UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-4108
Oppenheimer Capital Appreciation Fund/VA
(Exact name of registrant as specified in charter)
6803 South Tucson Way, Centennial, Colorado 80112-3924
(Address of principal executive offices) (Zip code)
Robert G. Zack, Esq.
OppenheimerFunds, Inc.
Two World Financial Center, New York, New York 10281-1008
(Name and address of agent for service)
Registrant's telephone number, including area code: (303) 768-3200
Date of fiscal year end: December 31
Date of reporting period: January 1, 2004 - December 31, 2004
ITEM 1. REPORTS TO STOCKHOLDERS.
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. Over the 12-month period ended
December 31, 2004, the Fund participated in the market's rise to a substantial
degree. However, returns proved mildly weaker than the benchmark, the S&P 500
Index. Performance compared to the benchmark suffered primarily from the Fund's
relatively large exposure to media and technology stocks, two areas that lagged
behind the market for the period as a whole.
Throughout the reporting period, the Fund maintained its focus on
companies that, in our opinion, offered strong potential for above-average
growth while exhibiting reasonable valuations relative to their future growth
prospects. As the period progressed, we found an increasing number of
investments meeting our criteria in the industrial sector. The Fund's growing
exposure to industrials significantly contributed to returns. Top performers
included diversified industrials, such as General Electric Co.; delivery and
shipping services companies; and various defense and aerospace contractors.
Returns also benefited from energy holdings, such as Exxon Mobil Corp, which
rose on the strength of climbing oil and gas prices. The Fund's energy exposure
roughly equaled that of the S&P 500 Index, enabling the Fund to match the
benchmark's exceptional gains in the sector.
On the other hand, technology stocks pulled back in mid-2004 after
delivering very strong gains the prior year. Cyclical semiconductor makers and
communications equipment holdings, such as Intel Corp., Cisco Systems, Inc. and
an integrated circuits maker experienced the greatest declines. The Fund shifted
some assets out of these industries and into other areas of technology, deriving
strong gains from holdings such as Yahoo! Inc. and a publishing software
developer. Nevertheless, our relatively heavy technology weighting undermined
returns on average. Returns compared to the benchmark also suffered due to the
Fund's holdings of media stocks, such as Viacom, Inc. and a leading radio
station operator, and, to a lesser degree, U.S. pharmaceutical stocks, such as
Pfizer, Inc. and another major drug maker. Both areas appeared to offer
attractive valuations after sustained declines in prior periods. However, media
stocks were dogged by concerns regarding consumer confidence and advertising
revenues, while large-cap U.S. pharmaceutical stocks were undermined by issues
related to product safety and the depth of drug pipelines. Gains in other
consumer discretionary holdings, such as Royal Caribbean Cruises, Ltd., helped
compensate for these losses, as did positive returns from other health care
holdings, such as Johnson & Johnson and a maker of cancer and autoimmune
diseases treatments. As of the end of the period, we continue to believe that a
select group of stocks in both areas exhibit attractive valuations relative to
their growth prospects.
The Fund's portfolio holdings, allocations and strategies are subject to
change.
COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that follow show the
performance of a hypothetical $10,000 investment in each share class of the Fund
held until December 31, 2004. In the case of Non-Service shares, performance is
measured over a ten-year period. In the case of Service shares, performance is
measured from inception of the class on September 18, 2001. Performance
information does not reflect charges that apply to separate accounts investing
in the Fund. If these charges were taken into account, performance would be
lower. The graph assumes that all dividends and capital gains distributions were
reinvested in additional shares.
The Fund's performance is compared to the performance of the S&P 500
Index, an unmanaged index of equity securities that is a measure of the general
domestic stock market. Index performance reflects the reinvestment of income but
does not consider the effect of transaction costs, and none of the data in the
graphs show the effect of taxes. The Fund's performance reflects the effects of
the Fund's business and operating expenses. While index comparisons may be
useful to provide a benchmark for the Fund's performance, it must be noted that
the Fund's investments are not limited to the investments in the index.
4 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
NON-SERVICE SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Capital Appreciation Fund/VA (Non-Service)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Capital
Appreciation Fund/VA S&P 500
(Non-Service) Index
12/31/1994 10,000 10,000
03/31/1995 10,892 10,973
06/30/1995 12,047 12,019
09/30/1995 13,114 12,973
12/31/1995 13,666 13,753
03/31/1996 14,616 14,491
06/30/1996 15,219 15,141
09/30/1996 16,205 15,609
12/31/1996 17,110 16,909
03/31/1997 16,945 17,363
06/30/1997 19,644 20,392
09/30/1997 22,183 21,919
12/31/1997 21,675 22,548
03/31/1998 24,436 25,691
06/30/1998 25,367 26,544
09/30/1998 21,204 23,910
12/31/1998 26,877 28,997
03/31/1999 28,639 30,441
06/30/1999 31,129 32,583
09/30/1999 29,632 30,554
12/31/1999 38,073 35,096
03/31/2000 43,630 35,900
06/30/2000 41,659 34,946
09/30/2000 41,439 34,608
12/31/2000 37,985 31,902
03/31/2001 34,053 28,122
06/30/2001 36,132 29,767
09/30/2001 28,742 25,399
12/31/2001 33,208 28,113
03/31/2002 32,246 28,191
06/30/2002 26,835 24,416
09/30/2002 22,574 20,200
12/31/2002 24,289 21,902
03/31/2003 23,492 21,212
06/30/2003 27,295 24,476
09/30/2003 28,496 25,124
12/31/2003 31,805 28,181
03/31/2004 32,108 28,658
06/30/2004 32,558 29,151
09/30/2004 31,317 28,606
12/31/2004 34,011 31,245
AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/04
1 -Year 6.93% 5-Year -2.23% 10-Year 13.02%
SERVICE SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Capital Appreciation Fund/VA (Service)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Captial
Appreciation Fund/VA S&P 500
(Service) Index
09/18/2001 10,000 10,000
09/30/2001 10,000 10,000
12/31/2001 11,551 11,068
03/31/2002 11,209 11,099
06/30/2002 9,311 9,613
09/30/2002 7,825 7,953
12/31/2002 8,422 8,623
03/31/2003 8,131 8,352
06/30/2003 9,448 9,637
09/30/2003 9,859 9,892
12/31/2003 11,007 11,095
03/31/2004 11,102 11,283
06/30/2004 11,252 11,477
09/30/2004 10,815 11,262
12/31/2004 11,735 12,302
AVERAGE ANNUAL TOTAL RETURNS OF SERVICE SHARES OF THE FUND AT 12/31/04
1-Year 6.62% 5-Year N/A Since Inception (9/18/01) 4.99%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, CALL US AT 1.800.981.2871. THE FUND'S
TOTAL RETURNS SHOULD NOT BE EXPECTED TO BE THE SAME AS THE RETURNS OF OTHER
FUNDS, WHETHER OR NOT BOTH FUNDS HAVE THE SAME PORTFOLIO MANAGERS AND/OR SIMILAR
NAMES. THE FUND'S TOTAL RETURNS DO NOT INCLUDE THE CHARGES ASSOCIATED WITH THE
SEPARATE ACCOUNT PRODUCTS THAT OFFER THIS FUND. SUCH PERFORMANCE WOULD HAVE BEEN
LOWER IF SUCH CHARGES WERE TAKEN INTO ACCOUNT.
5 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
FUND EXPENSES
- --------------------------------------------------------------------------------
FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1)
transaction costs, which may include redemption fees, if any; and (2) ongoing
costs, including management fees; distribution and service fees; and other Fund
expenses. These examples are intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning
of the period and held for the entire 6-month period ended December 31, 2004.
ACTUAL EXPENSES. The "actual" lines of the table provide information about
actual account values and actual expenses. You may use the information on this
line for the class of shares you hold, together with the amount you invested, to
estimate the expense that you paid over the period. Simply divide your account
value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00
= 8.60), then multiply the result by the number in the "actual" line under the
heading entitled "Expenses Paid During Period" to estimate the expenses you paid
on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the
table provide information about hypothetical account values and hypothetical
expenses based on the Fund's actual expense ratio for each class of shares, and
an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of investing
in the Fund and other funds. To do so, compare this 5% hypothetical example for
the class of shares you hold with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any charges associated with the separate
accounts that offer this Fund. Therefore, the "hypothetical" lines of the table
are useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these separate
account charges were included, your costs would have been higher.
