Annual Report December 31, 1999
================================================================================
Oppenheimer
Small Cap
Growth Fund/VA
A Series of Oppenheimer Variable Account Funds
[logo] OppenheimerFunds(R)
The Right Way to Invest
<PAGE>
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Oppenheimer Variable Account Funds--Oppenheimer Small Cap Growth Fund/VA
- --------------------------------------------------------------------------------
================================================================================
Objective
Oppenheimer Small Cap Growth Fund/VA, a series of Oppenheimer Variable Account
Funds, seeks capital appreciation. In seeking its objective, the Fund emphasizes
investments in securities of small-cap growth-type companies (those with market
capitalizations less than $1.8 billion.)
================================================================================
Narrative by Jay Tracey, Portfolio Manager
The past 12 months were a volatile and challenging period for small company
stocks. Throughout the period, small-cap stocks rode a roller coaster of gains
and declines related to global economic events as well as developments within
particular industries. At the beginning of the reporting period, economic
difficulties in several emerging markets fueled concerns about the ability of
U.S. companies to sustain earnings growth. Stocks of smaller companies were hit
especially hard as investors turned to the perceived safety of well-known,
blue-chip corporate names with a history of earnings predictability.
During the period, our performance was largely attributable to our
exposure to technology, the Fund's largest investment sector. We held
substantial positions in the stocks of companies that are providing bandwidth
solutions to facilitate the growth of the Internet. In another area of
technology, we achieved gains from investments in companies that are providing
innovative software solutions to meet the expanding data storage needs of large
corporations.
Performance benefited additionally from our investments in several
media and communications companies that are preeminent within their markets.
These companies include Cinar Films, Inc., a leading producer of nonviolent
children's television programming, and Spanish Broadcasting System, Inc., the
largest group of Spanish language radio broadcasting stations in the United
States.
Although our investment strategy remained highly disciplined, we began
to place greater emphasis on sectors that showed dynamic growth, such as energy
and semiconductors, and companies within those sectors that were growing
earnings faster than most analysts had predicted.
The world today is changing more quickly than ever before. Trends such
as the growth of the Internet are creating vast new opportunities for small
companies to grow rapidly into large ones. While there is no way to predict
when--or even if--small caps will begin to outperform large caps for a sustained
period of time, and we are mindful that small-cap stocks are volatile, we
believe compelling opportunities are available in well-managed, fast-growing
small companies. That's why we remain dedicated to our strategy of disciplined
small company investing, and why we believe Oppenheimer Small Cap Growth Fund/VA
remains part of The Right Way to Invest.
- --------------------------------------------------------------------------------
Management's discussion of performance. The fiscal year that ended December 31,
1999, opened with sharp market declines, particularly among small company
stocks, driven by fears of global recession. The subsequent recovery during the
second quarter of 1999 proved strongest among the transportation, technology,
capital goods, energy and communication services sectors. While the Fund's
substantial exposure to technology stocks boosted returns, our relatively light
exposure to other strong sectors hurt performance. The Fund also suffered due to
its relatively large holdings of healthcare company stocks, many of which fell
sharply in response to the potential for Medicare reform. In the third quarter,
the Fund's investment approach was refocused under the guidance of new portfolio
management. The Manager emphasized faster-than-expected earnings growth in
rapidly growing sectors such as energy and technology. At the same time, total
holdings decreased to focus more closely on a smaller group of companies. The
Fund's portfolio holdings, allocations and strategies are subject to change.
2 Oppenheimer Small Cap Growth Fund/VA
<PAGE>
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Oppenheimer Variable Account Funds--Oppenheimer Small Cap Growth Fund/VA
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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 Russell
2000 Index, which is an index of the 2000 smallest, by market value, of
securities in the Russell 3000 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 that follow 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.
Comparison of Change in Value of $10,000 Hypothetical Investments in:
OVAF/Oppenheimer Small Cap Growth Fund/VA and Russell 2000 Index
[line graph]
<TABLE>
<CAPTION>
OVAF/Oppenheimer Small Cap Growth Fund/VA Russell 2000 Index
<S> <C> <C>
5.1.98 10000 10000
12.31.98 9600 8806
12.31.99 14070 10678
</TABLE>
Average Annual Total Return of the Fund at 12/31/99
1-Year 46.56% Life 22.74%
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 Russell 2000 Index begins on
4/30/98. The inception date of the Fund is 5/1/98.
