N-14/A

As filed with the Securities and Exchange Commission on March 7, 2008
                                                    ---------------------------
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File No. 333-148748                                 ---------------------------
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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM N-14

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933                    [ X ]

PRE-EFFECTIVE AMENDMENT NO. 1                                              [ X ]

POST-EFFECTIVE AMENDMENT NO. __                                            [   ]


                       OPPENHEIMER VARIABLE ACCOUNT FUNDS
                       [GRAPHIC OMITTED][GRAPHIC OMITTED]
               (Exact Name of Registrant as Specified in Charter)


             6803 South Tucson Way, Centennial, Colorado 80112-3924
                       [GRAPHIC OMITTED][GRAPHIC OMITTED]
                    (Address of Principal Executive Offices)


                                  303-768-3200
                       [GRAPHIC OMITTED][GRAPHIC OMITTED]
                 (Registrant's Area Code and Telephone Number)


                              Robert G. Zack, Esq.
                   Executive Vice President & General Counsel
                             OppenheimerFunds, Inc.
                           Two World Financial Center
                               225 Liberty Street
                            New York, New York 10148
                                 (212) 323-0250
                       [GRAPHIC OMITTED][GRAPHIC OMITTED]
                    (Name and Address of Agent for Service)


   As soon as practicable after the Registration Statement becomes effective.
                       [GRAPHIC OMITTED][GRAPHIC OMITTED]
                 (Approximate Date of Proposed Public Offering)


Title of Securities Being Registered:  Non-Service shares of Oppenheimer Core
Bond Fund/VA.

No filing fee is due because of reliance on Section 24(f) of the Investment
Company Act of 1940, as amended.

The Registrant hereby amends this Registration Statement on such date as may
be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.




                           PANORAMA SERIES FUND, INC.
                        Government Securities Portfolio
               6803 South Tucson Way, Centennial, Colorado 80112
                                 1.800.399.7181

                   NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
                          TO BE HELD ON APRIL 25, 2008


         Notice is hereby given that a Special Meeting of the shareholders of
Government Securities Portfolio, a series of Panorama Series Fund, Inc.
("Panorama Fund"), a registered open-end management investment company, will be
held at 6803 South Tucson Way, Centennial, Colorado 80112 at 1:00 p.m.,
Mountain time, on April 25, 2008, or any adjournments thereof (the "Meeting"),
for the following purposes:

1.       To approve an Agreement and Plan of Reorganization between Panorama
          Fund and Oppenheimer Core Bond Fund/VA ("Core Bond Fund/VA"), a
          series of Oppenheimer Variable Account Funds, and the transactions
          contemplated thereby, including: (a) the transfer of substantially
          all the assets of Panorama Fund to Core Bond Fund/VA in exchange for
          Non-Service shares of Core Bond Fund/VA; (b) the distribution of
          Non-Service shares of Core Bond Fund/VA to shareholders of Panorama
          Fund in complete liquidation of Panorama Fund; and (c) the
          cancellation of the outstanding shares of Panorama Fund (all of the
          foregoing being referred to as the "Reorganization"); and

2.       To act upon such other matters as may properly come before the
Meeting.

         As an owner of a variable life insurance, annuity or other contract
and a beneficial owner of shares of Panorama Fund (a "shareholder"), you are
being asked for instructions as to how to vote the shares of the Panorama Fund
that are attributable to your variable contract.  Accordingly, we ask that you
indicate whether you approve or disapprove of the Reorganization.  If you are
a shareholder of Panorama Fund at the close of business on January 29, 2008,
you are entitled to notice of, and to vote at, the Meeting. The Reorganization
is more fully discussed in the combined Prospectus and Proxy Statement. Please
read it carefully before telling us, through your proxy or in person, how you
wish to vote. The Board of Directors of Panorama Series Fund, Inc., on behalf
of Panorama Fund, recommends a vote in favor of the Reorganization.

                         WE URGE YOU TO VOTE PROMPTLY.
                            YOUR VOTE IS IMPORTANT.

By Order of the Board of Directors,
Robert G. Zack, Secretary
March 7, 2008
________________________________________________________________________________
                     PLEASE VOTE THE ENCLOSED PROXY TODAY.
           YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWN.

                         OPPENHEIMER CORE BOND FUND/VA
                 a Series of Oppenheimer Variable Account Funds
               6803 South Tucson Way, Centennial, Colorado 80112
                                 1.800.399.7181

                    COMBINED PROSPECTUS AND PROXY STATEMENT
                              Dated March 7, 2008

                       SPECIAL MEETING OF SHAREHOLDERS OF
                        GOVERNMENT SECURITIES PORTFOLIO
                     a series of Panorama Series Fund, Inc
                          to be held on April 25, 2008

                          Acquisition of the Assets of
                        GOVERNMENT SECURITIES PORTFOLIO
               6803 South Tucson Way, Centennial, Colorado 80112
                                 1.800.399.7181

                  By and in exchange for Non-Service Shares of
                         OPPENHEIMER CORE BOND FUND/VA

This combined Prospectus and Proxy Statement solicits proxies from the
shareholders of Panorama Government Securities Portfolio ("Panorama Fund"), a
series of Panorama Series Fund, Inc., an open-end management investment
company, to be voted at a Special Meeting of Shareholders (the "Meeting") to
approve the Agreement and Plan of Reorganization (the "Reorganization
Agreement") and the transactions contemplated thereby (together with the
Reorganization Agreement, the "Reorganization") between Panorama Fund and
Oppenheimer Core Bond Fund/VA ("Core Bond Fund/VA"), a series of Oppenheimer
Variable Account Funds, an open-end management investment company (Panorama
Fund and Core Bond Fund/VA are each a "Fund" and collectively the "Funds").
This combined Prospectus and Proxy Statement constitutes the Prospectus of
Core Bond Fund/VA and the Proxy Statement of Panorama Fund filed on Form N-14
with the Securities and Exchange Commission ("SEC").

         Shares of Panorama Fund have been purchased at your direction by
certain insurance companies ("Participating Insurance Companies") for
allocation to certain of their separate accounts established for the purpose
of funding variable annuity contracts, variable life insurance contracts, and
other products. The Participating Insurance Companies as the shareholders of
record and legal owners of those separate accounts have been asked to approve
the Reorganization. The Participating Insurance Companies are asking you, as
an owner of a variable contract and a beneficial owner of shares of Panorama
Fund, for instructions as to how to vote the shares of the Panorama Fund that
are attributable to your variable contract.  Accordingly, we ask that you
indicate whether you approve or disapprove of the Reorganization.  For clarity
of presentation, shares of beneficial interest of the Funds may be referenced
in this document as "shares," and references to "shareholder" may include
holders of variable annuity contracts, variable life insurance policies and
other insurance company products.
         If shareholders of Panorama Fund vote to approve the Reorganization,
substantially all of the assets of Panorama Fund will be transferred to Core
Bond Fund/VA in exchange for Non-Service shares of Core Bond Fund/VA and the
assumption of certain liabilities, if any, by Core Bond Fund/VA.  The Meeting
will be held at the offices of OppenheimerFunds, Inc., the investment manager
for each Fund (the "Manager"), at 6803 South Tucson Way, Centennial, Colorado
80112 on April 25, 2008 at 1:00 p.m., Mountain Time. The Board of Directors of
Panorama Series Fund, Inc., on behalf of Panorama Fund, is soliciting these
proxies. This Prospectus and Proxy Statement may first be sent to shareholders
on or about March 7, 2008.

         If the shareholders of Panorama Fund vote to approve the
Reorganization, shareholders will receive Non-Service shares of Core Bond
Fund/VA equal in value to the value as of the "Valuation Date," which is
expected to be the business day preceding the date on which the Reorganization
is completed ("Closing Date"), of their shares of Panorama Fund.  Panorama
Fund will subsequently be dissolved.  The parties may change the Closing Date.

         This combined Prospectus and Proxy Statement gives information about
the Non-Service shares of Core Bond Fund/VA. You should retain it for future
reference.  A Statement of Additional Information, dated March 7, 2008,
relating to the Reorganization has been filed with the SEC as part of the
Registration Statement on Form N-14 of Oppenheimer Variable Account Funds (SEC
File No. 333-148748) (the "Registration Statement") and is incorporated herein
by reference.  This Statement of Additional Information contains the audited
financial statements of each Fund for the fiscal year ended December 31,
2007.  You may receive a free copy by writing to OppenheimerFunds Services
(the "Transfer Agent") at P.O. Box 5270, Denver, Colorado 80217, by visiting
the website at www.oppenheimerfunds.com or by calling toll-free
1.800.225.5677.  The Prospectus of Core Bond Fund/VA (SEC File No. 2-93177),
dated April 30, 2007, is enclosed herewith and considered a part of this
combined Prospectus and Proxy Statement.  It is intended to provide you with
information about Core Bond Fund/VA.  For more information regarding Core Bond
Fund/VA, in addition to its Prospectus, see the Statement of Additional
Information (SEC File No. 2-93177) dated April 30, 2007, revised as of August
31, 2007 and as supplemented October 12, 2007.  This Statement of Additional
Information has been filed with the SEC and is incorporated herein by
reference.  The annual report of Core Bond Fund/VA dated December 31, 2007,
which will include audited financial statements of Core Bond Fund/VA and
management's discussion of Fund performance for the 12-month period ended
December 31, 2007, will be made available no later than 60 days thereafter.
You may receive a free copy of these documents by writing to the Transfer
Agent at P.O. Box 5270, Denver, Colorado 80217, by visiting the website at
www.oppenheimerfunds.com or by calling toll-free 1.800.225.5677.

         For more information regarding Panorama Fund, see the Prospectus of
Panorama Fund (SEC No. 2-73969) dated April 30, 2007, as supplemented December
3, 2007.  In addition to its Prospectus, see the Statement of Additional
Information of Panorama Fund (SEC File No. 2-73969) dated April 30, 2007,
revised as of May 25, 2007 and as supplemented December 3, 2007.  These
documents have been filed with the SEC and are incorporated herein by
reference.  The annual report of Panorama Fund, dated December 31, 2007, which
will include audited financial statements of Panorama Fund and management's
discussion of Fund performance for the 12-month period ended December 31,
2007, will be made available no later than 60 days thereafter.  You may receive
a free copy of these documents by writing to the Transfer Agent at P.O. Box
5270, Denver, Colorado 80217, by visiting the website at
www.oppenheimerfunds.com or by calling toll-free 1.800.225.5677.

         Mutual fund shares are not deposits or obligations of any bank, and
are not insured or guaranteed by the Federal Deposit Insurance Corporation or
any other U.S. government agency. Mutual fund shares involve investment risks,
including the possible loss of principal.

         As with all mutual funds, the Securities and Exchange Commission has
not approved or disapproved these securities or passed upon the adequacy of
this Prospectus and Proxy Statement. Any representation to the contrary is a
criminal offense.

         This combined Prospectus and Proxy Statement is dated March 7, 2008.


                               TABLE OF CONTENTS
                    COMBINED PROSPECTUS AND PROXY STATEMENT

                                                                         Page

Synopsis......................................................................1

     What am I being asked to vote on?........................................1

     What are the general tax consequences of the Reorganization?.............2

     How do the investment objectives and policies of the Funds compare?......3

     How do the Principal Risks of Investing in the Funds differ?.............6

     What are the fees and expenses of each Fund and what are they expected to
     be after the Reorganization?.............................................15

     What are the capitalizations of the Funds and what would the
     capitalization be after the Reorganization?..............................17

     How have the Funds performed?............................................17

How do the Account Features and Shareholder Services for the Funds Compare?...19

         Purchases and Redemptions............................................19

         Dividends and Distributions..........................................20

Information About the Reorganization..........................................21

     How will the Reorganization be carried out? .............................21

     Who will pay the expenses of the Reorganization? ........................21

     What are the tax consequences of the Reorganization? ....................22

Reasons for the Reorganization................................................23

     Board Considerations ....................................................23

     Receipt of Non-Service shares of Core Bond Fund/VA.......................24

What are the Fundamental Investment Restrictions of the Funds?................24

Other Comparisons Between the Funds...........................................25

         Management of the Funds..............................................25

         Investment Management and Fees.......................................25

         Payments to Financial Intermediaries and Service Providers...........26

         Transfer Agency and Custody Services.................................28

         Shareholder Rights...................................................28

Voting Information ...........................................................30

     How do I vote? ..........................................................30

     Who is Entitled to Vote and How are Votes Counted?.......................31

     Quorum and Required Vote.................................................31

     Solicitation of Proxies..................................................32

     Revoking a Proxy.........................................................32

     What other matters will be voted upon at the Meeting?....................32

Additional Information About the Funds........................................33

     Householding of Reports to Shareholders and Other Fund Documents.........33

     Principal Shareholders...................................................33

Exhibit A:  Principal Shareholders...........................................A-1

Enclosures:

Prospectus of Oppenheimer Core Bond Fund/VA dated April 30, 2007.


                                    SYNOPSIS

         This is only a summary and is qualified in its entirety by the more
detailed information contained in or incorporated by reference in this
combined Prospectus and Proxy Statement. Shareholders should carefully review
this Prospectus and Proxy Statement in its entirety and, in particular, the
Prospectus of Core Bond Fund/VA (SEC File No. 2-93177), which accompanies this
Prospectus and Proxy Statement and is incorporated herein by reference.

What am I being asked to vote on?

         You are being asked to approve the reorganization of your Fund,
Panorama Fund, with and into Core Bond Fund/VA.  If shareholders of Panorama
Fund approve the Reorganization, substantially all of the assets of Panorama
Fund will be transferred to Core Bond Fund/VA, in exchange for an equal value
of Non-Service shares of Core Bond Fund/VA and the assumption of certain
liabilities, if any, by Core Bond Fund/VA. The Non-Service shares of Core Bond
Fund/VA will then be distributed to Panorama Fund shareholders, and Panorama
Fund will subsequently be liquidated. If the Reorganization is approved by
shareholders of Panorama Fund, you will no longer be a shareholder of Panorama
Fund, and, instead, will become a shareholder of Core Bond Fund/VA.  This
exchange will occur on the Closing Date of the Reorganization.

         Approval of the Reorganization means that as a shareholder in
Panorama Fund, you will receive Non-Service shares of Core Bond Fund/VA, equal
in value to the value of the net assets of your Panorama Fund shares
transferred to Core Bond Fund/VA on the Closing Date.  The shares you receive
will be issued at net asset value ("NAV") without a sales charge or other
transaction fee imposed by a Fund.

         In considering whether to approve the Reorganization, you should
consider, among other things:

(i)      The number of similarities (as well as any differences) between the
                      Funds (as discussed herein) and the relative advantages
                      and disadvantages of each Fund.

(ii)     That the Reorganization would allow you the ability to continue your
                      investment in a fund that closely resembles the
                      investment style you were seeking when you invested in
                      Panorama Fund.

         Core Bond Fund/VA is a series of Oppenheimer Variable Account Funds,
an open-end, diversified management investment company organized as a
Massachusetts business trust in 1983. Panorama Fund is a series of Panorama
Series Fund, Inc., an open-end, diversified management investment company
organized as a Maryland corporation in 1981.  Core Bond Fund/VA commenced
operations on April 3, 1985 and Panorama Fund commenced operations on May 13,
1992.  As of December 31, 2007, Panorama Fund had approximately $17.0 million
in net assets and Non-Service shares of Core Bond Fund/VA had approximately
$325.7 million in net assets.


         Shareholders of Panorama Fund are expected to realize a number of
 benefits from the proposed Reorganization.

o        Panorama Fund (with approximately $17.0 million in net assets as of
         December 31, 2007) has a much smaller asset base than Core Bond
         Fund/VA (Non-Service shares had net assets of approximately $325.7
         million as of December 31, 2007).  As a result, Panorama Fund's
         "other expenses" as a percentage of net assets, are significantly
         higher than those of Core Bond Fund/VA.  Although the management fee
         rate as of December 31, 2007 of Core Bond Fund/VA (0.60%) is higher
         than that of Panorama Fund (0.525%), following the Reorganization,
         shareholders of Panorama Fund would benefit significantly because Core
         Bond Fund VA's Non-Service shares' total expense ratio of (0.64%)(1)
         is substantially lower than that of Panorama Fund (1.020%), as of
         December 31, 2007. If the Reorganization is approved, Panorama Fund
         shareholders would get the benefit of a larger fund with lower total
         operating expenses, resulting in the payment of significantly lower
         expenses as shareholders of Core Bond Fund/VA.

o        If the Reorganization is approved, shareholders would continue to
         have exposure to high-quality fixed income securities.  Also, because
         Core Bond Fund/VA may invest in a broader array of fixed income
         securities, shareholders would benefit from a portfolio that is more
         diversified across the various segments of the fixed income market.
         Because Core Bond Fund/VA may invest up to 20% of its total assets in
         lower-grade securities ("junk bonds") and may invest in securities of
         issuers located in non-U.S. markets, Core Bond Fund/VA at times may
         present greater investment risk than Panorama Fund.


         The Board of Directors of Panorama Fund reviewed and discussed with
the Manager and the Board's independent legal counsel the proposed
Reorganization.  Panorama Fund's Board of Directors also considered each
Fund's investment objectives and policies, management fees, distribution fees
and other operating expenses, historical performance and asset size.

         Based on the considerations discussed above and the reasons more
fully described under "Reasons for the Reorganization" (beginning on page 22),
together with other relevant factors and information, at a meeting held on
November 30, 2007, the Board of Panorama Fund concluded that the
Reorganization would be in the best interests of shareholders of Panorama Fund
and that Panorama Fund would not experience any dilution as a result of the
Reorganization.  The Board of Panorama Fund voted to approve the proposed
Reorganization and to recommend that shareholders approve the proposed
Reorganization.

         The proposed Reorganization was also approved by the Board of
Trustees of Core Bond Fund/VA at a meeting held on November 30, 2007.


                THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
              TO APPROVE THE AGREEMENT AND PLAN OF REORGANIZATION

What are the general tax consequences of the Reorganization?

         It is expected that shareholders of Panorama Fund will not recognize
any gain or loss for federal income tax purposes as a result of the exchange
of their shares for shares of Core Bond Fund/VA. You should, however, consult
your tax adviser regarding the effect, if any, of the Reorganization in light
of your individual circumstances as a variable contract owner. You should also
consult your tax adviser about state and local tax consequences.

         For federal income tax purposes, the holding period of your Panorama
Fund shares will be carried over to the holding period for Core Bond Fund/VA
shares you receive in connection with the Reorganization. This exchange will
occur on the Closing Date.

         One of the requirements to qualify as a tax-free reorganization under
the Internal Revenue Code is that a significant portion of the assets of
Panorama Fund continue to be used by Core Bond Fund/VA after the
Reorganization.  Due to common holdings in both Funds, it is expected that the
assets of Panorama Fund will satisfy this requirement.  As a result, prior to
the Reorganization, it is not expected to be necessary for Panorama Fund to
sell portfolio securities that do not conform to the portfolio securities of
Core Bond Fund/VA for purposes of the Reorganization.  However, Panorama Fund
may sell securities prior to the Reorganization in the ordinary course of its
business as an open-end investment company.

         For further information about the tax consequences of the
Reorganization, please see the section "Information About the
Reorganization--What are the Tax Consequences of the Reorganization?"

How do the investment objectives and policies of the Funds compare?

         The chart below compares the Funds' overall investment objectives,
investment strategies and other policies.  For more detailed information about
Core Bond Fund/VA's investment objective and strategies, please refer to the
enclosed prospectus for Core Bond Fund/VA.


  ---------------------------------------------------------- -----------------------------------------------------------
                        Panorama Fund                                            Core Bond Fund/VA
  ---------------------------------------------------------- -----------------------------------------------------------
  ----------------------------------------------------------------------------------------------------------------------
                                                  Investment Objectives
  ----------------------------------------------------------------------------------------------------------------------
  ---------------------------------------------------------- -----------------------------------------------------------
  The Fund seeks a high level of current income with a       The Fund's main objective is to seek a high level of
  high degree of safety of principal.                        current income. As a secondary objective, the Fund seeks
                                                             capital appreciation when consistent with its primary
                                                             objective.
  ---------------------------------------------------------- -----------------------------------------------------------
  ----------------------------------------------------------------------------------------------------------------------
                                                  Investment Strategies
  ----------------------------------------------------------------------------------------------------------------------
  ---------------------------------------------------------- -----------------------------------------------------------
  Under normal market conditions, the Fund invests at        Under normal market conditions, the Fund invests at least
  least 80% of its net assets (plus borrowings for           80% of its net assets (plus borrowings for investment
  investment purposes, under normal market conditions) in    purposes) in investment grade bonds.
  U.S. government securities and U.S. government-related
  securities.

  U.S. government securities include debt securities that    The investment-grade debt bonds the Fund invests in may
  are issued or guaranteed by the United States Treasury,    be issued by U.S. or non-U.S. issuers and may include the
  such as Treasury bills, bonds or notes, and securities     following types of obligations:
  issued or guaranteed by agencies or federally-chartered    o        short-, medium- and long-term foreign and U.S.
  corporate entities that are referred to as                      government bonds and notes,
  "instrumentalities" of the U.S. government. "U.S.          o        domestic and foreign corporate debt obligations,
  government-related securities" are debt obligations that   o        collateralized mortgage obligations (CMOs), and
  are fully collateralized or secured by U.S. government          other mortgage-related securities and asset-backed
  securities to back the payments of interest and                 securities,
  repayments of principal.  The Fund invests significant     o        participation interests in loans, and
  amounts of its assets in U.S. government-related           o        "structured" notes.
  mortgage-backed securities, such as collateralized
  mortgage obligations (called "CMO's") and mortgage
  participation certificates.

  The Fund does not have a target portfolio duration or
  overall average portfolio credit quality target.           The Fund seeks to maintain an average effective portfolio
                                                             duration of three to six years (measured on a
                                                             dollar-weighted basis) to try to reduce the volatility of
                                                             the value of its securities portfolio. The Fund however
                                                             has no limitations on the range of maturities of the debt
                                                             securities in which it can invest and therefore may hold
                                                             securities with short, medium or long-term maturities.
                                                             Because of market events and interest rate changes, the
                                                             duration of the portfolio might not meet that target at
                                                             all times. The Fund will attempt to maintain (on a
                                                             dollar-weighted basis) an overall average portfolio
                                                             credit quality of "A-" or higher as rated by Moody's
                                                             Investor Services, Inc. (or equivalent rating of any
                                                             nationally recognized credit rating organization).

  The Fund can also invest up to 20% of its net assets
  (plus borrowings for investment purposes) in               The Fund can invest up to 20% of its total assets in high
  investment-grade debt obligations issued by private        yield debt securities and other debt securities that are
  issuers, which do not have any credit support from the     below investment grade (commonly referred to as "junk
  U.S. government.                                           bonds").

  The Fund can use hedging instruments and other
  derivative investments to try to enhance income and to     The Fund can also use hedging instruments and other
  manage investment risks.                                   derivative investments to try to enhance income and to
                                                             manage investment risks.

  In selecting securities for the Fund, the portfolio
  managers research the universe of U.S. government and      In selecting securities for the Fund, the Fund's
  U.S. government-related securities and private-issuer      portfolio managers analyze the overall investment
  mortgage-related securities and weigh yields and           opportunities and risks in different sectors of the debt
  relative values against investment risks.  While this      security markets by focusing on business cycle analysis
  process and the inter-relationship of the factors used     and relative values between the corporate and government
  may change over time and may vary in particular cases,     sectors. The portfolio managers' overall strategy is to
  in general, they look for:                                 build a broadly diversified portfolio of debt securities.
  o        Sectors of the U.S. government debt market that   The portfolio managers currently focus on the factors
       they believe offer high relative value,               below (which may vary in particular cases and may change
  o        Securities that have high income potential to     over time), looking for:
       help cushion the Fund's share price against           o        High current income from different types of
       volatility, and                                            corporate and government debt securities,
  o        Different types of U.S. government and            o        Investment-grade securities, primarily to help
       private-issuer securities.                                 reduce credit risk,
                                                             o        Broad portfolio diversification to help reduce
                                                                  the volatility of the Fund's share prices, and
                                                             o        Relative values among the debt securities market
                                                                  sectors.

