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 AGGRESSIVE GROWTH 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, 2003 - DECEMBER 31, 2003
ITEM 1. REPORTS TO STOCKHOLDERS.
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. Over the 12-month period ended
December 31, 2003, the Fund delivered more modest gains than its benchmark. The
Fund's gains were driven primarily by the stock market's broadly based upward
trend. Performance relative to the benchmark was undermined by the
disproportionate strength in highly speculative, small-cap stocks with weak
underlying fundamentals, an investment profile the Fund generally avoided.
Performance particularly suffered due to the Fund's underweighted position in
technology, one of the market's strongest areas, and its overweighted position
in the relatively weak areas of health care service and pharmaceuticals.
Stock-specific disappointments included Cerner Corp., a healthcare information
technology provider, and Concord EFS, Inc., an electronic transaction processor,
both of which we sold in response to disappointing financial results.
On October 28, 2003, John O'Hare stepped in as portfolio manager. Under his
guidance, we broadened the Fund's portfolio and attempted to decrease overall
volatility by increasing the number and breadth of holdings. Our aim is to
deliver competitive results without subjecting shareholders to unnecessary risk.
As such, we focused on high quality growth companies with above-average earnings
that we believed were well positioned to sustain growth over the next three to
five years. In particular, we looked for leaders in their industries with
experienced management teams that had established strong track records of
fostering sales and earnings growth. We want to see companies with sustainable
competitive advantages, high margins and margin expansion, high return on
equity, and strong financial positions. We selected investments one security at
a time based on individual growth characteristics and upside appreciation
potential.
During the final two months of 2003, the Fund's portfolio grew from
approximately 40 to over 60 individual holdings. We reduced the size of the
Fund's largest holdings to under 3.5% of the total portfolio. We also reduced
the Fund's exposure to the technology and health care areas, and added to areas
in which the Fund held little exposure, such as energy and industrials, that we
believed offered strong growth prospects. Significant additions to the Fund's
portfolio included several business services and process companies, such as
Affiliated Computer Services, Inc. and Fiserv, Inc.; energy exploration
companies and service providers, such as Apache Corp. and Smith International,
Inc.; consumer-related companies, ranging from supermarket chains and food
retailers to automotive supply companies; health care providers; and various
industrials, such as Expeditors International of Washington, Inc. and Southwest
Airlines Co.
At the same time, we retained roughly half of the Fund's former holdings, all
of which met our strict investment criteria. Holdings that remained in the Fund
included, among others, biotechnology companies, such as Gilead Sciences, Inc.,
retailers, such as Bed Bath & Beyond Inc., health care service providers, such
as Stryker Corp.; and technology companies, such as Symantec Corp. 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, 2003. 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 October 16, 2000. 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 graphs assume 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. 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.
3 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
NON-SERVICE SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Aggressive Growth Fund/VA (Non-Service)
S&P 500 Index
[LINE GRAPH]
Oppenheimer Aggressive Growth S&P 500
Fund/VA (Non-Service) Index
12/31/1993 $10,000 $10,000
03/31/1994 9,447 9,621
06/30/1994 8,393 9,662
09/30/1994 9,244 10,133
12/31/1994 9,241 10,131
03/31/1995 9,633 11,117
06/30/1995 10,413 12,176
09/30/1995 11,720 13,143
12/31/1995 12,246 13,934
03/31/1996 13,278 14,682
06/30/1996 14,563 15,340
09/30/1996 15,183 15,814
12/31/1996 14,723 17,131
03/31/1997 12,981 17,591
06/30/1997 15,671 20,660
09/30/1997 17,810 22,207
12/31/1997 16,441 22,845
03/31/1998 18,585 26,029
06/30/1998 19,302 26,893
09/30/1998 14,814 24,224
12/31/1998 18,474 29,378
03/31/1999 20,266 30,841
06/30/1999 22,356 33,011
09/30/1999 23,258 30,955
12/31/1999 33,919 35,557
03/31/2000 42,618 36,371
06/30/2000 41,112 35,405
09/30/2000 43,643 35,062
12/31/2000 30,107 32,321
03/31/2001 22,081 28,491
06/30/2001 21,979 30,158
09/30/2001 19,031 25,733
12/31/2001 20,693 28,482
03/31/2002 19,625 28,561
06/30/2002 17,125 24,737
09/30/2002 14,528 20,466
12/31/2002 14,942 22,190
03/31/2003 14,712 21,491
06/30/2003 16,992 24,798
09/30/2003 17,928 25,454
12/31/2003 18,766 28,551
AVERAGE ANNUAL TOTAL RETURNS OF NON-SERVICE SHARES OF THE FUND AT 12/31/03
1-Year 25.59% 5-Year 0.31% 10-Year 6.50% Inception Date 8/15/1986
SERVICE SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Aggressive Growth Fund/VA (Service)
S&P 500 Index
[LINE GRAPH]
Oppenheimer Aggressive Growth S&P 500
Fund/VA (Service) Index
10/16/2000 $10,000 $10,000
12/31/2000 7,240 9,257
03/31/2001 5,311 8,161
06/30/2001 5,285 8,638
09/30/2001 4,575 7,370
12/31/2001 4,973 8,158
03/31/2002 4,713 8,181
06/30/2002 4,110 7,085
09/30/2002 3,484 5,862
12/31/2002 3,578 6,356
03/31/2003 3,521 6,156
06/30/2003 4,067 7,103
09/30/2003 4,290 7,291
12/31/2003 4,489 8,178
AVERAGE ANNUAL TOTAL RETURNS OF SERVICE SHARES OF THE FUND AT 12/31/03
1-Year 25.44% Since Inception -22.10% Inception Date 10/16/2000
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 MORE CURRENT
PERFORMANCE DATA, 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.
