Annual Report December 31, 1999
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Oppenheimer
Aggressive Growth
Fund/VA
A Series of Oppenheimer Variable Account Funds
[logo] OppenheimerFunds(R)
The Right Way to Invest
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Oppenheimer Variable Account Funds--Oppenheimer Aggressive Growth Fund/VA
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Objective
Oppenheimer Aggressive Growth Fund/VA, a series of Oppenheimer Variable Account
Funds, primarily seeks capital appreciation from investments in "growth-type"
companies.
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Narrative by Bruce Bartlett, Portfolio Manager
Oppenheimer Aggressive Growth Fund/VA performed exceptionally well during 1999.
The Fund's average annual total return for the fiscal year that ended December
31, 1999, was 83.60%.(1) We attribute the Fund's gains primarily to our focus on
growth and our strong emphasis on technology, particularly some of the
technology sector's better performing areas.
Economic conditions provided a firm foundation for the Fund's
performance. Throughout 1999, U.S. economic growth remained robust, largely
driven by the performance of technology-oriented companies. As the year
progressed, growth accelerated in key global markets of Europe and Asia as well.
However, the possibility that U.S. growth might slow in the face of increasing
domestic interest rates gave rise to economic uncertainty. In such an
environment, the market tends to reward companies that appear most likely to
deliver strong and sustainable growth. These are precisely the kinds of
companies on which the Fund focuses. In fact, average revenue growth for all the
Fund's holdings exceeded 60% during the period.
We had allocated approximately 38% of the Fund's total portfolio to
technology at the beginning of the year. Bolstered by the technology sector's
strong performance, that allocation grew to nearly 60% by year's end. Within
technology, we derived our greatest gains from a wide range of companies
supplying the building blocks of the world's communications infrastructure.
Nearly half of our technology holdings were among optical networking companies,
such as JDS Uniphase Corp. and Harmonic, Inc.(2) By providing equipment to
increase the geographical reach and bandwidth of today's high-speed,
high-capacity data communications and telecommunications networks, these
companies are profiting from the explosive growth of the Internet and other
forms of business communications.
The Fund also enjoyed strong performance from a number of
consumer-related product and service providers. Our holdings included electronic
retailers, such as Tandy Corp., that are benefiting from strong consumer demand
for the latest generation of digital cameras, disk players and other digital
media. Tandy Corp. is further positioned to profit from its national
infrastructure of retail outlets, which are capable of providing
bandwidth-enabling technologies--such as cellular telephones, satellite services
and high-speed Internet access--directly to consumers.
Of course, not all of the Fund's holdings performed strongly. Financial
stocks proved volatile performers during 1999. The sector was buoyed during the
first half of the year by the healthy U.S. economy and signs of financial
strength among worldwide emerging markets. However, financial stocks suffered
during the second half of the year under pressure from slowing earnings and
moderate, but consistent, increases in long-term interest rates. In response, we
significantly reduced our position in financial companies.
We also reduced our healthcare holdings. Patents on many of the
blockbuster drugs that have driven the earnings of major pharmaceutical
companies in recent years are about to expire, exposing these companies to
heightened competition from generic drug producers. In addition, both
pharmaceutical firms and healthcare services companies face potential regulatory
challenges that are likely to increase pricing pressures and negatively affect
the industry's earnings. We focused our remaining healthcare investments on
biotechnology firms, such as Biogen, Inc., with strong product pipelines and an
arsenal of recently approved drugs that face relatively little competition.
Looking toward the coming year, we see indications that global economic
momentum is likely to continue. Consumer confidence and spending remain high,
and although pressures on prices and wages continue to grow, counterbalancing
forces such as global price competition and improved productivity have thus far
held them largely in check. In such an environment of continuing economic
health, we are enthusiastic about the growth prospects of the industries and
companies we have identified.
1. Includes changes in net asset value per share and does 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. This
performance was achieved in part during periods of rapidly rising markets, and
there is no assurance that the Fund will continue to achieve those gains in the
future.