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
(7/1/04) (12/31/04) DECEMBER 31, 2004
- --------------------------------------------------------------------------------
Non-Service shares Actual $1,000.00 $1,044.60 $ 3.40
- --------------------------------------------------------------------------------
Non-Service shares Hypothetical 1,000.00 1,021.82 3.36
- --------------------------------------------------------------------------------
Service shares Actual 1,000.00 1,042.90 4.68
- --------------------------------------------------------------------------------
Service shares Hypothetical 1,000.00 1,020.56 4.63
Hypothetical assumes 5% annual return before expenses.
Expenses are equal to the Fund's annualized expense ratio for that class,
multiplied by the average account value over the period, multiplied by 184/366
(to reflect the one-half year period). Those annualized expense ratios based on
the 6-month period ended December 31, 2004 are as follows:
CLASS EXPENSE RATIOS
- ---------------------------------------
Non-Service shares 0.66%
- ---------------------------------------
Service shares 0.91
6 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
STATEMENT OF INVESTMENTS December 31, 2004
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
COMMON STOCKS--97.1%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--18.7%
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--1.9%
Carnival Corp. 325,500 $ 18,758,565
- --------------------------------------------------------------------------------
Royal Caribbean Cruises Ltd. 358,200 19,500,408
---------------
38,258,973
- --------------------------------------------------------------------------------
MEDIA--11.7%
Clear Channel Communications, Inc. 437,300 14,645,177
- --------------------------------------------------------------------------------
Comcast Corp., Cl. A Special,
Non-Vtg. 1 1,955,800 64,228,472
- --------------------------------------------------------------------------------
News Corp., Inc., Cl. B 1,332,400 25,582,080
- --------------------------------------------------------------------------------
Omnicom Group, Inc. 103,300 8,710,256
- --------------------------------------------------------------------------------
Time Warner, Inc. 1 2,280,700 44,336,808
- --------------------------------------------------------------------------------
Univision Communications, Inc., Cl. A 1 444,165 13,000,710
- --------------------------------------------------------------------------------
Viacom, Inc., Cl. B 1,264,300 46,007,877
- --------------------------------------------------------------------------------
Walt Disney Co. (The) 677,000 18,820,600
---------------
235,331,980
- --------------------------------------------------------------------------------
MULTILINE RETAIL--2.0%
Federated Department Stores, Inc. 209,700 12,118,563
- --------------------------------------------------------------------------------
J.C. Penney Co., Inc. (Holding Co.) 122,800 5,083,920
- --------------------------------------------------------------------------------
Target Corp. 459,600 23,867,028
---------------
41,069,511
- --------------------------------------------------------------------------------
SPECIALTY RETAIL--3.1%
Best Buy Co., Inc. 231,700 13,767,614
- --------------------------------------------------------------------------------
Gap, Inc. (The) 828,800 17,504,256
- --------------------------------------------------------------------------------
Home Depot, Inc. 394,100 16,843,834
- --------------------------------------------------------------------------------
Lowe's Cos., Inc. 176,100 10,141,599
- --------------------------------------------------------------------------------
Williams-Sonoma, Inc. 1 114,900 4,026,096
---------------
62,283,399
- --------------------------------------------------------------------------------
CONSUMER STAPLES--7.6%
- --------------------------------------------------------------------------------
BEVERAGES--2.9%
Anheuser-Busch Cos., Inc. 382,000 19,378,860
- --------------------------------------------------------------------------------
Coca-Cola Co. (The) 146,100 6,082,143
- --------------------------------------------------------------------------------
PepsiCo, Inc. 629,200 32,844,240
---------------
58,305,243
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--2.5%
Costco Wholesale Corp. 227,800 11,027,798
- --------------------------------------------------------------------------------
Wal-Mart Stores, Inc. 644,100 34,021,362
- --------------------------------------------------------------------------------
Walgreen Co. 130,500 5,007,285
---------------
50,056,445
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS--1.6%
Kimberly-Clark Corp. 70,200 $ 4,619,862
- --------------------------------------------------------------------------------
Procter & Gamble Co. (The) 529,500 29,164,860
---------------
33,784,722
- --------------------------------------------------------------------------------
PERSONAL PRODUCTS--0.6%
Estee Lauder Cos., Inc. (The), Cl. A 255,800 11,707,966
- --------------------------------------------------------------------------------
ENERGY--4.4%
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--0.8%
Halliburton Co. 36,100 1,416,564
- --------------------------------------------------------------------------------
Schlumberger Ltd. 221,600 14,836,120
---------------
16,252,684
- --------------------------------------------------------------------------------
OIL & GAS--3.6%
Amerada Hess Corp. 81,900 6,746,922
- --------------------------------------------------------------------------------
Burlington Resources, Inc. 136,300 5,929,050
- --------------------------------------------------------------------------------
Devon Energy Corp. 105,400 4,102,168
- --------------------------------------------------------------------------------
Exxon Mobil Corp. 792,700 40,633,802
- --------------------------------------------------------------------------------
Kinder Morgan Management LLC 249,768 10,165,558
- --------------------------------------------------------------------------------
Murphy Oil Corp. 69,600 5,599,320
---------------
73,176,820
- --------------------------------------------------------------------------------
FINANCIALS--10.9%
- --------------------------------------------------------------------------------
COMMERCIAL BANKS--0.5%
Bank of America Corp. 216,200 10,159,238
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--8.3%
American Express Co. 435,500 24,549,135
- --------------------------------------------------------------------------------
Bear Stearns Cos., Inc. (The) 112,900 11,550,799
- --------------------------------------------------------------------------------
Citigroup, Inc. 977,500 47,095,950
- --------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The) 116,300 12,099,852
- --------------------------------------------------------------------------------
JPMorgan Chase & Co. 627,028 24,460,362
- --------------------------------------------------------------------------------
MBNA Corp. 369,100 10,404,929
- --------------------------------------------------------------------------------
Morgan Stanley 660,500 36,670,960
---------------
166,831,987
- --------------------------------------------------------------------------------
INSURANCE--2.1%
American International Group, Inc. 381,550 25,056,389
- --------------------------------------------------------------------------------
Prudential Financial, Inc. 245,700 13,503,672
- --------------------------------------------------------------------------------
XL Capital Ltd., Cl. A 59,200 4,596,880
---------------
43,156,941
- --------------------------------------------------------------------------------
HEALTH CARE--16.1%
- --------------------------------------------------------------------------------
BIOTECHNOLOGY--3.1%
Amgen, Inc. 1 423,800 27,186,770
- --------------------------------------------------------------------------------
Applera Corp./Applied
Biosystems Group 167,700 3,506,607
- --------------------------------------------------------------------------------
Digene Corp. 1 92,200 2,411,030
- --------------------------------------------------------------------------------
Genentech, Inc. 1 183,100 9,967,964
- --------------------------------------------------------------------------------
Gilead Sciences, Inc. 1 469,400 16,424,306
7 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
BIOTECHNOLOGY Continued
MedImmune, Inc. 1 124,600 $ 3,377,906
---------------
62,874,583
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--4.4%
Medtronic, Inc. 787,700 39,125,059
- --------------------------------------------------------------------------------
Millipore Corp. 1 364,700 18,165,707
- --------------------------------------------------------------------------------
PerkinElmer, Inc. 396,300 8,912,787
- --------------------------------------------------------------------------------
Stryker Corp. 286,900 13,842,925
- --------------------------------------------------------------------------------
Varian Medical Systems, Inc. 1 89,500 3,869,980
- --------------------------------------------------------------------------------
Waters Corp. 1 83,500 3,906,965
---------------
87,823,423
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--0.4%
Laboratory Corp. of America Holdings 1 77,300 3,851,086
- --------------------------------------------------------------------------------
Pharmaceutical Product Development, Inc. 1 70,600 2,915,074
- --------------------------------------------------------------------------------
Quest Diagnostics, Inc. 21,200 2,025,660
---------------
8,791,820
- --------------------------------------------------------------------------------
PHARMACEUTICALS--8.2%
Abbott Laboratories 86,400 4,030,560
- --------------------------------------------------------------------------------
Eli Lilly & Co. 307,000 17,422,250
- --------------------------------------------------------------------------------
Johnson & Johnson 633,600 40,182,912
- --------------------------------------------------------------------------------
Merck & Co., Inc. 403,867 12,980,285
- --------------------------------------------------------------------------------
Novartis AG 497,588 25,074,129
- --------------------------------------------------------------------------------
Pfizer, Inc. 1,437,300 38,648,997
- --------------------------------------------------------------------------------
Roche Holdings AG 45,716 5,262,707
- --------------------------------------------------------------------------------
Teva Pharmaceutical Industries
Ltd., Sponsored ADR 707,396 21,122,845
---------------
164,724,685
