Oppenheimer International Growth Fund/VA A Series of Oppenheimer Variable Account Funds

Transcription

1 June 30, 2018 Oppenheimer International Growth Fund/VA A Series of Oppenheimer Variable Account Funds Semiannual Report SEMIANNUAL REPORT Listing of Top Holdings Fund Performance Discussion Financial Statements

2 PORTFOLIO MANAGERS: George R. Evans, CFA, and Robert B. Dunphy, CFA AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 6/30/18 Inception Date 6-Months 1-Year 5-Year 10-Year Non-Service Shares 5/13/ % 6.73% 6.44% 5.42% Service Shares 3/19/ MSCI AC World ex-u.s. Index 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 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 include changes in share price and reinvested distributions but 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. Returns for periods of less than one year are cumulative and not annualized. See Fund prospectuses and summary prospectuses for more information on share classes and sales charges. The Fund s performance is compared to the performance of the MSCI AC World ex-u.s. Index. The MSCI AC World ex-u.s. Index is designed to measure the equity market performance of developed and emerging markets and excludes the U.S. The Index is unmanaged and cannot be purchased directly by investors. 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 comprising the Index. Index performance includes reinvestment of income, but does not reflect transaction costs, fees, expenses or taxes. Index performance is shown for illustrative purposes only as a benchmark for the Fund's performance, and does not predict or depict performance of the Fund. The Fund's performance reflects the effects of the Fund's business and operating expenses. TOP HOLDINGS AND ALLOCATIONS TOP TEN COMMON STOCK HOLDINGS REGIONAL ALLOCATION Infineon Technologies AG 2.4% SAP SE 2.2 Temenos AG 2.1 Nippon Telegraph & Telephone Corp. 1.7 STMicroelectronics NV 1.6 Atos SE 1.6 CSL Ltd. 1.6 ASML Holding NV 1.6 LVMH Moet Hennessy Louis Vuitton SE 1.5 Continental AG 1.5 Portfolio holdings and allocations are subject to change. Percentages are as of June 30, 2018, and are based on net assets. For more current Fund holdings, please visit oppenheimerfunds.com. Europe 70.7% Asia 20.3% U.S./Canada 8.0% Middle East/Africa 0.7% Latin & South America 0.3 Portfolio holdings and allocations are subject to change. Percentages are as of June 30, 2018, and are based on the total market value of investments. For more current Fund holdings, please visit oppenheimerfunds.com. 2 OPPENHEIMER INTERNATIONAL GROWTH FUND/VA

3 Fund Performance Discussion The Fund s Non-Service shares returned -2.74% during the six-month reporting period ended June 30, On a relative basis, the Fund outperformed the MSCI AC World Ex-U.S. Index (the Index ), which returned -3.77%. The Fund outperformed the Index in Information Technology and Health Care sectors due to stock selection. Stock selection in Financials along with our usual underweight position in the sector also contributed to performance. Underperformers for the Fund included stock selection in the Consumer Discretionary and Consumer Staples sectors, and our usual underweight position in the Energy sector. With regard to countries, we remind investors that we are fundamental, bottom-up investors who view the world as one marketplace. Our geographic exposure is purely the result of our stock selection and does not reflect any views regarding the general economy of any country. During this reporting period, an overweight position in France and stock selection in Sweden and Australia were top performers relative to the Index. Detractors included stock selection in Hong Kong, India, and Canada. MARKET OVERVIEW World equity markets surged in the fourth quarter of 2017 to bring a close to a very strong year started on a similar note, with equity markets rising strongly in January on the positive sentiment provoked by the U.S. tax law changes. This was followed by a sharp correction in February and volatile range trading thereafter. Given the very strong performance of equity markets last year, a correction and consolidation seemed in order and we do not find it alarming. We believe that there are currently segments within the economy that are poised for long-term growth. For instance, we are of the opinion that the increasing digitization of the world economy is altering the shape of the semi-conductor cycle by lengthening it and reducing its amplitude. The evolution of the car to include more electronics and automation is another trend that is currently underappreciated in our view. The rates of growth for companies that benefit from these trends began to ease during the reporting period from the high levels experienced through most of the last two years. In response, investors have de-rated many of them, particularly if they are in areas that are in any way seen as sensitive to macro-economic strength or weakness. Over the second quarter of 2018, this was compounded for all things auto-related, which suffered a precipitous sell-off at the end of the reporting period on news flow of further tariff imposition by the U.S. on foreign car imports. Within this environment, many of the companies in which we have invested, especially those that we hold within our Data Deluge and Evolution of the Car investment themes, suffered profit taking. TOP INDIVIDUAL CONTRIBUTORS Top performing holdings for the Fund this reporting period included NEX Group plc, William Demant Holding A/S, and CSL Ltd. NEX Group plc, a UK company, is a broker s broker. It is the intermediary between professional participants in many over-the-counter financial markets such as those for foreign exchange, bonds and some derivative instruments. During the period, the Chicago Mercantile Exchange (CME) bid for NEX and the share price rose to reflect the significant premium the CME proposes to pay. We exited our position. William Demant Holding A/S is a Danish hearing aid company whose securities we have owned for many years. During the period, the company announced earnings ahead of consensus forecasts and the stock reacted favorably. In our opinion, the demographic tailwind of an aging population will continue to support the company well into the future. CSL is an Australian company that makes and sells medicines derived from human plasma, which it also collects. The global market for plasma is very concentrated, with only a few scale players who tightly control collection bottlenecks. The demand for plasma-based products is well-supported by the demographic trends of an aging population in the developed world and, in the emerging markets, a rising ability to pay for health care. CSL announced strong earnings during the reporting period and the share price reacted favorably. TOP INDIVIDUAL DETRACTORS Detractors from performance included Valeo SA, Pandora A/S, and Iliad SA. Valeo SA is a French auto component supplier that is on the right side of the car evolution trend towards more complex componentry. Both demand for Valeo s products and its pricing power over them are rising with this trend. During the reporting period, the company announced earnings that were shy of very 3 OPPENHEIMER INTERNATIONAL GROWTH FUND/VA

