Annual Report December 31, 1999
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Oppenheimer
Global Securities 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 Global Securities Fund/VA
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Objective
Oppenheimer Global Securities Fund/VA, a series of Oppenheimer Variable Account
Funds, seeks long-term capital appreciation by investing a substantial portion
of assets in common stocks of U.S. and foreign companies.
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Narrative by William Wilby, Portfolio Manager
We are very pleased with the Fund's performance over the fiscal year that ended
December 31, 1999. The Fund's average annual total return for the one-year
period was 58.48%.(1)
We attribute the Fund's excellent performance during the reporting
period to our disciplined stock selection strategy. By identifying trends--such
as technological change and restructuring--that are propelling global growth, we
have been able to take advantage of strong, individual companies that have
played important roles in enabling this growth.
In addition, the global financial markets rebounded quickly and
dramatically after 1998's declines. In large part, the markets' recovery was the
result of actions taken by central banks worldwide as the crisis unfolded last
year. The recovery was also enhanced by an increase in corporate earnings.
Certain key sectors of the global markets, including the energy and
semiconductor industries, began to recover after experiencing recession-like
conditions for several years. Higher oil prices and robust demand for microchips
helped fuel a rebound in those sectors, which positively influenced the entire
marketplace.
The Asian markets rebounded strongly in early 1999 as the fear of
depression eased and economies stabilized. Within Asia, Japan's stock market has
had a particularly good year, driven by the widespread belief that the Japanese
economy has stabilized.
The advance of European markets paused during the first several months
of 1999 as the region adjusted to a new currency, the euro, which remains weak
relative to the U.S. dollar. In the United States, stocks as a whole have
performed very well, with the greatest returns coming from technology and
economically sensitive businesses such as oil companies and other manufacturers
of basic materials.
Throughout the reporting period, we generally maintained our focus on
companies based in Europe and the United States. It is important to note,
however, that this strategy was not so much a reaction to broad economic or
market trends as it was a result of our disciplined, bottom-up stock selection
strategy. We choose investments one company at a time by evaluating their
prospects in the context of long-term growth trends.
The Fund's largest investment position, QUALCOMM, Inc., provided
outstanding returns during the period. This U.S. telecommunications company
recently set a new standard for software that runs cellular telephone
communications. This new--and, in our opinion, superior--standard was adopted by
many competing cellular telephone equipment manufacturers.(2)
U.S. technology company National Semiconductor Corp. also provided very
good returns over the past year as the entire semiconductors sector recovered
from a period of relatively lackluster growth. Driven by greater demand for
microprocessors, National Semiconductor was a prime beneficiary of this
recovery. In addition, the company's stock price rallied when it sold an
under-performing division in order to focus on its more profitable niche
businesses.
1. Includes changes in net asset value per share and does not include the
charges associated with the separate account products which 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 Global Securities Fund/VA
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Oppenheimer Variable Account Funds--Oppenheimer Global Securities Fund/VA
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With regard to our outlook over the coming months, we currently see little
reason for global stock markets to either rise or fall substantially from
current levels. On one hand, most global economies are either stable or growing,
and we see little likelihood of an economic collapse in any major markets. On
the other hand, valuations of many growth companies remain quite high, which
should help prevent markets from rising much further. As a result, we continue
to believe that the greatest returns are likely to be achieved by focusing on
individual companies rather than overall markets.
Fortunately, we have had no trouble identifying growth companies that
we believe will benefit from our long-term global growth themes: Mass Affluence,
New Technologies, Restructuring and Aging. Adhering to these long-term
investment themes and focusing on the companies that we believe will benefit are
what makes Oppenheimer Global Securities Fund/VA an important part of The Right
Way to Invest.
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Management's discussion of performance. During the Fund's fiscal year that ended
December 31, 1999, Oppenheimer Global Securities Fund/VA provided very good
performance. Returns were generally attractive over the past year as stocks
worldwide recovered from last year's global credit and currency crisis. The Fund
benefited from its stock selection strategy, including a number of investments
in the technology, telecommunications and consumer durables market sectors.
However, the Fund's performance was constrained by its asset allocation
strategy, which focused more on U.S. and European markets than on the better
performing markets in Japan and other Asian nations. Overall, the Fund's
managers continued to adhere to their longstanding strategy of identifying
out-of-favor growth companies most likely to benefit from four distinct
long-term investment themes. The Fund's portfolio holdings, allocations and
strategies are subject to change.