INVESTORS SHOULD CONSIDER THE FUND'S INVESTMENT OBJECTIVES, RISKS, AND CHARGES
AND EXPENSES CAREFULLY BEFORE INVESTING. THE FUND'S PROSPECTUS CONTAINS THIS AND
OTHER INFORMATION ABOUT THE FUND, AND MAY BE OBTAINED BY ASKING YOUR FINANCIAL
ADVISOR OR CALLING US AT 1.800.981.2871. READ THE PROSPECTUS CAREFULLY BEFORE
INVESTING.
GRAPHS ARE NOT DRAWN TO SAME SCALE. AN EXPLANATION OF THE CALCULATION OF THE
PERFORMANCE IS IN THE STATEMENT OF ADDITIONAL INFORMATION.
4 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
STATEMENT OF INVESTMENTS December 31, 2003
- --------------------------------------------------------------------------------
MARKET VALUE
SHARES SEE NOTE 1
- ----------------------------------------------------------------
COMMON STOCKS--97.3%
- ----------------------------------------------------------------
CONSUMER DISCRETIONARY--24.7%
- ----------------------------------------------------------------
AUTO COMPONENTS--1.7%
Gentex Corp. 430,300 $ 19,002,048
- ----------------------------------------------------------------
AUTOMOBILES--1.0%
Harley-Davidson, Inc. 241,400 11,473,742
- ----------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--6.2%
Krispy Kreme Doughnuts, Inc. 1 148,300 5,427,780
- ----------------------------------------------------------------
P.F. Chang's China Bistro, Inc. 1 230,000 11,702,400
- ----------------------------------------------------------------
Panera Bread Co., Cl. A 1 250,700 9,910,171
- ----------------------------------------------------------------
Ruby Tuesday, Inc. 616,200 17,555,538
- ----------------------------------------------------------------
Starbucks Corp. 1 747,500 24,712,350
----------------
69,308,239
- ----------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS--1.0%
Marvel Enterprises, Inc. 1 376,200 10,951,182
- ----------------------------------------------------------------
MEDIA--1.7%
Univision Communications, Inc.,
Cl. A 1 479,400 19,027,386
- ----------------------------------------------------------------
MULTILINE RETAIL--3.9%
Family Dollar Stores, Inc. 805,100 28,886,988
- ----------------------------------------------------------------
Fred's, Inc. 478,700 14,830,126
----------------
43,717,114
- ----------------------------------------------------------------
SPECIALTY RETAIL--7.1%
Bed Bath & Beyond, Inc. 1 727,600 31,541,460
- ----------------------------------------------------------------
Chico's FAS, Inc. 1 462,700 17,096,765
- ----------------------------------------------------------------
O'Reilly Automotive, Inc. 1 407,097 15,616,241
- ----------------------------------------------------------------
PetsMart, Inc. 672,200 15,998,360
----------------
80,252,826
- ----------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS--2.1%
Coach, Inc. 1 643,400 24,288,350
- ----------------------------------------------------------------
CONSUMER STAPLES--2.1%
- ----------------------------------------------------------------
FOOD & STAPLES RETAILING--2.1%
Whole Foods Market, Inc. 1 354,000 23,764,020
- ----------------------------------------------------------------
ENERGY--4.7%
- ----------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--1.6%
Smith International, Inc. 1 439,400 18,243,888
- ----------------------------------------------------------------
OIL & GAS--3.1%
Apache Corp. 249,500 20,234,450
- ----------------------------------------------------------------
XTO Energy, Inc. 493,600 13,968,880
----------------
34,203,330
- ----------------------------------------------------------------
FINANCIALS--8.2%
- ----------------------------------------------------------------
COMMERCIAL BANKS--1.6%
Commerce Bancorp, Inc. 347,100 18,285,228
MARKET VALUE
SHARES SEE NOTE 1
- ----------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--3.3%
Investors Financial Services Corp. 497,200 $ 19,097,452
- ----------------------------------------------------------------
Legg Mason, Inc. 232,500 17,944,350
----------------
37,041,802
- ----------------------------------------------------------------
INSURANCE--1.4%
AMBAC Financial Group, Inc. 235,100 16,313,589
- ----------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE--1.9%
Doral Financial Corp. 385,200 12,434,256
- ----------------------------------------------------------------
Radian Group, Inc. 176,000 8,580,000
----------------
21,014,256
- ----------------------------------------------------------------
HEALTH CARE--17.4%
- ----------------------------------------------------------------
BIOTECHNOLOGY--5.3%
Gilead Sciences, Inc. 1 559,400 32,523,516
- ----------------------------------------------------------------
Idexx Laboratories, Inc. 1 201,641 9,331,945
- ----------------------------------------------------------------
Invitrogen Corp. 1 257,900 18,053,000
----------------
59,908,461
- ----------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--4.1%
Stryker Corp. 158,900 13,508,089
- ----------------------------------------------------------------
Varian Medical Systems, Inc. 1 482,200 33,320,020
----------------
46,828,109
- ----------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--7.0%
Coventry Health Care, Inc. 1 62,600 4,037,074
- ----------------------------------------------------------------
Health Management Associates,
Inc., Cl. A 1,245,200 29,884,800
- ----------------------------------------------------------------
Lincare Holdings, Inc. 1 604,200 18,144,126
- ----------------------------------------------------------------
Patterson Dental Co. 1 415,800 26,677,728
----------------
78,743,728
- ----------------------------------------------------------------
PHARMACEUTICALS--1.0%
Mylan Laboratories, Inc. 429,700 10,854,222