- --------------------------------------------------------------------------------
INDUSTRIALS--13.0%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE--3.3%
Empresa Brasileira de Aeronautica SA, ADR 325,000 10,868,000
- --------------------------------------------------------------------------------
Honeywell International, Inc. 217,600 7,705,216
- --------------------------------------------------------------------------------
L-3 Communications Holdings, Inc. 127,900 9,367,396
- --------------------------------------------------------------------------------
Lockheed Martin Corp. 284,300 15,792,865
- --------------------------------------------------------------------------------
Northrop Grumman Corp. 111,700 6,072,012
- --------------------------------------------------------------------------------
Rockwell Collins, Inc. 37,700 1,486,888
- --------------------------------------------------------------------------------
United Technologies Corp. 154,700 15,988,245
---------------
67,280,622
- --------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS--2.0%
Expeditors International of Washington, Inc. 180,500 10,086,340
- --------------------------------------------------------------------------------
FedEx Corp. 122,600 12,074,874
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS Continued
United Parcel Service, Inc., Cl. B 213,100 $ 18,211,526
---------------
40,372,740
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--0.9%
Manpower, Inc. 96,300 4,651,290
- --------------------------------------------------------------------------------
Waste Management, Inc. 464,900 13,919,106
---------------
18,570,396
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--0.1%
Rockwell Automation, Inc. 47,300 2,343,715
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--5.9%
General Electric Co. 2,802,900 102,305,850
- --------------------------------------------------------------------------------
Tyco International Ltd. 467,600 16,712,024
---------------
119,017,874
- --------------------------------------------------------------------------------
MACHINERY--0.8%
Ingersoll-Rand Co., Cl. A 186,300 14,959,890
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--22.4%
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--4.1%
Cisco Systems, Inc. 1 2,029,200 39,163,560
- --------------------------------------------------------------------------------
Lucent Technologies, Inc. 1 1,925,200 7,238,752
- --------------------------------------------------------------------------------
Motorola, Inc. 645,800 11,107,760
- --------------------------------------------------------------------------------
Nokia Corp., Sponsored ADR 957,200 14,999,324
- --------------------------------------------------------------------------------
Telefonaktiebolaget LM Ericsson,
Sponsored ADR 1 313,900 9,884,711
---------------
82,394,107
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--3.9%
Dell, Inc. 1 474,300 19,987,002
- --------------------------------------------------------------------------------
EMC Corp. 1 249,300 3,707,091
- --------------------------------------------------------------------------------
International Business
Machines Corp. 472,700 46,598,766
- --------------------------------------------------------------------------------
Sun Microsystems, Inc. 1 1,462,200 7,866,636
---------------
78,159,495
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--1.5%
Agilent Technologies, Inc. 1 496,200 11,958,420
- --------------------------------------------------------------------------------
Ingram Micro, Inc., Cl. A 1 381,000 7,924,800
- --------------------------------------------------------------------------------
Tektronix, Inc. 357,800 10,809,138
---------------
30,692,358
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--1.6%
VeriSign, Inc. 1 44,400 1,488,288
- --------------------------------------------------------------------------------
Yahoo!, Inc. 1 796,600 30,015,888
---------------
31,504,176
- --------------------------------------------------------------------------------
IT SERVICES--0.3%
Accenture Ltd., Cl. A 1 231,400 6,247,800
8 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--3.7%
Altera Corp. 1 149,800 $ 3,100,860
- --------------------------------------------------------------------------------
Analog Devices, Inc. 251,600 9,289,072
- --------------------------------------------------------------------------------
Broadcom Corp., Cl. A 1 321,000 10,361,880
- --------------------------------------------------------------------------------
Intel Corp. 1,578,100 36,911,759
- --------------------------------------------------------------------------------
Texas Instruments, Inc. 601,500 14,808,930
---------------
74,472,501
- --------------------------------------------------------------------------------
SOFTWARE--7.3%
Adobe Systems, Inc. 374,100 23,471,034
- --------------------------------------------------------------------------------
Cadence Design Systems, Inc. 1 517,200 7,142,532
- --------------------------------------------------------------------------------
Citrix Systems, Inc. 1 393,500 9,652,555
- --------------------------------------------------------------------------------
Mercury Interactive Corp. 1 222,800 10,148,540
- --------------------------------------------------------------------------------
Microsoft Corp. 2,760,400 73,730,284
- --------------------------------------------------------------------------------
Novell, Inc. 1 323,400 2,182,950
- --------------------------------------------------------------------------------
SAP AG, Sponsored ADR 499,000 22,060,789
---------------
148,388,684
- --------------------------------------------------------------------------------
MATERIALS--2.7%
- --------------------------------------------------------------------------------
CHEMICALS--2.6%
Air Products & Chemicals, Inc. 258,600 14,991,042
- --------------------------------------------------------------------------------
Dow Chemical Co. 88,800 4,396,488
- --------------------------------------------------------------------------------
E.I. DuPont de Nemours & Co. 288,500 14,150,925
- --------------------------------------------------------------------------------
Praxair, Inc. 455,600 20,114,740
---------------
53,653,195
- --------------------------------------------------------------------------------
METALS & MINING--0.1%
Alcan, Inc. 38,800 1,902,752
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--1.3%
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--1.1%
Sprint Corp. 450,800 11,202,380
- --------------------------------------------------------------------------------
Telefonos de Mexico SA de CV,
Sponsored ADR 294,600 11,289,072
---------------
22,491,452
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--0.2%
AT&T Corp. 196,900 3,752,914
---------------
Total Common Stocks
(Cost $1,800,967,668) 1,960,795,091
VALUE
UNITS SEE NOTE 1
- --------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- --------------------------------------------------------------------------------
Lucent Technologies, Inc. Wts.,
Exp. 12/10/07 1 (Cost $0) 84,120 $ 132,910
PRINCIPAL
AMOUNT
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--3.1%
- --------------------------------------------------------------------------------
Undivided interest of 4.34% in joint
repurchase agreement (Principal Amount/Value
$1,443,703,000, with a maturity value of
$1,443,962,867) with UBS Warburg LLC, 2.16%,
dated 12/31/04, to be repurchased at
$62,698,284 on 1/3/05, collateralized by
Federal National Mortgage Assn., 5%--6%,
4/1/34--10/1/34, with a value of
$1,474,609,071 (Cost $62,687,000) $ 62,687,000 62,687,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $1,863,654,668) 100.2% 2,023,615,001
- --------------------------------------------------------------------------------
LIABILITIES IN EXCESS
OF OTHER ASSETS (0.2) (4,692,277)
------------------------------
NET ASSETS 100.0% $2,018,922,724
==============================
FOOTNOTE TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
9 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 31, 2004
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
ASSETS
- ----------------------------------------------------------------------------------------------------------------------
Investments, at value (cost $1,863,654,668)--see accompanying statement of investments $ 2,023,615,001
- ----------------------------------------------------------------------------------------------------------------------
Cash 294,467
- ----------------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 4,968,096
Interest and dividends 1,981,833
Shares of beneficial interest sold 1,782,291
Other 18,729
----------------
Total assets 2,032,660,417
- ----------------------------------------------------------------------------------------------------------------------
LIABILITIES
- ----------------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 12,631,037
Shares of beneficial interest redeemed 819,695
Distribution and service plan fees 141,957
Shareholder communications 61,796
Trustees' compensation 27,565
Transfer and shareholder servicing agent fees 1,773
Other 53,870
----------------
Total liabilities 13,737,693
- ----------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 2,018,922,724
================
- ----------------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 54,633
- ----------------------------------------------------------------------------------------------------------------------
Additional paid-in capital 2,126,705,195
- ----------------------------------------------------------------------------------------------------------------------
Accumulated net investment income 17,399,802
- ----------------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions (285,201,028)
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets and liabilities
denominated in foreign currencies 159,964,122
----------------
NET ASSETS $ 2,018,922,724
================
- ----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- ----------------------------------------------------------------------------------------------------------------------
Non-Service Shares:
Net asset value, redemption price per share and offering price per share (based
on net assets of $1,770,273,281 and 47,863,861 shares of beneficial interest outstanding) $ 36.99
- ----------------------------------------------------------------------------------------------------------------------
Service Shares:
Net asset value, redemption price per share and offering price per share (based
on net assets of $248,649,443 and 6,769,088 shares of beneficial interest outstanding) $ 36.73
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
