurer of the following: OAC (since
March 1999), Centennial Asset Management Corporation (March 1999-October 2003) and
OppenheimerFunds Legacy Program (April 2000-June 2003). An officer of 102 portfolios in the
OppenheimerFunds complex.
BRIAN S. PETERSEN, Vice President of the Manager (since February 2007); Assistant Vice President of the Manager
Assistant Treasurer (August 2002-February 2007); Manager/Financial Product Accounting of the Manager (November
(since 2004) 1998-July 2002). An officer of 102 portfolios in the OppenheimerFunds complex.
Age: 37
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). An officer of 102 portfolios in the OppenheimerFunds
Age: 37 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 2003) Centennial Asset Management Corporation (since December 2001); Senior Vice President and General
Age: 59 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). An officer of 102 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) of UBS Financial Services,
(since 2004) Inc. An officer of 102 portfolios in the OppenheimerFunds complex.
Age: 40
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 102 portfolios in the OppenheimerFunds complex.
Age: 44
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: 42 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 102
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.
25 | OPPENHEIMER VALUE FUND/VA
DECEMBER 31, 2007
- --------------------------------------------------------------------------------
Management
Oppenheimer Commentaries
Main Street Fund(R)/VA and
A Series of Oppenheimer Variable Account Funds Annual Report
- --------------------------------------------------------------------------------
MANAGEMENT COMMENTARIES
Listing of Top Holdings
ANNUAL REPORT [GRAPHIC]
Fund Performance Discussion
Listing of Investments
Financial Statements
[LOGO] OPPENHEIMERFUNDS(R)
The Right Way to Invest
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. For the 12-month period ended
December 31, 2007, Oppenheimer Main Street Fund/VA's Non-Service shares provided
a total return that was lower than its benchmark, the S&P 500 Index, which
returned 5.49%. We attribute the Fund's performance primarily to lagging results
in the fourth quarter of the year, when investors turned away from the more
volatile stocks that historically have fared relatively well toward year-end.
Although we manage the Fund according to the results of our quantitative
models, and not in response to macroeconomic or market trends, it is important
to note that the U.S. stock market encountered heightened volatility
approximately mid-way through 2007, which persisted through year-end. The stock
market experienced a fundamental shift in investor sentiment when credit
concerns spread from the sub-prime mortgage sector of the bond market to other
areas of the financial markets. An unexpectedly high level of sub-prime mortgage
defaults and delinquencies, combined with declining home values and surging
energy costs, led to renewed concerns regarding the sustainability of consumer
spending, which has been one of the main pillars supporting the U.S. economic
expansion over the past several years.
As investors became increasingly averse to risks, the stock market gave up
many of the gains it had achieved over the first half of 2007, when strong
corporate profits and robust global economic growth had driven equity prices
generally higher. In addition, investors shifted their focus over the second
half of the year to large companies with track records of consistent earnings
even during economic downturns. The stocks of banks, broker-dealers and other
financial services firms were particularly hard hit in the fourth quarter due to
uncertainty regarding the full magnitude of these companies' exposure to
securities backed by troubled sub-prime loans. Conversely, stocks of large,
multinational corporations with a robust presence in overseas markets fared
relatively well. In fact, after producing relatively lackluster returns over the
past several years, very large companies returned to favor in 2007 among newly
risk-averse investors.
In this changing market environment, the Fund benefited from its heavy
exposure to "mega-cap" and large-cap companies compared to its benchmark, the
S&P 500 Index. The Fund also achieved positive results from its relatively light
holdings of small- and mid-cap stocks. The Fund's "bottom-up" security selection
strategies also worked well over the first three quarters of 2007.
Unfortunately, our security selection models proved to be less effective during
the fourth quarter, as the credit and liquidity crisis caused investors to shun
the riskier and value-oriented shares that typically tend to outperform toward
the end of the year. To a significant degree, the Fund's fourth-quarter results
stemmed from the adoption of our "turn of the year" security selection model,
which tends to emphasize the more speculative stocks that historically have
tended to outperform due to seasonal factors.
From a market sector perspective, while the Fund participated fully in the
advance of information technology stocks over much of the reporting period, an
overweighted position in the sector detracted from relative performance in the
fourth quarter when information technology stocks gave back a portion of their
previous gains. Nonetheless, the Fund received relatively good results from
large, well established technology companies with strong cash flows and a robust
presence in international markets. An overweighted position in the financials
sector also represented one of the greater detractors from the Fund's
performance relative to the benchmark during the fourth quarter.
Over the course of the year, the results of our quantitative models caused
us to increase the Fund's weightings in the information technology and
financials sectors, due mainly to their relatively attractive valuations.
Conversely, we reduced the size of the Fund's positions in the consumer
discretionary, consumer staples and energy areas, where a number of stocks had
become more richly valued compared to historical averages. In addition, the Fund
ended 2007 broadly diversified across over 265 stocks, a strategy that helped
cushion the effects of heightened market volatility. Indeed, managing risks
while remaining fully invested is key 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, 2007. 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
12/31/1997 $10,000 $10,000
03/31/1998 $11,252 $11,394
06/30/1998 $11,309 $11,772
09/30/1998 $ 8,778 $10,604
12/31/1998 $10,470 $12,860
03/31/1999 $10,875 $13,500
06/30/1999 $12,003 $14,450
09/30/1999 $11,403 $13,550
12/31/1999 $12,743 $15,565
03/31/2000 $13,134 $15,921
06/30/2000 $12,768 $15,498
09/30/2000 $12,899 $15,348
12/31/2000 $11,625 $14,148
03/31/2001 $10,466 $12,472
06/30/2001 $10,933 $13,201
09/30/2001 $ 9,685 $11,264
12/31/2001 $10,444 $12,468
03/31/2002 $10,640 $12,502
06/30/2002 $ 9,710 $10,828
09/30/2002 $ 8,121 $ 8,959
12/31/2002 $ 8,481 $ 9,713
03/31/2003 $ 8,200 $ 9,408
06/30/2003 $ 9,358 $10,855
09/30/2003 $ 9,627 $11,142
12/31/2003 $10,747 $12,498
03/31/2004 $10,962 $12,710
06/30/2004 $11,024 $12,928
09/30/2004 $10,809 $12,686
12/31/2004 $11,763 $13,857
03/31/2005 $11,539 $13,559
06/30/2005 $11,705 $13,745
09/30/2005 $12,191 $14,240
12/31/2005 $12,466 $14,537
03/31/2006 $13,095 $15,148
06/30/2006 $12,846 $14,930
09/30/2006 $13,448 $15,775
12/31/2006 $14,339 $16,831
03/31/2007 $14,412 $16,939
06/30/2007 $15,353 $18,002
09/30/2007 $15,798 $18,367
12/31/2007 $14,973 $17,755
AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/07
1-Year 4.43% 5-Year 12.04% 10-Year 4.12%
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
03/31/2007 $10,804 $10,930
06/30/2007 $11,506 $11,615
09/30/2007 $11,828 $11,851
12/31/2007 $11,206 $11,456
AVERAGE ANNUAL TOTAL RETURNS OF SERVICE SHARES OF THE FUND AT 12/31/07
1-Year 4.15% 5-Year 11.77% Since Inception (7/13/00) 1.54%
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 applicable); 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, 2007.
ACTUAL EXPENSES. The first section of the table provides information about
actual account values and actual expenses. You may use the information in this
section for the class of shares you hold, together with the amount you invested,
to estimate the expense that you paid over the period. Simply divide your
account value by $1,000.00 (for example, an $8,600.00 account value divided by
$1,000.00 = 8.60), then multiply the result by the number in the first section
under the heading entitled "Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The second section of the table
provides information about hypothetical account values and hypothetical expenses
based on the Fund's actual expense ratio for each class of shares, and an
assumed rate of return of 5% per year for each class before expenses, which is
not the actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of investing
in the Fund and other funds. To do so, compare this 5% hypothetical example for
the class of shares you hold with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any charges associated with the separate
accounts that offer this Fund. Therefore, the "hypothetical" lines of the table
are useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these separate
account charges were included your costs would have been higher.
- --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
ACTUAL JULY 1, 2007 DECEMBER 31, 2007 DECEMBER 31, 2007
- --------------------------------------------------------------------------------
Non-Service Shares $ 1,000.00 $ 975.20 $ 3.19
- --------------------------------------------------------------------------------
Service Shares 1,000.00 973.90 4.44
HYPOTHETICAL
(5% return before expenses)
- --------------------------------------------------------------------------------
Non-Service Shares 1,000.00 1,021.98 3.27
- --------------------------------------------------------------------------------
Service Shares 1,000.00 1,020.72 4.54
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 indirect expenses from affiliated fund, based on the 6-month period
ended December 31, 2007 are as follows:
CLASS EXPENSE RATIOS
- -----------------------------------
Non-Service Shares 0.64%
- -----------------------------------
Service Shares 0.89
The expense ratios reflect reduction to custodian expenses and 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 and reduction to
custodian expenses, if applicable.
- --------------------------------------------------------------------------------
6 | OPPENHEIMER MAIN STREET FUND/VA
STATEMENT OF INVESTMENTS December 31, 2007
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS--99.2%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--7.7%
- --------------------------------------------------------------------------------
AUTO COMPONENTS--0.1%
Goodyear Tire & Rubber Co. (The) 1 25,900 $ 730,898
- --------------------------------------------------------------------------------
Johnson Controls, Inc. 36,100 1,301,044
- --------------------------------------------------------------------------------
Lear Corp. 1,2 24,000 663,840
----------------
2,695,782
- --------------------------------------------------------------------------------
DIVERSIFIED CONSUMER SERVICES--0.1%
Apollo Group, Inc., Cl. A 1 36,100 2,532,415
- --------------------------------------------------------------------------------
Career Education Corp. 1 11,100 279,054
- --------------------------------------------------------------------------------
ITT Educational Services, Inc. 1,2 9,600 818,592
----------------
3,630,061
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--0.1%
Chipotle Mexican Grill, Inc., Cl. B 1 7,419 912,908
- --------------------------------------------------------------------------------
Wendy's International, Inc. 11,000 284,240
- --------------------------------------------------------------------------------
Yum! Brands, Inc. 12,800 489,856
----------------
1,687,004
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES--0.2%
Black & Decker Corp. 2 11,700 814,905
- --------------------------------------------------------------------------------
Lennar Corp., Cl. A 2 46,000 822,940
- --------------------------------------------------------------------------------
NVR, Inc. 1,2 1,700 890,800
- --------------------------------------------------------------------------------
Pulte Homes, Inc. 77,000 811,580
- --------------------------------------------------------------------------------
Stanley Works (The) 2 16,900 819,312
- --------------------------------------------------------------------------------
Tempur-Pedic International, Inc. 2 24,500 636,265
- --------------------------------------------------------------------------------
Toll Brothers, Inc. 1,2 39,400 790,364
----------------
5,586,166
- --------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL--0.6%
Amazon.com, Inc. 1,2 148,000 13,710,720
- --------------------------------------------------------------------------------
IAC/InterActiveCorp 1 18,600 500,712
----------------
14,211,432
- --------------------------------------------------------------------------------
MEDIA--4.9%
CBS Corp., Cl. B 175,100 4,771,475
- --------------------------------------------------------------------------------
Clear Channel Communications, Inc. 376,600 13,000,232
- --------------------------------------------------------------------------------
Comcast Corp., Cl. A 1 409,500 7,477,470
- --------------------------------------------------------------------------------
EchoStar Communications Corp.,
Cl. A 1,2 97,800 3,689,016
- --------------------------------------------------------------------------------
Liberty Global, Inc., Series A 1,2 105,500 4,134,545
- --------------------------------------------------------------------------------
Liberty Media Holding Corp.-Capital,
Series A 1 8,500 990,165
- --------------------------------------------------------------------------------
News Corp., Inc., Cl. A 225,500 4,620,495
- --------------------------------------------------------------------------------
Time Warner, Inc. 2,311,200 38,157,912
- --------------------------------------------------------------------------------
Viacom, Inc., Cl. B 1 322,573 14,167,406
- --------------------------------------------------------------------------------
Walt Disney Co. (The) 791,300 25,543,164
----------------
116,551,880
SHARES VALUE
- --------------------------------------------------------------------------------
MULTILINE RETAIL--0.9%
Big Lots, Inc. 1,2 28,500 $ 455,715
- --------------------------------------------------------------------------------
Dollar Tree Stores, Inc. 1,2 30,500 790,560
- --------------------------------------------------------------------------------
Family Dollar Stores, Inc. 2 41,900 805,737
- --------------------------------------------------------------------------------
Macy's, Inc. 350,500 9,067,435
- --------------------------------------------------------------------------------
Sears Holdings Corp. 1,2 91,700 9,357,985
----------------
20,477,432
- --------------------------------------------------------------------------------
SPECIALTY RETAIL--0.7%
AutoNation, Inc. 1 51,900 812,754
- --------------------------------------------------------------------------------
AutoZone, Inc. 1 8,500 1,019,235
- --------------------------------------------------------------------------------
Best Buy Co., Inc. 24,400 1,284,660
- --------------------------------------------------------------------------------
Gap, Inc. (The) 263,300 5,603,024
- --------------------------------------------------------------------------------
Home Depot, Inc. 242,600 6,535,644
- --------------------------------------------------------------------------------
Men's Wearhouse, Inc. (The) 2 8,400 226,632
- --------------------------------------------------------------------------------
RadioShack Corp. 2 45,300 763,758
----------------
16,245,707
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS--0.1%
Fossil, Inc. 1,2 13,100 549,938
- --------------------------------------------------------------------------------
Liz Claiborne, Inc. 12,800 260,480
- --------------------------------------------------------------------------------
Polo Ralph Lauren Corp., Cl. A 12,000 741,480
----------------
1,551,898
- --------------------------------------------------------------------------------
CONSUMER STAPLES--3.7%
- --------------------------------------------------------------------------------
BEVERAGES--0.9%
Coca-Cola Co. (The) 218,500 13,409,345
- --------------------------------------------------------------------------------
PepsiCo, Inc. 119,450 9,066,255
----------------
22,475,600
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--0.6%
Costco Wholesale Corp. 66,700 4,652,992
- --------------------------------------------------------------------------------
CVS Corp. 7,300 290,175
- --------------------------------------------------------------------------------
Kroger Co. (The) 188,100 5,024,151
- --------------------------------------------------------------------------------
Wal-Mart Stores, Inc. 63,700 3,027,661
----------------
12,994,979
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS--1.3%
Procter & Gamble Co. (The) 428,515 31,461,571
- --------------------------------------------------------------------------------
PERSONAL PRODUCTS--0.0%
Herbalife Ltd. 2 8,900 358,492
- --------------------------------------------------------------------------------
TOBACCO--0.9%
Altria Group, Inc. 261,300 19,749,054
- --------------------------------------------------------------------------------
Reynolds American, Inc. 5,500 362,780
----------------
20,111,834
- --------------------------------------------------------------------------------
ENERGY--10.6%
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--1.6%
Dresser-Rand Group, Inc. 1,2 16,900 659,945
7 | OPPENHEIMER MAIN STREET FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES Continued
Global Industries Ltd. 1,2 32,500 $ 696,150
- --------------------------------------------------------------------------------
National Oilwell Varco, Inc. 1,2 44,600 3,276,316
- --------------------------------------------------------------------------------
Schlumberger Ltd. 267,500 26,313,975
- --------------------------------------------------------------------------------
Transocean, Inc. 45,400 6,499,010
----------------
37,445,396
- --------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS--9.0%
Chevron Corp. 474,426 44,278,179
- --------------------------------------------------------------------------------
ConocoPhillips 358,983 31,698,199
- --------------------------------------------------------------------------------
Exxon Mobil Corp. 1,154,416 108,157,235
- --------------------------------------------------------------------------------
Occidental Petroleum Corp. 168,200 12,949,718
- --------------------------------------------------------------------------------
Tesoro Corp. 20,500 977,850
- --------------------------------------------------------------------------------
Valero Energy Corp. 2 234,900 16,450,047
----------------
214,511,228
- --------------------------------------------------------------------------------
FINANCIALS--23.5%
- --------------------------------------------------------------------------------
CAPITAL MARKETS--5.8%
Ameriprise Financial, Inc. 92,200 5,081,142
- --------------------------------------------------------------------------------
Charles Schwab Corp. (The) 78,400 2,003,120
- --------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The) 231,000 49,676,550
- --------------------------------------------------------------------------------
Janus Capital Group, Inc. 2 33,800 1,110,330
- --------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc. 115,100 7,532,144
- --------------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 526,000 28,235,680
- --------------------------------------------------------------------------------
Morgan Stanley 819,900 43,544,889
----------------
137,183,855
- --------------------------------------------------------------------------------
COMMERCIAL BANKS--3.0%
U.S. Bancorp 352,170 11,177,876
- --------------------------------------------------------------------------------
Wachovia Corp. 2 972,193 36,972,500
- --------------------------------------------------------------------------------
Wells Fargo & Co. 739,700 22,331,543
----------------
70,481,919
- --------------------------------------------------------------------------------
CONSUMER FINANCE--0.3%
American Express Co. 92,800 4,827,456
- --------------------------------------------------------------------------------
Capital One Financial Corp. 2 35,100 1,658,826
- --------------------------------------------------------------------------------
Discover Financial Services 2 24,500 369,460
----------------
6,855,742
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--7.6%
Bank of America Corp. 1,442,209 59,505,543
- --------------------------------------------------------------------------------
CIT Group, Inc. 37,100 891,513
- --------------------------------------------------------------------------------
Citigroup, Inc. 1,928,588 56,777,631
- --------------------------------------------------------------------------------
JPMorgan Chase & Co. 1,475,044 64,385,671
----------------
181,560,358
- --------------------------------------------------------------------------------
INSURANCE--5.9%
ACE Ltd. 18,600 1,149,108
- --------------------------------------------------------------------------------
Allstate Corp. 188,900 9,866,247
SHARES VALUE
- --------------------------------------------------------------------------------
INSURANCE Continued
Ambac Financial Group, Inc. 2 31,300 $ 806,601
- --------------------------------------------------------------------------------
American International Group, Inc. 993,740 57,935,042
- --------------------------------------------------------------------------------
Aon Corp. 212,100 10,115,049
- --------------------------------------------------------------------------------
Assurant, Inc. 2 12,400 829,560
- --------------------------------------------------------------------------------
Berkshire Hathaway, Inc., Cl. B 1,2 1,590 7,530,240
- --------------------------------------------------------------------------------
Chubb Corp. 270,300 14,752,974
- --------------------------------------------------------------------------------
CNA Financial Corp. 2 22,000 741,840
- --------------------------------------------------------------------------------
First American Corp. (The) 2 24,100 822,292
- --------------------------------------------------------------------------------
Genworth Financial, Inc., Cl. A 208,700 5,311,415
- --------------------------------------------------------------------------------
HCC Insurance Holdings, Inc. 2,900 83,172
- --------------------------------------------------------------------------------
Lincoln National Corp. 39,300 2,288,046
- --------------------------------------------------------------------------------
Loews Corp. 74,800 3,765,432
- --------------------------------------------------------------------------------
MBIA, Inc. 2 41,300 769,419
- --------------------------------------------------------------------------------
MetLife, Inc. 105,900 6,525,558
- --------------------------------------------------------------------------------
Progressive Corp. 88,000 1,686,080
- --------------------------------------------------------------------------------
Safeco Corp. 5,100 283,968
- --------------------------------------------------------------------------------
Travelers Cos., Inc. (The) 291,200 15,666,560
----------------
140,928,603
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS--0.1%
General Growth Properties, Inc. 2 31,400 1,293,052
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE--0.8%
Fannie Mae 391,200 15,640,176
- --------------------------------------------------------------------------------
Washington Mutual, Inc. 2 328,900 4,476,329
----------------
20,116,505
- --------------------------------------------------------------------------------
HEALTH CARE--10.1%
- --------------------------------------------------------------------------------
BIOTECHNOLOGY--1.2%
Amgen, Inc. 1,2 221,300 10,277,172
- --------------------------------------------------------------------------------
Biogen Idec, Inc. 1,2 186,500 10,615,580
- --------------------------------------------------------------------------------
Genentech, Inc. 1 85,100 5,707,657
- --------------------------------------------------------------------------------
OSI Pharmaceuticals, Inc. 1 13,900 674,289
----------------
27,274,698
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--0.6%
Baxter International, Inc. 95,700 5,555,385
- --------------------------------------------------------------------------------
Intuitive Surgical, Inc. 1,2 3,200 1,038,400
- --------------------------------------------------------------------------------
Kinetic Concepts, Inc. 1,2 15,400 824,824
- --------------------------------------------------------------------------------
Medtronic, Inc. 143,800 7,228,826
----------------
14,647,435
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--4.6%
Aetna, Inc. 280,300 16,181,719
- --------------------------------------------------------------------------------
AmerisourceBergen Corp. 18,200 816,634
- --------------------------------------------------------------------------------
Coventry Health Care, Inc. 1 14,600 865,050
- --------------------------------------------------------------------------------
Express Scripts, Inc. 1 192,200 14,030,600
- --------------------------------------------------------------------------------
Health Net, Inc. 1 19,300 932,190
8 | OPPENHEIMER MAIN STREET FUND/VA
SHARES VALUE
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES Continued
Humana, Inc. 1 39,400 $ 2,967,214
- --------------------------------------------------------------------------------
Lincare Holdings, Inc. 1,2 16,600 583,656
- --------------------------------------------------------------------------------
McKesson Corp. 161,200 10,560,212
- --------------------------------------------------------------------------------
Medco Health Solutions, Inc. 1 154,500 15,666,300
- --------------------------------------------------------------------------------
Omnicare, Inc. 2 30,600 697,986
- --------------------------------------------------------------------------------
UnitedHealth Group, Inc. 325,448 18,941,074
- --------------------------------------------------------------------------------
WellPoint, Inc. 1 297,912 26,135,820
----------------
108,378,455
- --------------------------------------------------------------------------------
LIFE SCIENCES TOOLS & SERVICES--0.0%
Invitrogen Corp. 1 11,000 1,027,510
- --------------------------------------------------------------------------------
PHARMACEUTICALS--3.7%
Abbott Laboratories 19,700 1,106,155
- --------------------------------------------------------------------------------
Endo Pharmaceuticals Holdings, Inc. 1 22,500 600,075
- --------------------------------------------------------------------------------
Forest Laboratories, Inc. 1 147,300 5,369,085
- --------------------------------------------------------------------------------
Johnson & Johnson 614,506 40,987,550
- --------------------------------------------------------------------------------
King Pharmaceuticals, Inc. 1 77,800 796,672
- --------------------------------------------------------------------------------
Merck & Co., Inc. 174,100 10,116,951
- --------------------------------------------------------------------------------
Pfizer, Inc. 811,300 18,440,849
- --------------------------------------------------------------------------------
Sepracor, Inc. 1,2 31,100 816,375
- --------------------------------------------------------------------------------
Wyeth 233,200 10,305,108
----------------
88,538,820
- --------------------------------------------------------------------------------
INDUSTRIALS--9.2%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE--3.1%
Boeing Co. 180,200 15,760,292
- --------------------------------------------------------------------------------
Honeywell International, Inc. 151,300 9,315,541
- --------------------------------------------------------------------------------
L-3 Communications Holdings, Inc. 95,800 10,149,052
- --------------------------------------------------------------------------------
Lockheed Martin Corp. 30,500 3,210,430
- --------------------------------------------------------------------------------
Northrop Grumman Corp. 140,000 11,009,600
- --------------------------------------------------------------------------------
Raytheon Co. 229,500 13,930,650
- --------------------------------------------------------------------------------
United Technologies Corp. 127,000 9,720,580
----------------
73,096,145
- --------------------------------------------------------------------------------
AIRLINES--0.1%
AMR Corp. 1,2 55,900 784,277
- --------------------------------------------------------------------------------
Continental Airlines, Inc., Cl. B 1,2 34,100 758,725
- --------------------------------------------------------------------------------
Northwest Airlines Corp. 1 18,400 266,984
- --------------------------------------------------------------------------------
UAL Corp. 1,2 15,400 549,164
----------------
2,359,150
- --------------------------------------------------------------------------------
BUILDING PRODUCTS--0.0%
USG Corp. 1,2 20,600 737,274
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--0.1%
ChoicePoint, Inc. 1,2 21,200 772,104
- --------------------------------------------------------------------------------
Corporate Executive Board Co.