- ----------------------------------------------------------------
INDUSTRIALS--15.7%
- ----------------------------------------------------------------
AIR FREIGHT & LOGISTICS--2.5%
Expeditors International of
Washington, Inc. 763,500 28,753,410
- ----------------------------------------------------------------
AIRLINES--2.2%
JetBlue Airways Corp. 1 204,700 5,428,644
- ----------------------------------------------------------------
Southwest Airlines Co. 1,214,500 19,602,030
----------------
25,030,674
- ----------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--5.7%
Apollo Group, Inc., Cl. A 1 467,900 31,817,200
- ----------------------------------------------------------------
Corporate Executive Board Co. 1 349,100 16,292,497
- ----------------------------------------------------------------
Stericycle, Inc. 1 339,800 15,868,660
----------------
63,978,357
5 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
STATEMENT OF INVESTMENTS Continued
- ----------------------------------------------------------------
MARKET VALUE
SHARES SEE NOTE 1
- ----------------------------------------------------------------
MACHINERY--1.6%
Donaldson Co., Inc. 302,700 $ 17,907,732
- ----------------------------------------------------------------
ROAD & RAIL--2.0%
C.H. Robinson Worldwide, Inc. 589,100 22,332,781
- ----------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS--1.7%
Fastenal Co. 377,300 18,842,362
- ----------------------------------------------------------------
INFORMATION TECHNOLOGY--24.5%
- ----------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--1.4%
QLogic Corp. 1 306,900 15,836,040
- ----------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--3.4%
CDW Corp. 380,500 21,977,680
- ----------------------------------------------------------------
Thermo Electron Corp. 1 646,600 16,294,320
----------------
38,272,000
- ----------------------------------------------------------------
IT SERVICES--5.0%
Affiliated Computer Services, Inc.,
Cl. A 1 237,000 12,907,020
- ----------------------------------------------------------------
Fiserv, Inc. 1 331,500 13,097,565
- ----------------------------------------------------------------
Paychex, Inc. 343,300 12,770,760
- ----------------------------------------------------------------
Sungard Data Systems, Inc. 1 624,600 17,307,666
----------------
56,083,011
- ----------------------------------------------------------------
OFFICE ELECTRONICS--2.4%
Zebra Technologies Corp., Cl. A 1 408,100 27,085,597
- ----------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--1.5%
Linear Technology Corp. 400,200 16,836,414
- ----------------------------------------------------------------
SOFTWARE--10.8%
Adobe Systems, Inc. 520,700 20,463,510
- ----------------------------------------------------------------
Amdocs Ltd. 1 557,200 12,525,856
- ----------------------------------------------------------------
Citrix Systems, Inc. 1 226,537 4,804,850
- ----------------------------------------------------------------
Electronic Arts, Inc. 1 578,800 27,655,064
- ----------------------------------------------------------------
Intuit, Inc. 1 484,600 25,640,186
- ----------------------------------------------------------------
Symantec Corp. 1 863,400 29,916,810
----------------
121,006,276
----------------
Total Common Stocks
(Cost $980,655,647) 1,095,186,174
MARKET VALUE
SHARES SEE NOTE 1
- ----------------------------------------------------------------
PREFERRED STOCKS--0.3%
Axsun Technologies, Inc., Cv.,
Series C 1,2,3 3,170,523 $ 1,350,326
- ----------------------------------------------------------------
Blaze Network Products, Inc.,
8% Cv., Series D 1,2,3 1,147,862 --
- ----------------------------------------------------------------
BroadBand Office, Inc., Cv.,
Series C 1,2,3 211,641 --
- ----------------------------------------------------------------
Centerpoint Broadband
Technologies, Inc.:
Cv., Series D 1,2,3 1,298,701 --
Cv., Series Z 1,2,3 262,439 --
- ----------------------------------------------------------------
fusionOne, Inc., 8% Non-Cum. Cv.,
Series D 1,2,3 2,663,972 95,104
- ----------------------------------------------------------------
MicroPhotonix Integration Corp.,
Cv., Series C 1,2,3 633,383 --
- ----------------------------------------------------------------
Multiplex, Inc., Cv.,
Series C 1,2,3 2,330,253 1,447,786
- ----------------------------------------------------------------
Questia Media, Inc., Cv.,
Series B 1,2,3 2,329,735 168,440
----------------
Total Preferred Stocks
(Cost $113,962,357) 3,061,656
PRINCIPAL
AMOUNT
- ----------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--2.4%
Undivided interest of 12.06% in joint
repurchase agreement (Principal Amount/
Market Value $226,368,000, with a
maturity value of $226,378,061) with DB
Alex Brown LLC, 0.80%, dated 12/31/03,
to be repurchased at $27,305,214 on
1/2/04, collateralized by U.S. Treasury
Nts., 6.75%, 5/31/05, with a value of
$231,043,540
(Cost $27,304,000) $27,304,000 27,304,000
- ----------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $1,121,922,004) 100.0% 1,125,551,830
- ----------------------------------------------------------------
LIABILITIES IN EXCESS
OF OTHER ASSETS (0.0) (110,865)
-------------------------------
NET ASSETS 100.0% $1,125,440,965
===============================
6 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
2. Identifies issues considered to be illiquid or restricted. See Note 6 of
Notes to Financial Statements.
3. Affiliated company. Represents ownership of at least 5% of the voting
securities of the issuer, and is or was an affiliate, as defined in the
Investment Company Act of 1940, at or during the period ended December 31, 2003.