  ---------------------------------------------------------- -----------------------------------------------------------
  ----------------------------------------------------------------------------------------------------------------------
  Consistent with its investment objective, each Fund may invest a significant portion of its assets in U.S.
  government-related and private issuer mortgage-backed securities.  U.S government-related securities include pools
  of residential or commercial mortgages, in the form of CMOs and other "pass-through" mortgage securities. CMOs that
  are U.S. government securities have collateral to secure payment of interest and principal.  They may be issued in
  different series with different interest rates and maturities.  The collateral is either in the form of mortgage
  pass-through certificates issued or guaranteed by a U.S. agency or instrumentality or mortgage loans insured by a
  U.S. government agency.  Private-issuer mortgage-backed securities are issued by private issuers, which do not offer
  the credit backing of U.S. government securities.
  ----------------------------------------------------------------------------------------------------------------------
  ----------------------------------------------------------------------------------------------------------------------
                                              Who is the Fund Designed For?
  ----------------------------------------------------------------------------------------------------------------------
  ---------------------------------------------------------- -----------------------------------------------------------
  Panorama Fund is designed for investors seeking current    Core Bond Fund/VA is designed for investors seeking high
  income from a fund that also has the goal of preserving    current income from a fund that invests mainly in
  capital and invests mainly in U.S. government and          investment-grade debt securities, but which can also hold
  government-related securities.  However, the Fund's        below-investment-grade securities to seek higher income.
  share price and income levels will fluctuate.  The         Those investors should be willing to assume the credit
  Fund's share price and distributions are not backed or     risks of a fund that typically invests a significant
  guaranteed by the U.S. government.  The Fund is intended   amount of its assets in debt securities and the changes
  to be a long-term investment, not a short-term trading     in share prices that can occur when interest rates rise.
  vehicle.  The Fund is not a complete investment program.   Since the Fund's income level will fluctuate, it is not
                                                             designed for investors needing an assured level of
                                                             current income. The Fund is not a complete investment
                                                             program.
  ---------------------------------------------------------- -----------------------------------------------------------
  ----------------------------------------------------------------------------------------------------------------------
                                                         Manager
  ----------------------------------------------------------------------------------------------------------------------
  ---------------------------------------------------------- -----------------------------------------------------------
  OppenheimerFunds, Inc.                                     OppenheimerFunds, Inc.
  ---------------------------------------------------------- -----------------------------------------------------------
  ----------------------------------------------------------------------------------------------------------------------
                                                   Portfolio Managers
  ----------------------------------------------------------------------------------------------------------------------
  ---------------------------------------------------------- -----------------------------------------------------------
  Angelo Manioudakis, Benjamin J. Gord, Geoffrey Caan,       Angelo Manioudakis, Benjamin J. Gord, Geoffrey Caan,
  Antulio Bomfim and Thomas Swaney                           Antulio Bomfim and Thomas Swaney
  ---------------------------------------------------------- -----------------------------------------------------------

         As shown in the chart above, each Fund has the primary investment
objective of seeking high current income, with Panorama Fund seeking a high
degree of safety of principal.  Core Bond Fund/VA has a secondary objective of
seeking capital appreciation when consistent with the Fund's primary
objective.  Each Fund emphasizes investment in high-quality, fixed income
securities.  Panorama Fund emphasizes investment in U.S. government securities
and U.S. government-related securities, but may invest up to 20% of its assets
in private issuer securities.  Core Bond Fund/VA may invest in a broader array
of high-quality fixed income securities, may invest up to 20% of its total
assets in lower-grade debt ("junk bonds"), and may invest in issuers located in
non-U.S. markets.

         As of December 31, 2007, 89.20% of Panorama Fund's net assets
consisted of mortgage-backed obligations.  As of December 31, 2007, 79.90% of
Core Bond Fund/VA's net assets consisted of mortgage-backed obligations and
19.80% consisted of corporate bonds and notes. The tables below summarize each
Fund's portfolio holdings, by type of investment and credit quality, as of
December 31, 2007.

                                      Panorama Fund              Core Bond Fund/VA

Portfolio Composition
Mortgage-Backed
  Obligations                         89.20%                     79.90%
Asset-Backed Securities               4.80%                      5.00%
U.S. Government
  Obligations                         2.60%                      -
Joint Repurchase
  Agreements                          1.60%                      -
Other Assets Net of
  Liabilities                         1.80%                      -
Corporate Bonds and
  Notes                               -                          19.80%
Investment Company
  Shares                              -                          1.00%
Investments Purchased
  with Cash from Securities
  Loaned                              -                          0.80%
Liabilities in Excess of
  Other Assets                        -                          -6.50%
                                      -------------------------- -----------------------------
                                      -------------------------- -----------------------------
                                      100.00%                    100.00%
                                      ========================== =============================

Ratings
Agency                                76.40%                     46.90%
AAA                                   18.90%                     30.80%
AA                                    -                          3.10%
A                                     -                          3.70%
BBB                                   -                          7.80%
BB                                    -                          4.60%
B                                     -                          0.20%
Not Rated                             4.70%                      2.00%
Other Securities                      -                          0.90%
                                      -------------------------- -----------------------------
                                      -------------------------- -----------------------------
Total                                 100.00%                    100.00%
                                      ========================== =============================
                                      ========================== =============================


          HOW DO THE PRINCIPAL RISKS OF INVESTING IN THE FUNDS DIFFER?

         The Funds' Overall Risk.  Both Funds are designed for investors
seeking high current income from a fund, in the case of Panorama Fund, that
also has the goal of preserving capital and invests mainly in U.S. government
securities and, in the case of Core Bond Fund/VA, that invests mainly in
investment-grade debt securities, but which can also hold
below-investment-grade securities to seek higher income.  Because both Funds
emphasize investment in high-quality debt securities, the Funds are subject to
many of the same risks associated with investment in debt securities.  Core
Bond Fund/VA, however, has greater investment risk because it may invest up to
20% of its total assets in lower-grade securities, may invest in
private-issuer debt securities without limitation, and may invest in
securities of issuers located in non-U.S. markets.

         Like all investments, an investment in either Fund involves risk.
There is no assurance that either Fund will meet its investment objective.
The achievement of the Funds' goals depends upon market conditions, generally,
and on the portfolio manager's analytical and portfolio management skills. The
risks described below collectively form the risk profiles of the Funds, and
can affect the value of the Funds' investments, investment performance and
prices per share.  There is also the risk that poor securities selection by
the Manager will cause a Fund to underperform other funds having a similar
objective.  These risks mean that you can lose money by investing in either
Fund. When you redeem your shares, they may be worth more or less than what
you paid for them.

          The allocation of each Fund's portfolio among different investments
will vary over time based upon the Manager's evaluation of economic and market
trends.  For both Funds, the Manager tries to reduce risks by carefully
researching securities before they are purchased and in some cases by using
hedging techniques.
         An investment in a Fund is not a deposit of any bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency.  The Funds are intended to be a long-term investment,
not short-term trading vehicles.  Neither Fund is a complete investment
program.
         The table below summarizes the other important risks of investment in
each Fund.  These risks are described in more detail below.

- ----------------------------------------------- ------------------------------ ------------------------------
                                                                                   Government Securities
                     Risk                             Core Bond Fund/VA                  Portfolio
- ----------------------------------------------- ------------------------------ ------------------------------
- -------------------------------------------------------------------------------------------------------------
                                                       Principal Risks
- -------------------------------------------------------------------------------------------------------------
- ----------------------------------------------- ------------------------------ ------------------------------
Interest Rate Risk                                            X                              X
- ----------------------------------------------- ------------------------------ ------------------------------
- ----------------------------------------------- ------------------------------ ------------------------------
Credit Risk                                                   X                              X
- ----------------------------------------------- ------------------------------ ------------------------------
- ----------------------------------------------- ------------------------------ ------------------------------
     Private-Issuer Debt Securities                           X                              X
- ----------------------------------------------- ------------------------------ ------------------------------
- ----------------------------------------------- ------------------------------ ------------------------------
     Special Risks of Lower-Grade Securities                  X
- ----------------------------------------------- ------------------------------ ------------------------------
- ----------------------------------------------- ------------------------------ ------------------------------
Risks of Foreign Investing                                    X
- ----------------------------------------------- ------------------------------ ------------------------------
- ----------------------------------------------- ------------------------------ ------------------------------
Asset-Backed Securities                                       X                              X
- ----------------------------------------------- ------------------------------ ------------------------------
- ----------------------------------------------- ------------------------------ ------------------------------
Prepayment Risk                                               X                              X
- ----------------------------------------------- ------------------------------ ------------------------------
- -------------------------------------------------------------------------------------------------------------

                                                         Other Risks
- -------------------------------------------------------------------------------------------------------------
- ----------------------------------------------- ------------------------------ ------------------------------
Derivative Investments and Hedging Techniques                 X                              X
- ----------------------------------------------- ------------------------------ ------------------------------
- ----------------------------------------------- ------------------------------ ------------------------------
Zero-Coupon and "Stripped" Securities                         X                              X
- ----------------------------------------------- ------------------------------ ------------------------------
- ----------------------------------------------- ------------------------------ ------------------------------
Repurchase Agreements                                         X                              X
- ----------------------------------------------- ------------------------------ ------------------------------
- ----------------------------------------------- ------------------------------ ------------------------------
Illiquid and Restricted Securities                            X                              X
- ----------------------------------------------- ------------------------------ ------------------------------
- ----------------------------------------------- ------------------------------ ------------------------------
Credit Default Swaps                                          X                              X
- ----------------------------------------------- ------------------------------ ------------------------------
- ----------------------------------------------- ------------------------------ ------------------------------
Structured Notes                                              X
- ----------------------------------------------- ------------------------------ ------------------------------

         Interest Rate Risks.  Debt securities are subject to changes in value
when prevailing interest rates change.  When interest rates fall, the values
of outstanding debt securities generally rise, and the securities may sell for
more than the Fund paid for them. When interest rates rise, the values of
outstanding debt securities generally fall, and the securities may sell below
the purchase price paid by the Fund.  The magnitude of these price changes is
generally greater for longer-term debt securities than for short-term debt
securities. However, interest rate changes may have different effects on the
values of mortgage-related securities because of prepayment risks, discussed
below.  A Fund's share price can go up or down when interest rates change
because of the effect of the changes on the value of the Fund's investments in
debt securities.

         At times, a Fund may buy longer-term debt securities to seek higher
income. When the average maturity of the Portfolio is longer, its share price
may fluctuate more when interest rates change. The Funds may buy zero-coupon
or "stripped" securities, which are particularly sensitive to interest rate
changes and the rate of principal payments (and prepayments), and have prices
that may go up or down more than other types of debt securities in response to
those changes.  A Fund's share prices can go up or down when interest rates
change because of the effect of interest rate changes on the value of the
Fund's investments in debt securities.

         Credit Risk.  Debt securities are also subject to credit risk.
Credit risk relates to the ability of the issuer of a security to make
interest and principal payments on the security as they become due. While
securities directly issued by the U.S. Treasury and certain agencies that are
backed by the full faith and credit of the U.S. government have little credit
risk and securities issued by other agencies or instrumentalities of the U.S.
government generally have low credit risks, securities issued by private
issuers may have greater credit risks. If the issuer fails to pay interest, a
Fund's income might be reduced and, if the issuer fails to repay principal,
the value of that security and of the Fund's shares might be reduced.

o        Private-Issuer Debt Securities.  Core Bond Fund/VA can invest without
                  limitation in private-issuer debt securities, and Panorama
                  Fund can invest up to 20% of its assets in debt securities
                  issued by private issuers, under normal market conditions.
                  For Panorama Fund, these debt obligations must be
                  "investment-grade", which means that if they are rated, they
                  must be rated within the four highest rating categories of
                  Moody's Investors Service, Inc. or Standard & Poor's Rating
                  Service or that have a comparable rating by another rating
                  organization, except that investments in privately-issued
                  mortgage-related securities are limited to those rated in
                  the two highest rating categories of a national rating
                  organization.  If private-issuer debt securities are
                  unrated, Panorama Fund can buy them only if they are
                  assigned a rating comparable to investment-grade by the
                  Manager.

                  A reduction in the rating of a security after its purchase
                  by a Fund will not automatically require the Fund to dispose
                  of that security.  However, the Manager will evaluate those
                  securities to determine whether to keep them in the Fund.

o        Special Risks of Lower-Grade Securities.  Core Bond Fund/VA can
                  invest up to 20% of its total assets in securities
                  (including convertible securities) that are rated below
                  investment grade.  Lower-grade debt securities are those
                  rated below "Baa" by Moody's Investors Service, Inc. or
                  lower than "BBB" by Standard & Poor's Rating Service or that
                  have similar ratings by other nationally-recognized rating
                  organizations. Core Bond Fund/VA can invest in securities
                  rated as low as "C" or "D", in unrated bonds or bonds which
                  are in default at the time Core Bond Fund/VA buys them.
                  While securities rated "Baa" by Moody's or "BBB" by S&P are
                  considered "investment grade," they have some speculative
                  characteristics.

                  Core Bond Fund/VA can purchase a variety of lower-grade,
                  high-yield debt securities of U.S. and foreign issuers,
                  including bonds, debentures, notes, preferred stocks, loan
                  participation interests, structured notes, asset-backed
                  securities, among others, to seek high current income. These
                  securities are sometimes called "junk bonds." Core Bond
                  Fund/VA has no requirements as to the maturity of the debt
                  securities it can buy, or as to the market capitalization
                  range of the issuers of those securities.

                  The Manager does not rely solely on ratings issued by rating
                  organizations when selecting investments for Core Bond
                  Fund/VA, which can buy unrated securities that offer high
                  current income. The Manager assigns a rating to an unrated
                  security that is equivalent to the rating of a rated
                  security that the Manager believes offers comparable yields
                  and risks.

                  While investment-grade securities are subject to risks of
                  non-payment of interest and principal, in general
                  higher-yielding lower-grade ("junk") bonds, whether rated or
                  unrated, have greater risks than investment-grade
                  securities. They may be subject to greater market
                  fluctuations and risk of loss of income and principal than
                  investment-grade securities. There may be less of a market
                  for them and therefore they may be harder to value and to
                  sell at an acceptable price. There is a relatively greater
                  possibility that the issuer's earnings may be insufficient
                  to make the payments of interest and principal due on the
                  bonds. These risks mean that Core Bond Fund/VA may not
                  achieve the expected income from lower-grade securities, and
                  that Core Bond Fund/VA's net asset value per share may be
                  affected by declines in value of these securities.

         Risks of Foreign Investing.  Core Bond Fund/VA can invest its assets
without limit in foreign debt securities and can buy securities of governments
and companies in both developed markets and emerging markets. While foreign
securities offer special investment opportunities, there are also special
risks that can reduce the Core Bond Fund/VA's share prices and returns.

         The change in value of a foreign currency against the U.S. dollar will
result in a change in the U.S. dollar value of securities denominated in that
foreign currency. Currency rate changes can also affect the distributions Core
Bond Fund/VA makes from the income it receives from foreign securities as
foreign currency values change against the U.S. dollar. Foreign investing can
result in higher transaction and operating costs for the Core Bond Fund/VA.
Foreign issuers are not subject to the same accounting and disclosure
requirements that U.S. companies are subject to.

         The value of foreign investments may be affected by exchange control
regulations, expropriation or nationalization of a company's assets, foreign
taxes, delays in settlement of transactions, changes in governmental economic
or monetary policy in the U.S. or abroad, or other political and economic
factors. These risks could cause the prices of foreign securities to fall and
therefore could depress Core Bond Fund/VA's share prices.

         Additionally, if Core Bond Fund/VA invests a significant amount of
its assets in foreign securities, it may be exposed to "time-zone arbitrage"
attempts by investors seeking to take advantage of the differences in value of
foreign securities that might result from events that occur after the close of
the foreign securities market on which a foreign security is traded and before
the close of the New York Stock Exchange (the "NYSE") that day, when the Core
Bond Fund/VA's net asset value is calculated. If such time-zone arbitrage were
successful, it might dilute the interests of other shareholders. However, the
Core Bond Fund/VA's use of "fair value pricing" to adjust the closing market
prices of foreign securities under certain circumstances, to reflect what the
Manager and the Board of Trustees believe to be their fair value may help
deter those activities.

         Asset-Backed Securities.  Each Fund may invest in asset-backed
securities. Asset-backed securities are fractional interests in pools of
assets, typically accounts receivable or consumer loans. They are issued by
trusts or special-purpose corporations. They are similar to mortgage-backed
securities and are backed by a pool of assets that consist of obligations of
individual borrowers. The income from the pool is passed through to the
holders of participation interest in the pools. The pools may offer a credit
enhancement, such as a bank letter of credit, to try to reduce the risks that
the underlying debtors will not pay their obligations when due. However, the
enhancement, if any, might not be for the full par value of the security.  If
the enhancement is exhausted and any required payments of interest or
repayments of principal are not made, a Fund could suffer losses on its
investment or delays in receiving payment.

         The value of an asset-backed security is affected by changes in the
market's perception of the asset backing the security, the creditworthiness of
the servicing agent for the loan pool, the originator of the loans, or the
financial institution providing any credit enhancement, and is also affected
if any credit enhancement has been exhausted. The risks of investing in
asset-backed securities are ultimately related to payment of consumer loans by
the individual borrowers. As a purchaser of an asset-backed security, a Fund
would generally have no recourse to the entity that originated the loans in
the event of default by a borrower. The underlying loans are subject to
prepayments, which may shorten the weighted average life of asset-backed
securities and may lower their return, in the same manner as in the case of
mortgage-backed securities and CMOs. Unlike mortgage-backed securities,
asset-backed securities typically do not have the benefit of a security
interest in the underlying collateral.

         Prepayment Risk.  The Funds' investments in mortgage-related
securities are subject to prepayment risk.  Prepayment risk occurs when the
mortgages underlying a mortgage-related security are prepaid at a rate faster
than anticipated (usually when interest rates fall) and the issuer of the
security can prepay the principal prior to the security's maturity.
Mortgage-related securities that are subject to prepayment risk generally
offer less potential for gains when prevailing interest rates decline, and
have greater potential for loss when interest rates rise.

         The impact of prepayments on the price of a security may be difficult
to predict and may increase the volatility of the price.  Additionally, both
Funds can buy mortgage-related securities at a premium. Accelerated
prepayments on those securities could cause a Fund to lose a portion of its
principal investment represented by the premiums the Fund paid.

         If interest rates rise rapidly, prepayments may occur at slower rates
than expected, which could have the effect of lengthening the expected
maturity of a short or medium-term security.  That could cause its value to
fluctuate more widely in response to changes in interest rates.  In turn, this
could cause the value of the Funds' shares to fluctuate more.

         Special Risks of Derivative Investments and Hedging Techniques. Both
Funds can use derivatives to seek increased income or to try to hedge
investment risks and preserve capital. In general terms, a derivative
investment is an investment contract whose value depends on (or is derived
from) the value of an underlying asset, interest rate or index. Options,
futures, swaps, stripped securities, collateralized mortgage obligations, and
structured notes are examples of derivatives the Funds can use.

         If the issuer of the derivative does not pay the amount due, the
Funds can lose money on the investment.  Also, the underlying security or
investment on which the derivative is based, and the derivative itself, may
not perform the way the Manager expects it to perform.  If that happens, the
Funds' share price could decline or the Funds could get less income than
expected. Certain derivative investments held by the Funds might be illiquid.
Using derivatives can cause the Funds to lose money on its investments and/or
increase the volatility of its share prices.  Each Fund has limits on the
amount of particular types of derivatives it can hold.


Other Investment Strategies and Risks

         Zero-Coupon and "Stripped" Securities.  Some of the U.S. government
and corporate debt securities the Funds can buy are zero-coupon bonds that pay
no interest.  They are issued at a substantial discount from their face
value.  "Stripped" securities are the separate income or principal components
of a debt security.  Some CMO's or other mortgage-related securities may be
stripped, with each component having a different proportion of principal or
interest payments.  One class might receive all the interest and the other all
the principal payments.

         Zero-coupon and stripped securities are subject to greater
fluctuations in price from interest rate changes than conventional
interest-bearing securities.  The Funds may have to pay out the imputed income
on zero-coupon securities without receiving the actual cash currently.
Interest-only securities are particularly sensitive to changes in interest
rates.

         The values of interest-only mortgage-related securities are also very
sensitive to prepayments of underlying mortgages.  Principal-only securities
are also sensitive to changes in interest rates. When prepayments tend to
fall, the timing of the cash flows to these securities increases, making them
more sensitive to changes in interest rates.  The market for some of these
securities may be limited, making it difficult for the Funds to value them or
to dispose of its holdings at an acceptable price.

         Repurchase Agreements.  The Funds can enter into repurchase
agreements.  In a repurchase transaction, a Fund buys a security and
simultaneously sells it to the vendor for delivery at a future date.
Repurchase agreements must be fully collateralized.  However, if the vendor
fails to pay the resale price on the delivery date, the Fund could incur costs
in disposing of the collateral and might experience losses if there is any
delay in its ability to do so.

         Investments in Oppenheimer Institutional Money Market Fund.  Each
Fund can invest its free cash balances in Class E shares of Oppenheimer
Institutional Money Market Fund, to provide liquidity or for defensive
purposes. Each Fund can invest in Oppenheimer Institutional Money Market
Fund rather than purchasing individual short-term investments to try to seek
a higher yield than the Fund could obtain on its own. Oppenheimer
Institutional Money Market Fund is a registered open-end management
investment company, regulated as a money market fund under the Investment
Company Act of 1940, as amended (the "Investment Company Act"), and is part
of the Oppenheimer Family of Funds. It invests in a variety of short-term,
high-quality, dollar-denominated money market instruments issued by the U.S.
Government, domestic and foreign corporations, other financial institutions,
and other entities. Those investments may have a higher rate of return than
the investments that would be available to a Fund directly. At the time of
an investment, a Fund cannot always predict what the yield of the
Oppenheimer Institutional Money Market Fund will be because of the wide
variety of instruments that fund holds in its portfolio. The return on those
investments may, in some cases, be lower than the return that would have
been derived from other types of investments that would provide liquidity.
As a shareholder, a Fund will be subject to its proportional share of the
expenses, including the advisory fee, of Oppenheimer Institutional Money
Market Fund's Class E shares. However, the Manager will waive a portion of a
Fund's advisory fee to the extent of the Fund's share of the advisory fee
paid to the Manager by Oppenheimer Institutional Money Market Fund.

         Illiquid and Restricted Securities.  Neither Fund will invest more
than 15% of its net assets in illiquid or restricted securities.  Investments
may be illiquid because they do not have an active trading market, making it
difficult to value them or dispose of them promptly at an acceptable price.
Restricted securities may have terms that limit their resale to other
investors or may require registration under applicable securities laws before
they may be sold publicly.  Certain restricted securities that are eligible
for resale to qualified institutional purchasers may not be subject to that
limit. The Manager monitors holdings of illiquid securities on an ongoing
basis to determine whether to sell any holdings to maintain adequate liquidity.

         Credit Default Swaps.  Each Fund may enter into credit default
swaps.  A credit default swap enables an investor to buy or sell protection
against a credit event, such as an issuer's failure to make timely payments of
interest or principal, bankruptcy or restructuring.  The terms of the
instrument are generally negotiated by the Fund and the swap counterparty.

         If a Fund buys credit protection using a credit default swap, the
Fund will make fixed payments to the counterparty.  If a credit event occurs,
the Fund will deliver the defaulted bonds underlying the swap and the swap
counterparty will pay the par amount of the bonds.  If the Fund sells credit
protection using a credit default swap, the Fund will receive fixed payments
from the counterparty.  If a credit event occurs, the Fund will pay the par
amount of the defaulted bonds underlying the swap and the swap counterparty
will deliver the bonds.  If the swap is on a basket of securities, the
notional amount of the swap is reduced by the par amount of the defaulted
bonds, and the fixed payments are then made on the reduced notional amount.

         Risks of credit default swaps include the cost of paying for credit
protection if there are no credit events, pricing transparency when assessing
the cost of a credit default swap, counterparty risk, and the need to fund the
delivery obligation (either cash or the defaulted bonds, depending on whether
the Fund is long or short the swap, respectively).  The tax treatment of many
types of credit default swaps is uncertain.

         "Structured" Notes. Core Bond Fund/VA can buy "structured" notes,
which are privately negotiated debt obligations in which the principal and/or
interest is determined by reference to the performance of a benchmark asset,
market or interest rate, an index of securities or specified interest rates,
or the differential performance of two assets or markets (such as indices
reflecting bonds).  The terms of the instrument may be "structured" by the
purchaser (Core Bond Fund/VA) and the borrower issuing the note.