(The) 2 10,600 637,060
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES Continued
Robert Half International, Inc. 23,600 $ 638,144
----------------
2,047,308
- --------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING--0.0%
Fluor Corp. 7,100 1,034,612
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--0.1%
Acuity Brands, Inc. 2 5,200 234,000
- --------------------------------------------------------------------------------
Rockwell Automation, Inc. 13,300 917,168
- --------------------------------------------------------------------------------
Thomas & Betts Corp. 1,2 15,700 769,928
----------------
1,921,096
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--4.6%
3M Co. 142,300 11,998,736
- --------------------------------------------------------------------------------
General Electric Co. 2 2,315,000 85,817,050
- --------------------------------------------------------------------------------
Teleflex, Inc. 3,300 207,933
- --------------------------------------------------------------------------------
Tyco International Ltd. 283,075 11,223,924
----------------
109,247,643
- --------------------------------------------------------------------------------
MACHINERY--1.2%
Cummins, Inc. 34,600 4,407,002
- --------------------------------------------------------------------------------
Deere & Co. 67,100 6,248,352
- --------------------------------------------------------------------------------
Eaton Corp. 34,400 3,335,080
- --------------------------------------------------------------------------------
Ingersoll-Rand Co. Ltd., Cl. A 81,600 3,791,952
- --------------------------------------------------------------------------------
Parker-Hannifin Corp. 135,600 10,212,036
- --------------------------------------------------------------------------------
SPX Corp. 10,300 1,059,355
- --------------------------------------------------------------------------------
Toro Co. (The) 2 6,100 332,084
----------------
29,385,861
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--28.0%
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--5.1%
Cisco Systems, Inc. 1 1,802,400 48,790,968
- --------------------------------------------------------------------------------
CommScope, Inc. 1,2 19,200 944,832
- --------------------------------------------------------------------------------
F5 Networks, Inc. 1,2 1,900 54,188
- --------------------------------------------------------------------------------
Foundry Networks, Inc. 1,2 46,400 812,928
- --------------------------------------------------------------------------------
Juniper Networks, Inc. 1,2 392,100 13,017,720
- --------------------------------------------------------------------------------
Motorola, Inc. 819,900 13,151,196
- --------------------------------------------------------------------------------
QUALCOMM, Inc. 1,125,000 44,268,750
- --------------------------------------------------------------------------------
Tellabs, Inc. 1,2 60,700 396,978
----------------
121,437,560
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--8.8%
Apple, Inc. 1 191,100 37,853,088
- --------------------------------------------------------------------------------
Dell, Inc. 1 1,105,200 27,088,452
- --------------------------------------------------------------------------------
EMC Corp. 1 790,000 14,638,700
- --------------------------------------------------------------------------------
Hewlett-Packard Co. 1,241,000 62,645,680
- --------------------------------------------------------------------------------
International Business Machines
Corp. 480,700 51,963,670
9 | OPPENHEIMER MAIN STREET FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS Continued
Lexmark International, Inc., Cl. A 1 24,300 $ 847,098
- --------------------------------------------------------------------------------
NCR Corp. 1 35,200 883,520
- --------------------------------------------------------------------------------
Network Appliance, Inc. 1 43,300 1,080,768
- --------------------------------------------------------------------------------
Seagate Technology 2 347,300 8,856,150
- --------------------------------------------------------------------------------
Seagate Technology International,
Inc. 1,3 31,000 3,100
- --------------------------------------------------------------------------------
Sun Microsystems, Inc. 1 99,700 1,807,561
- --------------------------------------------------------------------------------
Teradata Corp. 1 21,900 600,279
----------------
208,268,066
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--0.6%
Agilent Technologies, Inc. 1,2 331,500 12,179,310
- --------------------------------------------------------------------------------
Arrow Electronics, Inc. 1 24,400 958,432
- --------------------------------------------------------------------------------
Avnet, Inc. 1 25,900 905,723
----------------
14,043,465
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--2.1%
eBay, Inc. 1 424,400 14,085,836
- --------------------------------------------------------------------------------
Google, Inc., Cl. A 1 49,000 33,882,520
- --------------------------------------------------------------------------------
ValueClick, Inc. 1 10,800 236,520
- --------------------------------------------------------------------------------
VeriSign, Inc. 1,2 24,100 906,401
----------------
49,111,277
- --------------------------------------------------------------------------------
IT SERVICES--1.6%
Accenture Ltd., Cl. A 344,700 12,419,541
- --------------------------------------------------------------------------------
Affiliated Computer Services, Inc.,
Cl. A 1 7,600 342,760
- --------------------------------------------------------------------------------
Automatic Data Processing, Inc. 296,100 13,185,333
- --------------------------------------------------------------------------------
Computer Sciences Corp. 1 20,900 1,033,923
- --------------------------------------------------------------------------------
DST Systems, Inc. 1,2 11,200 924,560
- --------------------------------------------------------------------------------
Electronic Data Systems Corp. 403,500 8,364,555
- --------------------------------------------------------------------------------
Hewitt Associates, Inc. 1,2 16,600 635,614
- --------------------------------------------------------------------------------
NeuStar, Inc., Cl. A 1,2 9,000 258,120
- --------------------------------------------------------------------------------
SAIC, Inc. 1,2 19,900 400,388
- --------------------------------------------------------------------------------
Western Union Co. 59,200 1,437,376
----------------
39,002,170
- --------------------------------------------------------------------------------
OFFICE ELECTRONICS--0.3%
Xerox Corp. 452,200 7,321,118
- --------------------------------------------------------------------------------
Zebra Technologies Corp., Cl. A 1 5,700 197,790
----------------
7,518,908
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--3.6%
Analog Devices, Inc. 81,500 2,583,550
- --------------------------------------------------------------------------------
Applied Materials, Inc. 665,500 11,819,280
- --------------------------------------------------------------------------------
Integrated Device Technology, Inc. 1 31,400 355,134
- --------------------------------------------------------------------------------
Intel Corp. 1,280,700 34,143,462
- --------------------------------------------------------------------------------
Intersil Corp., Cl. A 2 29,500 722,160
SHARES VALUE
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT Continued
Lam Research Corp. 1,2 15,100 $ 652,773
- --------------------------------------------------------------------------------
Linear Technology Corp. 2 31,600 1,005,828
- --------------------------------------------------------------------------------
MEMC Electronic Materials, Inc. 1,2 15,600 1,380,444
- --------------------------------------------------------------------------------
National Semiconductor Corp. 42,000 950,880
- --------------------------------------------------------------------------------
Novellus Systems, Inc. 1 32,500 896,025
- --------------------------------------------------------------------------------
NVIDIA Corp. 1 370,100 12,590,802
- --------------------------------------------------------------------------------
ON Semiconductor Corp. 1,2 90,900 807,192
- --------------------------------------------------------------------------------
Texas Instruments, Inc. 504,000 16,833,600
- --------------------------------------------------------------------------------
Varian Semiconductor Equipment
Associates, Inc. 1,2 22,300 825,100
- --------------------------------------------------------------------------------
Xilinx, Inc. 44,300 968,841
----------------
86,535,071
- --------------------------------------------------------------------------------
SOFTWARE--5.9%
Activision, Inc. 1 34,400 1,021,680
- --------------------------------------------------------------------------------
Adobe Systems, Inc. 1 139,600 5,965,108
- --------------------------------------------------------------------------------
Ansys, Inc. 1,2 15,200 630,192
- --------------------------------------------------------------------------------
Autodesk, Inc. 1 25,000 1,244,000
- --------------------------------------------------------------------------------
BEA Systems, Inc. 1 71,200 1,123,536
- --------------------------------------------------------------------------------
BMC Software, Inc. 1 32,300 1,151,172
- --------------------------------------------------------------------------------
CA, Inc. 168,600 4,206,570
- --------------------------------------------------------------------------------
Cadence Design Systems, Inc. 1,2 53,300 906,633
- --------------------------------------------------------------------------------
Check Point Software Technologies
Ltd. 1 21,200 465,552
- --------------------------------------------------------------------------------
Citrix Systems, Inc. 1 19,600 744,996
- --------------------------------------------------------------------------------
Cognos, Inc. 1,2 9,100 523,887
- --------------------------------------------------------------------------------
Compuware Corp. 1 88,300 784,104
- --------------------------------------------------------------------------------
Intuit, Inc. 1 39,500 1,248,595
- --------------------------------------------------------------------------------
McAfee, Inc. 1 25,600 960,000
- --------------------------------------------------------------------------------
MICROS Systems, Inc. 1,2 8,400 589,344
- --------------------------------------------------------------------------------
Microsoft Corp. 2,421,900 86,219,640
- --------------------------------------------------------------------------------
Novell, Inc. 1 118,400 813,408
- --------------------------------------------------------------------------------
Oracle Corp. 1 813,300 18,364,314
- --------------------------------------------------------------------------------
Red Hat, Inc. 1,2 43,200 900,288
- --------------------------------------------------------------------------------
Symantec Corp. 1 638,800 10,310,232
- --------------------------------------------------------------------------------
Synopsys, Inc. 1 30,600 793,458
----------------
138,966,709
- --------------------------------------------------------------------------------
MATERIALS--2.8%
- --------------------------------------------------------------------------------
CHEMICALS--1.3%
Celanese Corp., Series A 17,300 732,136
- --------------------------------------------------------------------------------
Dow Chemical Co. (The) 142,700 5,625,234
- --------------------------------------------------------------------------------
Monsanto Co. 2 79,500 8,879,355
- --------------------------------------------------------------------------------
Mosaic Co. (The) 1 139,400 13,150,996
- --------------------------------------------------------------------------------
Scotts Miracle-Gro Co. (The), Cl. A 2 18,300 684,786
- --------------------------------------------------------------------------------
Terra Industries, Inc. 1,2 18,100 864,456
10 | OPPENHEIMER MAIN STREET FUND/VA
SHARES VALUE
- --------------------------------------------------------------------------------
CHEMICALS Continued
Zep, Inc. 1,2 1,100 $ 15,257
----------------
29,952,220
- --------------------------------------------------------------------------------
CONTAINERS & PACKAGING--0.1%
Owens-Illinois, Inc. 1 25,100 1,242,450
- --------------------------------------------------------------------------------
Packaging Corp. of America 2 26,800 755,760
----------------
1,998,210
- --------------------------------------------------------------------------------
METALS & MINING--1.3%
AK Steel Holding Corp. 1,2 15,100 698,224
- --------------------------------------------------------------------------------
Carpenter Technology Corp. 9,100 684,047
- --------------------------------------------------------------------------------
Freeport-McMoRan Copper & Gold,
Inc., Cl. B 48,000 4,917,120
- --------------------------------------------------------------------------------
Nucor Corp. 204,300 12,098,646
- --------------------------------------------------------------------------------
Reliance Steel & Aluminum Co. 2 11,700 634,140
- --------------------------------------------------------------------------------
Southern Copper Corp. 2 85,800 9,020,154
- --------------------------------------------------------------------------------
United States Steel Corp. 25,400 3,071,114
----------------
31,123,445
- --------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS--0.1%
International Paper Co. 83,400 2,700,492
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--3.5%
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--3.2%
AT&T, Inc. 1,316,128 54,698,280
- --------------------------------------------------------------------------------
CenturyTel, Inc. 21,600 895,536
- --------------------------------------------------------------------------------
Embarq Corp. 20,000 990,600
- --------------------------------------------------------------------------------
Qwest Communications
International, Inc. 1,2 1,378,500 9,663,285
- --------------------------------------------------------------------------------
Verizon Communications, Inc. 233,256 10,190,955
----------------
76,438,656
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--0.3%
American Tower Corp. 1 32,900 1,401,540
- --------------------------------------------------------------------------------
Sprint Nextel Corp. 289,223 3,797,498
- --------------------------------------------------------------------------------
Telephone & Data Systems, Inc. 2 12,300 769,980
----------------
5,969,018
- --------------------------------------------------------------------------------
UTILITIES--0.1%
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES--0.1%
Duke Energy Corp. 2 80,800 1,629,736
- --------------------------------------------------------------------------------
Progress Energy, Inc., Contingent
Value Obligation 1,3 32,000 10,560
----------------
1,640,296
----------------
Total Common Stocks
(Cost $2,098,767,448) 2,354,818,066
- --------------------------------------------------------------------------------
PREFERRED STOCKS--0.0%
- --------------------------------------------------------------------------------
Wachovia Corp., Dividend Equalization
Preferred Shares 1,3 (Cost $0) 6,000 9
UNITS VALUE
- --------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- --------------------------------------------------------------------------------
Dime Bancorp, Inc. Wts., Exp. 1/2/10 1
(Cost $0) 31,900 $ 5,168
SHARES
- --------------------------------------------------------------------------------
INVESTMENT COMPANIES--0.7%
- --------------------------------------------------------------------------------
Oppenheimer Institutional Money Market
Fund, Cl. E, 5.03% 4,5
(Cost $15,628,720) 15,628,720 15,628,720
- --------------------------------------------------------------------------------
Total Investments, at Value (excluding
Investments Purchased with Cash
Collateral from Securities Loaned)
(Cost $2,114,396,168) 2,370,451,963
PRINCIPAL
AMOUNT
- --------------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED--5.5% 6
- --------------------------------------------------------------------------------
ANZ National (Int'l) Ltd., 4.37%,
1/2/08 $ 3,998,688 3,998,688
- --------------------------------------------------------------------------------
Caixa Catal, 5.18%, 3/7/08 5,000,000 5,000,000
- --------------------------------------------------------------------------------
CAM US Finance SA Unipersonal,
4.96%, 2/1/08 4,500,000 4,500,000
- --------------------------------------------------------------------------------
CC USA, Inc., 4.39%, 1/2/08 1,499,330 1,499,330
- --------------------------------------------------------------------------------
Countrywide Asset-Backed
Certificates, Series 2006-2,
Cl. 2A1, 4.94%, 1/25/08 113,881 113,881
- --------------------------------------------------------------------------------
GSAA Home Equity Trust,
Series 2005-15, Cl. 2A1, 4.96%,
1/25/08 801,963 801,963
- --------------------------------------------------------------------------------
HSBC Finance Corp., 5.26%, 1/7/08 3,000,000 3,000,000
- --------------------------------------------------------------------------------
MBIA Global Funding LLC, 4.86%,
1/30/08 3,000,000 3,000,000
- --------------------------------------------------------------------------------
Metropolitan Life Global Funding,
4.89%, 1/22/08 3,500,000 3,500,000
- --------------------------------------------------------------------------------
Natexis Banques Populaires NY,
4.37%, 1/2/08 2,000,000 2,000,000
- --------------------------------------------------------------------------------
Natexis Banques Populaires NY,
4.39%, 1/2/08 1,999,951 1,999,951
- --------------------------------------------------------------------------------
Nationwide Global Fund I, 4.99%,
3/17/08 4,002,688 4,002,688
- --------------------------------------------------------------------------------
Tango Finance Corp., 4.38%, 1/2/08 4,499,774 4,499,774
- --------------------------------------------------------------------------------
Undivided interest of 9.01% in joint repurchase
agreement (Principal Amount/Value
$1,000,000,000, with a maturity value of
$1,000,250,000) with Bank of America NA, 4.50%,
dated 12/31/07, to be repurchased at
$90,128,005 on 1/2/08, collateralized by U.S.
Agency Mortgages, 5%, 5/1/35, with a value of
$1,020,000,000 90,105,479 90,105,479
11 | OPPENHEIMER MAIN STREET FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED Continued
- --------------------------------------------------------------------------------
Whitehawk CDO Funding Corp.,
5.04%, 3/17/08 $ 2,000,000 $ 2,000,000
----------------
Total Investments Purchased
with Cash Collateral from
Securities Loaned
(Cost $130,021,754) 130,021,754
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $2,244,417,922) 105.4% 2,500,473,717
- --------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (5.4) (128,056,937)
------------------------------
NET ASSETS 100.0% $ 2,372,416,780
==============================
INDUSTRY CLASSIFICATIONS ARE UNAUDITED.
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
2. Partial or fully-loaned security. See Note 7 of accompanying Notes.
3. Illiquid security. The aggregate value of illiquid securities as of December
31, 2007 was $13,669, which represents less than 0.005% of the Fund's net
assets. See Note 6 of accompanying Notes.
4. Rate shown is the 7-day yield as of December 31, 2007.
5. Is or was an affiliate, as defined in the Investment Company Act of 1940, at
or during the period ended December 31, 2007, by virtue of the Fund owning at
least 5% of the voting securities of the issuer or as a result of the Fund and
the issuer having the same investment adviser.Transactions during the period in
which the issuer was an affiliate are as follows:
SHARES GROSS GROSS SHARES
DECEMBER 31, 2006 ADDITIONS REDUCTIONS DECEMBER 31, 2007
- -----------------------------------------------------------------------------------------------------------------------
Oppenheimer Institutional Money Market Fund, Cl. E 12,793,527 451,739,331 448,904,138 15,628,720
DIVIDEND
VALUE INCOME
- -----------------------------------------------------------------------------------------------------------------------
Oppenheimer Institutional Money Market Fund, Cl. E $15,628,720 $672,430
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.
12 | OPPENHEIMER MAIN STREET FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 31, 2007
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
ASSETS
- -----------------------------------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments:
Unaffiliated companies (cost $2,228,789,202) $ 2,484,844,997
Affiliated companies (cost $15,628,720) 15,628,720
----------------
2,500,473,717
- -----------------------------------------------------------------------------------------------------------
Cash 940,949
- -----------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 13,928,627
Shares of beneficial interest sold 4,683,509
Dividends 2,684,622
Other 57,776
----------------
Total assets 2,522,769,200
- -----------------------------------------------------------------------------------------------------------
LIABILITIES
- -----------------------------------------------------------------------------------------------------------
Return of collateral for securities loaned 130,038,099
- -----------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 18,090,831
Shares of beneficial interest redeemed 1,132,162
Distribution and service plan fees 901,108
Shareholder communications 124,346
Trustees' compensation 20,339
Transfer and shareholder servicing agent fees 1,797
Other 43,738
----------------
Total liabilities 150,352,420
- -----------------------------------------------------------------------------------------------------------
NET ASSETS $ 2,372,416,780
================
- -----------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- -----------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 93,140
- -----------------------------------------------------------------------------------------------------------
Additional paid-in capital 1,975,417,893
- -----------------------------------------------------------------------------------------------------------
Accumulated net investment income 26,296,748
- -----------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 114,553,204
- -----------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets and
liabilities denominated in foreign currencies 256,055,795
----------------
NET ASSETS $ 2,372,416,780
================
- -----------------------------------------------------------------------------------------------------------
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 $907,727,350 and 35,438,868 shares of beneficial interest outstanding) $ 25.61
- -----------------------------------------------------------------------------------------------------------
Service Shares:
Net asset value, redemption price per share and offering price per share (based on net
assets of $1,464,689,430 and 57,701,444 shares of beneficial interest outstanding) $ 25.38
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
13 | OPPENHEIMER MAIN STREET FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 31, 2007
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- -----------------------------------------------------------------------------------------------------------
Dividends:
Unaffiliated companies $ 43,560,509
Affiliated companies 672,430
- -----------------------------------------------------------------------------------------------------------
Portfolio lending fees 431,767
- -----------------------------------------------------------------------------------------------------------
Interest 22,825
----------------
Total investment income 44,687,531
- -----------------------------------------------------------------------------------------------------------
EXPENSES
- -----------------------------------------------------------------------------------------------------------
Management fees 14,769,190
- -----------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Service shares 3,286,224
- -----------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service shares 10,207
Service shares 10,256
- -----------------------------------------------------------------------------------------------------------
Shareholder communications:
Non-Service shares 51,900
Service shares 60,960
- -----------------------------------------------------------------------------------------------------------
Trustees' compensation 40,547
- -----------------------------------------------------------------------------------------------------------
Custodian fees and expenses 13,436
- -----------------------------------------------------------------------------------------------------------
Administration service fees 1,500
- -----------------------------------------------------------------------------------------------------------
Other 78,177
----------------
Total expenses 18,322,397
Less reduction to custodian expenses (32)
Less waivers and reimbursements of expenses (12,893)
----------------
Net expenses 18,309,472
- -----------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 26,378,059
- -----------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- -----------------------------------------------------------------------------------------------------------
Net realized gain on:
Investments from unaffiliated companies 194,501,270
Foreign currency transactions 157,317
----------------
Net realized gain 194,658,587
- -----------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments (129,493,013)
Translation of assets and liabilities denominated in foreign currencies (129,200)
----------------
Net change in unrealized appreciation (129,622,213)
- -----------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 91,414,433
================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14 | OPPENHEIMER MAIN STREET FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2007 2006
- -----------------------------------------------------------------------------------------------------------
OPERATIONS
- -----------------------------------------------------------------------------------------------------------
Net investment income $ 26,378,059 $ 20,239,611
- -----------------------------------------------------------------------------------------------------------
Net realized gain 194,658,587 112,205,051
- -----------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (129,622,213) 135,126,116
----------------------------------
Net increase in net assets resulting from operations 91,414,433 267,570,778
- -----------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Non-Service shares (10,356,753) (12,723,204)
Service shares (9,852,371) (6,609,246)
(20,209,124) (19,332,450)
- -----------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
beneficial interest transactions:
Non-Service shares (175,658,859) (210,884,469)
Service shares 331,431,603 388,260,650
----------------------------------
155,772,744 177,376,181
- -----------------------------------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------------------------------
Total increase 226,978,053 425,614,509
- -----------------------------------------------------------------------------------------------------------
Beginning of period 2,145,438,727 1,719,824,218
----------------------------------
End of period (including accumulated net investment income of
$26,296,748 and $20,132,146, respectively) $ 2,372,416,780 $ 2,145,438,727
==================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
15 | OPPENHEIMER MAIN STREET FUND/VA
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2007 2006 2005 2004 2003
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 24.78 $ 21.79 $ 20.84 $ 19.20 $ 15.32
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .33 1 .27 1 .26 1 .27 1 .18
Net realized and unrealized gain .75 2.98 .97 1.53 3.86
---------------------------------------------------------------------------------
Total from investment operations 1.08 3.25 1.23 1.80 4.04
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.25) (.26) (.28) (.16) (.16)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 25.61 $ 24.78 $ 21.79 $ 20.84 $ 19.20
=================================================================================
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 4.43% 15.03% 5.98% 9.46% 26.72%
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 907,727 $1,046,146 $1,121,476 $1,238,948 $1,214,960
- -----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 1,006,655 $1,054,522 $1,156,299 $1,216,081 $1,003,396
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 1.28% 1.19% 1.26% 1.39% 1.10%
Total expenses 0.65% 4,5,6 0.66% 4,5 0.67% 6 0.67% 6 0.70% 6
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 111% 100% 88% 82% 85%
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 less than one full year.
4. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended December 31, 2007 0.65%
Year Ended December 31, 2006 0.66%
5. Voluntary waiver or reimbursement of indirect management fees less than
0.005%.
6. Reduction to custodian expenses less than 0.005%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
16 | OPPENHEIMER MAIN STREET FUND/VA
SERVICE SHARES YEAR ENDED DECEMBER 31, 2007 2006 2005 2004 2003
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 24.58 $ 21.63 $ 20.70 $ 19.10 $ 15.26
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .26 1 .22 1 .21 1 .25 1 .14
Net realized and unrealized gain .75 2.95 .96 1.49 3.85
---------------------------------------------------------------------------------
Total from investment operations 1.01 3.17 1.17 1.74 3.99
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.21) (.22) (.24) (.14) (.15)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 25.38 $ 24.58 $ 21.63 $ 20.70 $ 19.10
=================================================================================
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 4.15% 14.76% 5.74% 9.15% 26.44%
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 1,464,690 $1,099,293 $ 598,348 $ 372,845 $ 166,717
- -----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 1,315,488 $ 810,181 $ 462,272 $ 262,660 $ 98,210
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 1.03% 0.95% 1.02% 1.30% 0.83%
Total expenses 0.90% 4,5,6 0.91% 4,5 0.91% 6 0.92% 6 0.96% 6
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 111% 100% 88% 82% 85%
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 less than one full year.
4. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended December 31, 2007 0.90%
Year Ended December 31, 2006 0.91%
5. Voluntary waiver or reimbursement of indirect management fees less than
0.005%.
6. Reduction to custodian expenses less than 0.005%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
17 | 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 adviser is OppenheimerFunds, Inc. (the "Manager").
The Fund offers two classes of shares. Both classes are sold at their
offering price, which is the net asset value per share, to separate investment
accounts of participating insurance companies as an underlying investment for
variable life insurance policies, variable annuity contracts or other investment
products. The class of shares designated as Service shares is subject to a
distribution and service plan. Both classes of shares have identical rights and
voting privileges with respect to the Fund in general and exclusive voting
rights on matters that affect that class alone. Earnings, net assets and net
asset value per share may differ due to each class having its own expenses, such
as transfer and shareholder servicing agent fees and shareholder communications,
directly attributable to that class.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of the New York Stock Exchange (the "Exchange"), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for trading. Securities may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. Securities traded on a registered U.S.
securities exchange 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 whose principal exchange is NASDAQ(R) are valued based on the closing
price reported by NASDAQ prior to the time when the Fund's assets are valued. In
the absence of a sale, the security is valued at the last sale price on the
prior trading day, if it is within the spread of the 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, collateralized
mortgage obligations and other asset-backed securities will be valued at the
mean between the "bid" and "asked" prices. Securities for which market
quotations are not readily available are valued at their fair value. 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. Shares of a registered investment company
that are not traded on an exchange are valued at the acquired investment
company's net asset value per share. "Money market-type" debt instruments with
remaining maturities of sixty days or less are valued at cost adjusted by the
amortization of discount or premium to maturity (amortized cost), which
approximates market value.
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in
U.S. dollars. The values of securities denominated in foreign currencies and
amounts related to the purchase and sale of foreign securities and foreign
investment income are translated into U.S. dollars as of the close of the
Exchange, normally 4:00 P.M. Eastern time, on each day the Exchange is open for
trading. Foreign exchange rates may be valued primarily using a reliable bank,
dealer or service authorized by the Board of Trustees.
Reported net realized gains and losses from foreign currency transactions
arise from sales of portfolio securities, sales and maturities of short-term
securities, sales of foreign currencies, exchange rate fluctuations between the
trade and settlement dates on securities transactions, and the difference
between the amounts of dividends, interest, and foreign withholding taxes
recorded on the Fund's books and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized appreciation and depreciation on the
translation of assets and liabilities denominated in foreign currencies arise
from changes in the values of assets and liabilities, including investments in
securities at fiscal period end, resulting from changes in exchange rates.
18 | 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.
- --------------------------------------------------------------------------------
INVESTMENT IN OPPENHEIMER INSTITUTIONAL MONEY MARKET FUND. The Fund is permitted
to invest daily available cash balances in an affiliated money market fund. The
Fund may invest the available cash in Class E shares of Oppenheimer
Institutional Money Market Fund ("IMMF") to seek current income while preserving
liquidity. IMMF is a registered open-end management investment company,
regulated as a money market fund under the Investment Company Act of 1940, as
amended. The Manager is also the investment adviser of IMMF. 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. If the seller of the agreement defaults and the value of the
collateral declines, or if the seller enters an insolvency proceeding,
realization of the value of the collateral by the Fund may be delayed or
limited.
- --------------------------------------------------------------------------------
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. The Fund files
income tax returns in U.S. federal and applicable state jurisdictions. The
statute of limitations on the Fund's tax return filings remain open for the
three preceding fiscal reporting period ends.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders. Therefore, no federal income or excise tax provision is
required. The Fund files income tax returns in U.S. federal and applicable state
jurisdictions. The statute of limitations on the Fund's tax return filings
remain open for the three preceding fiscal reporting period ends.
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
- ------------------------------------------------------------------------------
$48,697,207 $106,324,703 $78 $241,899,367
1. The Fund had $78 of post-October foreign currency losses which were deferred.
2. During the fiscal year ended December 31, 2007, the Fund utilized $51,195,980
of capital loss carryforward to offset capital gains realized in that fiscal
year.
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.
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.
19 | OPPENHEIMER MAIN STREET FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
Accordingly, the following amounts have been reclassified for December 31, 2007.
Net assets of the Fund were unaffected by the reclassifications.
REDUCTION
REDUCTION TO ACCUMULATED NET
INCREASE TO PAID-IN TO ACCUMULATED NET REALIZED GAIN
CAPITAL INVESTMENT INCOME ON INVESTMENTS 4
------------------------------------------------------------------
$12,120,448 $4,333 $12,116,115
4. $12,120,448, including $10,012,401 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, 2007
and December 31, 2006 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2007 DECEMBER 31, 2006
------------------------------------------------------------------
Distributions paid from:
Ordinary income $20,209,124 $19,332,450
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, 2007 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 $ 2,258,574,350
====================
Gross unrealized appreciation $ 358,518,287
Gross unrealized depreciation (116,618,920)
--------------------
Net unrealized appreciation $ 241,899,367
====================
- --------------------------------------------------------------------------------
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 compensation deferral plan.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations and
may differ from U.S. generally accepted accounting principles, are recorded on
the ex-dividend date. Income and capital gain distributions, if any, are
declared and paid annually or at other times as deemed necessary by the Manager.
- --------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income is recognized on an accrual basis. Market discount and
premium, which are included in interest income on the Statement of Operations,
are amortized or accreted daily.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. "Custodian fees and expenses" in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
20 | OPPENHEIMER MAIN STREET FUND/VA
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts, to the extent they are not
offset by positive cash balances maintained by the Fund, at a rate equal to the
Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line item,
if applicable, represents earnings on cash balances maintained by the Fund
during the period. Such interest expense and other custodian fees may be paid
with these earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Fund's organizational documents provide current and former
trustees and officers with a limited indemnification against liabilities arising
in connection with the performance of their duties to the Fund. In the normal
course of business, the Fund may also enter into contracts that provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would be dependent on future claims that may be made against the
Fund. The risk of material loss from such claims is considered remote.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period. Actual
results could differ from those estimates.
