Annual Report December 31, 1999
O P P E N H E I M E R
Money Fund/VA
A Series of Oppenheimer Variable Account Funds
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OppenheimerFunds(R)
THE RIGHT WAY TO INVEST
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Oppenheimer Variable Account Funds--Oppenheimer Money Fund/VA
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Objective
Oppenheimer Money Fund/VA, a series of Oppenheimer Variable Account Funds,
primarily seeks maximum current income in "money market" securities and other
obligations that offer individual investors low capital risk and the maintenance
of liquidity. These may include short-term government securities, certificates
of deposit (CDs), bankers' acceptances and commercial paper.
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Narrative by Carol E. Wolf, Co-portfolio Manager
During the fiscal year that ended December 31, 1999, Oppenheimer Money Fund/VA
produced an annualized yield of 4.85% without compounding, and an annualized
yield including the effects of compounding, of 4.97%. On December 31, 1999, the
Fund's seven-day annualized yields, with and without compounding, were 5.64% and
5.49%, respectively.(1) These returns were substantially higher than the yields
reported six months ago, primarily because of higher short-term interest rates
during the reporting period.
When 1999 began, the world's financial markets were just beginning to
recover from the dislocations caused in 1998 by the spread of the global credit
and currency crisis in emerging markets and the failure of a large, highly
leveraged U.S. hedge fund. As a response to these problems, and to limit their
adverse impact on the world's economies, many nations' central banks--including
the Federal Reserve Board in the United States--had cut short-term interest
rates in an attempt to stimulate economic growth.
The central banks' strategies appear to have been successful, because
evidence began to emerge soon after 1999 started that the worst of the economic
malaise was over for Japan, Asia and Latin America, and that the U.S. economy
continued to grow strongly. In this environment, investors grew concerned that
unsustainable economic growth might rekindle long-dormant inflationary
pressures, especially in the United States where unemployment reached historical
lows and consumers appeared to be spending more than they were earning.
In order to forestall a potential reacceleration of inflation, the
Federal Reserve Board indicated in the second quarter that it was considering an
increase in short-term interest rates. This potential rate hike was quickly
reflected in the fixed income markets in the form of higher yields for both
money market securities and longer term bonds. Indeed, the Federal Reserve Board
subsequently raised interest rates three times during the summer and fall of
1999, effectively offsetting all of the previous year's rate cuts.
During the second half of the reporting period, the money markets were
also affected by Y2K-related concerns. Although the investment community's
consensus opinion appeared to be that the U.S. financial system was prepared for
the advent of the year 2000, many issuers decided to play it safe by issuing
relatively longer term money market securities over the summer and early fall of
1999. These securities generally featured maturity dates in January and February
of 2000, reducing the need for issuers to return to the marketplace close to
year-end 1999. However, because so many issuers came to market at the same time,
they were compelled to increase their securities' yields in order to attract
investor interest. Money market fund shareholders generally benefited from these
higher yields.
Under these market conditions, we focused primarily on enhancing the
Fund's yield in a way that was consistent with liquidity and capital
preservation. We generally found the most attractive yields in high-quality,
asset-backed commercial paper, which comprised 22.3% of the portfolio as of
December 31.(2) The asset-backed commercial paper market has grown tremendously
over the past several years, but we have invested only in highly liquid
securities from seasoned issuers who have passed our rigorous credit analysis.
We also found attractive income opportunities in commercial paper issued by
financial companies, such as high-quality insurers and banks. On the other hand,
we found few opportunities in U.S. Treasury bills, which were in relatively
short supply because of the federal budget surplus.
Thank you for your continued confidence and participation in
Oppenheimer Money Fund/VA. We look forward to helping you achieve your financial
goals in 2000 and beyond.
An investment in money market funds is neither insured nor guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
these funds may seek to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in these funds.
1. Compounded yields assume reinvestment of dividends, and do not include the
charges associated with the separate account products that offer this Fund. Past
performance is not indicative of future results.
