<PAGE>
OCC ACCUMULATION TRUST
U.S. GOVERNMENT INCOME PORTFOLIO
SEMI-ANNUAL REPORT
JUNE 30, 2000
MANAGED BY
[LOGO]
<PAGE>
OCC ACCUMULATION TRUST
U.S. GOVERNMENT INCOME PORTFOLIO
MANAGED BY
[LOGO]
2000 SEMI-ANNUAL REPORT
Fixed income securities delivered generally favorable returns during the first
six months of 2000, despite large interest rate swings and considerable
volatility. The six months ended June 30 witnessed two additional short-term
interest rate increases by the Federal Reserve (the "Fed") in its attempts to
prevent economic overheating and keep inflation under control. By June, the
Fed's tighter money policy seemed to be showing signs of taking hold, with
unemployment inching up, housing starts slowing and consumer confidence easing
slightly. Even if the Fed is not completely through raising rates, a cooling
economy should be positive for bond performance.
The U.S. Government Income Portfolio (the "Portfolio") returned 3.2% for the six
months ended June 30, 2000, compared with a return of 3.5% for the Lehman
Brothers Intermediate Government Bond Index (the "Lehman Index"). The Portfolio
invests in debt obligations issued or guaranteed by the U.S. Government and its
agencies or intermediaries. It primarily holds intermediate-term securities and
places a priority on maintaining a relatively stable net asset value per share.
The Portfolio is intended for investors seeking high current income from
investments in Government securities.
The Portfolio provided a total return of 3.7% for the twelve months ended
June 30, 2000, compared with 4.5% for the Lehman Index. For the three years
ended June 30, 2000, the Portfolio's average annual total return of 4.8%
compared with 5.7% for the Lehman Index, and for the five years ended June 30,
2000 the Portfolio provided a 4.8% average annual total return versus 5.8% for
the Lehman Index. From its inception on January 3, 1995 through June 30, 2000,
the Portfolio provided an average annual total return of 5.9%, compared with
7.0% for the Lehman Index. Returns take into account expenses incurred by the
Portfolio, but not separate account charges imposed by the insurance company.
During the six month period, the Portfolio's holdings of U.S. Treasury
securities increased to 37.6% of net assets at June 30, 2000 from 27.1% six
months earlier and duration was lengthened by more than half a year, with
emphasis on the ten-year Treasury maturity. The Treasury has been reducing the
national debt primarily by repurchasing longer-term bonds. This program provided
Treasury securities with a decided performance advantage in the first quarter of
2000. In the second quarter, however, agency and mortgage-backed securities
outperformed Treasuries.
At June 30, 2000, net assets were allocated 60.6% to U.S. Government agency and
mortgage-related securities, 37.6% to Treasuries and 0.9% to short-term
investments. Early in the year, the Portfolio's small holding of corporate bonds
was eliminated. The average maturity of the Portfolio was approximately
11.4 years at June 30, 2000.
"Real yields", yields in excess of the rate of inflation, remain attractive in
most areas of the bond market. Our goal is to deliver excellent returns while
controlling volatility by investing in those maturities, sectors and credit
categories where we find the highest yields at the lowest relative cost with the
least amount of risk.
<PAGE>
OCC ACCUMULATION TRUST
U.S. GOVERNMENT INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS
JUNE 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) VALUE
--------------------- ---------
<C> <S> <C>
MORTGAGE-RELATED SECURITIES -- 44.6%
Federal National Mortgage Association,
$ 592 6.00%, 3/1/13-9/1/13........................................ $ 560,356
980 6.50%, 4/29/09.............................................. 915,536
431 7.50%, 11/1/27.............................................. 425,257
1 9.00%, 8/1/02............................................... 1,340
150 9.20%, 9/11/00.............................................. 150,726
43 9.50%, 12/1/06-12/1/19...................................... 44,531
Freddie Mac,
175 6.22%, 3/24/03.............................................. 171,390
125 7.75%, 11/7/01.............................................. 126,132
150 8.115%, 1/31/05............................................. 156,047
Government National Mortgage Association,
881 4.00%, 10/20/25............................................. 784,807
809 7.00%, 3/15/28-6/15/28...................................... 786,316
---------
Total Mortgage-Related Securities (cost-$4,316,803)..... 4,122,438
---------
U.S. GOVERNMENT AGENCY -- 16.0%
500 Federal Farm Credit Bank, 5.875%, 7/2/01.................... 495,310
100 Student Loan Marketing Association, 7.20%, 11/9/00.......... 100,281
1,000 Tennessee Valley Authority, 5.375%, 11/13/08................ 888,440
---------
Total U.S. Government Agency (cost-$1,594,162).......... 1,484,031
---------
U.S. TREASURY NOTES & BONDS -- 37.6%
750 5.75%, 11/15/00............................................. 748,358
875 5.875%, 11/30/01............................................ 867,886
95 6.25%, 4/30/01.............................................. 94,807
1,200 6.50%, 5/31/02-2/15/10...................................... 1,234,470
475 7.25%, 8/15/22.............................................. 534,299
---------
Total U.S. Treasury Notes & Bonds (cost-$3,516,728)..... 3,479,820
---------
U.S. GOVERNMENT AGENCY DISCOUNT NOTES -- 0.9%
Federal Farm Credit Bank, 6.45%, 7/12/00
(amortized cost-$84,832)..................................