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
YEAR ENDED DECEMBER 31, 2007 YEAR ENDED DECEMBER 31, 2006
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------
NON-SERVICE SHARES
Sold 2,948,386 $ 76,016,214 2,514,408 $ 57,767,133
Dividends and/or distributions
reinvested 425,853 10,356,753 570,547 12,723,204
Redeemed (10,151,162) (262,031,826) (12,341,295) (281,374,806)
----------------------------------------------------------------
Net decrease (6,776,923) $(175,658,859) (9,256,340) $(210,884,469)
================================================================
- -------------------------------------------------------------------------------------------------
SERVICE SHARES
Sold 18,707,352 $ 478,137,931 19,602,827 $ 446,509,884
Dividends and/or distributions
reinvested 407,708 9,846,137 298,058 6,604,957
Redeemed (6,139,866) (156,552,465) (2,838,200) (64,854,191)
----------------------------------------------------------------
Net increase 12,975,194 $ 331,431,603 17,062,685 $ 388,260,650
================================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations and investments in IMMF, for the year ended December
31, 2007, were as follows:
PURCHASES SALES
---------------------------------------------------------
Investment securities $2,711,835,454 $2,553,382,648
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Under the investment advisory agreement, the Fund pays the
Manager a management fee based on the daily net assets of the Fund at an annual
rate as shown in the following table:
21 | OPPENHEIMER MAIN STREET FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
- --------------------------------------------------------------------------------
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, 2007, the Fund
paid $20,437 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 (the "Plan") in accordance with Rule 12b-1 under
the Investment Company Act of 1940 for Service shares to pay OppenheimerFunds
Distributor, Inc. (the "Distributor"), for distribution related services,
personal service and account maintenance for the Fund's Service shares. Under
the Plan, payments are made periodically at an annual rate of 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. These
fees are paid out of the Fund's assets on an on-going basis and increase
operating expenses of the Service shares, which results in lower performance
compared to the Fund's shares that are not subject to a service fee. Fees
incurred by the Fund under the Plan are detailed in the Statement of Operations.
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. 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, 2007, the Manager waived $12,893 for
IMMF management fees.
- --------------------------------------------------------------------------------
5. FOREIGN CURRENCY EXCHANGE CONTRACTS
The Fund may enter into foreign currency exchange contracts ("forward
contracts") for the purchase or sale of a foreign currency at a negotiated rate
at a future date.
Foreign currency exchange contracts are reported on a schedule following
the Statement of Investments. Forward contracts will be valued daily based upon
the closing prices of the forward currency rates determined at the close of the
Exchange as provided by a bank, dealer or pricing service. The resulting
unrealized appreciation (depreciation) is reported in the Statement of Assets
and Liabilities as a receivable or payable and in the Statement of Operations
within the change in unrealized appreciation (depreciation). At contract close,
the difference between the original cost of the contract and the value at the
close date is recorded as a realized gain (loss) in the Statement of Operations.
Risks to the Fund include both market and credit risk. Market risk is the
risk that the value of the forward contract will depreciate due to unfavorable
changes in the exchange rates. 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 payments that the Fund has not yet
received.
As of December 31, 2007, the Fund had no outstanding forward contracts.
22 | OPPENHEIMER MAIN STREET FUND/VA
- --------------------------------------------------------------------------------
6. ILLIQUID SECURITIES
As of December 31, 2007, investments in securities included issues that are
illiquid. Investments may be illiquid because they do not have an active trading
market, making it difficult to value them or dispose of them promptly at an
acceptable price. 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 an 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 the form of fees or interest on securities received as
collateral or the investment of any cash received as collateral. The loans are
secured by collateral (either securities, letters of credit, or cash) 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 each business day and any additional required collateral is
delivered to the Fund on the next business day. If the borrower defaults on its
obligation to return the securities loaned because of insolvency or other
reasons, the Fund could experience delays and cost in recovering the securities
loaned or in gaining access to the collateral. 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 and recognizes the gain
or loss in the fair value of the securities loaned that may occur during the
term of the loan. The Fund has the right under the lending agreement to recover
the securities from the borrower on demand. As of December 31, 2007, the Fund
had on loan securities valued at $126,192,641. Collateral of $130,038,099 was
received for the loans, all of which was received in cash and subsequently
invested in approved instruments or held as cash.
- --------------------------------------------------------------------------------
8. RECENT ACCOUNTING PRONOUNCEMENT
In September 2006, Financial Accounting Standards Board ("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, 2007, 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.
23 | 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, 2007,
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, 2007, 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, 2007, 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 13, 2008
24 | OPPENHEIMER MAIN STREET FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2008, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2007. 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, 2007 which are not designated as capital gain distributions should be
multiplied by 78.90% 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.
25 | 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.
26 | OPPENHEIMER MAIN STREET FUND/VA
BOARD APPROVAL OF THE FUND'S INVESTMENT ADVISORY AGREEMENT Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew the Fund's
investment advisory agreement (the "Agreement"). The Investment Company Act of
1940, as amended, requires that the Board request and evaluate, and that the
Manager provide, such information as may be reasonably necessary to evaluate the
terms of the Agreement. The Board employs an independent consultant to prepare a
report that provides information, including comparative information, that the
Board requests for that purpose. In addition, the Board receives information
throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager and its affiliates, including
an analysis of the cost of providing services, (v) whether economies of scale
are realized as the Fund grows and whether fee levels reflect these economies of
scale for Fund investors and (vi) other benefits to the Manager from its
relationship with the Fund. 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 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.
27 | OPPENHEIMER MAIN STREET FUND/VA
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited / Continued
- --------------------------------------------------------------------------------
INVESTMENT PERFORMANCE OF THE MANAGER AND THE FUND. 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,
though the Fund's ten-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
considered the comparability of the fees charged and the services provided to
the Fund to the fees and services for other clients or accounts advised by the
Manager. The independent consultant provided comparative data in regard to the
fees and expenses of the Fund and other large-cap core funds underlying variable
insurance products. The Board noted that the Fund's contractual and actual
management fees are 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. The Board noted that the
Fund currently has management fee breakpoints, which are intended to share with
Fund shareholders economies of scale that may exist as the Fund's assets grow.
OTHER BENEFITS TO THE MANAGER. In addition to considering the profits
realized by the Manager, the Board considered information that was provided
regarding the direct and indirect benefits the Manager receives as a result of
its relationship with the Fund, including compensation paid to the Manager's
affiliates and research provided to the Manager in connection with permissible
brokerage arrangements (soft dollar arrangements). The Board also considered
that the Manager must be able to pay and retain experienced professional
personnel at competitive rates to provide quality services to the Fund 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 considered all of the above information, and considered the
terms and conditions of the Agreement, including the management fee, in light of
all of the surrounding circumstances.
28 | OPPENHEIMER MAIN STREET FUND/VA
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) HELD WITH THE PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS HELD; NUMBER
FUNDS, LENGTH OF SERVICE, AGE OF 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, Cherry Creek Mortgage Company
Chairman of the Board (since 1991), Chairman, Centennial State Mortgage Company (since 1994), Chairman, The El Paso
of Trustees (since 2003), Mortgage Company (since 1993); Chairman, Ambassador Media Corporation (since 1984); Chairman,
Trustee (since 1999) Broadway Ventures (since 1984); Director of Helmerich & Payne, Inc. (oil and gas
Age: 70 drilling/production company) (since 1992), Campus Crusade for Christ (non-profit) (since 1991);
Former Director, The Lynde and Harry Bradley Foundation, Inc. (non-profit organization)
(2002-2006); former Chairman of: Transland Financial Services, Inc. (private mortgage banking
company) (1997-2003), Great Frontier Insurance (1995-2000), Frontier Real Estate, Inc.
(residential real estate brokerage) (1994-2000) and Frontier Title (title insurance agency)
(1995-2000); former Director of the following: UNUMProvident (insurance company) (1991-2004),
Storage Technology Corporation (computer equipment company) (1991-2003) and International Family
Entertainment (television channel) (1992-1997); U.S. Senator (January 1979-January 1991).
Oversees 39 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: 71 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 39 portfolios in the
OppenheimerFunds complex.
EDWARD L. CAMERON, Member of The Life Guard of Mount Vernon (George Washington historical site) (June 2000-May
Trustee (since 1999) 2006); Partner of PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman
Age: 69 of Price Waterhouse LLP Global Investment Management Industry Services Group (financial services
firm) (July 1994-June 1998). Oversees 39 portfolios in the OppenheimerFunds complex.
JON S. FOSSEL, Director of UNUMProvident (insurance company) (since June 2002); Director of Northwestern Energy
Trustee (since 1995) Corp. (public utility corporation) (since November 2004); Director of P.R. Pharmaceuticals
Age: 66 (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 39 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: 67 (until October 1994). Oversees 39 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: 61 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 39 portfolios in the OppenheimerFunds complex.
29 | OPPENHEIMER MAIN STREET FUND/VA
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
ROBERT J. MALONE, Director of Jones Knowledge, Inc. (since 2006); Director of Jones International University
Trustee (since 2002) (educational organization) (since August 2005); Chairman, Chief Executive Officer and Director
Age: 63 of Steele Street State Bank (commercial banking) (since August 2003); Director of Colorado
UpLIFT (charitable organization) (since 1986); Trustee of the Gallagher Family Foundation
(non-profit organization) (since 2000); Former Chairman of U.S. Bank-Colorado (subsidiary of
U.S. Bancorp and formerly Colorado National Bank) (July 1996-April 1999); Director of Commercial
Assets, Inc. (real estate investment trust) (1993-2000); Director of Jones Knowledge, Inc.
(2001-July 2004); and Director of U.S. Exploration, Inc. (oil and gas exploration) (1997-
February 2004). Oversees 39 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: 65 of Worcester Polytech Institute (since 1985); Chairman (since 1994) 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 41
portfolios in the OppenheimerFunds complex.
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH FLOOR, NEW
AND OFFICER YORK, NEW YORK 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN INDEFINITE TERM, OR UNTIL HIS
RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN OFFICER FOR AN INDEFINITE TERM, OR UNTIL
HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL. MR. MURPHY IS AN INTERESTED TRUSTEE DUE TO HIS
POSITIONS WITH OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES.
JOHN V. MURPHY, Chairman, Chief Executive Officer and Director of the Manager (since June 2001); President of
Trustee, President and the Manager (September 2000-March 2007); President and director or trustee of other Oppenheimer
Principal Executive Officer funds; President and Director of Oppenheimer Acquisition Corp. ("OAC") (the Manager's parent
(since 2001) holding company) and of Oppenheimer Partnership Holdings, Inc. (holding company subsidiary of
Age: 58 the Manager) (since July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of
the Manager) (November 2001-December 2006); 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); Chairman (since October 2007) and Member of the Investment Company Institute's Board of
Governors (since October 2003). Oversees 102 portfolios in the OppenheimerFunds complex.
- ------------------------------------------------------------------------------------------------------------------------------------
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 Chartered Financial Analyst.
Vice President and Portfolio Formerly Vice President of the Manager (April 1998-September 2003). A portfolio manager and
Manager (since 1999) officer of 6 portfolios in the OppenheimerFunds complex.
Age: 58
DR. MARC REINGANUM, Vice President of the Manager (since September 2002); Director of Quantitative Research and
Vice President and Portfolio Portfolio Strategist for Equities; the Mary Jo Vaughn Rauscher Chair in Financial Investments
Manager (since 2003) at Southern Methodist University (since 1995). Director of the Finance Institute, Chairman of
Age: 54 the Finance Department, President of the Faculty at the Cox School of Business and member of
the Board of Trustee Investment Committee while at Southern Methodist University. A portfolio
manager and officer of 3 portfolios in the OppenheimerFunds complex.
30 | OPPENHEIMER MAIN STREET FUND/VA
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Chief
Vice President and Chief Compliance Officer of OppenheimerFunds Distributor, Inc., Centennial Asset Management and
Compliance Officer Shareholder Services, Inc. (since March 2004); Vice President of OppenheimerFunds Distributor,
(since 2004) Inc., Centennial Asset Management Corporation and Shareholder Services, Inc. (since June 1983);
Age: 57 Former Vice President and Director of Internal Audit of the Manager (1997-February 2004). An
officer of 102 portfolios in the OppenheimerFunds complex.
BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer of the
Treasurer and Principal following: HarbourView Asset Management Corporation, Shareholder Financial Services, Inc.,
Financial & Accounting Shareholder Services, Inc., Oppenheimer Real Asset Management, Inc. and Oppenheimer Partnership
Officer (since 1999) Holdings, Inc. (since March 1999), OFI Private Investments, Inc. (since March 2000),
Age: 48 OppenheimerFunds International Ltd. and OppenheimerFunds plc (since May 2000), OFI
Institutional Asset Management, Inc. (since November 2000), and OppenheimerFunds Legacy Program
(charitable trust program established by the Manager) (since June 2003); Treasurer and Chief
Financial Officer of OFI Trust Company (trust company subsidiary of the Manager) (since May
2000); Assistant Treasurer of the following: OAC (since March 1999), Centennial Asset
Management Corporation (March 1999-October 2003) and OppenheimerFunds Legacy Program (April
2000-June 2003). An officer of 102 portfolios in the OppenheimerFunds complex.
BRIAN S. PETERSEN, Vice President of the Manager (since February 2007); Assistant Vice President of the Manager
Assistant Treasurer (August 2002-February 2007); Manager/Financial Product Accounting of the Manager (November
(since 2004) 1998-July 2002). An officer of 102 portfolios in the OppenheimerFunds complex.
Age: 37
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). An officer of 102 portfolios in the OppenheimerFunds
Age: 37 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: 59 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). An
officer of 102 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) of UBS Financial
(since 2004) Services, Inc. An officer of 102 portfolios in the OppenheimerFunds complex.
Age: 40
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 102 portfolios in the
Age: 44 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 2003)
(since 2001) of the Distributor; Assistant Secretary of Centennial Asset Management Corporation (since
Age: 42 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 102 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.
31 | OPPENHEIMER MAIN STREET FUND/VA
DECEMBER 31, 2007
- --------------------------------------------------------------------------------
Oppenheimer Management
Money Fund/VA Commentaries
A Series of Oppenheimer Variable Account Funds and
Annual Report
- --------------------------------------------------------------------------------
MANAGEMENT COMMENTARIES
Investment Strategy Discussion
ANNUAL REPORT [GRAPHIC]
Listing of Investments
Financial Statements
[LOGO] OPPENHEIMERFUNDS(R)
The Right Way to Invest
FUND EXPENSES
- --------------------------------------------------------------------------------
FUND EXPENSES. As a shareholder of the Fund, you incur ongoing costs, including
management fees; service fees; and other Fund expenses. These examples are
intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to compare these costs with the ongoing costs of investing in other
mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning
of the period and held for the entire 6-month period ended December 31, 2007.
ACTUAL EXPENSES. The first section of the table provides information about
actual account values and actual expenses. You may use the information in this
section, together with the amount you invested, to estimate the expense that you
paid over the period. Simply divide your account value by $1,000.00 (for
example, an $8,600.00 account value divided by $1,000.00 = 8.60), then multiply
the result by the number in the first section under the heading entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The second section of the table
provides information about hypothetical account values and hypothetical expenses
based on the Fund's actual expense ratio, and an assumed rate of return of 5%
per year before expenses, which is not the actual return. The hypothetical
account values and expenses may not be used to estimate the actual ending
account balance or expenses you paid for the period. You may use this
information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any charges associated with the separate
accounts that offer this Fund. Therefore, the "hypothetical" lines of the table
are useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these separate
account charges were included your costs would have been higher.
- --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
ACTUAL JULY 1, 2007 DECEMBER 31, 2007 DECEMBER 31, 2007
- --------------------------------------------------------------------------------
$1,000.00 $1,024.60 $2.55
HYPOTHETICAL
(5% return before expenses)
- --------------------------------------------------------------------------------
1,000.00 1,022.68 2.55
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, 2007 is as follows:
EXPENSE RATIO
- -------------
0.50%
The expense ratio reflects reduction to custodian expenses. The "Financial
Highlights" table in the Fund's financial statements, included in this report,
also show the gross expense ratio, without such waivers or reimbursements and
reduction to custodian expenses, if applicable.
- --------------------------------------------------------------------------------
5 | OPPENHEIMER MONEY FUND/VA
STATEMENT OF INVESTMENTS December 31, 2007
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT--20.1%
- --------------------------------------------------------------------------------
DOMESTIC CERTIFICATES OF DEPOSIT--1.9%
Citibank NA, 4.83%, 1/24/08 $ 1,500,000 $ 1,500,000
- --------------------------------------------------------------------------------
HSBC Bank USA, NA, 4.85%, 2/13/08 2,000,000 2,000,000
----------------
3,500,000
- --------------------------------------------------------------------------------
YANKEE CERTIFICATES OF DEPOSIT--18.2%
Barclays Bank plc, New York:
4.87%, 4/24/08 2,000,000 2,000,000
5.16%, 4/2/08 2,600,000 2,600,000
- --------------------------------------------------------------------------------
BNP Paribas, New York, 5.10%, 3/6/08 1,000,000 1,000,000
- --------------------------------------------------------------------------------
Canadian Imperial Bank of Commerce NY:
4.80%, 1/30/08 2,000,000 2,000,000
5.11%, 1/17/08 2,000,000 2,000,000
- --------------------------------------------------------------------------------
Fortis Bank SA/NV, New York, 5.16%,
1/3/08 3,000,000 3,000,001
- --------------------------------------------------------------------------------
Governor & Co. of the Bank of Ireland,
Stamford CT, 5.17%, 1/16/08 3,000,000 3,000,000
- --------------------------------------------------------------------------------
Lloyds TSB Bank plc, New York:
4.79%, 2/14/08 2,000,000 2,000,000
5.45%, 3/10/08 3,000,000 3,000,000
- --------------------------------------------------------------------------------
Rabobank Nederland NV, New York:
4.85%, 1/22/08 2,000,000 2,000,000
5%, 2/27/08 2,000,000 2,000,477
- --------------------------------------------------------------------------------
Royal Bank of Canada, New York,
4.81%, 2/8/08 2,000,000 2,000,000
- --------------------------------------------------------------------------------
Royal Bank of Scotland, New York,
5.44%, 3/13/08 1,500,000 1,500,000
- --------------------------------------------------------------------------------
Skandinaviska Enskilda Banken, New York:
5.155%, 2/29/08 3,000,000 3,000,024
5.20%, 1/10/08 1,500,000 1,500,000
- --------------------------------------------------------------------------------
UBS AG Stamford CT, 5.55%, 2/1/08 2,000,000 2,000,000
----------------
34,600,502
----------------
Total Certificates of Deposit (Cost $38,100,502) 38,100,502
- --------------------------------------------------------------------------------
DIRECT BANK OBLIGATIONS--18.3%
- --------------------------------------------------------------------------------
Abbey National North America LLC,
4.88%, 1/31/08 1,000,000 995,933
- --------------------------------------------------------------------------------
Anglo Irish Bank Corp. plc, 5.34%,
1/9/08 1 2,000,000 1,997,627
- --------------------------------------------------------------------------------
Barclays US Funding LLC, 4.77%,
2/26/08 1,500,000 1,488,870
- --------------------------------------------------------------------------------
Danske Corp., 5.38%, 3/6/08 1 4,000,000 3,961,144
- --------------------------------------------------------------------------------
Dexia Delaware LLC, 5.07%, 1/14/08 2,000,000 1,996,342
- --------------------------------------------------------------------------------
DnB NOR Bank ASA:
4.90%, 3/14/08 1 1,850,000 1,831,618
4.94%, 2/20/08 1,900,000 1,886,964
5.11%, 1/9/08 1 2,000,000 1,997,729
- --------------------------------------------------------------------------------
Governor & Co. of the Bank of Ireland,
4.94%, 2/19/08 1 2,000,000 1,986,552
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
DIRECT BANK OBLIGATIONS Continued
- --------------------------------------------------------------------------------
HSBC USA, Inc., 5.30%, 1/31/08 $ 3,000,000 $ 2,986,750
- --------------------------------------------------------------------------------
National Australia Funding
(Delaware), Inc., 4.75%, 1/15/08 1 2,000,000 1,996,306
- --------------------------------------------------------------------------------
Skandinaviska Enskilda Banken AB,
4.80%, 3/20/08 1 1,200,000 1,187,360
- --------------------------------------------------------------------------------
Societe Generale North America, Inc.:
5.13%, 1/16/08 2,500,000 2,494,656
5.16%, 1/18/08 2,000,000 1,995,127
- --------------------------------------------------------------------------------
Stadshypotek Delaware, Inc., 5.02%,
2/28/08 1 1,000,000 991,920
- --------------------------------------------------------------------------------
Swedbank Mortgage AB:
5%, 2/22/08 2,000,000 1,985,556
5%, 3/14/08 1,000,000 989,861
- --------------------------------------------------------------------------------
Wells Fargo Bank NA, 4.58%, 1/8/08 2,000,000 2,000,000
----------------
Total Direct Bank Obligations (Cost $34,770,315) 34,770,315
- --------------------------------------------------------------------------------
SHORT-TERM NOTES--60.8%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE--0.2%
Montgomery, AL Industrial
Development Board Revenue Bonds,
Bristol Properties LLC Project,
Series B, 5.19%, 2/1/08 2 320,000 320,000
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--18.5%
Amsterdam Funding Corp., 5.07%,
1/10/08 1 3,000,000 2,996,198
- --------------------------------------------------------------------------------
Capital Auto Receivables Asset
Trust 2007-SN1, 5.03%, 6/16/08 2,3 259,405 259,405
- --------------------------------------------------------------------------------
Chesham Finance LLC, 5%, 1/2/08 3,800,000 3,799,462
- --------------------------------------------------------------------------------
Fairway Finance Corp., 5.65%, 3/5/08 1 1,000,000 989,956
- --------------------------------------------------------------------------------
FCAR Owner Trust II, 6%, 2/27/08 2,000,000 1,981,000
- --------------------------------------------------------------------------------
Gemini Securitization Corp., 5.50%,
3/5/08 1 1,800,000 1,782,400
- --------------------------------------------------------------------------------
Gotham Funding Corp., 5.55%,
2/21/08 1 2,000,000 1,984,275
- --------------------------------------------------------------------------------
GOVCO, Inc., 5.15%, 1/3/08 1 1,000,000 999,714
- --------------------------------------------------------------------------------
Legacy Capital LLC, 5.15%, 1/29/08 5,000,000 4,980,322
- --------------------------------------------------------------------------------
Lexington Parker Capital Co. LLC,
5.05%, 1/24/08 1 1,000,000 996,774
- --------------------------------------------------------------------------------
Mont Blanc Capital Corp.,
5.10%, 2/14/08 1 2,000,000 1,987,533
- --------------------------------------------------------------------------------
New Center Asset Trust, 4.95%, 1/30/08 2,500,000 2,490,031
- --------------------------------------------------------------------------------
Old Line Funding Corp.:
5.30%, 2/19/08 1 1,000,000 992,786
5.45%, 3/6/08 1 3,000,000 2,970,479
- --------------------------------------------------------------------------------
Ranger Funding Co. LLC, 5.38%, 1/24/08 1,000,000 996,566
- --------------------------------------------------------------------------------
Victory Receivables Corp., 5.66%,
1/30/08 1 4,000,000 3,981,811
- --------------------------------------------------------------------------------
Windmill Funding Corp., 5.20%, 1/3/08 1 1,000,000 999,711
----------------
35,188,423
6 | OPPENHEIMER MONEY FUND/VA
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
AUTOMOBILES--1.0%
Ande Chevrolet Olds, Inc., Series 2004,
5.01%, 1/2/08 2 $ 1,870,000 $ 1,870,000
- --------------------------------------------------------------------------------
CAPITAL MARKETS--5.8%
Banc of America Securities LLC, 4.07%,
1/2/08 2 5,000,000 5,000,000
- --------------------------------------------------------------------------------
Citigroup Funding, Inc., 4.88%, 8/13/08 2 2,000,000 2,000,000
- --------------------------------------------------------------------------------
Lehman Brothers, Inc., 3.20%, 1/2/08 2 4,000,000 4,000,000
----------------
11,000,000
- --------------------------------------------------------------------------------
CHEMICALS--0.9%
BASF AG, 4.74%, 1/14/08 1 1,739,000 1,736,023
- --------------------------------------------------------------------------------
COMMERCIAL BANKS--2.6%
J.P. Morgan Chase & Co., 5.10%, 1/9/08 5,000,000 4,994,333
- --------------------------------------------------------------------------------
COMMERCIAL FINANCE--1.1%
Caterpillar Financial Services Corp.,
Series F, 5.16%, 11/26/08 2 1,000,000 1,000,000
- --------------------------------------------------------------------------------
Private Export Funding Corp.,
4.51%, 1/28/08 1 1,000,000 996,618
----------------
1,996,618
- --------------------------------------------------------------------------------
CONSUMER FINANCE--1.1%
American Express Credit Corp.,
4.62%, 2/14/08 2,000,000 1,988,707
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--2.6%
General Electric Capital Corp.,
5.03%, 1/25/08 4,000,000 3,986,587
- --------------------------------------------------------------------------------
Prudential Funding LLC, 4.70%, 1/28/08 1,000,000 996,475
----------------
4,983,062
- --------------------------------------------------------------------------------
FOOD PRODUCTS--1.0%
Nestle Capital Corp., 5.22%, 3/7/08 1 2,000,000 1,980,860
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--2.0%
Alta Mira LLC, Series 2004,
4.96%, 1/2/08 2 2,250,000 2,250,000
- --------------------------------------------------------------------------------
Premier Senior Living LLC,
Series 2007 A-H, 4.90%, 1/2/08 2 1,500,000 1,500,000
----------------
3,750,000
- --------------------------------------------------------------------------------
INSURANCE--7.4%
ING America Insurance Holdings, Inc.:
4.94%, 1/18/08 2,000,000 1,995,334
5%, 3/13/08 1,500,000 1,485,000
5%, 3/19/08 2,000,000 1,978,333
- --------------------------------------------------------------------------------
Jackson National Life Global Funding,
Series 2004-6, 5.12%, 1/15/08 2,3 2,500,000 2,500,000
- --------------------------------------------------------------------------------
Metropolitan Life Global Funding I,
Series 2003-5, 5.13%, 9/12/08 2,3 4,000,000 4,000,000
- --------------------------------------------------------------------------------
United of Omaha Life Insurance Co.,
5.10%, 12/29/08 2,3 2,000,000 2,000,000
----------------
13,958,667
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
LEASING & FACTORING--5.0%
American Honda Finance Corp.:
5.049%, 11/20/08 2,4 $ 3,000,000 $ 3,000,000
5.246%, 12/10/08 2,4 2,500,000 2,500,000
- --------------------------------------------------------------------------------
Toyota Motor Credit Corp.:
4.961%, 9/15/08 2 2,000,000 2,000,000
5.25%, 1/11/08 1,000,000 998,542
5.25%, 1/14/08 1,000,000 998,104
----------------
9,496,646
- --------------------------------------------------------------------------------
MACHINERY--1.0%
Jackson Tube Service, Inc., Series 2000,
4.91%, 1/2/08 2 1,850,000 1,850,000
- --------------------------------------------------------------------------------
MUNICIPAL--3.2%
Black Property Management LLC,
Series 2006, 4.91%, 1/2/08 2 2,515,000 2,515,000
- --------------------------------------------------------------------------------
Columbus, GA Development Authority
Revenue Bonds, MAC Property LLC
Project, Series 2007, 5.22%, 1/2/08 2 1,785,000 1,785,000
- --------------------------------------------------------------------------------
Hayward, CA Multifamily Housing
Revenue Bonds, Lord Tennyson Apts.
