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Semiannual Report June 30, 1999
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O P P E N H E I M E R
Aggressive Growth
Fund/VA
A Series of Oppenheimer Variable Account Funds
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OppenheimerFunds(R)
THE RIGHT WAY TO INVEST
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Oppenheimer Variable Account Funds--Oppenheimer Aggressive Growth Fund/VA
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Objective
Oppenheimer Aggressive Growth Fund/VA, a series of Oppenheimer Variable Account
Funds, primarily seeks capital appreciation from investments in growth-oriented
companies.
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Narrative by Bruce Bartlett, Portfolio Manager
Oppenheimer Aggressive Growth Fund/VA performed well during the first half of
1999, despite a volatile investment environment marked by a dramatic, mid-period
shift away from growth-oriented stocks in favor of value-oriented stocks. The
Fund's cumulative total return for the six-month period was 21.01%.(1) We
attribute the Fund's gains primarily to our emphasis on technology stocks, and
to our success in selecting some of the better-performing areas and companies
within the technology sector.
The year began with the U.S. economy growing at a robust rate, fueled
by high levels of consumer confidence and consumer spending. However, most
corporate earnings failed to keep pace with domestic economic growth due to
weaknesses in several international markets. Stock prices of many companies that
nevertheless were able to produce consistently high levels of earnings growth
rose rapidly. The bulk of this growth was concentrated among large-cap
technology stocks, including some held by the Fund. Stocks of several smaller
companies that demonstrated accelerating earnings growth, including many in the
Fund's portfolio, rose rapidly as well.
Then, in early April, reassured by evidence that the U.S. economy was
continuing to grow, investors abruptly began to look beyond large-cap
growth-oriented stocks for opportunities among smaller companies and
value-oriented companies. This shift in market sentiment caused some of the
Fund's holdings to decline, especially stocks of large-cap growth companies,
such as Microsoft Corp. However, most of the Fund's holdings maintained the
greater part of their increased value, and some of our small- and mid-cap
holdings benefited from the renewed attention that investors focused on smaller
companies.(2)
At approximately 42% of the portfolio, technology was the primary
sector that fueled the Fund's growth during the six-month period that ended June
30, 1999. Within technology, we derived our greatest gains from a wide range of
Internet-related investments. Some of these investments were in companies, such
as Uniphase Corp., that are either building or providing the equipment and
components needed for high-speed, global data and telecommunications networks.
Others were in companies, such as Charles Schwab Corp., a leading online
discount brokerage firm, that were using the Internet to enhance revenues and
earnings growth. Still others were among a group of smaller companies that are
building new, never-before-seen businesses on the Internet.
In addition to technology, the Fund enjoyed strong performance from the
stocks of several specialty retailers. We focused on those that are benefiting
from strong consumer demand for the latest generation of digital cameras, disc
players and other digital media.
Of course, not all of the Fund's holdings performed strongly. In the
capital goods area, evidence of slowing internal growth led us to cut our
holdings of the stocks of several weak-performing solid waste companies.
Healthcare stocks, already weakened by the impact of regulatory and competitive
pressures on company revenues, were hit particularly hard by the market's
transition away from growth-oriented businesses in April. Declines occurred
among stocks of pharmaceutical and medical product companies, as well as
wholesale and retail pharmaceutical distribution companies. In response, we sold
several of our healthcare holdings, adding instead to our technology holdings
and our holdings of leading biotechnology companies, such as Biogen, Inc., that
faced substantially less competition than traditional pharmaceuticals. Our
biotech holdings proved to be strong contributors to performance during the
period.
Because the stock market can be volatile, the Fund's performance may be subject
to substantial short-term changes. For updates on the Fund's performance, please
contact your financial advisor, call us at 1-800-525-7048 or visit our website,
www.oppenheimerfunds.com.
1. Includes changes in net asset value per share and does not include the
charges associated with the separate account products which offer this Fund.
Such performance is not annualized and would have been lower if such charges
were taken into account.
2. The Fund's portfolio is subject to change.
2 Oppenheimer Aggressive Growth Fund/VA
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Oppenheimer Variable Account Funds--Oppenheimer Aggressive Growth Fund/VA
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Looking toward the second half of 1999, we believe that the year's economic
momentum is likely to continue. Consumer confidence and spending remain high,
and although pressures on prices and wages continue to grow, counterbalancing
forces such as global price competition have thus far held them largely in
check. In such an environment, we are enthusiastic about the growth prospects of
the industries and companies we have identified.