2. The Fund's portfolio is subject to change.
2 Oppenheimer Aggressive Growth Fund/VA
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Oppenheimer Variable Account Funds--Oppenheimer Aggressive Growth Fund/VA
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We believe the past year highlights the value that the Fund can add to a
diversified portfolio, even in a changing market environment. We are committed
to rigorously maintaining our strategy of growth investing, as well as our
discipline of building the portfolio one company and one investment at a time.
That's what makes Oppenheimer Aggressive Growth Fund/VA part of The Right Way to
Invest.
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Management's discussion of performance. During the fiscal year that ended
December 31, 1999, the U.S. economy enjoyed strong growth. However investor
sentiment was affected by persistent concerns regarding the sustainability of
that growth. These conditions favored the stocks of companies most likely to
maintain their growth in the face of a slowdown. Since these are precisely the
types of companies the Fund targets, performance proved strong throughout the
period. We also benefited from the intrinsic characteristics of fast-growing,
well-established mid-cap companies, which combine high growth potential with
proven business models. Our largest areas of investment were technology and
specialty retail, both of which contributed strongly to the Fund's success. At
the same time, we trimmed healthcare and financial industry holdings that
evidenced slowing revenue growth. The Fund's portfolio holdings, allocations and
strategies are subject to change.
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Comparing the Fund's performance to the market. The graph that follows shows the
performance of a hypothetical $10,000 investment in the Fund held until December
31, 1999. 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, 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 graph shows the effect of
taxes. The Fund's performance reflects the effects of 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.
Comparison of Change in Value of $10,000 Hypothetical Investments in:
OVAF/Oppenheimer Aggressive Growth Fund/VA and S&P 500 Index
<TABLE>
<CAPTION>
OVAF/Oppenheimer
Aggressive Growth Fund/VA S&P 500 Index
<S> <C> <C>
12.31.89 10000 10000
8318 9690
12.31.91 12870 12635
14854 13597
12.31.93 18912 14966
17477 15162
12.31.95 23161 20851
27844 25630
12.31.97 31095 34176
34938 43944
12.31.99 64148 53181
</TABLE>
Average Annual Total Return of the Fund at 12/31/99
1-Year 83.60% 5-Year 29.70% 10-Year 20.43%
Because the stock market can be volatile, the Fund's performance may be
subject to substantial short-term changes. For updates on the Fund's
performance, please call us at 1.800.981.2871.
The performance information in the graph for the S&P 500 Index begins on
12/31/89. The inception date of the Fund is 8/15/86.
Total returns and the ending account value in the graph show change in share
value and include reinvestment of all dividends and capital gains distributions.
Past performance is not predictive of future performance.
Oppenheimer Aggressive Growth Fund/VA 3
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Statement of Investments December 31, 1999
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<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
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Common Stocks--88.9%
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Capital Goods--5.4%
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Electrical Equipment--3.4%
E-Tek Dynamics, Inc.(1) 537,400 $ 72,347,475
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Manufacturing--2.0%
Tyco International Ltd. 1,095,000 42,568,125
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Communication Services--2.5%
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Telecommunications: Long Distance--2.5%
Copper Mountain Networks, Inc.(1) 17,400 848,250
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Exodus Communications, Inc.(1) 250,000 22,203,125
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Global Crossing Ltd.(1) 593,899 29,694,950
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52,746,325
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Consumer Cyclicals--9.9%
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Consumer Services--1.2%
Young & Rubicam, Inc. 351,300 24,854,475
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Retail: General--1.2%
Kohl's Corp.(1) 360,000 25,987,500
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Retail: Specialty--7.5%
Abercrombie & Fitch Co., Cl. A(1) 480,000 12,810,000
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Best Buy Co., Inc.(1) 630,000 31,618,125
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Linens 'N Things, Inc.(1) 669,000 19,819,125
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Tandy Corp. 915,000 45,006,562
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Tiffany & Co. 519,300 46,347,525
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Williams-Sonoma, Inc.(1) 25,000 1,150,000
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156,751,337
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Consumer Staples--4.0%
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Broadcasting--2.0%
Charter Communications, Inc., Cl. A(1) 983,500 21,514,062
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Spanish Broadcasting System, Inc., Cl. A(1) 280,600 11,294,150
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Univision Communications, Inc., Cl. A(1) 96,900 9,901,969
