-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ILAHm99+FI5uyUUezU9e9xHdUA6l2tIZ8Hf6WYugko5IvMq8AHqn5xNqhUHwoQu/ 7xwWaVcq1djhUbQjcPHiOQ== 0000935069-03-000209.txt : 20030228 0000935069-03-000209.hdr.sgml : 20030228 20030227183852 ACCESSION NUMBER: 0000935069-03-000209 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20021231 FILED AS OF DATE: 20030228 EFFECTIVENESS DATE: 20030228 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OPPENHEIMER VARIABLE ACCOUNT FUNDS CENTRAL INDEX KEY: 0000752737 IRS NUMBER: 840974272 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-04108 FILM NUMBER: 03584383 BUSINESS ADDRESS: STREET 1: 6803 SOUTH TUCSON WAY CITY: CENTENNIAL STATE: CO ZIP: 80112-3924 BUSINESS PHONE: 3036713200 MAIL ADDRESS: STREET 2: 6803 SOUTH TUCSON WAY CITY: CENTENNIAL STATE: CO ZIP: 80112-3924 FORMER COMPANY: FORMER CONFORMED NAME: OPPENHEIMER VARIABLE LIFE FUNDS DATE OF NAME CHANGE: 19860609 N-30D 1 ra0660_6461vef.txt RA0660_6461VEF December 31, 2002 - -------------------------------------------------------------------------------- Oppenheimer Annual Report Money Fund/VA ------------ A Series of Oppenheimer Variable Account Funds Management Commentaries - -------------------------------------------------------------------------------- Performance Update Investment Strategy Discussion Financial Statements [GRAPHIC OMITTED] [LOGO] OppenheimerFunds(R) The Right Way to Invest OPPENHEIMER MONEY FUND/VA ------------------------------------------------------------------------------- Objective Oppenheimer Money Fund/VA, a series of Oppenheimer Variable Account Funds, seeks maximum current income from investments in "money market" securities consistent with low capital risk and the maintenance of liquidity. ------------------------------------------------------------------------------- Narrative by Carol Wolf and Barry Weiss, Portfolio Managers We are pleased to provide you with this annual report for Oppenheimer Money Fund/VA. During the 12-month reporting period ended December 31, 2002, the Fund produced a 1.46% annualized yield, and when taking into account the effects of compounding, a 1.47% annualized effective yield.1 As of December 31, 2002, the Fund's 7-day yields, with and without compounding, were 1.21% and 1.20%, respectively. These returns are primarily the result of the period's low interest rates, which remained near historical lows throughout the reporting period. When 2002 began, the U.S. economy was in recession and the nation was beginning to recover from the devastating effects of the September 11th attacks. To stimulate renewed economic growth, the Federal Reserve Board, which had reduced short-term interest rates aggressively with 11 rate cuts in 2001, cut rates once again during 2002 driving the benchmark federal funds rate--the rate banks charge one another for overnight loans--to 1.25%, a 40-year low. Money market yields fell along with general interest rates. As many analysts expected, the U.S. economy began to recover from the recession in early 2002. Soon after the year began, several economic sectors began to experience signs of growth, including manufacturing and industrial production. In addition, consumer spending remained relatively strong as Americans responded to low interest rates by purchasing automobiles, buying new homes and improving existing ones. In fact, the consumer represented the economy's sole pillar of strength throughout the recession and subsequent recovery. Despite robust consumer spending and borrowing, corporations generally continued to curtail capital spending. Without support from the corporate sector, the economy's performance turned decidedly mixed, and many analysts became concerned that the recovery was in danger of stalling. As a result, investors began to revise their expectations of the future direction of interest rates. Many had previously believed that the Fed would raise interest rates after the recovery gained momentum. By the summer, most expected the Fed's next move to be toward lower interest rates. Economic signals remained mixed throughout the third quarter, contributing to growing uncertainty among investors. What's more, investors became increasingly concerned about the potential economic effects of the corporate scandals affecting a number of major U.S. corporations. Heightened international tensions related to possible war in Iraq also contributed to investors' worries. Yet, despite these concerns, troubling signs of rising unemployment and a persistently weak stock market, the economy managed to grow at a relatively strong 4% rate between July and September. In response to what it called a "soft patch" in the economy to start the fourth quarter of 2002, the Fed intervened in November with a 0.5 percentage-point interest-rate reduction, its first in 2002. Investors and consumers apparently responded well to this move, as the stock market began to rally. In this generally weak and uncertain economic environment, we looked for tactical opportunities to invest at higher yields whenever possible. We occasionally identified such opportunities among commercial paper in the six-month maturity range. Otherwise, we had little choice but to reinvest maturing securities at prevailing rates. From a security selection standpoint, we found what we believed to be relatively attractive values in very highly rated commercial paper, and these short-term debt instruments comprised the majority of the Fund throughout the year. We also invested in variable-rate notes on which yields are re-set every three months, as well as securities issued by U.S. government agencies, such as Fannie Mae, Freddie Mac and Ginnie Mae. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. 1. Compounding yields assume reinvestment of dividends, and do not include changes associated with the separate account products which offer this Fund. 2 | OPPENHEIMER MONEY FUND/VA Looking forward, we intend to maintain a relatively constructive posture until we see convincing signs of economic strength. Accordingly, we have maintained the Fund's weighted average maturity at points that are somewhat longer than the average for our peer group. In our view, this is a prudent approach to earning competitive levels of income and that is an important part of what makes Oppenheimer Money Fund/VA part of The Right Way to Invest. In reviewing performance, please remember that past performance cannot guarantee future results. Because of ongoing market volatility, the Fund's performance may be subject to fluctuations, and current performance may be less than the results shown. The Fund's portfolio is subject to change. The Fund's investment strategy and focus can change over time. The mention of specific fund holdings does not constitute a recommendation by OppenheimerFunds, Inc. 