4 optimistic forecasts, and the stock corrected from record highs. In our opinion, the shift in the share towards component makers and away from assemblers of every dollar spent on a car, will continue for several years, and Valeo will continue to benefit from that shift. Pandora, the Danish jewelry retailer, has been benefitting from the consumer trend towards brands in the very fragmented jewelry market. Furthermore, Pandora is the only company applying fast fashion techniques to the jewelry industry. They offer a good product mix at a price point that is well within reach of most middle-class consumers. Currently, the company is taking more control over its distribution, by building out its own store network. In our opinion, this is an appropriate strategy, but it is expensive in the short term. During the reporting period, the company announced results below consensus forecasts and the share price reacted unfavorably. Iliad SA is a French telecommunications and Internet service provider. It has recently entered the Italian market as a fourth carrier and is incurring significant customer acquisition costs, which are weighing on the stock. Iliad entered the French mobile market as a fourth carrier in In the short term it lowered pricing in the market to gain share. It now has 25% of the French mobile market and makes healthy returns from it. STRATEGY & OUTLOOK As is often the case in market downdrafts, our portfolio outperformed the Index during the volatile reporting period. Looking ahead, we would not be at all surprised to see continued volatility in equity markets the rest of the year. In our opinion, it is reasonable to expect this after the extremely high returns that equity markets delivered to investors last year. It is worth remembering the old adage Markets don t go up in a straight line. We will look to take advantage of the volatility to add to companies already held in our portfolio and to add new companies to the portfolio from our watch list that have heretofore been too expensive for us to buy. We remind investors that, when we add companies to the portfolio, we are comparing their present value to the value we think they can have three to five years from now and beyond. With this long-term approach, market volatility does not change our view on the kind of companies we would like in our portfolio. It does give us the opportunity to add, or add to, such holdings. We are bottom up, global, growth investors with a mandate to buy non-u.s. companies. We look for companies that we believe are on the winning side of longterm structural trends, that have the ability to monetize them over a long period of time and that share with us the wealth they create. Those are the companies we believe we have in the portfolio and those are the kind of companies that we will continue to seek investing in, regardless of short-term market conditions. The views in the Fund Performance Discussion represent the opinions of this Fund's portfolio managers and are not intended as investment advice or to predict or depict the performance of any investment. These views are as of the close of business on June 30, 2018, and are subject to change based on subsequent developments. The Fund s portfolio and strategies are subject to change. Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested. 4 OPPENHEIMER INTERNATIONAL GROWTH FUND/VA

5 Fund Expenses Fund Expenses. As a shareholder of the Fund, you incur two types of costs: (1) transaction costs 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, invested at the beginning of the period and held for the entire 6-month period ended June 30, Actual Expenses. The first section of the table provides information about actual account values and actual expenses. You may use the information in this section 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, (for example, an $8, account value divided by $1, = 8.60), then multiply the result by the number in the first section under the heading entitled Expenses Paid During 6 Months Ended June 30, 2018 to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes. The second section of the table provides 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 for each class before expenses, which is not the 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 Account Value January 1, 2018 Ending Account Value June 30, 2018 Expenses Paid During 6 Months Ended June 30, 2018 Actual Non-Service shares $ 1, $ $ 4.90 Service shares 1, Hypothetical (5% return before expenses) Non-Service shares 1, , Service shares 1, , Expenses are equal to the Fund s annualized expense ratio for that class, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). Those annualized expense ratios, excluding indirect expenses from affiliated funds, based on the 6-month period ended June 30, 2018 are as follows: Class Expense Ratios Non-Service shares 1.00% Service shares 1.25 The expense ratios reflect voluntary and/or contractual waivers and/or reimbursements of expenses by the Fund s Manager. Some of these undertakings may be modified or terminated at any time, as indicated in the Fund's prospectus. The Financial Highlights tables in the Fund s financial statements, included in this report, also show the gross expense ratios, without such waivers or reimbursements and reduction to custodian expenses, if applicable. 5 OPPENHEIMER INTERNATIONAL GROWTH FUND/VA