Oppenheimer Global Securities Fund/VA 3
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Oppenheimer Variable Account Funds--Oppenheimer Global Securities 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 Morgan
Stanley Capital International (MSCI) World Index, an unmanaged index of issuers
listed on the stock exchanges of 20 foreign countries and the United States. It
is widely recognized as a measure of global stock market performance. 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.
[Chart]
Comparison of Change in Value of $10,000 Hypothetical Investments in:
OVAF/Oppenheimer Global Securities Fund/VA and
Morgan Stanley Capital International World Index
OVAF/Oppenheimer Global Morgan Stanley Capital
Securities Fund/VA International World Index
11.12.90 10000 10000
12.31.90 10040 10046
12.31.91 10380 11951
12.31.92 9642 11394
12.31.93 16424 14029
12.31.94 15483 14812
12.31.95 15830 17970
12.31.96 18648 20485
12.31.97 22829 23809
12.31.98 26050 29713
12.31.99 41283 37242
Average Annual Total Return of the Fund at 12/31/99
1-Year 58.48% 5-Year 21.67% Life 16.79%
[End Chart]
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 MSCI World Index begins on
10/31/90. The inception date of the Fund was 11/12/90.
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.
4 Oppenheimer Global Securities Fund/VA
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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--89.1%
Basic Materials--1.1%
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Chemicals--1.1%
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International Flavors & Fragrances, Inc. 501,200 $ 18,920,300
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Capital Goods--7.8%
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Electrical Equipment--1.5%
Toshiba Corp. 3,388,000 25,849,946
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Industrial Services--3.8%
Manpower, Inc. 437,800 16,472,225
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Rentokil Initial plc 3,216,300 11,729,826
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WPP Group plc 2,459,500 38,978,317
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67,180,368
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Manufacturing--2.5%
Bombardier, Inc., Cl. B 787,500 16,133,058
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Sidel SA 123,700 12,760,393
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Societe BIC SA 319,437 14,524,525
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43,417,976
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Communication Services--6.8%
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Telecommunications: Long Distance--0.6%
MCI WorldCom, Inc.(1) 200,700 10,649,644
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Telephone Utilities--2.7%
DDI Corp.(1) 600 8,216,766
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Hellenic Telecommunication Organization SA 182,118 4,327,815
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Portugal Telecom SA 719,000 7,880,019
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Tele Norte Leste Participacoes SA (Telemar), Preference 791,770,000 21,257,041
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Telstra Corp. Ltd. 1,245,400 6,774,926
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48,456,567
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Telecommunications: Wireless--3.5%
NTT Mobile Communications Network, Inc. 636 24,449,574
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Telecel-Comunicacoes Pessoais, S.A. 501,400 8,734,778
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Telecom Italia Mobile SpA 2,294,400 25,607,736
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Telesp Celular Participacoes SA, ADR 79,100 3,351,862
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62,143,950
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Consumer Cyclicals--9.9%
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Autos & Housing--5.9%
Autoliv, Inc., SDR 301,600 8,824,205
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General Motors Corp. 205,300 14,922,744
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Hanson plc 1,608,400 13,485,550
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IRSA Inversiones y Representaciones SA 1,816,959 5,887,536
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Porsche AG, Preference 16,600 43,770,336
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Volkswagen AG 295,500 16,585,502
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103,475,873
</TABLE>
Oppenheimer Global Securities 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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Leisure & Entertainment--1.2%
Hasbro, Inc. 478,200 $ 9,115,687
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International Game Technology 558,400 11,342,500
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20,458,187
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Media--1.1%
Reed International plc 1,599,200 11,974,566
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Singapore Press Holdings Ltd. 364,000 7,889,763
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19,864,329
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Retail: Specialty--1.7%
Circuit City Stores-Circuit City Group 274,000 12,347,125
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Dixons Group plc 739,194 17,781,172
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30,128,297
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Consumer Staples--10.5%
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Beverages--0.7%
Cadbury Schweppes plc 2,036,400 12,303,876
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Broadcasting--7.4%
Canal Plus 282,404 41,068,533
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Grupo Televisa SA, Sponsored GDR(1) 424,300 28,958,475
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ProSieben Media AG, Preference 235,948 13,416,377
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Television Broadcasts Ltd. 1,569,000 10,697,498
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Television Francaise 1 56,075 29,345,609
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Telewest Communications plc(1) 1,291,058 6,888,043