10 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 31, 2004
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- ----------------------------------------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $167,336) $ 30,583,919
- ----------------------------------------------------------------------------------------------------------------------
Interest 821,751
----------------
Total investment income 31,405,670
- ----------------------------------------------------------------------------------------------------------------------
EXPENSES
- ----------------------------------------------------------------------------------------------------------------------
Management fees 12,193,670
- ----------------------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Service shares 459,798
- ----------------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service shares 10,276
Service shares 10,036
- ----------------------------------------------------------------------------------------------------------------------
Shareholder communications:
Non-Service shares 90,788
Service shares 11,222
- ----------------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 48,830
- ----------------------------------------------------------------------------------------------------------------------
Trustees' compensation 35,958
- ----------------------------------------------------------------------------------------------------------------------
Other 79,122
----------------
Total expenses 12,939,700
Less reduction to custodian expenses (5,579)
----------------
Net expenses 12,934,121
- ----------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 18,471,549
- ----------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain on:
Investments 81,657,867
Foreign currency transactions 1,248,945
Net increase from payment by affiliate 153,724
----------------
Net realized gain 83,060,536
- ----------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation on:
Investments 25,551,439
Translation of assets and liabilities denominated in foreign currencies 1,809,774
----------------
Net change in unrealized appreciation 27,361,213
- ----------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 128,893,298
================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2004 2003
- ----------------------------------------------------------------------------------------------------------------------
OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------
Net investment income $ 18,471,549 $ 5,758,596
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) 83,060,536 (149,446,395)
- ----------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) 27,361,213 558,998,061
----------------------------------
Net increase in net assets resulting from operations 128,893,298 415,310,262
- ----------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ----------------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Non-Service shares (5,404,905) (5,643,286)
Service shares (357,596) (84,026)
- ----------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from beneficial interest
transactions:
Non-Service shares (53,964,830) (18,705,242)
Service shares 114,818,206 87,031,915
- ----------------------------------------------------------------------------------------------------------------------
NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------
Total increase 183,984,173 477,909,623
- ----------------------------------------------------------------------------------------------------------------------
Beginning of period 1,834,938,551 1,357,028,928
----------------------------------
End of period (including accumulated net investment income of $17,399,802
and $5,752,602, respectively) $2,018,922,724 $ 1,834,938,551
==================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
12 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31, 2004 2003 2002 2001 2000
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 34.70 $ 26.62 $ 36.58 $ 46.63 $ 49.84
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .35 1 .12 .11 .18 .27
Net realized and unrealized gain (loss) 2.05 8.07 (9.89) (5.86) .02
-----------------------------------------------------------------------------
Total from investment operations 2.40 8.19 (9.78) (5.68) .29
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.11) (.11) (.18) (.27) (.06)
Distributions from net realized gain -- -- -- (4.10) (3.44)
-----------------------------------------------------------------------------
Total dividends and/or distributions to shareholders (.11) (.11) (.18) (4.37) (3.50)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 36.99 $ 34.70 $ 26.62 $ 36.58 $ 46.63
=============================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 6.93% 30.94% (26.86)% (12.58)% (0.23)%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 1,770,273 $ 1,715,240 $ 1,338,769 $ 1,975,345 $ 2,095,803
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 1,708,511 $ 1,468,297 $ 1,630,430 $ 2,000,314 $ 1,922,099
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 0.99% 0.39% 0.35% 0.51% 0.66%
Total expenses 0.66% 4 0.67% 4 0.66% 4 0.68% 4 0.67% 4
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 44% 48% 32% 45% 38%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Total returns are not annualized for
periods less than one full year. Total return information does not reflect
expenses that apply at the separate account level or to related insurance
products. Inclusion of these charges would reduce the total return figures for
all periods shown. Returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
13 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SERVICE SHARES YEAR ENDED DECEMBER 31, 2004 2003 2002 2001 1
- ------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 34.53 $ 26.53 $ 36.56 $ 31.66
- ------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .29 2 .08 .20 -- 3
Net realized and unrealized gain (loss) 1.99 8.02 (10.05) 4.90
-----------------------------------------------------------
Total from investment operations 2.28 8.10 (9.85) 4.90
- ------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.08) (.10) (.18) --
Distributions from net realized gain -- -- -- --
-----------------------------------------------------------
Total dividends and/or distributions to shareholders (.08) (.10) (.18) --
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 36.73 $ 34.53 $ 26.53 $ 36.56
===========================================================
- ------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 4 6.62% 30.69% (27.09)% 15.51%
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 248,649 $ 119,699 $ 18,260 $ 90
- ------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 184,273 $ 48,178 $ 6,263 $ 16
- ------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 5
Net investment income 0.85% 0.14% 0.26% 0.11%
Total expenses 0.91% 6 0.94% 6 0.81% 6,7 0.81% 6
- ------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 44% 48% 32% 45%
1. For the period from September 18, 2001 (inception of offering) to December
31, 2001.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Less than $0.005 per share.
4. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Total returns are not annualized for
periods less than one full year. Total return information does not reflect
expenses that apply at the separate account level or to related insurance
products. Inclusion of these charges would reduce the total return figures for
all periods shown. Returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
5. Annualized for periods of less than one full year.
6. Reduction to custodian expenses less than 0.01%.
7. Voluntary waiver of transfer agent fees less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Capital Appreciation Fund/VA (the Fund) is a separate series of
Oppenheimer Variable Account Funds (the Trust), an open-end management
investment company registered under the Investment Company Act of 1940, as
amended. The Fund's investment objective is to seek capital appreciation by
investing in securities of well-known, established companies. The Trust's
investment advisor is OppenheimerFunds, Inc. (the Manager).
The Fund offers two classes of shares. Both classes are sold at their
offering price, which is the net asset value per share, to separate investment
accounts of participating insurance companies as an underlying investment for
variable life insurance policies, variable annuity contracts or other investment
products. The class of shares designated as Service shares is subject to a
distribution and service plan. Both classes of shares have identical rights and
voting privileges with respect to the Fund in general and exclusive voting
rights on matters that affect that class alone. Earnings, net assets and net
asset value per share may differ due to each class having its own expenses, such
as transfer and shareholder servicing agent fees and shareholder communications,
directly attributable to that class.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for business. 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. Securities traded on NASDAQ
are valued based on the closing price provided by NASDAQ 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.
Corporate, government and municipal debt instruments having a remaining maturity
in excess of 60 days and all mortgage-backed securities will be valued at the
mean between the "bid" and "asked" prices. Securities may be valued primarily
using dealer-supplied valuations or a portfolio pricing service authorized by
the Board of Trustees. Securities (including restricted securities) for which
market quotations are not readily available are valued at their fair value.
Foreign and domestic securities whose values have been materially affected by
what the Manager identifies as a significant event occurring before the Fund's
assets are valued but after the close of their respective exchanges will be fair
valued. Fair value is determined in good faith using 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 Fund's accounting records are maintained in
U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars as of the close of The New York Stock Exchange (the
Exchange), normally 4:00 P.M. Eastern time, on each day the Exchange is open for
business. 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. Foreign exchange rates may be valued
primarily using dealer supplied valuations or a portfolio pricing service
authorized by the Board of Trustees.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
values of assets and liabilities, including investments in securities at fiscal
period end, resulting from changes in exchange rates.