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. 3 | OPPENHEIMER MONEY FUND/VA Financial Statements Pages 5-13 4 | OPPENHEIMER MONEY FUND/VA STATEMENT OF INVESTMENTS December 31, 2002 Principal Value Amount See Note 1 --------------------------------------------------------------- Certificates of Deposit--9.3% --------------------------------------------------------------- Domestic Certificates of Deposit--3.8% Citibank NA, 1.33%, 2/27/03 $ 2,500,000 $ 2,500,000 --------------------------------------------------------------- National Bank of Commerce, Tennessee, 1.41%, 6/20/03 1 5,000,000 4,999,498 --------------------------------------------------------------- State Street Bank and Trust, 1.33%, 2/13/03 2,000,000 2,000,012 --------------------------------------------------------------- Suntrust Bank, 1.47%, 5/23/03 1 5,000,000 5,001,854 -------------- 14,501,364 --------------------------------------------------------------- Yankee Certificates of Deposit--5.5% Abbey National Treasury Services, 1.33%, 3/19/03 3,000,000 3,000,000 --------------------------------------------------------------- Barclays Bank plc, New York, 1.74%, 3/3/03 3,000,000 2,999,896 --------------------------------------------------------------- BNP Paribas, New York, 2.63%, 6/6/03 2,000,000 2,010,625 --------------------------------------------------------------- Canadian Imperial Bank of Commerce, New York, 1.33%, 2/11/03 3,000,000 3,000,000 --------------------------------------------------------------- Royal Bank of Scotland, New York, 1.72%, 1/21/03 5,000,000 5,000,027 --------------------------------------------------------------- Svenska Handelsbanken, New York, 1.94%, 1/22/03 5,000,000 5,000,029 -------------- 21,010,577 -------------- Total Certificates of Deposit (Cost $35,511,941) 35,511,941 --------------------------------------------------------------- Direct Bank Obligations--10.9% AB SPINTAB, 1.33%, 4/10/03 4,000,000 3,985,425 --------------------------------------------------------------- Abbey National North America, 1.31%, 2/10/03 1,000,000 998,545 --------------------------------------------------------------- ABN AMRO North America Finance, Inc.: 1.74%, 4/17/03 3,500,000 3,482,068 1.75%, 2/12/03 6,000,000 5,987,750 --------------------------------------------------------------- Governor & Co. of the Bank of Ireland, 1.76%, 4/23/03 2 3,000,000 2,983,573 --------------------------------------------------------------- HBOS Treasury Services: 1.35%, 3/6/03 3,519,000 3,510,554 1.70%, 3/12/03 4,000,000 3,986,778 --------------------------------------------------------------- Lloyds TSB Bank plc, 1.76%, 4/24/03 3,000,000 2,983,474 --------------------------------------------------------------- Nationwide Building Society: 1.54%, 2/4/03 3,000,000 2,995,637 1.74%, 4/16/03 3,000,000 2,984,819 --------------------------------------------------------------- Swedbank AB, 1.74%, 5/2/03 2,000,000 1,988,303 --------------------------------------------------------------- Wells Fargo Bank NA, 1.68%, 4/1/03 5,450,000 5,450,531 -------------- Total Direct Bank Obligations (Cost $41,337,457) 41,337,457 Principal Value Amount See Note 1 --------------------------------------------------------------- Short-Term Notes--72.2% --------------------------------------------------------------- Asset-Backed--24.2% Atlantic Asset Securitization Corp., 1.39%, 1/3/03 2 $ 2,000,000 $ 1,999,845 - ---------------------------------------------------------------- Barton Capital Corp., 1.40%, 1/17/03 2 5,000,000 4,996,889 --------------------------------------------------------------- Charta Corp.: 1.60%, 1/31/03 2 4,000,000 3,994,667 1.79%, 1/24/03 2 1,100,000 1,098,742 - ---------------------------------------------------------------- Crown Point Capital Co., 1.82%, 1/29/03 2 2,500,000 2,496,461 --------------------------------------------------------------- Fairway Finance Corp., 1.79%, 4/23/03 2 3,000,000 2,983,293 --------------------------------------------------------------- FCAR Owner Trust I, 1.70%, 1/24/03 6,500,000 6,492,940 --------------------------------------------------------------- FCAR Owner Trust II, 1.72%, 1/24/03 5,000,000 4,994,505 --------------------------------------------------------------- Galaxy Funding, Inc., 1.77%, 1/21/03 2 5,000,000 4,995,083 --------------------------------------------------------------- GOVCO, Inc., 1.80%, 1/23/03 2 2,500,000 2,497,250 --------------------------------------------------------------- Greyhawk Funding LLC, 1.82%, 1/13/03 2 5,000,000 4,996,967 --------------------------------------------------------------- La Fayette Asset Securitization, 1.39%, 3/18/03 2 5,000,000 4,985,328 --------------------------------------------------------------- Lexington Parker Capital Co. LLC: 1.38%, 2/18/03 2 2,500,000 2,495,400 1.76%, 3/14/03 2 4,000,000 3,985,920 --------------------------------------------------------------- Neptune Funding Corp.: 1.40%, 3/24/03 2 3,800,000 3,787,882 1.44%, 6/4/03 2 2,000,000 1,987,680 1.80%, 2/28/03 2 5,000,000 4,985,500 --------------------------------------------------------------- New Center Asset Trust: 1.76%, 3/17/03 5,000,000 4,981,667 1.77%, 3/7/03 5,000,000 4,984,021 --------------------------------------------------------------- Perry Global Funding LLC, Series A: 1.83%, 1/14/03 2 10,000,000 9,993,392 1.84%, 1/16/03 2 2,000,000 1,998,467 --------------------------------------------------------------- Scaldis Capital LLC, 1.76%, 1/21/03 2 6,213,000 6,206,925 -------------- 91,938,824 --------------------------------------------------------------- Broker-Dealer--8.4% Banc of America Securities LLC, 1.46%, 1/2/03 1 5,000,000 5,000,000 --------------------------------------------------------------- Goldman Sachs Group LP, 1.42%, 3/13/03 3 5,000,000 5,000,000 --------------------------------------------------------------- Merrill Lynch & Co., Inc., 1.71%, 1/3/03 5,000,000 4,999,525 --------------------------------------------------------------- Morgan Stanley, 1.31%, 12/2/03 1 5,000,000 5,000,000 --------------------------------------------------------------- Salomon Smith