85 84,832
---------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Total Investments (cost-$9,512,525)................... 99.1% 9,171,121
Other assets less liabilities......................... 0.9 85,506
------ ----------
Net Assets............................................ 100.0% $9,256,627
====== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<PAGE>
OCC ACCUMULATION TRUST
U.S. GOVERNMENT INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost-$9,512,525)..................... $9,171,121
Cash........................................................ 15,314
Interest receivable......................................... 114,214
Prepaid expenses............................................ 575
----------
Total Assets.............................................. 9,301,224
----------
LIABILITIES:
Payable for shares of beneficial interest redeemed.......... 11,928
Dividend payable............................................ 19,556
Investment advisory fee payable............................. 3,771
Trustees' retirement plan payable........................... 1,357
Accrued expenses............................................ 7,985
----------
Total Liabilities......................................... 44,597
----------
Net Assets.............................................. $9,256,627
==========
COMPOSITION OF NET ASSETS:
Beneficial interest shares of $0.01 par value (unlimited
number authorized)........................................ $ 9,203
Paid-in-capital in excess of par............................ 9,630,760
Accumulated net realized loss on investments................ (41,932)
Net unrealized depreciation of investments.................. (341,404)
----------
Net Assets.............................................. $9,256,627
==========
Shares outstanding.......................................... 920,271
----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE..................................................... $10.06
==========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<PAGE>
OCC ACCUMULATION TRUST
U.S. GOVERNMENT INCOME PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................. $282,461
--------
EXPENSES:
Investment advisory fees.................................. 27,916
Audit and tax service fees................................ 7,243
Custodian fees............................................ 6,267
Reports to shareholders................................... 2,276
Trustees' fees and expenses............................... 2,128
Transfer agent fees....................................... 1,394
Legal fees................................................ 580
Insurance expense......................................... 566
Miscellaneous............................................. 259
--------
Total expenses.......................................... 48,629
Less: Investment advisory fee waived.................... (1,507)
Expense offset..................................... (625)
--------
Net expenses............................................ 46,497
--------
Net investment income................................. 235,964
--------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments.......................... (9,910)
Net change in unrealized appreciation/depreciation of
investments............................................. 57,163
--------
Net realized and unrealized gain on investments......... 47,253
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $283,217
========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<PAGE>
OCC ACCUMULATION TRUST
U.S. GOVERNMENT INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
-------------- ------------------
<S> <C> <C>
OPERATIONS:
Net investment income....................................... $ 235,964 $ 503,363
Net realized loss on investments............................ (9,910) (31,440)
Net change in unrealized appreciation/depreciation of
investments............................................... 57,163 (628,105)
----------- -----------
Net increase (decrease) in net assets resulting from
operations.............................................. 283,217 (156,182)
----------- -----------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income....................................... (235,964) (503,363)
----------- -----------
SHARE TRANSACTIONS:
Net proceeds from the sale of shares........................ 574,490 3,365,637
Reinvestment of dividends................................... 216,408 503,363
Cost of shares redeemed..................................... (1,411,340) (3,921,601)
----------- -----------
Net decrease in net assets from share transactions........ (620,442) (52,601)
----------- -----------
Total decrease in net assets............................ (573,189) (712,146)