         The principal and/or interest payments depend on the performance of
one or more other securities or indices, and the values of these notes will
therefore fall or rise in response to the changes in the values of the
underlying security or index. They are subject to both credit and interest
rate risks and therefore Core Bond Fund/VA could receive more or less than it
originally invested when the notes mature, or it might receive less interest
than the stated coupon payment if the underlying investment or index does not
perform as anticipated. Their values may be very volatile and they may have a
limited trading market, making it difficult for Core Bond Fund/VA to sell its
investment at an acceptable price.

            Loans of Portfolio Securities.  Each Fund may make loans of its
portfolio securities, with a value not to exceed 25% of its net assets, in
accordance with policies approved by each Fund's Board.  Each Fund has entered
into a securities lending agreement with JPMorgan Chase Bank, N.A. ("JPMorgan
Chase") for that purpose. Under the agreement, a Fund's portfolio securities
may be loaned to brokers, dealers and financial institutions, provided that
such loans comply with the collateralization and other requirements of the
securities lending agreement, the Fund's policies and applicable government
regulations. JPMorgan Chase has agreed, in general, to bear the risk that a
borrower may default on its obligation to return loaned securities. However, a
Fund will be responsible for risks associated with the investment of its cash
collateral, including the risk of a default by the issuer of a security in
which cash collateral has been invested. If that occurs, a Fund may incur
additional costs in seeking to obtain the collateral or may lose the amount of
the collateral investment. A Fund may also lose money if the value of the
investments purchased with cash collateral decreases.

         Temporary Defensive and Interim Investments. In times of unstable
adverse market or economic conditions, Core Bond Fund/VA can invest up to 100%
of its assets in temporary investments that are inconsistent with its
principal investment strategies. Generally such investments would be cash or
cash equivalents, such as U.S. Treasury Bills and other short-term U.S.
government obligations or high-grade commercial paper, or shares of
Oppenheimer Institutional Money Market Fund. Core Bond Fund/VA can also hold
these types of securities pending the investment of proceeds from the sale of
Core Bond Fund/VA shares or portfolio securities or to meet anticipated
redemptions of Core Bond Fund/VA shares. To the extent Core Bond Fund/VA
invests defensively in these securities, it might not achieve its investment
objectives.

         Portfolio Turnover. A change in the securities held by a Fund is
known as "portfolio turnover."  Each Fund can engage in active and frequent
short-term trading while trying to achieve its objective, although Panorama
Fund's turnover rate has been less than 100% annually over the last five
fiscal years ended December 31, 2007.  Increased portfolio turnover creates
higher brokerage and transaction costs for a Fund (and may reduce
performance). A Fund may realize capital gains when it sells its portfolio
investments.  For a contract owner, any increase in realized gains will
generally not be taxable directly but may affect an owner's tax basis in his
or her account with a Participating Insurance Company.  The table below shows
the Funds' portfolio turnover rates for the last five fiscal years, excluding
purchase and sale transactions of To Be Announced mortgage-related securities:

- ----------------------------------------- -------------- --------------- -------------- --------------- --------------

                                              2007            2006           2005            2004           2003
- ----------------------------------------- -------------- --------------- -------------- --------------- --------------
- ----------------------------------------- -------------- --------------- -------------- --------------- --------------

Panorama Fund                                  84%            82%             84%            99%             43%
- ----------------------------------------- -------------- --------------- -------------- --------------- --------------
- ----------------------------------------- -------------- --------------- -------------- --------------- --------------

Core Bond Fund/VA                              89%            114%           111%            95%            101%
- ----------------------------------------- -------------- --------------- -------------- --------------- --------------

         Special Portfolio Diversification Requirements. To enable a variable
annuity or variable life insurance contract based on an insurance company
separate account to qualify for favorable tax treatment under the Internal
Revenue Code, the underlying investments must follow special diversification
requirements that limit the percentage of assets that can be invested in
securities of particular issuers.  Each Fund's investment program is managed
to meet those requirements, in addition to other diversification requirements
under the Internal Revenue Code and the Investment Company Act that apply to
publicly-sold mutual funds.

         Failure by a Fund to meet those special requirements could cause
earnings on a contract owner's interest in an insurance company separate
account to be taxable income. Those diversification requirements might also
limit, to some degree, a Fund's investment decisions in a way that could
reduce its performance.

         Possible Conflicts of Interest. The investment activities of the
Manager and its affiliates in regard to other accounts they manage may present
conflicts of interest that could disadvantage a Fund and its shareholders. The
Manager or its affiliates may provide investment advisory services to other
funds and accounts that have investment objectives or strategies that differ
from, or are contrary to, those of a Fund. That may result in another such
fund or account holding investment positions that are adverse to a Fund's
investment strategies or activities. For example, a Fund may take a long
position in a security at the same time that another fund or account advised
by the Manager takes a short position in the same security.

         Other funds or accounts advised by the Manager or its affiliates may
have conflicting interests arising from investment objectives that are similar
to those of a Fund. Those funds and accounts may engage in, and compete for,
transactions in the same types of securities or other investments as the Fund.
At other times, there may be conflicts of interest with other funds or
accounts that invest in one of the same issuers that a Fund invests in. For
example, a Fund may invest in an issuer's equity or debt securities that are
subordinate to other securities of that issuer held by another fund or account
the Manager advises.

         The Manager and its affiliates are not obligated to make available to
a Fund's investment personnel any information regarding the strategies or
investment activities of other funds or accounts that the Manager and its
affiliates advise. The trading and other investment activities of those other
funds or accounts are carried out without regard to the investment activities
of a Fund and, as a result, the value of securities held by a Fund or the
Fund's investment strategies may be adversely affected. A Fund's investment
performance will usually differ from the performance of other accounts advised
by the Manager or its affiliates and the Fund may experience losses during
periods in which other accounts advised by the Manager or its affiliates
achieve significant gains.

         Each Fund offers its shares to separate accounts of different
insurance companies, as an investment for their variable annuity, variable
life and other investment product contracts. While neither Fund foresees any
disadvantages to contract owners from these arrangements, it is possible that
the interests of owners of different contracts participating in a Fund through
different separate accounts might conflict. For example, a conflict could
arise because of differences in tax treatment.

         Each Fund's Board has procedures to monitor the Fund's portfolio for
possible conflicts to determine what action should be taken. Such policies and
procedures may also limit a Fund's investment activities and affect its
performance. If a conflict occurs, a Fund's Board might require one or more
Participating Insurance Company separate accounts to withdraw their
investments in the Fund. That could force a Fund to sell securities at
disadvantageous prices, and orderly portfolio management could be disrupted.
Also, a Fund's Board might refuse to sell shares of the Fund to a particular
separate account, or could terminate the offering of the Fund's shares if
required to do so by law or if it would be in the best interests of the
shareholders of the Fund to do so.
         The risks described above collectively form the expected overall risk
profile, respectively, of each Fund and can affect the value of a Fund's
investments, its investment performance and its prices per share. Particular
investments and investment strategies also have risks. These risks mean that
you can lose money by investing in either Fund. When you redeem your shares,
they may be worth more or less than what you paid for them. There is no
assurance that either Fund will achieve its investment objective.


  WHAT ARE THE FEES AND EXPENSES OF EACH FUND AND WHAT ARE THEY EXPECTED TO BE
                           AFTER THE REORGANIZATION?

         Each Fund pays a variety of expenses directly for management of their
respective assets, administration and other services. Those expenses are
subtracted from each Fund's assets to calculate the Fund's net asset value per
share. Shareholders pay these expenses indirectly. The Funds do not charge an
initial sales charge to buy shares or to reinvest dividends.  There are no
exchange fees or redemption fees and no contingent deferred sales charges;
however, you should refer to the prospectus provided by your Participating
Insurance Company for information on initial or contingent deferred sales
charges, exchange fees or redemption fees under your variable contract.  Those
charges and fees are not reflected in the fee and expense tables below.

Current and Pro Forma Fee Tables

         The tables below reflect the current contractual management fee
schedule for each Fund and the proposed "pro forma" management fee schedule
for the surviving Core Bond Fund/VA upon the successful completion of the
Reorganization.  The tables are provided to help you understand and compare
the fees and expenses of investing in shares of each Fund. The pro forma fees
and expenses of the surviving Core Bond Fund/VA show what the fees and
expenses are expected to be after giving effect to the Reorganization.

         "Other Expenses" in the tables include transfer agent fees, custodial
fees, and accounting and legal expenses that each Fund pays.  The "Other
Expenses" in the tables are based on, among other things, the fees each Fund
would have paid if the Transfer Agent had not waived a portion of its fee
under a voluntary undertaking to the Funds to limit these fees to 0.35% of
average daily net assets per fiscal year. For each Fund, that undertaking may
be amended or withdrawn at any time.  The transfer agent fees did not exceed
this expense limitation for either Fund for the fiscal year ended December 31,
2007.

         If the Reorganization is not approved, the Manager expects that the
"Other Fees" and "Total Annual Operating Expenses" for Panorama Fund would
continue at the levels reflected in the table below so long as Panorama Fund's
asset base continues to remain flat or in decline.  Please see "Reasons for
the Reorganization - Board Considerations" for more discussion about Panorama
Fund's fees and expenses.

- ----------------------------------------------- -------------------- ------------------------ ---------------------
                                                                                                    Combined

                                                                        Core Bond Fund/VA
          Fee and Expense Comparison               Panorama Fund      (Non-Service Shares)     Pro Forma Expenses
- ----------------------------------------------- -------------------- ------------------------ ---------------------
- ----------------------------------------------- -------------------- ------------------------ ---------------------
Management Fee                                        0.525%                  0.60%                  0.60%
- ----------------------------------------------- -------------------- ------------------------ ---------------------
- ----------------------------------------------- -------------------- ------------------------ ---------------------
Distribution and/or Service (12b-1) Fees               None                   None                    None
- ----------------------------------------------- -------------------- ------------------------ ---------------------
- ----------------------------------------------- -------------------- ------------------------ ---------------------
Other Fees                                            0.495%                  0.04%                  0.04%
- ----------------------------------------------- -------------------- ------------------------ ---------------------
- ----------------------------------------------- -------------------- ------------------------ ---------------------
Total Annual Operating Expenses                       1.020%                  0.64%                  0.64%
- ----------------------------------------------- -------------------- ------------------------ ---------------------
         In the table, "Management Fee" and "Total Annual Operating
         Expenses" for Core Bond Fund/VA and Combined Pro Forma Expenses
         reflect Core Bond Fund/VA's revised management fee schedule,
         which took effect on May 1, 2007.  Core Bond Fund/VA's actual
         "Management Fee" for the period ended December 31, 2007 was 0.64%
         and actual "Total Annual Operating Expenses" were 0.68%.


Examples

         The examples below are intended to help you compare the cost of
investing in Panorama Fund, Core Bond Fund/VA, and the surviving Core Bond
Fund/VA after the Reorganization. The examples assume that you invest $10,000
in shares of a Fund for the time periods indicated and reinvest your dividends
and distributions.  The examples also assume that your investment has a 5%
return each year and that a Fund's operating expenses remain the same.
Separate account or contract expenses are not included and if they were
included, overall expenses would be higher.  Your actual costs may be higher
or lower, because expenses will vary over time. Based on these assumptions
your expenses would be as follows whether or not you redeem your investment at
the end of each period:

                               Panorama Fund
- --------------------- -------------------- -------------------- ---------------------
       1 Year               3 Years              5 Years              10 Years
- --------------------- -------------------- -------------------- ---------------------
- --------------------- -------------------- -------------------- ---------------------
        $105                 $326                 $566                 $1,254
- --------------------- -------------------- -------------------- ---------------------

                               Core Bond Fund/VA
                               (Non-Service Shares)
- ---------------------- ------------------- -------------------- ---------------------
       1 Year               3 Years              5 Years              10 Years
- ---------------------- ------------------- -------------------- ---------------------
- ---------------------- ------------------- -------------------- ---------------------
         $66                  $206                $358                  $801
- ---------------------- ------------------- -------------------- ---------------------

Pro Forma Surviving Core Bond Fund/VA (Post-Reorganization)
                               (Non-Service Shares)
- --------------------- ------------------- ------------------- ---------------------
       1 year              3 years             5 years              10 years
- --------------------- ------------------- ------------------- ---------------------
- --------------------- ------------------- ------------------- ---------------------
        $66                  $206                $358                 $801
- --------------------- ------------------- ------------------- ---------------------

What are the capitalizations of the Funds and what would the capitalization be
after the Reorganization?

         The following tables set forth the existing capitalization of
Panorama Fund and Core Bond Fund/VA as of December 31, 2007, and the pro forma
combined capitalization of Core Bond Fund/VA as of December 31, 2007, as if
the Reorganization had occurred on that date.

- --------------------------------------------------------------------------------------------------------------------
                                         Net Assets                   Shares                 Net Asset Value
                                                                   Outstanding                  Per Share
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Panorama Fund                            17,023,920                 15,741,980                    $1.08
- --------------------------------------------------------------------------------------------------------------------

- --------------------------------------------------------------------------------------------------------------------
                                         Net Assets                   Shares                 Net Asset Value
                                                                   Outstanding                  Per Share
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Core Bond Fund/VA (Non-Service          325,661,015                 29,454,744                    $11.06
shares)
- --------------------------------------------------------------------------------------------------------------------

- --------------------------------------------------------------------------------------------------------------------
                                         Net Assets                   Shares                 Net Asset Value
                                                                   Outstanding                  Per Share
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Core Bond Fund/VA                       342,684,935                 30,993,977                    $11.06
(Pro Forma Surviving Fund)
(Non-Service shares)*
- --------------------------------------------------------------------------------------------------------------------
*    Reflects  the  issuance  of  1,539,233  Non-Service  shares  of  Core  Bond
     Fund/VA  in a  tax-free  exchange  for the net  assets  of  Panorama  Fund,
     aggregating $17,023,920.

How have the Funds performed?

         The following past performance information for each Fund is set forth
below: (i) a bar chart showing changes in the performance of Panorama Fund and
Non-Service shares of Core Bond Fund/VA from year to year for the last ten
calendar years and (ii) tables detailing how the average annual total returns
of each of Panorama Fund and Non-Service shares of Core Bond Fund/VA compared
to those of broad-based market indices. Charges imposed by the separate
accounts that invest in a Fund are not included in the calculations of a
Fund's returns and, if those charges were included, a Fund's returns would be
less than those shown. A Fund's past investment performance is not necessarily
an indication of how the Fund will perform in the future.


Annual Total Returns for Panorama Fund as of 12/31 each year

[Graphic bar chart]

        ------------------------------------------------------- -----------------------------------------------
                         Calendar Year Ended:                                Annual Total Returns
        ------------------------------------------------------- -----------------------------------------------
        ------------------------------------------------------- -----------------------------------------------
                               12/31/98                                           8.14%
        ------------------------------------------------------- -----------------------------------------------
        ------------------------------------------------------- -----------------------------------------------
                               12/31/99                                           -1.73%
        ------------------------------------------------------- -----------------------------------------------
        ------------------------------------------------------- -----------------------------------------------
                               12/31/00                                           12.36%
        ------------------------------------------------------- -----------------------------------------------
        ------------------------------------------------------- -----------------------------------------------
                               12/31/01                                           7.23%
        ------------------------------------------------------- -----------------------------------------------
        ------------------------------------------------------- -----------------------------------------------
                               12/31/02                                           10.06%
        ------------------------------------------------------- -----------------------------------------------
        ------------------------------------------------------- -----------------------------------------------
                               12/31/03                                           2.58%
        ------------------------------------------------------- -----------------------------------------------
        ------------------------------------------------------- -----------------------------------------------
                               12/31/04                                           4.17%
        ------------------------------------------------------- -----------------------------------------------
        ------------------------------------------------------- -----------------------------------------------
                               12/31/05                                           1.48%
        ------------------------------------------------------- -----------------------------------------------
        ------------------------------------------------------- -----------------------------------------------
                               12/31/06                                           3.74%
        ------------------------------------------------------- -----------------------------------------------
        ------------------------------------------------------- -----------------------------------------------
                               12/31/07                                           6.48%
        ------------------------------------------------------- -----------------------------------------------

During the period shown in the bar chart, the highest return (not annualized)
for a calendar quarter was 6.42% (3QTR02) and the lowest return (not
annualized) for a calendar quarter was -2.73% (2QTR04).


Annual  Total  Returns for Core Bond  Fund/VA  (Non-Service  shares) as of 12/31
each year

[Graphic bar chart]

- ----------------------------------------------------------- ---------------------------------------------------------
                   Calendar Year Ended:                                       Annual Total Returns
- ----------------------------------------------------------- ---------------------------------------------------------
- ----------------------------------------------------------- ---------------------------------------------------------
                        12/31/98                                                     6.80%
- ----------------------------------------------------------- ---------------------------------------------------------
- ----------------------------------------------------------- ---------------------------------------------------------
                        12/31/99                                                    -1.52%
- ----------------------------------------------------------- ---------------------------------------------------------
- ----------------------------------------------------------- ---------------------------------------------------------
                        12/31/00                                                     6.10%
- ----------------------------------------------------------- ---------------------------------------------------------
- ----------------------------------------------------------- ---------------------------------------------------------
                        12/31/01                                                     7.79%
- ----------------------------------------------------------- ---------------------------------------------------------
- ----------------------------------------------------------- ---------------------------------------------------------
                        12/31/02                                                     9.02%
- ----------------------------------------------------------- ---------------------------------------------------------
- ----------------------------------------------------------- ---------------------------------------------------------
                        12/31/03                                                     6.78%
- ----------------------------------------------------------- ---------------------------------------------------------
- ----------------------------------------------------------- ---------------------------------------------------------
                        12/31/04                                                     5.49%
- ----------------------------------------------------------- ---------------------------------------------------------
- ----------------------------------------------------------- ---------------------------------------------------------
                        12/31/05                                                     2.59%
- ----------------------------------------------------------- ---------------------------------------------------------
- ----------------------------------------------------------- ---------------------------------------------------------
                        12/31/06                                                     5.28%
- ----------------------------------------------------------- ---------------------------------------------------------
- ----------------------------------------------------------- ---------------------------------------------------------
                        12/31/07                                                     4.39%
- ----------------------------------------------------------- ---------------------------------------------------------

During the period shown in the bar chart, the highest return for a calendar
quarter was 4.04% (1QTR01) and the lowest return for a calendar quarter was
- -2.23% (2QTR04).


- ------------------------------------------------ --------------------- ----------------------- ---------------------
Panorama Fund
- ------------------------------------------------ --------------------- ----------------------- ---------------------
- ------------------------------------------------ --------------------- ----------------------- ---------------------
Average  Annual  Total  Returns for the periods                                                      10 Years
ended December 31, 2007                                 1 Year                5 Years
- ------------------------------------------------ --------------------- ----------------------- ---------------------
- ------------------------------------------------ --------------------- ----------------------- ---------------------
 Panorama Fund (inception 5/13/92)                      6.48%                  3.68%                   5.37%
- ------------------------------------------------ --------------------- ----------------------- ---------------------
- ------------------------------------------------ --------------------- ----------------------- ---------------------
Merrill Lynch Master Government Index                   8.76%                  4.11%                   5.90%
(reflects no deduction for fees, expenses or
taxes)
- ------------------------------------------------ --------------------- ----------------------- ---------------------

- ------------------------------------------------ --------------------- ----------------------- ---------------------
Core Bond Fund/VA (Non-Service shares)
- ------------------------------------------------ --------------------- ----------------------- ---------------------
- ------------------------------------------------ --------------------- ----------------------- ---------------------
Average Annual Total Returns                            1 Year                5 Years                10 Years
for the periods ended December 31, 2007
- ------------------------------------------------ --------------------- ----------------------- ---------------------
- ------------------------------------------------ --------------------- ----------------------- ---------------------
Core Bond Fund/VA                                       4.39%                  4.90%                   5.24%
Non-Service shares (inception 4/3/85)
- ------------------------------------------------ --------------------- ----------------------- ---------------------
- ------------------------------------------------ --------------------- ----------------------- ---------------------
Citigroup Broad Investment Grade Index                  7.22%                  4.55%                   6.02%
- ------------------------------------------------ --------------------- ----------------------- ---------------------
- ------------------------------------------------ --------------------- ----------------------- ---------------------
Lehman Brothers Aggregate Bond Index                    6.97%                  4.42%                   5.97%
- ------------------------------------------------ --------------------- ----------------------- ---------------------
- ------------------------------------------------ --------------------- ----------------------- ---------------------
Lehman Brothers Credit Index                            5.11%                  4.84%                   6.05%
- ------------------------------------------------ --------------------- ----------------------- ---------------------

A Fund's average annual total returns in the table measure the performance of
a hypothetical account without deducting charges imposed by the separate
accounts that invest in the Fund and assume that all dividends and capital
gains distributions have been reinvested in additional shares.  The Panorama
Fund's performance is compared to the Merrill Lynch Master Government Index,
an unmanaged composite index of both the Merrill Lynch Treasury and Merrill
Lynch Agency Master Indices.  The performance of Non-Service shares of Core
Bond Fund/VA is compared to the Lehman Brothers Aggregate Bond Index, a
broad-based index of government agencies and corporate debt; the Citigroup
Broad Investment Grade Index, an index of investment grade corporate and U.S.
government bonds; and the Lehman Brothers Credit Index, an index of
non-convertible U.S. investment grade corporate bonds. The indices'
performance includes reinvestment of income but does not reflect transaction
costs, fees or expenses. A Fund's investments vary from the securities that
compose the index or indices to which the Fund's performance is compared.

A Fund's total returns should not be expected to be the same as the returns of
other Oppenheimer funds, even if both funds have the same portfolio managers
and/or similar names.


HOW DO THE ACCOUNT FEATURES AND SHAREHOLDER SERVICES FOR THE FUNDS COMPARE?

Purchases and Redemptions

         Shares of each Fund may be purchased and redeemed only by separate
investment accounts of Participating Insurance Companies as an underlying
investment for variable life insurance policies, variable annuity contracts or
other investment products. Individual investors cannot buy or redeem shares of
a Fund directly. Shares of each Fund are sold to and redeemed by Participating
Insurance Companies at their offering price, which is the net asset value per
share. Neither Fund imposes any sales charge on the purchase, redemption or
exchange of its shares.  You should refer to the prospectus of the
Participating Insurance Company for a description of any initial
transaction-related, surrender, or withdrawal charge imposed under the
variable annuity, variable life or other contract through which a Fund's
shares are purchased or redeemed.

         Frequent purchases and redemptions of a Fund's shares may interfere
with the Manager's ability to manage the Fund's investments, may increase the
Fund's transaction and administrative costs and/or may affect the performance.
For example, if large dollar amounts were involved in redemption transactions,
a Fund might be required to sell portfolio securities or administrative
expenses might be increased. The extent to which the Fund might be affected by
such trading activity would depend on various factors, such as the current
asset size of a Fund, the nature of its investments, the amount of Fund assets
the portfolio managers maintain in cash or cash equivalents, and the aggregate
dollar amount, number and frequency of the share trades.

         The Manager and each Fund's Board have adopted policies and
procedures to try to prevent frequent and/or excessive purchase and redemption
activity.

         The Transfer Agent and OppenheimerFunds Distributor, Inc. (the
"Distributor"), on behalf of each Fund, have entered into agreements with
Participating Insurance Companies designed to detect and restrict excessive
short term trading activity by contract or policy owners or their financial
advisers in their accounts. The Transfer Agent generally does not consider
periodic asset allocation or re-balancing that affects a portion of the Fund
shares held in the account of a policy or contract owner to be "excessive
trading." However, the Transfer Agent has advised Participating Insurance
Companies that it generally considers certain other types of trading activity
to be "excessive," such as making a "transfer" out of a Fund within 30 days of
buying Fund shares (by the sale of the recently purchased Fund shares and the
purchase of shares of another fund) or making more than six "round trip
transfers" between funds during one year. The agreements require Participating
Insurance Companies to provide transaction information to the Funds and to
execute Fund instructions to restrict trading in Fund shares.

