-----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, WA0ZEXCbrOAnH6/Lzr1/+OLXmmO7rQEKNTrqR2ep5yTAmscnL95MM/JMSGR/v9I+ M4E+fk1wDUK7SOe49WOwgw== 0000935069-02-000969.txt : 20020829 0000935069-02-000969.hdr.sgml : 20020829 20020829134815 ACCESSION NUMBER: 0000935069-02-000969 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020829 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: 02752399 BUSINESS ADDRESS: STREET 1: 3410 S GALENA ST CITY: DENVER STATE: CO ZIP: 80231 BUSINESS PHONE: 3036713200 MAIL ADDRESS: STREET 2: 3410 S GALENA ST CITY: DENVER STATE: CO ZIP: 80231 FORMER COMPANY: FORMER CONFORMED NAME: OPPENHEIMER VARIABLE LIFE FUNDS DATE OF NAME CHANGE: 19860609 N-30D 1 g5297_capapp.txt SEMIANNUAL REPORT JUNE 30, 2002 OPPENHEIMER CAPITAL APPRECIATION FUND/VA A Series of Oppenheimer Variable Account Funds [LOGO OMITTED] OPPENHEIMERFUNDS[REGISTRATION MARK] The Right Way to Invest OPPENHEIMER CAPITAL APPRECIATION FUND/VA ================================================================================ OBJECTIVE OPPENHEIMER CAPITAL APPRECIATION FUND/VA, a series of Oppenheimer Variable Account Funds, seeks capital appreciation by investing in securities of well-known, established companies. ================================================================================ NARRATIVE BY JANE PUTNAM, PORTFOLIO MANAGER Oppenheimer Capital Appreciation Fund/VA Non-Service shares provided a cumulative total return of -19.19% for the six-month period that ended June 30, 2002.(1) The Fund's performance slipped during the period as a result of high levels of market volatility resulting from economic and political turbulence. While we are disappointed with these results, we believe they represent short-term fluctuations rather than long-term trends. We remain confident that our disciplined, growth-at-a-reasonable-price investment strategy will continue to deliver the long-term results our investors have come to expect. During the past six months, we began to see indications that the U.S. economy, including the lagging manufacturing sector, was emerging from recession. However, the pace of recovery proved slower than many observers had forecast, raising doubts regarding the ability of many companies to meet earnings and revenue expectations. These uncertainties were heightened by the accounting irregularities that surfaced at a few well-known companies, causing them to file for bankruptcy and raising broader concerns regarding the integrity of corporate reporting procedures. International political tensions further undermined confidence in the market. On the brighter side, most growth-oriented stocks proved more resilient in the past six months than during the prior two years. Stabilizing interest rates and improving economic indicators led many investors to anticipate a continued return to economic growth during the second half of 2002. Market strength broadened across multiple industry sectors, including certain areas of media and entertainment, consumer cyclicals, consumer staples and energy. Our investment strategy remained consistently focused on seeking individual stocks that we believed offered good growth potential at a reasonable price. At the same time, in light of the improving overall economic climate, we shifted the portfolio from a predominately defensive position to one that reflected a balance of both defensive stocks and those we believed were likely to benefit from a sustained economic recovery. Among defensive areas, we found the greatest number of attractive investment opportunities in consumer staples companies, such as Anheuser-Busch Cos., Inc. and PepsiCo, Inc. These investments generally delivered strong performance in the uncertain market environment that prevailed during the period. We also generated positive returns with investments in a variety of energy companies that benefited from rising oil and gas prices and increasing demand. Among cyclical areas that benefited from improving economic conditions, the Fund's best performers included media and entertainment companies, such as Viacom, Inc., which are 1. Total returns include changes in net asset value per share but do 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, and can be provided by the separate account product sponsor. 2 OPPENHEIMER CAPITAL APPRECIATION FUND/VA starting to benefit from a turn in the advertising cycle. The Fund also scored successes in the consumer cyclical area, which gained from continued strength in consumer spending. We enhanced returns by increasing the Fund's holdings among retailers, such as Target Corp., Limited Brands, Inc., and Sears Roebuck and Co. On the other hand, declines in technology and utilities hurt the Fund's performance. Technology holdings, such as Nokia Corp. and Microsoft Corp. slid on the basis of reduced levels of corporate capital spending on technology. Nevertheless, we remained focused on the excellent long-term growth potential of these dominant companies. Most utility stocks suffered in the wake of the collapse of Enron, the energy trading giant. However, the Fund's holdings, such as ElPaso Corp. and Duke Energy Corp., have greatly scaled back exposure to the trading business and have valuable hard assets. These companies enjoy relatively strong financial and business positions, with stocks selling at