------------
130,374,535
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Entertainment--0.9%
Disney (Walt) Co. 219,700 6,426,225
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Nintendo Co. Ltd. 54,000 8,969,187
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15,395,412
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Food & Drug Retailers--0.4%
Dairy Farm International Holdings Ltd. 8,172,194 7,354,975
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Household Goods--1.1%
Wella AG, Preference 910,700 19,980,315
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Energy--0.4%
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Oil: International--0.4%
BP Amoco plc, ADR 107,288 6,363,519
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Financial--9.1%
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Banks--1.5%
Australia & New Zealand Banking Group Ltd. 1,958,600 14,259,033
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Royal Bank of Scotland Group (The) plc 340,000 6,009,018
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UniCredito Italiano SpA 1,303,100 6,399,824
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26,667,875
</TABLE>
6 Oppenheimer Global Securities 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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Diversified Financial--5.1%
American Express Co. 99,000 $ 16,458,750
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Associates First Capital Corp., Cl. A 139,700 3,833,019
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Citigroup, Inc. 295,700 16,429,831
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Credit Saison Co. Ltd. 390,000 6,790,570
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Fannie Mae 190,000 11,863,125
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Housing Development Finance Corp. Ltd. 222,900 1,463,821
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ICICI Ltd., Sponsored ADR(1) 1,008,700 14,615,825
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Lehman Brothers Holdings, Inc. 226,000 19,139,375
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90,594,316
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Insurance--2.5%
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AEGON NV 143,400 13,840,069
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Allied Zurich plc 1,048,600 12,357,835
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American International Group, Inc. 56,937 6,156,313
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AXA SA 87,300 12,159,643
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44,513,860
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Healthcare--12.3%
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Healthcare/Drugs--10.0%
ALZA Corp., Cl. A(1) 419,900 14,539,037
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Amgen, Inc.(1) 294,200 17,670,387
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Eisai Co. Ltd. 704,000 13,531,840
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Elan Corp. plc, ADR(1) 614,800 18,136,600
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Fresenius AG, Preference 142,419 26,086,140
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Genset, Sponsored ADR(1) 938,600 17,892,062
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Genzyme Corp. (General Division)(1) 177,400 7,983,000
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Gilead Sciences, Inc.(1) 172,700 9,347,387
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Glaxo Wellcome plc, Sponsored ADR 154,800 8,649,450
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Millennium Pharmaceuticals, Inc.(1) 207,800 25,351,600
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Pliva d.d., Sponsored GDR(2) 810,300 10,574,415
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Taisho Pharmaceutical Co. 210,000 6,162,575
------------
175,924,493
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Healthcare/Supplies & Services--2.3%
Affymetrix, Inc.(1) 135,300 22,958,719
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Bard (C.R.), Inc. 178,400 9,455,200
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Quintiles Transnational Corp.(1) 458,900 8,575,694
------------
40,989,613
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Technology--30.7%
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Computer Hardware--2.9%
International Business Machines Corp. 145,800 15,746,400
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Sun Microsystems, Inc.(1) 447,200 34,630,050
------------
50,376,450
</TABLE>
Oppenheimer Global Securities Fund/VA 7
<PAGE>
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Statement of Investments (Continued)
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<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Computer Services--4.0%
Cap Gemini SA 115,600 $ 29,317,631
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Getronics NV 514,000 40,969,324
--------------
70,286,955
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Computer Software--5.8%
Cadence Design Systems, Inc.(1) 1,572,600 37,742,400
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Lernout & Hauspie Speech Products NV(1) 289,800 13,403,250
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Oracle Corp.(1) 339,000 37,989,187
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Sybase, Inc.(1) 345,900 5,880,300
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Synopsys, Inc.(1) 110,700 7,389,225
--------------
102,404,362
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Communications Equipment--11.1%
Alcatel 133,100 30,541,010
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Cisco Systems, Inc.(1) 161,350 17,284,619
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L.M. Ericsson Telephone Co., Cl. B, ADR 596,400 39,176,025
- ------------------------------------------------------------------------------------------------------------------------
Nokia Corp., A Shares, Sponsored ADR(1) 95,900 18,221,000
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QUALCOMM, Inc.(1) 385,100 67,825,737
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Scientific-Atlanta, Inc. 402,100 22,366,813
--------------
195,415,204