Project, 5.16%, 1/2/08 2 710,000 710,000
- --------------------------------------------------------------------------------
St. Johns Cnty., FL Industrial
Development Authority
Revenue Bonds, Presbyterian
Retirement Communities Project,
Series 2004B, 5%, 1/2/08 2 1,000,000 1,000,000
----------------
6,010,000
- --------------------------------------------------------------------------------
PERSONAL PRODUCTS--1.8%
Procter & Gamble International
Funding SCA, 4.65%, 1/31/08 1 1,000,000 996,125
- --------------------------------------------------------------------------------
Reckitt Benckiser Treasury Services plc,
5.11%, 1/15/08 1 2,500,000 2,495,032
----------------
3,491,157
- --------------------------------------------------------------------------------
SPECIAL PURPOSE FINANCIAL--5.6%
Cooperative Assn. of Tractor
Dealers, Inc., Series B, 5.30%, 1/8/08 1,640,000 1,638,310
- --------------------------------------------------------------------------------
K2 (USA) LLC, 4.97%, 2/25/08 3 2,000,000 1,984,814
- --------------------------------------------------------------------------------
LINKS Finance LLC:
4.845%, 8/6/08 2,4 2,000,000 1,999,762
4.849%, 8/15/08 2,4 2,000,000 1,999,628
- --------------------------------------------------------------------------------
Parkland (USA) LLC, 5.20%, 7/16/08 2,4 2,000,000 1,999,892
- --------------------------------------------------------------------------------
RACERS Trust, Series 2004-6-MM,
4.95%, 1/22/08 2,4 1,000,000 1,000,000
----------------
10,622,406
----------------
Total Short-Term Notes (Cost $115,236,902) 115,236,902
7 | OPPENHEIMER MONEY FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES--0.5%
- --------------------------------------------------------------------------------
Federal Home Loan Bank, 4.625%,
12/4/08 (Cost $1,000,000) $ 1,000,000 $ 1,000,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $189,107,719) 99.7% 189,107,719
- --------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 0.3 640,856
-------------------------------
NET ASSETS 100.0% $ 189,748,575
===============================
INDUSTRY CLASSIFICATIONS ARE UNAUDITED.
FOOTNOTES TO STATEMENT OF INVESTMENTS
SHORT-TERM NOTES AND DIRECT BANK OBLIGATIONS ARE GENERALLY TRADED ON A DISCOUNT
BASIS; THE INTEREST RATE SHOWN IS THE DISCOUNT RATE RECEIVED BY THE FUND AT THE
TIME OF PURCHASE. OTHER SECURITIES NORMALLY BEAR INTEREST AT THE RATES SHOWN.
1. Security issued in an exempt transaction without registration under the
Securities Act of 1933. Such securities amount to $44,836,551, or 23.63% 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, 2007 was $10,744,219, which represents 5.66% of the Fund's net assets. See
Note 5 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 $12,499,282 or 6.59% of the Fund's net
assets as of December 31, 2007.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
8 | OPPENHEIMER MONEY FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 31, 2007
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
ASSETS
- -----------------------------------------------------------------------------------------------------
Investments, at value (cost $189,107,719)--see accompanying statement of investments $ 189,107,719
- -----------------------------------------------------------------------------------------------------
Cash 22,570
- -----------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest 603,084
Shares of beneficial interest sold 563,253
Other 6,858
--------------
Total assets 190,303,484
- -----------------------------------------------------------------------------------------------------
LIABILITIES
- -----------------------------------------------------------------------------------------------------
Payables and other liabilities:
Shares of beneficial interest redeemed 322,250
Dividends 193,646
Shareholder communications 12,475
Trustees' compensation 3,941
Transfer and shareholder servicing agent fees 889
Other 21,708
--------------
Total liabilities 554,909
- -----------------------------------------------------------------------------------------------------
NET ASSETS $ 189,748,575
==============
- -----------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- -----------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 189,724
- -----------------------------------------------------------------------------------------------------
Additional paid-in capital 189,559,918
- -----------------------------------------------------------------------------------------------------
Accumulated net investment loss (1,065)
- -----------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (2)
--------------
NET ASSETS--applicable to 189,723,554 shares of beneficial interest outstanding $ 189,748,575
==============
- -----------------------------------------------------------------------------------------------------
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, 2007
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Interest $ 9,718,716
- --------------------------------------------------------------------------------
EXPENSES
- --------------------------------------------------------------------------------
Management fees 815,496
- --------------------------------------------------------------------------------
Shareholder communications 37,130
- --------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees 10,016
- --------------------------------------------------------------------------------
Trustees' compensation 6,750
- --------------------------------------------------------------------------------
Administration service fees 1,500
- --------------------------------------------------------------------------------
Custodian fees and expenses 927
- --------------------------------------------------------------------------------
Other 33,014
------------
Total expenses 904,833
Less reduction to custodian expenses (66)
------------
Net expenses 904,767
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 8,813,949
- --------------------------------------------------------------------------------
NET REALIZED LOSS ON INVESTMENTS (2)
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 8,813,947
============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
10 | OPPENHEIMER MONEY FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2007 2006
- -------------------------------------------------------------------------------------------
OPERATIONS
- -------------------------------------------------------------------------------------------
Net investment income $ 8,813,949 $ 7,889,511
- -------------------------------------------------------------------------------------------
Net realized gain (loss) (2) 3,420
------------------------------
Net increase in net assets resulting from operations 8,813,947 7,892,931
- -------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------
Dividends from net investment income (8,813,949) (7,889,609)
- -------------------------------------------------------------------------------------------
Distributions from net realized gain (3,645) (6,674)
- -------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- -------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
beneficial interest transactions 18,231,526 (1,637,470)
- -------------------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------------------
Total increase (decrease) 18,227,879 (1,640,822)
- -------------------------------------------------------------------------------------------
Beginning of period 171,520,696 173,161,518
------------------------------
End of period (including accumulated net investment
loss of $1,065 for the year ended December 31, 2007) $ 189,748,575 $ 171,520,696
==============================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
11 | OPPENHEIMER MONEY FUND/VA
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2007 2006 2005 2004 2003
- ---------------------------------------------------------------------------------------------------------------------------------
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 .05 1 .03 1 .01 1 .01
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.05) (.05) (.03) (.01) (.01)
Distributions from net realized gain -- 2 -- 2 -- -- --
-------------------------------------------------------------------------
Total dividends and/or distributions to shareholders (.05) (.05) (.03) (.01) (.01)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========================================================================
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 3 4.98% 4.71% 2.86% 0.98% 0.79%
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 189,749 $ 171,521 $ 173,162 $ 196,503 $ 237,613
- ---------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 181,271 $ 171,118 $ 186,453 $ 218,243 $ 316,096
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 4.86% 4.61% 2.80% 0.97% 0.80%
Total expenses 0.50% 5 0.49% 0.48% 5 0.48% 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 less than one full year.
5. Reduction to custodian expenses less than 0.005%.
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 adviser is OppenheimerFunds, Inc. (the "Manager").
The Fund offers shares to separate investment accounts of participating
insurance companies as an underlying investment for variable life insurance
policies, variable annuity contracts or other investments.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. Securities are valued at cost adjusted by the amortization
of discount or premium to maturity (amortized cost), which approximates market
value. If amortized cost is determined not to approximate market value, the fair
value of the portfolio securities will be determined under procedures approved
by the Fund's Board of Trustees.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income to shareholders.
Therefore, no federal income or excise tax provision is required. The Fund files
income tax returns in U.S. federal and applicable state jurisdictions. The
statute of limitations on the Fund's tax return filings remain open for the
three preceding fiscal reporting period ends.
The tax components of capital shown in the table below represent distribution
requirements the Fund must satisfy under the income tax regulations, losses the
Fund may be able to offset against income and gains realized in future years for
federal income tax purposes.
UNDISTRIBUTED NET UNDISTRIBUTED ACCUMULATED
INVESTMENT INCOME LONG-TERM GAINS LOSS CARRYFORWARD 1,2,3
---------------------------------------------------------------------
$243,661 $-- $2
1. As of December 31, 2007, the Fund had $2 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, 2007, details of the
capital loss carryforward were as follows:
EXPIRING
----------------------
2015 $2
2. During the fiscal year ended December 31, 2007, the Fund did not utilize any
capital loss carryforward.
3. During the fiscal year ended December 31, 2006, 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, 2007.
Net assets of the Fund were unaffected by the reclassifications.
INCREASE TO REDUCTION TO
ACCUMULATED ACCUMULATED NET REALIZED
NET INVESTMENT LOSS LOSS ON INVESTMENTS
-------------------------------------------------------------
$1,065 $1,065
The tax character of distributions paid during the years ended December 31, 2007
and December 31, 2006 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2007 DECEMBER 31, 2006
--------------------------------------------------------------------
Distributions paid from:
Ordinary income $8,817,594 $7,896,283
13 | OPPENHEIMER MONEY 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 compensation deferral plan.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations and
may differ from U.S. generally accepted accounting principles, are recorded on
the ex-dividend date. Income distributions, if any, are declared daily and paid
monthly. Capital gain distributions, if any, are declared and paid annually but
may be paid at other times to maintain the net asset value per share at $1.00.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. "Custodian fees and expenses" in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts, to the extent they are not
offset by positive cash balances maintained by the Fund, at a rate equal to the
Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line item,
if applicable, represents earnings on cash balances maintained by the Fund
during the period. Such interest expense and other custodian fees may be paid
with these earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Fund's organizational documents provide current and former
trustees and officers with a limited indemnification against liabilities arising
in connection with the performance of their duties to the Fund. In the normal
course of business, the Fund may also enter into contracts that provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would be dependent on future claims that may be made against the
Fund. The risk of material loss from such claims is considered remote.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period. Actual
results could differ from those estimates.
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $0.001 par value shares of
beneficial interest. Transactions in shares of beneficial interest were as
follows:
YEAR ENDED DECEMBER 31, 2007 YEAR ENDED DECEMBER 31, 2006
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------
Sold 142,287,227 $ 142,287,227 102,552,229 $ 102,552,229
Dividends and/or distributions reinvested 8,817,594 8,817,594 7,809,321 7,809,321
Redeemed (132,873,295) (132,873,295) (111,999,020) (111,999,020)
---------------------------------------------------------------
Net increase (decrease) 18,231,526 $ 18,231,526 (1,637,470) $ (1,637,470)
===============================================================
14 | OPPENHEIMER MONEY FUND/VA
- --------------------------------------------------------------------------------
3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Under the investment advisory agreement, the Fund pays the
Manager a management fee based on the daily net assets of the Fund at an annual
rate as shown in the following table:
FEE SCHEDULE
--------------------------------------
Up to $500 million 0.450%
Next $500 million 0.425
Next $500 million 0.400
Over $1.5 billion 0.375
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services ("OFS"), a division of the
Manager, acts as the transfer and shareholder servicing agent for the Fund. The
Fund pays OFS a per account fee. For the year ended December 31, 2007, the Fund
paid $10,001 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, 2007, investments in securities included issues that are
illiquid. Investments may be illiquid because they do not have an active trading
market, making it difficult to value them or dispose of them promptly at an
acceptable price. 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 an applicable footnote
on the Statement of Investments.
- --------------------------------------------------------------------------------
5. RECENT ACCOUNTING PRONOUNCEMENT
In September 2006, Financial Accounting Standards Board ("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, 2007, 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 | 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, 2007, 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, 2007, by correspondence with the
custodian and brokers. 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, 2007, 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 13, 2008
16 | OPPENHEIMER MONEY FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
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- --------------------------------------------------------------------------------
In early 2008, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2007. 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.
17 | OPPENHEIMER MONEY 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 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.
18 | OPPENHEIMER MONEY FUND/VA
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew the Fund's
investment advisory agreement (the "Agreement"). The Investment Company Act of
1940, as amended, requires that the Board request and evaluate, and that the
Manager provide, such information as may be reasonably necessary to evaluate the
terms of the Agreement. The Board employs an independent consultant to prepare a
report that provides information, including comparative information, that the
Board requests for that purpose. In addition, the Board receives information
throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager and its affiliates, including
an analysis of the cost of providing services, (v) whether economies of scale
are realized as the Fund grows and whether fee levels reflect these economies of
scale for Fund investors and (vi) other benefits to the Manager from its
relationship with the Fund. 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.
19 | OPPENHEIMER MONEY 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 money market 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
considered the comparability of the fees charged and the services provided to
the Fund to the fees and services for other clients or accounts advised by the
Manager. The independent consultant provided comparative data in regard to the
fees and expenses of the Fund and other money market funds underlying variable
insurance products. The Board noted that although the Fund's contractual
management fees are equal to its peer group median and its actual management
fees are higher than its peer group median, its actual 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. The Board noted that the
Fund currently has management fee breakpoints, which are intended to share with
Fund shareholders economies of scale that may exist as the Fund's assets grow.
OTHER BENEFITS TO THE MANAGER. In addition to considering the profits
realized by the Manager, the Board considered information that was provided
regarding the direct and indirect benefits the Manager receives as a result of
its relationship with the Fund, including compensation paid to the Manager's
affiliates. The Board also considered that the Manager must be able to pay and
retain experienced professional personnel at competitive rates to provide
quality services to the Fund 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 considered all of the above information, and considered the
terms and conditions of the Agreement, including the management fee, in light of
all of the surrounding circumstances.
20 | OPPENHEIMER MONEY FUND/VA
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, Cherry Creek Mortgage Company
Chairman of the Board (since 1991), Chairman, Centennial State Mortgage Company (since 1994), Chairman, The El Paso
of Trustees (since 2003), Mortgage Company (since 1993); Chairman, Ambassador Media Corporation (since 1984); Chairman,
Trustee (since 1999) Broadway Ventures (since 1984); Director of Helmerich & Payne, Inc. (oil and gas drilling/production
Age: 70 company) (since 1992), Campus Crusade for Christ (non-profit) (since 1991); Former Director, The
Lynde and Harry Bradley Foundation, Inc. (non-profit organization) (2002-2006); former Chairman of:
Transland Financial Services, Inc. (private mortgage banking company) (1997-2003), Great Frontier
Insurance (1995-2000), Frontier Real Estate, Inc. (residential real estate brokerage) (1994-2000)
and Frontier Title (title insurance agency) (1995-2000); former Director of the following:
UNUMProvident (insurance company) (1991-2004), Storage Technology Corporation (computer equipment
company) (1991-2003) and International Family Entertainment (television channel) (1992-1997); U.S.
Senator (January 1979-January 1991). Oversees 39 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: 71 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 39 portfolios in the OppenheimerFunds complex.
EDWARD L. CAMERON, Member of The Life Guard of Mount Vernon (George Washington historical site) (June 2000 - May 2006);
Trustee (since 1999) Partner of PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of Price
Age: 69 Waterhouse LLP Global Investment Management Industry Services Group (financial services firm) (July
1994-June 1998). Oversees 39 portfolios in the OppenheimerFunds complex.
JON S. FOSSEL, Director of UNUMProvident (insurance company) (since June 2002); Director of Northwestern Energy
Trustee (since 1990) Corp. (public utility corporation) (since November 2004); Director of P.R. Pharmaceuticals (October
Age: 66 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 39 portfolios in the OppenheimerFunds complex.
SAM FREEDMAN, Director of Colorado UpLIFT (charitable organization) (since September 1984). Mr. Freedman held
Trustee (since 1996) several positions with the Manager and with subsidiary or affiliated companies of the Manager (until
Age: 67 October 1994). Oversees 39 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); Director
Age: 61 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 39 portfolios in the
OppenheimerFunds complex.
21 | OPPENHEIMER MONEY FUND/VA
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
ROBERT J. MALONE, Director of Jones Knowledge, Inc. (since 2006); Director of Jones International University
Trustee (since 2002) (educational organization) (since August 2005); Chairman, Chief Executive Officer and Director of
Age: 63 Steele Street State Bank (commercial banking) (since August 2003); Director of Colorado UpLIFT
(charitable organization) (since 1986); Trustee of the Gallagher Family Foundation (non-profit
organization) (since 2000); Former Chairman of U.S. Bank-Colorado (subsidiary of U.S. Bancorp and
formerly Colorado National Bank) (July 1996-April 1999); Director of Commercial Assets, Inc. (real
estate investment trust) (1993-2000); Director of Jones Knowledge, Inc. (2001-July 2004); and
Director of U.S. Exploration, Inc. (oil and gas exploration) (1997-February 2004). Oversees 39
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 of Worcester
Age: 65 Polytech Institute (since 1985); Chairman (since 1994) 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 41 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 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 of the Manager (since June 2001); President of the
Trustee, President and Manager (September 2000-March 2007); President and director or trustee of other Oppenheimer funds;
Principal Executive Officer President and Director of Oppenheimer Acquisition Corp. ("OAC") (the Manager's parent holding
(since 2001) company) and of Oppenheimer Partnership Holdings, Inc. (holding company subsidiary of the Manager)
Age: 58 (since July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of the Manager)
(November 2001-December 2006); 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); Chairman (since October 2007) and Member of the
Investment Company Institute's Board of Governors (since October 2003). Oversees 102 portfolios in
the OppenheimerFunds complex.
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OTHER OFFICERS THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. ZACK, GILLESPIE AND MS.
OF THE FUND 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); formerly Vice President of the Manager (June 1990-June 2000). An
Portfolio Manager officer of 6 portfolios in the OppenheimerFunds complex.
(since 1998)
Age: 56
BARRY D. WEISS, Vice President of the Manager (since July 2001) and of HarbourView Asset Management Corporation
Vice President and (since June 2003); formerly Assistant Vice President and Senior Credit Analyst of the Manager
Portfolio Manager (February 2000-June 2001). Prior to joining the Manager in February 2000, he was Associate Director,
(since 2001) Structured Finance, Fitch IBCA Inc. (April 1998-February 2000). An officer of 5 portfolios in the
Age: 43 OppenheimerFunds complex.
22 | OPPENHEIMER MONEY FUND/VA
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Chief
Vice President and Compliance Officer of OppenheimerFunds Distributor, Inc., Centennial Asset Management and
Chief Compliance Officer Shareholder Services, Inc. (since March 2004); Vice President of OppenheimerFunds Distributor, Inc.,
(since 2004) Centennial Asset Management Corporation and Shareholder Services, Inc. (since June 1983); Former
Age: 57 Vice President and Director of Internal Audit of the Manager (1997-February 2004). An officer of 102
portfolios in the OppenheimerFunds complex.
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, Inc. and Oppenheimer Partnership Holdings, Inc.
Accounting Officer (since March 1999), OFI Private Investments, Inc. (since March 2000), OppenheimerFunds International
(since 1999) Ltd. and OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management, Inc. (since
Age: 48 November 2000), and OppenheimerFunds Legacy Program (charitable trust program established by the
Manager) (since June 2003); Treasurer and Chief Financial Officer of OFI Trust Company (trust
company subsidiary of the Manager) (since May 2000); Assistant Treasurer of the following: OAC
(since March 1999), Centennial Asset Management Corporation (March 1999-October 2003) and
OppenheimerFunds Legacy Program (April 2000-June 2003). An officer of 102 portfolios in the
OppenheimerFunds complex.
BRIAN S. PETERSEN, Vice President of the Manager (since February 2007); Assistant Vice President of the Manager (August
Assistant Treasurer 2002-February 2007); Manager/Financial Product Accounting of the Manager (November 1998-July 2002).
(since 2004) An officer of 102 portfolios in the OppenheimerFunds complex.
Age: 37
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). An officer of 102 portfolios in the OppenheimerFunds
Age: 37 complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March 2002) of the Manager;
Vice President and Secretary General Counsel and Director of the Distributor (since December 2001); General Counsel of Centennial
(since 2001) Asset Management Corporation (since December 2001); Senior Vice President and General Counsel of
Age: 59 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). An officer of 102 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) of UBS Financial Services,
(since 2004) Inc. An officer of 102 portfolios in the OppenheimerFunds complex.
Age: 40
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 102 portfolios in the OppenheimerFunds complex.
Age: 44
23 | OPPENHEIMER MONEY FUND/VA
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
KATHLEEN T. IVES, Vice President (since June 1998) and Senior Counsel and Assistant Secretary (since October 2003) of
Assistant Secretary 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: 42 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 102
portfolios in the OppenheimerFunds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION
ABOUT THE FUND'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT CHARGE, UPON
REQUEST, BY CALLING 1.800.981.2871.
24 | OPPENHEIMER MONEY FUND/VA
DECEMBER 31, 2007
- --------------------------------------------------------------------------------
Management
Oppenheimer Commentaries
Balanced Fund/VA and
A Series of Oppenheimer Variable Account Funds Annual Report
- --------------------------------------------------------------------------------
MANAGEMENT COMMENTARIES
Listing of Top Holdings
ANNUAL REPORT [GRAPHIC]
Fund Performance Discussion
Listing of Investments
Financial Statements
[LOGO] OPPENHEIMERFUNDS(R)
The Right Way to Invest
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. For its fiscal year ended December
31, 2007, Oppenheimer Balanced Fund/VA's Non-Service shares returned 3.79%,
underperforming its benchmarks, the S&P 500 Index and the Lehman Brothers
Aggregate Bond Index. Several factors influenced the Fund's performance results
this period, especially the turbulent market conditions that were sparked by
severe difficulties in the sub-prime mortgage market, which compressed returns
in most non-Treasury areas of the bond markets and select areas of the equity
markets. On the other hand, we enjoyed very successful stock selection across a
broad base of industries, which helped buoy the Fund's fiscal-year returns.
In 2007, the U.S. equity and bond markets struggled under the weight of
the sub-prime mortgage crisis. Select areas of the market posted stellar gains
against a generally dismal backdrop. While financial firms and
consumer-discretionary companies suffered most, technology, energy and materials
stocks rose. Likewise, a general flight to quality defined the broad U.S.
fixed-income markets in 2007, where Treasury securities outperformed even
domestic stocks, as investors sought a perceived safe haven in government debt.
Conversely, most spread products (non-Treasury securities) fell. As uncertainty
regarding the financial sector's exposure to sub-prime mortgages mounted,
financial bonds were hardest hit, regardless of credit quality or fundamentals.
While the credit sector overall lost ground, comparatively riskier high-yield
bonds deteriorated most.
Against this challenging backdrop, the Fund's equity component delivered
performance largely in line with that of its benchmark. This outcome was the
result of two competing forces: successful stock selection across a broad array
of industry sectors, hampered by the severe underperformance of two minor
holdings that suffered unexpected losses this year.
Our largest stock position, Liberty Global, Inc., continued to post robust
gains and was our best-performing name. This large consolidated media, cable and
telecommunications company has enjoyed strong, consistent growth thanks to its
nearly unrivalled position in Europe and Japan, and as such, its stock has
rallied steadily. The fact that we owned two classes of shares of this strong
performer further added to Fund returns.
Our largest industrial stock, Siemens AG, appreciated this year as global
growth and demand remained strong. While we still own this name, we harvested
gains for the portfolio by selling off part of this position. Likewise, CVRD, or
Companhia Vale do Rio Doce, the leading Brazilian iron-ore company, posted
gains, as did Petroleo Brasileiro SA, or Petrobras, our second-largest energy
holding and second-best overall performer for the equity component this year.
Meanwhile, our considerable exposure to two consumer staples stocks, Altria
Group, Inc. and Loews Corp./Carolina Group, added to returns as these names rose
in value on steady demand that is typically less vulnerable to economic ups and
downs.
On the negative side, two of our smaller positions dropped in value enough
to negatively impact full-year returns. E*Trade Financial Corp., a company whose
true exposure to sub-prime mortgages was revealed to investors, fell
significantly and hurt Fund returns. We exited our position. Similarly, one of
our health care names, Vanda Pharmaceuticals, Inc., suffered as we believe
investors lost confidence in the current management team, yet the company
continues to market a competitive product.
Although the bond portion of the Fund underperformed its relevant
benchmark for the year, the bulk of its difficulties occurred over a short,
concentrated timeframe--from mid-October through November--when concerns about
the sub-prime mortgage market collapse peaked. From January through early
October, however, the bond component had posted positive, competitive
performance. Unfortunately, subsequent, short-term market events pressured our
bond holdings enough to impair final performance results.
Although our mortgage holdings underperformed, they fell less severely
than the overall market, thanks to our focus on highly rated, agency
mortgage-backed securities (MBS) such as Fannie Mae and Freddie Mac securities,
which fared better than the rest of the mortgage sector. On the other hand, our
emphasis within the investment-grade portion of our credit exposure hurt us. We
had emphasized financials at the expense of industrials, based on our belief
that the wider spreads associated with industrial-related names at that time
indicated a higher level of leveraged buyout (LBO) or "event" risk. As such, we
avoided this area of the market. Unfortunately, when the sub-prime crisis peaked
in mid-October, industrial bonds rallied while spreads on financials widened out
dramatically and their values dropped. Similarly, our increased allocation to
high-yield bonds detracted from short-term returns after mid-October.
3 | OPPENHEIMER BALANCED FUND/VA
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
Despite the obstacles 2007 presented, we hold an optimistic outlook for
the Fund's components. Regardless of macro shifts, we hold firm to our
unwavering reliance on individual stock analysis and selection, which we believe
remains the most viable path to long-term, consistent returns. In the bond
arena, we believe select areas of the market have been unduly shunned despite
still-sound fundamental underpinnings, such as highly rated commercial
mortgage-backed securities (CMBS), an allocation we recently increased in the
bond component. Based on our longer-term perspective, we trust that despite this
recent, brief period of difficulty, our overall positioning and strategy will
serve our long-term competitive performance. We believe that while market
conditions change, our focus on individual security selection remains a
steadfast process that will enable the Fund to weather adversity for the long
term, and comprises the cornerstone 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, 2007. In the case of Non-Service shares, performance is
measured over a ten-year period. In the case of Service shares, performance is
measured from inception of the class on May 1, 2002. Performance information
does not reflect charges that apply to separate accounts investing in the Fund.
If these charges were taken into account, performance would be lower. The graphs
assume that all dividends and capital gains distributions were reinvested in
additional shares.
The Fund's performance is compared to the performance of both the S&P 500
Index, an unmanaged index of U.S. equity securities that is a measure of the
general domestic stock market and the Lehman Brothers Aggregate Bond Index, an
unmanaged index of U.S. corporate, government and mortgage-backed securities
that is a measure of the domestic bond market. Index performance reflects the
reinvestment of income but does not consider the effect of transaction costs,
and none of the data in the graphs shows the effect of taxes. The Fund's
performance reflects the effects of the Fund's business and operating expenses.
While index comparisons may be useful to provide a benchmark for the Fund's
performance, it must be noted that the Fund's investments are not limited to the
investments in the index.