attractively low multiples of earnings. Looking ahead, we see favorable prospects for growth in the coming months. Signs of recovery abound, accompanied by indications of rising corporate profits and increasing levels of capital spending. Still, the strength and shape of recovery remains in doubt. Accordingly, we favor a balanced investment approach that includes stocks in industry sectors likely to benefit from economic recovery, such as technology and consumer cyclicals, as well as stocks in traditionally defensive sectors, such as consumer staples, beverages, health care and financials. Within these groups, we are focusing on companies that we believe are best positioned to benefit from emerging market conditions. For example, among financials, we are concentrating on brokers and other entities that are likely to perform well in an environment characterized by expanding levels of market activity. In the health care sector, we have increased the Fund's exposure to health care service providers and biotech companies, while trimming holdings of major pharmaceutical companies that are being hurt by expiring patents and weak product pipelines. We remain rigorously committed to our fundamental approach of seeking growth at the right price. In today's volatile economic environment, we believe our disciplined approach and emphasis on selecting stocks one company at a time should serve investors well. That's why Oppenheimer Capital Appreciation Fund/VA continues to be 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 holdings are 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 CAPITAL APPRECIATION FUND/VA STATEMENT OF INVESTMENTS June 30, 2002 / Unaudited MARKET VALUE SHARES SEE NOTE 1 ============================================================ COMMON STOCKS--92.8% - ------------------------------------------------------------ CONSUMER DISCRETIONARY--25.4% - ------------------------------------------------------------ AUTOMOBILES--0.8% Harley-Davidson, Inc. 234,000 $ 11,997,180 - ------------------------------------------------------------ HOTELS, RESTAURANTS & LEISURE--3.7% Brinker International, Inc.(1) 304,000 9,652,000 Carnival Corp. 918,300 25,427,727 Mandalay Resort Group(1) 54,900 1,513,593 Royal Caribbean Cruises Ltd. 947,400 18,474,300 Ruby Tuesday, Inc. 115,200 2,234,880 Starwood Hotels & Resorts Worldwide, Inc. 67,400 2,216,786 -------------- 59,519,286 - ------------------------------------------------------------ HOUSEHOLD DURABLES--0.5% Ethan Allen Interiors, Inc. 215,610 7,514,009 - ------------------------------------------------------------ INTERNET & CATALOG RETAIL--0.1% ValueVision Media, Inc., Cl. A(1) 108,800 1,974,720 - ------------------------------------------------------------ LEISURE EQUIPMENT & PRODUCTS--0.5% Mattel, Inc. 375,000 7,905,000 - ------------------------------------------------------------ MEDIA--14.3% AOL Time Warner, Inc.(1) 2,033,500 29,912,785 Cablevision Systems Corp., Cl. A(1) 325,400 3,078,284 Clear Channel Communications, Inc.(1) 543,230 17,394,225 Comcast Corp., Cl. A Special(1) 1,847,000 44,032,480 Fox Entertainment Group, Inc., A Shares(1) 282,000 6,133,500 Hispanic Broadcasting Corp.(1) 271,225 7,078,972 McGraw-Hill Cos., Inc. (The) 492,100 29,378,370 New York Times Co., Cl. A 95,000 4,892,500 News Corp. Ltd. (The), Sponsored ADR 714,400 16,381,192 Omnicom Group, Inc. 230,300 10,547,740 Univision Communications, Inc., Cl. A(1) 227,200 7,134,080 Viacom, Inc., Cl. B(1) 1,224,400 54,326,628 --------------- 230,290,756 - ------------------------------------------------------------ MULTILINE RETAIL--3.5% BJ's Wholesale Club, Inc.(1) 62,700 2,413,950 Costco Wholesale Corp.(1) 352,900 13,628,998 Kohl's Corp.(1) 176,800 12,390,144 Sears Roebuck & Co. 216,000 11,728,800 Target Corp. 441,200 16,809,720 --------------- 56,971,612 - ------------------------------------------------------------ SPECIALTY RETAIL--1.7% AutoNation, Inc.(1) 127,100 1,842,950 Gap, Inc. (The) 617,200 8,764,240 - ------------------------------------------------------------ MARKET VALUE SHARES SEE NOTE 1 - ------------------------------------------------------------ Limited Brands, Inc. 508,000 $ 10,820,400 Tiffany & Co. 165,700 5,832,640 --------------- 27,260,230 - ------------------------------------------------------------ TEXTILES & APPAREL--0.3% Nike, Inc., Cl. B 102,900 5,520,585 - ------------------------------------------------------------ CONSUMER STAPLES--7.3% - ------------------------------------------------------------ BEVERAGES--4.1% Anheuser-Busch Cos., Inc. 637,500 31,875,000 Coca-Cola Enterprises, Inc. 215,200 4,751,616 Diageo plc, Sponsored ADR 79,600 4,111,340 PepsiCo, Inc. 516,200 24,880,840 --------------- 65,618,796 - ------------------------------------------------------------ FOOD & DRUG RETAILING--1.6% Kroger Co. (The)(1) 437,000 8,696,300 Rite Aid Corp.(1) 165,700 389,395 Safeway, Inc.(1) 417,700 12,192,663 Sysco Corp. 189,800 5,166,356 --------------- 26,444,714 - ------------------------------------------------------------ FOOD PRODUCTS--1.3% Dean Foods Co.(1) 311,400 11,615,220 General Mills, Inc. 225,000 9,918,000 --------------- 21,533,220 - ------------------------------------------------------------ PERSONAL PRODUCTS--0.3% Estee Lauder Cos., Inc. (The), Cl. A 129,160 4,546,432 - ------------------------------------------------------------ ENERGY--7.3% - ------------------------------------------------------------ ENERGY EQUIPMENT & SERVICES--1.9% BJ Services Co.