NET ASSETS:
Beginning of year........................................... 9,829,816 10,541,962
----------- -----------
End of period............................................... $9,256,627 $9,829,816
=========== ===========
SHARES ISSUED AND REDEEMED:
Issued...................................................... 57,510 326,391
Issued in reinvestment of dividends......................... 21,697 49,145
Redeemed.................................................... (141,509) (382,260)
----------- -----------
Net decrease.............................................. (62,302) (6,724)
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<PAGE>
OCC ACCUMULATION TRUST
U.S. GOVERNMENT INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31, FOR THE PERIOD
JUNE 30, 2000 ----------------------------------------------- JANUARY 3, 1995 (1)
(UNAUDITED) 1999 1998 1997 1996 DECEMBER 31, 1995
------------- -------- -------- -------- -------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period... $10.00 $10.66 $10.51 $10.38 $10.62 $10.00
------ ------ ------- ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................. 0.25 0.49 0.53 0.57 0.55 0.60
Net realized and unrealized gain (loss)
on investments....................... 0.06 (0.66) 0.31 0.14 (0.24) 0.68
------ ------ ------- ------ ------ ------
Total income (loss) from investment
operations....................... 0.31 (0.17) 0.84 0.71 0.31 1.28
------ ------ ------- ------ ------ ------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income.................. (0.25) (0.49) (0.53) (0.57) (0.55) (0.60)
Net realized gains..................... -- -- (0.16) (0.01) -- (0.06)
------ ------ ------- ------ ------ ------
Total dividends and distributions
to shareholders.................. (0.25) (0.49) (0.69) (0.58) (0.55) (0.66)
------ ------ ------- ------ ------ ------
Net asset value, end of period......... $10.06 $10.00 $ 10.66 $10.51 $10.38 $10.62
====== ====== ======= ====== ====== ======
TOTAL RETURN (2)....................... 3.2% (1.6)% 8.1% 7.0% 3.0% 13.1%
====== ====== ======= ====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)...... $9,257 $9,830 $10,542 $6,983 $3,422 $1,442
Ratio of expenses to average net assets
(3).................................. 1.01%(4)(5) 0.95% 1.00%(4) 0.93%(4) 0.96%(4) 0.75%(4)(5)
Ratio of net investment income to
average net assets................... 5.07%(4)(5) 4.78% 4.96%(4) 5.51%(4) 5.27%(4) 5.75%(4)(5)
Portfolio Turnover..................... 9% 69% 80% 80% 31% 65%
</TABLE>
------------------------------
(1) Commencements of operations
(2) Assumes reinvestment of all dividends and distributions. Total return for a
period of less than one year is not annualized.
(3) Inclusive of expenses offset by earnings credits from custodian bank (See 1G
in Notes to Financial Statements).
(4) During the fiscal periods indicated above, the Adviser waived a portion or
all of its fees and assumed a portion of the Portfolio's expenses. If such
waivers and assumptions had not been in effect, the ratios of expenses to
average net assets and the ratios of net investment income to average net
assets would have been 1.04% (annualized) and 5.04% (annualized),
respectively for the six months ended June 30, 2000, 1.19% and 4.77%,
respectively, for the year ended December 31, 1998, 1.06% and 5.38%,
respectively, for the year ended December 31, 1997, 2.34% and 3.89%,
respectively, for the year ended December 31, 1996, and 4.73% (annualized)
and 1.77% (annualized), respectively, for the period January 3, 1995
(commencement of operations) to December 31, 1995.
(5) Annualized
<PAGE>
OCC ACCUMULATION TRUST
U.S. GOVERNMENT INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED)
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
OCC Accumulation Trust (the "Trust") was organized May 12, 1994 as a
Massachusetts business trust and is registered under the Investment Company Act
of 1940, as amended, as a diversified, open-end management investment company.
The Trust is authorized to issue an unlimited number of shares of beneficial
interest at $0.01 par value. The Trust is comprised of: the Equity Portfolio,
the Small Cap Portfolio, the Global Equity Portfolio, the Managed Portfolio, the
U.S. Government Income Portfolio (the "Portfolio"), the Mid Cap Portfolio, and
the Science & Technology Portfolio. OpCap Advisors (the "Adviser"), a
wholly-owned subsidiary of Oppenheimer Capital, serves as the Trust's investment
adviser. The accompanying financial statement and notes thereto are those of the
Portfolio. The Trust is an investment vehicle for variable annuity and variable
life insurance contracts of various life insurance companies and qualified
pension and retirement plans.