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.
15 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated funds
advised by the Manager, may transfer uninvested cash balances into joint trading
accounts on a daily basis. These balances are invested in one or more repurchase
agreements. Securities pledged as collateral for repurchase agreements are held
by a custodian bank until the agreements mature. Each agreement requires that
the market value of the collateral be sufficient to cover payments of interest
and principal. In the event of default by the other party to the agreement,
retention of the collateral may be subject to legal proceedings.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders.
The tax components of capital shown in the table below represent distribution
requirements the Fund must satisfy under the income tax regulations, losses the
Fund may be able to offset against income and gains realized in future years and
unrealized appreciation or depreciation of securities and other investments for
federal income tax purposes.
NET UNREALIZED
APPRECIATION
BASED ON COST OF
SECURITIES AND
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED OTHER INVESTMENTS
NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME
INCOME GAIN CARRYFORWARD 1,2,3 TAX PURPOSES
--------------------------------------------------------------------------
$17,418,420 $-- $277,090,190 $151,853,324
1. As of December 31, 2004, the Fund had $277,090,190 of net capital loss
carryforwards available to offset future realized capital gains, if any, and
thereby reduce future taxable gain distributions. As of December 31, 2004,
details of the capital loss carryforwards were as follows:
EXPIRING
-------------------------
2010 $ 83,313,825
2011 193,776,365
------------
Total $277,090,190
============
2. During the fiscal year ended December 31, 2004, the Fund utilized $83,521,467
of capital loss carryforward to offset capital gains realized in that fiscal
year.
3. During the fiscal year ended December 31, 2003, the Fund did not utilize any
capital loss carryforward.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Fund. Accordingly, the
following amounts have been reclassified for December 31, 2004. Net assets of
the Fund were unaffected by the reclassifications.
REDUCTION TO REDUCTION TO
ACCUMULATED ACCUMULATED NET
NET INVESTMENT REALIZED LOSS
INCOME ON INVESTMENTS
---------------------------------------
$1,061,848 $1,061,848
16 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
The tax character of distributions paid during the years ended December 31, 2004
and December 31, 2003 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
--------------------------------------------------------------------------
Distributions paid from:
Ordinary income $5,762,501 $5,727,312
The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments
for federal income tax purposes as of December 31, 2004 are noted below. The
primary difference between book and tax appreciation or depreciation of
securities and other investments, if applicable, is attributable to the tax
deferral of losses or tax realization of financial statement unrealized gain or
loss.
Federal tax cost of securities $1,871,765,466
===============
Gross unrealized appreciation $ 290,087,257
Gross unrealized depreciation (138,233,933)
---------------
Net unrealized appreciation $ 151,853,324
===============
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred
compensation plan for independent trustees that enables trustees to elect to
defer receipt of all or a portion of the annual compensation they are entitled
to receive from the Fund. For purposes of determining the amount owed to the
Trustee under the plan, deferred amounts are treated as though equal dollar
amounts had been invested in shares of the Fund or in other Oppenheimer funds
selected by the Trustee. The Fund purchases shares of the funds selected for
deferral by the Trustee in amounts equal to his or her deemed investment,
resulting in a Fund asset equal to the deferred compensation liability. Such
assets are included as a component of "Other" within the asset section of the
Statement of Assets and Liabilities. Deferral of trustees' fees under the plan
will not affect the net assets of the Fund, and will not materially affect the
Fund's assets, liabilities or net investment income per share. Amounts will be
deferred until distributed in accordance to the Plan.
- --------------------------------------------------------------------------------
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. Income and capital gain distributions, if
any, are declared and paid annually.
- --------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and amortization
of premium, is accrued as earned.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. Custodian Fees and Expenses in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts at a rate equal to the Federal
Funds Rate plus 0.50%. The Reduction to Custodian Expenses line item, if
applicable, represents earnings on cash balances maintained by the Fund during
the period. Such interest expense and other custodian fees may be paid with
these earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with U.S. 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.
17 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
YEAR ENDED DECEMBER 31, 2004 YEAR ENDED DECEMBER 31, 2003
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
NON-SERVICE SHARES
Sold 5,578,990 $ 194,357,727 11,371,657 $ 330,561,752
Dividends and/or distributions reinvested 155,940 5,404,905 223,231 5,643,286
Redeemed (7,294,682) (253,727,462) (12,455,978) (354,910,280)
---------------------------------------------------------------
Net decrease (1,559,752) $ (53,964,830) (861,090) $ (18,705,242)
===============================================================
- ---------------------------------------------------------------------------------------------------------------
SERVICE SHARES
Sold 3,992,696 $ 138,774,693 2,961,561 $ 92,475,323
Dividends and/or distributions reinvested 10,365 357,596 3,339 84,026
Redeemed (700,538) (24,314,083) (186,681) (5,527,434)
---------------------------------------------------------------
Net increase 3,302,523 $114,818,206 2,778,219 $ 87,031,915
===============================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended December 31, 2004, were
$926,341,824 and $809,068,289, respectively.
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee at an
annual rate 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.
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICES. The Fund pays the Manager a fee of $1,500 per year for
preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the year ended December 31, 2004, the Fund paid
$20,206 to OFS for services to the Fund.
Additionally, funds offered in variable annuity separate accounts are
subject to minimum fees of $10,000 per class for class level assets of $10
million or more. Each class is subject to the minimum fee in the event that the
per account fee does not equal or exceed the applicable minimum fee.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN FOR SERVICE SHARES. The Fund has adopted a
Distribution and Service Plan for Service shares to pay OppenheimerFunds
Distributor, Inc. (the Distributor), for distribution related services and
personal service and account maintenance for the Fund's Service shares. Under
the Plan, payments are made quarterly at an annual rate of up to 0.25% of the
average annual net assets of Service shares of the Fund. The Distributor
currently uses all of those fees to compensate sponsor(s) of the insurance
product that offers Fund shares, for providing personal service and maintenance
of accounts of their variable contract owners that hold Service shares. The
impact of the service plan is to increase operating expenses of the Service
shares, which results in lower performance compared to the Fund's shares that
are not subject to a service fee. Fees incurred by the Fund under the Plan are
detailed in the Statement of Operations.
18 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
- --------------------------------------------------------------------------------
PAYMENTS AND WAIVERS OF EXPENSES. Following a review of its use of brokerage
commissions for sales that is permitted under its investment advisory agreement,
the Fund's Manager terminated that practice in July 2003. Subsequently, the
Manager paid the Fund $153,724, an amount equivalent to certain of such
commissions incurred in prior years.
OFS has voluntarily agreed to limit transfer and shareholder servicing
agent fees for all classes to 0.35% of average annual net assets per class. This
undertaking may be amended or withdrawn at any time.
- --------------------------------------------------------------------------------
5. FOREIGN CURRENCY CONTRACTS
A foreign currency contract is a commitment to purchase or sell a foreign
currency at a future date, at a negotiated rate. The Fund may enter into foreign
currency contracts to settle specific purchases or sales of securities
denominated in a foreign currency and for protection from adverse exchange rate
fluctuation. Risks to the Fund include the potential inability of the
counterparty to meet the terms of the contract.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using prevailing foreign currency exchange rates.
Unrealized appreciation and depreciation on foreign currency contracts are
reported in the Statement of Assets and Liabilities as a receivable or payable
and in the Statement of Operations with the change in unrealized appreciation or
depreciation.
The Fund may realize a gain or loss upon the closing or settlement of the
foreign transaction. Contracts closed or settled with the same broker are
recorded as net realized gains or losses. Such realized gains and losses are
reported with all other foreign currency gains and losses in the Statement of
Operations.
As of December 31, 2004, the Fund had no outstanding foreign currency
contracts.
- --------------------------------------------------------------------------------
6. LITIGATION
A consolidated amended complaint has been filed as putative derivative and class
actions against the Manager, OFS and the Distributor (collectively, the
"Oppenheimer defendants"), as well as 51 of the Oppenheimer funds (as "Nominal
Defendants") excluding the Fund, 31 present and former Directors or Trustees and
9 present and former officers of the funds. This complaint, filed in the U.S.