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Electronics--6.9%
Hoya Corp. 83,000 6,535,753
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Koninklijke (Royal) Philips Electronics NV 216,600 29,428,134
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National Semiconductor Corp.(1) 1,167,400 49,979,313
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STMicroelectronics NV, NY Registered Shares 229,800 34,800,338
--------------
120,743,538
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Transportation--0.5%
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Shipping--0.5%
Peninsular & Oriental Steam Navigation Co. 575,100 9,597,341
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Total Common Stocks (Cost $1,026,351,138) 1,569,832,076
<CAPTION>
Principal
Amount
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements--8.3%
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Repurchase agreement with Banc One Capital Markets, Inc., 2.75%, dated 12/31/99,
to be repurchased at $145,933,435 on 1/3/00, collateralized by U.S. Treasury Bonds,
5.25%-12%, 2/15/01-11/15/28, with a value of $57,264,247 and U.S. Treasury Nts.,
5%-7.50%, 12/31/00-2/15/07, with a value of $91,638,429 (Cost $145,900,000) $ 145,900,000 145,900,000
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Total Investments, at Value (Cost $1,172,251,138) 97.4% 1,715,732,076
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Other Assets Net of Liabilities 2.6 46,634,376
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Net Assets 100.0% $1,762,366,452
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</TABLE>
8 Oppenheimer Global Securities Fund/VA
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Statement of Investments (Continued)
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Distribution of investments representing geographic diversification, as a
percentage of total investments at value, is as follows:
<TABLE>
<CAPTION>
Geographic Diversification Market Value Percent
<S> <C> <C>
- ---------------------------------------------------------------------------------------
United States $ 736,854,433 42.8%
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France 222,409,744 13.0
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Great Britain 156,118,512 9.1
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Germany 119,838,669 7.0
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Japan 100,506,211 5.9
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The Netherlands 84,237,526 4.9
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Sweden 48,000,230 2.8
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Italy 32,007,560 1.9
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Mexico 28,958,475 1.7
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Brazil 24,608,904 1.4
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Australia 21,033,959 1.2
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Finland 18,221,000 1.1
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Ireland 18,136,600 1.1
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Portugal 16,614,798 1.0
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Canada 16,133,058 0.9
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Singapore 15,244,737 0.9
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Belgium 13,403,250 0.8
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India 11,917,146 0.7
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Hong Kong 10,697,498 0.6
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Croatia 10,574,415 0.6
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Argentina 5,887,536 0.3
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Greece 4,327,815 0.3
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Total $1,715,732,076 100.0%
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</TABLE>
1. Non-income producing security.
2. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $10,574,415 or 0.60% of the Fund's net
assets as of December 31, 1999.
See accompanying Notes to Financial Statements.
Oppenheimer Global Securities Fund/VA 9
<PAGE>
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Statement of Assets and Liabilities December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
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Assets
Investments, at value (cost $1,172,251,138)--see accompanying statement $1,715,732,076
- ------------------------------------------------------------------------------------------------
Cash 1,077,591
- ------------------------------------------------------------------------------------------------
Unrealized appreciation on foreign currency exchange contracts 7,046
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Receivables and other assets:
Investments sold 53,869,505
Shares of beneficial interest sold 1,265,029
Interest, dividends 1,158,012
Other 11,481
--------------
Total assets 1,773,120,740
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Liabilities
Unrealized depreciation on foreign currency exchange contracts 7,821
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Payables and other liabilities:
Investments purchased 9,066,120
Shares of beneficial interest redeemed 1,537,479
Trustees' compensation 1,967
Transfer and shareholder servicing agent fees 184
Other 140,717
--------------
Total liabilities 10,754,288
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Net Assets $1,762,366,452
==============
================================================================================================
Composition of Net Assets
Paid-in capital $ 924,735,645
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Overdistributed net investment income (567,744)
- ------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 294,753,467
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of
assets and liabilities denominated in foreign currencies 543,445,084
--------------
Net assets--applicable to 52,745,360 shares of beneficial interest outstanding $1,762,366,452
==============
================================================================================================
Net Asset Value, Redemption Price Per Share and Offering Price Per Share $33.41
</TABLE>
See accompanying Notes to Financial Statements.