         A Participating Insurance Company may also have its own policies and
procedures and may impose its own restrictions or limitations to discourage
short-term and/or excessive trading by its policy or contract owners. Those
policies and procedures may be different from the Funds' in certain respects.
You should refer to the prospectus for your insurance company variable annuity
contract for specific information about the insurance company's policies. To
the extent that a Fund has agreed to utilize an insurance company's short-term
or excessive trading restrictions, policy or contract owners may be required
to only transmit purchase or redemption orders by first class U.S. mail.

Dividends and Distributions

         Both Funds intend to declare dividends separately for each class of
shares from net investment income on an annual basis and pay them annually.
Dividends paid by a Fund (and any capital gains distributions) will be
reinvested automatically in additional shares of the Fund at net asset value
for the account of the Participating Insurance Company (unless the insurance
company elects to have dividends or distributions paid in cash).  The Funds
have no fixed dividend rate and cannot guarantee that they will pay any
dividends or distributions.


         A Fund may realize capital gains on the sale of portfolio securities.
If it does, it may make distributions out of any net short-term or long-term
capital gains each year. Each Fund may make supplemental distributions of
dividends and capital gains following the end of its fiscal year.  However,
there can be no assurance that either Fund will pay any capital gains
distributions in a particular year.

                      INFORMATION ABOUT THE REORGANIZATION

         This following is a summary of the  Reorganization  Agreement.  You may
request a copy of the  Reorganization  Agreement,  free of  charge,  by  calling
1.800.399.7181.

How will the Reorganization be carried out?

         If the shareholders of Panorama Fund approve the Reorganization, the
Reorganization will take place after various conditions are satisfied by
Panorama Fund and Core Bond Fund/VA, including delivery of certain documents.
The Closing Date is presently scheduled to occur on or about April 30, 2008
and the "Valuation Date" (which is the business day preceding the Closing Date
of the Reorganization) is presently scheduled to be on or about April 29, 2008.

         If the shareholders of Panorama Fund vote to approve the
Reorganization, substantially all of the assets of Panorama Fund will be
transferred to Core Bond Fund/VA in exchange for Non-Service shares of Core
Bond Fund/VA, and shareholders will receive Non-Service shares of Core Bond
Fund/VA equal in value to the value as of the Valuation Date of your shares of
Panorama Fund.  Panorama Fund will then be liquidated and its outstanding
shares will be cancelled. The stock transfer books of Panorama Fund will be
permanently closed at the close of business on the Valuation Date.

         If shareholders of Panorama Fund approve the Reorganization (please
see "Voting Information - Quorum and Required Vote" for more information about
the required vote), all shareholders' of Panorama Fund will have their shares
redeemed at net asset value on the Valuation Date, after Panorama Fund
subtracts a cash reserve ("Cash Reserve"), and the proceeds of redemption will
be reinvested in Non-Service shares of Core Bond Fund/VA at net asset value.
The Cash Reserve is an amount retained by Panorama Fund for the payment of
Panorama Fund's outstanding debts, taxes and expenses of liquidation following
the Reorganization.  Core Bond Fund/VA is not assuming any debts of Panorama
Fund except debts for unsettled securities transactions and outstanding
dividend and redemption checks. Any debts paid out of the Cash Reserve will be
those debts, taxes or expenses of liquidation incurred by Panorama Fund on or
before the Closing Date. Panorama Fund will recognize capital gains or losses
on any sales of portfolio securities made prior to the Reorganization. The
sales of portfolio securities contemplated by the Reorganization are
anticipated to be in the ordinary course of business of Panorama Fund's
activities.  Following the Reorganization, Panorama Fund will take all
necessary steps to complete its liquidation and effect a complete dissolution
of the Fund.

         Under the Reorganization Agreement, either Panorama Fund or Core Bond
Fund/VA may abandon and terminate the Reorganization Agreement for any reason
and there will be no liability for damages or other recourse available to the
other Fund; provided, however, that in the event that one of the Funds
terminates the Reorganization Agreement without reasonable cause, it shall,
upon demand, reimburse the other Fund for all expenses, including reasonable
out-of-pocket expenses and fees incurred in connection with the Reorganization
Agreement.

         To the extent permitted by law, the Funds may agree to amend the
Reorganization Agreement without shareholder approval. They may also agree to
terminate and abandon the Reorganization at any time before or, to the extent
permitted by law, after the approval of shareholders of Panorama Fund.

Who will pay the expenses of the Reorganization?

         Panorama Fund will be responsible for its out-of-pocket expenses
associated with the Reorganization, including outside legal and accounting
fees and shareholder communication costs.  The Manger will bear such expenses
incurred by Core Bond Fund/VA.  The Manager has estimated total merger related
costs to be approximately $51,650 for Panorama Fund and $26,750 for Core Bond
Fund/VA.  Due to the relatively moderate cost of the Reorganization, the
Manager does not anticipate that either Fund will experience any dilution as a
result of the proposed Reorganization.

What are the tax consequences of the Reorganization?

         The Reorganization is intended to qualify as a tax-free
reorganization for federal income tax purposes under Section 368(a)(1) of the
Internal Revenue Code of 1986, as amended.  Based on certain assumptions and
representations received from Panorama Fund and Core Bond Fund/VA, it is
expected to be the opinion of Bell, Boyd & Lloyd LLP ("tax opinion") that:

              (i)   shareholders of Panorama Fund should not recognize any gain
                    or loss for federal income tax purposes as a result of the
                    exchange of their shares for shares of Core Bond Fund/VA;

              (ii)  shareholders of Core Bond Fund/VA should not recognize any
                    gain or loss upon receipt of Panorama Fund's assets; and

              (iii) the holding period of Core Bond Fund/VA shares received in
                    that exchange should include the period that Panorama Fund
                    shares were held (provided such shares were held as a
                    capital asset on the Closing Date).  In addition, neither
                    Fund is expected to recognize a gain or loss as a direct
                    result of the Reorganization.

         If the tax opinion is not received by the Closing Date, Panorama Fund
may still pursue the Reorganization, pending re-solicitation of shareholders
and shareholder approval, which would delay the reorganization by several
months.  Although not likely, in the event the tax opinion is not received,
the Reorganization may not qualify as a tax-free reorganization.

         Prior to the Valuation Date, Panorama Fund may pay a dividend which
will have the effect of distributing to Panorama Fund's shareholders all of
Panorama Fund's investment company taxable income, if any, for taxable years
ending on or prior to the Closing Date (computed without regard to any
deduction for dividends paid) and all of its net capital gains, if any,
realized in taxable years ending on or prior to the Closing Date (after
reduction for any available capital loss carry-forward). As of December 31,
2007, Panorama Fund had $210,319 of net capital loss carry-forward available to
offset any realized capital gains and thereby reduce the capital gains
distributions. Any such dividends will be taxable, if at all, to the accounts
of Participating Insurance Companies, although such dividends may affect the
tax basis of certain types of distributions made to you by a Participating
Insurance Company.

         You will continue to be responsible for tracking the purchase cost
and holding period of your shares and should consult your tax adviser
regarding the effect, if any, of the Reorganization in light of your
individual circumstances. You should also consult your tax adviser as to state
and local and other tax consequences, if any, of the Reorganization because
this discussion relates only to federal income tax consequences.


                         REASONS FOR THE REORGANIZATION

Board Considerations

         In considering whether to approve the proposed Reorganization on
behalf of the Panorama Fund, Panorama Fund' Board of Directors reviewed and
discussed the proposed Reorganization with the Manager and the Board's
independent legal counsel.  Panorama Fund's Board of Directors considered
information with respect to, among other things, each Fund's management fees
and total expenses; comparability of the Funds' investment objectives,
investment policies, and portfolio characteristics; the Funds' historical
investment performance; and the terms of the proposed Reorganization.

         The Board reviewed information indicating that over the last several
years, the net assets of Panorama Fund have decreased significantly.  The
Manager presented its view that this trend is unlikely to be reversed.  The
Manager reported that Panorama Fund is currently offered under the variable
annuity or variable life contracts of only one insurance company sponsor,
which does not offer the Fund under new contracts.  The Manager reported that
it has found no interest among other insurance companies to offer Panorama
Fund under their variable annuity or variable life insurance products and,
therefore, there is no opportunity to increase Panorama Fund's asset base
through sales of shares to new investors.  Given the Fund's diminishing asset
base and inability to increase assets through new sales, the Manager believes
that Panorama Fund is not likely to provide opportunities for economies of
scale as a means to try to reduce expenses.

         The Board further considered the Manager's view that the proposed
Reorganization is the best alternative for shareholders of Panorama Fund to
benefit from a fund with a larger asset base and lower total expenses.
Panorama Fund's "other expenses" (0.495%) are significantly higher than those
of Core Bond Fund/VA (0.04%).  The Board considered that, although the
management fee rate of Core Bond Fund/VA (0.60%) as of December 31, 2007 is
higher than that of Panorama Fund (0.525%), following the Reorganization,
shareholders of Panorama Fund would benefit because Core Bond Fund/VA
Non-Service shares' total expense ratio (0.64%)(2) is significantly lower than
that of Panorama Fund (1.020%).

         The Board also considered the Funds' respective investment objectives
and policies.  The Board discussed with the Manager that each Fund has as an
investment objective of high current income, with Panorama Fund seeking a high
degree of safety of principal and Core Bond Fund/VA having a secondary
objective of capital appreciation when consistent with high current income.
The Board considered that each Fund emphasizes investment in high-quality
securities, with Core Bond Fund/VA having greater flexibility to invest in
private issuer securities, foreign securities, and high yield debt
securities.  The Manager discussed with the Board that the same portfolio
management team manages both Funds and that the Funds' portfolios have
substantial overlap in positions.  The Board considered the Manager's view
that the Reorganization would allow shareholders of Panorama Fund to continue
to participate in a fund that seeks high current income and emphasizes
investment in high-quality debt securities, with the possibility that
shareholders could benefit from a portfolio that is more diversified across
the various segments of the fixed income market.

         The Board also considered the Funds' relative historical investment
performance.  The Board received information reflecting that Panorama Fund had
higher one-year and ten-year average annual total returns, and Core Bond
Fund/VA had higher five-year returns, for the periods ended December 31,
2007.

         The Board also considered the terms and conditions of the
Reorganization, including that there would be no sales or other transaction
charge imposed by a Fund in effecting the Reorganization and that the
Reorganization is expected to be a tax-free reorganization.

         After consideration of the above factors, other considerations, and
such information as the Board of Panorama Fund deemed relevant, Panorama
Fund's Board of Directors, including the Directors who are not "interested
persons" (as defined in the Investment Company Act) of Panorama Fund or the
Manager (the "Independent Trustees"), unanimously approved the Reorganization
and the Reorganization Agreement and voted to recommend its approval by the
shareholders of Panorama Fund.  The Board and the Independent Trustees also
concluded that Panorama Fund's participation in the transaction was in the
best interests of Panorama Fund and that the Reorganization would not result
in a dilution of the interests of existing shareholders of Panorama Fund.

         The Board of Trustees of Core Bond Fund/VA also determined that the
Reorganization was in the best interests of Core Bond Fund/VA and its
shareholders and that no dilution would result to those shareholders.  Core
Bond Fund/VA shareholders do not vote on the Reorganization.  The Board on
behalf of Core Bond Fund/VA, including the Independent Trustees, unanimously
approved the Reorganization and the Reorganization Agreement.

         Board members are not required, nor do they plan, to attend the
Special Meeting of Shareholders.

For the reasons discussed above, the Board, on behalf of Panorama Fund,
recommends that you vote FOR the Reorganization. If shareholders of Panorama
Fund do not approve the Reorganization, it will not take place.



Receipt of Non-Service Shares of Core Bond Fund/VA

         Upon consummation of the Reorganization, Non-Service shares of Core
Bond Fund/VA will be distributed to shareholders (in this case, separate
accounts established by a Participating Insurance Company) of Panorama Fund,
in connection with the Reorganization. The Non-Service shares of Core Bond
Fund/VA will be recorded electronically in the separate account of the
Participating Insurance Company.  Core Bond Fund/VA will then send a
confirmation to the Participating Insurance Company with respect to each of
its separate accounts previously invested in Panorama Fund. The Participating
Insurance Company will be responsible for allocating to Core Bond Fund/VA the
contract values that were previously allocated to Panorama Fund.

WHAT ARE THE FUNDAMENTAL INVESTMENT RESTRICTIONS OF THE FUNDS?

Both Panorama Fund and Core Bond Fund/VA have certain additional fundamental
investment restrictions that can only be changed with shareholder approval.
Generally, these investment restrictions are similar between the Funds.
Please see the Statements of Additional Information for Panorama Fund (SEC
File No. 2-73969) and Core Bond Fund/VA (SEC File No. 2-93177) for
descriptions of those investment restrictions, which are incorporated by
reference into the Statement of Additional Information, dated March 7, 2008,
relating to the Reorganization.


OTHER COMPARISONS BETWEEN THE FUNDS

         A description of certain other key features of the Funds is set forth
below.  More detailed information is available in each Fund's Prospectus and
Statement of Additional Information, which are incorporated by reference.

Management of the Funds

         Core Bond Fund/VA is governed by a Board of Trustees, and Panorama
Fund is governed by a Board of Directors.  Each Fund's Board is comprised of
the same members.  The Board of Core Bond Fund/VA is responsible for
protecting the interests of the Fund's shareholders under Massachusetts law
and other applicable laws while the Board of Panorama Fund is responsible for
protecting the interests of shareholders under Maryland law and other
applicable laws.  For a listing of the Core Bond Fund/VA's Board of Trustees
and biographical information, please refer to the Statement of Additional
Information of Core Bond Fund/VA (SEC File No. 2-93177) dated April 30, 2007,
revised as of August 31, 2007 and supplemented October 12, 2007, which is
incorporated by reference into the Statement of Additional Information, dated
March 7, 2008, relating to this Prospectus and Proxy Statement.

Investment Management and Fees

         The day-to-day management of the business and affairs of each Fund is
the responsibility of the Manager.  Pursuant to each Fund's investment
advisory agreement, the Manager acts as the investment advisor for both Funds,
manages the assets of both Funds and makes each Fund's investment decisions.
The Manager employs the Funds' portfolio managers. Since April 23, 2002, each
Fund has been managed by Angelo Manioudakis, together with a team of
investment professionals including Benjamin J. Gord, Geoffrey Caan, Thomas
Swaney and Antulio N. Bomfim, who are primarily responsible for the day-to-day
management of the Portfolio's investments.
         Both Funds obtain investment management services from the Manager
according to terms that are substantially similar. The advisory agreements
require the Manager, at its expense, to provide each Fund with adequate office
space, facilities and equipment. The agreements also require the Manager to
provide and supervise the activities of all administrative and clerical
personnel required to provide effective administration for the Funds. Those
responsibilities include the compilation and maintenance of records with
respect to their operations, the preparation and filing of specified reports,
and composition of proxy materials and registration statements for continuous
public sale of shares of the Funds.

         Each Fund pays expenses not expressly assumed by the Manager under
the advisory agreement. The advisory agreements list examples of expenses paid
by each Fund. The major categories relate to interest, taxes, brokerage
commissions, fees to Independent Trustees/Directors, legal and audit expenses,
custodian bank and transfer agent expenses, share issuance costs, certain
printing and registration costs, and non-recurring expenses, including
litigation costs.

         Panorama Fund's investment advisory agreement provides that in the
absence of willful misfeasance, bad faith, gross negligence in the performance
of its duties, or reckless disregard of its obligations and duties under the
investment advisory agreement, the Manager is not liable for any loss
sustained by reason of good faith errors or omissions in connection with any
matters to which the agreement(s) relate.  Core Bond Fund/VA's investment
advisory agreement provides that the Manager is not be liable for any loss
sustained by the Fund in connection with matters to which the investment
advisory agreement relates, except a loss resulting by reason of the Manager's
willful misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of the Manager's reckless disregard of its obligations
and duties under the investment advisory agreement.

         The Manager is controlled by Oppenheimer Acquisition Corp., a holding
company owned in part by senior officers of the Manager and ultimately
controlled by Massachusetts Mutual Life Insurance Company, a mutual life
insurance company that also advises pension plans and investment companies.
The Manager has been an investment advisor since January 1960. The Manager
(including subsidiaries and an affiliate) managed more than $260 billion in
assets as of December 31, 2007, including other Oppenheimer funds with more
than 6 million shareholder accounts. The Manager is located at 225 Liberty
Street, 11th Floor, New York, New York 10281-1008.

         Management Fees.  Under each Fund's investment advisory agreement, the
Fund pays the manager an advisory fee at an annual rate that declines on
additional assets as the Fund grows.  The table below shows the current
advisory fee schedule for each Fund.  As shown in the table, based on net
assets as of December 31, 2007, the effective management fee for Core Bond
Fund/VA was 0.60% and 0.525% for Panorama Fund.  Core Bond Fund/VA's fee
schedule would be the fee schedule for the combined Fund upon successful
completion of the Reorganization.

                              Panorama Fund                                     Core Bond Fund/VA
                       Net assets                     Fee                  Net Assets                   Fee
                   Up to $300 million               0.525%              Up to $1 billion               0.60%
                   Next $100 million                0.500%               Over $1 billion               0.50%
                   Over $400 million                0.450%
          Effective Fee (based on net assets                     Effective Fee (based on net
          of $17.0 million as of 12/31/07)          0.525%       assets of $429.2 million as of        0.60%
                                                                 12/31/07)

         Core Bond Fund/VA's management fee schedule shown above became
effective on May 1, 2007.  From January 1, 2007 through April 30, 2007, Core
Bond Fund/VA's annual advisory fee rate was: 0.75% of the first $200 million
of 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 $200 million; and 0.50% of
net assets over $1 billion.

Payments to Financial Intermediaries and Service Providers

         The Manager and the Distributor, in their discretion, may pay
financial intermediaries and service providers for distribution and/or
shareholder servicing activities. These payments are made out of the Manager's
and/or the Distributor's own resources, including from the profits derived
from the advisory fees the Manager receives from a Fund. These cash payments,
which may be substantial, are paid to many firms having business relationships
with the Manager and Distributor. These payments are in addition to any
distribution fees, servicing fees, or transfer agency fees paid directly or
indirectly by the Fund to these financial intermediaries and any commissions
the Distributor pays to these firms out of the sales charges paid by
investors. These payments by the Manager or Distributor from their own
resources are not reflected in the fee tables contained in this combined
Prospectus and Proxy Statement because they are not paid by the Fund.

         "Financial intermediaries" are firms that offer and sell shares of
the Funds to their clients, or provide shareholder services to the Funds, or
both, and receive compensation for doing so.  Each Participating Insurance
Company, for example, is a financial intermediary.

         In general, these payments to financial intermediaries can be
categorized as "distribution-related" or "servicing" payments. Payments for
distribution-related expenses, such as marketing or promotional expenses, are
often referred to as "revenue sharing." Revenue sharing payments may be made
on the basis of the sales of shares attributable to a financial intermediary,
the average net assets of a Fund and other Oppenheimer funds attributable to
the accounts of that dealer and its clients, negotiated lump sum payments for
distribution services provided, or sales support fees. In some circumstances,
revenue sharing payments may create an incentive for a financial intermediary
or its representatives to recommend or offer shares of a Fund or other
Oppenheimer funds to its customers. These payments also may give a financial
intermediary an incentive to cooperate with the Distributor's marketing
efforts. A revenue sharing payment may, for example, qualify a Fund for
preferred status with the intermediary receiving the payment or provide
representatives of the Distributor with access to representatives of the
intermediary's sales or other personnel, in some cases on a preferential basis
over funds of competitors. Additionally, as firm support, the Manager or
Distributor may reimburse expenses related to educational seminars and "due
diligence" or training meetings (to the extent permitted by applicable laws or
the rules of the Financial Industry Regulatory Authority (FINRA) (formerly
known as the NASD) designed to increase sales representatives' awareness about
Oppenheimer funds, including travel and lodging expenditures. However, the
Manager does not consider a financial intermediary's sale of shares of the
Funds or other Oppenheimer funds when selecting brokers or dealers to effect
portfolio transactions for the funds.

         Various factors are used to determine whether to make revenue sharing
payments. Possible considerations include, without limitation, the types of
services provided by the intermediary, sales of Fund shares, the redemption
rates on accounts of clients of the intermediary or overall asset levels of
Oppenheimer funds held for or by clients of the intermediary, the willingness
of the intermediary to allow the Distributor to provide educational and
training support for the intermediary's sales personnel relating to the
Oppenheimer funds, the availability of the Oppenheimer funds on the
intermediary's sales system, as well as the overall quality of the services
provided by the intermediary and the Manager or Distributor's relationship
with the intermediary. The Manager and Distributor have adopted guidelines for
assessing and implementing each prospective revenue sharing arrangement. To
the extent that financial intermediaries receiving distribution-related
payments from the Manager or Distributor sell more shares of the Oppenheimer
funds or retain more shares of the funds in their client accounts, the Manager
and Distributor benefit from the incremental management and other fees they
receive with respect to those assets.

         Payments may also be made by the Manager, the Distributor or the
Transfer Agent to financial intermediaries to compensate or reimburse them for
administrative or other client services provided such as sub-transfer agency
services for shareholders or retirement plan participants, omnibus accounting
or sub-accounting, participation in networking arrangements, account set-up,
recordkeeping and other shareholder services. Payments may also be made for
administrative services related to the distribution of Fund shares through the
intermediary. Firms that may receive servicing fees include retirement plan
administrators, qualified tuition program sponsors, banks and trust companies,
and others. These fees may be used by the service provider to offset or reduce
fees that would otherwise be paid directly to them by certain account holders,
such as retirement plans.

         Each Fund's Statement of Additional Information contains more
information about revenue sharing and service payments made by the Manager or
the Distributor.  Please refer to separate account prospectuses provided by
your Participating Insurance Company for a description of any fees that you
may pay or charges to the Participating Insurance Company charges in addition
to those disclosed in this combined Prospectus and Proxy Statement.

Transfer Agency and Custody Services

         Both Funds receive shareholder accounting and other clerical services
from OppenheimerFunds Services, a division of the Manager, in its capacity as
transfer agent and dividend paying agent. It acts on an annual per-account fee
basis for both Funds. The terms of the transfer agency agreement for both
Funds, and of a voluntary undertaking to limit transfer agent fees to 0.35% of
average daily net assets per fiscal year for Non-Service shares of Core Bond
Fund/VA and shares of Panorama Fund, are substantially similar.  JP Morgan
Chase Bank, located at 4 Chase Metro Tech Center, Brooklyn, NY 11245, acts as
custodian for both Funds.

Shareholder Rights

         Core Bond Fund/VA is a Massachusetts business trust and Panorama Fund
is a Maryland Corporation. The Funds are not required to, and do not, hold
annual meetings of shareholders and have no current intention to hold such
meetings, except as required by the Investment Company Act or other applicable
law.

         Under the Investment Company Act, a Fund is required to hold a
shareholder meeting if, among other reasons, the numbers of Trustees or
Directors elected by the Fund's shareholders is less than a majority of the
total number of Trustees or Directors, or if the Fund seeks to change a
fundamental investment policy. The Trustees of Core Bond Fund/VA will call a
meeting of shareholders to vote on the removal of a Trustee upon the written
request of the record holders of 10% of its outstanding shares. If the
Trustees receive a request from at least 10 shareholders stating that they
wish to communicate with other shareholders to request a meeting to remove a
Trustee, the Trustees will then either make the Fund's shareholder list
available to the applicants or mail their communication to all other
shareholders at the applicants' expense. The shareholders making the request
must have been shareholders for at least six months and must hold shares of
the Fund valued at $25,000 or more or constituting at least 1% of the Fund's
outstanding shares. The Trustees may also take other action as permitted by
the Investment Company Act.

         The rights of shareholders of both Funds are substantially the same
under their governing documents.  The table below compares important
provisions of each Fund's charter documents.  Shares of a Fund will be fully
paid and non-assessable when issued.  Neither Fund permits cumulative voting.