District Court for the Southern District of New York on January 10, 2005,
consolidates into a single action and amends six individual previously-filed
putative derivative and class action complaints. Like those prior complaints,
the complaint alleges that the Manager charged excessive fees for distribution
and other costs, improperly used assets of the funds in the form of directed
brokerage commissions and 12b-1 fees to pay brokers to promote sales of the
funds, and failed to properly disclose the use of assets of the funds to make
those payments in violation of the Investment Company Act of 1940 and the
Investment Advisers Act of 1940. Also, like those prior complaints, the
complaint further alleges that by permitting and/or participating in those
actions, the Directors/Trustees and the Officers breached their fiduciary duties
to shareholders of the funds under the Investment Company Act of 1940 and at
common law. The complaint seeks unspecified compensatory and punitive damages,
rescission of the funds' investment advisory agreements, an accounting of all
fees paid, and an award of attorneys' fees and litigation expenses.
The Oppenheimer defendants believe that the allegations contained in the
Complaints are without merit and that they, the funds named as Nominal
Defendants, and the Directors/Trustees of those funds have meritorious defenses
against the claims asserted. The Oppenheimer defendants intend to defend these
lawsuits vigorously and to contest any claimed liability, and they have retained
legal counsel to defend such suits. The Oppenheimer defendants believe that it
is premature to render any opinion as to the likelihood of an outcome
unfavorable to them and that no estimate can yet be made with any degree of
certainty as to the amount or range of any potential loss.
19 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER CAPITAL APPRECIATION
FUND/VA:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer Capital Appreciation Fund/VA, a series of Oppenheimer Variable
Account Funds, including the statement of investments, as of December 31, 2004,
and the related statement of operations for the year then ended, the statements
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for the periods presented. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
An audit includes consideration of internal control over financial reporting as
a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 2004, by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
Additionally, an audit includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer Capital Appreciation Fund/VA as of December 31, 2004, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for the
periods presented, in conformity with accounting principles generally accepted
in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
February 11, 2005
20 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2005, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2004. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
Dividends of $0.1095 and $0.0792 per share were paid to Non-service and
Service shareholders, respectively, on March 15, 2004, all of which was
designated as ordinary income for federal income tax purposes.
Dividends, if any, paid by the Fund during the fiscal year ended December
31, 2004 which are not designated as capital gain distributions should be
multiplied by 100% to arrive at the amount eligible for the corporate
dividend-received deduction.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Fund to the Internal Revenue Service. Because of
the complexity of the federal regulations which may affect your individual tax
return and the many variations in state and local tax regulations, we recommend
that you consult your tax advisor for specific guidance.
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES; UPDATES TO STATEMENTS OF
INVESTMENTS Unaudited
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- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file new Form N-PX, with its complete proxy voting record for the 12 months
ended June 30th, no later than August 31st of each year. The Fund's Form N-PX
filing is available (i) without charge, upon request, by calling the Fund
toll-free at 1.800.525.7048, and (ii) on the SEC's website at www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC
for the first quarter and the third quarter of each fiscal year on Form N-Q. The
Fund's Form N-Q filings are available on the SEC's website at www.sec.gov. Those
forms may be reviewed and copied at the SEC's Public Reference Room in
Washington D.C. Information on the operation of the Public Reference Room may be
obtained by calling 1-800-SEC-0330.
21 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) HELD PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS HELD BY
WITH FUND, LENGTH OF TRUSTEE; NUMBER OF PORTFOLIOS IN FUND COMPLEX CURRENTLY OVERSEEN BY TRUSTEE
SERVICE, AGE
INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL, CO
TRUSTEES 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, UNTIL HIS OR HER RESIGNATION,
RETIREMENT, DEATH OR REMOVAL.
WILLIAM L. ARMSTRONG, Chairman of the following private mortgage banking companies: Cherry Creek Mortgage
Chairman of the Board Company (since 1991), Centennial State Mortgage Company (since 1994), The El Paso
of Trustees (since 2003) Mortgage Company (since 1993), Transland Financial Services, Inc. (since 1997);
and Trustee (since 1999) Chairman of the following private companies: Great Frontier Insurance (insurance
Age: 67 agency) (since 1995), Ambassador Media Corporation and Broadway Ventures (since 1984);
a director of the following public companies: Helmerich & Payne, Inc. (oil and gas
drilling/production company) (since 1992) and UNUMProvident (insurance company) (since
1991). Mr. Armstrong is also a Director/Trustee of Campus Crusade for Christ and the
Bradley Foundation. Formerly a director of the following: Storage Technology
Corporation (a publicly-held computer equipment company) (1991-February 2003), and
International Family Entertainment (television channel) (1992-1997), Frontier Real
Estate, Inc. (residential real estate brokerage) (1994-1999), and Frontier Title
(title insurance agency) (1995-June 1999); a U.S. Senator (January 1979-January 1991).
Oversees 38 portfolios in the OppenheimerFunds complex.
ROBERT G. AVIS, Formerly, Director and President of A.G. Edwards Capital, Inc. (General Partner of
Trustee (since 1993) private equity funds) (until February 2001); Chairman, President and Chief Executive
Age: 73 Officer of A.G. Edwards Capital, Inc. (until March 2000); Vice Chairman and Director
of A.G. Edwards, Inc. and Vice Chairman of A.G. Edwards & Sons, Inc. (its brokerage
company subsidiary) (until March 1999); Chairman of A.G. Edwards Trust Company and
A.G.E. Asset Management (investment advisor) (until March 1999); and a Director (until
March 2000) of A.G. Edwards & Sons and A.G. Edwards Trust Company. Oversees 38
portfolios in the OppenheimerFunds complex.
GEORGE C. BOWEN, Formerly Assistant Secretary and a director (December 1991-April 1999) of Centennial
Trustee (since 1999) Asset Management Corporation; President, Treasurer and a director (June 1989-April
Age: 68 1999) of Centennial Capital Corporation; Chief Executive Officer and a director of
MultiSource Services, Inc. (March 1996-April 1999). Until April 1999 Mr. Bowen held
several positions in subsidiary or affiliated companies of the Manager. Oversees 39
portfolios in the OppenheimerFunds complex.
EDWARD L. CAMERON, A member of The Life Guard of Mount Vernon, George Washington's home (since June
Trustee (since 1999) 2000). Formerly Director (March 2001-May 2002) of Genetic ID, Inc. and its
Age: 66 subsidiaries (a privately held biotech company); a partner (July 1974-June 1999) with
PricewaterhouseCoopers LLP (an accounting firm); and Chairman (July 1994-June 1998) of
Price Waterhouse LLP Global Investment Management Industry Services Group. Oversees 38
portfolios in the OppenheimerFunds complex.
JON S. FOSSEL, Director (since February 1998) of Rocky Mountain Elk Foundation (a not-for-profit
Trustee (since 1990) foundation); a director (since 1997) of Putnam Lovell Finance (finance company); a
Age: 63 director (since June 2002) of UNUMProvident (an insurance company). Formerly a
director (October 1999-October 2003) of P.R. Pharmaceuticals (a privately held
company); Chairman and a director (until October 1996) and President and Chief
Executive Officer (until October 1995) of the Manager; President, Chief Executive
Officer and a director (until October 1995) of Oppenheimer Acquisition Corp.,
Shareholders Services Inc. and Shareholder Financial Services, Inc. Oversees 38
portfolios in the OppenheimerFunds complex.
SAM FREEDMAN, Director of Colorado Uplift (a non-profit charity) (since September 1984). Formerly
Trustee (since 1996) (until October 1994) Mr. Freedman held several positions in subsidiary or affiliated
Age: 64 companies of the Manager. Oversees 38 portfolios in the OppenheimerFunds complex.