10 Oppenheimer Global Securities Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------------------
Investment Income
Dividends (net of foreign withholding taxes of $712,662) $ 13,352,150
- ----------------------------------------------------------------------------------------------
Interest 2,466,093
------------
Total income 15,818,243
==============================================================================================
Expenses
Management fees 8,336,850
- ----------------------------------------------------------------------------------------------
Custodian fees and expenses 270,778
- ----------------------------------------------------------------------------------------------
Trustees' compensation 11,193
- ----------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees 2,104
- ----------------------------------------------------------------------------------------------
Other 43,962
------------
Total expenses 8,664,887
Less expenses paid indirectly (6,321)
------------
Net expenses 8,658,566
==============================================================================================
Net Investment Income 7,159,677
==============================================================================================
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 320,164,650
Foreign currency transactions (29,286,569)
------------
Net realized gain 290,878,081
- ----------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 363,894,982
Translation of assets and liabilities denominated in foreign currencies (23,520,911)
------------
Net change 340,374,071
------------
Net realized and unrealized gain 631,252,152
==============================================================================================
Net Increase in Net Assets Resulting from Operations $638,411,829
============
</TABLE>
See accompanying Notes to Financial Statements.
Oppenheimer Global Securities Fund/VA 11
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998
<S> <C> <C>
===============================================================================================================
Operations
Net investment income $ 7,159,677 $ 12,887,134
- ---------------------------------------------------------------------------------------------------------------
Net realized gain 290,878,081 36,962,992
- ---------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 340,374,071 86,460,026
-------------- --------------
Net increase in net assets resulting from operations 638,411,829 136,310,152
===============================================================================================================
Dividends and/or Distributions to Shareholders
Dividends from net investment income (7,159,677) (21,307,082)
- ---------------------------------------------------------------------------------------------------------------
Dividends in excess of net investment income (6,137,505) --
- ---------------------------------------------------------------------------------------------------------------
Distributions from net realized gain (37,262,160) (80,203,951)
===============================================================================================================
Beneficial Interest Transactions
Net increase in net assets resulting from beneficial interest transactions 39,484,831 141,119,795
===============================================================================================================
Net Assets
Total increase 627,337,318 175,918,914
- ---------------------------------------------------------------------------------------------------------------
Beginning of period 1,135,029,134 959,110,220
-------------- --------------
End of period [including undistributed (overdistributed) net investment
income of $(567,744) and $11,592,206, respectively] $1,762,366,452 $1,135,029,134
============== ==============
</TABLE>
See accompanying Notes to Financial Statements.
12 Oppenheimer Global Securities Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<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 $22.07 $21.37 $17.67 $15.00 $15.09
- ---------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .14 .24 .25 .15 .12
Net realized and unrealized gain 12.21 2.64 3.68 2.52 .19
- ---------------------------------------------------------------------------------------------------------------------
Total income from investment operations 12.35 2.88 3.93 2.67 .31
- ---------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.14) (.46) (.23) -- --
Dividends in excess of net investment income (.13) -- -- -- --
Distributions from net realized gain (.74) (1.72) -- -- (.40)
- ---------------------------------------------------------------------------------------------------------------------
Total dividends and/or distributions to shareholders (1.01) (2.18) (.23) -- (.40)
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $33.41 $22.07 $21.37 $17.67 $15.00
====== ====== ====== ====== ======
=====================================================================================================================
Total Return, at Net Asset Value(1) 58.48% 14.11% 22.42% 17.80% 2.24%
=====================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in millions) $1,762 $1,135 $959 $582 $361
- ---------------------------------------------------------------------------------------------------------------------
Average net assets (in millions) $1,251 $1,055 $802 $467 $332
- ---------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income 0.57% 1.22% 1.51% 1.09% 0.86%
Expenses 0.69% 0.74%(3) 0.76%(3) 0.81%(3) 0.89%(3)
- ---------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 64% 81% 67% 90% 131%
</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 $772,038,559 and $956,384,357, respectively.
See accompanying Notes to Financial Statements.
Oppenheimer Global Securities Fund/VA 13
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies
Oppenheimer Global Securities 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 long-term capital
appreciation by investing a substantial portion of assets in securities of
foreign issuers, "growth-type" companies, cyclical industries and special
situations that are considered to have appreciation possibilities. The Fund's
investment advisor is OppenheimerFunds, Inc. (the Manager). The following is a
summary of significant accounting policies consistently followed by the Fund.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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.
14 Oppenheimer Global Securities Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (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 $6,653, a decrease in undistributed net
investment income of $6,022,445, and an increase in accumulated net realized
gain on investments of $6,029,098.
