Semiannual Report June 30, 2000
Oppenheimer
Small Cap Growth Fund/VA
A Series of Oppenheimer Variable Account Funds
[logo]OppenheimerFunds(R)
The Right Way to Invest
<PAGE>
Oppenheimer Variable Account Funds--Oppenheimer Small Cap Growth Fund/VA
================================================================================
Objective
Oppenheimer Small Cap Growth Fund/VA, a series of Oppenheimer Variable Account
Funds, seeks capital appreciation. In seeking its objective, the Fund emphasizes
investments in securities of growth-type companies with market capitalizations
less than $2.5 billion.
================================================================================
Narrative by Oppenheimer Growth Team(1)
After the euphoria of the spectacular fourth quarter of 1999, small-cap stocks
suffered a precipitous decline over the six-month period that ended June 30,
2000. There were a number of reasons for this lackluster performance, including
investors' inflation fears and concern that the Federal Reserve would continue
its series of interest-rate raises that began a little over a year ago.
Investors' qualms about a new rate hike were confirmed when the Fed raised rates
not only once, but twice--once in February and again in May. In addition, the
federal government's anti-trust suit against Microsoft caused many investors to
take a closer look at the risks posed by stocks in the technology and
biotechnology sectors. Among those securities undergoing this scrutiny were
small-cap stocks. The Fund's cumulative total return for the six-month period
was -6.34%.(2)
While the Fund did not maintain high exposure to biotech stocks during
the reporting period, it did commit approximately over 35% of its portfolio to
the technology sector. In particular, we had considerable holdings in the
business-to-business computer-services area.
Generally, these tech stocks did not fare well in this market even
though several of our holdings actually reported superior earnings. By March, it
had become evident that the market was experiencing a valuation correction that
had little to do with companies' economic fundamentals, such as earnings and
operations.
To create a buffer against the widespread volatility in this
environment, the Fund increased its cash position, temporarily, and reduced its
number of equity positions.(3) Many of the eliminated positions were
early-stage, emerging-technology companies that were not reporting profits
despite impressive revenue gains. In their place, we focused on companies that
we perceive to be currently producing substantial earnings gains. These include
several stocks in the electronics sector that we believe will benefit from the
positive performance we've seen lately in the semiconductor industry, as well as
from the communications revolution that is taking place in wireless
technologies.
We believe that our adjustments will enable us to profit from a market
recovery and better withstand the effects of a continued downward correction. At
present, however, we do not see a clear trend--in any direction--returning to
the market for at least another quarter.
There are still questions about whether the Fed's recent action will be
sufficient to keep inflation under control or whether more interest-rate
increases will be warranted.
Because the stock market can be volatile, the Fund's performance is subject to
substantial short-term fluctuations and current performance may be less than the
results shown.
1. Effective May 24, 2000, Oppenheimer's growth team in its equity portfolio
department has been managing the Fund.
2. 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.
3.The Fund's portfolio is subject to change.
2 Oppenheimer Small Cap Growth Fund/VA
<PAGE>
Oppenheimer Variable Account Funds--Oppenheimer Small Cap Growth Fund/VA
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In addition, the previously mentioned anti-trust case against Microsoft could
have far-reaching ramifications that might affect investor activities in
unpredictable ways. The good news, however, is that we believe that the market
has already factored valuation risk into its current pricing. All these
considerations point toward more volatility in the third quarter, but, as a
clearer picture begins to emerge, we are optimistic that the market will become
more stable by the end of the year.
It should be noted that, by their very nature, small-cap stocks can be
volatile, and investors must be able to tolerate price swings that are often
dramatic. At the same time, we believe that we have positioned the Fund to
participate in companies with outstanding prospects for sustainable growth. In
the difficult markets that marked the first six months of the year, for
instance, we did not simply wait passively for conditions to change. Rather, we
eliminated positions in companies that we believed did not offer a sufficiently
competitive business plan for the prevailing economic environment. Instead of
embracing the next new fad, we preferred to wait for better opportunities to
reveal themselves in the coming months. This is why we believe that, especially
for long-term investors, the disciplined strategy of Oppenheimer Small Cap
Growth Fund/VA represents The Right Way to Invest.