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42,710,181
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Entertainment--1.6%
Royal Caribbean Cruises Ltd. 674,000 33,236,625
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Household Goods--0.4%
Dial Corp. (The) 325,000 7,901,563
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Financial--1.4%
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Diversified Financial--1.4%
Schwab (Charles) Corp. 770,000 29,548,750
</TABLE>
4 Oppenheimer Aggressive Growth Fund/VA
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Statement of Investments (Continued)
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<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
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Healthcare--4.6%
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Healthcare/Drugs--4.6%
Biogen, Inc.(1) 636,600 $ 53,792,700
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Genentech, Inc.(1) 72,200 9,710,900
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Immunex Corp.(1) 300,000 32,850,000
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96,353,600
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Technology--60.7%
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Computer Hardware--7.1%
Dell Computer Corp.(1) 250,000 12,750,000
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EMC Corp.(1) 603,000 65,877,750
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Gateway, Inc.(1) 350,000 25,221,875
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Juniper Networks, Inc. 28,000 9,520,000
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Lexmark International Group, Inc., Cl. A(1) 400,000 36,200,000
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149,569,625
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Computer Services--0.5%
Finisar Corp(1) 39,800 3,577,025
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Foundry Networks, Inc.(1) 18,200 5,490,713
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High Speed Access Corp.(1) 114,800 2,023,350
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11,091,088
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Computer Software--11.6%
Citrix Systems, Inc.(1) 693,000 85,239,000
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Microsoft Corp.(1) 550,000 64,212,500
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VeriSign, Inc.(1) 50,000 9,546,875
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Veritas Software Corp.(1) 600,000 85,875,000
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244,873,375
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Communications Equipment--14.2%
Antec Corp.(1) 392,800 14,337,200
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Audiocodes Ltd.(1) 237,100 21,813,200
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Cisco Systems, Inc.(1) 450,000 48,206,250
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Harmonic, Inc(1) 1,000,000 94,937,500
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Optical Coating Laboratory, Inc. 335,000 99,160,000
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Scientific-Atlanta, Inc. 375,000 20,859,375
------------
299,313,525
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Electronics--27.3%
Gemstar International Group Ltd.(1) 200,000 14,250,000
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GlobeSpan, Inc.(1) 6,300 410,288
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Intel Corp. 372,000 30,620,250
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JDS Uniphase Corp.(1) 1,561,332 251,862,367
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LSI Logic Corp.(1) 545,700 36,834,750
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QLogic Corp.(1) 450,000 71,943,750
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SDL, Inc.(1) 350,000 76,300,000
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Vitesse Semiconductor Corp.(1) 1,040,000 54,535,000
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Waters Corp.(1) 690,000 36,570,000
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573,326,405
</TABLE>
Oppenheimer Aggressive Growth Fund/VA 5
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Statement of Investments (Continued)
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<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
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Utilities--0.4%
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Electric Utilities--0.4%
Calpine Corp.(1) 126,800 $ 8,115,200
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Total Common Stocks (Cost $771,289,353) 1,871,295,174
Principal
Amount
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Repurchase Agreements--10.7%
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Repurchase agreement with Banc One Capital Markets, Inc., 2.75%, dated
12/31/99, to be repurchased at $225,151,585 on 1/3/00, collateralized
by U.S. Treasury Bonds, 5.25%-12%, 2/15/01-11/15/28, with a value
of $88,349,431 and U.S. Treasury Nts., 5%-7.50%, 12/31/00-2/15/07,
with a value of $141,383,210 (Cost $225,100,000) $225,100,000 225,100,000
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Total Investments, at Value (Cost $996,389,353) 99.6% 2,096,395,174
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Other Assets Net of Liabilities 0.4 7,732,586
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Net Assets 100.0% $2,104,127,760
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</TABLE>
1. Non-income producing security.
See accompanying Notes to Financial Statements.