6 STATEMENT OF INVESTMENTS June 30, 2018 Unaudited Shares Value Common Stocks 96.9% Consumer Discretionary 21.3% Auto Components 4.2% Continental AG 37,159 $ 8,493,270 Koito Manufacturing Co. Ltd. 109,600 7,230,528 Valeo SA 136,543 7,452,920 23,176,718 Automobiles 3.3% Bayerische Motoren Werke AG 53,890 4,887,990 Hero MotoCorp Ltd. 161,717 8,193,701 Subaru Corp. 191,200 5,562,551 18,644,242 Hotels, Restaurants & Leisure 3.0% Carnival Corp. 124,468 7,133,261 Domino's Pizza Group plc 1,048,054 4,785,945 Whitbread plc 94,176 4,919,717 16,838,923 Household Durables 1.2% SEB SA 1 39,200 6,835,512 Internet & Catalog Retail 0.9% JD.com, Inc., ADR 1 131,128 5,107,436 Media 2.2% ProSiebenSat.1 Media SE 181,356 4,598,406 SES SA, Cl. A, FDR 360,190 6,592,028 Technicolor SA 1 694, ,138 12,044,572 Multiline Retail 1.0% Dollarama, Inc. 139,482 5,406,764 Specialty Retail 1.1% Nitori Holdings Co. Ltd. 38,800 6,052,155 Textiles, Apparel & Luxury Goods 4.4% Cie Financiere Richemont SA 53,987 4,573,607 Hermes International 12,506 7,643,675 LVMH Moet Hennessy Louis Vuitton SE 25,930 8,619,618 Pandora AS 52,858 3,694,218 24,531,118 Consumer Staples 9.8% Beverages 2.1% Heineken NV 54,916 5,505,938 Pernod Ricard SA 39,110 6,383,336 11,889,274 Food & Staples Retailing 2.4% Alimentation Couche-Tard, Inc., Cl. B 111,346 4,837,006 CP ALL PCL 2,124,700 4,710,875 SPAR Group Ltd. (The) 296,961 4,010,706 13,558,587 Food Products 3.0% Barry Callebaut AG 2,816 5,056,693 Saputo, Inc. 197,075 6,543,433 WH Group Ltd. 2 6,061,500 4,900,713 16,500,839 Household Products 1.3% Reckitt Benckiser Group plc 86,635 7,121,865 Tobacco 1.0% Swedish Match AB 113,161 5,601,555 Energy 1.5% Energy Equipment & Services 1.1% TechnipFMC plc 188,522 5,991,015 Oil, Gas & Consumable Fuels 0.4% Koninklijke Vopak NV 47,812 2,207,017 Shares Value Financials 3.8% Capital Markets 1.2% TP ICAP plc 639,406 $ 3,553,484 UBS Group AG 1 192,440 2,960,704 6,514,188 Commercial Banks 1.4% ICICI Bank Ltd., Sponsored ADR 1 969,753 7,787,117 Insurance 1.2% Prudential plc 295,659 6,755,421 Health Care 12.3% Biotechnology 3.0% CSL Ltd. 61,100 8,734,958 Grifols SA 267,975 8,036,895 16,771,853 Health Care Equipment & Supplies 4.7% Essilor International Cie Generale d'optique SA 32,763 4,622,602 Hoya Corp. 100,893 5,730,069 Siemens Healthineers AG 1,2 106,321 4,388,721 Sonova Holding AG 30,268 5,429,923 William Demant Holding AS 1 147,051 5,913,981 26,085,296 Life Sciences Tools & Services 1.2% Lonza Group AG 1 25,909 6,882,483 Pharmaceuticals 3.4% Bayer AG 60,798 6,698,513 Novo Nordisk AS, Cl. B 157,447 7,272,353 Roche Holding AG 21,083 4,691,288 18,662,154 Industrials 17.4% Aerospace & Defense 1.2% Airbus SE 58,170 6,798,822 Commercial Services & Supplies 2.7% Edenred 191,834 6,054,129 Prosegur Cash SA 2 1,405,536 3,776,282 Prosegur Cia de Seguridad SA 837,042 5,461,798 15,292,209 Construction & Engineering 1.1% Boskalis Westminster 210,422 6,123,706 Electrical Equipment 2.7% Legrand SA 81,050 5,936,434 Melrose Industries plc 767,188 2,152,900 Nidec Corp. 47,300 7,086,574 15,175,908 Machinery 5.3% Aalberts Industries NV 139,411 6,670,640 Atlas Copco AB, Cl. A 164,124 4,756,926 Epiroc AB, Cl. A 1 218,967 2,297,788 Kubota Corp. 343,800 5,398,798 VAT Group AG 1,2 47,205 6,309,772 Weir Group plc (The) 148,746 3,924,097 29,358,021 Professional Services 0.8% Intertek Group plc 57,420 4,330,409 Trading Companies & Distributors 3.6% Brenntag AG 88,240 4,914,756 Bunzl plc 259,579 7,860,789 Ferguson plc 43,877 3,560,352 Travis Perkins plc 202,332 3,797,477 20,133,374 Information Technology 24.3% Communications Equipment 1.4% Nokia OYJ 1,378,137 7,905,951 6 OPPENHEIMER INTERNATIONAL GROWTH FUND/VA