- ----------------------------------------------------------- ---------------------------------------------------------
Panorama  Fund,  a series of Panorama  Series  Fund,  Inc.  Core  Bond  Fund/VA,  a series of  Oppenheimer  Variable
(the "Corporation")                                         Account Funds (the "Trust")
- ----------------------------------------------------------- ---------------------------------------------------------
- ----------------------------------------------------------- ---------------------------------------------------------
Shareholders have the power to elect and remove Directors.  Shareholders have the power to elect and remove
                                                            Trustees.
- ----------------------------------------------------------- ---------------------------------------------------------
- ----------------------------------------------------------- ---------------------------------------------------------
The Corporation reserves the right from time to time to     The Declaration of Trust may be amended by the
make any amendment to its charter now or thereafter         affirmative vote of the holders of not less than a
authorized by law, including any amendment which changes    majority of the shares. The Trustees generally may
charter terms or contract rights, as expressly set forth    amend the Declaration of Trust without the vote or
in the charter, by classification, reclassification, or     consent of shareholders; however, no amendment may be
otherwise.                                                  made, which would change any rights with respect to any
                                                            shares of the Trust or any series or class thereof by
                                                            reducing the amount payable thereon upon liquidation of
                                                            the Trust or by diminishing or eliminating any voting
                                                            rights pertaining thereto, except with the vote or
                                                            consent of the holders of a majority of the Shares
                                                            entitled to vote.

- ----------------------------------------------------------- ---------------------------------------------------------
- ----------------------------------------------------------- ---------------------------------------------------------
The Board of Directors may amend or repeal any provision    The Bylaws may be altered, amended, added to or
of the Bylaws at any meeting of the Board.  The Bylaws      repealed by the Shareholders or by majority vote of the
may be amended or repealed at any regular meeting of the    entire Board of Trustees, but any such alteration,
stockholders or at any special meeting of the               amendment, addition or repeal of the Bylaws by action
stockholders at which a quorum is present or represented,   of the Board of Trustees may be altered or repealed by
provided that                                               the Shareholders.
notice of the proposed amendment, alteration, or repeal
be contained in the notice of such special meeting.

- ----------------------------------------------------------- ---------------------------------------------------------
- ----------------------------------------------------------- ---------------------------------------------------------
Under Maryland law, a voluntary dissolution of the          The liquidation of the Trust or any particular Series
Corporation requires approval by a majority of the entire   or Class thereof may be authorized at any time by vote
Board of Directors and by the affirmative vote of           of a majority of the Trustees or instrument executed by
two-thirds of all the shareholders' votes entitled to be    a majority of their number then in office, provided the
cast on the matter.                                         Trustees find that it is in the best interest of the
                                                            Shareholders of such Series or Class or as otherwise
                                                            provided in this Declaration of Trust or the instrument
                                                            establishing such Series or Class. The Trustees shall
                                                            provide written notice to affected shareholders of such
                                                            liquidation.

- ----------------------------------------------------------- ---------------------------------------------------------
- ----------------------------------------------------------- ---------------------------------------------------------
Meetings of the stockholders may be called for any          Meetings of the Shareholders for any purpose or
purpose or purposes by a majority of the Board of           purposes may be called by the Chairman of the Board of
Directors, by the President, or upon the written request    Trustees, if any, or by the President or by the Board
of the holder of at least 25% of the outstanding capital    of Trustees and shall be called by the Secretary upon
stock of the Corporation entitled to vote at such meeting.  receipt of the request in writing signed by
                                                            Shareholders holding not less than one third in amount
                                                            of the entire number of Shares issued and outstanding
                                                            and entitled to vote thereat.  Such request shall state
                                                            the purpose or purposes of the proposed meeting.  In
                                                            addition, meetings of the Shareholders shall be called
                                                            by the Board of Trustees upon receipt of the request in
                                                            writing signed by Shareholders that hold not less than
                                                            ten percent in amount of the entire number of Shares
                                                            issued and outstanding and entitled to vote thereat,
                                                            stating that the purpose of the proposed meeting is the
                                                            removal of a Trustee.
- ----------------------------------------------------------- ---------------------------------------------------------


                               VOTING INFORMATION

How do I vote?

         Please take a few moments to complete your proxy ballot promptly. You
may vote your shares by completing and signing the enclosed proxy ballot(s)
and mailing the proxy ballot(s) in the postage paid envelope provided.  You
also may vote your shares by telephone by following the instructions on the
attached proxy ballot(s) and accompanying materials.  You may cast your vote
by attending the Meeting in person if you are a record owner.

         If you need assistance, have any questions regarding the
Reorganization or need a replacement proxy ballot, you may contact us
toll-free at 1-866-406-2288.  Any proxy given by a shareholder, whether in
writing, by telephone, is revocable as described below under the paragraph
titled "Revoking a Proxy".

         If you simply sign and date the proxy but give no voting
instructions, your shares will be voted in favor of the Reorganization.

         As the Meeting date approaches, certain shareholders may receive
telephone calls from a representative of the solicitation firm (if applicable)
if their vote has not yet been received.  Authorization to permit the
solicitation firm to execute proxies may be obtained by telephonic
instructions from shareholders of Panorama Fund.  Proxies that are obtained
telephonically will be recorded in accordance with the procedures discussed
below.  These procedures have been designed to reasonably ensure that the
identity of the shareholder providing voting instructions is accurately
determined and that the voting instructions of the shareholder are accurately
recorded.

         In all cases where a telephonic proxy is solicited, the solicitation
firm representative is required to ask for each shareholder's full name,
address, title (if the shareholder is authorized to act on behalf of an
entity, such as a corporation) and to confirm that the shareholder has
received the Prospectus and Proxy Statement and ballot.  If the information
solicited agrees with the information provided to the solicitation firm, the
solicitation firm representative has the responsibility to explain the
process, read the proposal listed on the proxy ballot, and ask for the
shareholder's instructions on such proposal.  The solicitation firm
representative, although he or she is permitted to answer questions about the
process, is not permitted to recommend to the shareholder how to vote.  The
solicitation firm representative may read any recommendation set forth in the
Prospectus and Proxy Statement.  The solicitation firm representative will
record the shareholder's instructions.  Within 72 hours, the shareholder will
be sent a confirmation of his or her vote asking the shareholder to call the
solicitation firm immediately if his or her instructions are not correctly
reflected in the confirmation.  For additional information, see also the
section below titled "Solicitation of Proxies".

Who is entitled to vote and how are votes counted?

         Shareholders of record of Panorama Fund at the close of business on
January 29, 2008 (the "Record Date") will be entitled to vote at the Meeting.
On January 29, 2008, there were 15,811,061 outstanding shares of Panorama
Fund's shares.  Each shareholder will be entitled to one vote for each full
share, and a fractional vote for each fractional share of Panorama Fund held
on the Record Date.

         The individuals named as proxies on the proxy ballots (or their
substitutes) will vote according to your directions if your proxy ballot is
received and properly executed, or in accordance with the instructions you
provide if you vote by telephone or mail.  You may direct the proxy holders to
vote your shares on the proposal by checking the appropriate box "FOR" or
"AGAINST", or instruct them not to vote those shares on the proposal by
checking the "ABSTAIN" box.


Quorum and Required Vote

         A Participating Insurance Company is required to request voting
instructions from variable contract owners and must vote all Panorama Fund
shares held in the separate accounts of the Participating Insurance Company in
proportion to the voting instructions received.  This method of voting is
sometimes referred to as proportional voting.  Because of proportional voting,
a small number of contract owners could determine the outcome of the vote with
respect to the Reorganization.

         The presence in person or by proxy of a majority of Panorama Fund's
shares outstanding and entitled to vote constitutes a quorum.  Shares whose
proxies reflect an abstention on the proposal are counted as shares present
and entitled to vote for purposes of determining whether the required quorum
of shares exists for voting on the Reorganization.  However, abstentions will
have the same effect as a vote "against" the Reorganization.  In the absence
of a quorum, the shareholders present or represented by proxy and entitled to
vote thereat have the power to adjourn the meeting from time to time.

         The Reorganization must be approved by the affirmative vote of
two-thirds of all the votes entitled to be cast by Panorama Fund shareholders
on the matter.  Core Bond Fund/VA shareholders do not vote on the
Reorganization.

         In the absence of a quorum or if a quorum is present but sufficient
votes to approve the Reorganization are not received by the date of the
Meeting, the persons named in the enclosed proxy (or their substitutes) may
propose and approve one or more adjournments of the Meeting to permit further
solicitation of proxies.  All such adjournments will require the affirmative
vote of a majority of the shares present in person or by proxy at the session
of the Meeting to be adjourned.  The persons named as proxies on the proxy
ballots (or their substitutes) will vote the shares present in person or by
proxy (including abstentions) in favor of such an adjournment if they
determine additional solicitation is warranted and in the interests of the
Fund's shareholders.

Solicitation of Proxies

         Participating Insurance Companies may be required to forward
soliciting material to the beneficial owners of the shares on behalf of
Panorama Fund and to obtain authorization for the execution of proxies.  For
any such services, Participating Insurance companies may be reimbursed by the
Panorama Fund for their reasonable expenses incurred in connection with the
proxy solicitation to the extent that Panorama Fund would have directly borne
those expenses.

     In addition to solicitations by mail, solicitations may be conducted by
telephone or email including by a proxy solicitation firm hired at Panorama
Fund's expense. It is expected that a proxy solicitation firm will be hired.
It is estimated that the cost to Panorama Fund of engaging a proxy
solicitation firm would not exceed $14,360, plus any additional costs which
would be incurred in connection with contacting those shareholders who have
not voted, in the event of a need for re-solicitation of votes.  These costs
are included in the estimated total merger related costs discussed earlier.
Currently, if the Manager determines to retain the services of a proxy
solicitation firm on behalf of the Fund, the Manager anticipates retaining The
Altman Group, Inc.   Any proxy solicitation firm engaged by the Fund, among
other things, will be: (i) required to maintain the confidentiality of all
shareholder information; (ii) prohibited from selling or otherwise disclosing
shareholder information to any third party; and (iii) required to comply with
applicable telemarketing laws.


Revoking a Proxy

         You may revoke a previously granted proxy at any time before it is
exercised by: (1) delivering a written notice to Panorama Fund expressly
revoking your proxy, (2) signing and sending to the Panorama Fund a
later-dated proxy, (3) telephone or (4) attending the Meeting and casting your
votes in person if you are a record owner. Please be advised that the deadline
for revoking your proxy by telephone is 3:00 p.m., Eastern Time, on the last
business day before the Meeting.

What other matters will be voted upon at the Meeting?

         The Board of Directors of Panorama Fund does not intend to bring any
matters before the Meeting other than those described in this combined
Prospectus and Proxy Statement. Neither the Board nor the Manager is aware of
any other matters to be brought before the Meeting by others. Matters not
known at the time of the solicitation may come before the Meeting.  The proxy
as solicited confers discretionary authority with respect to such matters that
might properly come before the Meeting, including any adjournment or
adjournments thereof, and it is the intention of the persons named as
attorneys-in-fact in the proxy (or their substitutes) to vote the proxy in
accordance with their judgment on such matters.

o        Shareholder Proposals.  The Funds are not required and do not intend
         to hold shareholder meetings on a regular basis.  Special meetings of
         shareholders may be called from time to time by either a Fund or its
         shareholders (for certain matters and under special conditions
         described in the Funds' Statements of Additional Information).  Under
         the proxy rules of the SEC, shareholder proposals that meet certain
         conditions may be included in a fund's proxy statement for a
         particular meeting.  Those rules currently require that for future
         meetings, the shareholder must be a record or beneficial owner of
         Fund shares either (i) with a value of at least $2,000 or (ii) in an
         amount representing at least 1% of the Fund's securities to be voted,
         at the time the proposal is submitted and for one year prior thereto,
         and must continue to own such shares through the date on which the
         meeting is held.  Another requirement relates to the timely receipt
         by a Fund of any such proposal. Under those rules, a proposal must
         have been submitted a reasonable time before the Fund began to print
         and mail this Prospectus and Proxy Statement in order to be included
         in this Prospectus and Proxy Statement.  A proposal submitted for
         inclusion in a Fund's proxy material for the next special meeting
         after the meeting to which this Prospectus and Proxy Statement
         relates must be received by the Fund a reasonable time before the
         Fund begins to print and mail the proxy materials for that meeting.
         Notice of shareholder proposals to be presented at the Meeting must
         have been received within a reasonable time before the Fund began to
         mail this Prospectus and Proxy Statement.  The fact that the Fund
         receives a proposal from a qualified shareholder in a timely manner
         does not ensure its inclusion in the proxy materials because there
         are other requirements under the proxy rules for such inclusion.

o        Shareholder Communications to the Board.  Shareholders who desire to
         communicate generally with the Board should address their
         correspondence to the Board of Trustees of Core Bond Fund/VA or the
         Board of Directors of Panorama Fund, as applicable, and may submit
         their correspondence by mail to the applicable Fund at 6803 South
         Tucson Way, Centennial, CO 80112, attention Secretary of the Fund;
         and if the correspondence is intended for a particular Trustee or
         Director, the shareholder should so indicate.


                         ADDITIONAL INFORMATION ABOUT THE FUNDS

         Both Funds also file proxy materials, proxy voting reports and other
information with the SEC in accordance with the informational requirements of
the Securities and Exchange Act of 1934 and the Investment Company Act. These
materials can be inspected and copied at: the SEC's Public Reference Room in
Washington, D.C. (Phone: 1.202.551.8090) or the EDGAR database on the SEC's
website at www.sec.gov. Copies may be obtained upon payment of a duplicating
fee by electronic request at the SEC's e-mail address: publicinfo@sec.gov or
by writing to the SEC's Public Reference Section, Washington, D.C.
20549-0102.

Householding of Reports to Shareholders and Other Fund Documents

         To avoid sending duplicate copies of materials to households, the
Funds mail only one copy of each report to shareholders having the same last
name and address on the Funds' records.  The consolidation of these mailings,
called householding, benefits the Funds through reduced mailing expenses.  If
you want to receive multiple copies of these materials or request householding
in the future, you may call the transfer agent at 1.800.647.7374.  You may
also notify the transfer agent in writing at 6803 South Tucson Way,
Centennial, Colorado 80112.  Individual copies of prospectuses and reports
will be sent to you within 30 days after the transfer agent receives your
request to stop householding.

Principal Shareholders

         As of January 31, 2008, the officers and Directors of Panorama Fund
as a group, and officers and Trustees of Core Bond Fund/VA as a group, owned
less than 1% of the outstanding voting shares of any class of their respective
Fund. As of January 31, 2008, the only persons who owned of record or were
known by Panorama Fund or Core Bond Fund/VA to own beneficially 5% or more of
any class of the outstanding shares of that respective Fund are listed in
Exhibit A.


                         EXHIBIT TO THE COMBINED PROXY
                            STATEMENT AND PROSPECTUS

Exhibit

A.       Principal Shareholders


                                                                    EXHIBIT A


                             PRINCIPAL SHAREHOLDERS

         Principal  Shareholders  of Panorama  Fund.  As of January 31, 2008,
the only  persons who owned of record or were known by  Panorama  Fund to own
beneficially  5% or more of any class of the  outstanding  shares of Panorama
Fund were:


         All of the outstanding shares of Government Securities Portfolio
         were owned by Massachusetts Mutual Life Insurance Company, 1295
         State Street, Springfield, MA  01111, for variable annuity
         contracts, variable life insurance policies and other investment
         products owned by its customers.


         Principal  Shareholders  of Core Bond  Fund/VA.  As of  January  31,
2008,  the only  persons  who  owned of  record  or were  known by Core  Bond
Fund/VA  to own  beneficially  5% or more  of any  class  of the  outstanding
shares of Core Bond Fund/VA were:


         Genworth  Life and  Annuity  Insurance  Company,  which  owned
         16.94%  of the  outstanding  Non-Service  shares  of Core Bond
         Fund/VA;  Massachusetts  Mutual Life Insurance Company,  which
         owned  41.26% of the  outstanding  Non-Service  shares of Core
         Bond Fund/VA and Nationwide  Insurance,  which owned 35.96% of
         the outstanding Non-Service shares of Core  Bond Fund/VA.


                      STATEMENT OF ADDITIONAL INFORMATION
                       TO PROSPECTUS AND PROXY STATEMENT
                                       OF
                         OPPENHEIMER CORE BOND FUND/VA
                 a series of Oppenheimer Variable Account Funds

                                     PART B

                          Acquisition of the Assets of
                        GOVERNMENT SECURITIES PORTFOLIO,
                     a series of Panorama Series Fund, Inc.

                  By and in exchange for Non-Service Shares of
                         OPPENHEIMER CORE BOND FUND/VA,
                 a series of Oppenheimer Variable Account Funds


         This Statement of Additional Information to this Prospectus and Proxy
Statement (the "SAI") relates specifically to the proposed delivery of
substantially all of the assets of Government Securities Portfolio, a series
of Panorama Series Fund, Inc. ("Panorama Fund"), for Non-Service shares of
Oppenheimer Core Bond Fund/VA ("Core Bond Fund/VA"), a series of Oppenheimer
Variable Account Funds (together, these transactions are referred to as the
"Reorganization").

         This SAI consists of (i) this Cover Page; (ii) audited financial
statements of Core Bond Fund/VA for the fiscal year ended December 31, 2007,
and audited financial statements of Panorama Fund for the fiscal year ended
December 31, 2007; and (iii) the following documents which are incorporated
into this SAI by reference: the Statement of Additional Information of
Panorama Fund (SEC File No. 2-73969), dated April 30, 2007, revised as of May
25, 2007 and supplemented December 3, 2007, and the Statement of Additional
Information of Core Bond Fund/VA (SEC File No. 2-93177), dated April 30, 2007,
revised as of August 31, 2007 and supplemented October 12, 2007.

         This SAI is not a Prospectus; you should read this SAI in conjunction
with the combined Prospectus and Proxy Statement dated March 7, 2008 relating
to the Reorganization. You can request a copy of the Prospectus and Proxy
Statement by calling 1.800.647.1963 or by writing OppenheimerFunds Services at
P.O. Box 5270, Denver, Colorado 80217.  The date of this SAI is March 7, 2008.

                        PRO FORMA FINANCIAL STATEMENTS

         Pro forma financial statements demonstrating the effect of the
Reorganization on Core Bond Fund/VA are not necessary because the net asset
value of Panorama Fund does not exceed ten percent of the net asset value of
Core Bond Fund/VA as of December 31, 2007.

(1) Total expense ratio reflects Core Bond Fund/VA's revised management fee
schedule, which took effect on May 1, 2007.

(2) Total expense ratio reflects Core Bond Fund/VA's revised management fee
schedule, which took effect on May 1, 2007.


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER CORE BOND FUND/VA:

We have audited the accompanying statement of assets and liabilities of
Oppenheimer Core Bond Fund/VA (the "Fund"), a series of Oppenheimer Variable
Account Funds, including the statement of investments, as of December 31, 2007,
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 each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.

      We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
The Fund is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audits included consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of December 31, 2007, by correspondence with the
custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. 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 the
Fund as of December 31, 2007, 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 each of the five years in the
period then ended, in conformity with accounting principles generally accepted
in the United States of America.

/s/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP

Denver, Colorado
February 13, 2008


DECEMBER 31, 2007



STATEMENT OF INVESTMENTS  December 31, 2007
- --------------------------------------------------------------------------------

                                                    PRINCIPAL
                                                       AMOUNT             VALUE
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--5.0%
Aesop Funding II LLC, Automobile
Asset-Backed Certificates, Series
2005-1A, Cl. A2, 5.009%, 4/20/09 1,2              $   426,667   $       426,631
- --------------------------------------------------------------------------------
Argent Securities Trust 2004-W8,
Asset-Backed Pass-Through
Certificates, Series 2004-W8, Cl. A2,
5.345%, 5/25/34 2                                   1,476,940         1,391,413
- --------------------------------------------------------------------------------
Capital One Prime Auto Receivables
Trust, Automobile Asset-Backed
Certificates, Series 2005-1, Cl. A4,
5.048%, 4/15/11 2                                   4,930,000         4,912,100
- --------------------------------------------------------------------------------
Citibank Credit Card Issuance Trust,
Credit Card Receivable Nts., Series
2003-C4, Cl. C4, 5%, 6/10/15                          310,000           292,028
- --------------------------------------------------------------------------------
Citigroup Mortgage Loan Trust,
Inc. 2005-WF2, Asset-Backed
Pass-Through Certificates,
Series 2005-WF2, Cl. AF2, 4.922%,
8/25/35 2                                              76,142            75,964
- --------------------------------------------------------------------------------
CWABS Asset-Backed Certificates
Trust 2002-4, Asset-Backed
Certificates, Series 2002-4, Cl. A1,
5.605%, 2/25/33 2                                      35,747            32,011
- --------------------------------------------------------------------------------
CWABS Asset-Backed Certificates
Trust 2005-11, Asset-Backed
Certificates, Series 2005-11, Cl. AF2,
4.657%, 2/25/36                                       640,000           636,149
- --------------------------------------------------------------------------------
CWABS Asset-Backed Certificates Trust 2005-16, Asset-Backed Certificates, Series
2005-16, Cl. 2AF2,
5.382%, 5/25/36 2                                     670,000           645,778
- --------------------------------------------------------------------------------
CWABS Asset-Backed Certificates Trust 2005-17, Asset-Backed Certificates, Series
2005-17, Cl. 1AF2,
5.363%, 5/25/36 2                                     440,000           436,631
- --------------------------------------------------------------------------------
Honda Auto Receivables Owner
Trust, Automobile Receivable
Obligations, Series 2005-2, Cl. A4,
4.15%, 10/15/10                                       920,000           917,269
- --------------------------------------------------------------------------------
Household Home Equity Loan Trust,
Home Equity Loan Pass-Through
Certificates, Series 2005-3, Cl. A1,
5%, 1/20/35 2                                         673,259           657,954
- --------------------------------------------------------------------------------
Lehman XS Trust, Mtg. Pass-Through
Certificates:
Series 2005-10, Cl. 2A3B, 5.55%,
1/25/36                                               723,981           725,282
Series 2005-4, Cl. 2A1B, 5.17%,
10/25/35                                              454,626           455,338
- --------------------------------------------------------------------------------
Litigation Settlement Monetized
Fee Trust, Asset-Backed Certificates,
Series 2001-1A, Cl. A1, 8.33%,
4/25/31 3                                           2,185,807         2,179,687

                                                    PRINCIPAL
                                                       AMOUNT             VALUE
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
Merrill Lynch Mortgage Investors
Trust 2006-WMC1, Mtg. Asset-
Backed Certificates, Series 2006-
WMC1, Cl. A2B, 5.005%, 1/25/37 2                  $   731,979   $       722,712
- --------------------------------------------------------------------------------
NC Finance Trust, CMO
Pass-Through Certificates,
Series 1999-I, Cl. ECFD, 0.491%,
1/25/29 3,14                                        3,370,016           572,903
- --------------------------------------------------------------------------------
Option One Mortgage Loan Trust,
Asset-Backed Certificates, Series
2006-2, Cl. 2A2, 4.965%, 7/1/36 2                   1,250,000         1,217,206
- --------------------------------------------------------------------------------
Popular ABS Mortgage Pass-Through
Trust 2005-6, Mtg. Pass-Through
Certificates, Series 2005-6, Cl. A3,
5.68%, 1/25/36 2                                      690,000           684,107
- --------------------------------------------------------------------------------
Structured Asset Investment Loan
Trust, Mtg. Pass-Through Certificates,
Series 2006-BNC3, Cl. A2, 4.905%,
9/25/36 2                                             925,616           904,400
- --------------------------------------------------------------------------------
Structured Asset Securities Corp.,
Mtg. Pass-Through Certificates,
Series 2002-AL1, Cl. B2, 3.45%,
2/25/32                                             2,386,566         1,893,591
- --------------------------------------------------------------------------------
Tobacco Settlement Authority,
Asset-Backed Securities,
Series 2001-A, 6.79%, 6/1/10                        1,570,000         1,602,138
                                                                ---------------
Total Asset-Backed Securities
(Cost $24,399,232)                                                   21,381,292
- --------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS--79.9%
- --------------------------------------------------------------------------------
GOVERNMENT AGENCY--51.2%
- --------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED--51.0%
Fannie Mae Trust 2004-W9,
Pass-Through Certificates,
Trust 2004-W9, Cl. 2A2, 7%, 2/25/44                   512,837           544,075
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.:
4.50%, 5/15/19                                      9,570,377         9,411,788
5%, 8/15/33                                         4,041,662         3,950,112
6%, 7/15/17-3/15/33                                 8,483,965         8,673,554
6.50%, 4/15/18-4/15/34                              1,218,433         1,262,085
7%, 5/15/29-3/15/35                                 5,796,278         6,077,447
8%, 4/15/16                                           557,664           591,591
9%, 8/15/22-5/15/25                                   161,082           173,794
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
Gtd. Real Estate Mtg. Investment
Conduit Multiclass Pass-Through
Certificates:
Series 151, Cl. F, 9%, 5/15/21                         30,394            30,343
Series 2006-11, Cl. PS, 6.728%,
3/25/36 2                                             662,756           735,642
Series 2043, Cl. ZP, 6.50%, 4/15/28                 1,083,464         1,125,972
Series 2066, Cl. Z, 6.50%, 6/15/28                  2,243,785         2,316,706
Series 2195, Cl. LH, 6.50%, 10/15/29                1,256,633         1,301,891
Series 2326, Cl. ZP, 6.50%, 6/15/31                   436,852           457,461



