OPPENHEIMER VARIABLE ACCOUNT FUNDS
Supplement dated September 30, 1994
to the Prospectus dated May 1, 1994
The Prospectus is amended as follows:
1. The section captioned "Forward Contracts" is deleted and replaced
with the following:
Forward Contracts
Each Fund, other than Money Fund, may enter into foreign currency
exchange contracts ("Forward Contracts"), which obligate the seller
to deliver and the purchaser to take a specific amount of foreign
currency at a specific future date for a fixed price. The Funds
may enter into a Forward Contract in order to "lock in" the U.S.
dollar price of a security denominated in a foreign currency which
it has purchased or sold but which has not yet settled, or to
protect against a possible loss resulting from an adverse change in
the relationship between the U.S. dollar and a foreign currency.
There is a risk that use of Forward Contracts may reduce gain that
would otherwise result from a change in the relationship between the
U.S. dollar and a foreign currency.
2. The first three sentences of the paragraph entitled "Puts on
Securities and Futures" is deleted and replaced with the following:
Each Fund, other than Money Fund, may purchase put options ("puts")
which relate to securities (whether or not it holds such securities
in its portfolio) or Futures. They may also write puts on
securities, securities indices or Futures only if such puts are
covered by segregated liquid assets. None of the Funds will write
puts if, as a result, more than 50% of its net assets would be
required to be segregated liquid assets.
3. The paragraph captioned "Derivatives" is deleted and replaced with
the following:
Derivative Investments. Each Fund, other than Money Fund, can
invest in a number of different kinds of "derivative investments."
In general, a "derivative investment" is a specially designed
investment whose performance is linked to the performance of another
investment or security, such as an option, future, index or
currency. In the broadest sense, derivative investments include
exchange-traded options and futures contracts (see "Writing Covered
Calls" and "Hedging"), as well as the investments discussed in this
section. The risks of investing in derivative investments include
not only the ability of the company issuing the instrument to pay
the amount due on the maturity of the instrument, but also the risk
that the underlying investment or security might not perform the way
the Manager expected it to perform. The performance of derivative
investments may also be influenced by interest rate changes in the
U.S. and abroad. All of this can mean that the Funds will realize
less principal and/or income than expected. Certain derivative
investments held by the Fund may trade in the over-the-counter
market and may be illiquid. See "Restricted and Illiquid
Securities."
Examples of derivative investments the Funds may invest in
include, among others, "index-linked" notes. These are debt
securities of companies that call for payment on the maturity of the
note in different terms than the typical note where the borrower
agrees to pay a fixed sum on the maturity of the note. The payment
on maturity of an index-linked note depends on the performance of
one or more market indices, such as the S & P 500 Index. Further
examples of derivative investments the Fund may invest in include
"debt exchangeable for common stock" of an issuer or "equity-linked
debt securities" of an issuer. At maturity, the principal amount of
the debt security is exchanged for common stock of the issuer or is
payable in an amount based on the issuer's common stock price at the
time of maturity. In either case there is a risk that the amount
payable at maturity will be less than the principal amount of the
debt.
Other examples of derivative investments the Funds may invest in
are currency-indexed securities. These are typically short-term or
intermediate-term debt securities whose maturity values or interest
rates are determined by reference to one or more specified foreign
currencies. Certain currency-indexed securities purchased by the
Fund may have a payout factor tied to a multiple of the movement of
the U.S. dollar (or the foreign currency in which the security is
denominated) against the movement in the U.S. dollar, the foreign
currency, another currency, or an index. Such securities may be
subject to increased principal risk and increased volatility than
comparable securities without a payout factor in excess of one, but
the Manager believes the increased yield justifies the increased
risk.
September 30, 1994 PS999