Barney Holdings, Inc.: 1.79%, 4/25/03 1 5,000,000 5,000,000 1.81%, 1/10/03 7,000,000 6,996,832 -------------- 31,996,357 5 | OPPENHEIMER MONEY FUND/VA STATEMENT OF INVESTMENTS Continued Principal Value Amount See Note 1 --------------------------------------------------------------- Chemicals--0.8% BASF AG, 1.33%, 2/21/03 2 $ 3,000,000 $ 2,994,348 --------------------------------------------------------------- Commercial Finance--2.6% Private Export Funding Corp., 1.75%, 2/5/03 2 9,700,000 9,683,497 --------------------------------------------------------------- Commercial Services & Supplies--1.3% First Data Corp., 1.45%, 1/2/03 5,000,000 4,999,799 --------------------------------------------------------------- Consumer Finance--5.3% American Express Credit Corp., 1.68%, 3/5/03 5,000,000 4,985,300 --------------------------------------------------------------- American Express Credit Corp., Series B: 1.41%, 4/25/03 1 5,000,000 5,000,000 1.42%, 5/7/03 1 5,000,000 5,000,000 --------------------------------------------------------------- American General Finance Corp., 1.98%, 1/8/03 5,000,000 4,998,075 -------------- 19,983,375 --------------------------------------------------------------- Food Products--2.8% Nestle Capital Corp.: 1.87%, 2/3/03 2 5,800,000 5,790,058 1.90%, 2/5/03 2 5,000,000 4,990,764 -------------- 10,780,822 --------------------------------------------------------------- Insurance--5.5% General Electric Capital Assurance Co., 1.49%, 12/1/03 1,3 5,000,000 5,000,000 ---------------------------------------------------------------- ING America Insurance Holdings, Inc.: 1.32%, 2/13/03 1,500,000 1,497,635 1.34%, 3/12/03 3,000,000 2,992,183 --------------------------------------------------------------- Metropolitan Life Insurance Co., 1.49%, 1/2/03 1 3,500,000 3,500,000 --------------------------------------------------------------- Pacific Life Insurance Co., 1.46%, 2/14/03 1,3 4,000,000 4,000,000 --------------------------------------------------------------- United of Omaha Life Insurance Co., 1.42%, 1/2/03 1,3 4,000,000 4,000,000 -------------- 20,989,818 --------------------------------------------------------------- Leasing & Factoring--1.3% American Honda Finance Corp., 1.41%, 4/9/03 1 5,000,000 5,000,000 Principal Value Amount See Note 1 --------------------------------------------------------------- Media--0.5% --------------------------------------------------------------- McGraw-Hill Cos., Inc., 1.33%, 5/13/03 $2,000,000 $ 1,990,247 --------------------------------------------------------------- Metals & Mining--0.8% Rio Tinto Ltd., 1.33%, 3/12/03 2 3,000,000 2,992,242 --------------------------------------------------------------- Oil & Gas--3.6% Koch Industries, Inc., 1.20%, 1/2/03 2 8,500,000 8,499,716 --------------------------------------------------------------- Total Fina Elf SA, 1.76%, 4/24/03 2 5,000,000 4,972,378 -------------- 13,472,094 --------------------------------------------------------------- Pharmaceuticals--0.5% GlaxoSmithKline Finance PLC, 1.32%, 1/13/03 2 2,000,000 1,999,120 --------------------------------------------------------------- Special Purpose Financial--14.6% --------------------------------------------------------------- AriesOne Metafolio Corp.: 1.43%, 1/6/03 2 2,500,000 2,499,497 1.45%, 1/7/03 2 5,000,000 4,998,792 --------------------------------------------------------------- Beta Finance, Inc., 1.87%, 1/6/03 2 10,000,000 9,997,410 --------------------------------------------------------------- Cooperative Assn. of Tractor Dealers, Inc., Series A: 1.80%, 1/22/03 5,000,000 4,994,750 1.82%, 4/9/03 2,800,000 2,786,128 --------------------------------------------------------------- Cooperative Assn. of Tractor Dealers, Inc., Series B: 1.43%, 3/17/03 1,500,000 1,495,547 1.43%, 4/22/03 1,000,000 995,606 1.75%, 2/20/03 2,700,000 2,693,437 1.82%, 4/16/03 2,600,000 2,586,198 --------------------------------------------------------------- CORSAIR Trust, Series 1-1005, 1.63%, 9/17/03 1,4 5,000,000 5,000,000 --------------------------------------------------------------- K2 (USA) LLC, 2.10%, 1/15/03 2 3,100,000 3,097,468 --------------------------------------------------------------- LINKS Finance LLC: 1.45%, 5/15/03 1 3,000,000 2,999,700 1.86%, 1/6/03 2 5,000,000 4,998,701 --------------------------------------------------------------- RACERS, Series 2002-31-C, 1.42%, 9/3/03 1,4 3,500,000 3,495,310 --------------------------------------------------------------- RACERS, Series 2002-36-C, 1.42%, 10/1/03 1,4 3,000,000 2,995,770 -------------- 55,634,314 -------------- Total Short-Term Notes (Cost $274,454,857) 274,454,857 6 | OPPENHEIMER MONEY FUND/VA PRINCIPAL VALUE AMOUNT SEE NOTE 1 --------------------------------------------------------------- U.S. Government Agencies--6.9% Federal Home Loan Bank: 1.58%, 12/9/03 $ 5,000,000 $ 5,000,000 1.60%, 12/16/03 5,000,000 5,000,000 --------------------------------------------------------------- Federal National Mortgage Assn., 1.67%, 1/23/03 3,000,000 2,996,938 --------------------------------------------------------------- FNMA Master Credit Facility: 1.72%, 1/2/03 5,180,200 5,179,953 2%, 4/1/03 8,000,000 7,960,000 -------------- Total U.S. Government Agencies (Cost $26,136,891) 26,136,891 - --------------------------------------------------------------- Total Investments, at Value (Cost $377,441,146) 99.3% 377,441,146 - --------------------------------------------------------------- Other Assets Net of Liabilities 0.7 2,528,294 ---------------------------- Net Assets 100.0% $ 379,969,440 ============================ Footnotes to Statement of Investments Short-term notes and direct bank obligations are generally traded on a discount basis; the interest rate shown is the discount rate received by the Fund at the time of purchase. Other securities normally bear interest at the rates shown. 1. Represents the current interest rate for a variable or increasing rate security. 2. Security issued in an exempt transaction without registration under the Securities Act of 1933. Such securities amount to $140,983,255, or 37.10% of the Fund's net assets, and have been determined to be liquid pursuant to guidelines adopted by the Board of Trustees. 3. Identifies issues considered to be illiquid or restricted--See Note 4 of Notes to Financial Statements. 4. 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 $11,491,080 or 3.02% of the Fund's net assets as of December 31, 2002. See accompanying Notes to Financial Statements. 7 | OPPENHEIMER MONEY FUND/VA STATEMENT OF ASSETS AND LIABILITIES December 31, 2002