STATEMENT OF INVESTMENTS  Continued
- --------------------------------------------------------------------------------

                                                    PRINCIPAL
                                                       AMOUNT             VALUE
- --------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal Home Loan Mortgage Corp.,
Gtd. Real Estate Mtg. Investment
Conduit Multiclass Pass-Through
Certificates: Continued
Series 2461, Cl. PZ, 6.50%, 6/15/32               $ 1,375,522   $     1,437,750
Series 2500, Cl. FD, 5.528%, 3/15/32 2                313,058           313,401
Series 2526, Cl. FE, 5.428%, 6/15/29 2                510,355           509,091
Series 2538, Cl. F, 5.628%, 12/15/32 2              3,046,583         3,068,570
Series 2551, Cl. FD, 5.428%, 1/15/33 2                395,348           397,103
Series 2676, Cl. KY, 5%, 9/15/23                      552,000           536,918
Series 3025, Cl. SJ, 6.316%, 8/15/35 2                140,999           160,440
Series 3094, Cl. HS, 5.949%, 6/15/34 2                413,449           451,057
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
Interest-Only Stripped Mtg.-Backed
Security:
Series 176, Cl. IO, 4.908%, 6/1/26 4                  548,871           126,589
Series 183, Cl. IO, 3.481%, 4/1/27 4                  855,039           195,347
Series 184, Cl. IO, 9.161%, 12/1/26 4                 937,977           213,195
Series 192, Cl. IO, 8.247%, 2/1/28 4                  224,461            54,475
Series 200, Cl. IO, 7.322%, 1/1/29 4                  270,429            62,849
Series 206, Cl. IO, (9.554)%, 12/1/29 4               540,203           118,015
Series 2130, Cl. SC, 3.243%, 3/15/29 4                601,298            58,263
Series 216, Cl. IO, 9.04%, 12/1/31 4                  359,920            87,209
Series 224, Cl. IO, 5.646%, 3/1/33 4                1,099,866           258,181
Series 243, Cl. 6, 15.199%, 12/15/32 4                679,519           143,355
Series 2796, Cl. SD, (2.121)%,7/15/26 4               962,057            85,241
Series 2802, Cl. AS, 5.232%, 4/15/33 4              1,058,066            71,423
Series 2920, Cl. S, (4.806)%,1/15/35 4              3,490,446           248,222
Series 3000, Cl. SE, 11.913%,7/15/25 4              4,171,932           223,777
Series 3110, Cl. SL, 24.356%,2/15/26 4                577,276            29,502
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
Principal-Only Stripped Mtg.-Backed
Security:
Series 176, Cl. PO, 5.939%, 6/1/26 5                  223,618           184,475
Series 192, Cl. PO, 7.631%, 2/1/28 5                  224,461           177,518
- --------------------------------------------------------------------------------
Federal National Mortgage Assn.:
4.50%, 9/25/18-8/25/20                             14,924,845        14,687,035
5%, 12/25/17-3/25/34                               36,161,501        35,876,138
5%, 1/1/22 6                                        9,328,000         9,338,205
5%, 6/25/33 7                                       4,169,738         4,078,747
5.50%, 1/25/33-1/25/34                             26,884,998        26,926,720
5.50%, 1/1/22-1/1/37 6                             16,308,000        16,335,583
6%, 5/25/29-11/1/33                                10,568,209        10,782,719
6%, 1/1/22 6                                        3,752,000         3,839,350
6.50%, 3/25/11-11/25/31                            10,344,203        10,734,177
7%, 11/25/17-7/25/35                                3,758,629         3,946,047
7.50%, 4/25/08-1/25/33                                 23,026            24,612
8%, 5/25/17                                             5,213             5,536
8.50%, 7/25/32                                         47,405            51,067
- --------------------------------------------------------------------------------
Federal National Mortgage Assn.,
Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates:
Trust 1989-17, Cl. E, 10.40%, 4/25/19                  53,733            58,354
Trust 1993-87, Cl. Z, 6.50%, 6/25/23                1,312,557         1,354,021
Trust 1998-58, Cl. PC, 6.50%,
10/25/28                                            1,109,573         1,148,973
Trust 1998-61, Cl. PL, 6%, 11/25/28                   603,681           619,446

                                                    PRINCIPAL
                                                       AMOUNT             VALUE
- --------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal National Mortgage Assn.,
Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates:
Continued
Trust 1999-54, Cl. LH, 6.50%,
11/25/29                                          $   821,312   $       863,125
Trust 2001-70, Cl. LR, 6%, 9/25/30                    161,391           161,915
Trust 2001-74, Cl. QE, 6%, 12/25/31                 1,836,626         1,880,145
Trust 2001-82, Cl. ZA, 6.50%,
1/25/32                                               564,651           576,586
Trust 2002-9, Cl. PC, 6%, 3/25/17                   1,344,373         1,391,187
Trust 2003-130, Cl. CS, 4.37%,
12/25/33 2                                            385,418           364,453
Trust 2003-28, Cl. KG, 5.50%,
4/25/23                                             3,964,000         3,989,854
Trust 2003-84, Cl. PW, 3%, 6/25/22                    470,883           467,857
Trust 2004-101, Cl. BG, 5%, 1/25/20                 1,908,000         1,914,341
Trust 2005-100, Cl. BQ, 5.50%,
11/25/25                                            1,120,000         1,125,157
Trust 2005-59, Cl. NQ, 4.713%,
5/25/35 2                                             709,166           709,259
Trust 2006-46, Cl. SW, 6.362%,
6/25/36 2                                             501,944           550,786
Trust 2006-50, Cl. KS, 6.362%,
6/25/36 2                                           1,105,284         1,176,477
Trust 2006-50, Cl. SA, 6.362%,
6/25/36 2                                           1,412,254         1,505,232
Trust 2006-50, Cl. SK, 6.362%,
6/25/36 2                                             443,782           472,087
Trust 2006-64, Cl. MD, 5.50%,
7/25/36                                             4,671,000         4,636,857
- --------------------------------------------------------------------------------
Federal National Mortgage Assn.,
Interest-Only Stripped Mtg.-Backed
Security:
Trust 2001-65, Cl. S, 11.769%,
11/25/31 4                                          1,871,817           241,756
Trust 2001-81, Cl. S, 3.721%,
1/25/32 4                                             450,815            48,555
Trust 2002-47, Cl. NS, 2.892%,
4/25/32 4                                           1,172,221           129,147
Trust 2002-51, Cl. S, 3.029%,
8/25/32 4                                           1,076,103           120,851
Trust 2002-52, Cl. SD, (0.737)%,
9/25/32 4                                           1,192,052           194,050
Trust 2002-77, Cl. SH, 5.015%,
12/18/32 4                                            559,799            55,199
Trust 2002-84, Cl. SA, 12.932%,
12/25/32 4                                          1,646,089           191,140
Trust 2003-118, Cl. S, 9.431%,
12/25/33 4                                          3,354,181           576,518
Trust 2003-33, Cl. SP, 9.135%,
5/25/33 4                                           1,696,241           220,214
Trust 2003-4, Cl. S, 12.143%,
2/25/33 4                                           1,089,260           132,862
Trust 2004-54, Cl. DS, (2.17)%,
11/25/30 4                                            894,916            71,925
Trust 2005-19, Cl. SA, 1.188%,
3/25/35 4                                           8,834,864           628,244


                                                    PRINCIPAL
                                                       AMOUNT             VALUE
- --------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal National Mortgage Assn.,
Interest-Only Stripped Mtg.-Backed
Security: Continued
Trust 2005-40, Cl. SA, 0.806%,
5/25/35 4                                        $  1,944,233   $       133,783
Trust 2005-6, Cl. SE, 3.271%,
2/25/35 4                                           2,494,298           216,490
Trust 2005-71, Cl. SA, 8.893%,
8/25/25 4                                           2,630,460           204,660
Trust 2005-87, Cl. SE, 12.322%,
10/25/35 4                                          4,911,349           342,627
Trust 2005-87, Cl. SG, 14.11%,
10/25/35 4                                          4,935,612           462,475
Trust 2006-33, Cl. SP, 15.444%,
5/25/36 4                                           3,844,364           355,078
Trust 222, Cl. 2, 14.682%, 6/1/23 4                 1,876,620           444,446
Trust 240, Cl. 2, 17.248%, 9/1/23 4                 2,263,896           520,540
Trust 252, Cl. 2, 14.948%, 11/1/23 4                1,462,654           360,804
Trust 273, Cl. 2, 13.207%, 8/1/26 4                   425,316            96,575
Trust 303, Cl. IO, (3.329)%, 11/1/29 4                237,177            56,623
Trust 319, Cl. 2, 11.251%, 2/1/32 4                   397,161            92,260
Trust 321, Cl. 2, 6.373%, 4/1/32 4                  4,386,049         1,016,624
Trust 331, Cl. 9, 15.578%, 2/1/33 4                 1,012,132           250,941
Trust 334, Cl. 17, 22.98%, 2/1/33 4                   699,455           161,474
Trust 339, Cl. 7, 10.442%, 7/1/33 4                 3,576,381           845,153
Trust 342, Cl. 2, 6.635%, 9/1/33 4                    246,604            57,739
Trust 344, Cl. 2, 4.743%, 12/1/33 4                 7,002,459         1,605,620
Trust 345, Cl. 9, 8.864%, 1/1/34 4                  1,446,102           344,065
Trust 362, Cl. 12, 9.377%, 8/1/35 4                 1,932,348           447,288
Trust 362, Cl. 13, 9.359%, 8/1/35 4                 1,071,421           246,042
- --------------------------------------------------------------------------------
Federal National Mortgage Assn.,
Principal-Only Stripped Mtg.-Backed
Security, Trust 1993-184, Cl. M,
5.585%, 9/25/23 5                                     543,801           444,444
                                                                ----------------
                                                                     218,772,687

- --------------------------------------------------------------------------------
GNMA/GUARANTEED--0.2%
Government National Mortgage
Assn.:
7%, 1/30/09-5/29/09                                     9,056             9,225
8.50%, 8/15/17-12/29/17                               237,240           256,015
- --------------------------------------------------------------------------------
Government National Mortgage
Assn., Interest-Only Stripped
Mtg.-Backed Security:
Series 2001-21, Cl. SB, 8.438%,
1/16/27 4                                             945,026            95,105
Series 2002-15, Cl. SM, 5.989%,
2/16/32 4                                           1,174,606           181,141
Series 2004-11, Cl. SM, 1.721%,
1/17/30 4                                             787,867           127,698
Series 2006-47, Cl. SA, 31.192%,
8/16/36 4                                           5,903,623           465,549
                                                                ----------------
                                                                       1,134,733

                                                    PRINCIPAL
                                                       AMOUNT             VALUE
- --------------------------------------------------------------------------------
NON-AGENCY--28.7%
- --------------------------------------------------------------------------------
COMMERCIAL--11.5%
Asset Securitization Corp.,
Commercial Interest-Only Stripped
Mtg.-Backed Security, Series 1997-D4,
Cl. PS1, 2.706%, 4/14/29 4                       $ 13,797,762   $       564,607
- --------------------------------------------------------------------------------
Banc of America Commercial
Mortgage, Inc., Commercial Mtg.
Pass-Through Certificates,
Series 2005-3, Cl. A2, 4.501%, 7/10/43              2,100,000         2,075,456
- --------------------------------------------------------------------------------
Banc of America Funding Corp.,
CMO Pass-Through Certificates,
Series 2004-2, Cl. 2A1, 6.50%,
7/20/32                                             1,441,816         1,466,373
- --------------------------------------------------------------------------------
Banc of America Mortgage
Securities, Inc., CMO Pass-Through
Certificates, Series 2004-8, Cl. 5A1,
6.50%, 5/25/32                                      1,146,075         1,168,049
- --------------------------------------------------------------------------------
Capital Lease Funding Securitization
LP, Interest-Only Corporate-Backed
Pass-Through Certificates,
Series 1997-CTL1, (6.498)%, 6/22/24 4              10,797,339           320,855
- --------------------------------------------------------------------------------
Citigroup Mortgage Loan Trust, Inc.
2006-WF1, Asset-Backed
Pass-Through Certificates,
Series 2006-WF1, Cl. A2B,
5.536%, 3/1/36                                        460,000           459,904
- --------------------------------------------------------------------------------
Citigroup/Deutsche Bank 2007-CD4
Commercial Mortgage Trust,
Commercial Mtg. Pass-Through
Certificates:
Series 2007-CD4, Cl. A2B, 5.205%,
12/11/49                                            1,510,000         1,509,762
Series 2007-CD4, Cl. A4, 5.322%,
12/1/49 8                                           1,970,000         1,967,912
- --------------------------------------------------------------------------------
CitiMortgage Alternative Loan Trust
2006-A5, Real Estate Mtg. Investment
Conduit Pass-Through Certificates:
Series 2006-A5, Cl. 1A1, 5.265%,
10/25/36 2                                          3,113,536         2,953,519
Series 2006-A5, Cl. 1A13, 5.315%,
10/25/36 2                                          1,556,768         1,522,170
- --------------------------------------------------------------------------------
Deutsche Alt-A Securities Mortgage
Loan Trust, Mtg. Pass-Through
Certificates:
Series 2006-AB2, Cl. A7, 5.961%,
6/25/36                                               818,876           818,730
Series 2006-AB3, Cl. A7, 6.36%, 7/1/36                262,671           262,888
- --------------------------------------------------------------------------------
First Horizon Alternative Mortgage
Securities Trust 2004-FA2, Mtg.
Pass-Through Certificates,
Series 2004-FA2, Cl. 3A1, 6%, 1/25/35                 829,749           798,679



STATEMENT OF INVESTMENTS  Continued
- --------------------------------------------------------------------------------

                                                    PRINCIPAL
                                                       AMOUNT             VALUE
- --------------------------------------------------------------------------------
COMMERCIAL Continued
First Horizon Alternative Mortgage
Securities Trust 2007-FA2, Mtg.
Pass-Through Certificates,
Series 2007-FA2, Cl. 1A1, 5.50%,
4/25/37                                          $    950,000   $       938,462
- --------------------------------------------------------------------------------
GE Capital Commercial Mortgage
Corp., Commercial Mtg. Obligations,
Series 2005-C3, Cl. A2, 4.853%,
7/10/45                                             1,190,000         1,185,895
- --------------------------------------------------------------------------------
Greenwich Capital Commercial
Funding Corp., Commercial Mtg.
Pass-Through Certificates:
Series 2005-GG3, Cl. A2, 4.305%,
8/10/42                                             1,460,000         1,442,573
Series 2005-GG5, Cl. A2, 5.117%,
4/10/37                                             1,290,000         1,293,057
Series 2007-GG9, Cl. A2, 5.381%,
3/10/39                                             4,250,000         4,276,295
- --------------------------------------------------------------------------------
JPMorgan Chase Commercial
Mortgage Securities Corp.,
Commercial Mtg. Pass-Through
Certificates:
Series 2005-LDP2, Cl. A2, 4.575%,
7/15/42                                               510,000           504,775
Series 2005-LDP4, Cl. A2, 4.79%,
10/15/42                                            1,720,000         1,709,558
Series 2007-LDPX, Cl. A2S, 5.305%,
1/15/49                                               590,000           590,860
Series 2006-CB14, Cl. A4, 5.481%,
12/12/44                                            2,190,000         2,219,175
Series 2007-LD12, Cl. A2, 5.827%,
2/15/51                                             1,040,000         1,062,187
- --------------------------------------------------------------------------------
LB-UBS Commercial Mortgage Trust,
Commercial Mtg. Pass-Through
Certificates:
Series 2005-C5, Cl. A2, 4.885%,
9/15/30                                             1,430,000         1,427,860
Series 2007-C1, Cl. A2, 5.318%,
1/15/12                                             1,700,000         1,708,243
Series 2007-C1, Cl. A4, 5.424%,
2/11/40                                             1,680,000         1,690,520
- --------------------------------------------------------------------------------
Lehman Brothers Commercial
Conduit Mortgage Trust,
Interest-Only Stripped Mtg.-Backed
Security, Series 1998-C1, Cl. IO,
(0.88)%, 2/18/30 4                                  6,809,288           176,314
- --------------------------------------------------------------------------------
Lehman Structured Securities Corp.,
CMO, Series 2002-GE1, Cl. A,
2.514%, 7/26/24 3                                     272,953           210,174
- --------------------------------------------------------------------------------
Mastr Alternative Loan Trust, CMO
Pass-Through Certificates:
Series 2004-9, Cl. A3, 4.70%, 8/25/34 2                39,117            38,978
Series 2004-6, Cl. 10A1, 6%, 7/25/34                1,550,630         1,535,736

                                                    PRINCIPAL
                                                       AMOUNT             VALUE
- --------------------------------------------------------------------------------
COMMERCIAL Continued
RALI Series 2003-QS1 Trust, Mtg.
Asset-Backed Pass-Through
Certificates, Series 2003-QS1, Cl. A2,
5.75%, 1/25/33                                   $    759,305   $       755,535
- --------------------------------------------------------------------------------
RALI Series 2007-QS6 Trust, Mtg.
Asset-Backed Pass-Through
Certificates, Series 2007-QS6, Cl.
A114, 5.75%, 4/25/37                                1,312,491         1,297,400
- --------------------------------------------------------------------------------
Residential Asset Securitization
Trust 2006-A9CB, CMO
Pass-Through Certificates,
Series 2006-A9CB, Cl. A5,
6%, 9/25/36                                         1,882,552         1,879,081
- --------------------------------------------------------------------------------
Salomon Brothers Mortgage
Securities VII, Inc., Interest-Only
Commercial Mtg. Pass-Through
Certificates, Series 1999-C1, Cl. X,
(5.389)%, 5/18/32 4                               258,810,500           398,775
- --------------------------------------------------------------------------------
Wachovia Bank Commercial
Mortgage Trust 2005-C17,
Commercial Mtg. Pass-Through
Certificates, Series 2005-C17, Cl. A2,
4.782%, 3/15/42                                     2,520,000         2,509,183
- --------------------------------------------------------------------------------
Wachovia Bank Commercial
Mortgage Trust 2006-C29,
Commercial Mtg. Pass-Through
Certificates, Series 2006-C29, Cl. A2,
5.272%, 11/15/48                                      355,000           355,831
- --------------------------------------------------------------------------------
WaMu, Mtg. Pass-Through
Certificates, Series 2006-AR8, Cl. 2A1,
6.133%, 8/25/36 2                                   4,379,770         4,378,975
                                                                ----------------
                                                                      49,474,346

- --------------------------------------------------------------------------------
MANUFACTURED HOUSING--1.7%
Wells Fargo Mortgage-Backed
Securities 2006-AR12 Trust, Mtg.
Pass-Through Certificates, Series
2006-AR12, Cl. 2A1, 6.102%, 9/25/36 2               3,419,170         3,426,716
- --------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed
Securities 2006-AR2 Trust, Mtg.
Pass-Through Certificates, Series
2006-AR2, Cl. 2A5, 5.10%, 3/25/36 2                 3,969,757         3,940,316
                                                                ----------------
                                                                       7,367,032

- --------------------------------------------------------------------------------
MULTIFAMILY--9.0%
Banc of America Mortgage
Securities, Inc., CMO Pass-Through
Certificates, Series 2005-F, Cl. 2A3,
4.716%, 7/25/35 2                                   2,820,303         2,798,470
- --------------------------------------------------------------------------------
Bear Stearns ARM Trust 2006-4,
Mtg. Pass-Through Certificates,
Series 2006-4, Cl. 2A1, 5.802%,
10/25/36 2                                          1,571,602         1,583,678



                                                    PRINCIPAL
                                                       AMOUNT             VALUE
- --------------------------------------------------------------------------------
MULTIFAMILY Continued
Citigroup Mortgage Loan Trust, Inc.
2006-AR5, Mtg. Pass-Through
Certificates, Series 2006-AR5,
Cl. 1A3A, 5.894%, 7/25/36 2                      $  1,172,685   $     1,183,115
- --------------------------------------------------------------------------------
Countrywide Alternative Loan
Trust, CMO:
Series 2008-85CB, Cl. 2A3, 5.50%,
2/25/36                                             1,790,000         1,700,266
Series 2004-28CB, Cl. 2A4, 5.75%,
1/25/35                                             2,316,000         2,213,868
- --------------------------------------------------------------------------------
Countrywide Home Loans Servicing
LP, Mtg. Pass-Through Certificates:
Series 2003-46, Cl. 1A2, 4.122%,
1/19/34 2                                           2,018,465         2,043,183
Series 2005-HYB1, Cl. 5A1, 4.995%,
3/25/35 2                                           2,687,933         2,626,614
Series 2007-HY1, Cl. 1A1, 5.695%,
4/25/37 2                                           2,872,197         2,884,641
- --------------------------------------------------------------------------------
GMAC Mortgage Corp. Loan Trust,
Mtg. Pass-Through Certificates:
Series 2005-AR4, Cl. 2A1, 5.292%,
7/19/35 2                                           3,149,052         3,159,939
Series 2004-J4, Cl. A7, 5.50%, 9/25/34              1,660,000         1,588,881
- --------------------------------------------------------------------------------
GSR Mortgage Loan Trust
2005-AR7, Mtg. Pass-Through
Certificates, Series 2005-AR7, Cl.
3A1, 5.152%, 11/25/35 2                             4,573,708         4,570,077
- --------------------------------------------------------------------------------
Merrill Lynch Mortgage Investors
Trust 2007-2, Mtg. Pass-Through
Certificates, Series 2007-2, Cl. 2A1,
6.007%, 6/25/37 2                                   3,873,769         3,895,259
- --------------------------------------------------------------------------------
WaMu, Mtg. Pass-Through
Certificates, Series 2005-AR8, Cl.
2AB1, 5.115%, 7/25/45 2                                37,267            37,186
- --------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed
Securities 2004-AA Trust, Mtg.
Pass-Through Certificates, Series
2004-AA, Cl. 2A, 4.993%, 12/25/34 2                   927,973           915,011
- --------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed
Securities 2004-S Trust, Mtg. Pass-
Through Certificates, Series 2004-S,
Cl. A1, 3.54%, 9/25/34 2                              771,487           759,729
- --------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed
Securities 2005-AR2 Trust, Mtg.
Pass-Through Certificates, Series
2005-AR2, Cl. 2A2, 4.547%, 3/25/35 2                  574,768           570,176
- --------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed
Securities 2005-AR4 Trust, Mtg.
Pass-Through Certificates, Series
2005-AR4, Cl. 2A2, 4.524%, 4/25/35 2                  953,773           946,101

                                                    PRINCIPAL
                                                       AMOUNT             VALUE
- --------------------------------------------------------------------------------
MULTIFAMILY Continued
Wells Fargo Mortgage-Backed
Securities 2006-AR10 Trust, Mtg.
Pass-Through Certificates:
Series 2006-AR10, Cl. 4A1, 5.56%,
7/25/36 2                                        $  1,892,727   $     1,903,402
Series 2006-AR10, Cl. 2A1, 5.646%,
7/25/36 2                                           1,460,208         1,471,152
- --------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed
Securities 2006-AR2 Trust, Mtg.
Pass-Through Certificates, Series
2006-AR2, Cl. 2A6, 5.10%, 3/25/36 2                   753,853           748,262
- --------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed
Securities 2006-AR6 Trust, Mtg.
Pass-Through Certificates, Series
2006-AR6, Cl. 3A1, 5.093%, 3/25/36 2                  840,377           836,812
                                                                ----------------
                                                                      38,435,822