Total returns include changes in net asset value per share and 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.
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.
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 Small Cap Growth Fund/VA 3
<PAGE>
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Statement of Investments December 31, 1999
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<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
==============================================================================================================
Common Stocks--84.2%
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Capital Goods--8.5%
- --------------------------------------------------------------------------------------------------------------
Aerospace/Defense--0.5%
Armor Holdings, Inc.(1) 2,500 $ 32,812
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Electrical Equipment--0.2%
Plug Power, Inc.(1) 500 14,125
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Industrial Services--5.5%
Corporate Executive Board Co.(1) 1,000 55,875
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CyberSource Corp.(1) 300 15,525
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Digimarc Corp.(1) 500 25,000
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Keynote Systems, Inc.(1) 300 22,125
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Loislaw.com, Inc.(1) 600 23,475
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Metamor Worldwide, Inc.(1) 1,200 34,950
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Navidec, Inc.(1) 900 10,800
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Navigant Consulting, Inc.(1) 1,100 11,962
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Source Information Management Co. (The)(1) 3,600 60,300
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Tetra Tech, Inc.(1) 6,000 92,250
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Waste Connections, Inc.(1) 1,800 25,987
--------
378,249
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Manufacturing--2.3%
AstroPower, Inc.(1) 1,500 21,000
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Asyst Technologies, Inc.(1) 600 39,337
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Koala Corp.(1) 6,000 84,000
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Metron Technology NV(1) 800 12,850
--------
157,187
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Communication Services--6.9%
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Telecommunications: Long Distance--4.1%
Clarent Corp.(1) 600 46,650
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Efficient Networks, Inc.(1) 300 20,400
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Internap Network Services Corp.(1) 150 25,950
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Latitude Communications, Inc.(1) 1,000 26,125
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MGC Communications, Inc.(1) 2,100 106,575
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Network Plus Corp.(1) 1,300 27,300
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Triton PCS Holdings, Inc., Cl. A(1) 300 13,650
- --------------------------------------------------------------------------------------------------------------
Z-Tel Technologies, Inc.(1) 400 16,150
--------
282,800
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Telephone Utilities--0.3%
Allied Riser Communications Corp.(1) 1,100 22,756
</TABLE>
4 Oppenheimer Small Cap Growth Fund/VA
<PAGE>
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Statement of Investments (Continued)
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<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Telecommunications: Wireless--2.5%
Aether Systems, Inc.(1) 200 $ 14,325
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AirGate PCS, Inc.(1) 100 5,275
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Airnet Communications Corp.(1) 200 7,275
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Chartered Semiconductor Manufacturing, Sponsored ADR(1) 600 43,800
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Phone.com, Inc.(1) 150 17,391
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Proxim, Inc.(1) 600 66,000
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TeleCorp PCS, Inc.(1) 200 7,600
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Tritel, Inc.(1) 300 9,506
--------
171,172
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Consumer Cyclicals--12.0%
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Consumer Services--1.5%
Cornell Corrections, Inc.(1) 4,000 33,500
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Getty Images, Inc.(1) 700 34,212
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Jupiter Communications, Inc.(1) 400 12,100
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Netcentives, Inc.(1) 400 24,925
--------
104,737
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Leisure & Entertainment--2.0%
Activision, Inc.(1) 3,000 45,937
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Handleman Co.(1) 3,500 46,812
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JAKKS Pacific, Inc.(1) 2,400 44,850
--------
137,599
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Media--2.0%
Lifeminders.com, Inc.(1) 500 28,875
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NetRatings, Inc.(1) 100 4,812
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True North Communications, Inc. 900 40,219
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Tweeter Home Entertainment Group, Inc. 1,800 63,900
--------
137,806
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Retail: Specialty--6.5%
BOLDER Technologies Corp.(1) 2,500 31,875
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Charlotte Russe Holding, Inc.(1) 800 16,800
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Chico's Fas, Inc.(1) 800 30,100
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Copart, Inc.(1) 1,200 52,200
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Cost Plus, Inc.(1) 800 28,500