6 Oppenheimer Aggressive Growth Fund/VA
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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 (including repurchase agreement of $225,100,000)
(cost $996,389,353)--see accompanying statement $2,096,395,174
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Cash 1,032,385
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Receivables and other assets:
Investments sold 7,087,097
Shares of beneficial interest sold 3,244,267
Interest and dividends 138,944
Other 11,681
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Total assets 2,107,909,548
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Liabilities
Payables and other liabilities:
Shares of beneficial interest redeemed 3,716,257
Trustees' compensation 1,697
Transfer and shareholder servicing agent fees 201
Other 63,633
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Total liabilities 3,781,788
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Net Assets $2,104,127,760
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Composition of Net Assets
Paid-in capital $ 904,071,695
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Accumulated net realized gain on investments and foreign currency transactions 100,050,244
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Net unrealized appreciation on investments and translation of
assets and liabilities denominated in foreign currencies 1,100,005,821
--------------
Net assets--applicable to 25,564,825 shares of beneficial interest outstanding $2,104,127,760
==============
===============================================================================================================
Net Asset Value, Redemption Price Per Share and Offering Price Per Share $82.31
</TABLE>
See accompanying Notes to Financial Statements.
Oppenheimer Aggressive Growth Fund/VA 7
<PAGE>
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Statement of Operations For the Year Ended December 31, 1999
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<TABLE>
===============================================================================================================
<S> <C>
Investment Income
Interest $ 4,468,423
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Dividends 2,049,968
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Total income 6,518,391
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Expenses
Management fees 8,700,904
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Custodian fees and expenses 24,681
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Trustees' compensation 10,056
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Transfer and shareholder servicing agent fees 2,127
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Other 24,249
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Total expenses 8,762,017
Less expenses paid indirectly (11,539)
------------
Net expenses 8,750,478
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Net Investment Loss (2,232,087)
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Realized and Unrealized Gain (Loss)
Net realized gain on:
Investments (including premiums on options exercised) 169,730,345
Closing and expiration of option contracts written 428,019
Foreign currency transactions 130,388
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Net realized gain 170,288,752
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Net change in unrealized appreciation or depreciation on:
Investments 750,572,210
Translation of assets and liabilities denominated in foreign currencies (791,294)
------------
Net change 749,780,916
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Net realized and unrealized gain 920,069,668
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Net Increase in Net Assets Resulting from Operations $917,837,581
============
</TABLE>
See accompanying Notes to Financial Statements.
8 Oppenheimer Aggressive Growth Fund/VA
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Statements of Changes in Net Assets
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<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998
<S> <C> <C>
================================================================================================================================
Operations
Net investment loss $ (2,232,087) $ (1,162,585)
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Net realized gain (loss) 170,288,752 (67,125,014)
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Net change in unrealized appreciation or depreciation 749,780,916 183,484,620
-------------- --------------
Net increase in net assets resulting from operations 917,837,581 115,197,021
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Dividends and/or Distributions to Shareholders
Dividends from net investment income -- (2,267,793)
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Distributions from net realized gain -- (23,288,487)
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Beneficial Interest Transactions
Net increase in net assets resulting from
beneficial interest transactions 108,330,019 110,511,946
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Net Assets
Total increase 1,026,167,600 200,152,687
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Beginning of period 1,077,960,160 877,807,473
-------------- --------------
End of period $2,104,127,760 $1,077,960,160
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</TABLE>
See accompanying Notes to Financial Statements.