4 | OPPENHEIMER BALANCED FUND/VA
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 Aggregate
Fund/VA (Non-Service) S&P 500 Index Bond Index
12/31/1997 $ 10,000 $ 10,000 $ 10,000
03/31/1998 $ 10,690 $ 11,394 $ 10,156
06/30/1998 $ 10,709 $ 11,772 $ 10,393
09/30/1998 $ 9,589 $ 10,604 $ 10,832
12/31/1998 $ 10,665 $ 12,860 $ 10,869
03/31/1999 $ 10,838 $ 13,500 $ 10,815
06/30/1999 $ 11,569 $ 14,450 $ 10,720
09/30/1999 $ 11,186 $ 13,550 $ 10,793
12/31/1999 $ 11,924 $ 15,565 $ 10,779
03/31/2000 $ 12,653 $ 15,921 $ 11,017
06/30/2000 $ 12,722 $ 15,498 $ 11,209
09/30/2000 $ 12,760 $ 15,348 $ 11,547
12/31/2000 $ 12,691 $ 14,148 $ 12,033
03/31/2001 $ 12,585 $ 12,472 $ 12,398
06/30/2001 $ 13,369 $ 13,201 $ 12,468
09/30/2001 $ 11,903 $ 11,264 $ 13,043
12/31/2001 $ 12,973 $ 12,468 $ 13,049
03/31/2002 $ 13,019 $ 12,502 $ 13,061
06/30/2002 $ 12,065 $ 10,828 $ 13,543
09/30/2002 $ 10,890 $ 8,959 $ 14,164
12/31/2002 $ 11,623 $ 9,713 $ 14,387
03/31/2003 $ 11,504 $ 9,408 $ 14,587
06/30/2003 $ 12,946 $ 10,855 $ 14,952
09/30/2003 $ 13,402 $ 11,142 $ 14,930
12/31/2003 $ 14,524 $ 12,498 $ 14,977
03/31/2004 $ 14,858 $ 12,710 $ 15,375
06/30/2004 $ 14,719 $ 12,928 $ 15,000
09/30/2004 $ 14,830 $ 12,686 $ 15,479
12/31/2004 $ 15,991 $ 13,857 $ 15,627
03/31/2005 $ 15,815 $ 13,559 $ 15,552
06/30/2005 $ 16,234 $ 13,745 $ 16,020
09/30/2005 $ 16,720 $ 14,240 $ 15,912
12/31/2005 $ 16,613 $ 14,537 $ 16,007
03/31/2006 $ 16,941 $ 15,148 $ 15,903
06/30/2006 $ 16,513 $ 14,930 $ 15,891
09/30/2006 $ 17,411 $ 15,775 $ 16,496
12/31/2006 $ 18,465 $ 16,831 $ 16,700
03/31/2007 $ 18,896 $ 16,939 $ 16,951
06/30/2007 $ 19,561 $ 18,002 $ 16,863
09/30/2007 $ 19,678 $ 18,367 $ 17,343
12/31/2007 $ 19,164 $ 17,755 $ 17,864
AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/07
1-Year 3.79% 5-Year 10.52% 10-Year 6.72%
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 Aggregate
Fund/VA (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
03/31/2007 $ 14,563 $ 14,423 $ 12,732
06/30/2007 $ 15,071 $ 15,328 $ 12,666
09/30/2007 $ 15,143 $ 15,639 $ 13,026
12/31/2007 $ 14,745 $ 15,118 $ 13,417
AVERAGE ANNUAL TOTAL RETURNS OF SERVICE SHARES OF THE FUND AT 12/31/07
1-Year 3.49% 5-Year 10.24% Since Inception (5/1/02) 7.09%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, CALL US AT 1.800.981.2871. THE FUND'S
TOTAL RETURNS SHOULD NOT BE EXPECTED TO BE THE SAME AS THE RETURNS OF OTHER
FUNDS, WHETHER OR NOT BOTH FUNDS HAVE THE SAME PORTFOLIO MANAGERS AND/OR SIMILAR
NAMES. THE FUND'S TOTAL RETURNS DO NOT INCLUDE THE CHARGES ASSOCIATED WITH THE
SEPARATE ACCOUNT PRODUCTS THAT OFFER THIS FUND. SUCH PERFORMANCE WOULD HAVE BEEN
LOWER IF SUCH CHARGES WERE TAKEN INTO ACCOUNT.
5 | OPPENHEIMER 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 applicable); 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, 2007.
ACTUAL EXPENSES. The first section of the table provides information about
actual account values and actual expenses. You may use the information in this
section for the class of shares you hold, together with the amount you invested,
to estimate the expense that you paid over the period. Simply divide your
account value by $1,000.00 (for example, an $8,600.00 account value divided by
$1,000.00 = 8.60), then multiply the result by the number in the first section
under the heading entitled "Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The second section of the table
provides information about hypothetical account values and hypothetical expenses
based on the Fund's actual expense ratio for each class of shares, and an
assumed rate of return of 5% per year for each class before expenses, which is
not the actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of investing
in the Fund and other funds. To do so, compare this 5% hypothetical example for
the class of shares you hold with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any charges associated with the separate
accounts that offer this Fund. Therefore, the "hypothetical" lines of the table
are useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these separate
account charges were included your costs would have been higher.
- --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
ACTUAL JULY 1, 2007 DECEMBER 31, 2007 DECEMBER 31, 2007
- --------------------------------------------------------------------------------
Non-Service Shares $ 1,000.00 $ 979.70 $ 3.45
- --------------------------------------------------------------------------------
Service Shares 1,000.00 978.40 4.70
HYPOTHETICAL
(5% return before expenses)
- --------------------------------------------------------------------------------
Non-Service Shares 1,000.00 1,021.73 3.52
- --------------------------------------------------------------------------------
Service Shares 1,000.00 1,020.47 4.80
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 indirect expenses from affiliated fund, based on the 6-month period
ended December 31, 2007 are as follows:
CLASS EXPENSE RATIOS
- -----------------------------------
Non-Service Shares 0.69%
- -----------------------------------
Service Shares 0.94
The expense ratios reflect reduction to custodian expenses and 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 and reduction to
custodian expenses, if applicable.
- --------------------------------------------------------------------------------
6 | OPPENHEIMER BALANCED FUND/VA
STATEMENT OF INVESTMENTS December 31, 2007
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS--51.3%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--5.5%
- --------------------------------------------------------------------------------
MEDIA--5.1%
Liberty Global, Inc., Series A 1 338,018 $ 13,246,925
- --------------------------------------------------------------------------------
Liberty Global, Inc., Series C 1 342,790 12,542,686
----------------
25,789,611
- --------------------------------------------------------------------------------
SPECIALTY RETAIL--0.4%
Office Depot, Inc. 1 77,400 1,076,634
- --------------------------------------------------------------------------------
OfficeMax, Inc. 50,500 1,043,330
----------------
2,119,964
- --------------------------------------------------------------------------------
CONSUMER STAPLES--5.7%
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--1.0%
Costco Wholesale Corp. 75,100 5,238,976
- --------------------------------------------------------------------------------
FOOD PRODUCTS--0.4%
ConAgra Foods, Inc. 71,900 1,710,501
- --------------------------------------------------------------------------------
TOBACCO--4.3%
Altria Group, Inc. 176,030 13,304,347
- --------------------------------------------------------------------------------
Loews Corp./Carolina Group 100,140 8,541,942
----------------
21,846,289
- --------------------------------------------------------------------------------
ENERGY--3.9%
- --------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS--3.9%
BP plc, ADR 45,120 3,301,430
- --------------------------------------------------------------------------------
Exxon Mobil Corp. 102,610 9,613,531
- --------------------------------------------------------------------------------
Petroleo Brasileiro SA, ADR 30,600 3,526,344
- --------------------------------------------------------------------------------
Petroleo Brasileiro SA, Preference 69,490 3,366,103
----------------
19,807,408
- --------------------------------------------------------------------------------
FINANCIALS--7.1%
- --------------------------------------------------------------------------------
CAPITAL MARKETS--2.9%
UBS AG 2 253,343 11,754,198
- --------------------------------------------------------------------------------
UBS AG 2 64,600 2,971,600
----------------
14,725,798
- --------------------------------------------------------------------------------
COMMERCIAL BANKS--1.3%
Wachovia Corp. 175,445 6,672,173
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--1.6%
Bank of America Corp. 191,038 7,882,228
- --------------------------------------------------------------------------------
INSURANCE--1.3%
Everest Re Group Ltd. 42,480 4,264,992
- --------------------------------------------------------------------------------
National Financial Partners Corp. 54,600 2,490,306
----------------
6,755,298
- --------------------------------------------------------------------------------
HEALTH CARE--7.7%
- --------------------------------------------------------------------------------
BIOTECHNOLOGY--1.7%
Amicus Therapeutics, Inc. 1 86,800 933,100
- --------------------------------------------------------------------------------
deCODE genetics, Inc. 1 193,500 712,080
- --------------------------------------------------------------------------------
Human Genome Sciences, Inc. 1 263,700 2,753,028
SHARES VALUE
- --------------------------------------------------------------------------------
BIOTECHNOLOGY Continued
Orexigen Therapeutics, Inc. 1 173,230 $ 2,468,528
- --------------------------------------------------------------------------------
Vanda Pharmaceuticals, Inc. 1 255,000 1,754,400
----------------
8,621,136
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--0.5%
Beckman Coulter, Inc. 37,430 2,724,904
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--1.4%
Medco Health Solutions, Inc. 1 21,200 2,149,680
- --------------------------------------------------------------------------------
Skilled Healthcare Group, Inc., Cl. A 1 136,100 1,991,143
- --------------------------------------------------------------------------------
WellPoint, Inc. 1 31,300 2,745,949
----------------
6,886,772
- --------------------------------------------------------------------------------
PHARMACEUTICALS--4.1%
Abbott Laboratories 56,500 3,172,475
- --------------------------------------------------------------------------------
Medicines Co. (The) 1 184,570 3,536,361
- --------------------------------------------------------------------------------
Mylan Laboratories, Inc. 230,900 3,246,454
- --------------------------------------------------------------------------------
Novartis AG, ADR 93,160 5,059,520
- --------------------------------------------------------------------------------
Schering-Plough Corp. 220,000 5,860,800
----------------
20,875,610
- --------------------------------------------------------------------------------
INDUSTRIALS--4.6%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE--2.1%
Orbital Sciences Corp. 1 74,024 1,815,068
- --------------------------------------------------------------------------------
United Technologies Corp. 115,540 8,843,432
----------------
10,658,500
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--0.2%
Sinomem Technology Ltd. 1 1,664,000 1,027,374
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--1.6%
Siemens AG, Sponsored ADR 51,900 8,166,984
- --------------------------------------------------------------------------------
MACHINERY--0.7%
Navistar International Corp. 1 64,600 3,501,320
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--12.2%
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--0.8%
Cisco Systems, Inc. 1 155,250 4,202,618
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--0.8%
International Business Machines Corp. 39,310 4,249,411
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--0.0%
CalAmp Corp. 1 19 53
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--1.8%
eBay, Inc. 1 122,690 4,072,081
- --------------------------------------------------------------------------------
Google, Inc., Cl. A 1 3,300 2,281,884
- --------------------------------------------------------------------------------
Yahoo!, Inc. 1 114,820 2,670,713
----------------
9,024,678
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--0.9%
Texas Instruments, Inc. 135,130 4,513,342
7 | OPPENHEIMER BALANCED FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
SOFTWARE--7.9%
Microsoft Corp. 330,400 $ 11,762,240
- --------------------------------------------------------------------------------
Novell, Inc. 1 394,040 2,707,055
- --------------------------------------------------------------------------------
Synopsys, Inc. 1 206,520 5,355,064
- --------------------------------------------------------------------------------
Take-Two Interactive Software, Inc. 1 1,083,450 19,989,653
----------------
39,814,012
- --------------------------------------------------------------------------------
MATERIALS--2.1%
- --------------------------------------------------------------------------------
CHEMICALS--0.3%
Lubrizol Corp. (The) 26,400 1,429,824
- --------------------------------------------------------------------------------
CONSTRUCTION MATERIALS--0.4%
Texas Industries, Inc. 15,060 1,055,706
- --------------------------------------------------------------------------------
Vulcan Materials Co. 16,180 1,279,676
----------------
2,335,382
- --------------------------------------------------------------------------------
METALS & MINING--1.4%
Carpenter Technology Corp. 48,800 3,668,296
- --------------------------------------------------------------------------------
Companhia Vale do Rio Doce,
Sponsored ADR 120,540 3,372,709
----------------
7,041,005
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--1.6%
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--1.0%
AT&T, Inc. 123,200 5,120,192
- --------------------------------------------------------------------------------
XO Holdings, Inc. 1 85 176
----------------
5,120,368
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--0.6%
Sprint Nextel Corp. 250,000 3,282,500
- --------------------------------------------------------------------------------
UTILITIES--0.9%
- --------------------------------------------------------------------------------
ENERGY TRADERS--0.9%
AES Corp. (The) 1 149,600 3,199,944
- --------------------------------------------------------------------------------
Dynegy, Inc., Cl. A 1 176,900 1,263,066
----------------
4,463,010
----------------
Total Common Stocks (Cost $200,887,779) 260,487,049
UNITS
- --------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- --------------------------------------------------------------------------------
XO Communications, Inc.:
Series A Wts., Exp. 1/16/10 1,3 171 34
Series B Wts., Exp. 1/16/10 1,3 128 17
Series C Wts., Exp. 1/16/10 1,3 128 6
----------------
Total Rights, Warrants and Certificates (Cost $0) 57
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--2.1%
- --------------------------------------------------------------------------------
Aesop Funding II LLC, Automobile
Asset-Backed Certificates,
Series 2005-1A, Cl. A2, 5.009%,
4/20/09 4,5 $ 246,667 $ 246,646
- --------------------------------------------------------------------------------
Argent Securities Trust 2004-W8,
Asset-Backed Pass-Through Certificates,
Series 2004-W8, Cl. A2, 5.345%, 5/25/34 5 830,484 782,392
- --------------------------------------------------------------------------------
Capital One Prime Auto Receivables
Trust, Automobile Asset-Backed
Certificates, Series 2005-1,
Cl. A4, 5.048%, 4/15/11 5 2,490,000 2,480,959
- --------------------------------------------------------------------------------
Citibank Credit Card Issuance Trust,
Credit Card Receivable Nts.,
Series 2003-C4, Cl. C4, 5%, 6/10/15 180,000 169,565
- --------------------------------------------------------------------------------
Citigroup Mortgage Loan Trust, Inc.
2005-WF2, Asset-Backed Pass-Through
Certificates, Series 2005-WF2,
Cl. AF2, 4.922%, 8/25/35 5 39,393 39,301
- --------------------------------------------------------------------------------
CWABS Asset-Backed Certificates
Trust 2002-4, Asset-Backed Certificates,
Series 2002-4, Cl. A1, 5.605%, 2/25/33 5 18,836 16,867
- --------------------------------------------------------------------------------
CWABS Asset-Backed Certificates
Trust 2005-11, Asset-Backed Certificates,
Series 2005-11, Cl. AF2, 4.657%, 2/25/36 320,000 318,075
- --------------------------------------------------------------------------------
CWABS Asset-Backed Certificates
Trust 2005-16, Asset-Backed Certificates,
Series 2005-16, Cl. 2AF2, 5.382%, 5/25/36 5 360,000 346,985
- --------------------------------------------------------------------------------
CWABS Asset-Backed Certificates
Trust 2005-17, Asset-Backed Certificates,
Series 2005-17, Cl. 1AF2, 5.363%, 5/25/36 5 240,000 238,162
- --------------------------------------------------------------------------------
CWABS Asset-Backed Certificates
Trust 2006-25, Asset-Backed Certificates,
Series 2006-25, Cl. 2A2, 4.985%, 12/25/29 5 480,000 449,280
- --------------------------------------------------------------------------------
Honda Auto Receivables Owner Trust,
Automobile Receivable Obligations,
Series 2005-2, Cl. A4, 4.15%, 10/15/10 460,000 458,635
- --------------------------------------------------------------------------------
Household Home Equity
Loan Trust, Home Equity Loan
Pass-Through Certificates:
Series 2005-3, Cl. A1, 5%, 1/20/35 5 351,832 343,834
Series 2006-4, Cl. A2V, 5.059%, 3/20/36 5 180,000 169,602
- --------------------------------------------------------------------------------
Lehman XS Trust, Mtg.
Pass-Through Certificates,
Series 2005-2, Cl. 2A1B, 5.18%, 8/25/35 5 294,330 295,245
- --------------------------------------------------------------------------------
MBNA Credit Card Master
Note Trust, Credit Card Receivables,
Series 2003-C7, Cl. C7, 6.378%, 3/15/16 5 1,710,000 1,654,405
- --------------------------------------------------------------------------------
Option One Mortgage Loan Trust,
Asset-Backed Certificates,
Series 2006-2, Cl. 2A2, 4.965%, 7/1/36 5 1,100,000 1,071,141
- --------------------------------------------------------------------------------
RASC Series 2006-KS7 Trust,
Home Equity Mtg. Asset-Backed
Pass-Through Certificates,
Series 2006-KS7, Cl. A2, 4.965%, 9/25/36 5 800,000 782,527
8 | OPPENHEIMER BALANCED FUND/VA
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
- --------------------------------------------------------------------------------
Structured Asset Investment
Loan Trust, Mtg. Pass-Through
Certificates, Series 2006-BNC3,
Cl. A2, 4.905%, 9/25/36 5 $ 456,035 $ 445,582
- --------------------------------------------------------------------------------
Structured Asset Securities Corp.,
Mtg. Pass-Through Certificates,
Series 2005-4XS, Cl. 3A1, 5.18%, 3/26/35 172,454 172,646
----------------
Total Asset-Backed Securities (Cost $10,793,074) 10,481,849
- --------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS--35.3%
- --------------------------------------------------------------------------------
GOVERNMENT AGENCY--22.6%
- --------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED--22.5%
Federal Home Loan Mortgage Corp.:
4.50%, 5/15/19-7/15/19 1,851,371 1,820,291
5%, 12/15/32-12/15/34 3,193,911 3,122,256
6%, 3/15/33 289,795 295,151
6.50%, 4/15/18-4/15/34 2,717,738 2,819,357
7%, 5/15/29-11/15/32 1,176,129 1,234,408
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage
Corp., Gtd. Real Estate Mtg.
Investment Conduit Multiclass
Pass-Through Certificates:
Series 2006-11, Cl. PS, 6.728%, 3/25/36 5 358,687 398,134
Series 2043, Cl. ZP, 6.50%, 4/15/28 584,727 607,667
Series 2055, Cl. ZM, 6.50%, 5/15/28 333,809 345,164
Series 2075, Cl. D, 6.50%, 8/15/28 819,666 855,937
Series 2080, Cl. Z, 6.50%, 8/15/28 217,216 226,622
Series 2461, Cl. PZ, 6.50%, 6/15/32 742,753 776,355
Series 2500, Cl. FD, 5.528%, 3/15/32 5 102,137 102,248
Series 2526, Cl. FE, 5.428%, 6/15/29 5 151,498 151,123
Series 2538, Cl. F, 5.628%, 12/15/32 5 1,577,753 1,589,140
Series 2551, Cl. FD, 5.428%, 1/15/33 5 117,009 117,528
Series 2676, Cl. KY, 5%, 9/15/23 298,000 289,858
Series 3025, Cl. SJ, 6.316%, 8/15/35 5 117,499 133,700
Series 3094, Cl. HS, 5.949%, 6/15/34 5 223,951 244,323
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage
Corp., Interest-Only Stripped
Mtg.-Backed Security:
Series 176, Cl. IO, 4.832%, 6/1/26 6 203,247 46,876
Series 183, Cl. IO, 3.419%, 4/1/27 6 328,172 74,976
Series 184, Cl. IO, 9.097%, 12/1/26 6 356,349 80,995
Series 192, Cl. IO, 8.182%, 2/1/28 6 96,927 23,523
Series 200, Cl. IO, 7.261%, 1/1/29 6 116,803 27,146
Series 2130, Cl. SC, 3.243%, 3/15/29 6 256,652 24,868
Series 216, Cl. IO, 9.04%, 12/1/31 6 186,133 45,100
Series 224, Cl. IO, 5.666%, 3/1/33 6 584,674 137,246
Series 243, Cl. 6, 15.199%, 12/15/32 6 360,732 76,102
Series 2796, Cl. SD, (2.097)%, 7/15/26 6 369,248 32,717
Series 2802, Cl. AS, 5.232%, 4/15/33 6 560,461 37,833
Series 2920, Cl. S, (4.806)%, 1/15/35 6 2,025,249 144,025
Series 3000, Cl. SE, 11.913%, 7/15/25 6 2,092,083 112,216
Series 3110, Cl. SL, 24.355%, 2/15/26 6 299,599 15,311
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal Home Loan Mortgage
Corp., Principal-Only Stripped
Mtg.-Backed Security:
Series 176, Cl. PO, 5.952%, 6/1/26 7 $ 89,447 $ 73,790
Series 192, Cl. PO, 7.631%, 2/1/28 7 96,926 76,656
- --------------------------------------------------------------------------------
Federal National Mortgage Assn.:
4.50%, 5/25/18-8/25/20 9,538,401 9,387,885
5%, 12/25/17-9/25/35 23,647,833 23,433,616
5.50%, 9/25/20-11/25/34 16,349,527 16,367,983
5.50%, 4/25/34 8 3,201,269 3,204,143
5.50%, 1/1/22 9 1,560,000 1,580,232
5.50%, 12/25/33 10 276,442 276,690
6%, 8/25/32-8/25/34 10,310,649 10,505,184
6%, 1/1/22 9 4,324,000 4,424,667
6.50%, 6/25/17-10/25/30 4,957,664 5,143,159
7%, 11/25/17-11/25/35 2,604,667 2,736,807
7.50%, 1/25/33 354,746 379,542
8.50%, 7/25/32 13,263 14,288
- --------------------------------------------------------------------------------
Federal National Mortgage Assn.
Grantor Trust, CMO, Trust 2002-T1,
Cl. A2, 7%, 11/25/31 701,769 740,109
- --------------------------------------------------------------------------------
Federal National Mortgage Assn.,
Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates:
Trust 1993-215, Cl. ZQ, 6.50%, 11/25/23 679,809 704,156
Trust 1993-87, Cl. Z, 6.50%, 6/25/23 614,563 633,977
Trust 1998-61, Cl. PL, 6%, 11/25/28 320,706 329,081
Trust 2001-50, Cl. NE, 6%, 8/25/30 3,324 3,312
Trust 2001-51, Cl. OD, 6.50%, 10/25/31 844,160 878,543
Trust 2001-70, Cl. LR, 6%, 9/25/30 70,137 70,365
Trust 2001-82, Cl. ZA, 6.50%, 1/25/32 299,436 305,765
Trust 2002-9, Cl. PC, 6%, 3/25/17 705,667 730,240
Trust 2003-130, Cl. CS, 4.37%, 12/25/33 5 200,395 189,494
Trust 2003-28, Cl. KG, 5.50%, 4/25/23 1,052,000 1,058,861
Trust 2003-84, Cl. PW, 3%, 6/25/22 247,362 245,773
Trust 2004-101, Cl. BG, 5%, 1/25/20 1,110,000 1,113,689
Trust 2005-59, Cl. NQ, 4.713%, 5/25/35 5 368,766 368,815
Trust 2006-24, Cl. DB, 5.50%, 4/25/26 1,000,000 1,016,553
Trust 2006-46, Cl. SW, 6.362%, 6/25/36 5 265,835 291,702
Trust 2006-50, Cl. KS, 6.362%, 6/25/36 5 701,896 747,106
Trust 2006-50, Cl. SA, 6.362%, 6/25/36 5 212,838 226,851
Trust 2006-50, Cl. SK, 6.362%, 6/25/36 5 661,780 703,990
Trust 2006-64, Cl. MD, 5.50%, 7/25/36 2,983,000 2,961,196
- --------------------------------------------------------------------------------
Federal National Mortgage Assn.,
Interest-Only Stripped
Mtg.-Backed Security:
Trust 2001-65, Cl. S, 11.769%, 11/25/31 6 960,702 124,080
Trust 2001-81, Cl. S, 7.034%, 1/25/32 6 206,136 22,202
Trust 2002-47, Cl. NS, 2.892%, 4/25/32 6 450,343 49,616
Trust 2002-51, Cl. S, 3.029%, 8/25/32 6 413,521 46,440
Trust 2002-52, Cl. SD, (0.581)%, 9/25/32 6 456,108 74,248
Trust 2002-77, Cl. SH, 5.015%, 12/18/32 6 277,393 27,352
Trust 2002-84, Cl. SA, 12.932%, 12/25/32 6 843,064 97,895
Trust 2002-9, Cl. MS, 3.665%, 3/25/32 6 305,359 33,003
Trust 2003-118, Cl. S, 9.431%, 12/25/33 6 1,736,016 298,387
Trust 2003-33, Cl. SP, 9.135%, 5/25/33 6 923,084 119,839
9 | OPPENHEIMER BALANCED FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal National Mortgage Assn.,
Interest-Only Stripped
Mtg.-Backed Security: Continued
Trust 2003-4, Cl. S, 12.143%, 2/25/33 6 $ 536,737 $ 65,468
Trust 2003-46, Cl. IH, 5.41%, 6/25/33 6 3,142,299 713,148
Trust 2004-54, Cl. DS, (2.17)%, 11/25/30 6 402,482 32,348
Trust 2005-19, Cl. SA, 1.188%, 3/25/35 6 5,294,603 376,497
Trust 2005-40, Cl. SA, 0.806%, 5/25/35 6 1,116,786 76,846
Trust 2005-6, Cl. SE, 3.23%, 2/25/35 6 1,427,895 123,933
Trust 2005-71, Cl. SA, 8.893%, 8/25/25 6 1,321,263 102,800
Trust 2005-87, Cl. SE, 12.322%, 10/25/35 6 2,633,178 183,697
Trust 2005-87, Cl. SG, 14.11%, 10/25/35 6 2,617,854 245,297
Trust 2006-33, Cl. SP, 15.444%, 5/25/36 6 2,859,044 264,070
Trust 222, Cl. 2, 14.005%, 6/1/23 6 743,130 175,998
Trust 233, Cl. 2, 13.987%, 8/1/23 6 632,466 148,253
Trust 240, Cl. 2, 18.465%, 9/1/23 6 1,182,260 271,838
Trust 252, Cl. 2, 14.848%, 11/1/23 6 559,095 137,916
Trust 273, Cl. 2, 13.105%, 8/1/26 6 157,485 35,759
Trust 319, Cl. 2, 11.165%, 2/1/32 6 203,976 47,383
Trust 321, Cl. 2, 6.52%, 4/1/32 6 2,116,450 490,563
Trust 331, Cl. 9, 15.5%, 2/1/33 6 573,893 142,287
Trust 334, Cl. 17, 22.855%, 2/1/33 6 331,327 76,489
Trust 339, Cl. 7, 9.391%, 7/1/33 6 2,198,745 519,597
Trust 342, Cl. 2, 8.143%, 9/1/33 6 236,480 55,368
Trust 344, Cl. 2, 5.034%, 12/1/33 6 4,014,024 920,391
Trust 345, Cl. 9, 8.864%, 1/1/34 6 791,799 188,389
Trust 362, Cl. 12, 9.377%, 8/1/35 6 1,361,093 315,057
Trust 362, Cl. 13, 9.359%, 8/1/35 6 754,680 173,305
- --------------------------------------------------------------------------------
Federal National Mortgage Assn.,
Principal-Only Stripped Mtg.-Backed
Security, Trust 1993-184,
Cl. M, 5.602%, 9/25/23 7 257,009 210,051
----------------
113,918,226
- --------------------------------------------------------------------------------
GNMA/GUARANTEED--0.1%
Government National
Mortgage Assn., 8%, 4/15/23 140,412 151,639
- --------------------------------------------------------------------------------
Government National
Mortgage Assn., Interest-Only
Stripped Mtg.-Backed Security:
Series 2001-21, Cl. SB, 8.395%, 1/16/27 6 421,622 42,431
Series 2002-15, Cl. SM, 5.989%, 2/16/32 6 506,664 78,135
Series 2002-76, Cl. SY, 6.388%, 12/16/26 6 1,033,840 100,553
Series 2004-11, Cl. SM, 1.721%, 1/17/30 6 345,027 55,922
----------------
428,680
- --------------------------------------------------------------------------------
NON-AGENCY--12.7%
- --------------------------------------------------------------------------------
COMMERCIAL--5.5%
Banc of America Commercial
Mortgage, Inc., Commercial Mtg.