(1) 325,500 11,027,940 Halliburton Co. 312,000 4,973,280 Noble Corp.(1) 147,500 5,693,500 Rowan Cos., Inc. 185,000 3,968,250 Varco International, Inc.(1) 197,700 3,467,658 Williams Cos., Inc. (The) 228,800 1,370,512 --------------- 30,501,140 - ------------------------------------------------------------ OIL & GAS--5.4% Amerada Hess Corp. 231,800 19,123,500 Encana Corp. 321,710 9,878,267 Exxon Mobil Corp. 725,400 29,683,368 Suncor Energy, Inc. 163,500 2,920,110 TotalFinaElf SA, Sponsored ADR 316,400 25,596,760 --------------- 87,202,005 - ------------------------------------------------------------ FINANCIALS--15.4% - ------------------------------------------------------------ BANKS--2.1% Bank of America Corp. 202,700 14,261,972 Bank One Corp. 523,000 20,125,040 --------------- 34,387,012 4 OPPENHEIMER CAPITAL APPRECIATION FUND/VA MARKET VALUE SHARES SEE NOTE 1 - ------------------------------------------------------------- DIVERSIFIED FINANCIALS--10.1% American Express Co. 403,700 $ 14,662,384 Citigroup, Inc. 1,009,500 39,118,125 Fannie Mae 195,700 14,432,875 Freddie Mac 437,400 26,768,880 Goldman Sachs Group, Inc. (The) 111,500 8,178,525 iShares Russell 2000 Index Fund 36,900 3,344,985 J.P. Morgan Chase & Co. 399,300 13,544,256 Merrill Lynch & Co., Inc. 234,700 9,505,350 Morgan Stanley 514,500 22,164,660 Schwab (Charles) Corp. 919,500 10,298,400 ---------------- 162,018,440 - ------------------------------------------------------------- INSURANCE--2.3% American International Group, Inc. 328,350 22,403,321 Everest Re Group Ltd. 55,200 3,088,440 St. Paul Cos., Inc. 131,200 5,106,304 XL Capital Ltd., Cl. A 70,500 5,971,350 ---------------- 36,569,415 - ------------------------------------------------------------- REAL ESTATE--0.9% Boston Properties, Inc. 140,700 5,620,965 Host Marriott Corp. 805,000 9,096,500 ---------------- 14,717,465 - ------------------------------------------------------------- HEALTH CARE--9.0% - ------------------------------------------------------------- BIOTECHNOLOGY--1.5 Amgen, Inc.(1) 116,400 4,874,832 Genzyme Corp. (General Division)(1) 360,200 6,930,248 IDEC Pharmaceuticals Corp.(1) 167,060 5,922,277 Medimmune, Inc.(1) 30,000 792,000 Serono SA, Sponsored ADR 371,700 6,058,710 ---------------- 24,578,067 - ------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES--1.5% Applera Corp./Applied Biosystems Group 459,380 8,953,316 Medtronic, Inc. 188,300 8,068,655 Stryker Corp. 119,600 6,399,796 ---------------- 23,421,767 - ------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES--2.5% Anthem, Inc.(1) 84,400 5,695,312 Cardinal Health, Inc. 8,000 491,280 Caremark Rx, Inc.(1) 389,100 6,420,150 Covance, Inc.(1) 329,200 6,172,500 Humana, Inc.(1) 270,600 4,229,478 McKesson Corp. 290,100 9,486,270 Oxford Health Plans, Inc.(1) 161,600 7,507,936 ---------------- 40,002,926 MARKET VALUE SHARES SEE NOTE 1 - ------------------------------------------------------------- PHARMACEUTICALS--3.5% Abbott Laboratories 250,900 $ 9,446,385 Johnson & Johnson 271,980 14,213,675 Perrigo Co.(1) 418,940 5,446,220 Pfizer, Inc. 771,000 26,985,000 ---------------- 56,091,280 - ------------------------------------------------------------- INDUSTRIALS--6.7% - ------------------------------------------------------------- AEROSPACE & DEFENSE--2.0% Boeing Co. 71,000 3,195,000 Honeywell International, Inc. 480,100 16,913,923 Northrop Grumman Corp. 101,500 12,687,500 ---------------- 32,796,423 - ------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES--2.7% Automatic Data Processing, Inc. 144,100 6,275,555 Concord EFS, Inc.(1) 370,200 11,157,828 First Data Corp. 231,420 8,608,824 Waste Management, Inc. 661,700 17,237,285 ---------------- 43,279,492 - ------------------------------------------------------------- INDUSTRIAL CONGLOMERATES--0.3% Tyco International Ltd. 333,400 4,504,234 - ------------------------------------------------------------- MACHINERY--1.3% Dover Corp. 109,300 3,825,500 Ingersoll-Rand Co., Cl. A 227,600 10,392,216 Mettler-Toledo International, Inc.(1) 177,930 6,560,279 ---------------- 20,777,995 - ------------------------------------------------------------- ROAD & RAIL--0.4% Canadian Pacific Ltd. 227,900 5,635,689 - ------------------------------------------------------------- INFORMATION TECHNOLOGY--16.6% - ------------------------------------------------------------- COMMUNICATIONS EQUIPMENT--3.3% Adaptec, Inc.(1) 226,900 1,790,241 Cisco Systems, Inc.(1) 1,104,900 15,413,355 Extreme Networks, Inc.(1) 400,800 4,044,072 L.M. Ericsson Telephone Co., ADR, Cl. B 508,100 731,664 Lucent Technologies, Inc.(1) 1,385,900 2,300,594 Nokia Corp., Sponsored ADR, A Shares 1,681,700 24,351,016 QUALCOMM, Inc.(1) 165,300 4,544,097 ---------------- 53,175,039 - ------------------------------------------------------------- COMPUTERS & PERIPHERALS--0.0% Seagate Technology International, Inc.(1,2) 325,000 -- - ------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS--1.9% Flextronics International Ltd.(1) 648,000 4,620,240 Millipore Corp. 99,000 3,166,020 PerkinElmer, Inc. 143,600 1,586,780 5 OPPENHEIMER CAPITAL APPRECIATION FUND/VA STATEMENT OF INVESTMENTS Unaudited / Continued MARKET VALUE SHARES SEE NOTE 1 - -------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS Continued Sanmina-SCI Corp.