7 Shares Value Electronic Equipment, Instruments, & Components 3.3% Hitachi Ltd. 1,044,000 $ 7,353,996 Keyence Corp. 14,112 7,958,977 Spectris plc 82,340 2,830,914 18,143,887 Internet Software & Services 4.2% Alibaba Group Holding Ltd., Sponsored ADR 1 19,987 3,708,188 Baidu, Inc., Sponsored ADR 1 27,660 6,721,380 Scout24 AG 2 141,222 7,490,310 United Internet AG 92,623 5,303,408 23,223,286 IT Services 3.1% Amadeus IT Group SA 80,526 6,344,756 Atos SE 65,910 8,981,461 Cielo SA 444,500 1,894,637 17,220,854 Semiconductors & Semiconductor Equipment 7.0% ams AG 103,015 7,629,864 ASML Holding NV 44,245 8,726,045 Infineon Technologies AG 537,199 13,689,595 STMicroelectronics NV 414,640 9,213,275 39,258,779 Software 5.3% Dassault Systemes SE 41,047 5,743,914 SAP SE 104,065 12,022,317 Temenos AG 1 79,155 11,969,910 29,736,141 Shares Value Materials 4.1% Chemicals 2.3% Essentra plc 455,282 $ 2,885,810 Novozymes AS, Cl. B 86,769 4,393,275 Sika AG 40,320 5,556,365 12,835,450 Construction Materials 0.6% James Hardie Industries plc 191,000 3,214,960 Containers & Packaging 1.2% CCL Industries, Inc., Cl. B 144,966 7,106,879 Telecommunication Services 2.4% Diversified Telecommunication Services 2.4% Iliad SA 24,080 3,802,111 Nippon Telegraph & Telephone Corp. 211,500 9,610,433 13,412,544 Total Common Stocks (Cost $358,473,017) 540,237,284 Preferred Stock 0.0% Zee Entertainment Enterprises Ltd., 6% Cum. Non-Cv., 6.00% (Cost $ ) 599,541 67,466 Investment Company 2.3% Oppenheimer Institutional Government Money Market Fund, Cl. E, 1.85% 3,4 (Cost $12,756,037) 12,756,037 12,756,037 Total Investments, at Value (Cost $371,229,054) 99.2% 553,060,787 Net Other Assets (Liabilities) 0.8 4,662,607 Net Assets 100.0% $ 557,723,394 Footnotes to Statement of Investments 1. Non-income producing security. 2. Represents securities sold under Rule 144A, which are exempt from registration under the Securities Act of 1933, as amended. These securities have been determined to be liquid under guidelines established by the Board of Trustees. These securities amount to $26,865,798 or 4.82% of the Fund's net assets at period end. 3. Rate shown is the 7-day yield at period end. 4. Is or was an affiliate, as defined in the Investment Company Act of 1940, as amended, at or during the reporting period, by virtue of the Fund owning at least 5% of the voting securities of the issuer or as a result of the Fund and the issuer having the same investment adviser. Transactions during the reporting period in which the issuer was an affiliate are as follows: Shares Gross Gross Shares December 31, 2017 Additions Reductions June 30, 2018 Oppenheimer Institutional Government Money Market Fund, Cl. E 1,843,768 74,320,825 63,408,556 12,756,037 Realized Change in Unrealized Value Income Gain (Loss) Gain (Loss) Oppenheimer Institutional Government Money Market Fund, Cl. E $ 12,756,037 $ 47,694 $ $ Distribution of investments representing geographic holdings, as a percentage of total investments at value, is as follows: Geographic Holdings Value Percent France $ 86,320, % Germany 72,487, United Kingdom 64,470, Switzerland 62,644, Japan 61,984, Netherlands 29,233, Canada 23,894, Spain 23,619, Denmark 21,273, United States 19,889, India 16,048, China 15,537, Sweden 12,656, Australia 8,734, Finland 7,905, Austria 7,629, Hong Kong 4,900, Thailand 4,710, South Africa 4,010, Ireland 3,214, OPPENHEIMER INTERNATIONAL GROWTH FUND/VA