Oppenheimer Small Cap Growth Fund/VA 3
<PAGE>
Statement of Investments June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Market Value
Shares Note 1
======================================================================================================
<S> <C> <C>
Common Stocks--76.4%
------------------------------------------------------------------------------------------------------
Basic Materials--0.6%
------------------------------------------------------------------------------------------------------
Chemicals--0.6%
Cabot Microelectronics Corp.(1) 1,800 $ 82,350
------------------------------------------------------------------------------------------------------
Capital Goods--10.9%
------------------------------------------------------------------------------------------------------
Aerospace/Defense--0.4%
Armor Holdings, Inc.(1) 3,500 45,500
------------------------------------------------------------------------------------------------------
Electrical Equipment--0.8%
Kemet Corp.(1) 2,000 50,125
------------------------------------------------------------------------------------------------------
Vishay Intertechnology, Inc.(1) 1,500 56,906
--------
107,031
------------------------------------------------------------------------------------------------------
Industrial Services--4.7%
Corporate Executive Board Co.(1) 3,900 233,512
------------------------------------------------------------------------------------------------------
Keynote Systems, Inc.(1) 1,400 98,787
------------------------------------------------------------------------------------------------------
National Computer Systems, Inc. 1,500 73,875
------------------------------------------------------------------------------------------------------
Source Information Management Co. (The)(1) 3,400 51,850
------------------------------------------------------------------------------------------------------
Tetra Tech, Inc.(1) 7,300 166,987
--------
625,011
------------------------------------------------------------------------------------------------------
Manufacturing--5.0%
AstroPower, Inc.(1) 2,350 63,744
------------------------------------------------------------------------------------------------------
Asyst Technologies, Inc.(1) 3,300 113,025
------------------------------------------------------------------------------------------------------
ATMI, Inc.(1) 2,600 120,900
------------------------------------------------------------------------------------------------------
Brooks Automation, Inc.(1) 1,650 105,497
------------------------------------------------------------------------------------------------------
Koala Corp.(1) 6,000 84,750
------------------------------------------------------------------------------------------------------
Metron Technology NV(1) 2,300 29,002
------------------------------------------------------------------------------------------------------
Photon Dynamics, Inc.(1) 1,450 108,297
------------------------------------------------------------------------------------------------------
PRI Automation, Inc.(1) 600 39,234
--------
664,449
------------------------------------------------------------------------------------------------------
Communication Services--6.7%
------------------------------------------------------------------------------------------------------
Telecommunications: Long Distance--4.6%
Clarent Corp.(1) 800 57,200
------------------------------------------------------------------------------------------------------
Corsair Communications, Inc.(1) 1,100 31,625
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Efficient Networks, Inc.(1) 1,300 95,631
------------------------------------------------------------------------------------------------------
Madge Networks NV(1) 5,900 26,919
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MGC Communications, Inc.(1) 3,300 197,794
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MRV Communications, Inc.(1) 800 53,800
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Network Plus Corp.(1) 2,000 28,375
------------------------------------------------------------------------------------------------------
STARTEC Global Communications Corp.(1) 3,200 34,200
------------------------------------------------------------------------------------------------------
Triton PCS Holdings, Inc., Cl. A(1) 1,200 69,300
------------------------------------------------------------------------------------------------------
Z-Tel Technologies, Inc.(1) 1,400 16,800
--------
611,644
4 Oppenheimer Small Cap Growth Fund/VA
<PAGE>
Statement of Investments (Unaudited) (Continued)
Market Value
Shares Note 1
------------------------------------------------------------------------------------------------------
Telecommunications: Wireless--2.1%
AirGate PCS, Inc.(1) 650 $ 34,166
------------------------------------------------------------------------------------------------------