The aggregate fair value of securities of affiliated companies held by the Fund
as of December 31, 2003 amounts to $3,061,656. Transactions during the period in
which the issuer was an affiliate are as follows:
SHARES GROSS GROSS SHARES UNREALIZED
DECEMBER 31, 2002 ADDITIONS REDUCTIONS DECEMBER 31, 2003 DEPRECIATION
- ------------------------------------------------------------------------------------------------------------------------------------
STOCKS AND/OR WARRANTS
Axsun Technologies, Inc., Cv., Series C 3,170,523 -- -- 3,170,523 $ 35,649,677
Blaze Network Products, Inc., 8% Cv., Series D 1,147,862 -- -- 1,147,862 7,346,317
BroadBand Office, Inc., Cv., Series C 211,641 -- -- 211,641 4,000,015
Centerpoint Broadband Technologies, Inc., Cv., Series D 1,298,701 -- -- 1,298,701 13,999,997
Centerpoint Broadband Technologies, Inc., Cv., Series Z 262,439 -- -- 262,439 6,999,992
fusionOne, Inc., 8% Non-Cum. Cv., Series D 2,663,972 -- -- 2,663,972 14,370,264
MicroPhotonix Integration Corp., Cv., Series C 633,383 -- -- 633,383 4,000,004
Multiplex, Inc., Cv., Series C 2,330,253 -- -- 2,330,253 15,702,876
Questia Media, Inc., Cv., Series B 2,329,735 -- -- 2,329,735 8,831,559
-------------
$110,900,701
=============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
7 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
STATEMENT OF ASSETS AND LIABILITIES December 31, 2003
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at value--see accompanying statement:
Unaffiliated companies (cost $1,007,959,647) $1,122,490,174
Affiliated companies (cost $113,962,357) 3,061,656
---------------
1,125,551,830
- ------------------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest and dividends 210,737
Shares of beneficial interest sold 197,806
Other 7,240
---------------
Total assets 1,125,967,613
- ------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Bank overdraft 823
- ------------------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Shares of beneficial interest redeemed 344,583
Investments purchased 76,847
Shareholder reports 51,113
Legal, auditing and other professional fees 34,661
Distribution and service plan fees 5,478
Trustees' compensation 5,287
Transfer and shareholder servicing agent fees 848
Other 7,008
---------------
Total liabilities 526,648
- ------------------------------------------------------------------------------------------------------------------------
NET ASSETS $1,125,440,965
===============
- ------------------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
Par value of shares of beneficial interest $ 30,657
- ------------------------------------------------------------------------------------------------------------------------
Additional paid-in capital 1,909,596,778
- ------------------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (787,816,296)
- ------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 3,629,826
---------------
NET ASSETS $1,125,440,965
===============
- ------------------------------------------------------------------------------------------------------------------------
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
$1,113,743,024 and 30,337,235 shares of beneficial interest outstanding) $36.71
- ------------------------------------------------------------------------------------------------------------------------
Service Shares:
Net asset value, redemption price per share and offering price per share (based on net assets of
$11,697,941 and 320,169 shares of beneficial interest outstanding) $36.54
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
8 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
STATEMENT OF OPERATIONS For the Year Ended December 31, 2003
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of foreign withholding taxes of $21,019) $ 1,809,704
- ----------------------------------------------------------------------------------------------
Interest 1,014,753
-------------
Total investment income 2,824,457
- ----------------------------------------------------------------------------------------------
EXPENSES
Management fees 7,110,272
- ----------------------------------------------------------------------------------------------
Distribution and service plan fees--Service shares 9,523
- ----------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service shares 10,406
Service shares 176
- ----------------------------------------------------------------------------------------------
Shareholder reports 92,622
- ----------------------------------------------------------------------------------------------
Trustees' compensation 27,749
- ----------------------------------------------------------------------------------------------
Custodian fees and expenses 1,629
- ----------------------------------------------------------------------------------------------
Other 97,254
-------------
Total expenses 7,349,631
Less reduction to custodian expenses (1,629)
-------------
Net expenses 7,348,002
- ----------------------------------------------------------------------------------------------
NET INVESTMENT LOSS (4,523,545)
- ----------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
Net realized gain on:
Investments (including premiums on options exercised) 62,484,464
Closing and expiration of option contracts written 335,012
-------------
Net realized gain 62,819,476
- ----------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments 175,024,712
- ----------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $233,320,643
=============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
9 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2003 2002
- --------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment loss $ (4,523,545) $ (3,634,134)
- --------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) 62,819,476 (236,178,562)
- --------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) 175,024,712 (188,237,967)
-------------------------------
Net increase (decrease) in net assets resulting from operations 233,320,643 (428,050,663)
- --------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income:
Non-Service shares -- (8,907,419)
Service shares -- (359)
- --------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
Net increase (decrease) in net assets resulting from beneficial interest
transactions:
Non-Service shares (98,877,573) (204,697,344)
Service shares 10,935,179 114,405
- --------------------------------------------------------------------------------------------------------------------
NET ASSETS
Total increase (decrease) 145,378,249 (641,541,380)
- --------------------------------------------------------------------------------------------------------------------
Beginning of period 980,062,716 1,621,604,096
-------------------------------
End of period $1,125,440,965 $ 980,062,716
===============================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
10 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
NON-SERVICE SHARES YEAR ENDED DECEMBER 31 2003 2002 2001 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
Net asset value, beginning of period $29.23 $ 40.72 $ 70.77 $ 82.31 $44.83
- ------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.15) (.10) .23 .53 (.09)
Net realized and unrealized gain (loss) 7.63 (11.16) (21.38) (8.59) 37.57
--------------------------------------------------------------
Total from investment operations 7.48 (11.26) (21.15) (8.06) 37.48
- ------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income -- (.23) (.54) -- --
Distributions from net realized gain -- -- (8.36) (3.48) --
--------------------------------------------------------------
Total dividends and/or distributions to shareholders -- (.23) (8.90) (3.48) --
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $36.71 $ 29.23 $ 40.72 $ 70.77 $82.31
==============================================================
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1 25.59% (27.79)% (31.27)% (11.24)% 83.60%
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $1,113,743 $ 979,919 $1,621,550 $2,595,101 $2,104,128
- ------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $1,041,584 $1,240,435 $1,898,088 $2,978,465 $1,314,349
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income (loss) (0.43)% (0.29)% 0.47% 0.65% (0.17)%
Total expenses 0.70% 3 0.68% 3 0.68% 3 0.64% 3 0.67% 3
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 154% 54% 134% 39% 66%
1. 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.