----------------------------------------------------------------------------------------------- Assets Investments, at value (cost $377,441,146)--see accompanying statement $377,441,146 ----------------------------------------------------------------------------------------------- Cash 238,051 ----------------------------------------------------------------------------------------------- Receivables and other assets: Shares of beneficial interest sold 3,997,554 Interest 303,857 Other 384 ------------- Total assets 381,980,992 ----------------------------------------------------------------------------------------------- Liabilities Payables and other liabilities: Shares of beneficial interest redeemed 1,838,522 Dividends 111,868 Shareholder reports 15,779 Transfer and shareholder servicing agent fees 433 Trustees' compensation 343 Other 44,607 ------------- Total liabilities 2,011,552 ----------------------------------------------------------------------------------------------- Net Assets $379,969,440 ============= ----------------------------------------------------------------------------------------------- Composition of Net Assets Par value of shares of beneficial interest $ 379,942 ----------------------------------------------------------------------------------------------- Additional paid-in capital 379,589,498 ------------- Net Assets--applicable to 379,941,670 shares of beneficial interest outstanding $379,969,440 ============= ----------------------------------------------------------------------------------------------- Net Asset Value, Redemption Price Per Share and Offering Price Per Share $1.00
See accompanying Notes to Financial Statements. 8 | OPPENHEIMER MONEY FUND/VA STATEMENT OF OPERATIONS For the Year Ended December 31, 2002 ----------------------------------------------------------------------------- Investment Income Interest $7,441,721 ----------------------------------------------------------------------------- Expenses Management fees 1,738,866 ----------------------------------------------------------------------------- Transfer and shareholder servicing agent fees 10,431 ----------------------------------------------------------------------------- Custodian fees and expenses 8,249 ----------------------------------------------------------------------------- Trustees' compensation 5,644 ----------------------------------------------------------------------------- Other 37,070 ----------- Total expenses 1,800,260 Less reduction to custodian expenses (3,704) ----------- Net expenses 1,796,556 ----------------------------------------------------------------------------- Net Investment Income 5,645,165 ----------------------------------------------------------------------------- Net Realized Gain on Investments 6,284 ----------------------------------------------------------------------------- Net Increase in Net Assets Resulting from Operations $5,651,449 =========== See accompanying Notes to Financial Statements. 9 | OPPENHEIMER MONEY FUND/VA STATEMENTS OF CHANGES IN NET ASSETS
Year Ended December 31, 2002 2001 ---------------------------------------------------------------------------------------------------------------- Operations Net investment income $ 5,645,165 $ 10,350,301 ---------------------------------------------------------------------------------------------------------------- Net realized gain 6,284 35,731 ----------------------------- Net increase in net assets resulting from operations 5,651,449 10,386,032 ---------------------------------------------------------------------------------------------------------------- Dividends and/or Distributions to Shareholders Dividends from net investment income (5,603,150) (10,350,301) ---------------------------------------------------------------------------------------------------------------- Dividends from net realized gain (42,015) -- ---------------------------------------------------------------------------------------------------------------- Beneficial Interest Transactions Net increase in net assets resulting from beneficial interest transactions 9,734,246 154,422,163 ---------------------------------------------------------------------------------------------------------------- Net Assets Total increase 9,740,530 154,457,894 ---------------------------------------------------------------------------------------------------------------- Beginning of period 370,228,910 215,771,016 ----------------------------- End of period $379,969,440 $370,228,910 =============================
See accompanying Notes to Financial Statements. 10 | OPPENHEIMER MONEY FUND/VA FINANCIAL HIGHLIGHTS
Year Ended December 31 2002 2001 2000 1999 1998 ------------------------------------------------------------------------------------------------------------------------- Per Share Operating Data Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 ------------------------------------------------------------------------------------------------------------------------- Income from investment operations--net investment income and net realized gain .01 .04 .06 .05 .05 Dividends from net investment income (.01) (.04) (.06) (.05) (.05) Dividends from net realized gain -- 4 -- -- -- -- ---------------------------------------------------------------- Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 ================================================================ ------------------------------------------------------------------------------------------------------------------------- Total Return 1 1.47% 3.85% 6.26% 4.96% 5.25% ------------------------------------------------------------------------------------------------------------------------- Ratios/Supplemental Data Net assets, end of period (in thousands) $379,969 $370,229 $215,771 $201,066 $151,799 ------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $386,457 $288,106 $204,586 $166,727 $137,633 ------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 2 Net investment income 1.46% 3.59% 5.98% 4.87% 5.12% Expenses 0.47% 0.52% 0.51% 0.48% 0.50% 3 1. Assumes an 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 of less than one full year. 3. Expense ratio has been calculated without adjustment for the reduction to custodian expenses. 4. Less than $0.005 per share. See accompanying Notes to Financial Statements.