2. Based on total market value of net assets.
2 Oppenheimer Money Fund/VA
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Statement of Investments December 31, 1999
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<TABLE>
<CAPTION>
Principal Value
Amount Note 1
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<S> <C> <C>
Direct Bank Obligations--5.4%
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Bank of America NA:
6.12%, 1/6/00 $2,000,000 $ 2,000,000
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Dresdner Bank AG:
6.09%, 1/5/00 4,000,000 4,000,004
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U.S. Bank NA Minneapolis:
5.96%, 3/22/00(1) 5,000,000 5,000,000
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Total Direct Bank Obligations 11,000,004
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Letters of Credit--2.5%
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Dresdner Bank AG, guaranteeing commercial paper of Louis Dreyfus Corp., Series DR2:
6.85%, 1/18/00 5,000,000 4,983,826
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Short-Term Notes--91.3%
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Aerospace/Defense--2.5%
British Aerospace North America, Inc.:
6.14%, 3/10/00(1) 5,000,000 4,941,158
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Asset-Backed--22.3%
Asset Backed Capital Finance, Inc.:
6.05%, 1/18/00(1) 5,000,000 4,985,715
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Asset-Securitization Cooperative:
5.82%, 2/24/00(1) 4,000,000 3,965,080
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Beta Finance, Inc.:
5.73%, 2/10/00(1) 5,000,000 4,968,167
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Breeds Hill Capital Co. LLC, Series A:
5.91%, 3/16/00(1) 4,418,000 4,363,603
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Cooperative Assn. of Tractor Dealers, Inc., Series A:
5.85%, 3/17/00 2,500,000 2,469,125
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Cooperative Assn. of Tractor Dealers, Inc., Series B:
6.17%, 3/15/00 2,100,000 2,073,366
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Eureka Securitization, Inc.:
5.98%, 1/28/00(1) 3,700,000 3,683,295
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Lexington Parker Capital Co. LLC:
5.92%, 3/17/00(1) 5,000,000 4,936,139
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Moat Funding LLC:
6.35%, 1/14/00(1) 3,500,000 3,491,974
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Preferred Receivables Funding Corp.:
5.88%, 2/29/00(1) 5,000,000 4,951,817
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Sigma Finance, Inc.:
6.07%, 1/21/00(1) 5,000,000 4,983,139
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44,871,420
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Automotive--3.7%
BMW US Capital Corp.:
6.01%, 3/21/00 7,500,000 7,399,833
Oppenheimer Money Fund/VA 3
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Statement of Investments (Continued)
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Principal Value
Amount Note 1
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Banks--2.5%
First Chicago Financial Corp.:
5.79%, 1/20/00(1) $5,000,000 $ 4,984,721
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Beverages--1.2%
Coca-Cola Enterprises, Inc.:
5.47%, 1/28/00(1) 2,500,000 2,489,744
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Broker/Dealers--15.4%
Banc of America Securities LLC:
5.95%, 1/3/00(2) 5,000,000 5,000,000
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Bear Stearns Cos., Inc.:
5.83%, 1/11/00 3,500,000 3,494,332
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Goldman Sachs Group LP:
5.60%, 1/27/00 3,000,000 2,987,867
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Merrill Lynch & Co., Inc.:
5.85%, 2/7/00 3,000,000 2,981,963
6%, 1/31/00 2,600,000 2,586,827
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Morgan Stanley, Dean Witter & Co.:
4.50%, 6/8/00(2) 3,500,000 3,500,000
5.79%, 2/28/00 4,400,000 4,358,955
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Salomon Smith Barney Holdings, Inc.:
5.44%, 1/26/00 6,000,000 5,975,875
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30,885,819
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Building Materials--2.4%
Compagnie de Saint-Gobain:
5.80%, 3/27/00(1) 5,000,000 4,930,722
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Commercial Finance--5.9%
Caterpillar Financial Services Corp.:
6.10%, 4/3/00 6,000,000 5,905,450
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Heller Financial, Inc., Series H:
6.33%, 6/1/00(2) 1,000,000 1,000,341
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Homeside Lending, Inc.:
5.86%, 2/3/00 5,000,000 4,973,142
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11,878,933
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Consumer Services--3.7%
Prudential Funding Corp.:
5.79%, 1/26/00 4,500,000 4,481,906
6.07%, 1/10/00 3,000,000 2,995,448
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7,477,354
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Diversified Financial--6.9%
Associates Corp. of North America:
4%, 1/3/00 6,000,000 5,998,667
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General Motors Acceptance Corp.:
5.99%, 1/26/00 8,000,000 7,966,722
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13,965,389
4 Oppenheimer Money Fund/VA
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Statement of Investments (Continued)
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Principal Value
Amount Note 1
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Insurance--12.2%
AIG Life Insurance Co.:
6.476%, 5/31/00(2)(3) $3,000,000 $ 3,000,000
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Marsh U.S.A., Inc.:
5.60%, 1/26/00(1) 6,000,000 5,976,667
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Metropolitan Life Insurance Co.:
5.839%, 1/3/00(2) 3,500,000 3,500,000
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Pacific Mutual Life Insurance Co.:
5.53%, 2/14/00(2)(3) 5,000,000 5,000,000
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Protective Life Insurance Co.:
5.658%, 6/1/00(2) 5,000,000 5,000,000
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Travelers Insurance Co.:
5.608%, 9/16/00(2)(3) 2,000,000 2,000,000
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24,476,667
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Manufacturing--2.2%
Eaton Corp.:
5.95%, 1/31/00(1) 4,400,000 4,378,183
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Nondurable Household Goods--4.5%
Newell Co.:
5%, 1/7/00(1) 9,000,000 8,992,500
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Special Purpose Financial--3.9%
KZH-KMS Corp.:
5.83%, 3/29/00(1) 5,000,000 4,928,744
5.86%, 4/6/00(1) 3,000,000 2,953,120
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7,881,864
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Telecommunications: Technology--2.0%
GTE Corp.:
6.155%, 6/12/00(2) 4,000,000 3,998,853
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Total Short-Term Notes 183,553,160
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Total Investments, at Value 99.2% 199,536,990
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Other Assets Net of Liabilities 0.8 1,528,667
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Net Assets 100.0% $201,065,657
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</TABLE>
Short-term notes, direct bank obligations and letters of credit are generally
traded on a discount basis; the interest rate is the discount rate received by
the Fund at the time of purchase.