22 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
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BEVERLY L. HAMILTON, Trustee of Monterey International Studies (an educational organization) (since
Trustee (since 2002) February 2000); a director of The California Endowment (a philanthropic organization)
Age: 58 (since April 2002) and of Community Hospital of Monterey Peninsula (educational
organization) (since February 2002); a director of America Funds Emerging Markets
Growth Fund (since October 1991) (an investment company); an advisor to Credit Suisse
First Boston's Sprout venture capital unit. Mrs. Hamilton also is a member of the
investment committees of the Rockefeller Foundation and of the University of Michigan.
Formerly, Trustee of MassMutual Institutional Funds (open-end investment company)
(1996-May 2004); a director of MML Series Investment Fund (April 1989-May 2004) and
MML Services (April 1987-May 2004) (investment companies); member of the investment
committee (2000- 2003) of Hartford Hospital; an advisor (2000-2003) to Unilever
(Holland)'s pension fund; and President (February 1991-April 2000) of ARCO Investment
Management Company. Oversees 37 portfolios in the OppenheimerFunds complex.
ROBERT J. MALONE, Chairman, Chief Executive Officer and Director of Steele Street State Bank (a
Trustee (since 2002) commercial banking entity) (since August 2003); director of Colorado UpLIFT (a
Age: 60 non-profit organization) (since 1986); trustee (since 2000) of the Gallagher Family
Foundation (non-profit organization). Formerly, Chairman of U.S. Bank-Colorado (a
subsidiary of U.S. Bancorp and formerly Colorado National Bank,) (July 1996-April 1,
1999), a director of: Commercial Assets, Inc. (a REIT) (1993-2000), Jones Knowledge,
Inc. (a privately held company) (2001-July 2004) and U.S. Exploration, Inc. (oil and
gas exploration) (1997-February 2004). Oversees 37 portfolios in the OppenheimerFunds
complex.
F. WILLIAM MARSHALL, JR., Trustee of MassMutual Institutional Funds (since 1996) and MML Series Investment Fund
Trustee (since 2000) (since 1987) (both open-end investment companies) and the Springfield Library and
Age: 62 Museum Association (since 1995) (museums) and the Community Music School of
Springfield (music school) (since 1996); Trustee (since 1987), Chairman of the Board
(since 2003) and Chairman of the investment committee (since 1994) for the Worcester
Polytech Institute (private university); and President and Treasurer (since January
1999) of the SIS Fund (a private not for profit charitable fund). Formerly, member of
the investment committee of the Community Foundation of Western Massachusetts (1998 -
2003); Chairman (January 1999-July 1999) of SIS & Family Bank, F.S.B. (formerly SIS
Bank) (commercial bank); and Executive Vice President (January 1999-July 1999) of
Peoples Heritage Financial Group, Inc. (commercial bank). Oversees 38 portfolios in
the OppenheimerFunds complex.
- --------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IN THE CHART BELOW IS TWO WORLD FINANCIAL CENTER, 225
AND OFFICER LIBERTY STREET, 11TH FLOOR, NEW YORK, NY 10281-1008. MR. MURPHY SERVES FOR AN
INDEFINITE TERM, UNTIL HIS RESIGNATION, DEATH OR REMOVAL.
JOHN V. MURPHY, Chairman, Chief Executive Officer and director (since June 2001) and President (since
President and Trustee September 2000) of the Manager; President and a director or trustee of other
(since 2001) Oppenheimer funds; President and a director (since July 2001) of Oppenheimer
Age: 55 Acquisition Corp. (the Manager's parent holding company) and of Oppenheimer
Partnership Holdings, Inc. (a holding company subsidiary of the Manager); a director
(since November 2001) of OppenheimerFunds Distributor, Inc. (a subsidiary of the
Manager); Chairman and a director (since July 2001) of Shareholder Services, Inc. and
of Shareholder Financial Services, Inc. (transfer agent subsidiaries of the Manager);
President and a director (since July 2001) of OppenheimerFunds Legacy Program (a
charitable trust program established by the Manager); a director of the following
investment advisory subsidiaries of the Manager: OFI Institutional Asset Management,
Inc., Centennial Asset Management Corporation, Trinity Investment Management
Corporation and Tremont Capital Management, Inc. (since November 2001), HarbourView
Asset Management Corporation and OFI Private Investments, Inc. (since July 2001);
President (since November 1, 2001) and a director (since July 2001) of Oppenheimer
Real Asset Management, Inc.; Executive Vice President (since February 1997) of
Massachusetts Mutual Life Insurance Company (the Manager's parent company); a director
(since June 1995) of DLB Acquisition Corporation (a holding company that owns the
shares of Babson Capital Management LLC); a member of the Investment Company
Institute's Board of Governors (elected to serve from October 3, 2003 through
September 30, 2006). Formerly, Chief Operating Officer (September 2000-June 2001) of
the Manager; President and trustee (November 1999-November 2001) of MML Series
Investment Fund and MassMutual Institutional Funds (open-end investment companies); a
director (September 1999-August 2000) of C.M. Life Insurance Company; President,
Chief Executive Officer and director (September 1999-August 2000) of MML Bay State
Life Insurance Company; a director (June 1989-June 1998) of Emerald Isle Bancorp and
Hibernia Savings Bank (a wholly-owned subsidiary of Emerald Isle Bancorp). Oversees 62
portfolios as Trustee/Director and 21 additional portfolios as Officer in the
OppenheimerFunds complex.
23 | OPPENHEIMER CAPITAL APPRECIATION FUND/VA
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
OFFICERS THE ADDRESS OF THE OFFICERS IN THE CHART BELOW IS AS FOLLOWS: FOR MS. PUTNAM AND MR.
ZACK, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH FLOOR, NEW YORK, NY
10281-1008, FOR MESSRS. VANDEHEY AND WIXTED 6803 S. TUCSON WAY, CENTENNIAL, CO
80112-3924. EACH OFFICER SERVES FOR AN ANNUAL TERM OR UNTIL HIS OR HER EARLIER
RESIGNATION, DEATH OR REMOVAL.
JANE PUTNAM, Vice President of the Manager since October 1995; an officer of 2 portfolios in the
Vice President and OppenheimerFunds complex.
Portfolio Manager
(since 1994)
Age: 44
BRIAN W. WIXTED, Senior Vice President and Treasurer (since March 1999) of the Manager; Treasurer of
Treasurer (since 1999) HarbourView Asset Management Corporation, Shareholder Financial Services, Inc.,
Age: 45 Shareholder Services, Inc., Oppenheimer Real Asset Management Corporation, and
Oppenheimer Partnership Holdings, Inc. (since March 1999), of OFI Private Investments,
Inc. (since March 2000), of OppenheimerFunds International Ltd. and OppenheimerFunds
plc (since May 2000), of OFI Institutional Asset Management, Inc. (since November
2000), and of OppenheimerFunds Legacy Program (a Colorado non-profit corporation)
(since June 2003); Treasurer and Chief Financial Officer (since May 2000) of OFI Trust
Company (a trust company subsidiary of the Manager); Assistant Treasurer (since March
1999) of Oppenheimer Acquisition Corp. Formerly Assistant Treasurer of Centennial
Asset Management Corporation (March 1999-October 2003) and OppenheimerFunds Legacy
Program (April 2000-June 2003); Principal and Chief Operating Officer (March
1995-March 1999) at Bankers Trust Company-Mutual Fund Services Division. An officer of
83 portfolios in the OppenheimerFunds complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since February
Vice President and 2002) of the Manager; General Counsel and a director (since November 2001) of the
Secretary (since 2001) Distributor; General Counsel (since November 2001) of Centennial Asset Management
Age: 56 Corporation; Senior Vice President and General Counsel (since November 2001) of
HarbourView Asset Management Corporation; Secretary and General Counsel (since
November 2001) of Oppenheimer Acquisition Corp.; Assistant Secretary and a director
(since October 1997) of OppenheimerFunds International Ltd. and OppenheimerFunds plc;
Vice President and a director (since November 2001) of Oppenheimer Partnership
Holdings, Inc.; a director (since November 2001) of Oppenheimer Real Asset Management,
Inc.; Senior Vice President, General Counsel and a director (since November 2001) of
Shareholder Financial Services, Inc., Shareholder Services, Inc., OFI Private
Investments, Inc. and OFI Trust Company; Vice President (since November 2001) of
OppenheimerFunds Legacy Program; Senior Vice President and General Counsel (since
November 2001) of OFI Institutional Asset Management, Inc.; a director (since June
2003) of OppenheimerFunds (Asia) Limited. Formerly Senior Vice President (May
1985-December 2003), Acting General Counsel (November 2001-February 2002) and
Associate General Counsel (May 1981-October 2001) of the Manager; Assistant Secretary
of Shareholder Services, Inc. (May 1985-November 2001), Shareholder Financial
Services, Inc. (November 1989-November 2001); and OppenheimerFunds International Ltd.