Alamosa PCS Holdings, Inc.(1) 1,500 31,312
------------------------------------------------------------------------------------------------------
Chartered Semiconductor Manufacturing Ltd., Sponsored ADR(1) 500 45,000
------------------------------------------------------------------------------------------------------
Dobson Communications Corp., Cl. A(1) 2,500 48,125
------------------------------------------------------------------------------------------------------
Proxim, Inc.(1) 1,250 123,711
--------
282,314
------------------------------------------------------------------------------------------------------
Consumer Cyclicals--6.2%
------------------------------------------------------------------------------------------------------
Consumer Services--2.1%
Getty Images, Inc.(1) 2,300 85,244
------------------------------------------------------------------------------------------------------
Heidrick & Struggles International, Inc.(1) 2,500 157,812
------------------------------------------------------------------------------------------------------
Pivotal Corp.(1) 1,600 37,600
--------
280,656
------------------------------------------------------------------------------------------------------
Leisure & Entertainment--0.6%
Handleman Co.(1) 6,500 81,250
------------------------------------------------------------------------------------------------------
Media--1.5%
LifeMinders, Inc.(1) 1,600 47,300
------------------------------------------------------------------------------------------------------
T/R Systems, Inc.(1) 3,900 24,862
------------------------------------------------------------------------------------------------------
True North Communications, Inc. 900 39,600
------------------------------------------------------------------------------------------------------
Tweeter Home Entertainment Group, Inc.(1) 2,700 82,012
--------
193,774
------------------------------------------------------------------------------------------------------
Retail: Specialty--2.0%
Copart, Inc.(1) 4,300 68,800
------------------------------------------------------------------------------------------------------
Factory 2-U Stores, Inc.(1) 3,100 117,219
------------------------------------------------------------------------------------------------------
School Specialty, Inc.(1) 4,100 76,106
--------
262,125
------------------------------------------------------------------------------------------------------
Consumer Staples--5.2%
------------------------------------------------------------------------------------------------------
Broadcasting--0.9%
Citadel Communications Corp.(1) 2,200 76,862
------------------------------------------------------------------------------------------------------
New Frontier Media, Inc.(1) 6,000 43,875
--------
120,737
------------------------------------------------------------------------------------------------------
Education--1.0%
Corinthian Colleges, Inc.(1) 2,100 49,219
------------------------------------------------------------------------------------------------------
ProsoftTraining.com(1) 4,500 75,656
--------
124,875
------------------------------------------------------------------------------------------------------
Entertainment--3.3%
Buca, Inc.(1) 8,800 137,500
------------------------------------------------------------------------------------------------------
Cinar Films, Inc., Cl. B(1)(2) 4,900 29,155
------------------------------------------------------------------------------------------------------
Imax Corp.(1) 1,800 40,950
------------------------------------------------------------------------------------------------------
Macrovision Corp.(1) 1,700 108,667
------------------------------------------------------------------------------------------------------
P.F. Chang's China Bistro, Inc.(1) 3,900 124,556
--------
440,828
Oppenheimer Small Cap Growth Fund/VA 5
<PAGE>
Statement of Investments (Unaudited) (Continued)
Market Value
Shares Note 1
------------------------------------------------------------------------------------------------------
Energy--0.9%
------------------------------------------------------------------------------------------------------
Energy Services--0.9%
Cal Dive International, Inc.(1) 2,200 $119,212
------------------------------------------------------------------------------------------------------
Financial--2.9%
------------------------------------------------------------------------------------------------------
Banks--1.7%
Investors Financial Services Corp. 3,600 142,875
------------------------------------------------------------------------------------------------------
Labranche & Co., Inc.(1) 5,700 81,937
--------
224,812
------------------------------------------------------------------------------------------------------
Diversified Financial--0.7%
MicroFinancial, Inc. 9,600 96,000
------------------------------------------------------------------------------------------------------