(1) 1,220,100 $ 7,698,831 Vishay Intertechnology, Inc.(1) 573,900 12,625,800 --------------- 29,697,671 - -------------------------------------------------------------- INTERNET SOFTWARE & SERVICES--0.2% Check Point Software Technologies Ltd.(1) 224,000 3,037,440 - -------------------------------------------------------------- SEMICONDUCTOR EQUIPMENT & PRODUCTS--5.0% Analog Devices, Inc.(1) 161,000 4,781,700 Atmel Corp.(1) 125,800 787,508 Cypress Semiconductor Corp.(1) 637,000 9,669,660 Intel Corp. 1,100,800 20,111,616 International Rectifier Corp.(1) 299,800 8,739,170 Micron Technology, Inc.(1) 551,700 11,155,374 National Semiconductor Corp.(1) 359,000 10,472,030 RF Micro Devices, Inc.(1) 611,000 4,655,820 Texas Instruments, Inc. 337,000 7,986,900 Vitesse Semiconductor Corp.(1) 588,900 1,831,479 --------------- 80,191,257 - -------------------------------------------------------------- SOFTWARE--6.2% Cadence Design Systems, Inc.(1) 524,600 8,456,552 Electronic Arts, Inc.(1) 240,300 15,871,815 Microsoft Corp.(1) 1,079,300 59,037,710 Peoplesoft, Inc.(1) 343,300 5,108,304 Reynolds & Reynolds Co., Cl. A 31,800 888,810 SAP AG (Systeme, Anwendungen, Produkte in der Datenverarbeitung), Sponsored ADR 230,900 5,608,561 Veritas Software Corp.(1) 265,423 5,252,721 --------------- 100,224,473 - -------------------------------------------------------------- MATERIALS--2.6% - -------------------------------------------------------------- CHEMICALS--1.9% Air Products & Chemicals, Inc. 176,500 8,907,955 International Flavors & Fragrances, Inc. 240,000 7,797,600 Praxair, Inc. 233,100 13,279,707 --------------- 29,985,262 - -------------------------------------------------------------- PAPER & FOREST PRODUCTS--0.7% International Paper Co. 270,100 11,770,958 - -------------------------------------------------------------- TELECOMMUNICATION SERVICES--0.5% - -------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES--0.1% Sprint Corp. (Fon Group) 140,200 1,487,522 WorldCom, Inc./WorldCom Group(1) 179,200 16,128 --------------- 1,503,650 MARKET VALUE SHARES SEE NOTE 1 - -------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES--0.4% Sprint Corp. (PCS Group)(1) 209,800 $ 937,806 Vodafone Group plc, Sponsored ADR 439,100 5,993,715 --------------- 6,931,521 - -------------------------------------------------------------- UTILITIES--2.0% - -------------------------------------------------------------- ELECTRIC UTILITIES--1.0% Duke Energy Corp. 527,900 16,417,690 - -------------------------------------------------------------- GAS UTILITIES--0.9% El Paso Corp. 675,830 13,928,856 - -------------------------------------------------------------- WATER UTILITIES--0.1% Philadelphia Suburban Corp. 62,500 1,262,500 --------------- Total Common Stocks (Cost $1,879,817,658) 1,491,706,207 ============================================================== OTHER SECURITIES--0.4% Nasdaq-100 Unit Investment Trust(1) (Cost $7,018,456) 249,200 6,496,644 PRINCIPAL AMOUNT ============================================================== REPURCHASE AGREEMENTS--7.3% Repurchase agreement with BNP Paribas Securities Corp., 1.89%, dated 6/28/02, to be repurchased at $116,744,384 on 7/1/02, collateralized by U.S. Treasury Bonds, 5.375%--10.375%, 11/15/12--2/15/31, with a value of $113,453,006 and U.S. Treasury Nts., 5.625%, 11/30/02, with a value of $6,081,212 (Cost $116,726,000) $116,726,000 116,726,000 - -------------------------------------------------------------- TOTAL INVESTMENTS, AT VALUE (COST $2,003,562,114) 100.5% 1,614,928,851 - -------------------------------------------------------------- LIABILITIES IN EXCESS OF OTHER ASSETS (0.5) (8,483,292) ------------------------------ NET ASSETS 100.0% $1,606,445,559 ============================== FOOTNOTES TO STATEMENT OF INVESTMENTS 1. Non-income producing security. 2. Identifies issues considered to be illiquid or restricted-- See Note 6 of Notes to Financial Statements. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 6 OPPENHEIMER CAPITAL APPRECIATION FUND/VA STATEMENT OF ASSETS AND LIABILITIES Unaudited
June 30, 2002 =========================================================================================================================== ASSETS Investments, at value (cost $2,003,562,114) - see accompanying statement $1,614,928,851 - --------------------------------------------------------------------------------------------------------------------------- Receivables and other assets: Interest and dividends 965,208 Shares of beneficial interest sold 442,195 Investments sold 200,213 Other 7,291 --------------- Total assets 1,616,543,758 =========================================================================================================================== LIABILITIES Bank overdraft 701,739 - --------------------------------------------------------------------------------------------------------------------------- Payables and other liabilities: Shares of beneficial interest redeemed 6,857,875 Investments purchased 2,293,525 Shareholder reports 218,458 Trustees' compensation 952 Distribution and service plan fees 736 Transfer and shareholder servicing agent fees 1,607 Other 23,307 --------------- Total