Pass-Through Certificates,
Series 2005-3, Cl. A2, 4.501%, 7/10/43 1,050,000 1,037,728
- --------------------------------------------------------------------------------
Banc of America Funding Corp.,
CMO Pass-Through Certificates,
Series 2004-2, Cl. 2A1, 6.50%, 7/20/32 653,847 664,983
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
COMMERCIAL Continued
Banc of America Mortgage
Securities, Inc., CMO Pass-Through
Certificates, Series 2004-8,
Cl. 5A1, 6.50%, 5/25/32 $ 540,804 $ 551,173
- --------------------------------------------------------------------------------
ChaseFlex Trust 2006-2, Multiclass
Mtg. Pass-Through Certificates,
Series 2006-2, Cl. A1B, 4.965%, 8/25/08 5 262,730 262,489
- --------------------------------------------------------------------------------
Citigroup Mortgage Loan Trust,
Inc. 2006-WF1, Asset-Backed
Pass-Through Certificates,
Series 2006-WF1,
Cl. A2B, 5.536%, 3/1/36 260,000 259,945
- --------------------------------------------------------------------------------
Citigroup/Deutsche Bank 2007-CD4
Commercial Mortgage Trust,
Commercial Mtg. Pass-Through
Certificates:
Series 2007-CD4,
Cl. A2B, 5.205%, 12/11/49 570,000 569,910
Series 2007-CD4,
Cl. A4, 5.322%, 12/1/49 940,000 939,004
- --------------------------------------------------------------------------------
CitiMortgage Alternative
Loan Trust 2006-A5
Real Estate Mtg. Investment
Conduit Pass-Through Certificates:
Series 2006-A5,
Cl. 1A1, 5.265%, 10/25/36 5 1,499,714 1,422,638
Series 2006-A5,
Cl. 1A13, 5.315%, 10/25/36 5 790,610 773,039
- --------------------------------------------------------------------------------
Deutsche Alt-A Securities
Mortgage Loan Trust,
Mtg. Pass-Through Certificates:
Series 2006-AB2,
Cl. A7, 5.961%, 6/25/36 446,660 446,580
Series 2006-AB4,
Cl. A1A, 6.005%, 10/25/36 974,449 974,398
Series 2006-AB3,
Cl. A7, 6.36%, 7/1/36 138,552 138,666
- --------------------------------------------------------------------------------
First Horizon Alternative Mortgage
Securities Trust 2004-FA2, Mtg.
Pass-Through Certificates,
Series 2004-FA2,
Cl. 3A1, 6%, 1/25/35 401,491 386,458
- --------------------------------------------------------------------------------
First Horizon Alternative Mortgage
Securities Trust 2007-FA2, Mtg.
Pass-Through Certificates,
Series 2007-FA2,
Cl. 1A1, 5.50%, 4/25/37 509,545 503,357
- --------------------------------------------------------------------------------
First Union National Bank/Lehman
Brothers/Bank of America
Commercial Mtg. Trust,
Pass-Through Certificates,
Series 1998-C2,
Cl. A2, 6.56%, 11/18/35 275,227 275,038
10 | OPPENHEIMER BALANCED FUND/VA
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
COMMERCIAL Continued
GE Capital Commercial Mortgage
Corp., Commercial Mtg. Obligations,
Series 2005-C3, Cl. A2, 4.853%, 7/10/45 $ 620,000 $ 617,861
- --------------------------------------------------------------------------------
Greenwich Capital Commercial
Funding Corp., Commercial Mtg.
Pass-Through Certificates:
Series 2005-GG3, Cl. A2, 4.305%, 8/10/42 890,000 879,376
Series 2005-GG5, Cl. A2, 5.117%, 4/10/37 680,000 681,612
Series 2007-GG9, Cl. A2, 5.381%, 3/10/39 2,240,000 2,253,859
- --------------------------------------------------------------------------------
JPMorgan Chase Commercial
Mortgage Securities Corp., Commercial
Mtg. Pass-Through Certificates:
Series 2005-LDP2, Cl. A2, 4.575%, 7/15/42 260,000 257,336
Series 2005-LDP4, Cl. A2, 4.79%, 10/15/42 890,000 884,597
Series 2007-LDPX, Cl. A2S, 5.305%, 1/15/49 210,000 210,306
Series 2006-CB14, Cl. A4, 5.481%, 12/12/44 1,140,000 1,155,187
Series 2007-LD12, Cl. A2, 5.827%, 2/15/51 510,000 520,880
- --------------------------------------------------------------------------------
LB-UBS Commercial
Mortgage Trust, Commercial
Mtg. Pass-Through Certificates:
Series 2005-C5, Cl. A2, 4.885%, 9/15/30 740,000 738,893
Series 2007-C1, Cl. A2, 5.318%, 1/15/12 910,000 914,413
Series 2007-C1, Cl. A4, 5.424%, 2/11/40 810,000 815,072
- --------------------------------------------------------------------------------
Mastr Alternative Loan Trust,
CMO Pass-Through Certificates:
Series 2004-9, Cl. A3, 4.70%, 8/25/34 5 33,581 33,462
Series 2004-6, Cl. 10A1, 6%, 7/25/34 833,985 825,975
- --------------------------------------------------------------------------------
Nomura Asset Securities Corp.,
Commercial Mtg. Pass-Through
Certificates, Series 1998-D6,
Cl. A1B, 6.59%, 3/15/30 119,995 120,282
- --------------------------------------------------------------------------------
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 1,042,437
- --------------------------------------------------------------------------------
RALI Series 2003-QS1 Trust, Mtg.
Asset-Backed Pass-Through Certificates,
Series 2003-QS1, Cl. A2, 5.75%, 1/25/33 380,889 378,998
- --------------------------------------------------------------------------------
RALI Series 2007-QS6 Trust, Mtg.
Asset-Backed Pass-Through Certificates,
Series 2007-QS6,
Cl. A114, 5.75%, 4/25/37 715,081 706,859
- --------------------------------------------------------------------------------
Residential Asset Securitization
Trust 2006-A9CB, CMO Pass-Through
Certificates, Series 2006-A9CB,
Cl. A5, 6%, 9/25/36 992,247 990,418
- --------------------------------------------------------------------------------
Wachovia Bank Commercial
Mortgage Trust 2005-C17,
Commercial Mtg. Pass-Through
Certificates, Series 2005-C17,
Cl. A2, 4.782%, 3/15/42 1,450,000 1,443,776
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
COMMERCIAL Continued
Wachovia Bank Commercial
Mortgage Trust 2006-C29,
Commercial Mtg. Pass-Through
Certificates, Series 2006-C29,
Cl. A2, 5.272%, 11/15/48 $ 256,000 $ 256,599
- --------------------------------------------------------------------------------
WaMu, Mtg. Pass-Through Certificates:
Series 2003-AR9,
Cl. 2A, 4.047%, 9/25/33 5 725,757 721,592
Series 2006-AR8,
Cl. 2A1, 6.133%, 8/25/36 5 2,106,725 2,106,342
----------------
27,761,538
- --------------------------------------------------------------------------------
MANUFACTURED HOUSING--0.7%
Wells Fargo Mortgage-Backed
Securities 2006-AR12 Trust,
Mtg. Pass-Through Certificates,
Series 2006-AR12,
Cl. 2A1, 6.102%, 9/25/36 5 1,646,267 1,649,900
- --------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed
Securities 2006-AR2 Trust, Mtg.
Pass-Through Certificates,
Series 2006-AR2,
Cl. 2A5, 5.10%, 3/25/36 5 1,908,691 1,894,536
----------------
3,544,436
- --------------------------------------------------------------------------------
MULTIFAMILY--3.9%
Banc of America Mortgage
Securities, Inc., CMO
Pass-Through Certificates:
Series 2003-E, Cl. 2A2, 4.35%, 6/25/33 5 1,164,278 1,160,072
Series 2005-F, Cl. 2A3, 4.716%, 7/25/35 5 1,391,249 1,380,478
- --------------------------------------------------------------------------------
Bear Stearns ARM Trust 2006-4,
Mtg. Pass-Through Certificates,
Series 2006-4,
Cl. 2A1, 5.802%, 10/25/36 5 756,697 762,512
- --------------------------------------------------------------------------------
Citigroup Mortgage Loan Trust, Inc.
2006-AR5, Mtg. Pass-Through
Certificates, Series 2006-AR5,
Cl. 1A3A, 5.894%, 7/25/36 5 570,495 575,569
- --------------------------------------------------------------------------------
Countrywide Alternative
Loan Trust, CMO:
Series 2008-85CB,
Cl. 2A3, 5.50%, 2/25/36 860,000 816,887
Series 2004-28CB,
Cl. 2A4, 5.75%, 1/25/35 1,166,000 1,114,581
- --------------------------------------------------------------------------------
Countrywide Home Loans Servicing
LP, Mtg. Pass-Through Certificates:
Series 2003-46,
Cl. 1A2, 4.122%, 1/19/34 5 994,928 1,007,112
Series 2005-HYB1,
Cl. 5A1, 4.995%, 3/25/35 5 1,316,398 1,286,367
Series 2007-HY1,
Cl. 1A1, 5.695%, 4/25/37 5 1,381,563 1,387,549
11 | OPPENHEIMER BALANCED FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
MULTIFAMILY Continued
GMAC Mortgage Corp. Loan Trust,
Mtg. Pass-Through Certificates:
Series 2005-AR4,
Cl. 2A1, 5.292%, 7/19/35 5 $ 1,514,658 $ 1,519,895
Series 2004-J4,
Cl. A7, 5.50%, 9/25/34 800,000 765,726
- --------------------------------------------------------------------------------
GSR Mortgage Loan Trust 2005-AR7,
Mtg. Pass-Through Certificates,
Series 2005-AR7,
Cl. 3A1, 5.152%, 11/25/35 5 2,221,722 2,219,958
- --------------------------------------------------------------------------------
Merrill Lynch Mortgage Investors
Trust 2007-2, Mtg. Pass-Through
Certificates, Series 2007-2,
Cl. 2A1, 6.007%, 6/25/37 5 1,866,195 1,876,548
- --------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed
Securities 2004-AA Trust, Mtg.
Pass-Through Certificates,
Series 2004-AA,
Cl. 2A, 4.993%, 12/25/34 5 450,730 444,434
- --------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed
Securities 2004-S Trust, Mtg.
Pass-Through Certificates,
Series 2004-S,
Cl. A1, 3.54%, 9/25/34 5 378,465 372,697
- --------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed
Securities 2005-AR2 Trust, Mtg.
Pass-Through Certificates,
Series 2005-AR2,
Cl. 2A2, 4.547%, 3/25/35 5 277,474 275,257
- --------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed
Securities 2005-AR4 Trust, Mtg.
Pass-Through Certificates,
Series 2005-AR4,
Cl. 2A2, 4.524%, 4/25/35 5 456,736 453,062
- --------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed
Securities 2006-AR10 Trust,
Mtg. Pass-Through Certificates:
Series 2006-AR10,
Cl. 4A1, 5.56%, 7/25/36 5 913,730 918,884
Series 2006-AR10,
Cl. 2A1, 5.646%, 7/25/36 5 704,928 710,211
- --------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed
Securities 2006-AR2 Trust,
Mtg. Pass-Through Certificates,
Series 2006-AR2,
Cl. 2A6, 5.10%, 3/25/36 5 368,907 366,171
- --------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed
Securities 2006-AR6 Trust,
Mtg. Pass-Through Certificates,
Series 2006-AR6,
Cl. 3A1, 5.093%, 3/25/36 5 407,950 406,219
----------------
19,820,189
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
RESIDENTIAL--2.6%
Chase Mortgage Finance Trust
Series 2005-S1, Multiclass Mtg.
Pass-Through Certificates,
Series 2005-S1,
Cl. 1A5, 5.50%, 5/25/35 $ 490,000 $ 481,802
- --------------------------------------------------------------------------------
Countrywide Alternative
Loan Trust, CMO:
Series 2005-18CB,
Cl. A8, 5.50%, 5/25/36 1,170,000 1,129,141
Series 2005-J1, Cl. 3A1, 6.50%, 8/25/32 1,187,155 1,212,967
- --------------------------------------------------------------------------------
Morgan Stanley Mortgage Loan
Trust 2006-AR, Mtg. Pass-Through
Certificates, Series 2006-AR,
Cl. 5A3, 5.427%, 6/25/36 5 530,000 532,449
- --------------------------------------------------------------------------------
RALI Series 2006-QS13 Trust,
Mtg. Asset-Backed Pass-Through
Certificates, Series 2006-QS13,
Cl. 1A8, 6%, 9/25/36 691,447 691,154
- --------------------------------------------------------------------------------
RALI Series 2006-QS5 Trust,
Mtg. Asset-Backed Pass-Through
Certificates, Series 2006-QS5,
Cl. 2A2, 6%, 4/25/08 577,298 576,653
- --------------------------------------------------------------------------------
STARM Mortgage Loan Trust
2007-S1, Mtg. Pass-Through
Certificates, Series 2007-S1,
Cl. 3A1, 5.004%, 8/1/22 5 2,073,482 2,045,296
- --------------------------------------------------------------------------------
WaMu, Mtg. Pass-Through Certificates:
Series 2007-HY6,
Cl. 2A1, 5.702%, 6/25/37 5 1,306,020 1,289,642
Series 2006-AR12,
Cl. 2A1, 5.75%, 10/25/36 5 2,053,734 2,041,301
- --------------------------------------------------------------------------------
Washington Mutual Mortgage
Loan Trust, Mtg. Pass-Through
Certificates, 2007-A,
Cl. 1A8, 6%, 2/25/37 1,996,555 2,002,746
- --------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed
Securities 2006-AR5 Trust,
Mtg. Pass-Through Certificates,
Series 2006-AR5,
Cl. 2A2, 5.535%, 4/1/36 5 801,299 728,308
- --------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed
Securities 2003-6 Trust, Mtg.
Pass-Through Certificates,
Series 2003-6, Cl. 1A1, 5%, 6/25/18 756,820 752,982
----------------
13,484,441
----------------
Total Mortgage-Backed Obligations
(Cost $176,016,481) 178,957,510
12 | OPPENHEIMER BALANCED FUND/VA
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--0.2%
- --------------------------------------------------------------------------------
U.S. Treasury Nts.:
4.25%, 9/30/12 $ 735,000 $ 761,012
4.75%, 8/15/17 216,000 228,201
----------------
Total U.S. Government Obligations (Cost $949,668) 989,213
- --------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES--8.9%
- --------------------------------------------------------------------------------
ABN Amro Bank NV (NY Branch),
7.125% Sub. Nts., Series B, 10/15/93 400,000 419,920
- --------------------------------------------------------------------------------
Albertson's, Inc.,
8% Sr. Unsec. Debs., 5/1/31 880,000 897,135
- --------------------------------------------------------------------------------
Barclays Bank plc,
6.278% Perpetual Bonds 11 2,600,000 2,266,888
- --------------------------------------------------------------------------------
Belo Corp.,
8% Sr. Unsec. Unsub. Nts., 11/1/08 1,520,000 1,533,902
- --------------------------------------------------------------------------------
Buckeye Partners LP,
4.625% Sr. Nts., 7/15/13 1,035,000 994,732
- --------------------------------------------------------------------------------
Caesars Entertainment, Inc.,
7.50% Sr. Unsec. Nts., 9/1/09 3 1,195,000 1,270,126
- --------------------------------------------------------------------------------
Capmark Financial Group, Inc.,
5.875% Nts., 5/10/12 4 585,000 463,484
- --------------------------------------------------------------------------------
Centex Corp.,
5.80% Sr. Unsec. Nts., 9/15/09 765,000 704,860
- --------------------------------------------------------------------------------
Chancellor Media CCU,
8% Sr. Unsec. Nts., 11/1/08 845,000 873,557
- --------------------------------------------------------------------------------
CIT Group Funding Co. of Canada,
4.65% Sr. Unsec. Nts., 7/1/10 670,000 637,551
- --------------------------------------------------------------------------------
Citigroup, Inc.,
8.30% Jr. Sub. Bonds, 12/21/57 5 380,000 397,919
- --------------------------------------------------------------------------------
Clear Channel Communications, Inc.,
6.25% Nts., 3/15/11 710,000 643,002
- --------------------------------------------------------------------------------
Coca-Cola Co. (The),
7.375% Unsec. Debs., 7/29/93 360,000 447,482
- --------------------------------------------------------------------------------
Cox Enterprises, Inc.,
4.375% Nts., 5/1/08 4 1,075,000 1,071,633
- --------------------------------------------------------------------------------
CSC Holdings, Inc.,
7.25% Sr. Unsec. Nts., 7/15/08 845,000 848,169
- --------------------------------------------------------------------------------
D.R. Horton, Inc.,
8% Sr. Nts., 2/1/09 285,000 277,093
- --------------------------------------------------------------------------------
Delhaize America, Inc.,
9% Unsub. Debs., 4/15/31 606,000 703,673
- --------------------------------------------------------------------------------
Dillard's, Inc.,
6.625% Unsec. Nts., 11/15/08 3 445,000 444,444
- --------------------------------------------------------------------------------
Eastman Kodak Co.,
3.625% Nts., Series A, 5/15/08 465,000 460,350
- --------------------------------------------------------------------------------
EchoStar DBS Corp.,
5.75% Sr. Unsec. Nts., 10/1/08 1,285,000 1,286,606
- --------------------------------------------------------------------------------
El Paso Corp.,
6.50% Sr. Unsec. Nts., 6/1/08 210,000 211,994
- --------------------------------------------------------------------------------
Ford Motor Credit Co.,
9.75% Sr. Unsec. Nts., 9/15/10 2,030,000 1,938,143
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued
- --------------------------------------------------------------------------------
Gap, Inc. (The),
10.05% Unsub. Nts., 12/15/08 5 $ 141,000 $ 146,288
- --------------------------------------------------------------------------------
General Motors Acceptance Corp.,
8% Bonds, 11/1/31 930,000 782,010
- --------------------------------------------------------------------------------
Goldman Sachs Capital, Inc. (The),
6.345% Sub. Bonds, 2/15/34 1,850,000 1,675,798
- --------------------------------------------------------------------------------
HBOS plc, 6.413% Sub.
Perpetual Bonds, Series A 4,11 3,100,000 2,529,544
- --------------------------------------------------------------------------------
HSBC Finance Capital Trust IX,
5.911% Nts., 11/30/35 5 2,300,000 2,131,412
- --------------------------------------------------------------------------------
Hyundai Motor Manufacturing
Alabama LLC,
5.30% Sr. Unsec. Nts., 12/19/08 4 610,000 612,242
- --------------------------------------------------------------------------------
IPALCO Enterprises, Inc.,
8.375% Sr. Sec. Nts., 11/14/08 3,5 540,000 552,150
- --------------------------------------------------------------------------------
Kaneb Pipe Line Operating
Partnership LP,
5.875% Sr. Unsec. Nts., 6/1/13 830,000 845,630
- --------------------------------------------------------------------------------
Lennar Corp.,
7.625% Sr. Unsec. Nts., 3/1/09 1,010,000 962,520
- --------------------------------------------------------------------------------
Liberty Media Corp.,
7.875% Sr. Nts., 7/15/09 290,000 295,870
- --------------------------------------------------------------------------------
Liberty Media LLC,
7.75% Sr. Nts., 7/15/09 950,000 974,424
- --------------------------------------------------------------------------------
MBIA, Inc., 5.70% Sr. Unsec.
Unsub. Nts., 12/1/34 565,000 449,503
- --------------------------------------------------------------------------------
MetLife, Inc., 6.40% Jr.
Unsec. Sub. Bonds, 12/15/66 5 1,710,000 1,572,094
- --------------------------------------------------------------------------------
MGM Mirage, Inc.,
6% Sr. Sec. Nts., 10/1/09 1,305,000 1,305,000
- --------------------------------------------------------------------------------
Monongahela Power Co.,
7.36% Unsec. Nts., Series A, 1/15/10 1,030,000 1,085,891
- --------------------------------------------------------------------------------
NCR Corp., 7.125% Sr.
Unsec. Unsub. Nts., 6/15/09 855,000 883,954
- --------------------------------------------------------------------------------
PF Export Receivables Master Trust,
3.748% Sr. Nts., Series B, 6/1/13 4 292,632 288,665
- --------------------------------------------------------------------------------
Popular North America, Inc.,
4.70% Nts., 6/30/09 1,360,000 1,347,075
- --------------------------------------------------------------------------------
Prudential Holdings LLC,
8.695% Bonds, Series C, 12/18/23 4 1,285,000 1,542,810
- --------------------------------------------------------------------------------
Prudential Insurance Co. of
America, 8.30% Nts., 7/1/25 4 1,110,000 1,312,175
- --------------------------------------------------------------------------------
Pulte Homes, Inc., 4.875% Nts., 7/15/09 450,000 419,012
- --------------------------------------------------------------------------------
Qwest Corp., 5.625%
Unsec. Nts., 11/15/08 3 131,000 131,000
- --------------------------------------------------------------------------------
R&B Falcon Corp., 9.50% Sr.
Unsec. Nts., 12/15/08 500,000 521,389
- --------------------------------------------------------------------------------
SLM Corp.:
3.95% Nts., Series A, 8/15/08 25,000 24,400
4% Nts., 1/15/09 895,000 862,426
13 | OPPENHEIMER BALANCED FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued
- --------------------------------------------------------------------------------
Standard Pacific Corp., 5.125%
Sr. Unsec. Unsub. Nts., 4/1/09 $ 470,000 $ 373,650
- --------------------------------------------------------------------------------
TEPPCO Partners LP,
6.125% Nts., 2/1/13 490,000 510,987
- --------------------------------------------------------------------------------
Tribune Co., 5.50% Nts.,
Series E, 10/6/08 3 765,000 723,881
- --------------------------------------------------------------------------------
Univision Communications, Inc.,
3.875% Sr. Unsec. Nts., 10/15/08 315,000 309,094
- --------------------------------------------------------------------------------
Valero Logistics Operations LP,
6.05% Nts., 3/15/13 210,000 214,897
- --------------------------------------------------------------------------------
Westar Energy, Inc.,
7.125% Sr. Unsec. Nts., 8/1/09 985,000 1,016,675
----------------
Total Non-Convertible Corporate Bonds
and Notes (Cost $46,483,119) 45,195,129
SHARES VALUE
- --------------------------------------------------------------------------------
INVESTMENT COMPANIES--3.3%
- --------------------------------------------------------------------------------
Oppenheimer Institutional
Money Market Fund,
Cl. E, 5.03% 12,13
(Cost $16,578,809) 16,578,809 $ 16,578,809
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS,
AT VALUE (COST $451,708,930) 101.1% 512,689,616
- --------------------------------------------------------------------------------
LIABILITIES IN EXCESS
OF OTHER ASSETS (1.1) (5,342,326)
-------------------------------
NET ASSETS 100.0% $ 507,347,290
===============================
INDUSTRY CLASSIFICATIONS ARE UNAUDITED.
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
2. The Fund holds securities which have been issued by the same entity and that
trade on separate exchanges.
3. Illiquid security. The aggregate value of illiquid securities as of December
31, 2007 was $3,121,658, which represents 0.62% of the Fund's net assets. See
Note 9 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 $8,067,199 or 1.59% of the Fund's net
assets as of December 31, 2007.
5. Represents the current interest rate for a variable or increasing rate
security.
6. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline. Most other fixed income securities
increase in price when interest rates decline. The principal amount of the
underlying pool represents the notional amount on which current interest is
calculated. The price of these securities is typically more sensitive to changes
in prepayment rates than traditional mortgage-backed securities (for example,
GNMA pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future cash
flows. These securities amount to $7,931,734 or 1.56% of the Fund's net assets
as of December 31, 2007.
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 $360,497 or 0.07% of the Fund's net assets as of
December 31, 2007.
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 $2,978,751. See Note 6 of accompanying Notes.
9. When-issued security or delayed delivery to be delivered and settled after
December 31, 2007. See Note 1 of accompanying Notes.