1. Security issued in an exempt transaction without registration under the
Securities Act of 1933. Such securities amount to $89,904,488, or 44.71% 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 rate security.
3. Represents a restricted security which is considered illiquid, by virtue of
the absence of a readily available market or because of legal or contractual
restrictions on resale. Such securities amount to $10,000,000, or 4.97% of the
Fund's net assets. The Fund may not invest more than 10% of its net assets
(determined at the time of purchase) in illiquid securities.
See accompanying Notes to Financial Statements.
Oppenheimer Money Fund/VA 5
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Statement of Assets and Liabilities December 31, 1999
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<TABLE>
<S> <C>
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Assets
Investments, at value--see accompanying statement $199,536,990
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Cash 1,523,358
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Receivables and other assets:
Shares of beneficial interest sold 1,013,551
Interest 278,529
Other 3,889
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Total assets 202,356,317
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Liabilities
Payables and other liabilities:
Dividends 430,915
Shares of beneficial interest redeemed 826,738
Trustees' compensation 235
Transfer and shareholder servicing agent fees 187
Other 32,585
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Total liabilities 1,290,660
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Net Assets $201,065,657
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Composition of Net Assets
Paid-in capital $201,082,465
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Accumulated net realized loss on investment transactions (16,808)
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Net assets--applicable to 201,082,486 shares of beneficial interest outstanding $201,065,657
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Net Asset Value, Redemption Price and Offering Price Per Share $1.00
</TABLE>
See accompanying Notes to Financial Statements.
6 Oppenheimer Money Fund/VA
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Statement of Operations For the Year Ended December 31, 1999
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<TABLE>
<S> <C>
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Investment Income
Interest $8,907,818
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Expenses
Management fees 749,665
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Custodian fees and expenses 9,011
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Trustees' compensation 2,226
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Transfer and shareholder servicing agent fees 2,110
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Other 32,014
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Total expenses 795,026
Less expenses paid indirectly (4,083)
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Net expenses 790,943
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Net Investment Income 8,116,875
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Net Realized Gain on Investments 1,540
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Net Increase in Net Assets Resulting from Operations $8,118,415
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</TABLE>
See accompanying Notes to Financial Statements.
Oppenheimer Money Fund/VA 7
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Statements of Changes in Net Assets
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<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998
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<S> <C> <C>
Operations
Net investment income $ 8,116,875 $ 7,050,032
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Net realized gain 1,540 9,101
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Net increase in net assets resulting from operations 8,118,415 7,059,133
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Dividends and/or Distributions to Shareholders (8,128,189) (7,050,032)
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Beneficial Interest Transactions
Net increase in net assets resulting from beneficial interest transactions 49,276,631 25,007,317
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Net Assets
Total increase 49,266,857 25,016,418
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Beginning of period 151,798,800 126,782,382
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End of period (including undistributed net investment income
of $11,314 for the year ended December 31, 1998) $201,065,657 $151,798,800
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</TABLE>
See accompanying Notes to Financial Statements.
8 Oppenheimer Money Fund/VA
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Financial Highlights
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<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997 1996 1995
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<S> <C> <C> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
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Income from investment operations--net
investment income and net realized gain .05 .05 .05 .05 .06
Dividends and/or distributions to shareholders (.05) (.05) (.05) (.05) (.06)
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Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
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Total Return(1) 4.96% 5.25% 5.31% 5.13% 5.62%
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Ratios/Supplemental Data
Net assets, end of period (in thousands) $201,066 $151,799 $126,782 $129,719 $65,386
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Average net assets (in thousands) $166,727 $137,633 $133,707 $ 99,263 $75,136
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Ratios to average net assets:(2)
Net investment income 4.87% 5.12% 5.19% 5.01% 5.52%
Expenses 0.48% 0.50%(3) 0.48%(3) 0.49%(3) 0.51%(3)
</TABLE>
1. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption at the
net asset value calculated on the last business day of the fiscal period. Total
returns reflect changes in net investment income only. 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.
2. Annualized for periods less than one full year.
3. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.