The following is a summary of significant accounting policies consistently
followed by the Portfolio in the preparation of its financial statements:
(A) VALUATION OF INVESTMENTS
Investment debt securities (other than short-term obligations) are valued each
business day by an independent pricing service (approved by the Board of
Trustees) using methods which include current market quotations from a major
market maker in the securities and trader-reviewed "matrix" prices. Short-term
debt securities having a remaining maturity of sixty days or less are valued at
amortized cost or amortized value, which approximates market value. Securities
or other assets for which market quotations are not readily available are valued
at their fair value as determined in good faith by the Board of Trustees. The
ability of issuers of debt instruments to meet their obligations may be affected
by economic developments in a specific industry or region.
(B) FEDERAL INCOME TAXES
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its taxable income to shareholders; accordingly, no federal
income tax provision is required.
(C) INVESTMENT TRANSACTIONS AND OTHER INCOME
Investment transactions are accounted for on the trade date. In determining the
gain or loss from the sale of investments, the cost of investments sold has been
determined on the basis of identified cost. Interest income is accrued as
earned. Discounts or premiums on debt securities purchased are accreted or
amortized to interest income over the lives of the respective securities using
the effective method.
(D) DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income are declared daily and paid monthly.
Distributions from net realized capital gains, if any, are declared and paid at
least annually.
The Portfolio records dividends and distributions to its shareholders on the
ex-dividend date. The amount of dividends and distributions is determined in
accordance with federal income tax regulations, which may differ from generally
accepted accounting principles. These "book-tax" differences are either
considered temporary or permanent in nature. To the extent these differences are
permanent in nature, such amounts
<PAGE>
OCC ACCUMULATION TRUST
U.S. GOVERNMENT INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED) (CONTINUED)
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
are reclassified within the capital accounts based on their federal income tax
treatment; temporary differences do not require reclassification. To the extent
dividends and/or distributions exceed current and accumulated earnings and
profits for federal income tax purposes, they are reported as dividends and/or
distributions of paid-in-capital or as a tax return of capital.
(E) ALLOCATION OF EXPENSES
Expenses specifically identifiable to a particular portfolio are borne by that
portfolio. Other expenses are allocated to each portfolio based on its net
assets in relation to the total net assets of all applicable portfolios of the
Trust or another reasonable basis.
(F) USE OF ESTIMATES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
(G) EXPENSE OFFSET
The Portfolio benefits from an expense offset arrangement with its custodian
bank whereby uninvested cash balances earn credits that reduce custodian fees.
Had these cash balances been invested in income producing securities, they would
have generated income for the Portfolio.
(H) TRUSTEES' RETIREMENT PLAN
The Trustees have adopted a Retirement Plan (the "Plan") effective January 1,
1999. The Plan provides for payments upon retirement to independent Trustees
based on the average annual compensation paid to them during their five highest
paid years of service. An independent Trustee must serve for a minimum of seven
years (or such lessor period as may be approved by the Board of Trustees) to
become eligible to receive benefits. For the six months ended June 30, 2000, the
Portfolio accrued $468 in connection with the Plan.
(2) INVESTMENT ADVISORY FEE
The investment advisory fee is accrued daily and payable monthly to the Adviser,
and is computed as a percentage of the Portfolio's net assets as of the close of
business each day at the annual rate of 0.60%. The Adviser is contractually
obligated to waive that portion of the advisory fee and to assume any necessary
expense to limit total operating expenses of the Portfolio to 1.00% of average
net assets (net of any expense offset) on an annual basis.
(3) INVESTMENTS IN SECURITIES
For federal income tax purposes the cost of securities owned at June 30, 2000
was $9,512,525. Accordingly, net unrealized depreciation of investments of
$341,404 was composed of gross appreciation of $8,973 for those investments
having an excess of value over cost and gross depreciation of $350,377 for those
investments having an excess of cost over value.
For the six months ended June 30, 2000, purchases and sales of investment
securities, other than short-term securities, aggregated $1,521,004 and
$764,958, respectively.