- --------------------------------------------------------------------------------
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. 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.
================================================================================
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 14,212,563 $ 365,308,523 11,735,029 $ 248,354,528
Dividends and distributions reinvested 2,349,412 50,559,342 4,877,993 101,511,033
Redeemed (15,245,808) (376,383,034) (10,067,775) (208,745,766)
----------- ------------- ----------- -------------
Net increase 1,316,167 $ 39,484,831 6,545,247 $ 141,119,795
=========== ============= =========== =============
</TABLE>
================================================================================
3. Unrealized Gains and Losses on Securities
As of December 31, 1999, net unrealized appreciation on securities of
$543,480,938 was composed of gross appreciation of $590,197,031, and gross
depreciation of $46,716,093.
Oppenheimer Global Securities Fund/VA 15
<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 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 Fund's management fee
for the year ended December 31, 1999 was 0.67% 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. Foreign Currency Contracts
A foreign currency contract is a commitment to purchase or sell a foreign
currency at a future date, at a negotiated rate. The Fund may enter into foreign
currency contracts for operational purposes and to seek to protect against
adverse exchange rate fluctuations. Risks to the Fund include the potential
inability of the counterparty to meet the terms of the contract.
The net U.S. dollar value of foreign currency underlying all
contractual commitments held by the Fund and the resulting unrealized
appreciation or depreciation are determined using foreign currency exchange
rates as provided by a reliable bank, dealer or pricing service. Unrealized
appreciation and depreciation on foreign currency contracts are reported in the
Statement of Assets and Liabilities.
The Fund may realize a gain or loss upon the closing or settlement of
the foreign currency transactions. Realized gains and losses are reported with
all other foreign currency gains and losses in the Statement of Operations.
Securities denominated in foreign currency to cover net exposure on
outstanding foreign currency contracts are noted in the Statement of Investments
where applicable.
As of December 31, 1999, the Fund had outstanding foreign currency contracts as
follows:
<TABLE>
<CAPTION>
Expiration Contract Valuation as of Unrealized Unrealized
Contract Description Dates Amounts (000s) December 31, 1999 Appreciation Depreciation
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Contracts to Purchase
- ---------------------
British Pound Sterling (GBP) 1/3/00 164 GBP $ 264,200 $ 554 $ --
British Pound Sterling (GBP) 1/3/00 285 GBP 461,002 -- 860
Euro (EUR) 1/3/00 209 EUR 210,398 538 --
Japanese Yen (JPY) 1/3/00 163,044 JPY 1,596,537 3,186 --
Japanese Yen (JPY) 1/3/00 9,642 JPY 94,379 -- 202
------ ------
4,278 1,062
------ ------
Contracts to Sell
- -----------------
British Pound Sterling (GBP) 1/3/00 2,135 GBP 3,449,810 2,768 --
Euro (EUR) 1/3/00 2,933 EUR 2,959,230 -- 6,759
------ ------
2,768 6,759
------ ------
Total Unrealized Appreciation and Depreciation $7,046 $7,821
====== ======
</TABLE>
16 Oppenheimer Global Securities Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
================================================================================
To the Board of Trustees and Shareholders of Oppenheimer Global Securities
Fund/VA:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer Global Securities 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
Global Securities 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
Oppenheimer Global Securities Fund/VA 17
<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.
Distributions of $1.0095 per share were paid to shareholders on March
22, 1999, of which $0.4700 was designated as a "capital gain distribution" for
federal income tax purposes. Whether received in stock or in cash, the capital
gain distribution should be treated by shareholders as a gain from the sale of
capital assets held for more than one year (long-term capital gains).
Dividends paid by the Fund during the fiscal year ended December 31,
1999 which are not designated as capital gain distributions should be multiplied
by 1.98% to arrive at the net amount eligible for the corporate
dividend-received deduction.
The foregoing information is presented to assist shareholders in
reporting distributions received from the Fund to the Internal Revenue Service.
Because of the complexity of the federal regulations which may affect your
individual tax return and the many variations in state and local tax
regulations, we recommend that you consult your tax advisor for specific
guidance.
18 Oppenheimer Global Securities Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Oppenheimer Global Securities 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
William L. Wilby, 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 Global Securities Fund/VA. This report
must be preceded or accompanied by a Prospectus of
Oppenheimer Global Securities 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>
Oppenheimer Global Securities Fund/VA 19