We believe the past six months highlight the value that the Fund can
add to a diversified portfolio, even in a changing market environment. We are
committed to rigorously maintaining our strategy of growth investing, as well as
our discipline of building the portfolio one company and one investment at a
time. That's what makes Oppenheimer Aggressive Growth Fund/VA part of The Right
Way to Invest.
Oppenheimer Aggressive Growth Fund/VA 3
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Statement of Investments June 30, 1999 (Unaudited)
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<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
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Common Stocks--96.5%
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Capital Goods--7.8%
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Electrical Equipment--0.7%
E-Tek Dynamics, Inc.(1) 200,000 $ 9,512,500
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Industrial Services--0.8%
United Rentals, Inc.(1) 356,693 10,522,443
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Manufacturing--6.3%
Optical Coating Laboratory, Inc. 230,000 19,233,750
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Tyco International Ltd. 645,000 61,113,750
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80,347,500
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Communication Services--4.5%
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Telecommunications: Long Distance--4.3%
Audiocodes Ltd.(1) 134,000 3,618,000
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Copper Mountain Networks, Inc.(1) 8,700 672,075
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Global Crossing Ltd.(1) 593,899 25,314,945
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MCI WorldCom, Inc.(1) 183,000 15,749,437
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Qwest Communications International, Inc.(1) 293,220 9,694,586
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55,049,043
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Telecommunications: Wireless--0.2%
NorthPoint Communications Group, Inc.(1) 54,800 2,000,200
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Consumer Cyclicals--15.4%
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Consumer Services--0.8%
Young & Rubicam, Inc.(1) 211,300 9,600,944
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Retail: General--3.2%
Kohl's Corp.(1) 275,000 21,226,562
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Wal-Mart Stores, Inc. 400,000 19,300,000
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40,526,562
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Retail: Specialty--11.4%
Abercrombie & Fitch Co., Cl. A(1) 580,000 27,840,000
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Best Buy Co., Inc. 555,000 37,462,500
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Home Depot, Inc. 375,000 24,164,062
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Linens 'N Things, Inc.(1) 669,000 29,268,750
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Lowe's Cos., Inc. 137,500 7,794,531
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Tandy Corp. 400,000 19,550,000
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146,079,843
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Consumer Staples--7.4%
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Broadcasting--1.1%
Adelphia Communications Corp.(1) 31,800 2,023,275
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Infinity Broadcasting Corp., Cl. A(1) 420,700 12,515,825
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14,539,100
4 Oppenheimer Aggressive Growth Fund/VA
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Statement of Investments (Unaudited) (Continued)
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Market Value
Shares Note 1
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Entertainment--4.1%
Outback Steakhouse, Inc.(1) 375,000 $ 14,742,187
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SFX Entertainment, Inc., Cl. A(1) 275,000 17,600,000
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Starbucks Corp.(1) 530,000 19,908,125
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52,250,312
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Food & Drug Retailers--1.2%
CVS Corp. 290,000 14,717,500
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Household Goods--1.0%
Dial Corp. (The) 350,000 13,015,625
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Financial--11.3%
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Banks--3.6%
AmSouth Bancorp 300,000 6,956,250
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Fifth Third Bancorp 200,000 13,312,500
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First Tennessee National Corp. 340,000 13,026,250
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Firstar Corp. 465,000 13,020,000
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46,315,000
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Diversified Financial--7.7%
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Associates First Capital Corp., Cl. A 407,000 18,035,188
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Goldman Sachs Group, Inc. (The)(1) 15,000 1,083,750
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Providian Financial Corp. 315,000 29,452,500
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Schwab (Charles) Corp. 450,000 49,443,750
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98,015,188
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Healthcare--7.5%
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Healthcare/Drugs--4.7%
Biogen, Inc.(1) 636,600 40,941,338
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Immunex Corp.(1) 150,000 19,115,625
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60,056,963
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Healthcare/Supplies & Services--2.8%
Cardinal Health, Inc. 269,800 17,300,925
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Guidant Corp. 200,000 10,287,500
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Medtronic, Inc. 99,779 7,770,290
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35,358,715
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Technology--42.0%
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Computer Hardware--5.9%
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Dell Computer Corp.(1) 250,000 9,250,000
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EMC Corp.(1) 750,000 41,250,000
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Juniper Networks, Inc. 28,000 4,172,000
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Lexmark International Group, Inc., Cl. A(1) 320,000 21,140,000