11 | OPPENHEIMER MONEY FUND/VA NOTES TO FINANCIAL STATEMENTS ------------------------------------------------------------------------------- 1. Significant Accounting Policies Oppenheimer Money Fund/VA (the Fund) is a separate series of Oppenheimer Variable Account Funds (the Trust), an open end management investment company registered under the Investment Company Act of 1940, as amended. The Fund's investment objective is to seek maximum current income from investments in money market securities consistent with low capital risk and the maintenance of liquidity. The Trust'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 on the basis of amortized cost, which approximates market value. ------------------------------------------------------------------------------- Joint Repurchase Agreements. The Fund, along with other affiliated funds of the Manager, may transfer uninvested cash balances into one or more joint repurchase agreement accounts. These balances are invested in one or more repurchase agreements, secured by U.S. government securities. Securities pledged as collateral for repurchase agreements are held by a custodian bank until the agreements mature. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal; however, in the event of default by the other party to the agreement, retention of the collateral may be subject to legal proceedings. ------------------------------------------------------------------------------- Federal Taxes. The Fund intends to continue to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income to shareholders. ------------------------------------------------------------------------------- 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. ------------------------------------------------------------------------------- Classification of Dividends and Distributions to Shareholders. Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes. The character of dividends and distributions made during the fiscal year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to timing of dividends and distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or net 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, 2002, amounts have been reclassified to reflect an increase in paid-in capital of $27,791, a decrease in undistributed net investment income of $42,015, and a decrease in accumulated net realized loss on investments of $14,224. Net assets of the Fund were unaffected by the reclassifications. ------------------------------------------------------------------------------- Security Transactions. Security transactions are recorded on the trade date. Realized gains and losses on securities sold are determined on the basis of identified cost. ------------------------------------------------------------------------------- Other. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. 12 | OPPENHEIMER MONEY FUND/VA ------------------------------------------------------------------------------- 2. Shares of Beneficial Interest The Fund has authorized an unlimited number of $0.001 par value shares of beneficial interest. Transactions in shares of beneficial interest were as follows:
Year Ended December 31, 2002 Year Ended December 31, 2001 Shares Amount Shares Amount --------------------------------------------------------------------------------------------------------------------------- Sold 1,008,410,332 $ 1,008,410,332 1,020,448,982 $1,020,448,982 Dividends and/or distributions reinvested 5,645,165 5,645,165 10,350,301 10,350,301 Redeemed (1,004,321,251) (1,004,321,251) (876,377,120) (876,377,120) --------------------------------------------------------------------- Net increase 9,734,246 $ 9,734,246 154,422,163 $ 154,422,163 =====================================================================
------------------------------------------------------------------------------- 3. Fees and Other Transactions with Affiliates Management Fees. Management fees paid to the Manager were in accordance with the investment advisory agreement with the Trust. The annual fees are 0.45% of the first $500 million of average annual net assets, 0.425% of the next $500 million, 0.40% of the next $500 million and 0.375% of average annual net assets in excess of $1.5 billion. ------------------------------------------------------------------------------- Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager, acts as the transfer and shareholder servicing agent for the Fund. The Fund pays OFS a $27.50 per account fee. Additionally, funds offered in variable annuity separate accounts are subject to minimum fees of $5,000 for assets of less than $10 million and $10,000 for assets of $10 million or more. The Fund is subject to the minimum fee in the event that the per account fee does not equal or exceed the applicable minimum fee. OFS has voluntarily agreed to limit transfer and shareholder servicing agent fees up to an annual rate of 0.35% of average net assets of the Fund. This undertaking may be amended or withdrawn at any time. ------------------------------------------------------------------------------- 4. Illiquid Securities As of December 31, 2002, investments in securities included issues that are illiquid. A security may be considered illiquid if it lacks a readily available market or if its valuation has not changed for a certain period of time. The Fund intends to invest no more than 10% of its net assets (determined at the time of purchase and reviewed periodically) in illiquid securities. The aggregate value of illiquid securities subject to this limitation as of December 31, 2002 was $18,000,000, which represents 4.74% of the Fund's net assets. 13 | OPPENHEIMER MONEY FUND/VA INDEPENDENT AUDITORS' REPORT ------------------------------------------------------------------------------- To the Board of Trustees and Shareholders of Oppenheimer Money Fund/VA: We have audited the accompanying statement of assets and liabilities of Oppenheimer Money Fund/VA, which is a series of Oppenheimer Variable Account Funds, including the statement of investments, as of December 31, 2002, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for the five years in the period then ended. 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 auditing standards generally accepted in the United States of America. 