8 STATEMENT OF INVESTMENTS Unaudited / Continued Geographic Holdings (Continued) Value Percent Brazil $ 1,894, % Total $ 553,060, % See accompanying Notes to Financial Statements. 8 OPPENHEIMER INTERNATIONAL GROWTH FUND/VA

9 STATEMENT OF ASSETS AND LIABILITIES June 30, 2018 Unaudited Assets Investments, at value see accompanying statement of investments: Unaffiliated companies (cost $358,473,017) $ 540,304,750 Affiliated companies (cost $12,756,037) 12,756, ,060,787 Cash 315,755 Cash foreign currencies (cost $109) 109 Receivables and other assets: Investments sold 5,623,536 Dividends 2,071,108 Shares of beneficial interest sold 152,710 Other 46,288 Total assets 561,270,293 Liabilities Payables and other liabilities: Investments purchased 2,854,183 Foreign capital gains tax 314,609 Shares of beneficial interest redeemed 230,551 Distribution and service plan fees 49,033 Trustees' compensation 35,622 Other 62,901 Total liabilities 3,546,899 Net Assets $ 557,723,394 Composition of Net Assets Par value of shares of beneficial interest $ 224,104 Additional paid-in capital 351,356,706 Accumulated net investment income 2,314,305 Accumulated net realized gain on investments and foreign currency transactions 22,329,223 Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies 181,499,056 Net Assets $ 557,723,394 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 $326,447,534 and 133,504,698 shares of beneficial interest outstanding) $2.45 Service Shares: Net asset value, redemption price per share and offering price per share (based on net assets of $231,275,860 and 90,598,928 shares of beneficial interest outstanding) $2.55 See accompanying Notes to Financial Statements. 9 OPPENHEIMER INTERNATIONAL GROWTH FUND/VA

10 STATEMENT OF OPERATIONS For the Six Months Ended June 30, 2018 Unaudited Investment Income Dividends: Unaffiliated companies (net of foreign withholding taxes of $822,793) $ 7,856,258 Affiliated companies 47,694 Total investment income 7,903,952 Expenses Management fees 2,750,217 Distribution and service plan fees - Service shares 301,160 Transfer and shareholder servicing agent fees: Non-Service shares 208,705 Service shares 144,557 Shareholder communications: Non-Service shares 7,378 Service shares 5,121 Custodian fees and expenses 30,349 Trustees' compensation 11,275 Borrowing fees 10,525 Other 40,671 Total expenses 3,509,958 Less reduction to custodian expenses (127) Less waivers and reimbursements of expenses (252,811) Net expenses 3,257,020 Net Investment Income 4,646,932 Realized and Unrealized Gain (Loss) Net realized gain (loss) on: Investment transactions in unaffiliated companies (net of foreign capital gains tax of $128,417) 26,481,888 Foreign currency transactions (11,428) Net realized gain 26,470,460 Net change in unrealized appreciation/depreciation on: Investment transactions in unaffiliated companies (47,904,415) Translation of assets and liabilities denominated in foreign currencies (44,499) Net change in unrealized appreciation/depreciation (47,948,914) Net Decrease in Net Assets Resulting from Operations $ (16,831,522) See accompanying Notes to Financial Statements. 10 OPPENHEIMER INTERNATIONAL GROWTH FUND/VA

11 STATEMENTS OF CHANGES IN NET ASSETS Six Months Ended June 30, 2018 (Unaudited) Year Ended December 31, 2017 Operations Net investment income $ 4,646,932 $ 4,255,911 Net realized gain 26,470,460 14,279,372 Net change in unrealized appreciation/depreciation (47,948,914) 108,297,137 Net increase (decrease) in net assets resulting from operations (16,831,522) 126,832,420 Dividends and/or Distributions to Shareholders Dividends from net investment income: Non-Service shares (2,799,467) (4,868,321) Service shares (1,364,714) (2,425,707) (4,164,181) (7,294,028) Distributions from net realized gain: Non-Service shares (6,335,023) Service shares (4,325,570) (10,660,593) Beneficial Interest Transactions Net increase (decrease) in net assets resulting from beneficial interest transactions: Non-Service shares (15,457,657) (14,779,318) Service shares 5,378,571 17,507,241 (10,079,086) 2,727,923 Net Assets Total increase (decrease) (41,735,382) 122,266,315 Beginning of period 599,458, ,192,461 End of period (including accumulated net investment income of $2,314,305 and $1,831,554, respectively) $ 557,723,394 $ 599,458,776 See accompanying Notes to Financial Statements. 11 OPPENHEIMER INTERNATIONAL GROWTH FUND/VA