Insurance--0.5%
Advance Paradigm, Inc.(1) 3,000 61,500
------------------------------------------------------------------------------------------------------
Healthcare--8.2%
------------------------------------------------------------------------------------------------------
Healthcare/Drugs--6.7%
Abgenix, Inc.(1) 1,100 131,845
------------------------------------------------------------------------------------------------------
Cubist Pharmaceuticals, Inc.(1) 2,000 98,500
------------------------------------------------------------------------------------------------------
CV Therapeutics, Inc.(1) 1,550 107,434
------------------------------------------------------------------------------------------------------
Lynx Therapeutics, Inc.(1) 2,400 114,150
------------------------------------------------------------------------------------------------------
Nuerocrine Biosciences, Inc.(1) 4,000 142,250
------------------------------------------------------------------------------------------------------
PRAECIS Pharmaceuticals, Inc.(1) 3,500 97,562
------------------------------------------------------------------------------------------------------
Repligen Corp.(1) 900 5,653
------------------------------------------------------------------------------------------------------
Syncor International Corp.(1) 1,600 115,200
------------------------------------------------------------------------------------------------------
Ventana Medical Systems, Inc.(1) 1,700 39,950
------------------------------------------------------------------------------------------------------
XOMA Ltd.(1) 7,900 33,822
--------
886,366
------------------------------------------------------------------------------------------------------
Healthcare/Supplies & Services--1.5%
EP MedSystems, Inc.(1) 7,100 34,612
------------------------------------------------------------------------------------------------------
Renal Care Group, Inc.(1) 4,500 110,039
------------------------------------------------------------------------------------------------------
Zoll Medical Corp.(1) 1,100 53,900
--------
198,551
------------------------------------------------------------------------------------------------------
Technology--34.8%
------------------------------------------------------------------------------------------------------
Computer Hardware--4.4%
ActivCard SA, Sponsored ADR(1) 1,400 26,950
------------------------------------------------------------------------------------------------------
Cobalt Networks, Inc.(1) 1,000 57,875
------------------------------------------------------------------------------------------------------
Creo Products, Inc.(1) 3,400 77,350
------------------------------------------------------------------------------------------------------
M-Systems Flash Disk Pioneers Ltd.(1) 700 54,512
------------------------------------------------------------------------------------------------------
Network Appliance, Inc.(1) 1,200 96,600
------------------------------------------------------------------------------------------------------
Optimal Robotics Corp.(1) 2,950 113,206
------------------------------------------------------------------------------------------------------
SanDisk Corp.(1) 1,000 61,188
------------------------------------------------------------------------------------------------------
Splash Technology Holdings, Inc.(1) 3,200 25,200
------------------------------------------------------------------------------------------------------
Xircom, Inc.(1) 1,500 71,250
--------
584,131
6 Oppenheimer Small Cap Growth Fund/VA
<PAGE>
Statement of Investments (Unaudited) (Continued)
Market Value
Shares Note 1
------------------------------------------------------------------------------------------------------
Computer Services--4.8%
Anicom, Inc.(1) 7,300 $ 27,375
------------------------------------------------------------------------------------------------------
AppNet, Inc.(1) 1,450 52,200
------------------------------------------------------------------------------------------------------
Art Technology Group, Inc.(1) 800 80,750
------------------------------------------------------------------------------------------------------
Braun Consulting, Inc.(1) 2,200 46,475
------------------------------------------------------------------------------------------------------
iBasis, Inc.(1) 1,800 77,513
------------------------------------------------------------------------------------------------------
Inforte Corp.(1) 1,500 54,000
------------------------------------------------------------------------------------------------------
Internet Pictures Corp.(1) 3,200 48,400
------------------------------------------------------------------------------------------------------
MedQuist, Inc.(1) 183 6,222
------------------------------------------------------------------------------------------------------
Predictive Systems, Inc.(1) 1,000 35,938