liabilities 10,098,199 =========================================================================================================================== NET ASSETS $1,606,445,559 =============== =========================================================================================================================== COMPOSITION OF NET ASSETS Par value of shares of beneficial interest $ 54,626 - --------------------------------------------------------------------------------------------------------------------------- Additional paid-in capital 2,091,697,301 - --------------------------------------------------------------------------------------------------------------------------- Undistributed net investment income 3,071,396 - --------------------------------------------------------------------------------------------------------------------------- Accumulated net realized loss on investments and foreign currency transactions (99,744,519) - --------------------------------------------------------------------------------------------------------------------------- Net unrealized depreciation on investments and translation of assets and liabilities denominated in foreign currencies (388,633,245) --------------- NET ASSETS $1,606,445,559 =============== =========================================================================================================================== NET ASSET VALUE PER SHARE Non-Service shares: Net asset value, redemption price per share and offering price per share (based on net assets of $1,602,149,019 and 54,479,074 shares of beneficial interest outstanding) $29.41 - --------------------------------------------------------------------------------------------------------------------------- Service shares: Net asset value, redemption price per share and offering price per share (based on net assets of $4,296,540 and 146,475 shares of beneficial interest outstanding) $29.33
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 7 OPPENHEIMER CAPITAL APPRECIATION FUND/VA STATEMENT OF OPERATIONS Unaudited
For the Six Months Ended June 30, 2002 =========================================================================================================================== INVESTMENT INCOME Dividends (net of foreign withholding taxes of $173,534) $ 7,903,462 - --------------------------------------------------------------------------------------------------------------------------- Interest 1,237,803 --------------- Total investment income 9,141,265 =========================================================================================================================== EXPENSES Management fees 6,001,974 - --------------------------------------------------------------------------------------------------------------------------- Distribution and service plan fees-Service shares 804 - --------------------------------------------------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees 6,683 - --------------------------------------------------------------------------------------------------------------------------- Trustees' compensation 13,950 - --------------------------------------------------------------------------------------------------------------------------- Custodian fees and expenses 11,747 - --------------------------------------------------------------------------------------------------------------------------- Other 5,566 --------------- Total expenses 6,040,724 Less reduction to custodian expenses (478) --------------- Net expenses 6,040,246 =========================================================================================================================== NET INVESTMENT INCOME 3,101,019 =========================================================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) Net realized loss on: Investments (59,461,365) Foreign currency transactions (27,599) --------------- Net realized loss (59,488,964) - --------------------------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation) on: Investments (332,380,062) Translation of assets and liabilities denominated in foreign currencies 425,304 --------------- Net change (331,954,758) --------------- Net realized and unrealized loss (391,443,722) =========================================================================================================================== NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(388,342,703) ===============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 8 OPPENHEIMER CAPITAL APPRECIATION FUND/VA STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS YEAR ENDED ENDED JUNE 30, 2002 DECEMBER 31, (UNAUDITED) 2001 =========================================================================================================================== OPERATIONS Net investment income $ 3,101,019 $ 10,207,039 - --------------------------------------------------------------------------------------------------------------------------- Net realized loss (59,488,964) (37,893,430) - --------------------------------------------------------------------------------------------------------------------------- Net change in unrealized depreciation (331,954,758) (256,855,458) --------------------------------- Net decrease in net assets resulting from operations (388,342,703) (284,541,849) =========================================================================================================================== DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS Dividends from net investment income: Non-Service shares (10,120,100) (12,638,065) Service shares (1,731) -- - --------------------------------------------------------------------------------------------------------------------------- Distributions from net realized gain: Non-Service shares -- (189,649,710) Service shares -- -- =========================================================================================================================== BENEFICIAL INTEREST TRANSACTIONS Net increase in net assets resulting from beneficial interest transactions: Non-Service shares 24,838,933 366,372,108 Service shares 4,636,261 89,253 =========================================================================================================================== NET ASSETS Total decrease (368,989,340) (120,368,263) - --------------------------------------------------------------------------------------------------------------------------- Beginning of period 1,975,434,899 2,095,803,162 --------------------------------- End of period (including undistributed net investment income of $3,071,396 and $10,092,208, respectively) $1,606,445,559 $1,975,434,899 =================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 9 OPPENHEIMER CAPITAL APPRECIATION FUND/VA FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED ENDED JUNE 30, 2002 DECEMBER 31, NON-SERVICE SHARES (UNAUDITED) 2001 2000 1999 1998 1997 ============================================================================================================================ PER SHARE OPERATING DATA Net asset value, beginning of period $36.58 $46.63 $49.84 $36.67 $32.44 $27.24 - ---------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .05 .18 .27 .06 .13 .25 Net realized and unrealized gain (loss) (7.04) (5.86) .02 14.68 7.28 6.62 ---------------------------------------------------------------------------- Total from investment operations (6.99) (5.68) .29 14.74 7.41 6.87 - ---------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.18) (.27) (.06) (.13) (.24) (.15) Distributions from net realized gain -- (4.10) (3.44) (1.44) (2.94) (1.52) ---------------------------------------------------------------------------- Total dividends and/or distributions to shareholders (.18) (4.37) (3.50) (1.57) (3.18) (1.67) - ---------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $29.41 $36.58 $46.63 $49.84 $36.67 $32.44 ============================================================================ ============================================================================================================================ TOTAL RETURN, AT NET ASSET VALUE(1) (19.19)% (12.58)% (0.23)% 41.66% 24.00% 26.68% ============================================================================================================================ RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $1,602,149 $1,975,345 $2,095,803 $1,425,197 $768,550 $493,906 - ---------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $1,874,104 $2,000,314 $1,922,099 $1,002,835 $609,246 $390,447 - ---------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets:(2) Net investment income 0.33% 0.51% 0.66% 0.21% 0.50% 1.02% Expenses 0.65% 0.68% 0.67% 0.70% 0.75%(3) 0.75%(3) - ---------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 21% 45% 38% 56% 56% 66%
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. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 10 OPPENHEIMER CAPITAL APPRECIATION FUND/VA
SIX MONTHS PERIOD ENDED ENDED JUNE 30, 2002 DECEMBER 31, SERVICE SHARES (UNAUDITED) 2001(1) =========================================================================================================================== PER SHARE OPERATING DATA Net asset value, beginning of period $ 36.56 $ 31.66 - --------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .18 --(2) Net realized and unrealized gain (loss) (7.23) 4.90 ----------------------- Total from investment operations (7.05) 4.90 - ---------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.18) -- Distributions from net realized gain -- -- ----------------------- Total dividends and/or distributions to shareholders (.18) -- - ---------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $29.33 $36.56 ======================= ============================================================================================================================ TOTAL RETURN, AT NET ASSET VALUE(3) (19.39)% 15.51% ============================================================================================================================ RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $4,297 $90 - ---------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $1,103 $16 - ---------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets:(4) Net investment income 0.27% 0.11% Expenses 0.80% 0.81% - ---------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 21% 45%