12 FINANCIAL HIGHLIGHTS Six Months Ended June 30, 2018 (Unaudited) Year Ended December 31, 2017 Year Ended December 31, 2016 Year Ended December 31, 2015 Year Ended December 31, 2014 Year Ended December 31, 2013 Non-Service Shares Per Share Operating Data Net asset value, beginning of period $2.59 $2.08 $2.20 $2.31 $2.57 $2.07 Income (loss) from investment operations: Net investment income Net realized and unrealized gain (loss) (0.09) 0.52 (0.08) 0.06 (0.21) 0.50 Total from investment operations (0.07) 0.54 (0.05) 0.09 (0.18) 0.53 Dividends and/or distributions to shareholders: Dividends from net investment income (0.02) (0.03) (0.02) (0.03) (0.03) (0.03) Distributions from net realized gain (0.05) 0.00 (0.05) (0.17) (0.05) 0.00 Total dividends and/or distributions to shareholders (0.07) (0.03) (0.07) (0.20) (0.08) (0.03) Net asset value, end of period $2.45 $2.59 $2.08 $2.20 $2.31 $2.57 Total Return, at Net Asset Value 2 (2.74)% 26.29% (2.12)% 3.43% (7.22)% 25.87% Ratios/Supplemental Data Net assets, end of period (in thousands) $326,447 $360,417 $301,559 $317,547 $358,756 $458,038 Average net assets (in thousands) $350,498 $339,999 $305,269 $343,347 $400,556 $404,859 Ratios to average net assets: 3 Net investment income 1.68% 0.87% 1.24% 1.08% 1.13% 1.24% Expenses excluding specific expenses listed below 1.09% 1.08% 1.09% 1.08% 1.07% 1.09% Interest and fees from borrowings 0.00% % % % % 0.00% Total expenses % 1.08% 1.09% 1.08% 1.07% 1.09% Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% Portfolio turnover rate 11% 27% 15% 24% 41% 32% 1. Per share amounts calculated based on the average shares outstanding during the period. 2. Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. 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 less than one full year. 4. Less than 0.005%. 5. Total expenses including indirect expenses from affiliated fund fees and expenses were as follows: Six Months Ended June 30, % Year Ended December 31, % Year Ended December 31, % Year Ended December 31, % Year Ended December 31, % Year Ended December 31, % See accompanying Notes to Financial Statements. 12 OPPENHEIMER INTERNATIONAL GROWTH FUND/VA

13 Six Months Ended June 30, 2018 (Unaudited) Year Ended December 31, 2017 Year Ended December 31, 2016 Year Ended December 31, 2015 Year Ended December 31, 2014 Year Ended December 31, 2013 Service Shares Per Share Operating Data Net asset value, beginning of period $2.70 $2.16 $2.29 $2.40 $2.66 $2.14 Income (loss) from investment operations: Net investment income Net realized and unrealized gain (loss) (0.10) 0.56 (0.08) 0.06 (0.21) 0.53 Total from investment operations (0.08) 0.57 (0.06) 0.08 (0.19) 0.55 Dividends and/or distributions to shareholders: Dividends from net investment income (0.02) (0.03) (0.02) (0.02) (0.02) (0.03) Distributions from net realized gain (0.05) 0.00 (0.05) (0.17) (0.05) 0.00 Total dividends and/or distributions to shareholders (0.07) (0.03) (0.07) (0.19) (0.07) (0.03) Net asset value, end of period $2.55 $2.70 $2.16 $2.29 $2.40 $2.66 Total Return, at Net Asset Value 2 (3.23)% 26.44% (2.72)% 3.11% (7.15)% 25.71% Ratios/Supplemental Data Net assets, end of period (in thousands) $231,276 $239,042 $175,633 $169,292 $145,515 $118,060 Average net assets (in thousands) $242,929 $213,440 $174,834 $165,226 $128,694 $88,647 Ratios to average net assets: 3 Net investment income 1.43% 0.60% 0.99% 0.79% 0.85% 0.89% Expenses excluding specific expenses listed below 1.34% 1.33% 1.34% 1.33% 1.32% 1.34% Interest and fees from borrowings 0.00% % % % % 0.00% Total expenses % 1.33% 1.34% 1.33% 1.32% 1.34% Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% Portfolio turnover rate 11% 27% 15% 24% 41% 32% 1. Per share amounts calculated based on the average shares outstanding during the period. 2. Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. 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 less than one full year. 4. Less than 0.005%. 5. Total expenses including indirect expenses from affiliated fund fees and expenses were as follows: Six Months Ended June 30, % Year Ended December 31, % Year Ended December 31, % Year Ended December 31, % Year Ended December 31, % Year Ended December 31, % See accompanying Notes to Financial Statements. 13 OPPENHEIMER INTERNATIONAL GROWTH FUND/VA