------------------------------------------------------------------------------------------------------
Turnstone Systems, Inc.(1) 300 49,702
------------------------------------------------------------------------------------------------------
Universal Access, Inc.(1) 1,000 24,500
------------------------------------------------------------------------------------------------------
WatchGuard Technologies, Inc.(1) 1,100 60,431
------------------------------------------------------------------------------------------------------
WebTrends Corp.(1) 2,000 77,375
----------
640,881
------------------------------------------------------------------------------------------------------
Computer Software--16.4%
Accrue Software, Inc.(1) 1,500 53,250
------------------------------------------------------------------------------------------------------
Active Software, Inc.(1) 1,200 93,225
------------------------------------------------------------------------------------------------------
Advent Software, Inc.(1) 5,600 361,200
------------------------------------------------------------------------------------------------------
Allaire Corp.(1) 1,000 36,750
------------------------------------------------------------------------------------------------------
Bluestone Software, Inc.(1) 2,000 51,375
------------------------------------------------------------------------------------------------------
Data Return Corp.(1) 1,400 40,600
------------------------------------------------------------------------------------------------------
Exchange Applications, Inc.(1) 2,800 74,550
------------------------------------------------------------------------------------------------------
Informatica Corp.(1) 1,400 114,713
------------------------------------------------------------------------------------------------------
Interactive Intelligence, Inc.(1) 2,200 82,500
------------------------------------------------------------------------------------------------------
ISS Group, Inc.(1) 800 78,988
------------------------------------------------------------------------------------------------------
Metasolv Software, Inc.(1) 400 17,600
------------------------------------------------------------------------------------------------------
Micromuse, Inc.(1) 1,400 231,678
------------------------------------------------------------------------------------------------------
NetIQ Corp.(1) 3,000 178,875
------------------------------------------------------------------------------------------------------
Numerical Technologies, Inc.(1) 1,000 48,625
------------------------------------------------------------------------------------------------------
Portal Software, Inc.(1) 900 57,488
------------------------------------------------------------------------------------------------------
Primus Knowledge Solutions, Inc.(1) 1,400 63,000
------------------------------------------------------------------------------------------------------
Project Software & Development, Inc.(1) 1,700 30,600
------------------------------------------------------------------------------------------------------
Psion plc 6,500 62,880
------------------------------------------------------------------------------------------------------
Quest Software, Inc.(1) 1,400 77,525
------------------------------------------------------------------------------------------------------
SERENA Software, Inc.(1) 3,600 163,463
------------------------------------------------------------------------------------------------------
Software.com, Inc.(1) 600 77,925
------------------------------------------------------------------------------------------------------
SonicWALL, Inc.(1) 900 79,256
------------------------------------------------------------------------------------------------------
TenFold Corp.(1) 1,550 25,478
------------------------------------------------------------------------------------------------------
Verity, Inc.(1) 1,900 72,200
----------
2,173,744
Oppenheimer Small Cap Growth Fund/VA 7
<PAGE>
Statement of Investments (Unaudited) (Continued)
Market Value
Shares Note 1
------------------------------------------------------------------------------------------------------
Communications Equipment--3.7%
Advanced Fibre Communications, Inc.(1) 1,800 $ 81,563
------------------------------------------------------------------------------------------------------
Audiovox Corp., Cl. A(1) 2,600 57,363
------------------------------------------------------------------------------------------------------
Aware, Inc.(1) 400 20,450
------------------------------------------------------------------------------------------------------
Com21, Inc.(1) 2,500 62,500
------------------------------------------------------------------------------------------------------
Extreme Networks, Inc.(1) 550 58,025
------------------------------------------------------------------------------------------------------
Inet Technologies, Inc.(1) 1,150 62,388