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David's Bridal, Inc.(1) 3,800 42,512
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Factory 2-U Stores, Inc.(1) 2,000 56,750
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Pantry, Inc. (The)(1) 2,200 31,075
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PurchasePro.com, Inc.(1) 500 68,750
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School Specialty, Inc.(1) 1,600 24,200
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Whitehall Jewellers, Inc. 1,200 44,250
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Yankee Candle, Inc. (The)(1) 1,600 26,100
--------
453,112
</TABLE>
Oppenheimer Small Cap Growth Fund/VA 5
<PAGE>
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Statement of Investments (Continued)
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<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Consumer Staples--7.9%
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Broadcasting--3.0%
Citadel Communications Corp.(1) 900 $ 58,387
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Classic Communications, Inc.(1) 500 18,281
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Cumulus Media, Inc., Cl. A(1) 900 45,675
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Insight Communications Co., Inc.(1) 900 26,662
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Radio Unica Corp.(1) 400 11,550
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Spanish Broadcasting System, Inc., Cl. A(1) 1,200 48,300
--------
208,855
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Education--0.8%
Corinthian Colleges, Inc.(1) 1,700 40,587
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ZapMe! Corp.(1) 1,700 14,662
--------
55,249
- --------------------------------------------------------------------------------------------------------------
Entertainment--3.4%
Buca, Inc.(1) 4,000 41,000
- --------------------------------------------------------------------------------------------------------------
Cinar Films, Inc., Cl. B(1) 4,000 98,000
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Imax Corp.(1) 1,500 41,062
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P.F. Chang's China Bistro, Inc.(1) 2,300 57,212
--------
237,274
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Food--0.7%
Diedrich Coffee, Inc.(1) 5,000 20,312
- --------------------------------------------------------------------------------------------------------------
Wild Oats Markets, Inc.(1) 1,200 26,625
--------
46,937
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Energy--0.4%
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Energy Services--0.4%
Cal Dive International, Inc.(1) 800 26,500
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Financial--3.4%
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Banks--1.5%
Investors Financial Services Corp. 1,500 69,000
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Labrance & Co., Inc.(1) 3,000 38,250
--------
107,250
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Diversified Financial--1.4%
MicroFinancial, Inc. 5,000 58,438
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NextCard, Inc.(1) 600 17,325
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ReSourcePhoenix.com, Inc.(1) 1,000 19,750
--------
95,513
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Insurance--0.5%
Advance Paradigm, Inc.(1) 1,600 34,500
</TABLE>
6 Oppenheimer Small Cap Growth Fund/VA
<PAGE>
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Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Healthcare--5.1%
- --------------------------------------------------------------------------------------------------------------
Healthcare/Drugs--3.8%
Abgenix, Inc.(1) 500 $ 66,250
- --------------------------------------------------------------------------------------------------------------
BioCryst Pharmaceuticals, Inc.(1) 1,500 44,250
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Cubist Pharmaceuticals, Inc.(1) 1,100 21,175
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Maxygen, Inc.(1) 200 14,200
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Nuerocrine Biosciences, Inc.(1) 2,100 51,975
- --------------------------------------------------------------------------------------------------------------
Syncor International Corp.(1) 1,500 43,688
- --------------------------------------------------------------------------------------------------------------
Ventana Medical Systems, Inc.(1) 1,000 24,875
--------
266,413
- --------------------------------------------------------------------------------------------------------------
Healthcare/Supplies & Services--1.3%
Hanger Orthopedic Group, Inc.(1) 500 5,000
- --------------------------------------------------------------------------------------------------------------
NovaMed Eyecare, Inc.(1) 600 4,050
- --------------------------------------------------------------------------------------------------------------
PlanetRx.com, Inc.(1) 700 10,150
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Renal Care Group, Inc.(1) 2,400 56,100
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SciQuest.com, Inc.(1) 200 15,900
--------
91,200
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Technology--40.0%
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Computer Hardware--6.1%
3DO Co. (The) 5,500 50,016
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Creo Products, Inc.(1) 1,200 46,125
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Echelon Corp.(1) 1,000 19,563
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Gadzoox Networks, Inc. 300 13,069
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Network Appliance, Inc.(1) 1,200 99,675
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Optimal Robotics Corp.(1) 1,200 44,700
- --------------------------------------------------------------------------------------------------------------
SanDisk Corp.(1) 500 48,125