2. Annualized for periods of less than one full year.
3. Reduction to custodian expenses less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SERVICE SHARES YEAR ENDED DECEMBER 31 2003 2002 2001 2000 1
- -----------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
Net asset value, beginning of period $29.13 $ 40.70 $ 70.77 $ 97.75
- -----------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income -- 2 .16 .19 .20
Net realized and unrealized gain (loss) 7.41 (11.53) (21.36) (27.18)
----------------------------------------------
Total from investment operations 7.41 (11.37) (21.17) (26.98)
- -----------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income -- (.20) (.54) --
Distributions from net realized gain -- -- (8.36) --
----------------------------------------------
Total dividends and/or distributions to shareholders -- (.20) (8.90) --
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $36.54 $ 29.13 $ 40.70 $ 70.77
==============================================
- -----------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 25.44% (28.05)% (31.31)% (27.60)%
- -----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $11,698 $144 $54 $1
- -----------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 3,858 $ 72 $31 $1
- -----------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income (loss) (0.72)% (0.56)% 0.09% 1.14%
Total expenses 0.95% 1.55% 0.83% 0.64%
Expenses after expense reimbursement or fee waiver and
reduction to custodian expenses N/A 5 0.98% N/A 5 N/A 5
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 154% 54% 134% 39%
1. For the period from October 16, 2000 (inception of offering) to December 31,
2000.
2. Less than $0.005 per share.
3. 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.
4. Annualized for periods of less than one full year.
5. Reduction to custodian expenses less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
12 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Aggressive Growth Fund/VA (the Fund) is a separate series of
Oppenheimer Variable Account Funds (the Trust), an open-end management
investment company registered under the Investment Company Act of 1940, as
amended. The Fund's investment objective is to seek capital appreciation by
investing in "growth type" 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. All 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 by minor amounts due to each class having its
own expenses directly attributable to that class.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. Securities listed or traded on National Stock Exchanges or
other domestic or foreign exchanges are valued based on the last sale price of
the security traded on that exchange prior to the time when the Fund's assets
are valued. 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. Securities (including restricted securities)
for which quotations are not readily available are valued primarily using
dealer-supplied valuations, a portfolio pricing service authorized by the Board
of Trustees, or at their fair value. 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 foreign 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).
- --------------------------------------------------------------------------------
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. Secured by U.S. government securities, 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.
13 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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 TAX PURPOSES
----------------------------------------------------------------------------
$-- $-- $787,400,423 $3,213,944
1. As of December 31, 2003, the Fund had $787,400,423 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, 2003,
details of the capital loss carryforwards were as follows:
EXPIRING
-------------------------
2009 $557,175,601
2010 230,224,822
------------
Total $787,400,423
============
2. During the fiscal year December 31, 2003, the Fund utilized $32,872,643 of
capital loss carryforward to offset capital gains realized in that fiscal year.
During the fiscal year December 31, 2002, the Fund did not utilize any capital
loss carryforwards.
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, 2003. Net assets of
the Fund were unaffected by the reclassifications.
REDUCTION TO
ACCUMULATED
REDUCTION TO NET INVESTMENT
PAID-IN CAPITAL LOSS
-----------------------------------------------
$4,523,545 $4,523,545
The tax character of distributions paid during the years ended December 31, 2003
and December 31, 2002 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
--------------------------------------------------------------------------
Distributions paid from:
Ordinary income $-- $8,907,778
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, 2003 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 $1,122,337,886
==============
Gross unrealized appreciation $ 139,443,578
Gross unrealized depreciation (136,229,634)
--------------
Net unrealized appreciation $ 3,213,944
==============
- --------------------------------------------------------------------------------
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. Under the plan, deferred amounts are treated as though
equal dollar amounts had been invested in shares of the Fund or are invested in
other Oppenheimer funds selected by the Trustee. Deferral of trustees'
14 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
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.
- --------------------------------------------------------------------------------
EXPENSE OFFSET ARRANGEMENT. The reduction of custodian fees, if applicable,
represents earnings on cash balances maintained by the Fund.
- --------------------------------------------------------------------------------
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 accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
YEAR ENDED DECEMBER 31, 2003 YEAR ENDED DECEMBER 31, 2002
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------------
NON-SERVICE SHARES
Sold 7,581,692 $ 249,645,333 7,012,727 $ 240,059,154
Dividends and/or distributions reinvested -- -- 230,762 8,907,419
Redeemed (10,767,148) (348,522,906) (13,538,032) (453,663,917)
--------------------------------------------------------------------
Net decrease (3,185,456) $ (98,877,573) (6,294,543) $(204,697,344)
====================================================================
- ---------------------------------------------------------------------------------------------------------------------
SERVICE SHARES
Sold 328,184 $ 11,390,813 5,604 $ 188,927
Dividends and/or distributions reinvested -- -- 9 359
Redeemed (12,954) (455,634) (1,993) (74,881)
--------------------------------------------------------------------
Net increase 315,230 $ 10,935,179 3,620 $ 114,405
====================================================================
- --------------------------------------------------------------------------------
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, 2003, were
$1,475,858,581 and $1,488,037,400, respectively.
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Trust 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, 0.60% of the next $700 million and 0.58% of average annual
net assets over $1.5 billion.
15 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
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, 2003, the Fund paid
$10,185 to OFS for services to the Fund.
Additionally, funds offered in variable annuity separate accounts are subject
to minimum fees of $5,000 for assets of less than $10 million and $10,000 for
assets of $10 million or more. The Fund is subject to the minimum fee in the
event that the per account fee does not equal or exceed the applicable minimum
fee.
OFS has voluntarily agreed to limit transfer and shareholder servicing agent
fees up to an annual rate of 0.35% of average net assets of the Fund. This
undertaking may be amended or withdrawn at any time.
- --------------------------------------------------------------------------------
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 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 the Service shares of
the Fund. Fees incurred by the Fund under the plan are detailed in the Statement
of Operations..
- --------------------------------------------------------------------------------
5. OPTION ACTIVITY
The Fund may buy and sell put and call options, or write put and covered call
options on portfolio securities in order to produce incremental earnings or
protect against changes in the value of portfolio securities.
The Fund generally purchases put options or writes covered call options to
hedge against adverse movements in the value of portfolio holdings. When an
option is written, the Fund receives a premium and becomes obligated to sell or
purchase the underlying security at a fixed price, upon exercise of the option.