------------------------------------------------------------------------------------------------------
International FiberCom, Inc.(1) 3,100 79,050
------------------------------------------------------------------------------------------------------
ViaSat, Inc.(1) 1,350 73,238
-----------
494,577
------------------------------------------------------------------------------------------------------
Electronics--5.5%
ACT Manufacturing, Inc.(1) 1,400 65,013
------------------------------------------------------------------------------------------------------
Advanced Energy Industries, Inc.(1) 1,200 70,725
------------------------------------------------------------------------------------------------------
Alpha Industries, Inc.(1) 1,400 61,688
------------------------------------------------------------------------------------------------------
ANADIGICS, Inc.(1) 800 27,250
------------------------------------------------------------------------------------------------------
ASM International NV(1) 2,800 74,200
------------------------------------------------------------------------------------------------------
DDi Corp./CA(1) 1,000 28,500
------------------------------------------------------------------------------------------------------
DSP Group(1) 1,600 89,600
------------------------------------------------------------------------------------------------------
Intersil Holding Corp.(1) 1,800 97,313
------------------------------------------------------------------------------------------------------
InterTAN, Inc.(1) 3,600 42,300
------------------------------------------------------------------------------------------------------
Silicon Image, Inc.(1) 400 19,950
------------------------------------------------------------------------------------------------------
Virata Corp.(1) 2,600 155,025
-----------
731,564
-----------
Total Common Stocks (Cost $8,982,911) 10,133,882
Principal
Amount
------------------------------------------------------------------------------------------------------
Repurchase Agreements--23.7%
------------------------------------------------------------------------------------------------------
Repurchase agreement with PaineWebber, Inc., 6.55%,
dated 6/30/00, to be repurchased at $3,136,711 on 7/3/00,
collateralized by U.S. Treasury Nts., 5.50%, 7/31/01, with a value
of $1,591,891 and U.S. Treasury Bonds, 7.875%, 11/15/07,
with a value of $1,609,334 (Cost $3,135,000) $3,135,000 3,135,000
------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $12,117,911) 100.1% 13,268,882
------------------------------------------------------------------------------------------------------
Liabilities in Excess of Other Assets (0.1) (10,037)
---------- -----------
Net Assets 100.0% $13,258,845
========== ===========
</TABLE>
1. Non-income-producing security.
2. Identifies issues considered to be illiquid or restricted--See Note 5 of
Notes to Financial Statements.
See accompanying Notes to Financial Statements.
8 Oppenheimer Small Cap Growth Fund/VA
<PAGE>
Statement of Assets and Liabilities June 30, 2000 (Unaudited)
<TABLE>
<S> <C>
================================================================================================
Assets
Investments, at value (including repurchase agreement of $3,135,000)
(cost $12,117,911)--see accompanying statement $13,268,882
------------------------------------------------------------------------------------------------
Cash 1,111
------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 20,167
Interest and dividends 1,138
Shares of beneficial interest sold 549
Other 597
-----------
Total assets 13,292,444
================================================================================================
Liabilities
Payables and other liabilities:
Shares of beneficial interest redeemed 27,057
Legal, auditing and other professional fees 3,940
Registration and filing fees 2,139
Trustees' compensation 315
Other 148
-----------
Total liabilities 33,599
================================================================================================
Net Assets $13,258,845
===========
================================================================================================
Composition of Net Assets
Paid-in capital $13,054,170
------------------------------------------------------------------------------------------------
Accumulated net investment loss (635)
------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions (945,661)
------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of
assets and liabilities denominated in foreign currencies 1,150,971
-----------
Net assets--applicable to 1,042,269 shares of beneficial interest outstanding $13,258,845
===========
================================================================================================
Net Asset Value, Redemption Price Per Share and Offering Price Per Share $12.72
</TABLE>
See accompanying Notes to Financial Statements.