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, 2002, 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, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Oppenheimer Money Fund/VA as of December 31, 2002, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. Deloitte & Touche LLP Denver, Colorado January 23, 2003 14 | OPPENHEIMER MONEY FUND/VA FEDERAL INCOME TAX INFORMATION Unaudited ------------------------------------------------------------------------------- In early 2003, shareholders of record received information regarding all dividends and distributions paid to them by the Fund during calendar year 2002. Regulations of the U.S. Treasury Department require the Fund to report this information to the Internal Revenue Service. None of the dividends paid by the Fund during the year ended December 31, 2002 are 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. 15 | OPPENHEIMER MONEY FUND/VA TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------------- Name, Position(s) Held with Principal Occupation(s) During Past 5 Years; Other Fund, Length of Service, Age Trusteeships/Directorships Held by Trustee; Number of Portfolios in Fund Complex Currently Overseen by Trustee INDEPENDENT The address of each Trustee in the chart below is TRUSTEES 6803 S. Tucson Way, Centennial, Co 80112-3924. Each Trustee serves for an indefinite term, until his or her resignation, retirement, death or removal. James C. Swain, Formerly, Chief Executive Officer (until August Chairman and Trustee 27, 2002) of the Board II Funds, Vice Chairman (since 1985) (until January 2, 2002) of OppenheimerFunds, Inc. Age: 69 (the Manager) and President and a director (until 1997) of Centennial Asset Management Corporation (a wholly-owned investment advisory subsidiary of the Manager). Oversees 41 portfolios in the OppenheimerFunds complex. William L. Armstrong, Chairman of the following private mortgage banking Trustee (since 1999) companies: Cherry Creek Mortgage Company (since Age: 65 1991), Centennial State Mortgage Company (since 1994), The El Paso Mortgage Company (since 1993), Transland Financial Services, Inc. (since 1997); Chairman of the following private companies: Great Frontier Insurance (insurance agency) (since 1995) and Ambassador Media Corporation (since 1984); a director of the following public companies: Storage Technology Corporation (computer equipment company) (since 1991), Helmerich & Payne, Inc. (oil and gas drilling/production company) (since 1992), UNUMProvident (insurance company) (since 1991). Formerly Director of International Family Entertainment (television channel) (1992-1997) and Natec Resources, Inc. (air pollution control equipment and services company) (1991-1995), Frontier Real Estate, Inc. (residential real estate brokerage) (1994-1999), and Frontier Title (title insurance agency) (1995-June 1999); a U.S. Senator (January 1979-January 1991). Oversees 41 portfolios in the OppenheimerFunds complex. Robert G. Avis, Formerly, Director and President of A.G. Edwards Trustee (since 1993) Capital, Inc. (General Partner of private equity Age: 71 funds) (until February 2001); Chairman, President and Chief Executive Officer of A.G. Edwards Capital, Inc. (until March 2000); Vice Chairman and Director of A.G. Edwards, Inc. and Vice Chairman of A.G. Edwards & Sons, Inc. (its brokerage company subsidiary) (until March 1999); Chairman of A.G. Edwards Trust Company and A.G.E. Asset Management (investment advisor) (until March 1999); and a Director (until March 2000) of A.G. Edwards & Sons and A.G. Edwards Trust Company. Oversees 41 portfolios in the OppenheimerFunds complex. George C. Bowen, Formerly (until April 1999): Senior Vice President Trustee (since 1997) (from September 1987) and Treasurer (from March Age: 66 1985) of the Manager; Vice President (from June 1983) and Treasurer (since March 1985) of OppenheimerFunds Distributor, Inc. (a subsidiary of the Manager); Senior Vice President (since February 1992), Treasurer (since July 1991) Assistant Secretary and a director (since December 1991) of Centennial Asset Management Corporation; Vice President (since October 1989) and Treasurer (since April 1986) of HarbourView Asset Management Corporation (an investment advisory subsidiary of the Manager); President, Treasurer and a director (June 1989-January 1990) of Centennial Capital Corporation (an investment advisory subsidiary of the Manager); Vice President and Treasurer (since August 1978) and Secretary (since April 1981) of Shareholder Services, Inc. (a transfer agent subsidiary of the Manager); Vice President, Treasurer and Secretary (since November 1989) of Shareholder Financial Services, Inc. (a transfer agent subsidiary of the Manager); Assistant Treasurer (since March 1998) of Oppenheimer Acquisition Corp. (the Manager's parent corporation); Treasurer (since November 1989) of Oppenheimer Partnership Holdings, Inc. (a holding company subsidiary of the Manager); Vice President and Treasurer (since July 1996) of Oppenheimer Real Asset Management, Inc. (an investment advisory subsidiary of the Manager); Chief Executive Officer and director (since March 1996) of MultiSource Services, Inc. (a broker-dealer subsidiary of the Manager); Treasurer (since October 1997) of OppenheimerFunds International Ltd. and Oppenheimer Millennium Funds plc (offshore fund management subsidiaries of the Manager). Oversees 41 portfolios in the OppenheimerFunds complex. Edward L. Cameron, A member of The Life Guard of Mount Vernon, Trustee (since 1999) (George Washington's home) (since June 2000). Age: 64 Formerly (March 2001-May 2002) Director of Genetic ID, Inc. and its subsidiaries (a privately held biotech company); a partner with PricewaterhouseCoopers LLP (from 1974-1999) (an accounting firm) and Chairman (from 1994-1998), Price Waterhouse LLP Global Investment Management Industry Services Group. Oversees 41 portfolios in the OppenheimerFunds complex. Jon S. Fossel, Chairman and Director (since 1998) of Rocky Trustee (since 1990) Mountain Elk Foundation (a not-for-profit Age: 60 foundation); and a director (since October 1999) of P.R. Pharmaceuticals (a privately held company) and UNUMProvident (an insurance company) (since June 1, 2002). Formerly Chairman and a director (until October 1996) and President and Chief Executive Officer (until October 1995) of the Manager; President, Chief Executive Officer and a director of Oppenheimer Acquisition Corp., Shareholders Services Inc. and Shareholder Financials Services, Inc. (until October 1995). Oversees 41 portfolios in the OppenheimerFunds complex.