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SmartDisk Corp.(1) 300 9,825
- --------------------------------------------------------------------------------------------------------------
Xircom, Inc.(1) 1,200 90,000
--------
421,098
- --------------------------------------------------------------------------------------------------------------
Computer Services--10.9%
Alloy Online, Inc.(1) 1,800 28,350
- --------------------------------------------------------------------------------------------------------------
AppNet, Inc.(1) 600 26,250
- --------------------------------------------------------------------------------------------------------------
Art Technology Group, Inc.(1) 400 51,250
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BackWeb Technologies Ltd.(1) 800 33,700
- --------------------------------------------------------------------------------------------------------------
Braun Consulting, Inc.(1) 1,200 85,800
- --------------------------------------------------------------------------------------------------------------
C-bridge Internet Solutions, Inc.(1) 300 14,588
- --------------------------------------------------------------------------------------------------------------
CAIS Internet, Inc.(1) 1,000 35,500
- --------------------------------------------------------------------------------------------------------------
Critical Path, Inc.(1) 300 28,313
- --------------------------------------------------------------------------------------------------------------
El Sitio, Inc.(1) 200 7,350
- --------------------------------------------------------------------------------------------------------------
Finisar Corp.(1) 100 8,988
- --------------------------------------------------------------------------------------------------------------
Interactive Pictures Corp.(1) 900 20,981
- --------------------------------------------------------------------------------------------------------------
Kopin Corp.(1) 900 37,800
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MedQuist, Inc.(1) 600 15,488
- --------------------------------------------------------------------------------------------------------------
OneSource Information Services, Inc.(1) 4,500 60,469
</TABLE>
Oppenheimer Small Cap Growth Fund/VA 7
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Computer Services (continued)
Packeteer, Inc.(1) 400 $ 28,400
- --------------------------------------------------------------------------------------------------------------
pcOrder.com, Inc.(1) 600 30,600
- --------------------------------------------------------------------------------------------------------------
Predictive Systems, Inc.(1) 300 19,650
- --------------------------------------------------------------------------------------------------------------
Ramp Networks, Inc.(1) 1,600 24,400
- --------------------------------------------------------------------------------------------------------------
Salon.com, Inc.(1) 3,600 18,000
- --------------------------------------------------------------------------------------------------------------
Stamps.com, Inc.(1) 750 31,219
- --------------------------------------------------------------------------------------------------------------
Student Advantage, Inc.(1) 1,500 33,281
- --------------------------------------------------------------------------------------------------------------
Tanning Technology Corp. 450 26,522
- --------------------------------------------------------------------------------------------------------------
Viant Corp.(1) 300 29,700
- --------------------------------------------------------------------------------------------------------------
WatchGuard Technologies, Inc.(1) 700 21,175
- --------------------------------------------------------------------------------------------------------------
WebTrends Corp.(1) 500 40,500
--------
758,274
- --------------------------------------------------------------------------------------------------------------
Computer Software--17.8%
Accrue Software, Inc.(1) 400 21,650
- --------------------------------------------------------------------------------------------------------------
Active Software, Inc.(1) 400 36,800
- --------------------------------------------------------------------------------------------------------------
Advent Software, Inc.(1) 1,500 96,656
- --------------------------------------------------------------------------------------------------------------
AGENCY.COM Ltd.(1) 100 5,100
- --------------------------------------------------------------------------------------------------------------
Allaire Corp.(1) 300 43,894
- --------------------------------------------------------------------------------------------------------------
Andover.Net, Inc.(1) 400 14,250
- --------------------------------------------------------------------------------------------------------------
Best Software, Inc.(1) 1,000 29,500
- --------------------------------------------------------------------------------------------------------------
BindView Development Corp.(1) 2,600 129,188
- --------------------------------------------------------------------------------------------------------------
Brio Technology, Inc.(1) 1,500 63,000
- --------------------------------------------------------------------------------------------------------------
Data Return Corp.(1) 700 37,450
- --------------------------------------------------------------------------------------------------------------
E.piphany, Inc.(1) 150 33,469
- --------------------------------------------------------------------------------------------------------------
eCollege.com(1) 800 8,750
- --------------------------------------------------------------------------------------------------------------
FreeMarkets, Inc.(1) 50 17,066
- --------------------------------------------------------------------------------------------------------------
GRIC Communications, Inc.(1) 200 5,075
- --------------------------------------------------------------------------------------------------------------