Options are valued daily based upon the last sale price on the principal
exchange on which the option is traded and unrealized appreciation or
depreciation is recorded. The Fund will realize a gain or loss upon the
expiration or closing of the option transaction. When an option is exercised,
the proceeds on sales for a written call option, the purchase cost for a written
put option, or the cost of the security for a purchased put or call option is
adjusted by the amount of premium received or paid.
Securities designated to cover outstanding call options are noted in the
Statement of Investments where applicable. Shares subject to call, expiration
date, exercise price, premium received and market value are detailed in a note
to the Statement of Investments. Options written are reported as a liability in
the Statement of Assets and Liabilities. Realized gains and losses are reported
in the Statement of Operations.
The risk in writing a call option is that the Fund gives up the opportunity
for profit if the market price of the security increases and the option is
exercised. The risk in writing a put option is that the Fund may incur a loss if
the market price of the security decreases and the option is exercised. The risk
in buying an option is that the Fund pays a premium whether or not the option is
exercised. The Fund also has the additional risk of not being able to enter into
a closing transaction if a liquid secondary market does not exist.
Written option activity for the year ended December 31, 2003 was as follows:
CALL OPTIONS
----------------------------
NUMBER OF AMOUNT OF
CONTRACTS PREMIUMS
- -------------------------------------------------------------------------
Options outstanding as of December 31, 2002 -- $ --
Options written 2,840 436,467
Options closed or expired (2,460) (335,012)
Options exercised (380) (101,455)
----------------------------
Options outstanding as of December 31, 2003 -- $ --
============================
16 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
- --------------------------------------------------------------------------------
6. ILLIQUID OR RESTRICTED SECURITIES
As of December 31, 2003, investments in securities included issues that are
illiquid or restricted. Restricted securities are purchased in private placement
transactions, are not registered under the Securities Act of 1933, may have
contractual restrictions on resale, and are valued under methods approved by the
Board of Trustees as reflecting fair value. A security may also be considered
illiquid if it lacks a readily available market or if its valuation has not
changed for a certain period of time. The Fund intends to invest no more than
15% of its net assets (determined at the time of purchase and reviewed
periodically) in illiquid or restricted securities. Certain restricted
securities, eligible for resale to qualified institutional investors, are not
subject to that limitation. The aggregate value of illiquid or restricted
securities subject to this limitation as of December 31, 2003 was $3,061,656,
which represents 0.27% of the Fund's net assets, all of which is considered
restricted. Information concerning restricted securities is as follows:
ACQUISITION VALUATION AS OF UNREALIZED
SECURITY DATES COST DECEMBER 31, 2003 DEPRECIATION
- ---------------------------------------------------------------------------------------------------------------
STOCKS AND/OR WARRANTS
Axsun Technologies, Inc., Cv., Series C 12/13/00 $37,000,003 $1,350,326 $35,649,677
Blaze Network Products, Inc., 8% Cv., Series D 10/17/00 7,346,317 -- 7,346,317
BroadBand Office, Inc., Cv., Series C 8/28/00 4,000,015 -- 4,000,015
Centerpoint Broadband Technologies, Inc.,
Cv., Series D 10/23/00 13,999,997 -- 13,999,997
Centerpoint Broadband Technologies, Inc.,
Cv., Series Z 5/26/00 6,999,992 -- 6,999,992
fusionOne, Inc., 8% Non-Cum. Cv., Series D 9/6/00 14,465,368 95,104 14,370,264
MicroPhotonix Integration Corp., Cv., Series C 7/6/00 4,000,004 -- 4,000,004
Multiplex, Inc., Cv., Series C 2/9/01 17,150,662 1,447,786 15,702,876
Questia Media, Inc., Cv., Series B 8/18/00 8,999,999 168,440 8,831,559
- --------------------------------------------------------------------------------
7. BORROWING AND LENDING ARRANGEMENTS
The Fund entered into an "interfund borrowing and lending arrangement" with
other funds in the Oppenheimer funds complex, to allow funds to borrow for
liquidity purposes. The arrangement was initiated pursuant to exemptive relief
granted by the Securities and Exchange Commission (the SEC) to allow these
affiliated funds to lend money to, and borrow money from, each other, in an
attempt to reduce borrowing costs below those of bank loan facilities. The SEC's
order requires the Fund's Board of Trustees to adopt operating policies and
procedures to administer interfund borrowing and lending. Under the arrangement
the Fund may lend money to other Oppenheimer funds and may borrow from other
Oppenheimer funds at a rate set by the Fund's Board of Trustees, based upon a
recommendation by the Manager. The Fund's borrowings, if any, are subject to
asset coverage requirements under the Investment Company Act and the provisions
of the SEC order and other applicable regulations. If the Fund borrows money,
there is a risk that the loan could be called on one day's notice, in which case
the Fund might have to borrow from a bank at higher rates if a loan were not
available from another Oppenheimer fund. If the Fund lends money to another
fund, it will be subject to the risk that the other fund might not repay the
loan in a timely manner, or at all.
The Fund had no interfund borrowings or loans outstanding during the year
ended or at December 31, 2003.
17 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER AGGRESSIVE
GROWTH FUND/VA:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer Aggressive Growth Fund/VA, a series of Oppenheimer Variable Account
Funds, including the statement of investments, as of December 31, 2003, 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 indicated. 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 auditing standards generally
accepted in the United States of America. 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 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, 2003, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also 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 Aggressive Growth Fund/VA as of December 31, 2003, 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 indicated, in conformity with accounting principles generally accepted
in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
February 12, 2004
18 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2004, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2003. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
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 Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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
1.800.225.5677, (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 will be
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 first such
filing is due no later than August 31, 2004, for the twelve months ended June
30, 2004. Once filed, the Fund's Form N-PX filing will be available (i) without
charge, upon request, by calling the Fund toll-free at 1.800.225.5677, and (ii)
on the SEC's website at www.sec.gov.