14 NOTES TO FINANCIAL STATEMENTS June 30, 2018 Unaudited 1. Organization Oppenheimer International Growth Fund/VA (the Fund ), is a separate series of Oppenheimer Variable Account Funds, which is registered under the Investment Company Act of 1940 ( 1940 Act ), as amended, as a diversified open-end management investment company. The Fund s investment objective is to seek capital appreciation. The Fund s investment adviser is OFI Global Asset Management, Inc. ( OFI Global or the Manager ), a wholly-owned subsidiary of OppenheimerFunds, Inc. ( OFI or the Sub-Adviser ). The Manager has entered into a sub-advisory agreement with OFI. Shares of the Fund are sold only to separate accounts of life insurance companies. 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 followed in the Fund's preparation of financial statements in accordance with accounting principles generally accepted in the United States ( U.S. GAAP ). 2. Significant Accounting Policies Security Valuation. All investments in securities are recorded at their estimated fair value, as described in Note 3. Foreign Currency Translation. The books and records of the Fund are maintained in U.S. dollars. Any foreign currency amounts are translated into U.S. dollars on the following basis: (1) Value of investment securities, other assets and liabilities at the exchange rates prevailing at market close as described in Note 3. (2) Purchases and sales of investment securities, income and expenses at the rates of exchange prevailing on the respective dates of such transactions. Although the net assets and the values are presented at the foreign exchange rates at market close, the Fund does not isolate the portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in prices of securities held. Such fluctuations are included with the net realized and unrealized gains or losses from investments shown in the Statement of Operations. For securities, which are subject to foreign withholding tax upon disposition, realized and unrealized gains or losses on such securities are recorded net of foreign withholding tax. Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest, and foreign withholding tax reclaims 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 value of assets and liabilities other than investments in securities, resulting from changes in the exchange rate. 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. Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations and may differ from U.S. GAAP, are recorded on the ex-dividend date. Income and capital gain distributions, if any, are declared and paid annually or at other times as determined necessary by the Manager. The tax character of distributions is determined as of the Fund s fiscal year end. Therefore, a portion of the Fund s distributions made to shareholders prior to the Fund s fiscal year end may ultimately be categorized as a tax return of capital. 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 value of the securities received. Withholding taxes on foreign dividends, if any, and capital gains taxes on foreign investments, if any, have been provided for in accordance with the Fund's understanding of the applicable tax rules and regulations. Interest income, if any, is recognized on an accrual basis. Discount and premium, which are included in interest income on the Statement of Operations, are amortized or accreted daily. 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, to the extent they are not offset by positive cash balances maintained by the Fund, at a rate equal to the Federal Funds Rate plus 2.00%. 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 14 OPPENHEIMER INTERNATIONAL GROWTH FUND/VA

15 2. Significant Accounting Policies (Continued) identified cost. Indemnifications. The Fund s organizational documents provide current and former Trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote. 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 to shareholders. Therefore, no federal income or excise tax provision is required. The Fund files income tax returns in U.S. federal and applicable state jurisdictions. The statute of limitations on the Fund's tax return filings generally remains open for the three preceding fiscal reporting period ends. The Fund has analyzed its tax positions for the fiscal year ended December 31, 2017, including open tax years, and does not believe there are any uncertain tax positions requiring recognition in the Fund s financial statements. During the fiscal year ended December 31, 2017, the Fund utilized $417,148 of capital loss carryforwards to offset capital gains realized in that fiscal year. Capital losses will be carried forward to future years if not offset by gains. At period end, it is estimated that the capital loss carryforwards would be zero. The estimated capital loss carryforward represents the carryforward as of the end of the last fiscal year, increased or decreased by capital losses or gains realized in the first six months of the current fiscal year. During the reporting period, it is estimated that the Fund will not utilize any capital loss carryforward to offset realized capital gains. 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 are determined in accordance with federal income tax requirements, which may differ from the character of net investment income or net realized gains presented in those financial statements in accordance with U.S. GAAP. 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. 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 at period end are noted in the following table. 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 $ 375,089,888 Federal tax cost of other investments 109 Total federal tax cost $ 375,089,997 Gross unrealized appreciation $ 214,430,345 Gross unrealized depreciation (36,792,123) Net unrealized appreciation $ 177,638,222 Certain foreign countries impose a tax on capital gains which is accrued by the Fund based on unrealized appreciation, if any, on affected securities. The tax is paid when the gain is realized. Use of Estimates. The preparation of financial statements in conformity with U.S. GAAP 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 increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. 3. Securities Valuation The Fund calculates the net asset value of its shares as of 4:00 P.M. Eastern Time, on each day the New York Stock Exchange (the "Exchange") is open for trading, except in the case of a scheduled early closing of the Exchange, in which case the Fund will calculate net asset value of the shares as of the scheduled early closing time of the Exchange. The Fund s Board has adopted procedures for the valuation of the Fund s securities and has delegated the day-to-day responsibility for valuation determinations under those procedures to the Manager. The Manager has established a Valuation Committee which is responsible for determining a fair valuation for any security for which market quotations are not readily available. The Valuation Committee s fair valuation determinations are subject to review, approval and ratification by the Fund s Board at least quarterly or more frequently, if necessary. Valuation Methods and Inputs Securities are valued primarily using unadjusted quoted market prices, when available, as supplied by third party pricing services or broker-dealers. The following methodologies are used to determine the market value or the fair value of the types of securities described below: Equity securities traded on a securities exchange (including exchange-traded derivatives other than futures and futures options) are valued based on the official closing price on the principal exchange on which the security is traded, as identified by the Manager, prior to the time when the Fund s assets are valued. If the official closing price is unavailable, the security is valued at the last sale price on the principal exchange on which it is traded, or if no sales occurred, the security is valued at the mean between the quoted bid and asked prices. Over-the-counter equity securities are valued at the last 15 OPPENHEIMER INTERNATIONAL GROWTH FUND/VA