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75,812,000
Oppenheimer Aggressive Growth Fund/VA 5
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Statement of Investments (Unaudited) (Continued)
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Market Value
Shares Note 1
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Computer Services--1.6%
Affiliated Computer Services, Inc., Cl. A(1) 200,000 $ 10,125,000
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drkoop.com, Inc.(1) 67,800 1,080,563
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eToys, Inc.(1) 47,500 1,935,625
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High Speed Access Corp.(1) 114,800 2,941,750
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Rhythms NetConnections, Inc.(1) 72,300 4,220,513
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20,303,451
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Computer Software--13.4%
America Online, Inc.(1) 200,000 22,100,000
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At Home Corp.(1) 154,190 8,316,623
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Citrix Systems, Inc.(1) 693,000 39,154,500
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Compuware Corp.(1) 900,000 28,631,250
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eBay, Inc.(1) 50,600 7,659,575
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Microsoft Corp.(1) 450,000 40,584,375
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Unisys Corp.(1) 255,000 9,929,063
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Veritas Software Corp.(1) 162,500 15,427,344
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171,802,730
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Communications Equipment--7.5%
Cisco Systems, Inc.(1) 450,000 28,996,875
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General Instrument Corp.(1) 1,200,000 51,000,000
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Harmonic, Inc.(1) 270,000 15,508,125
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95,505,000
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Electronics--13.6%
GlobeSpan, Inc.(1) 6,300 250,425
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Intel Corp. 200,000 11,900,000
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JDS Fitel, Inc.(1) 425,000 35,463,376
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Level One Communications, Inc.(1) 200,000 9,787,500
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SDL, Inc.(1) 220,000 11,233,750
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Uniphase Corp.(1) 214,200 35,557,200
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Vitesse Semiconductor Corp.(1) 490,000 33,044,375
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Waters Corp.(1) 690,000 36,656,250
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173,892,876
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Utilities--0.6%
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Gas Utilities--0.6%
Enron Corp. 100,000 8,175,000
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Total Common Stocks (Cost $733,646,789) 1,233,398,495
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Other Securities--0.7%
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Qwest Trends Trust, 5.75% Cv.(2) 80,000 4,580,000
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United Rental Trust I, 6.50% Cv. Quarterly Income Preferred Securities(2) 100,000 4,625,000
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Total Other Securities (Cost $10,732,480) 9,205,000
6 Oppenheimer Aggressive Growth Fund/VA
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Statement of Investments (Unaudited) (Continued)
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Principal Market Value
Amount Note 1
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Repurchase Agreements--1.9%
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Repurchase agreement with First Chicago Capital Markets, 4.80%, dated 6/30/99,
to be repurchased at $24,603,280 on 7/1/99, collateralized by U.S. Treasury Nts.,
5.50%-8%, 11/30/99-7/15/06, with a value of $20,767,350, U.S. Treasury Bonds,
6%-9.25%, 2/15/16-2/15/26, with a value of $4,358,852 (Cost $24,600,000) $24,600,000 $ 24,600,000
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Total Investments, at Value (Cost $768,979,269) 99.1% 1,267,203,495
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Other Assets Net of Liabilities 0.9 10,977,723
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Net Assets 100.0% $1,278,181,218
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</TABLE>
1. Non-income producing security.
2. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $9,205,000 or 0.72% of the Fund's net
assets as of June 30, 1999.
See accompanying Notes to Financial Statements.
Oppenheimer Aggressive Growth Fund/VA 7
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Statement of Assets and Liabilities June 30, 1999 (Unaudited)
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<TABLE>
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<S> <C>
Assets
Investments, at value (cost $768,979,269)--see accompanying statement $1,267,203,495
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Receivables and other assets:
Investments sold 13,565,369
Interest and dividends 314,102
Other 5,589
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Total assets 1,281,088,555
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Liabilities
Bank overdraft 30,903
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Payables and other liabilities:
Shares of beneficial interest redeemed 2,841,318
Shareholder reports 12,315
Legal, auditing and other professional fees 10,456
Custodian fees 8,482
Other 3,863
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Total liabilities 2,907,337
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Net Assets $1,278,181,218
==============
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Composition of Net Assets
Paid-in capital $ 775,314,191
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Accumulated net investment loss (1,141,250)
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Accumulated net realized gain on investment transactions 5,784,051
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Net unrealized appreciation on investments--Note 3 498,224,226
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Net assets--applicable to 23,560,166 shares of beneficial
interest outstanding $1,278,181,218
==============
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Net Asset Value, Redemption Price Per Share and Offering Price Per Share $54.25
</TABLE>
See accompanying Notes to Financial Statements.