19 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS HELD BY TRUSTEE;
FUND, LENGTH OF SERVICE, AGE NUMBER OF FUNDS IN FUND COMPLEX CURRENTLY OVERSEEN BY TRUSTEE
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 Company
Chairman of the Board (since 1991), Centennial State Mortgage Company (since 1994), The El Paso Mortgage Company
(since 2003) and (since 1993), Transland Financial Services, Inc. (since 1997); Chairman of the following
Trustee (since 1999) private companies: Great Frontier Insurance (insurance agency) (since 1995), Ambassador Media
Age: 66 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 private
Trustee (since 1993) equity funds) (until February 2001); Chairman, President and Chief Executive Officer of A.G.
Age: 72 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 (until April 1999): Senior Vice President (from September 1987) and Treasurer (from
Trustee (since 1997) March 1985) of OppenheimerFunds, Inc. (the Manager); Vice President (from June 1983) and
Age: 67 Treasurer (since March 1985) of OppenheimerFunds Distributor, Inc. (a subsidiary of the
Manager); Senior Vice President (since February 1992), Treasurer (since July 1991) Assistant
Secretary and a director (since December 1991) of Centennial Asset Management Corporation; Vice
President (since October 1989) and Treasurer (since April 1986) of HarbourView Asset Management
Corporation (an investment advisory subsidiary of the Manager); President, Treasurer and a
director (June 1989-January 1990) of Centennial Capital Corporation (an investment advisory
subsidiary of the Manager); Vice President and Treasurer (since August 1978) and Secretary
(since April 1981) of Shareholder Services, Inc. (a transfer agent subsidiary of the Manager);
Vice President, Treasurer and Secretary (since November 1989) of Shareholder Financial
Services, Inc. (a transfer agent subsidiary of the Manager); Assistant Treasurer (since March
1998) of Oppenheimer Acquisition Corp. (the Manager's parent corporation); Treasurer (since
November 1989) of Oppenheimer Partnership Holdings, Inc. (a holding company subsidiary of the
Manager); Vice President and Treasurer (since July 1996) of Oppenheimer Real Asset Management,
Inc. (an investment advisory subsidiary of the Manager); Chief Executive Officer and director
(since March 1996) of MultiSource Services, Inc. (a broker-dealer subsidiary of the Manager);
Treasurer (since October 1997) of OppenheimerFunds International Ltd. and OppenheimerFunds plc
(offshore fund management subsidiaries of the Manager). Oversees 38 portfolios in the
OppenheimerFunds complex.
EDWARD L. CAMERON, A member of The Life Guard of Mount Vernon, George Washington's home (since June 2000).
Trustee (since 1999) Formerly (March 2001 - May 2002) Director of Genetic ID, Inc. and its subsidiaries (a privately
Age: 65 held biotech company); a partner with PricewaterhouseCoopers LLP (from 1974-1999) (an
accounting firm) and Chairman (from 1994-1998), Price Waterhouse LLP Global Investment
Management Industry Services Group. Oversees 38 portfolios in the OppenheimerFunds complex.
JON S. FOSSEL, Chairman and Director (since 1998) of Rocky Mountain Elk Foundation (a not-for-profit
Trustee (since 1990) foundation); and a director (since October 1999) of P.R. Pharmaceuticals (a privately held
Age: 61 company) and UNUMProvident (an insurance company) (since June 1, 2002). Formerly 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 of Oppenheimer Acquisition
Corp., Shareholders Services Inc. and Shareholder Financial Services, Inc. (until October
1995). Oversees 38 portfolios in the OppenheimerFunds complex.
20 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
SAM FREEDMAN, Director of Colorado Uplift (a non-profit charity) (since September 1984). Formerly (until
Trustee (since 1996) October 1994) Mr. Freedman held several positions in subsidiary or affiliated companies of the
Age: 63 Manager. Oversees 38 portfolios in the OppenheimerFunds complex.
BEVERLY L. HAMILTON, Trustee (since 1996) of MassMutual Institutional Funds and of MML Series Investment Fund
Trustee (since 2002) (open-end investment companies); Director of MML Services (since April 1987) and America Funds
Age: 57 Emerging Markets Growth Fund (since October 1991) (both are investment companies), The
California Endowment (a philanthropy organization) (since April 2002), and Community Hospital
of Monterey Peninsula, (since February 2002); a trustee (since February 2000) of Monterey
International Studies (an educational organization), and an advisor to Unilever (Holland)'s
pension fund and to Credit Suisse First Boston's Sprout venture capital unit. Mrs. Hamilton
also is a member of the investment committees of the Rockefeller Foundation, the University of
Michigan and Hartford Hospital. Formerly, President (February 1991-April 2000) ARCO Investment
Management Company. Oversees 37 portfolios in the OppenheimerFunds complex.
ROBERT J. MALONE, Chairman and CEO (since 2003) of Steele Street State Bank (a commercial banking entity);
Trustee (since 2002) Director (since 2001) of Jones Knowledge, Inc. (a privately held company), U.S. Exploration,
Age: 59 Inc., (since 1997), Colorado UpLIFT (a non-profit organization) (since 1986) and a trustee of
the Gallagher Family Foundation (non-profit organization) (since 2000). Formerly, Chairman of
U.S. Bank (a subsidiary of U.S. Bancorp and formerly Colorado National Bank,) (July 1996-April
1, 1999) and a director of Commercial Assets, Inc. (a REIT) (1993-2000). Oversees 37 portfolios
in the OppenheimerFunds complex.