16 | OPPENHEIMER MONEY FUND/VA
Sam Freedman, A trustee or director of other Oppenheimer funds. Trustee (since 1996) Formerly (until October 1994) Mr. Freedman held Age: 62 several positions in subsidiary or affiliated companies of the Manager. Oversees 41 portfolios in the OppenheimerFunds complex. Beverly L. Hamilton, Trustee (since 1996) of MassMutual Institutional Trustee (since 2002) Funds and of MML Series Investment Fund (open-end Age: 56 investment companies); Director of MML Services (since April 1987) and America Funds Emerging Markets Growth Fund (since October 1991) (both are investment companies), The California Endowment (a philanthropy organization) (since April 2002), and Community Hospital of Monterey Peninsula, (since February 2002); a trustee (since February 2000) of Monterey International Studies (an educational organization), and an advisor to Unilever (Holland)'s pension fund and to Credit Suisse First Boston's Sprout venture capital unit. Mrs. Hamilton also is a member of the investment committees of the Rockefeller Foundation, the University of Michigan and Hartford Hospital. Formerly, President (February 1991-April 2000) ARCO Investment Management Company. Oversees 40 portfolios in the OppenheimerFunds complex. Robert J. Malone, Director (since 2001) of Jones Knowledge, Inc. (a Trustee (since 2002) privately held company), U.S. Exploration, Inc., Age: 58 (since 1997), Colorado UpLIFT (a non-profit organization) (since 1986) and a trustee of the Gallagher Family Foundation (since 2000). Formerly, Chairman of U.S. Bank (a subsidiary of U.S. Bancorp and formerly Colorado National Bank,) (July 1996-April 1, 1999) and a director of Commercial Assets, Inc. (1993-2000). Oversees 40 portfolios in the OppenheimerFunds complex. F. William Marshall, Jr., Trustee (since 1996) of MassMutual Institutional Trustee (since 2000) Funds and of MML Series Investment Fund (open-end Age: 60 investment companies); Trustee and Chairman (since May 1987) of the investment committee for the Worcester Polytech Institute; President and Treasurer (since January 1999) of the SIS Fund (a private not for profit charitable organization); Trustee (since 1995) of the Springfield Library and Museum Association; Trustee (since 1996) of the Community Music School of Springfield; Member of the investment committee of the Community Foundation of Western Massachusetts (since 1998). Formerly, Chairman (January 1999-July 1999) of SIS & Family Bank, F.S.B. (formerly SIS Bank); President, Chief Executive Officer and Director (May 1993-December 1998) of SIS Bankcorp, Inc. and SIS Bank (formerly Springfield Institution for Savings) and Executive Vice President (January 1999-July 1999) of Peoples Heritage Financial Group, Inc. Oversees 41 portfolios in the OppenheimerFunds complex. - --------------------------------------------------------------------------------------- INTERESTED TRUSTEE The address of Mr. Murphy in the chart below is AND OFFICER 498 Seventh Avenue, New York, NY 10018. Mr. Murphy serves for an indefinite term, until his resignation, retirement, death or removal. John V. Murphy, Chairman, Chief Executive Officer and director President and Trustee (since June 2001) and President (since September (since 2001) 2000) of the Manager; President and a director or Age: 53 trustee of other Oppenheimer funds; President and a director (since July 2001) of Oppenheimer Acquisition Corp. and of Oppenheimer Partnership Holdings, Inc.; a director (since November 2001) of OppenheimerFunds Distributor, Inc.; Chairman and a director (since July 2001) of Shareholder Services, Inc. and of Shareholder Financial Services, Inc.; President and a director (since July 2001) of OppenheimerFunds Legacy Program (a charitable trust program established by the Manager); a director of the following investment advisory subsidiaries of OppenheimerFunds, Inc.: OFI Institutional Asset Management, Inc. and Centennial Asset Management Corporation (since November 2001), HarbourView Asset Management Corporation and OFI Private Investments, Inc. (since July 2001); President (since November 1, 2001) and a director (since July 2001) of Oppenheimer Real Asset Management, Inc.; a director (since November 2001) of Trinity Investment Management Corp. and Tremont Advisers, Inc. (investment advisory affiliates of the Manager); Executive Vice President (since February 1997) of Massachusetts Mutual Life Insurance Company (the Manager's parent company); a director (since June 1995) of DLB Acquisition Corporation (a holding company that owns the shares of David L. Babson & Company, Inc.); formerly, Chief Operating Officer (September 2000-June 2001) of the Manager; President and trustee (November 1999-November 2001) of MML Series Investment Fund and MassMutual Institutional Funds (open-end investment companies); a director (September 1999-August 2000) of C.M. Life Insurance Company; President, Chief Executive Officer and director (September 1999-August 2000) of MML Bay State Life Insurance Company; a director (June 1989-June 1998) of Emerald Isle Bancorp and Hibernia Savings Bank (a wholly-owned subsidiary of Emerald Isle Bancorp). Oversees 69 portfolios in the OppenheimerFunds complex.