iBasis, Inc.(1) 500 14,375
- --------------------------------------------------------------------------------------------------------------
iManage, Inc.(1) 200 6,425
- --------------------------------------------------------------------------------------------------------------
Interactive Intelligence, Inc.(1) 1,100 29,288
- --------------------------------------------------------------------------------------------------------------
Intertrust Technologies Corp.(1) 150 17,644
- --------------------------------------------------------------------------------------------------------------
Legato Systems, Inc.(1) 600 41,288
- --------------------------------------------------------------------------------------------------------------
McAfee.com Corp.(1) 400 18,000
- --------------------------------------------------------------------------------------------------------------
Metasolv Software, Inc.(1) 250 20,438
- --------------------------------------------------------------------------------------------------------------
Micromuse, Inc.(1) 700 119,000
- --------------------------------------------------------------------------------------------------------------
Mission Critical Software, Inc.(1) 400 28,000
- --------------------------------------------------------------------------------------------------------------
National Information Consortium, Inc.(1) 800 25,600
- --------------------------------------------------------------------------------------------------------------
NetIQ Corp.(1) 1,200 62,475
- --------------------------------------------------------------------------------------------------------------
Novadigm, Inc.(1) 1,300 26,975
- --------------------------------------------------------------------------------------------------------------
OnDisplay, Inc.(1) 100 9,088
- --------------------------------------------------------------------------------------------------------------
Optio Software, Inc.(1) 1,000 23,500
- --------------------------------------------------------------------------------------------------------------
Preview Systems, Inc.(1) 200 12,975
- --------------------------------------------------------------------------------------------------------------
Primus Knowledge Solutions, Inc.(1) 700 31,719
</TABLE>
8 Oppenheimer Small Cap Growth Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Computer Software (continued)
Quest Software, Inc.(1) 200 $ 20,400
- --------------------------------------------------------------------------------------------------------------
SERENA Software, Inc.(1) 1,200 37,125
- --------------------------------------------------------------------------------------------------------------
SonicWALL, Inc. 400 16,100
- --------------------------------------------------------------------------------------------------------------
Telemate.Net Software, Inc.(1) 1,000 16,250
- --------------------------------------------------------------------------------------------------------------
TenFold Corp.(1) 700 27,956
- --------------------------------------------------------------------------------------------------------------
Verity, Inc.(1) 800 34,050
- --------------------------------------------------------------------------------------------------------------
Viador, Inc.(1) 700 29,663
- --------------------------------------------------------------------------------------------------------------
Vitria Technology, Inc.(1) 100 23,400
----------
1,233,582
- --------------------------------------------------------------------------------------------------------------
Communications Equipment--1.4%
Advanced Fibre Communications, Inc.(1) 1,200 53,625
- --------------------------------------------------------------------------------------------------------------
Extreme Networks, Inc.(1) 150 12,525
- --------------------------------------------------------------------------------------------------------------
Inet Technologies, Inc.(1) 450 31,444
----------
97,594
- --------------------------------------------------------------------------------------------------------------
Electronics--3.8%
ACT Manufacturing, Inc.(1) 1,200 45,000
- --------------------------------------------------------------------------------------------------------------
Alpha Industries, Inc.(1) 800 45,850
- --------------------------------------------------------------------------------------------------------------
ANADIGICS, Inc.(1) 400 18,875
- --------------------------------------------------------------------------------------------------------------
ASM International NV(1) 1,800 41,400
- --------------------------------------------------------------------------------------------------------------
ATMI, Inc.(1) 1,300 42,981
- --------------------------------------------------------------------------------------------------------------
Audiovox Corp., Cl. A(1) 1,000 30,375
- --------------------------------------------------------------------------------------------------------------
Caliper Technologies Corp.(1) 100 6,675
- --------------------------------------------------------------------------------------------------------------
InterTAN, Inc.(1) 1,200 31,350
----------
262,506
----------
Total Common Stocks (Cost $4,138,541) 5,835,100
<CAPTION>
Principal
Amount
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreements--1.5%
- --------------------------------------------------------------------------------------------------------------
Repurchase agreement with Banc One Capital Markets, Inc., 2.75%,
dated 12/31/99, to be repurchased at $100,023 on 1/3/00, collateralized
by U.S. Treasury Bonds, 5.25%-12%, 2/15/01-11/15/28, with a value
of $39,249 and U.S. Treasury Nts., 5%-7.50%, 12/31/00-2/15/07,
with a value of $62,809 (Cost $100,000) $100,000 100,000
- --------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $4,238,541) 85.7% 5,935,100
- --------------------------------------------------------------------------------------------------------------