- --------------------------------------------------------------------------------
OTHER--0.0%
Salomon Brothers Mortgage
Securities VI, Inc., Interest-Only
Stripped Mtg.-Backed Security,
Series 1987-3, Cl. B, 91.826%,
10/23/17 4                                              8,386             1,040
- --------------------------------------------------------------------------------
Salomon Brothers Mortgage
Securities VI, Inc., Principal-Only
Stripped Mtg.-Backed Security,
Series1987-3, Cl. A, 4.037%, 10/23/17 5                12,411            11,562
                                                                ----------------
                                                                          12,602

- --------------------------------------------------------------------------------
RESIDENTIAL--6.5%
Chase Mortgage Finance Trust
Series 2005-S1, Multiclass Mtg.
Pass-Through Certificates, Series
2005-S1, Cl. 1A5, 5.50%, 5/25/35                    1,000,000           983,269
- --------------------------------------------------------------------------------
Countrywide Alternative Loan
Trust, CMO:
Series 2005-18CB, Cl. A8, 5.50%,
5/25/36                                             2,420,000         2,335,488
Series 2005-J1, Cl. 3A1, 6.50%,
8/25/32                                             2,290,023         2,339,815
Series 2005-J3, Cl. 3A1, 6.50%,
9/25/34                                             2,151,269         2,158,598
- --------------------------------------------------------------------------------
Morgan Stanley Mortgage Loan
Trust 2006-AR, Mtg. Pass-Through
Certificates, Series 2006-AR, Cl.
5A3, 5.427%, 6/25/36 2                              1,110,000         1,115,129
- --------------------------------------------------------------------------------
RALI Series 2006-QS5 Trust, Mtg.
Asset-Backed Pass-Through
Certificates, Series 2006-QS5, Cl.
2A2, 6%, 4/25/08                                    1,080,504         1,079,297
- --------------------------------------------------------------------------------
STARM Mortgage Loan Trust
2007-S1, Mtg. Pass-Through
Certificates, Series 2007-S1, Cl. 3A1,
5.004%, 8/1/22 2                                    4,272,338         4,214,261



STATEMENT OF INVESTMENTS  Continued
- --------------------------------------------------------------------------------

                                                      PRINCIPAL
                                                         AMOUNT           VALUE
- --------------------------------------------------------------------------------
RESIDENTIAL Continued
WaMu, Mtg. Pass-Through
Certificates:
Series 2006-AR12, Cl. 2A1, 5.75%,
10/25/36 2                                          $ 4,262,606   $   4,236,800
Series 2007-HY6, Cl. 2A1, 5.702%,
6/25/37 2                                             2,708,071       2,674,110
- --------------------------------------------------------------------------------
Washington Mutual Mortgage
Loan Trust, Mtg. Pass-Through
Certificates, 2007-A, Cl. 1A8, 6%,
2/25/37                                               3,691,408       3,702,854
- --------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed
Securities 2006-AR5 Trust, Mtg.
Pass-Through Certificates, Series
2006-AR5, Cl. 2A2, 5.535%, 4/1/36 2                   1,656,531       1,505,638
- --------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed
Securities 2003-6 Trust, Mtg.
Pass-Through Certificates, Series
2003-6, Cl. 1A1, 5%, 6/25/18                          1,552,618       1,544,743
                                                                  --------------
                                                                      27,890,002
                                                                  --------------
Total Mortgage-Backed Obligations
(Cost $338,516,149)                                                 343,087,224

- --------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES--19.8%
- --------------------------------------------------------------------------------
Albertson's, Inc., 8% Sr. Unsec.
Debs., 5/1/31 8                                       1,675,000       1,707,616
- --------------------------------------------------------------------------------
Barclays Bank plc, 6.278% Perpetual
Bonds 9                                               5,160,000       4,498,901
- --------------------------------------------------------------------------------
Belo Corp., 8% Sr. Unsec. Unsub. Nts.,
11/1/08                                               2,825,000       2,850,837
- --------------------------------------------------------------------------------
Buckeye Partners LP, 4.625% Sr. Nts.,
7/15/13                                               1,955,000       1,878,939
- --------------------------------------------------------------------------------
Caesars Entertainment, Inc., 7.50%
Sr. Unsec. Nts., 9/1/09 3                             2,250,000       2,391,451
- --------------------------------------------------------------------------------
Capmark Financial Group, Inc.,
5.875% Nts., 5/10/12 1                                1,090,000         863,585
- --------------------------------------------------------------------------------
Centex Corp., 5.80% Sr. Unsec. Nts.,
9/15/09                                               1,400,000       1,289,940
- --------------------------------------------------------------------------------
Chancellor Media CCU, 8%
Sr. Unsec. Nts., 11/1/08                              1,540,000       1,592,044
- --------------------------------------------------------------------------------
CIT Group Funding Co. of Canada,
4.65% Sr. Unsec. Nts., 7/1/10                         1,235,000       1,175,188
- --------------------------------------------------------------------------------
Citigroup, Inc., 8.30% Jr. Sub. Bonds,
12/21/57 2                                              790,000         827,252
- --------------------------------------------------------------------------------
Clear Channel Communications, Inc.,
6.25% Nts., 3/15/11                                   1,370,000       1,240,723
- --------------------------------------------------------------------------------
Cox Enterprises, Inc., 4.375% Nts.,
5/1/08 1                                              2,145,000       2,138,282
- --------------------------------------------------------------------------------
CSC Holdings, Inc., 7.25% Sr. Unsec.
Nts., 7/15/08                                         1,635,000       1,641,131
- --------------------------------------------------------------------------------
D.R. Horton, Inc., 8% Sr. Nts., 2/1/09                  615,000         597,937

                                                      PRINCIPAL
                                                         AMOUNT           VALUE
- --------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES Continued
- --------------------------------------------------------------------------------
Delhaize America, Inc., 9% Unsub.
Debs., 4/15/31                                      $ 1,141,000   $   1,324,902
- --------------------------------------------------------------------------------
Dillard's, Inc., 6.625% Unsec. Nts.,
11/15/08 3                                              930,000         928,838
- --------------------------------------------------------------------------------
Eastman Kodak Co., 3.625% Nts.,
Series A, 5/15/08                                       975,000         965,250
- --------------------------------------------------------------------------------
EchoStar DBS Corp., 5.75%
Sr. Unsec. Nts., 10/1/08                              2,445,000       2,448,056
- --------------------------------------------------------------------------------
El Paso Corp., 6.50% Sr. Unsec. Nts.,
6/1/08                                                  390,000         393,703
- --------------------------------------------------------------------------------
Ford Motor Credit Co., 9.75%
Sr. Unsec. Nts., 9/15/10                              3,860,000       3,685,335
- --------------------------------------------------------------------------------
Gap, Inc. (The), 10.05% Unsub. Nts.,
12/15/08 2                                              466,000         483,475
- --------------------------------------------------------------------------------
General Motors Acceptance Corp.,
8% Bonds, 11/1/31                                     1,660,000       1,395,846
- --------------------------------------------------------------------------------
Goldman Sachs Capital, Inc. (The),
6.345% Sub. Bonds, 2/15/34 8                          3,595,000       3,256,484
- --------------------------------------------------------------------------------
HBOS plc, 6.413% Sub. Perpetual
Bonds, Series A 1,9                                   6,300,000       5,140,687
- --------------------------------------------------------------------------------
HSBC Finance Capital Trust IX,
5.911% Nts., 11/30/35 2                               4,600,000       4,262,825
- --------------------------------------------------------------------------------
Hyundai Motor Manufacturing
Alabama LLC, 5.30% Sr. Unsec. Nts.,
12/19/08 1                                            1,115,000       1,119,099
- --------------------------------------------------------------------------------
IPALCO Enterprises, Inc., 8.375%
Sr. Sec. Nts., 11/14/08 2,3                           1,180,000       1,206,550
- --------------------------------------------------------------------------------
Kaneb Pipe Line Operating
Partnership LP, 5.875% Sr. Unsec.
Nts., 6/1/13                                          1,560,000       1,589,376
- --------------------------------------------------------------------------------
Lennar Corp., 7.625% Sr. Unsec. Nts.,
3/1/09                                                1,930,000       1,839,271
- --------------------------------------------------------------------------------
Liberty Media Corp., 7.875% Sr. Nts.,
7/15/09                                                 580,000         591,739
- --------------------------------------------------------------------------------
Liberty Media LLC, 7.75% Sr. Nts.,
7/15/09                                               1,840,000       1,887,305
- --------------------------------------------------------------------------------
MBIA, Inc., 5.70% Sr. Unsec. Unsub.
Nts., 12/1/34                                         1,055,000         839,337
- --------------------------------------------------------------------------------
MetLife, Inc., 6.40% Jr. Unsec. Sub.
Bonds, 12/15/66 2                                     3,565,000       3,277,493
- --------------------------------------------------------------------------------
MGM Mirage, Inc., 6% Sr. Sec. Nts.,
10/1/09                                               2,570,000       2,570,000
- --------------------------------------------------------------------------------
Monongahela Power Co., 7.36%
Unsec. Nts., Series A, 1/15/10                        1,925,000       2,029,456
- --------------------------------------------------------------------------------
NCR Corp., 7.125% Sr. Unsec. Unsub.
Nts., 6/15/09                                         1,580,000       1,633,505
- --------------------------------------------------------------------------------
PF Export Receivables Master Trust,
3.748% Sr. Nts., Series B, 6/1/13 1                   1,048,872       1,034,652
- --------------------------------------------------------------------------------
Popular North America, Inc., 4.70%
Nts., 6/30/09                                         2,485,000       2,461,383



                                                      PRINCIPAL
                                                         AMOUNT           VALUE
- --------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES Continued
- --------------------------------------------------------------------------------
Prudential Holdings LLC, 8.695%
Bonds, Series C, 12/18/23 1                         $ 2,400,000   $   2,881,512
- --------------------------------------------------------------------------------
Prudential Insurance Co. of America,
8.30% Nts., 7/1/25 1                                  2,035,000       2,405,655
- --------------------------------------------------------------------------------
Pulte Homes, Inc., 4.875% Nts.,
7/15/09                                                 825,000         768,188
- --------------------------------------------------------------------------------
Qwest Corp., 5.625% Unsec. Nts.,
11/15/08 3                                              250,000         250,000
- --------------------------------------------------------------------------------
SLM Corp.:
3.95% Nts., Series A, 8/15/08                           220,000         214,724
4% Nts., 1/15/09                                      1,670,000       1,609,219
- --------------------------------------------------------------------------------
Standard Pacific Corp., 5.125%
Sr. Unsec. Unsub. Nts., 4/1/09 8                        865,000         687,675
- --------------------------------------------------------------------------------
TEPPCO Partners LP, 6.125% Nts.,
2/1/13                                                  900,000         938,548
- --------------------------------------------------------------------------------
Tribune Co., 5.50% Nts., Series E,
10/6/08 3                                             1,427,000       1,350,299
- --------------------------------------------------------------------------------
Univision Communications, Inc.,
3.875% Sr. Unsec. Nts., 10/15/08                        590,000         578,938
- --------------------------------------------------------------------------------
Valero Logistics Operations LP,
6.05% Nts., 3/15/13                                     390,000         399,094
- --------------------------------------------------------------------------------
Westar Energy, Inc., 7.125% Sr. Unsec.
Nts., 8/1/09                                          1,820,000       1,878,517
                                                                  --------------
Total Corporate Bonds and Notes
(Cost $87,712,277)                                                   85,020,762

                                                          UNITS
- --------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- --------------------------------------------------------------------------------
Pathmark Stores, Inc. Wts., Exp.
9/19/10 3,10 (Cost $14,872)                               5,408             189

                                                         SHARES           VALUE
- --------------------------------------------------------------------------------
INVESTMENT COMPANIES--1.0%
- --------------------------------------------------------------------------------
Oppenheimer Institutional Money
Market Fund, Cl. E, 5.03% 11,12
(Cost $4,105,793)                                     4,105,793   $   4,105,793

- --------------------------------------------------------------------------------
Total Investments, at Value (excluding
Investments Purchased with Cash
Collateral from Securities Loaned)
(Cost $454,748,323)                                                 453,595,260

                                                      PRINCIPAL
                                                         AMOUNT
- --------------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM
SECURITIES LOANED--0.8% 13
- --------------------------------------------------------------------------------
Undivided interest of 0.18% in joint repurchase agreement (Principal
Amount/Value $1,000,000,000, with a maturity value of $1,000,250,000) with Bank
of America NA, 4.50%, dated 12/31/07, to be repurchased at $1,832,106 on 1/2/08,
collateralized by U.S. Agency Mortgages, 5%, 5/1/35, with a value of
$1,020,000,000                                      $ 1,831,648       1,831,648
- --------------------------------------------------------------------------------
Whitehawk CDO Funding Corp.,
5.041%, 3/17/08                                       1,500,000       1,500,000
                                                                  --------------
Total Investments Purchased with
Cash Collateral from Securities
Loaned (Cost $3,331,648)                                              3,331,648

- --------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $458,079,971)                                       106.5%    456,926,908
- --------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF
OTHER ASSETS                                               (6.5)    (27,723,727)
                                                     ---------------------------
NET ASSETS                                                100.0%  $ 429,203,181
                                                     ===========================
INDUSTRY CLASSIFICATIONS ARE UNAUDITED.

FOOTNOTES TO STATEMENT OF INVESTMENTS

1. 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 $16,010,103 or 3.73% of the Fund's net
assets as of December 31, 2007.

2. Represents the current interest rate for a variable or increasing rate
security.

3. Illiquid security. The aggregate value of illiquid securities as of December
31, 2007 was $9,090,091, which represents 2.12% of the Fund's net assets. See
Note 8 of accompanying Notes.

4. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline. Most other fixed income securities
increase in price when interest rates decline. The principal amount of the
underlying pool represents the notional amount on which current interest is
calculated. The price of these securities is typically more sensitive to changes
in prepayment rates than traditional mortgage-backed securities (for example,
GNMA pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future cash
flows. These securities amount to $15,178,495 or 3.54% of the Fund's net assets
as of December 31, 2007.

5. Principal-Only Strips represent the right to receive the monthly principal
payments on an underlying pool of mortgage loans. The value of these securities
generally increases as interest rates decline and prepayment rates rise. The
price of these securities is typically more volatile than that of coupon-bearing
bonds of the same maturity. Interest rates disclosed represent current yields
based upon the current cost basis and estimated timing of future cash flows.
These securities amount to $817,999 or 0.19% of the Fund's net assets as of
December 31, 2007.

6. When-issued security or delayed delivery to be delivered and settled after
December 31, 2007. See Note 1 of accompanying Notes.

7. All or a portion of the security is held in collateralized accounts to cover
initial margin requirements on open futures contracts. The aggregate market
value of such securities is $509,125. See Note 6 of accompanying Notes.

8. Partial or fully-loaned security. See Note 9 of accompanying Notes.

9. This bond has no contractual maturity date, is not redeemable and
contractually pays an indefinite stream of interest. Rate reported represents
the current interest rate for this variable rate security.

10. Non-income producing security.

11. Rate shown is the 7-day yield as of December 31, 2007.



STATEMENT OF INVESTMENTS  Continued
- --------------------------------------------------------------------------------

12. Is or was an affiliate, as defined in the Investment Company Act of 1940, at
or during the period ended December 31, 2007, 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 period in
which the issuer was an affiliate are as follows:


                                                                    SHARES         GROSS           GROSS              SHARES
                                                         DECEMBER 31, 2006     ADDITIONS      REDUCTIONS   DECEMBER 31, 2007
- -----------------------------------------------------------------------------------------------------------------------------

Oppenheimer Institutional Money Market Fund, Cl. E               4,562,502   281,699,962     282,156,671           4,105,793

>
                                                                                                                    DIVIDEND
                                                                                                   VALUE              INCOME
- -----------------------------------------------------------------------------------------------------------------------------

Oppenheimer Institutional Money Market Fund, Cl. E                                           $ 4,105,793         $   542,042
>

13. The security/securities have been segregated to satisfy the forward
commitment to return the cash collateral received in securities lending
transactions upon the borrower's return of the securities loaned. See Note 9 of
accompanying Notes.

14. Short-fall security.

- --------------------------------------------------------------------------------
FUTURES CONTRACTS AS OF DECEMBER 31, 2007 ARE AS FOLLOWS:
- --------------------------------------------------------------------------------


                                                                                        UNREALIZED
                                            NUMBER OF   EXPIRATION                    APPRECIATION
CONTRACT DESCRIPTION             BUY/SELL   CONTRACTS         DATE          VALUE   (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------

U.S. Long Bonds                       Buy         455      3/19/08   $ 52,950,625       $ (323,052)
U.S. Treasury Nts., 2 yr.            Sell         531      3/31/08    111,642,750           48,676
U.S. Treasury Nts., 5 yr.             Buy         218      3/31/08     24,041,313          126,459
U.S. Treasury Nts., 10 yr.           Sell         206      3/19/08     23,358,469         (135,945)
                                                                                        -----------
                                                                                        $ (283,862)
                                                                                        ===========


- --------------------------------------------------------------------------------
CREDIT DEFAULT SWAPS AS OF DECEMBER 31, 2007 ARE AS FOLLOWS:
- --------------------------------------------------------------------------------


                                                         BUY/SELL   NOTIONAL         PAY/                   PREMIUM
                                                           CREDIT     AMOUNT      RECEIVE   TERMINATION       PAID/
SWAP COUNTERPARTY    REFERENCE ENTITY                  PROTECTION     (000S)   FIXED RATE          DATE   (RECEIVED)        VALUE
- -----------------------------------------------------------------------------------------------------------------------------------

Barclays Bank plc:
                     Beazer Homes USA, Inc.                  Sell     $  570        2.100%      6/20/08         $ --   $   (30,486)
                     Capmark Financial Group, Inc.           Sell        950        1.000       6/20/12           --      (189,344)
                     CDX.NA.IG.9 Index                       Sell      7,860        0.600      12/20/12      (49,117)      (57,765)
                     CDX.NA.IG.9 Index                       Sell      3,930        0.600      12/20/12      (29,584)      (28,882)
                     Countrywide Home Loans, Inc.            Sell      1,250        0.750       9/20/08           --      (183,245)
                     Dillard's, Inc.                         Sell        750        1.900      12/20/08           --        (4,955)
                     iStar Financial, Inc.                   Sell      1,140        4.400      12/20/12           --        19,736
                     Lehman Brothers Holdings, Inc.          Sell      2,050        0.490       9/20/10           --       (51,941)
                     Merrill Lynch & Co., Inc.               Sell      4,265        0.680       9/20/08           --       (36,301)
                     Six Flags, Inc.                         Sell      1,075        8.250      12/20/08           --       (15,151)
                     Toys "R" Us, Inc.                       Sell      1,000        1.450       9/20/08           --       (19,892)
- -----------------------------------------------------------------------------------------------------------------------------------
Credit Suisse International:
                     ArvinMeritor, Inc.                      Sell      1,635        1.550       9/20/08           --       (20,263)
                     Freescale Semiconductor, Inc.           Sell        975        0.600       3/20/08           --        (4,060)
                     Freescale Semiconductor, Inc.           Sell      1,085        0.750       3/20/08           --        (4,108)
                     Intelsat Ltd.                           Sell      1,075        3.450       9/20/08           --        (5,920)
                     Quebecor World, Inc.                    Sell      1,175        2.600       9/20/08           --      (105,721)
                     Rite Aid Corp.                          Sell      1,595        0.875       6/20/08           --       (35,694)
                     Saks, Inc.                              Sell      1,715        2.000       9/20/08           --        (5,280)
                     The Goodyear Tire & Rubber Co.          Sell      1,640        1.550       9/20/08           --         3,579
                     TXU Corp.                               Sell        365        5.910      12/20/12           --        10,561
                     TXU Corp.                               Sell        350        6.050      12/20/12           --        12,030
                     TXU Corp.                               Sell        365        6.000      12/20/12           --        10,562
                     Univision Communications, Inc.          Sell        490        0.750       3/20/08           --        (1,412)



                                                           BUY/SELL  NOTIONAL         PAY/                  PREMIUM
                                                             CREDIT    AMOUNT      RECEIVE  TERMINATION       PAID/
SWAP COUNTERPARTY   REFERENCE ENTITY                     PROTECTION    (000S)   FIXED RATE         DATE  (RECEIVED)       VALUE
- --------------------------------------------------------------------------------------------------------------------------------

Deutsche Bank AG:
                    ABX.HE.AA.06-2 Index                       Sell  $    450        0.170%     5/25/46  $  (53,996)  $(171,519)
                    Allied Waste North America, Inc.           Sell       630        2.000      9/20/09          --      (3,068)
                    Allied Waste North America, Inc.           Sell       990        2.000      9/20/09          --      (4,821)
                    Capital One Bank                            Buy       670        1.800     12/20/12          --       8,592
                    Capital One Bank                            Buy     1,235        1.700     12/20/12          --      21,815
                    CDX.NA.HY.8 Index                          Sell       905        2.750      6/20/12     (78,546)    (44,940)
                    CDX.NA.HY.8 Index                          Sell       905        2.750      6/20/12     (54,790)    (44,940)
                    CDX.NA.HY.8 Index                          Sell       280        2.750      6/20/12     (36,612)    (13,904)
                    CDX.NA.HY.8 Index                          Sell     1,010        2.750      6/20/12     (69,522)    (50,154)
                    CDX.NA.IG.9 Index                          Sell    15,890        0.600     12/20/12     (95,756)   (119,809)
                    CDX.NA.IG.9 Index                          Sell     7,945        0.600     12/20/12     (45,270)    (59,905)
                    Centex Corp.                               Sell       355        1.550      9/20/09          --     (16,050)
                    Countrywide Home Loans, Inc.               Sell     1,150        3.250      9/20/08          --    (149,075)
                    Dillard's, Inc.                            Sell       420        0.750      9/20/08          --      (7,634)
                    Dow Jones CDX.NA.IG.7 Index                 Buy     3,600        0.400     12/20/11         370      60,013
                    Georgia-Pacific Corp.                      Sell     1,635        1.750      9/20/08          --      10,350
                    Intelsat Ltd.                              Sell       430        2.850      9/20/08          --      (2,644)
                    iStar Financial, Inc.                      Sell     2,025        2.925     12/20/08          --     (38,625)
                    iStar Financial, Inc.                      Sell     1,175        3.000     12/20/08          --     (21,566)
                    iStar Financial, Inc.                      Sell       180        4.320     12/20/12          --       2,022
                    Lehman Brothers Holdings, Inc.             Sell     2,230        1.410      9/20/08          --         398
                    Levi Strauss & Co.                         Sell       935        1.000      9/20/08          --      (9,352)
                    Levi Strauss & Co.                         Sell       700        0.900      9/20/08          --      (7,523)
                    MBIA, Inc.                                 Sell     1,025        0.520      9/20/08          --     (59,861)
                    MBIA, Inc.                                 Sell     1,020        0.600      9/20/08          --     (59,036)
                    Merrill Lynch & Co., Inc.                  Sell       630        1.850      6/20/08          --       2,032
                    Owens-Illinois, Inc.                       Sell       900        1.250      9/20/08          --       1,989
                    Tenet Healthcare Corp.                     Sell     1,635        1.600      3/20/09          --     (40,768)
                    The Bear Stearns Cos., Inc.                Sell     4,195        2.350      9/20/08          --       8,642
                    Washington Mutual, Inc.                    Sell       255        4.500     12/20/08          --      (1,360)
                    Washington Mutual, Inc.                    Sell     1,275        4.500     12/20/08          --      (6,802)
- --------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Capital Markets LP:
                    ABX.HE.AA.06-2 Index                       Sell       760        0.170      5/25/46    (300,182)   (288,782)
                    ABX.HE.AA.06-2 Index                       Sell       155        0.170      5/25/46     (12,771)    (58,896)
                    Capmark Financial Group, Inc.              Sell     1,035        0.950      6/20/12          --    (205,997)
                    First Data Corp.                           Sell     1,020        1.150      9/20/08          --      (7,356)
- --------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs International:
                    Amkor Technology, Inc.                     Sell       155        2.650      9/20/08          --       1,340
                    Citigroup, Inc.                            Sell     1,315        1.250      9/20/08          --     (33,531)
                    Dole Food Co., Inc.                        Sell     1,645        3.880      9/20/08          --      (7,405)
                    D.R. Horton, Inc.                          Sell       935        4.210     12/20/08          --      (1,009)
                    General Mills, Inc.                        Sell     1,415        0.380     12/20/12          --        (390)
                    iStar Financial, Inc.                      Sell       185        3.950     12/20/12          --         130
                    K. Hovnanian Enterprises, Inc.             Sell       635        6.750      9/20/08          --     (49,913)
                    Merrill Lynch & Co., Inc.                  Sell     1,440        1.850      6/20/08          --       4,875
                    Pulte Homes, Inc.                          Sell     1,625        2.750      9/20/09          --     (51,110)
                    Quebecor World, Inc.                       Sell       495        3.000      9/20/08          --     (37,428)
                    Sara Lee Corp.                              Buy     1,370        0.419      9/20/12          --      (4,754)
                    Smurfit-Stone Container Enterprises, Inc.  Sell     1,640        1.450      9/20/08          --         356
                    Standard Pacific Corp.                     Sell       845        6.625      9/20/08          --     (86,464)
- --------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Special Financing, Inc.:
                    Capital One Bank                            Buy       730        1.800     12/20/12          --      11,715
                    D.R. Horton, Inc.                          Sell     1,705        4.200     12/20/08          --        (829)
                    General Mills, Inc.                        Sell     1,715        0.400     12/20/12          --        (752)
                    Morgan Stanley                             Sell     4,275        0.640      9/20/08          --     (18,186)
                    Nortel Networks Corp.                      Sell       265        1.850      9/20/08          --        (652)
                    Residential Capital LLC                    Sell     1,015        5.000      6/20/08    (131,950)   (111,086)
                    Univision Communications, Inc.             Sell       155        3.000     12/20/08          --        (956)
                    Univision Communications, Inc.             Sell     1,325        3.000     12/20/08          --      (5,003)
                    Washington Mutual, Inc.                    Sell       595        4.400     12/20/08          --      (5,420)