17 | OPPENHEIMER MONEY FUND/VA TRUSTEES AND OFFICERS Continued
- --------------------------------------------------------------------------------------- OFFICERS The address of the Officers in the chart below is as follows: for Mr. Zack, 498 Seventh Avenue, New York, NY 10018, for Mr. Weiss and Wixted and Ms. Wolf, 6803 S. Tucson Way, Centennial, CO 80112-3924. Each Officer serves for an annual term or until his or her earlier resignation, retirement, death or removal. Barry D. Weiss, Vice President of the Manager (since July 2001); Vice President (since 2001) formerly Assistant Vice President and Senior Age: 38 Credit Analyst of the Manager (February 2000-June 2001). Prior to joining the Manager in February 2000, he was Associate Director, Structured Finance, Fitch IBCA Inc. (April 1998-February 2000); News Director, Fitch Investors Service (September 1996-April 1998); and Senior Budget Analyst, City of New York, Office of Management & Budget (February 1990-September 1996). An officer of 7 portfolios in the OppenheimerFunds complex. Carol E. Wolf, Senior Vice President (since June 2000) of the Vice President (since 1998) Manager; formerly Vice President of the Manager Age: 50 (June 1990-June 2000). An officer of 7 portfolios in the OppenheimerFunds complex. Brian W. Wixted, Senior Vice President and Treasurer (since March Treasurer, Principal Financial 1999) of the Manager; Treasurer (since March 1999) and Accounting Officer of HarbourView Asset Management Corporation, (since 1999) Shareholder Services, Inc., Oppenheimer Real Asset Age: 43 Management Corporation, Shareholder Financial Services, Inc., Oppenheimer Partnership Holdings, Inc., OFI Private Investments, Inc. (since March 2000), OppenheimerFunds International Ltd. and Oppenheimer Millennium Funds plc (since May 2000) and OFI Institutional Asset Management, Inc. (since November 2000); Treasurer and Chief Financial Officer (since May 2000) of Oppenheimer Trust Company (a trust company subsidiary of the Manager); Assistant Treasurer (since March 1999) of Oppenheimer Acquisition Corp. and OppenheimerFunds Legacy Program (since April 2000); formerly Principal and Chief Operating Officer (March 1995-March 1999), Bankers Trust Company-Mutual Fund Services Division. An officer of 85 portfolios in the OppenheimerFunds complex. Robert G. Zack, Senior Vice President (since May 1985) and General Vice President and Secretary Counsel (since February 2002) of the Manager; (since 2001) General Counsel and a director (since November Age: 54 2001) of OppenheimerFunds Distributor, Inc.; Senior Vice President and General Counsel (since November 2001) of HarbourView Asset Management Corporation; Vice President and a director (since November 2000) of Oppenheimer Partnership Holdings, Inc.; Senior Vice President, General Counsel and a director (since November 2001) of Shareholder Services, Inc., Shareholder Financial Services, Inc., OFI Private Investments, Inc., Oppenheimer Trust Company and OFI Institutional Asset Management, Inc.; General Counsel (since November 2001) of Centennial Asset Management Corporation; a director (since November 2001) of Oppenheimer Real Asset Management, Inc.; Assistant Secretary and a director (since November 2001) of OppenheimerFunds International Ltd.; Vice President (since November 2001) of OppenheimerFunds Legacy Program; Secretary (since November 2001) of Oppenheimer Acquisition Corp.; formerly Acting General Counsel (November 2001-February 2002) and Associate General Counsel (May 1981-October 2001) of the Manager; Assistant Secretary of Shareholder Services, Inc. (May 1985-November 2001), Shareholder Financial Services, Inc. (November 1989-November 2001); OppenheimerFunds International Ltd. And Oppenheimer Millennium Funds plc (October 1997-November 2001). An officer of 85 portfolios in the OppenheimerFunds complex.
The Fund's Statement of Additional Information contains additional information about the Fund's Trustees and is available without charge upon request. 18 | OPPENHEIMER MONEY FUND/VA OPPENHEIMER MONEY FUND/VA A Series of Oppenheimer Variable Account Funds ------------------------------------------------------------------------------- Investment Advisor OppenheimerFunds, Inc. ------------------------------------------------------------------------------- Distributor OppenheimerFunds Distributor, Inc. ------------------------------------------------------------------------------- Transfer Agent OppenheimerFunds Services ------------------------------------------------------------------------------- Independent Auditors Deloitte & Touche LLP ------------------------------------------------------------------------------- Legal Counsel to the Fund Myer, Swanson, Adams & Wolf, P.C. ------------------------------------------------------------------------------- Legal Counsel to the Mayer Brown Rowe & Maw Independent Trustees For more complete information about Oppenheimer Money Fund/VA, please refer to the Prospectus. To obtain a copy, call your financial advisor, or call OppenheimerFunds, Inc. at 1.800.981.2871. 19 | OPPENHEIMER MONEY FUND/VA (C) Copyright 2003 OppenheimerFunds, Inc. All rights reserved. [LOGO] OppenheimerFunds(R) Distributor, Inc. -----END PRIVACY-ENHANCED MESSAGE-----