1. For the period from September 18, 2001 (inception of offering) to December 31, 2001. 2. Less than $0.005 per share. 3. Assumes an investment on the business day before the first day of the fiscal period (or inception of offering), 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. 4. Annualized for periods of less than one full year. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 11 OPPENHEIMER CAPITAL APPRECIATION FUND/VA NOTES TO FINANCIAL STATEMENTS Unaudited ================================================================================ 1. SIGNIFICANT ACCOUNTING POLICIES Oppenheimer Capital Appreciation 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 capital appreciation by investing in securities of well-known, established companies. The Trust's investment advisor is OppenheimerFunds, Inc. (the Manager). The Fund offers two classes of shares. Both classes are sold at their offering price, which is the net asset value per share, to separate investment accounts of participating insurance companies as an underlying investment for variable life insurance policies, variable annuity contracts or other investment products. The class of shares designated as Service shares is subject to a distribution and service plan. All classes of shares have identical rights and voting privileges. Earnings, net assets and net asset value per share may differ by minor amounts due to each class having its own expenses directly attributable to that class. The following is a summary of significant accounting policies consistently followed by the Fund. - -------------------------------------------------------------------------------- SECURITIES VALUATION. Securities listed or traded on National Stock Exchanges or other domestic or foreign exchanges are valued based on the last sale price of the security traded on that exchange prior to the time when the Fund's assets are valued. In the absence of a sale, the security is valued at the last sale price on the prior trading day, if it is within the spread of the closing bid and asked prices, and if not, at the closing bid price. Securities (including restricted securities) for which quotations are not readily available are valued primarily using dealer-supplied valuations, a portfolio pricing service authorized by the Board of Trustees, or at their fair value. Fair value is determined in good faith under consistently applied procedures under the supervision of the Board of Trustees. Short-term "money market type" debt securities with remaining maturities of sixty days or less are valued at amortized cost (which approximates market value). - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- JOINT REPURCHASE AGREEMENTS. The Fund, along with other affiliated entities managed by OFI, 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. 12 OPPENHEIMER CAPITAL APPRECIATION FUND/VA - -------------------------------------------------------------------------------- ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than those attributable to a specific class), gains and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class. - -------------------------------------------------------------------------------- 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 capital loss carryforwards, if any, to shareholders. As of June 30, 2002, the Fund had available for federal income tax purposes an estimated unused capital loss carryforward of $92,488,914. This estimated capital loss carryforward represents carryforward as of the end of the last fiscal year, increased for losses deferred under tax accounting rules to the current fiscal year and increased or decreased by capital losses or gains realized in the first six months of the current fiscal year. As of December 31, 2001, the Fund had available for federal income tax purposes an unused capital loss carryforward as follows: EXPIRING -------------------------------- 2009 $14,552,938 - -------------------------------------------------------------------------------- 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 primarily because of the recognition of certain foreign currency gains (losses) as ordinary income (loss) for 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. - -------------------------------------------------------------------------------- INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon ex-dividend notification in the case of certain foreign dividends where the ex-dividend date may have passed. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income, which includes accretion of discount and amortization of premium, is accrued as earned. - -------------------------------------------------------------------------------- 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. 13 OPPENHEIMER CAPITAL APPRECIATION FUND/VA NOTES TO FINANCIAL STATEMENTS Unaudited / Continued ================================================================================ 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:
SIX MONTHS ENDED JUNE 30, 2002 YEAR ENDED DECEMBER 31, 2001(1) SHARES AMOUNT SHARES AMOUNT - -------------------------------------------------------------------------------------------------------------------------- NON-SERVICE SHARES Sold 7,355,101 $ 253,109,427 15,808,805 $ 618,618,659 Dividends and/or distributions reinvested 282,921 10,120,099 5,299,654 202,287,775 Redeemed (7,154,983) (238,390,593) (12,057,267) (454,534,326) --------------------------------------------------------------- Net increase 483,039 $ 24,838,933 9,051,192 $366,372,108 =============================================================== - --------------------------------------------------------------------------------------------------------------------------- SERVICE SHARES Sold 146,669 $ 4,725,637 2,703 $ 97,939 Dividends and/or distributions reinvested 48 1,730 -- -- Redeemed (2,706) (91,106) (239) (8,686) --------------------------------------------------------------- Net increase 144,011 $ 4,636,261 2,464 $ 89,253 ===============================================================