10. All or a portion of the security was segregated by the Fund in the amount of
$211,000, which represented 100.11% of the market value of securities sold
short. See Note 1 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. Is or was an affiliate, as defined in the Investment Company Act of 1940, at
or during the period ended December 31, 2007, by virtue of the Fund owning at
least 5% of the voting securities of the issuer or as a result of the Fund and
the issuer having the same investment adviser. Transactions during the period in
which the issuer was an affiliate are as follows:
SHARES GROSS GROSS SHARES
DECEMBER 31, 2006 ADDITIONS REDUCTIONS DECEMBER 31, 2007
- ---------------------------------------------------------------------------------------------------------------------------
Oppenheimer Institutional Money Market Fund, Cl. E 15,913,062 327,795,979 327,130,232 16,578,809
DIVIDEND
VALUE INCOME
- ---------------------------------------------------------------------------------------------------------------------------
Oppenheimer Institutional Money Market Fund, Cl. E $16,578,809 $ 971,318
13. Rate shown is the 7-day yield as of December 31, 2007.
PRINCIPAL
AMOUNT
SOLD SHORT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS SOLD SHORT--0.0%
- ---------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5.50%, 1/1/37 9 (Proceeds $209,549) $ (211,000) $ (210,769)
14 | OPPENHEIMER BALANCED FUND/VA
- --------------------------------------------------------------------------------
FUTURES CONTRACTS AS OF DECEMBER 31, 2007 ARE AS FOLLOWS:
- --------------------------------------------------------------------------------
UNREALIZED
NUMBER OF EXPIRATION APPRECIATION
CONTRACT DESCRIPTION BUY/SELL CONTRACTS DATE VALUE (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------
U.S. Long Bonds Buy 211 3/19/08 $ 24,555,125 $ (114,034)
U.S. Treasury Nts., 2 yr. Sell 305 3/31/08 64,126,250 28,657
U.S. Treasury Nts., 5 yr. Buy 112 3/31/08 12,351,500 66,405
U.S. Treasury Nts., 10 yr. Sell 184 3/19/08 20,863,875 (82,377)
-----------
$ (101,349)
===========
- --------------------------------------------------------------------------------
CREDIT DEFAULT SWAPS AS OF DECEMBER 31, 2007 ARE AS FOLLOWS:
- --------------------------------------------------------------------------------
BUY/SELL NOTIONAL
SWAP CREDIT AMOUNT PAY/RECEIVE TERMINATION PREMIUM
COUNTERPARTY REFERENCE ENTITY PROTECTION (000S) FIXED RATE DATE PAID/(RECEIVED) VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
Barclays Bank plc:
Beazer Homes USA, Inc. Sell $ 305 2.100% 6/20/08 $ -- $ (16,313)
Capmark Financial Group, Inc. Sell 520 1.000 6/20/12 -- (103,641)
CDX.NA.IG.9 Index Sell 3,750 0.600 12/20/12 (23,433) (27,559)
CDX.NA.IG.9 Index Sell 1,875 0.600 12/20/12 (14,114) (13,780)
Countrywide Home Loans, Inc. Sell 675 0.750 9/20/08 -- (98,952)
Dillard's, Inc. Sell 370 1.900 12/20/08 -- (2,444)
iStar Financial, Inc. Sell 480 4.400 12/20/12 -- 8,310
Lehman Brothers Holdings, Inc. Sell 1,110 0.490 9/20/10 -- (28,124)
Merrill Lynch & Co., Inc. Sell 2,090 0.680 9/20/08 -- (17,789)
Six Flags, Inc. Sell 535 8.250 12/20/08 -- (7,540)
Toys "R" Us, Inc. Sell 550 1.450 9/20/08 -- (10,940)
- -----------------------------------------------------------------------------------------------------------------------------------
Credit Suisse International:
ArvinMeritor, Inc. Sell 885 1.550 9/20/08 -- (10,968)
Freescale Semiconductor, Inc. Sell 515 0.600 3/20/08 -- (2,145)
Freescale Semiconductor, Inc. Sell 545 0.750 3/20/08 -- (2,063)
Intelsat Ltd. Sell 570 3.450 9/20/08 -- (3,139)
Quebecor World, Inc. Sell 560 2.600 9/20/08 -- (50,386)
Rite Aid Corp. Sell 860 0.875 6/20/08 -- (19,246)
Saks, Inc. Sell 900 2.000 9/20/08 -- (2,771)
The Goodyear Tire & Rubber Co. Sell 850 1.550 9/20/08 -- 1,855
TXU Corp. Sell 175 5.910 12/20/12 -- 5,064
TXU Corp. Sell 170 6.050 12/20/12 -- 5,843
TXU Corp. Sell 175 6.000 12/20/12 -- 5,064
Univision Communications, Inc. Sell 250 0.750 3/20/08 -- (720)
- -----------------------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG:
ABX.HE.AA.06-2 Index Sell 240 0.170 5/25/46 (28,798) (91,477)
Allied Waste North America, Inc. Sell 340 2.000 9/20/09 -- (1,656)
Allied Waste North America, Inc. Sell 530 2.000 9/20/09 -- (2,581)
Capital One Bank Buy 610 1.700 12/20/12 -- 10,775
Capital One Bank Buy 320 1.800 12/20/12 -- 4,104
CDX.NA.HY.8 Index Sell 430 2.750 6/20/12 (29,598) (21,353)
CDX.NA.HY.8 Index Sell 475 2.750 6/20/12 (41,226) (23,587)
CDX.NA.HY.8 Index Sell 475 2.750 6/20/12 (28,757) (23,587)
CDX.NA.HY.8 Index Sell 130 2.750 6/20/12 (17,702) (6,455)
CDX.NA.IG.9 Index Sell 7,585 0.600 12/20/12 (45,709) (57,190)
CDX.NA.IG.9 Index Sell 3,800 0.600 12/20/12 (21,652) (28,652)
Centex Corp. Sell 135 1.550 9/20/09 -- (6,103)
Countrywide Home Loans, Inc. Sell 435 3.250 9/20/08 -- (56,389)
Dillard's, Inc. Sell 225 0.750 9/20/08 -- (4,090)
15 | OPPENHEIMER BALANCED FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CREDIT DEFAULT SWAPS: Continued
- --------------------------------------------------------------------------------
BUY/SELL NOTIONAL
SWAP CREDIT AMOUNT PAY/RECEIVE TERMINATION PREMIUM
COUNTERPARTY REFERENCE ENTITY PROTECTION (000S) FIXED RATE DATE PAID/(RECEIVED) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG: Continued
Dow Jones CDX.NA.IG.7 Index Buy $ 4,700 0.400% 12/20/11 $ 483 $ 78,350
Georgia-Pacific Corp. Sell 850 1.750 9/20/08 -- 5,381
Intelsat Ltd. Sell 230 2.850 9/20/08 -- (1,414)
iStar Financial, Inc. Sell 600 3.000 12/20/08 -- (11,013)
iStar Financial, Inc. Sell 75 4.320 12/20/12 -- 842
iStar Financial, Inc. Sell 1,035 2.925 12/20/08 -- (19,742)
Lehman Brothers Holdings, Inc. Sell 1,005 1.410 9/20/08 -- 179
Levi Strauss & Co. Sell 375 0.900 9/20/08 -- (4,030)
Levi Strauss & Co. Sell 500 1.000 9/20/08 -- (5,001)
MBIA, Inc. Sell 555 0.520 9/20/08 -- (32,412)
MBIA, Inc. Sell 555 0.600 9/20/08 -- (32,123)
Merrill Lynch & Co., Inc. Sell 280 1.850 6/20/08 -- 903
Owens-Illinois, Inc. Sell 475 1.250 9/20/08 -- 1,050
Tenet Healthcare Corp. Sell 870 1.600 3/20/09 -- (21,693)
The Bear Stearns Cos., Inc. Sell 2,090 2.350 9/20/08 -- 4,305
Washington Mutual, Inc. Sell 610 4.500 12/20/08 -- (3,254)
Washington Mutual, Inc. Sell 125 4.500 12/20/08 -- (667)
- ------------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs
Capital Markets LP:
ABX.HE.AA.06-2 Index Sell 85 0.170 5/25/46 (7,003) (32,298)
ABX.HE.AA.06-2 Index Sell 330 0.170 5/25/46 (130,342) (125,392)
Capmark Financial Group, Inc. Sell 535 0.950 6/20/12 -- (106,482)
Citigroup, Inc. Sell 635 1.250 9/20/08 -- (16,192)
D.R. Horton, Inc. Sell 475 4.210 12/20/08 -- (512)
Dole Food Co., Inc. Sell 850 3.880 9/20/08 -- (3,826)
First Data Corp. Sell 545 1.150 9/20/08 -- (3,930)
General Mills, Inc. Sell 715 0.380 12/20/12 -- (197)
iStar Financial, Inc. Sell 75 3.950 12/20/12 -- 53
K. Hovnanian Enterprises, Inc. Sell 310 6.750 9/20/08 -- (24,367)
Merrill Lynch & Co., Inc. Sell 635 1.850 6/20/08 -- 2,150
Pulte Homes, Inc. Sell 800 2.750 9/20/09 -- (25,162)
Quebecor World, Inc. Sell 255 3.000 9/20/08 -- (19,281)
Sara Lee Corp. Buy 695 0.419 9/20/12 -- (2,412)
Smurfit-Stone Container Enterprises, Inc. Sell 845 1.450 9/20/08 -- 183
Standard Pacific Corp. Sell 425 6.625 9/20/08 -- (43,488)
- ------------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs
International Amkor Technology, Inc. Sell 80 2.650 9/20/08 -- 692
- ------------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers
Special Financing, Inc.:
Capital One Bank Buy 365 1.800 12/20/12 -- 5,857
D.R. Horton, Inc. Sell 850 4.200 12/20/08 -- (413)
General Mills, Inc. Sell 870 0.400 12/20/12 -- (382)
Morgan Stanley Sell 2,110 0.640 9/20/08 -- (8,976)
Nortel Networks Corp. Sell 135 1.850 9/20/08 -- (332)
Residential Capital LLC Sell 470 5.000 6/20/08 (61,100) (51,439)
Univision Communications, Inc. Sell 70 3.000 12/20/08 -- (432)
Univision Communications, Inc. Sell 585 3.000 12/20/08 -- (2,209)
Washington Mutual, Inc. Sell 285 4.400 12/20/08 -- (2,596)
16 | OPPENHEIMER BALANCED FUND/VA
BUY/SELL NOTIONAL
SWAP CREDIT AMOUNT PAY/RECEIVE TERMINATION PREMIUM
COUNTERPARTY REFERENCE ENTITY PROTECTION (000S) FIXED RATE DATE PAID/(RECEIVED) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley
Capital Services, Inc.:
ABX.HE.AA.06-2 Index Sell $ 85 0.170% 5/25/46 $ (6,791) $ (32,253)
ABX.HE.AA.06-2 Index Sell 160 0.170 5/25/46 (15,999) (60,015)
Beazer Homes USA, Inc. Sell 560 2.150 6/20/08 -- (25,932)
CDX.NA.IG.9 Index Sell 2,350 0.600 12/20/12 (18,605) (17,797)
Countrywide Home Loans, Inc. Sell 435 0.750 9/20/08 -- (57,406)
Countrywide Home Loans, Inc. Sell 1,615 0.420 6/20/09 -- (328,606)
First Data Corp. Sell 345 1.350 9/20/08 -- (2,398)
Ford Motor Co. Sell 1,100 7.150 12/20/16 -- (31,190)
Ford Motor Co. Sell 525 7.050 12/20/16 -- (17,330)
General Motors Corp. Sell 545 5.800 12/20/16 -- (39,438)
General Motors Corp. Sell 535 5.750 12/20/16 -- (39,997)
Harrah's Operating Co., Inc. Sell 385 2.200 9/20/08 -- (2,118)
Inco Ltd. Buy 550 0.630 3/20/17 -- (2,781)
Inco Ltd. Buy 545 0.700 3/20/17 -- (5,606)
J.C. Penney Co., Inc. Sell 545 1.300 12/20/17 -- (21,530)
J.C. Penney Co., Inc. Sell 525 1.070 12/20/17 -- (29,489)
K. Hovnanian Enterprises, Inc. Sell 270 1.850 6/20/08 -- (18,467)
K. Hovnanian Enterprises, Inc. Sell 270 1.850 6/20/08 -- (18,467)
Kohl's Corp. Buy 785 0.660 12/20/17 -- 25,703
Kohl's Corp. Buy 820 0.870 12/20/17 -- 13,721
Lennar Corp. Sell 535 2.900 12/20/08 -- (20,367)
Residential Capital LLC Sell 1,290 6.120 9/20/08 -- (210,940)
Residential Capital LLC Sell 105 5.000 6/20/08 (14,175) (12,630)
Residential Capital LLC Sell 140 5.000 6/20/08 (20,300) (16,840)
Residential Capital LLC Sell 265 5.000 6/20/08 (38,425) (31,876)
Sara Lee Corp. Buy 890 0.418 9/20/12 -- (4,185)
Toys "R" Us, Inc. Sell 325 2.550 9/20/08 -- (3,498)
Tribune Co. Sell 505 1.000 6/20/08 -- (22,750)
Vale Overseas Ltd. Sell 550 1.100 3/20/17 -- (9,630)
Vale Overseas Ltd. Sell 545 1.170 3/20/17 -- (6,759)
------------------------
$(563,246) $(2,253,218)
========================
- --------------------------------------------------------------------------------
INTEREST RATE SWAP AS OF DECEMBER 31, 2007 IS AS FOLLOWS:
- --------------------------------------------------------------------------------
SWAP NOTIONAL PAID BY RECEIVED BY TERMINATION
COUNTERPARTY AMOUNT THE FUND THE FUND DATE VALUE
- ----------------------------------------------------------------------------------------------------------
Three-Month
Deutsche Bank AG $ 4,300,000 USD BBA LIBOR 5.529% 8/10/17 $ 359,666
Index abbreviation is as follows:
BBA LIBOR British Bankers' Association London-Interbank Offered Rate
17 | OPPENHEIMER BALANCED FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN SWAPS AS OF DECEMBER 31, 2007 ARE AS FOLLOWS:
- --------------------------------------------------------------------------------
NOTIONAL PAID BY RECEIVED BY TERMINATION
SWAP COUNTERPARTY AMOUNT THE FUND THE FUND DATE VALUE
- -------------------------------------------------------------------------------------------------------------------------
If negative,the absolute If positive, the Total Return
value of the Lehman of the Lehman Brothers U.S.
Brothers U.S. CMBS AAA CMBS AAA 8.5+ Index minus 20
Barclays Bank plc $3,200,000 8.5+ Index basis points 6/1/08 $ 53,702
- -------------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG:
If negative,the absolute If positive, the Total Return
value of the Lehman of the Lehman Brothers U.S.
Brothers U.S. CMBS AAA CMBS AAA 8.5+ Index minus
2,300,000 8.5+ Index 45 basis points 2/1/08 40,109
If negative,the absolute If positive, the Total Return
value of the Lehman of the Lehman Brothers U.S.
Brothers U.S. CMBS AAA CMBS AAA 8.5+ Index plus
6,680,000 8.5+ Index 60 basis points 2/1/08 122,337
If negative,the absolute If positive, the Total Return
value of the Lehman of the Lehman Brothers U.S.
Brothers U.S. CMBS AAA CMBS AAA 8.5+ Index plus
610,000 8.5+ Index 25 basis points 2/1/08 10,994
- -------------------------------------------------------------------------------------------------------------------------
Lehman Brothers
Special Financing, Inc.:
If negative,the absolute If positive, the Total Return
value of the Lehman of the Lehman Brothers U.S.
Brothers U.S. CMBS AAA CMBS AAA 8.5+ Index minus
3,800,000 8.5+ Index 40 basis points 6/1/08 65,689
If negative,the absolute
value of the Lehman If positive, the Total Return
Brothers U.S. CMBS AAA of the Lehman Brothers U.S.
2,840,000 8.5+ Index CMBS AAA 8.5+ Index 2/1/08 50,149
If negative,the absolute If positive, the Total Return
value of the Lehman of the Lehman Brothers U.S.
Brothers U.S. CMBS AAA CMBS AAA 8.5+ Index minus
3,100,000 8.5+ Index 20 basis points 5/1/08 54,423
If negative,the absolute If positive, the Total Return
value of the Lehman of the Lehman Brothers U.S.
Brothers U.S. CMBS AAA CMBS AAA 8.5+ Index plus
2,429,000 8.5+ Index 60 basis points 2/1/08 43,984
If negative,the absolute If positive, the Total Return
value of the Lehman of the Lehman Brothers U.S.
Brothers U.S. CMBS AAA CMBS AAA 8.5+ Index plus
3,244,000 8.5+ Index 55 basis points 5/1/08 58,621
If negative,the absolute If positive, the Total Return
value of the Lehman of the Lehman Brothers U.S.
Brothers U.S. CMBS AAA CMBS AAA 8.5+ Index minus
1,310,000 8.5+ Index 25 basis points 3/1/08 22,886
If negative,the absolute If positive, the Total Return
value of the Lehman of the Lehman Brothers U.S.
Brothers U.S. CMBS AAA CMBS AAA 8.5+ Index plus
4,300,000 8.5+ Index 45 basis points 5/1/08 77,381
18 | OPPENHEIMER BALANCED FUND/VA
NOTIONAL PAID BY RECEIVED BY TERMINATION
SWAP COUNTERPARTY AMOUNT THE FUND THE FUND DATE VALUE
- -------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital
Services, Inc.:
If negative, the absolute If positive, the Total Return
value of the Lehman of the Lehman Brothers U.S.
Brothers U.S. CMBS AAA CMBS AAA 8.5+ Index minus 40
$2,700,000 8.5+ Index basis points 6/1/08 $ 41,284
If negative, the absolute If positive, the Total Return
value of the Lehman of the Lehman Brothers U.S.
Brothers U.S. CMBS AAA CMBS AAA 8.5+ Index plus 90
3,200,000 8.5+ Index basis points 6/1/08 51,677
- -------------------------------------------------------------------------------------------------------------------------
UBS AG:
If negative, the absolute If positive, the Total Return
value of the Lehman of the Lehman Brothers U.S.
Brothers U.S. CMBS AAA CMBS AAA 8.5+ Index minus 20
2,200,000 8.5+ Index basis points 5/1/08 38,891
If negative, the absolute If positive, the Total Return
value of the Lehman of the Lehman Brothers U.S.
Brothers U.S. CMBS AAA CMBS AAA 8.5+ Index plus 60 55,761
---------
3,036,000 8.5+ Index basis points 2/1/08 $ 787,888
=========
Index abbreviation is as follows:
CMBS Commercial Mortgage-Backed Securities
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19 | OPPENHEIMER BALANCED FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 31, 2007
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments:
Unaffiliated companies (cost $435,130,121) $ 496,110,807
Affiliated companies (cost $16,578,809) 16,578,809
----------------
512,689,616
- --------------------------------------------------------------------------------------------------------------------
Cash 88,592
- --------------------------------------------------------------------------------------------------------------------
Swaps, at value (net premiums received $413,861) 983,202
- --------------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest, dividends and principal paydowns 1,977,007
Investments sold (including $556,150 sold on a when-issued or delayed delivery basis) 746,177
Shares of beneficial interest sold 10,095
Other 22,291
----------------
Total assets 516,516,980
- --------------------------------------------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------------------------------------------
Short positions, at value (proceeds of $209,549)--see accompanying statement of investments 210,769
- --------------------------------------------------------------------------------------------------------------------
Swaps, at value (premiums received $149,385) 2,088,866
- --------------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased (including $6,332,188 purchased on a when-issued or delayed delivery basis) 6,474,912
Shares of beneficial interest redeemed 180,188
Distribution and service plan fees 76,641
Shareholder communications 60,026
Trustees' compensation 11,454
Futures margins 4,506
Transfer and shareholder servicing agent fees 1,754
Other 60,574
----------------
Total liabilities 9,169,690
- --------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 507,347,290
================
- --------------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- --------------------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 30,977
- --------------------------------------------------------------------------------------------------------------------
Additional paid-in capital 416,727,958
- --------------------------------------------------------------------------------------------------------------------
Accumulated net investment income 12,343,063
- --------------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 17,902,140
- --------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets and
liabilities denominated in foreign currencies 60,343,152
----------------
NET ASSETS $ 507,347,290
================
- --------------------------------------------------------------------------------------------------------------------
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 $385,947,681 and 23,520,013 shares of beneficial interest outstanding) $ 16.41
- --------------------------------------------------------------------------------------------------------------------
Service Shares:
Net asset value, redemption price per share and offering price per share (based on net
assets of $121,399,609 and 7,457,438 shares of beneficial interest outstanding) $ 16.28
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20 | OPPENHEIMER BALANCED FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 31, 2007
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
INVESTMENT INCOME
- -------------------------------------------------------------------------------------------
Interest $ 12,817,658
- -------------------------------------------------------------------------------------------
Dividends:
Unaffiliated companies (net of foreign withholding taxes of $127,561) 3,695,235
Affiliated companies 971,318
- -------------------------------------------------------------------------------------------
Portfolio lending fees 41,265
----------------
Total investment income 17,525,476
- -------------------------------------------------------------------------------------------
EXPENSES
- -------------------------------------------------------------------------------------------
Management fees 3,873,049
- -------------------------------------------------------------------------------------------
Distribution and service plan fees--Service shares 292,461
- -------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service shares 10,126
Service shares 10,045
- -------------------------------------------------------------------------------------------
Shareholder communications:
Non-Service shares 28,474
Service shares 7,439
- -------------------------------------------------------------------------------------------
Trustees' compensation 15,785
- -------------------------------------------------------------------------------------------
Custodian fees and expenses 6,031
- -------------------------------------------------------------------------------------------
Administration service fees 1,500
- -------------------------------------------------------------------------------------------
Other 55,695
----------------
Total expenses 4,300,605
Less reduction to custodian expenses (514)
Less waivers and reimbursements of expenses (143,162)
----------------
Net expenses 4,156,929
- -------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 13,368,547
- -------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- -------------------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments from unaffiliated companies 21,697,839
Closing and expiration of option contracts written 168,211
Closing and expiration of futures contracts (798,790)
Foreign currency transactions (3,158)
Swap contracts (1,179,992)
Increase from payment by affiliate 51,312
----------------
Net realized gain 19,935,422
- -------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments (13,187,154)
Translation of assets and liabilities denominated in foreign currencies 885,819
Futures contracts (340,343)
Option contracts written (35,643)
Short positions (1,220)
Swap contracts (566,467)
----------------
Net change in unrealized appreciation (13,245,008)
- -------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 20,058,961
================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
21 | OPPENHEIMER BALANCED FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2007 2006
- ----------------------------------------------------------------------------------------
OPERATIONS
- ----------------------------------------------------------------------------------------
Net investment income $ 13,368,547 $ 13,221,942
- ----------------------------------------------------------------------------------------
Net realized gain 19,935,422 49,442,386
- ----------------------------------------------------------------------------------------
Net change in unrealized appreciation (13,245,008) (4,993,484)
--------------------------------
Net increase in net assets resulting from operations 20,058,961 57,670,844
- ----------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ----------------------------------------------------------------------------------------
Dividends from net investment income:
Non-Service shares (10,919,746) (10,383,550)
Service shares (2,568,291) (1,826,958)
--------------------------------
(13,488,037) (12,210,508)
- ----------------------------------------------------------------------------------------
Distributions from net realized gain:
Non-Service shares (34,150,478) (22,826,230)
Service shares (8,836,795) (4,434,656)
--------------------------------
(42,987,273) (27,260,886)
- ----------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- ----------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
beneficial interest transactions:
Non-Service shares (21,014,578) (81,734,942)
Service shares 17,776,612 18,628,043
--------------------------------
(3,237,966) (63,106,899)
- ----------------------------------------------------------------------------------------
NET ASSETS
- ----------------------------------------------------------------------------------------
Total decrease (39,654,315) (44,907,449)
- ----------------------------------------------------------------------------------------
Beginning of period 547,001,605 591,909,054
--------------------------------
End of period (including accumulated net investment
income of $12,343,063 and $13,444,735, respectively) $ 507,347,290 $ 547,001,605
================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22 | OPPENHEIMER BALANCED FUND/VA
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2007 2006 2005 2004 2003
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 17.69 $ 17.07 $ 17.35 $ 15.92 $ 13.16
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .43 1 .40 1 .33 1 .26 1 .27
Net realized and unrealized gain .19 1.38 .31 1.33 2.90
---------------------------------------------------------------------------
Total from investment operations .62 1.78 .64 1.59 3.17
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.46) (.36) (.30) (.16) (.41)
Distributions from net realized gain (1.44) (.80) (.62) -- --
---------------------------------------------------------------------------
Total dividends and/or distributions to shareholders (1.90) (1.16) (.92) (.16) (.41)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 16.41 $ 17.69 $ 17.07 $ 17.35 $ 15.92
===========================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 3.79% 11.15% 3.89% 10.10% 24.96%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $385,948 $ 435,639 $ 503,753 $ 547,290 $ 533,710
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $418,103 $ 456,513 $ 522,754 $ 528,655 $ 475,389
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 2.55% 2.42% 1.98% 1.59% 1.82%
Total expenses 0.75% 4 0.75% 4 0.74% 0.74% 0.76%
Expenses after payments, waivers and/or reimbursements
and reduction to custodian expenses 0.73% 0.75% 0.74% 0.74% 0.76%
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 68% 5 76% 5 67% 5 68% 5 248%
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 less than one full year.
4. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended December 31, 2007 0.75%
Year Ended December 31, 2006 0.75%
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, 2007 $ 296,201,319 $ 315,527,720
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.
23 | OPPENHEIMER BALANCED FUND/VA
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SERVICE SHARES YEAR ENDED DECEMBER 31, 2007 2006 2005 2004 2003
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 17.57 $ 16.97 $ 17.26 $ 15.87 $ 13.14
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .38 1 .36 1 .29 1 .23 1 .39
Net realized and unrealized gain .19 1.37 .31 1.31 2.74
---------------------------------------------------------------------------
Total from investment operations .57 1.73 .60 1.54 3.13
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.42) (.33) (.27) (.15) (.40)
Distributions from net realized gain (1.44) (.80) (.62) -- --
---------------------------------------------------------------------------
Total dividends and/or distributions to shareholders (1.86) (1.13) (.89) (.15) (.40)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 16.28 $ 17.57 $ 16.97 $ 17.26 $ 15.87
===========================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 3.49% 10.86% 3.67% 9.79% 24.69%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $121,399 $ 111,363 $ 88,156 $ 59,650 $ 25,302
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $117,012 $ 100,010 $ 72,977 $ 39,851 $ 9,908
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 2.30% 2.17% 1.74% 1.41% 1.37%
Total expenses 1.00% 4 1.01% 4 1.00% 1.02% 1.01%
Expenses after payments, waivers and/or
reimbursements and reduction to custodian expenses 0.98% 1.01% 1.00% 1.02% 1.01%
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 68% 5 76% 5 67% 5 68% 5 248%
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 less than one full year.
4. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended December 31, 2007 1.00%
Year Ended December 31, 2006 1.01%
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, 2007 $ 296,201,319 $ 315,527,720
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.
24 | 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 adviser is OppenheimerFunds, Inc. (the "Manager").
The Fund offers two classes of shares. Both classes are sold at their
offering price, which is the net asset value per share, to separate investment
accounts of participating insurance companies as an underlying investment for
variable life insurance policies, variable annuity contracts or other investment
products. The class of shares designated as Service shares is subject to a
distribution and service plan. Both classes of shares have identical rights and
voting privileges with respect to the Fund in general and exclusive voting
rights on matters that affect that class alone. Earnings, net assets and net
asset value per share may differ due to each class having its own expenses, such
as transfer and shareholder servicing agent fees and shareholder communications,
directly attributable to that class.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of the New York Stock Exchange (the "Exchange"), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for trading. Securities may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. Securities traded on a registered U.S.
securities exchange 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 whose principal exchange is NASDAQ(R) are valued based on the closing
price reported by NASDAQ prior to the time when the Fund's assets are valued. In
the absence of a sale, the security is valued at the last sale price on the
prior trading day, if it is within the spread of the 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, collateralized
mortgage obligations and other asset-backed securities will be valued at the
mean between the "bid" and "asked" prices. Securities for which market
quotations are not readily available are valued at their fair value. 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. Shares of a registered investment company
that are not traded on an exchange are valued at the acquired investment
company's net asset value per share. "Money market-type" debt instruments with
remaining maturities of sixty days or less are valued at cost adjusted by the
amortization of discount or premium to maturity (amortized cost), which
approximates market value.