<PAGE>
OCC ACCUMULATION TRUST
U.S. GOVERNMENT INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED) (CONCLUDED)
(4) ACQUISITION OF INVESTMENT ADVISER
On May 5, 2000 the general partners of PIMCO Advisors closed the transactions
contemplated by the Implementation and Merger Agreement dated as of October 31,
1999 ("Implementation Agreement"), as amended March 3, 2000, with Allianz of
America, Inc., Pacific Asset Management LLC, PIMCO Partners LLC, PIMCO Holding
LLC, PIMCO Partners, G.P., and other parties to the Implementation Agreement. As
a result of completing these transactions, PIMCO Advisors is now majority-owned
indirectly by Allianz AG, with subsidiaries of Pacific Life Insurance Company
retaining a significant minority interest. Allianz AG is a German based insurer.
Pacific Life Insurance Company is a Newport Beach, California based insurer. For
the Portfolio, the change of control as a result of the closing of the
Implementation Agreement resulted in the automatic termination of the current
investment advisory agreement with OpCap Advisors. Prior to the closing of the
Implementation Agreement, the Board of Trustees and stockholders of the
Portfolio approved a new agreement with OpCap Advisors to become effective upon
the closing of the Implementation Agreement.
(5) SPECIAL MEETING OF SHAREHOLDERS
The Portfolio held a special meeting of shareholders on March 3, 2000.
Shareholders voted to: 1) approve a new investment advisory agreement between
OpCap Advisors and the Portfolio; 2) elect V. Lee Barnes, Paul Y. Clinton,
Thomas W. Courtney, Lacy B. Herrmann, Joseph M. La Motta and Theodore Mason as
Trustees of the Portfolio; and, 3) ratifiy the appointment of
PricewaterhouseCoopers LLP as independent accountants for the fiscal year ending
December 31, 2000.
The resulting vote count for each proposal is indicated below.
<TABLE>
<CAPTION>
WITHHHOLD
AFFIRMATIVE AGAINST AUTHORITY
----------- -------- ---------
<S> <C> <C> <C>
1. Approval of new Investment Advisory Agreement between
OpCap Advisors and the Portfolio: 945,532 4,740 39,723
2. Election of Trustees:
V. Lee Barnes 984,055 -- 5,940
Paul Y. Clinton 984,055 -- 5,940
Thomas W. Courtney 984,055 -- 5,940
Lacy B. Herrmann 984,055 -- 5,940
Joseph M. La Motta 984,055 -- 5,940
Theodore T. Mason 984,055 -- 5,940
3. Ratification of the appointment of PricewaterhouseCoopers
LLP as the Portfolio's independent accountants for the
fiscal year ending December 31, 2000. 948,028 16,760 25,207
</TABLE>
<PAGE>
OCC ACCUMULATION TRUST
1345 AVENUE OF THE AMERICAS
NEW YORK, NY 10105
<TABLE>
<S> <C>
TRUSTEES AND PRINCIPAL OFFICERS
Susan A. Murphy President
Joseph M. LaMotta Trustee and Chairman
V. Lee Barnes Trustee
Paul Y. Clinton Trustee
Thomas W. Courtney Trustee
Lacy B. Herrmann Trustee
Theodore T. Mason Trustee
Steven Calabria Vice President
Bernard H. Garil Vice President
Jeffrey J. Hughes Vice President
Eric V. Retzlaff Vice President
Kenneth W. Corba Vice President and Portfolio Manager
Mark F. Degenhart Vice President and Portfolio Manager
Michael F. Gaffney Vice President and Portfolio Manager
John C. Giusio, Jr. Vice President and Portfolio Manager
Richard J. Glasebrook, II Vice President and Portfolio Manager
Colin Glinsman Vice President and Portfolio Manager
Louis Goldstein Vice President and Portfolio Manager
William Gross Vice President and Portfolio Manager
Benjamin D. Gutstein Vice President and Portfolio Manager
Vikki Hanges Vice President and Portfolio Manager
Elisa A. Mazen Vice President and Portfolio Manager
Dennis McKechnie Vice President and Portfolio Manager
Jeffrey D. Parker Vice President and Portfolio Manager
Brian S. Shlissel Treasurer
Elliot M. Weiss Secretary
</TABLE>
INVESTMENT ADVISER
OpCap Advisors
1345 Avenue of the Americas
New York, NY 10105
CUSTODIAN AND TRANSFER AGENT
State Street Corp.
P.O. Box 1978
Boston, MA 02105
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
This report is authorized for distribution only
to shareholders and to others who have received
a copy of this Trust's prospectus.