Other Assets Net of Liabilities 14.3 991,496
--------- ----------
Net Assets 100.0% $6,926,596
========= ==========
</TABLE>
1. Non-income producing security.
See accompanying Notes to Financial Statements.
Oppenheimer Small Cap Growth Fund/VA 9
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
==========================================================================================
Assets
Investments, at value (cost $4,238,541)--see accompanying statement $5,935,100
- ------------------------------------------------------------------------------------------
Cash 1,000,432
- ------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 3,066
Interest and dividends 343
Other 5,360
----------
Total assets 6,944,301
==========================================================================================
Liabilities
Payables and other liabilities:
Shares of beneficial interest redeemed 12,487
Shareholder reports 2,780
Legal, auditing and other professional fees 1,158
Registration and filing fees 1,080
Trustees' compensation 76
Other 124
----------
Total liabilities 17,705
==========================================================================================
Net Assets $6,926,596
==========
==========================================================================================
Composition of Net Assets
Paid-in capital $4,791,913
- ------------------------------------------------------------------------------------------
Accumulated net realized gain on investment transactions 438,124
- ------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 1,696,559
----------
Net assets--applicable to 492,201 shares of beneficial interest outstanding $6,926,596
==========
==========================================================================================
Net Asset Value, Redemption Price Per Share and Offering Price Per Share $14.07
</TABLE>
See accompanying Notes to Financial Statements.
10 Oppenheimer Small Cap Growth Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
==========================================================================================
Investment Income
Interest $ 25,318
- ------------------------------------------------------------------------------------------
Dividends 1,127
----------
Total income 26,445
==========================================================================================
Expenses
Management fees 20,414
- ------------------------------------------------------------------------------------------
Shareholder reports 16,643
- ------------------------------------------------------------------------------------------
Legal, auditing and other professional fees 7,311
- ------------------------------------------------------------------------------------------
Custodian fees and expenses 2,410
- ------------------------------------------------------------------------------------------
Trustees' compensation 1,051
- ------------------------------------------------------------------------------------------
Other 2,373
----------
Total expenses 50,202
Less expenses paid indirectly (2,398)
Less voluntary assumption of expenses (11,200)
----------
Net expenses 36,604
==========================================================================================
Net Investment Loss (10,159)
==========================================================================================
Realized and Unrealized Gain
Net realized gain on investments 493,584
- ------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments 1,591,588
----------
Net realized and unrealized gain 2,085,172
==========================================================================================
Net Increase in Net Assets Resulting from Operations $2,075,013
==========
</TABLE>
See accompanying Notes to Financial Statements.
Oppenheimer Small Cap Growth Fund/VA 11
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Period Ended
December 31, December 31,
1999 1998(1)
===============================================================================================================
<S> <C> <C>
Operations
Net investment loss $ (10,159) $ (2,339)
- ---------------------------------------------------------------------------------------------------------------
Net realized gain (loss) 493,584 (45,301)
- ---------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 1,591,588 104,971
---------- --------
Net increase in net assets resulting from operations 2,075,013 57,331
===============================================================================================================
Beneficial Interest Transactions
Net increase in net assets resulting from beneficial interest transactions 3,857,279 936,973
===============================================================================================================
Net Assets
Total increase 5,932,292 994,304
- ---------------------------------------------------------------------------------------------------------------
Beginning of period 994,304 --
---------- --------
End of period $6,926,596 $994,304
========== ========
</TABLE>
1. For the period from May 1, 1998 (commencement of operations) to December 31,
1998.