8 Oppenheimer Aggressive Growth Fund/VA
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Statement of Operations For the Six Months Ended June 30, 1999 (Unaudited)
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<TABLE>
======================================================================================
<S> <C>
Investment Income
Interest $ 1,400,713
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Dividends (net of foreign withholding taxes of $2,480) 1,329,726
------------
Total income 2,730,439
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Expenses
Management fees--Note 4 3,837,693
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Custodian fees and expenses 16,207
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Legal, auditing and other professional fees 13,979
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Insurance expenses 2,923
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Transfer and shareholder servicing agent fees--Note 4 1,055
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Trustees' compensation 3,312
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Total expenses 3,875,169
Less expenses paid indirectly--Note 1 (3,480)
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Net expenses 3,871,689
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Net Investment Loss (1,141,250)
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Realized and Unrealized Gain (Loss)
Net realized gain on:
Investments (including premiums on options exercised) 75,776,006
Closing and expiration of option contracts written--Note 5 139,120
Foreign currency transactions 130,388
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Net realized gain 76,045,514
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Net change in unrealized appreciation or depreciation on:
Investments 148,375,710
Translation of assets and liabilities denominated in foreign currencies (376,389)
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Net change 147,999,321
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Net realized and unrealized gain 224,044,835
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Net Increase in Net Assets Resulting from Operations $222,903,585
============
</TABLE>
See accompanying Notes to Financial Statements.
Oppenheimer Aggressive Growth Fund/VA 9
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Statements of Changes in Net Assets
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<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1999 December 31,
(Unaudited) 1998
=============================================================================================
<S> <C> <C>
Operations
Net investment loss $ (1,141,250) $ (1,162,585)
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Net realized gain (loss) 76,045,514 (67,125,014)
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Net change in unrealized appreciation or depreciation 147,999,321 183,484,620
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Net increase in net assets resulting from operations 222,903,585 115,197,021
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Dividends and Distributions to Shareholders
Dividends from net investment income -- (2,267,793)
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Distributions from net realized gain -- (23,288,487)
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Beneficial Interest Transactions
Net increase (decrease) in net assets resulting from
beneficial interest transactions--Note 2 (22,682,527) 110,511,946
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Net Assets
Total increase 200,221,058 200,152,687
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Beginning of period 1,077,960,160 877,807,473
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End of period (including accumulated net investment
loss of $1,141,250 for the six months ended June 30, 1999) $1,278,181,218 $1,077,960,160
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</TABLE>
See accompanying Notes to Financial Statements.
10 Oppenheimer Aggressive Growth Fund/VA
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Financial Highlights
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<TABLE>
<CAPTION>
Six Months
Ended
June 30,1999 Year Ended December 31,
(Unaudited) 1998 1997 1996 1995 1994
========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $44.83 $40.96 $38.71 $34.21 $25.95 $31.64
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.05) (.05) .10 .09 .11 .10
Net realized and unrealized gain (loss) 9.47 5.09 4.01 6.59 8.29 (2.22)
- ------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations 9.42 5.04 4.11 6.68 8.40 (2.12)
- ------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income -- (.10) (.09) (.11) (.09) (.04)
Distributions from net realized gain -- (1.07) (1.77) (2.07) (.05) (3.53)
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Total dividends and distributions
to shareholders -- (1.17) (1.86) (2.18) (.14) (3.57)
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Net asset value, end of period $54.25 $44.83 $40.96 $38.71 $34.21 $25.95
====== ====== ====== ====== ====== ======
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Total Return, at Net Asset Value(1) 21.01% 12.36% 11.67% 20.22% 32.52% (7.59)%
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Ratios/Supplemental Data
Net assets, end of period (in millions) $1,278 $1,078 $878 $617 $325 $186
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Average net assets (in millions) $1,151 $955 $754 $467 $241 $154
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Ratios to average net assets:(2)
Net investment income (loss) (0.20)% (0.12)% 0.31% 0.32% 0.47% 0.50%
Expenses(3) 0.68% 0.71% 0.73% 0.75% 0.78% 0.57%
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Portfolio turnover rate(4) 33% 80% 88% 100% 126% 97%
</TABLE>
1. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption at the
net asset value calculated on the last business day of the fiscal period. Total
returns are not annualized for periods less than one full year. Total return
information does not reflect expenses that apply at the separate account level
or to related insurance products. Inclusion of these charges would reduce the
total return figures for all periods shown.