Oppenheimer Aggressive Growth Fund/VA 9
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Financial Highlights
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<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
=============================================================================================================================
Per Share Operating Data
Net asset value, beginning of period $44.83 $40.96 $38.71 $34.21 $25.95
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.09) (.05) .10 .09 .11
Net realized and unrealized gain 37.57 5.09 4.01 6.59 8.29
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Total income from investment operations 37.48 5.04 4.11 6.68 8.40
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Dividends and/or distributions to shareholders:
Dividends from net investment income -- (.10) (.09) (.11) (.09)
Distributions from net realized gain -- (1.07) (1.77) (2.07) (.05)
- -----------------------------------------------------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders -- (1.17) (1.86) (2.18) (.14)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $82.31 $44.83 $40.96 $38.71 $34.21
====== ====== ====== ====== ======
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Total Return, at Net Asset Value(1) 83.60% 12.36% 11.67% 20.22% 32.52%
=============================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in millions) $2,104 $1,078 $878 $617 $325
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Average net assets (in millions) $1,314 $ 955 $754 $467 $241
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Ratios to average net assets:(2)
Net investment income (loss) (0.17)% (0.12)% 0.31% 0.32% 0.47%
Expenses 0.67% 0.71%(3) 0.73%(3) 0.75%(3) 0.78%(3)
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Portfolio turnover rate(4) 66% 80% 88% 100% 126%
</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 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.
4. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended December 31, 1999, were $821,119,876 and $835,938,199, respectively.
See accompanying Notes to Financial Statements.
10 Oppenheimer Aggressive Growth Fund/VA
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Notes to Financial Statements
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1. Significant Accounting Policies
Oppenheimer Aggressive Growth 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 achieve capital
appreciation by investing in "growth-type" companies. 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 at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
the last sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio pricing service
approved by the Board of Trustees. Such securities which cannot be valued by an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of Trustees to
determine fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at cost (or
last determined market value) adjusted for amortization to maturity of any
premium or discount. Foreign currency exchange contracts are valued based on the
closing prices of the foreign currency contract rates in the London foreign
exchange markets on a daily basis as provided by a reliable bank or dealer.
Options are valued based upon the last sale price on the principal exchange on
which the option is traded or, in the absence of any transactions that day, the
value is based upon the last sale price on the prior trading date if it is
within the spread between the closing bid and asked prices. If the last sale
price is outside the spread, the closing bid is used.
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Foreign Currency Translation. The accounting records of the Fund are maintained
in U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of exchange. Amounts related
to the purchase and sale of foreign securities and investment income are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
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.
- --------------------------------------------------------------------------------
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, including any net realized gain on
investments not offset by loss carryovers 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.
Oppenheimer Aggressive Growth Fund/VA 11
<PAGE>
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Notes to Financial Stateaments (Continued)
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1. Significant Accounting Policies (continued)
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of the recognition of certain foreign currency gains (losses)
as ordinary income (loss) for tax purposes. The character of distributions made
during the year from net investment income or net realized gains may differ from
its ultimate characterization for federal income tax purposes. Also, due to
timing of dividend distributions, the fiscal year in which amounts are
distributed may differ from the fiscal year in which the income or realized gain
was recorded by the Fund.
The Fund adjusts the classification of distributions to shareholders to
reflect the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during the
year ended December 31, 1999, amounts have been reclassified to reflect a
decrease in paid-in capital of $2,255,042, a decrease in accumulated net
investment loss of $2,232,087, and an increase in accumulated net realized gain
on investments of $22,955.
- --------------------------------------------------------------------------------
Expense Offset Arrangements. Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by the Fund.
- --------------------------------------------------------------------------------
Other. Investment transactions are accounted for as of trade date and dividend
income is recorded on the ex-dividend date. Realized gains and losses on
investments and options written and unrealized appreciation and depreciation 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.