See accompanying Notes to Financial Statements.
12 Oppenheimer Small Cap Growth Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998(1)
===========================================================================================
<S> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $ 9.60 $10.00
- -------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (.02) (.02)
Net realized and unrealized gain (loss) 4.49 (.38)
- -------------------------------------------------------------------------------------------
Total income (loss) from investment operations 4.47 (.40)
- -------------------------------------------------------------------------------------------
Net asset value, end of period $14.07 $ 9.60
====== ======
===========================================================================================
Total Return, at Net Asset Value(2) 46.56% (4.00)%
===========================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $6,927 $994
- -------------------------------------------------------------------------------------------
Average net assets (in thousands) $2,738 $441
- -------------------------------------------------------------------------------------------
Ratios to average net assets:(3)
Net investment loss (0.37)% (0.79)%
Expenses 1.83% 0.87%(4)
Expenses, net of voluntary assumption of expenses 1.34% N/A
- -------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 176% 61%
</TABLE>
1. For the period from May 1, 1998 (commencement of operations) to December 31,
1998.
2. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or commencement of operations), 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 of 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.
3. Annualized for periods less than one full year.
4. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.
5. 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 $7,060,737 and $4,155,665, respectively.
See accompanying Notes to Financial Statements.
Oppenheimer Small Cap Growth Fund/VA 13
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies
Oppenheimer Small Cap 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 seek capital
appreciation. 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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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.
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Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and 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 accumulated net investment loss of $10,159. Accumulated net realized
gain on investments was decreased by the same amount.
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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.
14 Oppenheimer Small Cap Growth Fund/VA
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Notes to Financial Statements (Continued)
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Other. Investment transactions are accounted for as of trade date and dividend
income is recorded on the ex-dividend date. Certain dividends from foreign
securities will be recorded as soon as the Fund is informed of the dividend if
such information is obtained subsequent to the ex-dividend date. Realized gains
and losses on investments 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.
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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(1)
---------------------------- ------------------------------
Shares Amount Shares Amount
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<S> <C> <C> <C> <C>
Sold 504,223 $5,008,676 114,434 $1,030,883
Redeemed (115,553) (1,151,397) (10,903) (93,910)
-------- ---------- ------- ----------
Net increase 388,670 $3,857,279 103,531 $ 936,973
======== ========== ======= ==========
</TABLE>
1. For the period from May 1, 1998 (commencement of operations) to December 31,
1998.
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3. Unrealized Gains and Losses on Securities
As of December 31, 1999, net unrealized appreciation on securities of $1,696,559
was composed of gross appreciation of $1,896,881, and gross depreciation of
$200,322.
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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 Fund which provides for a fee of 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 and
0.60% of average annual net assets over $800 million. The Manager has
voluntarily reimbursed certain Fund expenses. The Fund's management fee for the
year ended December 31, 1999 was 0.75% 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 Small Cap Growth Fund/VA 15
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Independent Auditors' Report
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To the Board of Trustees and Shareholders of Oppenheimer Small Cap Growth
Fund/VA:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer Small Cap 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 year ended December 31, 1999 and the period ended
December 31, 1998 and the financial highlights for the period May 1, 1998, 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
Small Cap 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
16 Oppenheimer Small Cap Growth 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 Small Cap Growth Fund/VA 17
<PAGE>
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Oppenheimer Small Cap Growth 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
Jay W. Tracey, III, 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
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Custodian of Portfolio Securities The Bank of New York
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Independent Auditors Deloitte & Touche LLP
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Legal Counsel Myer, Swanson, Adams & Wolf, P.C.
This is a copy of a report to shareholders
of Oppenheimer Small Cap Growth Fund/VA.
This report must be preceded or accompanied
by a Prospectus of Oppenheimer Small Cap
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.
18 Oppenheimer Small Cap Growth Fund/VA