2. Annualized for periods less than one full year.
3. Beginning in fiscal 1995, the expense ratio reflects the effect of expense
paid indirectly by the Fund. Prior year expense ratios have not been adjusted.
4. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended June 30, 1999, were $408,233,163 and $356,230,044, respectively.
See accompanying Notes to Financial Statements.
Oppenheimer Aggressive Growth Fund/VA 11
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Notes to Financial Statements (Unaudited)
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1. Significant Accounting Policies
Oppenheimer Aggressive Growth Fund/VA (the Fund) is a separate series of
Oppenheimer Variable Account Funds (the Trust), a diversified, open-end
management investment company registered under the Investment Company Act of
1940, as amended. The Fund operated under the name of Oppenheimer Aggressive
Growth Fund through April 30, 1999. The Fund's investment objective is to seek
capital appreciation by investing in "growth-type" companies. The Trust's
investment advisor is OppenheimerFunds, Inc. (the Manager). The following is a
summary of significant accounting policies consistently followed by the Fund.
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Securities Valuation. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
the last sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio pricing service
approved by the Board of Trustees. Such securities which cannot be valued by an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of Trustees to
determine fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at cost (or
last determined market value) adjusted for amortization to maturity of any
premium or discount.
- --------------------------------------------------------------------------------
Foreign Currency Translation. The accounting records of the Fund are maintained
in U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of exchange. Amounts related
to the purchase and sale of foreign securities and investment income are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
The effect of changes in foreign currency exchange rates on investments
is separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
Repurchase Agreements. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
- --------------------------------------------------------------------------------
Federal Taxes. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. As of December 31,
1998, the Fund had available for federal income tax purposes an unused capital
loss carryover of approximately $66,711,000, expiring in 2006.
- --------------------------------------------------------------------------------
Distributions to Shareholders. Distributions to shareholders, which are
determined in accordance with income tax regulations, are recorded on the
ex-dividend date.
- --------------------------------------------------------------------------------
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of the recognition of certain foreign currency gains (losses)
as ordinary income (loss) for tax purposes. The character of distributions made
during the year from net investment income or net realized gains may differ from
its ultimate characterization for federal income tax purposes. Also, due to
timing of dividend distributions, the fiscal year in which amounts are
distributed may differ from the fiscal year in which the income or realized gain
was recorded by the Fund.
12 Oppenheimer Aggressive Growth Fund/VA
<PAGE>
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Notes to Financial Statements (Unaudited) (Continued)
- --------------------------------------------------------------------------------
================================================================================
Expense Offset Arrangements. Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by the Fund.
- --------------------------------------------------------------------------------
Other. Investment transactions are accounted for as of trade date and dividend
income is recorded on the ex-dividend date. Realized gains and losses on
investments and options written and unrealized appreciation and depreciation are
determined on an identified cost basis, which is the same basis used for federal
income tax purposes.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
================================================================================
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of beneficial
interest. Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
Six Months Ended June 30, 1999 Year Ended December 31, 1998
------------------------------ ----------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold 4,650,634 $ 226,026,729 13,376,589 $ 556,408,810
Dividends and distributions reinvested -- -- 580,166 25,556,280
Redeemed (5,134,270) (248,709,256) (11,344,620) (471,453,144)
---------- ------------- ----------- -------------
Net increase (decrease) (483,636) $ (22,682,527) 2,612,135 $ 110,511,946
========== ============= =========== =============
</TABLE>
================================================================================
3. Unrealized Gains and Losses on Securities
As of June 30, 1999, net unrealized appreciation on investments of $498,224,226,
was composed of gross appreciation of $506,087,708, and gross depreciation of
$7,863,482.