(October 1997-November 2001). An officer of 83 portfolios in the OppenheimerFunds
complex.
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer (since March 2004) of the Manager;
Vice President and Vice President (since June 1983) of OppenheimerFunds Distributor, Inc., Centennial
Chief Compliance Officer Asset Management Corporation and Shareholder Services, Inc. Formerly (until February
(since 2004) 2004) Vice President and Director of Internal Audit of OppenheimerFunds, Inc. An
Age: 54 officer of 83 portfolios in the OppenheimerFunds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION
ABOUT THE FUND'S TRUSTEES AND IS AVAILABLE WITHOUT CHARGE, UPON REQUEST, BY
CALLING 1.800.981.2871.
24| OPPENHEIMER CAPITAL APPRECIATION FUND/VA
ITEM 2. CODE OF ETHICS
The registrant has adopted a code of ethics that applies to the
registrant's principal executive officer, principal financial officer, principal
accounting officer or controller or persons performing similar functions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
The Board of Trustees of the registrant has determined that Edward L.
Cameron, the Chairman of the Board's Audit Committee, and George C. Bowen, a
member of the Board's Audit Committee, possess the technical attributes
identified in Instruction 2(b) of Item 3 to Form N-CSR to qualify as "audit
committee financial experts," and has designated Messrs. Cameron and Bowen as
the Audit Committee's financial experts. Messrs. Cameron and Bowen are
"independent" Trustees pursuant to paragraph (a)(2) of Item 3 to Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
(a) Audit Fees
The principal accountant for the audit of the registrant's annual
financial statements billed $22,000 in fiscal 2004 and $21,000 in
fiscal 2003.
(b) Audit-Related Fees
The principal accountant for the audit of the registrant's annual
financial statements billed no such fees to the registrant during
the last two fiscal years.
The principal accountant for the audit of the registrant's annual
financial statements billed no such fees in fiscal 2004 and $35,859
in fiscal 2003 to the registrant's investment adviser or any entity
controlling, controlled by, or under common control with the adviser
that provides ongoing services to the registrant.
Such fees include: internal control reviews.
(c) Tax Fees
The principal accountant for the audit of the registrant's annual
financial statements billed no such fees to the registrant during
the last two fiscal years.
The principal accountant for the audit of the registrant's annual
financial statements billed no such fees in fiscal 2004 and $5,548
in fiscal 2003 to the registrant's investment adviser or any entity
controlling, controlled by, or under common control with the adviser
that provides ongoing services to the registrant.
Such fees include: tax compliance, tax planning and tax advice. Tax
compliance generally involves preparation of original and amended
tax returns, claims for a refund and tax payment-planning services.
Tax planning and tax advice includes assistance with tax audits and
appeals, tax advice related to mergers and acquisitions and requests
for rulings or technical advice from taxing authorities.
(d) All Other Fees
The principal accountant for the audit of the registrant's annual
financial statements billed no such fees to the registrant during
the last two fiscal years.
The principal accountant for the audit of the registrant's annual
financial statements billed no such fees during the last two fiscal
years to the registrant's investment adviser or any entity
controlling, controlled by, or under common control with the adviser
that provides ongoing services to the registrant.
(e) (1) During its regularly scheduled periodic meetings, the
registrant's audit committee will pre-approve all audit,
audit-related, tax and other services to be provided by the
principal accountants of the registrant.
The audit committee has delegated pre-approval authority to its
Chairman for any subsequent new engagements that arise between
regularly scheduled meeting dates provided that any fees such
pre-approved are presented to the audit committee at its next
regularly scheduled meeting.
Under applicable laws, pre-approval of non-audit services maybe
waived provided that: 1) the aggregate amount of all such services
provided constitutes no more than five percent of the total amount
of fees paid by the registrant to it principal accountant during the
fiscal year in which services are provided 2) such services were not
recognized by the registrant at the time of engagement as non-audit
services and 3) such services are promptly brought to the attention
of the audit committee of the registrant and approved prior to the
completion of the audit.
(2) 100%
(f) Not applicable as less than 50%.
(g) The principal accountant for the audit of the registrant's annual
financial statements billed no such fees in fiscal 2004 and $41,407
in fiscal 2003 to the registrant and the registrant's investment
adviser or any entity controlling, controlled by, or under common
control with the adviser that provides ongoing services to the
registrant related to non-audit fees. Those billings did not include
any prohibited non-audit services as defined by the Securities
Exchange Act of 1934.
(h) The registrant's audit committee of the board of trustees has
considered whether the provision of non-audit services that were
rendered to the registrant's investment adviser, and any entity
controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal
account's independence. No such services were rendered.
ITEM 5. NOT APPLICABLE
ITEM 6. SCHEDULE OF INVESTMENTS
Not applicable
ITEM 7. NOT APPLICABLE
ITEM 8. NOT APPLICABLE
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The registrant's Board of Trustees has established a Governance Committee,
one function of which is to create and oversee the process by which shareholders
can submit nominees for positions on the Board. The Governance Committee has not
yet adopted a charter, but anticipates that it will do so by the end of this
calendar year. The Committee has temporarily adopted the process previously
adopted by the Audit Committee regarding shareholder submission of nominees for
board positions. Shareholders may submit names of individuals, accompanied by
complete and properly supported resumes, for the Governance Committee's
consideration by mailing such information to the Committee in care of the Fund.
The Committee may consider such persons at such time as it meets to consider
possible nominees. The Committee, however, reserves solo discretion to determine
the candidates for trustees and independent trustees to recommend to the Board
and/or shareholders and may identify candidates other than those submitted by
Shareholders. The Committee may, but need not, consider the advice and
recommendation of the Manager and its affiliates in selecting nominees. The full
Board elects new trustees except for those instances when a shareholder vote is
required.
Shareholders who desire to communicate with the Board should address
correspondence to the Board of Trustees of the registrant, or to an individual
Trustee c/o the Secretary of the Fund at 6803 South Tucson Way, Centennial,
Colorado 80112 and may submit their correspondence electronically at
WWW.OPPENHEIMERFUNDS.COM under the caption "contact us." If your correspondence
is intended for a particular Trustee, please indicate the name of the Trustee
for whom it is intended. The sender should indicate in the address whether it is
intended for the entire board, the Independent Trustees as group, or to an
individual Trustee. The Governance Committee will consider if a different
process should be recommended to the Board.
ITEM 10. CONTROLS AND PROCEDURES
(a) Based on their evaluation of registrant's disclosure controls and
procedures (as defined in rule 30a-3(c) under the Investment Company
Act of 1940 (17 CFR 270.30a-3(c)) as of December 31, 2004,
registrant's principal executive officer and principal financial
officer found registrant's disclosure controls and procedures to
provide reasonable assurances that information required to be
disclosed by registrant in the reports that it files under the
Securities Exchange Act of 1934 (a) is accumulated and communicated
to registrant's management, including its principal executive
officer and principal financial officer, to allow timely decisions
regarding required disclosure, and (b) is recorded, processed,
summarized and reported, within the time periods specified in the
rules and forms adopted by the U.S. Securities and Exchange
Commission.
(b) There have been no changes in registrant's internal controls over
financial reporting that occurred during the registrant's last
fiscal quarter that has materially affected, or is reasonably likely
to materially affect, the registrant's internal control over
financial reporting.
ITEM 11. EXHIBITS.
(A) EXHIBIT ATTACHED HERETO. (ATTACH CODE OF ETHICS AS EXHIBIT)(NOT
APPLICABLE TO SEMIANNUAL REPORTS)
(B) EXHIBITS ATTACHED HERETO. (ATTACH CERTIFICATIONS AS EXHIBITS)