- --------------------------------------------------------------------------------
SECURITIES ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS. The Fund may purchase
securities on a "when-issued" basis, and may purchase or sell securities on a
"delayed delivery" basis. "When-issued" or "delayed delivery" refers to
securities whose terms and indenture are available and for which a market
exists, but which are not available for immediate delivery. Delivery and payment
for securities that have been purchased by the Fund on a when-issued basis
normally takes place within six months and possibly as long as two years or more
after the trade date. During this period, such securities do not earn interest,
are subject to market fluctuation and may increase or decrease in value prior to
their delivery. The purchase of securities on a when-issued basis may increase
the volatility of the Fund's net asset value to the extent the Fund executes
such transactions while remaining substantially fully invested. When the Fund
engages in when-issued or delayed delivery transactions, it relies on the buyer
or seller, as the case may be, to complete the transaction. Their failure to do
so may cause the Fund to lose the opportunity to obtain or dispose of the
security at a price and yield it considers advantageous. The Fund maintains
internally designated assets with a market value equal to or greater than the
amount of its purchase commitments. The Fund may also sell securities that it
purchased on a when-issued basis or forward commitment prior to settlement of
the original purchase.
25 | OPPENHEIMER BALANCED FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
As of December 31, 2007, the Fund had purchased securities issued on a
when-issued or delayed delivery basis and sold securities issued on a delayed
delivery basis as follows:
WHEN-ISSUED OR DELAYED DELIVERY
BASIS TRANSACTIONS
------------------------------------------------------
Purchased securities $6,332,188
Sold securities 556,150
- --------------------------------------------------------------------------------
SECURITIES SOLD SHORT. The Fund may short sale when-issued securities for future
settlement. The value of the open short position is recorded as a liability, and
the Fund records an unrealized gain or loss for the value of the open short
position. The Fund records a realized gain or loss when the short position is
closed out.
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in
U.S. dollars. The values of securities denominated in foreign currencies and
amounts related to the purchase and sale of foreign securities and foreign
investment income are translated into U.S. dollars as of the close of the
Exchange, normally 4:00 P.M. Eastern time, on each day the Exchange is open for
trading. Foreign exchange rates may be valued primarily using a reliable bank,
dealer or service authorized by the Board of Trustees.
Reported net realized gains and losses from foreign currency transactions
arise from sales of portfolio securities, sales and maturities of short-term
securities, sales of foreign currencies, exchange rate fluctuations between the
trade and settlement dates on securities transactions, and the difference
between the amounts of dividends, interest, and foreign withholding taxes
recorded on the Fund's books and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized appreciation and depreciation on the
translation of assets and liabilities denominated in foreign currencies arise
from changes in the values of assets and liabilities, including investments in
securities at fiscal period end, resulting from changes in exchange rates.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
INVESTMENT IN OPPENHEIMER INSTITUTIONAL MONEY MARKET FUND. The Fund is permitted
to invest daily available cash balances in an affiliated money market fund. The
Fund may invest the available cash in Class E shares of Oppenheimer
Institutional Money Market Fund ("IMMF") to seek current income while preserving
liquidity. IMMF is a registered open-end management investment company,
regulated as a money market fund under the Investment Company Act of 1940, as
amended. The Manager is also the investment adviser of IMMF. 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.
- --------------------------------------------------------------------------------
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 BALANCED FUND/VA
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders. Therefore, no federal income or excise tax provision is
required. The Fund files income tax returns in U.S. federal and applicable state
jurisdictions. The statute of limitations on the Fund's tax return filings
remain open for the three preceding fiscal reporting period ends.
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
---------------------------------------------------------------------------
$ 16,571,460 $ 23,283,622 $ 10,520,209 $ 61,264,929
1. As of December 31, 2007, the Fund had $10,203,576 of post-October losses
available to offset future realized capital gains, if any. Such losses, if
unutilized, will expire in 2016.
2. The Fund had $316,633 of straddle losses which were deferred.
3. During the fiscal year ended December 31, 2007, the Fund did not utilize any
capital loss carryforward.
4. During the fiscal year ended December 31, 2006, 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, 2007.
Net assets of the Fund were unaffected by the reclassifications.
REDUCTION REDUCTION
TO ACCUMULATED TO ACCUMULATED NET
INCREASE NET INVESTMENT REALIZED GAIN
TO PAID-IN CAPITAL INCOME ON INVESTMENTS 5
----------------------------------------------------------------
$2,620,424 $982,182 $1,638,242
5. $2,620,424, including $2,148,778 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, 2007
and December 31, 2006 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2007 DECEMBER 31, 2006
----------------------------------------------------------------
Distributions paid from:
Ordinary income $ 14,806,317 $ 15,967,610
Long-term capital gain 41,668,993 23,503,784
-------------------------------------
Total $ 56,475,310 $ 39,471,394
=====================================
27 | OPPENHEIMER BALANCED 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, 2007 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 $ 451,781,808
Federal tax cost of other investments (49,749,601)
---------------
Total federal tax cost $ 402,032,207
===============
Gross unrealized appreciation $ 76,391,860
Gross unrealized depreciation (15,126,931)
---------------
Net unrealized appreciation $ 61,264,929
===============
- --------------------------------------------------------------------------------
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 compensation deferral plan.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations and
may differ from U.S. generally accepted accounting principles, are recorded on
the ex-dividend date. Income and capital gain distributions, if any, are
declared and paid annually or at other times as deemed necessary by the Manager.
- --------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income is recognized on an accrual basis. Market discount and
premium, which are included in interest income on the Statement of Operations,
are amortized or accreted daily.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. "Custodian fees and expenses" in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts, to the extent they are not
offset by positive cash balances maintained by the Fund, at a rate equal to the
Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line item,
if applicable, represents earnings on cash balances maintained by the Fund
during the period. Such interest expense and other custodian fees may be paid
with these earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Fund's organizational documents provide current and former
trustees and officers with a limited indemnification against liabilities arising
in connection with the performance of their duties to the Fund. In the normal
course of business, the Fund may also enter into contracts that provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would be dependent on future claims that may be made against the
Fund. The risk of material loss from such claims is considered remote.
28 | OPPENHEIMER BALANCED FUND/VA
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period. Actual
results could differ from those estimates.
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
YEAR ENDED DECEMBER 31, 2007 YEAR ENDED DECEMBER 31, 2006
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------
NON-SERVICE SHARES
Sold 999,612 $ 16,748,816 714,924 $ 11,819,806
Dividends and/or distributions
reinvested 2,818,651 45,070,224 2,069,145 33,209,780
Redeemed (4,921,045) (82,833,618) (7,669,019) (126,764,528)
-------------------------------------------------------------
Net decrease (1,102,782) $ (21,014,578) (4,884,950) $ (81,734,942)
=============================================================
- -----------------------------------------------------------------------------------------------
SERVICE SHARES
Sold 1,507,547 $ 25,038,747 1,978,250 $ 32,390,681
Dividends and/or distributions
reinvested 717,301 11,405,086 392,086 6,261,614
Redeemed (1,107,184) (18,667,221) (1,226,866) (20,024,252)
-------------------------------------------------------------
Net increase 1,117,664 $ 17,776,612 1,143,470 $ 18,628,043
=============================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations and investments in IMMF, for the year ended December
31, 2007, were as follows:
PURCHASES SALES
--------------------------------------------------------------
Investment securities $ 265,696,290 $ 318,970,030
U.S. government and government
agency obligations 69,453,129 87,609,277
To Be Announced (TBA)
mortgage-related securities 296,201,319 315,527,720
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Under the investment advisory agreement, the Fund pays the
Manager a management fee based on the daily net assets of the Fund at an annual
rate as shown in the following table:
FEE SCHEDULE
---------------------------------
Up to $200 million 0.75%
Next $200 million 0.72
Next $200 million 0.69
Next $200 million 0.66
Over $800 million 0.60
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services ("OFS"), a division of the
Manager, acts as the transfer and shareholder servicing agent for the Fund. The
Fund pays OFS a per account fee. For the year ended December 31, 2007, the Fund
paid $20,142 to OFS for services to the Fund.
29 | OPPENHEIMER BALANCED FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
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 (the "Plan") in accordance with Rule 12b-1 under
the Investment Company Act of 1940 for Service shares to pay OppenheimerFunds
Distributor, Inc. (the "Distributor"), for distribution related services,
personal service and account maintenance for the Fund's Service shares. Under
the Plan, payments are made periodically at an annual rate of 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. These
fees are paid out of the Fund's assets on an on-going basis and increase
operating expenses of the Service shares, which results in lower performance
compared to the Fund's shares that are not subject to a service fee. Fees
incurred by the Fund under the Plan are detailed in the Statement of Operations.
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. Effective September 1, 2007, the Manager
voluntarily agreed to waive a portion of the advisory fee and/or reimburse
certain expenses so the total expenses of the Fund will not exceed 0.67% of
average net assets for Non-Service shares and 0.92% of average annual net assets
for Service shares. During the year ended December 31, 2007, OFS waived $93,799
and $30,812 for Non-Service and Service shares, respectively. This voluntary
waiver and/or reimbursement may be withdrawn at any time.
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, 2007, the Manager waived $18,551 for
IMMF management fees.
During the year ended December 31, 2007, the Manager voluntarily
reimbursed the Fund $51,312 for certain transactions. The payment increased the
Fund's total returns by less than 0.01%.
- --------------------------------------------------------------------------------
5. FOREIGN CURRENCY EXCHANGE CONTRACTS
The Fund may enter into foreign currency exchange contracts ("forward
contracts") for the purchase or sale of a foreign currency at a negotiated rate
at a future date.
Foreign currency exchange contracts are reported on a schedule following
the Statement of Investments. Forward contracts will be valued daily based upon
the closing prices of the forward currency rates determined at the close of the
Exchange as provided by a bank, dealer or pricing service. The resulting
unrealized appreciation (depreciation) is reported in the Statement of Assets
and Liabilities as a receivable or payable and in the Statement of Operations
within the change in unrealized appreciation (depreciation). At contract close,
the difference between the original cost of the contract and the value at the
close date is recorded as a realized gain (loss) in the Statement of Operations.
Risks to the Fund include both market and credit risk. Market risk is the
risk that the value of the forward contract will depreciate due to unfavorable
changes in the exchange rates. Credit risk arises from the possibility that the
coun-terparty will default. If the counterparty defaults, the Fund's loss will
consist of the net amount of contractual payments that the Fund has not yet
received.
As of December 31, 2007, the Fund had no outstanding forward contracts.
- --------------------------------------------------------------------------------
6. FUTURES CONTRACTS
A futures contract is a commitment to buy or sell a specific amount of a
financial instrument at a negotiated price on a stipulated future date. The Fund
may buy and sell futures contracts that relate to broadly based securities
indices (financial futures), debt securities (interest rate futures) and various
commodities (commodity index futures). The Fund may also buy or write put or
call options on these futures contracts.
30 | OPPENHEIMER BALANCED FUND/VA
Futures contracts traded on a commodities or futures exchange will be
valued at the final settlement price or official closing price on the principal
exchange as reported by such principal exchange at its trading session ending
at, or most recently prior to, the time when the Fund's assets are valued.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities (initial margin) in an amount equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Fund each day. The variation margin payments are equal
to the daily changes in the contract value and are recorded as unrealized gains
and losses.
Futures contracts are reported on a schedule following the Statement of
Investments. Securities held in collateralized accounts to cover initial margin
requirements on open futures contracts are noted in the Statement of
Investments. Cash held by the broker to cover initial margin requirements on
open futures contracts and the receivable and/or payable for the daily mark to
market for the variation margin are noted in the Statement of Assets and
Liabilities. The net change in unrealized appreciation and depreciation is
reported in the Statement of Operations. Realized gains (losses) are reported in
the Statement of Operations at the closing or expiration of futures contracts.
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market where the Fund is unable to
liquidate the contract or enter into an offsetting position and, if used for
hedging purposes, the risk that the price of the contract will correlate
imperfectly with the prices of the Fund's securities.
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7. OPTION ACTIVITY
The Fund may buy and sell put and call options, or write put and covered
call options. When an option is written, the Fund receives a premium and becomes
obligated to sell or purchase the underlying security at a fixed price, upon
exercise of the option.
Options are valued daily based upon the last sale price on the principal
exchange on which the option is traded. The difference between the premium
received or paid, and market value of the option, is recorded as unrealized
appreciation or depreciation. The net change in unrealized appreciation or
depreciation is reported in the Statement of Operations. When an option is
exercised, the cost of the security purchased or the proceeds of the security
sale are adjusted by the amount of premium received or paid. Upon the expiration
or closing of the option transaction, a gain or loss is reported in the
Statement of Operations.
Securities designated to cover outstanding call or put options are noted
in the Statement of Investments where applicable. Options written are reported
in a schedule following the Statement of Investments and as a liability in the
Statement of Assets and Liabilities.
The risk in writing a call option is that the Fund gives up the
opportunity for profit if the market price of the security increases and the
option is exercised. The risk in writing a put option is that the Fund may incur
a loss if the market price of the security decreases and the option is
exercised. The risk in buying an option is that the Fund pays a premium whether
or not the option is exercised. The Fund also has the additional risk that there
may be an illiquid market where the Fund is unable to close the contract.
Written option activity for the year ended December 31, 2007 was as follows:
CALL OPTIONS
------------------------
NUMBER OF AMOUNT OF
CONTRACTS PREMIUMS
---------------------------------------------------------
Options outstanding as of
December 31, 2006 89 $ 46,768
Options written 437 149,192
Options closed or expired (526) (195,960)
------------------------
Options outstanding as of
December 31, 2007 -- $ --
========================
31 | OPPENHEIMER BALANCED FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
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8. SWAP CONTRACTS
The Fund may enter into swap contract agreements with a counterparty to exchange
a series of cash flows based on either specified reference rates, or the
occurrence of a credit event, over a specified period. Such contracts may
include interest rate, equity, debt, index, total return, credit and currency
swaps.
Swaps are marked to market daily using primarily quotations from pricing
services, counterparties and brokers. Swap contracts are reported on a schedule
following the Statement of Investments. The value of the contracts is separately
disclosed on the Statement of Assets and Liabilities. The unrealized
appreciation (depreciation) related to the change in the valuation of the
notional amount of the swap is combined with the accrued interest due to (owed
by) the Fund at termination or settlement. The net change in this amount during
the period is included on the Statement of Operations. The Fund also records any
periodic payments received from (paid to) the counter-party, including at
termination, under such contracts as realized gain (loss) on the Statement of
Operations.
Risks of entering into swap contracts include credit, market and liquidity
risk. 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 payments that the Fund has not yet received. Market risk
is the risk that the value of the contract will depreciate due to unfavorable
changes in the reference asset. If there is an illiquid market for the
agreement, the Fund may be unable to close the contract prior to contract
termination.
- --------------------------------------------------------------------------------
CREDIT DEFAULT SWAP CONTRACTS. A credit default swap is a bilateral contract
that enables an investor to buy or sell protection against a defined-issuer
credit event. The Fund may enter into credit default swaps on a single security,
or a basket of securities.
In a credit default swap contract, the purchaser of the contract will pay
a periodic interest fee, similar to an insurance premium, on the notional amount
of the swap contract to the counterparty (the seller of the contract). If there
is a credit event (for example, bankruptcy or a failure to timely pay interest
or principal), the purchaser will exercise the contract and will receive a
payment from the seller of the contract equal to the notional value of the
credit default swap contract less the value of the underlying security. In the
event that the credit default swap is exercised due to a credit event, the
difference between the value of the underlying security and the notional amount
is recorded as realized gain (loss) and is included on the Statement of
Operations.
Risks of credit default swaps include, but are not limited to, the cost of
paying for credit protection if there are no credit events.
- --------------------------------------------------------------------------------
INTEREST RATE SWAP CONTRACTS. An interest rate swap is an agreement between
counterparties to exchange periodic interest payments on the notional amount of
the contract. One cash flow stream will typically be a floating rate payment
based upon a specified index while the other is typically a fixed rate.
Interest rate swap agreements include interest rate 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.
- --------------------------------------------------------------------------------
TOTAL RETURN SWAP CONTRACTS. A total return swap is an agreement between
counterparties to exchange a set of future cash flows on the notional amount of
the contract. One cash flow is typically 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.
- --------------------------------------------------------------------------------
9. ILLIQUID SECURITIES
As of December 31, 2007, investments in securities included issues that are
illiquid. Investments may be illiquid because they do not have an active trading
market, making it difficult to value them or dispose of them promptly at an
acceptable price. 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 an applicable footnote
on the Statement of Investments.
32 | OPPENHEIMER BALANCED FUND/VA
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10. SECURITIES LENDING
The Fund lends portfolio securities from time to time in order to earn
additional income in the form of fees or interest on securities received as
collateral or the investment of any cash received as collateral. The loans are
secured by collateral (either securities, letters of credit, or cash) 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 each business day and any additional required collateral is
delivered to the Fund on the next business day. If the borrower defaults on its
obligation to return the securities loaned because of insolvency or other
reasons, the Fund could experience delays and cost in recovering the securities
loaned or in gaining access to the collateral. 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 and recognizes the gain
or loss in the fair value of the securities loaned that may occur during the
term of the loan. The Fund has the right under the lending agreement to recover
the securities from the borrower on demand.
As of December 31, 2007, the Fund had no securities on loan.
- --------------------------------------------------------------------------------
11. RECENT ACCOUNTING PRONOUNCEMENT
In September 2006, Financial Accounting Standards Board ("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, 2007, 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.
33 | 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, 2007,
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, 2007, 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, 2007, 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 13, 2008
34 | OPPENHEIMER BALANCED FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2008, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2007. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
Capital gain distributions of $1.3955 per share were paid to Non-service
and Service shareholders, respectively, on March 12, 2007. 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, 2007 which are not designated as capital gain distributions should be
multiplied by 14.63% 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.
35 | 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.
36 | 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 Emmanuel Ferreira, Angelo Manioudakis and the Manager's Value and Core Plus
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.
37 | OPPENHEIMER BALANCED 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 mixed asset target allocation
moderate 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
considered the comparability of the fees charged and the services provided to
the Fund to the fees and services for other clients or accounts advised by the
Manager. The independent consultant provided comparative data in regard to the
fees and expenses of the Fund and other mixed asset target allocation moderate
funds underlying variable insurance products. The Board noted that the Fund's
contractual and 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 waive a portion of the fund's management
fee so that annual total expenses will not exceed 0.67% for Non-service shares
and 0.92% for Service shares.
ECONOMIES OF SCALE. The Board reviewed whether the Manager may realize
economies of scale in managing and supporting the Fund. The Board noted that the
Fund currently has management fee breakpoints, which are intended to share with
Fund shareholders economies of scale that may exist as the Fund's assets grow.
OTHER BENEFITS TO THE MANAGER. In addition to considering the profits
realized by the Manager, the Board considered information that was provided
regarding the direct and indirect benefits the Manager receives as a result of
its relationship with the Fund, including compensation paid to the Manager's
affiliates and research provided to the Manager in connection with permissible
brokerage arrangements (soft dollar arrangements). The Board also considered
that the Manager must be able to pay and retain experienced professional
personnel at competitive rates to provide quality services to the Fund 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 considered all of the above information, and considered the
terms and conditions of the Agreement, including the management fee, in light of
all of the surrounding circumstances.
38 | OPPENHEIMER BALANCED FUND/VA
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) HELD WITH THE PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS HELD; NUMBER OF
FUND, LENGTH OF SERVICE, AGE 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, Cherry Creek Mortgage Company
Chairman of the Board of (since 1991), Chairman, Centennial State Mortgage Company (since 1994), Chairman, The El Paso
Trustees (since 2003), Mortgage Company (since 1993); Chairman, Ambassador Media Corporation (since 1984); Chairman,
Trustee (since 1999) Broadway Ventures (since 1984); Director of Helmerich & Payne, Inc. (oil and gas
Age: 70 drilling/production company) (since 1992), Campus Crusade for Christ (non-profit) (since 1991);
Former Director, The Lynde and Harry Bradley Foundation, Inc. (non-profit organization)
(2002-2006); former Chairman of: Transland Financial Services, Inc. (private mortgage banking
company) (1997-2003), Great Frontier Insurance (1995-2000), Frontier Real Estate, Inc.
(residential real estate brokerage) (1994-2000) and Frontier Title (title insurance agency)
(1995-2000); former Director of the following: UNUMProvident (insurance company) (1991-2004),
Storage Technology Corporation (computer equipment company) (1991-2003) and International Family
Entertainment (television channel) (1992-1997); U.S. Senator (January 1979-January 1991).
Oversees 39 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: 71 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 39 portfolios in the
OppenheimerFunds complex.
EDWARD L. CAMERON, Member of The Life Guard of Mount Vernon (George Washington historical site) (June 2000-May
Trustee (since 1999) 2006); Partner of PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999); Chairman of
Age: 69 Price Waterhouse LLP Global Investment Management Industry Services Group (financial services
firm) (July 1994-June 1998). Oversees 39 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: 66 (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 39 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: 67 (until October 1994). Oversees 39 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: 61 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 39 portfolios in the OppenheimerFunds complex.
39 | OPPENHEIMER BALANCED FUND/VA
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
ROBERT J. MALONE, Director of Jones Knowledge, Inc. (since 2006); Director of Jones International University
Trustee (since 2002) (educational organization) (since August 2005); Chairman, Chief Executive Officer and Director of
Age: 63 Steele Street State Bank (commercial banking) (since August 2003); Director of Colorado UpLIFT
(charitable organization) (since 1986); Trustee of the Gallagher Family Foundation (non-profit
organization) (since 2000); Former Chairman of U.S. Bank-Colorado (subsidiary of U.S. Bancorp
and formerly Colorado National Bank) (July 1996-April 1999); Director of Commercial Assets, Inc.
(real estate investment trust) (1993-2000); Director of Jones Knowledge, Inc. (2001-July 2004);
and Director of U.S. Exploration, Inc. (oil and gas exploration) (1997-February 2004). Oversees
39 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 of
Age: 65 Worcester Polytech Institute (since 1985); Chairman (since 1994) 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 41 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 of the Manager (since June 2001); President of the
Trustee, President and Manager (September 2000-March 2007); President and director or trustee of other Oppenheimer
Principal Executive Officer funds; President and Director of Oppenheimer Acquisition Corp. ("OAC") (the Manager's parent
(since 2001) holding company) and of Oppenheimer Partnership Holdings, Inc. (holding company subsidiary of the
Age: 58 Manager) (since July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of the
Manager) (November 2001-December 2006); 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); Chairman
(since October 2007) and Member of the Investment Company Institute's Board of Governors (since
October 2003). Oversees 102 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. FERREIRA, 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; FOR MESSRS. MANIOUDAKIS, BOMFIM, CAAN, GORD AND SWANEY, 470
ATLANTIC AVENUE, 11TH FLOOR, BOSTON, MASSACHUSETTS 02210. EACH OFFICER SERVES FOR AN INDEFINITE
TERM OR UNTIL HIS OR HER RESIGNATION, RETIREMENT, DEATH OR REMOVAL.
EMMANUEL FERREIRA, Vice President of the Manager (since January 2003); Portfolio Manager at Lashire Investments
Vice President and Portfolio (July 1999-December 2002). A portfolio manager and officer of 3 portfolios in the
Manager (since 2003) OppenheimerFunds complex.
Age: 40
ANGELO G. MANIOUDAKIS, Senior Vice President of the Manager and of HarbourView Asset Management Corporation (since April
Vice President and Portfolio 2002) and of OFI Institutional Asset Management, Inc. (since June 2002); Vice President of
Manager (since 2003) Oppenheimer Real Asset Management, Inc. (since November 2006). Executive Director and portfolio
Age: 41 manager for MSIM/Miller, Anderson & Sherrerd, (Morgan Stanley Asset Management) (August
1993-April 2002). A portfolio manager and officer of 15 portfolios in the OppenheimerFunds
complex.
40 | OPPENHEIMER BALANCED FUND/VA
ANTULIO N. BOMFIM, Vice President of the Manager (since October 2003); Senior Economist at the Board of Governors of
Vice President and Portfolio the Federal Reserve System (June 1992-October 2003). A portfolio manager and officer of 12
Manager (since 2006) portfolios in the OppenheimerFunds complex.
Age: 41
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 and officer of 12 portfolios in the OppenheimerFunds
Age: 38 complex.
BENJAMIN J. GORD, Vice President of the Manager (since April 2002) of HarbourView Asset 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: 45 Stanley Investment Management (April 1992-March 2002). A portfolio manager and officer of 12
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 and officer of 12
Age: 35 portfolios in the OppenheimerFunds complex.
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Chief
Vice President and Chief Compliance Officer of OppenheimerFunds Distributor, Inc., Centennial Asset Management and
Compliance Officer Shareholder Services, Inc. (since March 2004); Vice President of OppenheimerFunds Distributor,
(since 2004) Inc., Centennial Asset Management Corporation and Shareholder Services, Inc. (since June 1983);
Age: 57 Former Vice President and Director of Internal Audit of the Manager (1997-February 2004). An
officer of 102 portfolios in the OppenheimerFunds complex.
BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer of the
Treasurer and Principal following: HarbourView Asset Management Corporation, Shareholder Financial Services, Inc.,
Financial & Accounting Shareholder Services, Inc., Oppenheimer Real Asset Management, Inc. and Oppenheimer Partnership
Officer (since 1999) Holdings, Inc. (since March 1999), OFI Private Investments, Inc. (since March 2000),
Age: 48 OppenheimerFunds International Ltd. and OppenheimerFunds plc (since May 2000), OFI Institutional
Asset Management, Inc. (since November 2000), and OppenheimerFunds Legacy Program (charitable
trust program established by the Manager) (since June 2003); Treasurer and Chief Financial
Officer of OFI Trust Company (trust company subsidiary of the Manager) (since May 2000);
Assistant Treasurer of the following: OAC (since March 1999), Centennial Asset Management
Corporation (March 1999-October 2003) and OppenheimerFunds Legacy Program (April 2000-June
2003). An officer of 102 portfolios in the OppenheimerFunds complex.
BRIAN S. PETERSEN, Vice President of the Manager (since February 2007); Assistant Vice President of the Manager
Assistant Treasurer (August 2002-February 2007); Manager/Financial Product Accounting of the Manager (November
(since 2004) 1998-July 2002). An officer of 102 portfolios in the OppenheimerFunds complex.
Age: 37
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). An officer of 102 portfolios in the OppenheimerFunds
Age: 37 complex.
41 | OPPENHEIMER BALANCED FUND/VA
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
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 Counsel
Secretary (since 2001) of Centennial Asset Management Corporation (since December 2001); Senior Vice President and
Age: 59 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). An officer of 102 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) of UBS Financial Services,
(since 2004) Inc. An officer of 102 portfolios in the OppenheimerFunds complex.
Age: 40
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 102 portfolios in the
Age: 44 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: 42 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 102
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.
42 | OPPENHEIMER BALANCED 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 $317,675 in fiscal 2007 and $230,000 in fiscal 2006.
(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 in fiscal 2007.
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees in fiscal 2007 and $40,000 in fiscal 2006 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 no such fees in fiscal 2007 and $12,075 in fiscal 2006.
The principal accountant for the audit of the registrant's annual financial
statements billed $32,732 in fiscal 2007 and no such fees in fiscal 2006 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 fees would include professional services for 22c-2 program and compliance
review.
(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 $32,732 in fiscal 2007 and $52,075 in fiscal
2006 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 12/31/2007, 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: 02/07/2008
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: 02/07/2008
By: /s/ Brian W. Wixted
---------------------------
Brian W. Wixted
Principal Financial Officer
Date: 02/07/2008