================================================================================
4. Management Fees and Other Transactions with Affiliates
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. Effective May 1, 1999, an additional
breakpoint of 0.58% was added for average annual net assets in excess of $1.5
billion. The Fund's management fee for the six months ended June 30, 1999, was
0.67% of average annual net assets.
OppenheimerFunds Services (OFS), a division of the Manager, is the
transfer agent for the Fund and is responsible for maintaining the shareholder
registry and shareholder accounting records for the Fund. OFS provides these
services at cost.
Oppenheimer Aggressive Growth Fund/VA 13
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited) (Continued)
- --------------------------------------------------------------------------------
================================================================================
5. Option Activity
The Fund may buy and sell put and call options, or write put and covered call
options on portfolio securities in order to produce incremental earnings or
protect against changes in the value of portfolio securities.
The Fund generally purchases put options or writes covered call options
to hedge against adverse movements in the value of portfolio holdings. When an
option is written, the Fund receives a premium and becomes obligated to sell or
purchase the underlying security at a fixed price, upon exercise of the option.
Options are valued daily based upon the last sale price on the
principal exchange on which the option is traded and unrealized appreciation or
depreciation is recorded. The Fund will realize a gain or loss upon the
expiration or closing of the option transaction. When an option is exercised,
the proceeds on sales for a written call option, the purchase cost for a written
put option, or the cost of the security for a purchased put or call option is
adjusted by the amount of premium received or paid.
Securities designated to cover outstanding call options are noted in
the Statement of Investments where applicable. Shares subject to call,
expiration date, exercise price, premium received and market value are detailed
in a note to the Statement of Investments. Options written are reported as a
liability in the Statement of Assets and Liabilities. Gains and losses are
reported in the Statement of Operations.
The risk in writing a call option is that the Fund gives up the
opportunity for profit if the market price of the security increases and the
option is exercised. The risk in writing a put option is that the Fund may incur
a loss if the market price of the security decreases and the option is
exercised. The risk in buying an option is that the Fund pays a premium whether
or not the option is exercised. The Fund also has the additional risk of not
being able to enter into a closing transaction if a liquid secondary market does
not exist.
Written option activity for the six months ended June 30, 1999, was as follows:
<TABLE>
<CAPTION>
Call Options
-----------------------------
Number of Amount of
Shares Premiums
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Options outstanding as of December 31, 1998 138 $ 34,764
Options written 500 139,120
Options closed or expired (500) (139,120)
Options exercised (138) (34,764)
---- ---------
Options outstanding as of June 30, 1999 -- $ --
==== =========
</TABLE>
14 Oppenheimer Aggressive Growth Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Oppenheimer Aggressive Growth Fund/VA
- --------------------------------------------------------------------------------
A Series of Oppenheimer Variable Account Funds
<TABLE>
===============================================================================================
<S> <C>
Officers and Trustees James C. Swain, Chairman and Chief Executive Officer
Bridget A. Macaskill, President
Robert G. Avis, Trustee
William A. Baker, Trustee
Jon S. Fossel, Trustee
Sam Freedman, Trustee
Raymond J. Kalinowski, Trustee
C. Howard Kast, Trustee
Robert M. Kirchner, Trustee
Ned M. Steel, Trustee
Bruce L. Bartlett, Vice President
Andrew J. Donohue, Vice President and Secretary
Brian W. Wixted, Vice President and Treasurer
Robert G. Zack, Assistant Secretary
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
===============================================================================================
Investment Advisor OppenheimerFunds, Inc.
===============================================================================================
Transfer Agent OppenheimerFunds Services
===============================================================================================
Custodian of Portfolio Securities The Bank of New York
===============================================================================================
Independent Auditors Deloitte & Touche LLP
===============================================================================================
Legal Counsel Myer, Swanson, Adams & Wolf, P.C.
The financial statements included herein have been
taken from the records of the Fund without
examination of the independent auditors.
This is a copy of a report to shareholders of
Oppenheimer Aggressive Growth Fund/VA. This report
must be preceded or accompanied by a Prospectus of
Oppenheimer Aggressive Growth Fund/VA. For material
information concerning the Fund, see the Prospectus.
Shares of Oppenheimer funds are not deposits or
obligations of any bank, are not guaranteed by any
bank, are not insured by the FDIC or any other
agency, and involve investment risks, including the
possible loss of the principal amount invested.
</TABLE>
Oppenheimer Aggressive Growth Fund/VA 15