================================================================================
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
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
Sold 9,866,210 $ 549,485,112 13,376,589 $556,408,810
Dividends and/or distributions reinvested -- -- 580,166 25,556,280
Redeemed (8,345,187) (441,155,093) (11,344,620) (471,453,144)
---------- ------------- ----------- ------------
Net increase 1,521,023 $ 108,330,019 2,612,135 $110,511,946
========== ============= =========== ============
</TABLE>
================================================================================
3. Unrealized Gains and Losses on Securities
As of December 31, 1999, net unrealized appreciation on securities of
$1,100,005,821 was composed of gross appreciation of $1,116,099,786, and gross
depreciation of $16,093,965.
12 Oppenheimer Aggressive Growth Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
4. 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 Trust. The annual fees are 0.75% of the
first $200 million of average annual net assets, 0.72% of the next $200 million,
0.69% of the next $200 million, 0.66% of the next $200 million, 0.60% of the
next $700 million and 0.58% of average annual net assets over $1.5 billion. The
Fund's management fee for the year ended December 31, 1999, was 0.66% of average
annual net assets.
- --------------------------------------------------------------------------------
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.
================================================================================
5. Option Activity
The Fund may buy and sell put and call options, or write put and covered call
options on portfolio securities in order to produce incremental earnings or
protect against changes in the value of portfolio securities.
The Fund generally purchases put options or writes covered call options
to hedge against adverse movements in the value of portfolio holdings. When an
option is written, the Fund receives a premium and becomes obligated to sell or
purchase the underlying security at a fixed price, upon exercise of the option.
Options are valued daily based upon the last sale price on the
principal exchange on which the option is traded and unrealized appreciation or
depreciation is recorded. The Fund will realize a gain or loss upon the
expiration or closing of the option transaction. When an option is exercised,
the proceeds on sales for a written call option, the purchase cost for a written
put option, or the cost of the security for a purchased put or call option is
adjusted by the amount of premium received or paid.
Securities designated to cover outstanding call options are noted in
the Statement of Investments where applicable. Shares subject to call,
expiration date, exercise price, premium received and market value are detailed
in a note to the Statement of Investments. Options written are reported as a
liability in the Statement of Assets and Liabilities. Gains and losses are
reported in the Statement of Operations.
The risk in writing a call option is that the Fund gives up the
opportunity for profit if the market price of the security increases and the
option is exercised. The risk in writing a put option is that the Fund may incur
a loss if the market price of the security decreases and the option is
exercised. The risk in buying an option is that the Fund pays a premium whether
or not the option is exercised. The Fund also has the additional risk of not
being able to enter into a closing transaction if a liquid secondary market does
not exist.
Written option activity for the year ended December 31, 1999, was as follows:
<TABLE>
<CAPTION>
Call Options
---------------------------
Number of Amount of
Options Premiums
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
Options outstanding as of December 31, 1998 138 $ 34,764
Options written 2,500 640,611
Options closed or expired (1,700) (428,019)
Options exercised (938) (247,356)
------ ---------
Options outstanding as of December 31, 1999 -- $ --
====== =========
</TABLE>
Oppenheimer Aggressive Growth Fund/VA 13
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
================================================================================
To the Board of Trustees and Shareholders of Oppenheimer Aggressive Growth
Fund/VA:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer Aggressive Growth 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 and brokers; where
replies were not received from brokers, we performed other auditing procedures.
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
Aggressive Growth 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
14 Oppenheimer Aggressive Growth Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Federal Income Tax Information (Unaudited)
- --------------------------------------------------------------------------------
================================================================================
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 Aggressive Growth Fund/VA 15
<PAGE>
- --------------------------------------------------------------------------------
Oppenheimer Aggressive Growth Fund/VA
- --------------------------------------------------------------------------------
A Series of Oppenheimer Variable Account Funds
<TABLE>
========================================================================================================
<S> <C>
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
Bruce L. Bartlett, 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
========================================================================================================
Investment Advisor OppenheimerFunds, Inc.
========================================================================================================
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
Aggressive Growth Fund/VA. This report must be preceded or
accompanied by a Prospectus of Oppenheimer Aggressive Growth
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.
</TABLE>
16 Oppenheimer Aggressive Growth Fund/VA