F. WILLIAM MARSHALL, JR., Trustee (since 1996) of MassMutual Institutional Funds and of MML Series Investment Fund
Trustee (since 2000) (open-end investment companies); Trustee (since 1987), Chairman of the Board (since 2003) and
Age: 61 Chairman of the investment committee (since 1994) for the Worcester Polytech Institute;
President and Treasurer (since January 1999) of the SIS Fund (a private not for profit
charitable fund); Trustee (since 1995) of the Springfield Library and Museum Association;
Trustee (since 1996) of the Community Music School of Springfield. 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); President,
Chief Executive Officer and Director (May 1993-December 1998) of SIS Bankcorp, Inc. and SIS
Bank (formerly Springfield Institution for Savings) and Executive Vice President (January
1999-July 1999) of Peoples Heritage Financial Group, Inc. Oversees 38 portfolios in the
OppenheimerFunds complex.
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INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IN THE CHART BELOW IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET,
AND OFFICER 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 September
President and Trustee 2000) of the Manager; President and a director or trustee of other Oppenheimer funds; President
(since 2001) and a director (since July 2001) of Oppenheimer Acquisition Corp. and of Oppenheimer
Age: 54 Partnership Holdings, Inc.; a director (since November 2001) of OppenheimerFunds Distributor,
Inc.; Chairman and a director (since July 2001) of Shareholder Services, Inc. and of
Shareholder Financial Services, Inc.; 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 OppenheimerFunds, Inc.: OFI
Institutional Asset Management, Inc. and Centennial Asset Management Corporation (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.; a director (since November 2001) of Trinity Investment
Management Corp. and Tremont Advisers, Inc. (investment advisory affiliates of the Manager);
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 shares of David L. Babson & Company, Inc.); 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 72 portfolios as a
Trustee/Officer and 10 portfolios as an Officer in the OppenheimerFunds complex.
21 | OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
TRUSTEES AND OFFICERS Unaudited / Continued
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OFFICERS THE ADDRESS OF THE OFFICERS IN THE CHART BELOW IS AS FOLLOWS: FOR MESSRS. O'HARE AND MR. ZACK,
TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, NEW YORK, NY 10281-1008, FOR MR. 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.
JOHN O'HARE, Vice President of the Manager (since September 2003); an officer of 2 portfolios in the
Vice President and OppenheimerFunds complex. Formerly Executive Vice President and Portfolio Manager (June 2000 -
Portfolio Manager August 2003) and Portfolio Manager and Senior Vice President (August 1997 - June 2000) at
(since 2003) Geneva Capital Management, Ltd. (an investment advisor). Mr. O'Hare holds a BBA in Finance and
Age: 45 Economics from the University of Wisconsin and is a Chartered Financial Analyst.
BRIAN W. WIXTED, Senior Vice President and Treasurer (since March 1999) of the Manager; Treasurer (since March
Treasurer (since 1999) 1999) of HarbourView Asset Management Corporation, Shareholder Services, Inc., Oppenheimer Real
Age: 44 Asset Management Corporation, Shareholder Financial Services, Inc., Oppenheimer Partnership
Holdings, Inc., OFI Private Investments, Inc. (since March 2000), OppenheimerFunds
International Ltd. and OppenheimerFunds plc (offshore fund management subsidiaries of the
Manager) (since May 2000) and OFI Institutional Asset Management, Inc. (since November 2000);
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. and OppenheimerFunds Legacy Program (since April 2000); formerly Principal and Chief
Operating Officer (March 1995-March 1999), Bankers Trust Company-Mutual Fund Services Division.
An officer of 82 portfolios in the OppenheimerFunds complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since February 2002) of the
Vice President and Secretary Manager; General Counsel and a director (since November 2001) of OppenheimerFunds Distributor,
(since 2001) Inc.; Senior Vice President and General Counsel (since November 2001) of HarbourView Asset
Age: 55 Management Corporation; Vice President and a director (since November 2000) of Oppenheimer
Partnership Holdings, Inc.; Senior Vice President, General Counsel and a director (since
November 2001) of Shareholder Services, Inc., Shareholder Financial Services, Inc., OFI Private
Investments, Inc., OFI Trust Company and OFI Institutional Asset Management, Inc.; General
Counsel (since November 2001) of Centennial Asset Management Corporation; a director (since
November 2001) of Oppenheimer Real Asset Management, Inc.; Assistant Secretary and a director
(since November 2001) of OppenheimerFunds International Ltd.; Vice President (since November
2001) of OppenheimerFunds Legacy Program; Secretary (since November 2001) of Oppenheimer
Acquisition Corp.; formerly Senior Vice President (May 1985-January 2004), 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); OppenheimerFunds
International Ltd. And OppenheimerFunds plc (October 1997-November 2001). An officer of 82
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.
22 | OPPENHEIMER AGGRESSIVE GROWTH 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 Fund 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 $28,000 in fiscal 2003 and $27,500 in
fiscal 2002.
(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 $75,000 in fiscal 2003 and $65,000 in
fiscal 2002 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 would include, among others: due diligence related to
mergers and acquisitions, accounting consultations and audits in
connection with acquisitions, internal control reviews and
consultation concerning financial accounting and reporting
standards.
(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 $11,600 in fiscal 2003 and $6,500 in
fiscal 2002 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 would include, among others: 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 $0 in fiscal 2003 and $3,500 in
fiscal 2002 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 would include services provided to the registrant's
Board of Trustees with respect to the annual renewal of the
registrant's investment advisory agreement.
(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.
Pre-approval of non-audit services is 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 $86,600 in fiscal 2003 and $75,000 in
fiscal 2002 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. RESERVED
ITEM 7. NOT APPLICABLE
ITEM 8. NOT APPLICABLE
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable for fiscal periods ending December 31, 2003.
ITEM 10. CONTROLS AND PROCEDURES
(a) Based on their evaluation of registrant's disclosure controls and
procedures (as defined in rule 30a-2(c) under the Investment Company
Act of 1940 (17 CFR 270.30a-2(c)) as of December 31, 2003, 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 significant changes in registrant's internal
controls over financial reporting that occurred during the registrant's
second fiscal half-year 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)
(B) EXHIBITS ATTACHED HERETO. (ATTACH CERTIFICATIONS AS EXHIBITS)