Oppenheimer Small Cap Growth Fund/VA 9
<PAGE>
Statement of Operations For the Six Months Ended June 30, 2000 (Unaudited)
<TABLE>
<S> <C>
================================================================================================
Investment Income
Interest $ 60,619
------------------------------------------------------------------------------------------------
Dividends 1,298
-----------
Total income 61,917
================================================================================================
Expenses
Management fees 40,870
------------------------------------------------------------------------------------------------
Shareholder reports 14,590
------------------------------------------------------------------------------------------------
Legal, auditing and other professional fees 4,105
------------------------------------------------------------------------------------------------
Custodian fees and expenses 1,551
------------------------------------------------------------------------------------------------
Trustees' compensation 629
------------------------------------------------------------------------------------------------
Other 2,358
-----------
Total expenses 64,103
Less expenses paid indirectly (1,551)
-----------
Net expenses 62,552
================================================================================================
Net Investment Loss (635)
================================================================================================
Realized and Unrealized Loss
Net realized loss on:
Investments (904,732)
Foreign currency transactions (244)
-----------
Net realized loss (904,976)
------------------------------------------------------------------------------------------------
Net change in unrealized depreciation on:
Investments (541,755)
Translation of assets and liabilities denominated in foreign currencies (3,833)
-----------
Net change (545,588)
-----------
Net realized and unrealized loss (1,450,564)
================================================================================================
Net Decrease in Net Assets Resulting from Operations $(1,451,199)
===========
</TABLE>
See accompanying Notes to Financial Statements.
10 Oppenheimer Small Cap Growth Fund/VA
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31,
(Unaudited) 1999
=============================================================================================================
<S> <C> <C>
Operations
Net investment loss $ (635) $ (10,159)
-------------------------------------------------------------------------------------------------------------
Net realized gain (loss) (904,976) 493,584
-------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) (545,588) 1,591,588
----------- ----------
Net increase (decrease) in net assets resulting from operations (1,451,199) 2,075,013
=============================================================================================================
Dividends and/or Distributions to Shareholders
Distributions from net realized gain (478,809) --
=============================================================================================================
Beneficial Interest Transactions
Net increase in net assets resulting from beneficial interest transactions 8,262,257 3,857,279
=============================================================================================================
Net Assets
Total increase 6,332,249 5,932,292
-------------------------------------------------------------------------------------------------------------
Beginning of period 6,926,596 994,304
----------- ----------
End of period (including accumulated net investment
loss of $635 for the period ended June 30, 2000) $13,258,845 $6,926,596
=========== ==========
</TABLE>
See accompanying Notes to Financial Statements.
Oppenheimer Small Cap Growth Fund/VA 11
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Six Months Ended
June 30, 2000 Year Ended December 31,
(Unaudited) 1999 1998(1)
=======================================================================================================================
<S> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $14.07 $ 9.60 $10.00
-----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss -- (.02) (.02)
Net realized and unrealized gain (loss) (.75) 4.49 (.38)
-----------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations (.75) 4.47 (.40)
-----------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Distributions from net realized gain (.60) -- --
-----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.72 $14.07 $ 9.60
====== ====== ======
=======================================================================================================================
Total Return, at Net Asset Value(2) (6.34)% 46.56% (4.00)%
=======================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $13,259 $6,927 $994
-----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $10,993 $2,738 $441
-----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(3)
Net investment loss (0.01)% (0.37)% (0.79)%
Expenses 1.17% 1.83% 0.87%(4)
Expenses, net of indirect expenses and
voluntary assumption of expenses 1.14% 1.34% N/A
-----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 52% 176% 61%
</TABLE>
1. For the period from May 1, 1998 (commencement of operations) to December 31,
1998.
2. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or commencement of operations), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Total returns are not annualized for periods of less than
one full year. Total return information does not reflect expenses that apply at
the separate account level or to related insurance products. Inclusion of these
charges would reduce the total return figures for all periods shown.
3. Annualized for periods of less than one full year.
4. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.
See accompanying Notes to Financial Statements.
12 Oppenheimer Small Cap Growth Fund/VA
<PAGE>
Notes to Financial Statements (Unaudited)
================================================================================
1. Significant Accounting Policies
Oppenheimer Small Cap Growth 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. The
Trust's investment advisor is OppenheimerFunds, Inc. (the Manager). The
following is a summary of significant accounting policies consistently followed
by the Fund.
--------------------------------------------------------------------------------
Securities Valuation. 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.
--------------------------------------------------------------------------------
Repurchase Agreements. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
--------------------------------------------------------------------------------
Federal Taxes. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers to shareholders.
--------------------------------------------------------------------------------
Dividends and Distributions to Shareholders. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date.