See accompanying Notes to Financial Statements.
Oppenheimer Money Fund/VA 9
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Notes to Financial Statements
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1. Significant Accounting Policies
Oppenheimer Money Fund/VA (the Fund) is a separate series of Oppenheimer
Variable Account Funds (the Trust), a diversified, open-end management
investment company registered under the Investment Company Act of 1940, as
amended. The Fund's investment objective is to seek the maximum current income
from investment in money market securities consistent with low capital risk and
the maintenance of liquidity. The Fund's investment advisor is OppenheimerFunds,
Inc. (the Manager). The following is a summary of significant accounting
policies consistently followed by the Fund.
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Securities Valuation. Portfolio securities are valued on the basis of amortized
cost, which approximates market value.
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Repurchase Agreements. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. 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.
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Federal Taxes. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to shareholders.
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Dividends and Distributions to Shareholders. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date.
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Expense Offset Arrangements. Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by the Fund.
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Other. Investment transactions are accounted for as of trade date. Realized
gains and losses on investments are determined on an identified cost basis,
which is the same basis used for federal income tax purposes.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
10 Oppenheimer Money Fund/VA
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Notes to Financial Statements (Continued)
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2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of beneficial
interest. Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1999 Year Ended December 31, 1998
------------------------------- ------------------------------
Shares Amount Shares Amount
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<S> <C> <C> <C> <C>
Sold 381,258,296 $ 381,258,296 318,160,993 $ 318,160,993
Dividends and/or distributions reinvested 7,983,593 7,983,593 7,008,382 7,008,382
Redeemed (339,965,258) (339,965,258) (300,162,058) (300,162,058)
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Net increase 49,276,631 $ 49,276,631 25,007,317 $ 25,007,317
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</TABLE>
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3. Management Fees and Other Transactions with Affiliates
Management Fees. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee of 0.45% of
the first $500 million of average annual net assets, 0.425% of the next $500
million, 0.40% of the next $500 million and 0.375% of average annual net assets
in excess of $1.5 billion. The Fund's management fee for the year ended December
31, 1999, was 0.45% of average annual net assets.
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Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager,
is the transfer agent for the Fund and is responsible for maintaining the
shareholder registry and shareholder accounting records for the Fund. OFS
provides these services for cost.
Oppenheimer Money Fund/VA 11
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Independent Auditors' Report
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To the Board of Trustees and Shareholders of Oppenheimer Money Fund/VA:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppeneheimer Money Fund/VA (which is a series
of Oppenheimer Variable Account Funds) as of December 31, 1999, the related
statement of operations for the year then ended, the statements of changes in
net assets for the years ended December 31, 1999 and 1998 and the financial
highlights for the period January 1, 1995, to December 31, 1999. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of Oppenheimer
Money Fund/VA as of December 31, 1999, the results of its operations, the
changes in its net assets, and the financial highlights for the respective
stated periods, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Denver, Colorado
January 24, 2000
12 Oppenheimer Money Fund/VA
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Federal Income Tax Information (Unaudited)
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In early 2000 shareholders will receive information regarding all dividends and
distributions paid to them by the Fund during calendar year 1999. 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.
Oppenheimer Money Fund/VA 13
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Oppenheimer Money Fund/VA
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A Series of Oppenheimer Variable Account Funds
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Officers and Trustees James C. Swain, Trustee and
Chairman of the Board
Bridget A. Macaskill, President
William H. Armstrong, Trustee
Robert G. Avis, Trustee
William A. Baker, Trustee
Edward L. Cameron, Trustee
Jon S. Fossel, Trustee
Sam Freedman, Trustee
Raymond J. Kalinowski, Trustee
C. Howard Kast, Trustee
Robert M. Kirchner, Trustee
Ned M. Steel, Trustee
Carol E. Wolf, Vice President
Arthur J. Zimmer, Vice President
Andrew J. Donohue, Vice President and
Secretary
Brian W. Wixted, Treasurer
Robert G. Zack, Assistant Secretary
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
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Investment Advisor OppenheimerFunds, Inc.
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Transfer Agent OppenheimerFunds Services
================================================================================
Custodian of Portfolio Securities The Bank of New York
================================================================================
Independent Auditors Deloitte & Touche LLP
================================================================================
Legal Counsel Myer, Swanson, Adams & Wolf, P.C.
This is a copy of a report to shareholders of
Oppenheimer Money Fund/VA. This report must
be preceded or accompanied by a Prospectus of
Oppenheimer Money Fund/VA. For material
information concerning the Fund, see the
Prospectus.
Shares of Oppenheimer funds are not deposits
or obligations of any bank, are not
guaranteed by any bank, are not insured by
the FDIC or any other agency, and involve
investment risks, including the possible loss
of the principal amount invested.
14 Oppenheimer Money Fund/VA