16 NOTES TO FINANCIAL STATEMENTS Unaudited / Continued 3. Securities Valuation (Continued) published sale price, or if no sales occurred, at the mean between the quoted bid and asked prices. Events occurring after the close of trading on foreign exchanges may result in adjustments to the valuation of foreign securities to more accurately reflect their fair value as of the time when the Fund s assets are valued. Shares of a registered investment company that are not traded on an exchange are valued at that investment company s net asset value per share. Securities for which market quotations are not readily available, or when a significant event has occurred that would materially affect the value of the security, are fair valued either (i) by a standardized fair valuation methodology applicable to the security type or the significant event as previously approved by the Valuation Committee and the Fund s Board or (ii) as determined in good faith by the Manager s Valuation Committee. The Valuation Committee considers all relevant facts that are reasonably available, through either public information or information available to the Manager, when determining the fair value of a security. Those standardized fair valuation methodologies include, but are not limited to, valuing securities at the last sale price or initially at cost and subsequently adjusting the value based on: changes in company specific fundamentals, changes in an appropriate securities index, or changes in the value of similar securities which may be further adjusted for any discounts related to security-specific resale restrictions. When possible, such methodologies use observable market inputs such as unadjusted quoted prices of similar securities, observable interest rates, currency rates and yield curves. The methodologies used for valuing securities are not necessarily an indication of the risks associated with investing in those securities nor can it be assured that the Fund can obtain the fair value assigned to a security if it were to sell the security. Classifications Each investment asset or liability of the Fund is assigned a level at measurement date based on the significance and source of the inputs to its valuation. Various data inputs may be used in determining the value of each of the Fund s investments as of the reporting period end. These data inputs are categorized in the following hierarchy under applicable financial accounting standards: 1) Level 1-unadjusted quoted prices in active markets for identical assets or liabilities (including securities actively traded on a securities exchange) 2) Level 2-inputs other than unadjusted quoted prices that are observable for the asset or liability (such as unadjusted quoted prices for similar assets and market corroborated inputs such as interest rates, prepayment speeds, credit risks, etc.) 3) Level 3-significant unobservable inputs (including the Manager s own judgments about assumptions that market participants would use in pricing the asset or liability). The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. The Fund classifies each of its investments in investment companies which are publicly offered as Level 1. Investment companies that are not publicly offered, if any, are classified as Level 2 in the fair value hierarchy. The table below categorizes amounts that are included in the Fund's Statement of Assets and Liabilities at period end based on valuation input level: Level 1 Unadjusted Quoted Prices Level 2 Other Significant Observable Inputs Level 3 Significant Unobservable Inputs Value Assets Table Investments, at Value: Common Stocks Consumer Discretionary $ 24,482,973 $ 94,154,467 $ $ 118,637,440 Consumer Staples 11,380,439 43,291,681 54,672,120 Energy 8,198,032 8,198,032 Financials 7,787,117 13,269,609 21,056,726 Health Care 68,401,786 68,401,786 Industrials 97,212,449 97,212,449 Information Technology 10,429, ,059, ,488,898 Materials 7,106,879 16,050,410 23,157,289 Telecommunication Services 13,412,544 13,412,544 Preferred Stock 67,466 67,466 Investment Company 12,756,037 12,756,037 Total Assets $ 74,010,479 $ 479,050,308 $ $ 553,060,787 Forward currency exchange contracts and futures contracts, if any, are reported at their unrealized appreciation/depreciation at measurement date, which represents the change in the contract s value from trade date. All additional assets and liabilities included in the above table are reported at their market value at measurement date. For the reporting period, there were no transfers between levels. 4. Investments and Risks Risks of Foreign Investing. The Fund may invest in foreign securities which are subject to special risks. Securities traded in foreign markets may be less liquid and more volatile than those traded in U.S. markets. Foreign issuers are usually not subject to the same accounting and disclosure requirements that U.S. companies are subject to, which may make it difficult for the Fund to evaluate a foreign company s operations or financial condition. A change in the value of a foreign currency against the U.S. dollar will result in a change in the U.S. dollar value of investments denominated 16 OPPENHEIMER INTERNATIONAL GROWTH FUND/VA