--------------------------------------------------------------------------------
Classification of Dividends and Distributions to Shareholders. Net investment
income (loss) and net realized gain (loss) may differ for financial statement
and tax purposes. The character of dividends and distributions made during the
fiscal year from net investment income or net realized gains may differ from its
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 realized gain was
recorded by the Fund.
--------------------------------------------------------------------------------
Expense Offset Arrangements. Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by the Fund.
Oppenheimer Small Cap Growth Fund/VA 13
<PAGE>
Notes to Financial Statements (Unaudited) (Continued)
================================================================================
1. Significant Accounting Policies (continued)
Other. Investment transactions are accounted for as of trade date and dividend
income is recorded on the ex-dividend date. Certain dividends from foreign
securities will be recorded as soon as the Fund is informed of the dividend if
such information is obtained subsequent to the ex-dividend date. Realized gains
and losses on investments and unrealized appreciation and depreciation are
determined on an identified cost basis, which is the same basis used for federal
income tax purposes.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
================================================================================
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of beneficial
interest. Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
Six Months Ended June 30, 2000 Year Ended December 31, 1999
------------------------------ -----------------------------
Shares Amount Shares Amount
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold 774,726 $11,211,250 504,223 $ 5,008,676
Dividends and/or distributions reinvested 28,757 478,809 -- --
Redeemed (253,415) (3,427,802) (115,553) (1,151,397)
-------- ----------- -------- -----------
Net increase 550,068 $ 8,262,257 388,670 $ 3,857,279
======== =========== ======== ===========
</TABLE>
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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, 2000, were
$10,469,974 and $4,720,871, 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 Trust. The annual fees are 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, 2000, was an annualized rate of 0.75%, before any
waiver by the Manager.
--------------------------------------------------------------------------------
Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager,
is the transfer agent for the Fund and is responsible for maintaining the
shareholder registry and shareholder accounting records for the Fund. OFS
provides these services for cost.
================================================================================
5. Illiquid Securities
As of June 30, 2000, investments in securities included issues that are
illiquid. A security may be considered illiquid if it lacks a readily available
market or if its valuation has not changed for a certain period of time. The
Fund intends to invest no more than 15% of its net assets (determined at the
time of purchase and reviewed periodically) in illiquid securities. The
aggregate value of illiquid securities subject to this limitation as of June 30,
2000, was $29,155, which represents 0.22% of the Fund's net assets. Certain
restricted securities, eligible for resale to qualified institutional investors,
are not subject to that limit.
14 Oppenheimer Small Cap Growth Fund/VA
<PAGE>
Oppenheimer Small Cap Growth Fund/VA
A Series of Oppenheimer Variable Account Funds
<TABLE>
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<S> <C>
Officers and Trustees James C. Swain, Trustee and Chairman of the Board
Bridget A. Macaskill, Trustee and President
William L. Armstrong, Trustee
Robert G. Avis, Trustee
William A. Baker, Trustee
George C. Bowen, Trustee
Edward L. Cameron, Trustee
Jon S. Fossel, Trustee
Sam Freedman, Trustee
Raymond J. Kalinowski, Trustee
C. Howard Kast, Trustee
Robert M. Kirchner, Trustee
Ned M. Steel, Trustee
Andrew J. Donohue, Vice President and Secretary
Brian W. Wixted, Treasurer
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
Robert G. Zack, Assistant Secretary
====================================================================================================================================
Investment Advisor OppenheimerFunds, Inc.
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Transfer Agent OppenheimerFunds Services
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Custodian of Portfolio Securities The Bank of New York
====================================================================================================================================
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.
This is a copy of a report to shareholders of Oppenheimer Small Cap Growth Fund/VA. For
other material information concerning the Fund, see its prospectus. This report must be
preceded or accompanied by the Fund's prospectus, the separate account prospectus, and
current standardized average annual total returns for the separate account being offered.
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>
(C)Copyright 2000 OppenheimerFunds, Inc. All rights reserved.
Oppenheimer Small Cap Growth Fund/VA 15