1. For the year ended December 31, 2001, for Non-Service shares and for the period from September 18, 2001 (inception of offering) to December 31, 2001, for Service shares. ================================================================================ 3. PURCHASES AND SALES OF SECURITIES The aggregate cost of purchases and proceeds from sales of securities, other than short-term obligations, for the six months ended June 30, 2002, were $361,414,364 and $364,229,276, respectively. ================================================================================ 4. 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 six months ended June 30, 2002 was an annualized rate of 0.65%. - -------------------------------------------------------------------------------- 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 $19.75 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 0.25% of average net assets of the fund. This undertaking may be amended or withdrawn at any time. 14 OPPENHEIMER CAPITAL APPRECIATION FUND/VA - -------------------------------------------------------------------------------- DISTRIBUTION AND SERVICE PLAN FOR SERVICE SHARES. The Fund has adopted a Distribution and Service Plan for Service shares to pay OppenheimerFunds Distributor, Inc., the Distributor, for distribution-related services for the Fund's Service shares. Under the Plan, payments are made quarterly at an annual rate of up to 0.25% of the average annual net assets of the Service shares of the Fund. ================================================================================ 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 as a receivable or payable and in the Statement of Operations with the change in unrealized appreciation or depreciation. The Fund may realize a gain or loss upon the closing or settlement of the foreign currency transactions. Such realized gains and losses are reported with all other foreign currency gains and losses in the Statement of Operations. ================================================================================ 6. ILLIQUID OR RESTRICTED SECURITIES As of June 30, 2002, investments in securities included issues that are illiquid or restricted. Restricted securities are often purchased in private placement transactions, are not registered under the Securities Act of 1933, may have contractual restrictions on resale, and are valued under methods approved by the Board of Trustees as reflecting fair value. A security may also 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 15% of its net assets (determined at the time of purchase and reviewed periodically) in illiquid or restricted securities. Certain restricted securities, eligible for resale to qualified institutional investors, are not subject to that limitation. The aggregate value of illiquid or restricted securities subject to this limitation as of June 30, 2002 was zero. 15 OPPENHEIMER CAPITAL APPRECIATION FUND/VA OPPENHEIMER CAPITAL APPRECIATION FUND/VA A SERIES OF OPPENHEIMER VARIABLE ACCOUNT FUNDS ================================================================================ TRUSTEES AND OFFICERS James C. Swain, Trustee, CEO and Chairman of the Board John V. Murphy, President and Trustee William L. Armstrong, Trustee Robert G. Avis, Trustee George C. Bowen, Trustee Edward L. Cameron, Trustee Jon S. Fossel, Trustee Sam Freedman, Trustee Beverly L. Hamilton, Trustee Robert J. Malone, Trustee F. William Marshall, Jr., Trustee Jane Putnam, Vice President Robert G. Zack, Vice President and Secretary Brian W. Wixted, Treasurer Katherine P. Feld, Assistant Secretary Kathleen T. Ives, Assistant Secretary Denis R. Molleur, Assistant Secretary ================================================================================ INVESTMENT ADVISOR OppenheimerFunds, Inc. ================================================================================ DISTRIBUTOR OppenheimerFunds Distributor, Inc. ================================================================================ TRANSFER AGENT OppenheimerFunds Services ================================================================================ INDEPENDENT AUDITORS Deloitte & Touche LLP ================================================================================ LEGAL COUNSEL Myer, Swanson, Adams & Wolf, P.C. The financial statements included herein have been taken from the records of the Fund without examination of those records by the independent auditors. For more complete information about Oppenheimer Capital Appreciation Fund/VA, please refer to the Prospectus. To obtain a copy or for information on how to obtain a separate account prospectus, call OppenheimerFunds, Inc. at 1.800.981.2871. [LOGO OMITTED] OPPENHEIMERFUNDS[REGISTRATION MARK] Distributor, Inc. [COPYRIGHT]Copyright 2002 OppenheimerFunds, Inc. All rights reserved. -----END PRIVACY-ENHANCED MESSAGE-----