STATEMENT OF INVESTMENTS  Continued
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
CREDIT DEFAULT SWAPS: Continued
- --------------------------------------------------------------------------------


                                                        BUY/SELL   NOTIONAL         PAY/                      PREMIUM
                                                          CREDIT     AMOUNT      RECEIVE   TERMINATION          PAID/
SWAP COUNTERPARTY    REFERENCE ENTITY                 PROTECTION     (000S)   FIXED RATE          DATE     (RECEIVED)         VALUE
- ------------------------------------------------------------------------------------------------------------------------------------

Morgan Stanley Capital Services, Inc.:
                    ABX.HE.AA.06-2 Index                    Sell    $   155        0.170%      5/25/46   $    (12,383)  $   (58,815)
                    ABX.HE.AA.06-2 Index                    Sell        300        0.170       5/25/46        (29,999)     (112,529)
                    Beazer Homes USA, Inc.                  Sell      1,040        2.150       6/20/08             --       (48,160)
                    CDX.NA.IG.9 Index                       Sell      4,925        0.600      12/20/12        (38,992)      (37,298)
                    Countrywide Home Loans, Inc.            Sell        800        0.750       9/20/08             --      (105,573)
                    Countrywide Home Loans, Inc.            Sell      3,070        0.420       6/20/09             --      (624,657)
                    First Data Corp.                        Sell        620        1.350       9/20/08             --        (4,309)
                    Ford Motor Co.                          Sell      2,065        7.150      12/20/16             --       (58,552)
                    Ford Motor Co.                          Sell        980        7.050      12/20/16             --       (32,349)
                    General Motors Corp.                    Sell      1,035        5.800      12/20/16             --       (74,895)
                    General Motors Corp.                    Sell      1,000        5.750      12/20/16             --       (74,762)
                    Harrah's Operating Co., Inc.            Sell        720        2.200       9/20/08             --        (3,962)
                    Inco Ltd.                                Buy      1,030        0.700       3/20/17             --       (10,596)
                    Inco Ltd.                                Buy      1,015        0.630       3/20/17             --        (5,132)
                    J.C. Penney Co., Inc.                   Sell      1,095        1.300      12/20/17             --       (43,257)
                    J.C. Penney Co., Inc.                   Sell      1,060        1.070      12/20/17             --       (59,539)
                    K. Hovnanian Enterprises, Inc.          Sell        500        1.850       6/20/08             --       (34,198)
                    K. Hovnanian Enterprises, Inc.          Sell        500        1.850       6/20/08             --       (34,198)
                    Kohl's Corp.                             Buy      1,640        0.870      12/20/17             --        27,441
                    Kohl's Corp.                             Buy      1,590        0.660      12/20/17             --        52,060
                    Lennar Corp.                            Sell      1,210        2.900      12/20/08             --       (46,064)
                    Residential Capital LLC                 Sell        220        5.000       6/20/08        (29,700)      (26,463)
                    Residential Capital LLC                 Sell        310        5.000       6/20/08        (44,950)      (37,288)
                    Residential Capital LLC                 Sell        570        5.000       6/20/08        (82,650)      (68,562)
                    Residential Capital LLC                 Sell      2,455        6.120       9/20/08             --      (401,440)
                    Sara Lee Corp.                           Buy      1,760        0.418       9/20/12             --        (8,276)
                    Toys "R" Us, Inc.                       Sell        640        2.550       9/20/08             --        (6,888)
                    Tribune Co.                             Sell      1,000        1.000       6/20/08             --       (45,050)
                    Vale Overseas Ltd.                      Sell      1,030        1.170       3/20/17             --       (12,774)
                    Vale Overseas Ltd.                      Sell      1,015        1.100       3/20/17             --       (17,771)
                                                                                                         ---------------------------
                                                                                                         $ (1,196,400)  $(4,532,814)
                                                                                                         ===========================


- --------------------------------------------------------------------------------
INTEREST RATE SWAPS AS OF DECEMBER 31, 2007 ARE AS FOLLOWS:
- --------------------------------------------------------------------------------


                                        NOTIONAL                                             TERMINATION
SWAP COUNTERPARTY                         AMOUNT   PAID BY THE FUND   RECEIVED BY THE FUND          DATE       VALUE
- ---------------------------------------------------------------------------------------------------------------------

                                                        Three-Month
Credit Suisse International           $4,580,000      USD BBA LIBOR                  5.428%       8/7/17   $ 315,489
- ---------------------------------------------------------------------------------------------------------------------
                                                        Three-Month
Deutsche Bank AG                       3,870,000      USD BBA LIBOR                   5.445       8/8/17     295,525
                                                                                                           ----------
                                                                                                           $ 611,014
                                                                                                           ==========


Index abbreviation is as follows:

BBA LIBOR       British Bankers' Association London-Interbank Offered Rate



- --------------------------------------------------------------------------------
TOTAL RETURN SWAPS AS OF DECEMBER 31, 2007 ARE AS FOLLOWS:
- --------------------------------------------------------------------------------

>
                              NOTIONAL                                                                     TERMINATION
SWAP COUNTERPARTY               AMOUNT                  PAID BY THE FUND             RECEIVED BY THE FUND         DATE       VALUE
- -----------------------------------------------------------------------------------------------------------------------------------

Barclays Bank plc:                                                         If positive, the Total Return
                                         If negative, the absolute value          of the Lehman Brothers
                                                  of the Lehman Brothers        U.S. CMBS AAA 8.5+ Index
                           $ 6,720,000          U.S. CMBS AAA 8.5+ Index           minus 20 basis points        6/1/08   $  112,774
                                                                           If positive, the Total Return
                                         If negative, the absolute value          of the Lehman Brothers
                                                  of the Lehman Brothers        U.S. CMBS AAA 8.5+ Index
                             1,800,000          U.S. CMBS AAA 8.5+ Index           minus 25 basis points        5/1/08       30,130
- ------------------------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG:                                                          If positive, the Total Return
                                         If negative, the absolute value          of the Lehman Brothers
                                                  of the Lehman Brothers        U.S. CMBS AAA 8.5+ Index
                             4,420,000          U.S. CMBS AAA 8.5+ Index           minus 45 basis points        2/1/08       77,080
                                                                           If positive, the Total Return
                                         If negative, the absolute value          of the Lehman Brothers
                                                  of the Lehman Brothers        U.S. CMBS AAA 8.5+ Index
                            13,160,000          U.S. CMBS AAA 8.5+ Index            plus 60 basis points        2/1/08      241,011
                                                                           If positive, the Total Return
                                         If negative, the absolute value          of the Lehman Brothers
                                                  of the Lehman Brothers        U.S. CMBS AAA 8.5+ Index
                             1,180,000          U.S. CMBS AAA 8.5+ Index            plus 25 basis points        2/1/08       21,266
- ------------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Special
Financing, Inc.:                                                           If positive, the Total Return
                                         If negative, the absolute value          of the Lehman Brothers
                                                  of the Lehman Brothers        U.S. CMBS AAA 8.5+ Index
                             7,900,000          U.S. CMBS AAA 8.5+ Index           minus 40 basis points        6/1/08      136,564
                                         If negative, the absolute value   If positive, the Total Return
                                                  of the Lehman Brothers          of the Lehman Brothers
                             5,450,000          U.S. CMBS AAA 8.5+ Index        U.S. CMBS AAA 8.5+ Index        2/1/08       96,237
                                                                           If positive, the Total Return
                                         If negative, the absolute value          of the Lehman Brothers
                                                  of the Lehman Brothers        U.S. CMBS AAA 8.5+ Index
                             5,400,000          U.S. CMBS AAA 8.5+ Index           minus 20 basis points        5/1/08       94,801
                                                                           If positive, the Total Return
                                         If negative, the absolute value          of the Lehman Brothers
                                                  of the Lehman Brothers        U.S. CMBS AAA 8.5+ Index
                             4,785,000          U.S. CMBS AAA 8.5+ Index            plus 60 basis points        2/1/08       86,647
                                                                           If positive, the Total Return
                                         If negative, the absolute value          of the Lehman Brothers
                                                  of the Lehman Brothers        U.S. CMBS AAA 8.5+ Index
                             6,556,000          U.S. CMBS AAA 8.5+ Index            plus 55 basis points        5/1/08      118,471
                                                                           If positive, the Total Return
                                         If negative, the absolute value          of the Lehman Brothers
                                                  of the Lehman Brothers        U.S. CMBS AAA 8.5+ Index
                             2,860,000          U.S. CMBS AAA 8.5+ Index           minus 25 basis points        3/1/08       49,966
                                                                           If positive, the Total Return
                                         If negative, the absolute value          of the Lehman Brothers
                                                  of the Lehman Brothers        U.S. CMBS AAA 8.5+ Index
                             8,690,000          U.S. CMBS AAA 8.5+ Index             plus 45 basis points       5/1/08      156,381


STATEMENT OF INVESTMENTS  Continued
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
TOTAL RETURN SWAPS: Continued
- --------------------------------------------------------------------------------


                              NOTIONAL                                                                     TERMINATION
SWAP COUNTERPARTY               AMOUNT                  PAID BY THE FUND            RECEIVED BY THE FUND          DATE        VALUE
- ------------------------------------------------------------------------------------------------------------------------------------

Morgan Stanley Capital                                                     If positive, the Total Return
Services, Inc.:                          If negative, the absolute value          of the Lehman Brothers
                                                  of the Lehman Brothers        U.S. CMBS AAA 8.5+ Index
                           $ 5,600,000          U.S. CMBS AAA 8.5+ Index           minus 40 basis points        6/1/08   $   85,626
                                                                           If positive, the Total Return
                                         If negative, the absolute value          of the Lehman Brothers
                                                  of the Lehman Brothers        U.S. CMBS AAA 8.5+ Index
                             6,720,000          U.S. CMBS AAA 8.5+ Index            plus 90 basis points        6/1/08      108,522
                                                                           If positive, the Total Return
                                         If negative, the absolute value          of the Lehman Brothers
                                                  of the Lehman Brothers        U.S. CMBS AAA 8.5+ Index
                               900,000          U.S. CMBS AAA 8.5+ Index           plus 110 basis points       1/31/08       14,660

- ------------------------------------------------------------------------------------------------------------------------------------
UBS AG:
                                                                           If positive, the Total Return
                                         If negative, the absolute value          of the Lehman Brothers
                                                  of the Lehman Brothers        U.S. CMBS AAA 8.5+ Index
                             3,800,000          U.S. CMBS AAA 8.5+ Index           minus 20 basis points        5/1/08       67,175
                                                                           If positive, the Total Return
                                         If negative, the absolute value          of the Lehman Brothers
                                                  of the Lehman Brothers        U.S. CMBS AAA 8.5+ Index
                             5,981,000          U.S. CMBS AAA 8.5+ Index            plus 60 basis points        2/1/08      109,851
                                                                                                                         -----------
                                                                                                                         $1,607,162
                                                                                                                         ===========


Index abbreviation is as follows:

CMBS       Commercial Mortgage Backed Securities

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


STATEMENT OF ASSETS AND LIABILITIES  December 31, 2007
- --------------------------------------------------------------------------------


- ----------------------------------------------------------------------------------------------------------------
ASSETS
- ----------------------------------------------------------------------------------------------------------------
Investments, at value-see accompanying statement of investments:
Unaffiliated companies (cost $453,974,178)                                                      $   452,821,115
Affiliated companies (cost $4,105,793)                                                                4,105,793
                                                                                                ----------------
                                                                                                    456,926,908
- ----------------------------------------------------------------------------------------------------------------
Cash                                                                                                     32,272
- ----------------------------------------------------------------------------------------------------------------
Swaps, at value (premiums received $897,108)                                                          1,736,115
- ----------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Shares of beneficial interest sold                                                                    5,209,084
Interest, dividends and principal paydowns                                                            2,970,054
Investments sold (including $1,142,094 sold on a when-issued or delayed delivery basis)               1,542,155
Futures margins                                                                                         103,077
Other                                                                                                    16,431
                                                                                                ----------------
Total assets                                                                                        468,536,096

- ----------------------------------------------------------------------------------------------------------------
LIABILITIES
- ----------------------------------------------------------------------------------------------------------------
Return of collateral for securities loaned                                                            3,331,648
- ----------------------------------------------------------------------------------------------------------------
Swaps, at value (premiums received $299,292)                                                          4,050,753
- ----------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased on a when-issued or delayed delivery basis                                     30,488,769
Shares of beneficial interest redeemed                                                                1,281,505
Shareholder communications                                                                               61,953
Distribution and service plan fees                                                                       59,684
Trustees' compensation                                                                                   10,734
Transfer and shareholder servicing agent fees                                                             1,751
Other                                                                                                    46,118
                                                                                                ----------------
Total liabilities                                                                                    39,332,915

- ----------------------------------------------------------------------------------------------------------------
NET ASSETS                                                                                      $   429,203,181
                                                                                                ================

- ----------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- ----------------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest                                                      $        38,886
- ----------------------------------------------------------------------------------------------------------------
Additional paid-in capital                                                                          450,197,264
- ----------------------------------------------------------------------------------------------------------------
Accumulated net investment income                                                                    18,856,205
- ----------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions                      (37,334,011)
- ----------------------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments                                                           (2,555,163)
                                                                                                ----------------
NET ASSETS                                                                                      $   429,203,181
                                                                                                ================

- ----------------------------------------------------------------------------------------------------------------
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 $325,661,015 and 29,454,744 shares of beneficial interest outstanding)  $         11.06
- ----------------------------------------------------------------------------------------------------------------
Service Shares:
Net asset value, redemption price per share and offering price per share
(based on net assets of $103,542,166 and 9,431,174 shares of beneficial interest outstanding)   $         10.98


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.



STATEMENT OF OPERATIONS  For the Year Ended December 31, 2007
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Interest                                                           $ 23,201,092
- --------------------------------------------------------------------------------
Dividends--affiliated companies                                         542,042
- --------------------------------------------------------------------------------
Fee income                                                              106,223
- --------------------------------------------------------------------------------
Portfolio lending fees                                                   61,792
                                                                   -------------
Total investment income                                              23,911,149

- --------------------------------------------------------------------------------
EXPENSES
- --------------------------------------------------------------------------------
Management fees                                                       2,674,865
- --------------------------------------------------------------------------------
Distribution and service plan fees--Service shares                      174,887
- --------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service shares                                                       10,107
Service shares                                                           10,034
- --------------------------------------------------------------------------------
Shareholder communications:
Non-Service shares                                                       30,649
Service shares                                                            4,304
- --------------------------------------------------------------------------------
Trustees' compensation                                                   14,154
- --------------------------------------------------------------------------------
Custodian fees and expenses                                               2,455
- --------------------------------------------------------------------------------
Administration service fees                                               1,500
- --------------------------------------------------------------------------------
Other                                                                    55,434
                                                                   -------------
Total expenses                                                        2,978,389
Less reduction to custodian expenses                                       (779)
Less waivers and reimbursements of expenses                             (10,315)
                                                                   -------------
Net expenses                                                          2,967,295

- --------------------------------------------------------------------------------
NET INVESTMENT INCOME                                                20,943,854

- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- --------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments from unaffiliated companies                                 (79,713)
Closing and expiration of futures contracts                            (646,982)
Foreign currency transactions                                               298
Swap contracts                                                       (2,375,158)
                                                                   -------------
Net realized loss                                                    (3,101,555)
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments                                                           1,637,840
Futures contracts                                                      (468,091)
Swap contracts                                                       (1,180,815)
                                                                   -------------
Net change in unrealized depreciation                                   (11,066)

- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS               $ 17,831,233
                                                                   =============

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.



STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------


YEAR ENDED DECEMBER 31,                                                                                          2007          2006
- ------------------------------------------------------------------------------------------------------------------------------------

OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income                                                                                    $ 20,943,854  $ 19,887,682
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized loss                                                                                          (3,101,555)   (1,856,406)
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized depreciation                                                                         (11,066)    2,736,740
                                                                                                         ---------------------------
Net increase in net assets resulting from operations                                                       17,831,233    20,768,016

- ------------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Non-Service shares                                                                                        (18,342,384)  (21,803,446)
Service shares                                                                                             (2,404,569)     (608,147)
                                                                                                         ---------------------------
                                                                                                          (20,746,953)  (22,411,593)

- ------------------------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from beneficial interest
transactions:
Non-Service shares                                                                                        (37,703,583)  (61,099,902)
Service shares                                                                                             61,525,061    29,289,033
                                                                                                         ---------------------------
                                                                                                           23,821,478   (31,810,869)

- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease)                                                                                  20,905,758   (33,454,446)
- ------------------------------------------------------------------------------------------------------------------------------------
Beginning of period                                                                                       408,297,423   441,751,869
                                                                                                         ---------------------------
End of period (including accumulated net investment income of $18,856,205 and $20,676,318, respectively) $429,203,181  $408,297,423
                                                                                                         ===========================


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.



FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------


NON-SERVICE SHARES   YEAR ENDED DECEMBER 31,                    2007             2006           2005         2004         2003
- ---------------------------------------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period                       $   11.16        $   11.19      $   11.50    $   11.42    $   11.31
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                            .55 1            .53 1          .51 1        .43 1        .51
Net realized and unrealized gain (loss)                         (.08)             .03           (.23)         .18          .23
                                                           ----------------------------------------------------------------------
Total from investment operations                                 .47              .56            .28          .61          .74
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                            (.57)            (.59)          (.59)        (.53)        (.63)
- ---------------------------------------------------------------------------------------------------------------------------------

Net asset value, end of period                             $   11.06        $   11.16      $   11.19    $   11.50    $   11.42
                                                           ======================================================================

- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                              4.39%            5.28%          2.59%        5.49%        6.78%
- ---------------------------------------------------------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)                   $ 325,661        $ 367,106      $ 430,642    $ 504,244    $ 618,234
- ---------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                          $ 345,723        $ 391,750      $ 466,033    $ 552,293    $ 691,931
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                           5.07%            4.83%          4.56%        3.82%        4.03%
Total expenses                                                  0.68% 4,5,6      0.77% 4,5      0.76% 6      0.75% 6      0.73% 6
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                           89% 7           114% 7         111% 7        95% 7       101%


1. Per share amounts calculated based on the average shares outstanding during
the period.

2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Total returns are not annualized for
periods less than one full year. Total return information does not reflect
expenses that apply at the separate account level or to related insurance
products. Inclusion of these charges would reduce the total return figures for
all periods shown. Returns do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund shares.

3. Annualized for periods of less than one full year.

4. Total expenses including indirect expenses from affiliated fund were as
follows:

             Year Ended December 31, 2007        0.68%
             Year Ended December 31, 2006        0.77%

5. Voluntary waiver or reimbursement of indirect management fees less than
0.005%.

6. Reduction to custodian expenses less than 0.005%.

7. The portfolio turnover rate excludes purchase and sale transactions of To Be
Announced (TBA) mortgage-related securities as follows:

                                       PURCHASE TRANSACTIONS   SALE TRANSACTIONS
- --------------------------------------------------------------------------------
Year Ended December 31, 2007           $         662,784,931   $     678,316,693
Year Ended December 31, 2006           $       1,168,229,255   $   1,270,329,129
Year Ended December 31, 2005           $       2,420,041,493   $   2,423,498,913
Year Ended December 31, 2004           $       2,841,348,053   $   2,925,500,296

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.



SERVICE SHARES   YEAR ENDED DECEMBER 31,                        2007             2006           2005         2004         2003
- ---------------------------------------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period                       $   11.10        $   11.15      $   11.47    $   11.39    $   11.30
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income                                            .52 1            .49 1          .47 1        .40 1        .43
Net realized and unrealized gain (loss)                         (.08)             .03           (.22)         .18          .28
                                                           ----------------------------------------------------------------------
Total from investment operations                                 .44              .52            .25          .58          .71
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                            (.56)            (.57)          (.57)        (.50)        (.62)
- ---------------------------------------------------------------------------------------------------------------------------------

Net asset value, end of period                             $   10.98        $   11.10      $   11.15    $   11.47    $   11.39
                                                           ======================================================================

- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                              4.09%            4.93%          2.33%        5.22%        6.56%
- ---------------------------------------------------------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)                   $ 103,542        $  41,191      $  11,110    $   3,505    $   3,835
- ---------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                          $  70,116        $  21,265      $   7,213    $   3,002    $   3,903
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                           4.85%            4.56%          4.29%        3.55%        3.73%
Total expenses                                                  0.92% 4,5,6      1.06% 4,5      1.03% 6      0.99% 6      0.98% 6
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                           89% 7           114% 7         111% 7        95% 7       101%


1. Per share amounts calculated based on the average shares outstanding during
the period.

2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Total returns are not annualized for
periods less than one full year. Total return information does not reflect
expenses that apply at the separate account level or to related insurance
products. Inclusion of these charges would reduce the total return figures for
all periods shown. Returns do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund shares.

3. Annualized for periods less than one full year.

4. Total expenses including indirect expenses from affiliated fund were as
follows:

             Year Ended December 31, 2007        0.92%
             Year Ended December 31, 2006        1.06%

5. Voluntary waiver or reimbursement of indirect management fees less than
0.005%.

6. Reduction to custodian expenses less than 0.005%.

7. The portfolio turnover rate excludes purchase and sale transactions of To Be
Announced (TBA) mortgage-related securities as follows:

                                       PURCHASE TRANSACTIONS   SALE TRANSACTIONS
- --------------------------------------------------------------------------------
Year Ended December 31, 2007           $         662,784,931   $     678,316,693
Year Ended December 31, 2006           $       1,168,229,255   $   1,270,329,129
Year Ended December 31, 2005           $       2,420,041,493   $   2,423,498,913
Year Ended December 31, 2004           $       2,841,348,053   $   2,925,500,296

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES

Oppenheimer Core Bond Fund/VA (the "Fund"), is a separate series of Oppenheimer
Variable Account Funds, an open-end management investment company registered
under the Investment Company Act of 1940, as amended. The Fund's main investment
objective is to seek a high level of current income. As a secondary objective,
the Fund seeks capital appreciation when consistent with its primary objective.
The Fund's investment adviser is OppenheimerFunds, Inc. (the "Manager").

      The Fund offers two classes of shares. Both classes are sold at their
offering price, which is the net asset value per share, to separate investment
accounts of participating insurance companies as an underlying investment for
variable life insurance policies, variable annuity contracts or other investment
products. The class of shares designated as Service shares is subject to a
distribution and service plan. Both classes of shares have identical rights and
voting privileges with respect to the Fund in general and exclusive voting
rights on matters that affect that class alone. Earnings, net assets and net
asset value per share may differ due to each class having its own expenses, such
as transfer and shareholder servicing agent fees and shareholder communications,
directly attributable to that class.

      The following is a summary of significant accounting policies consistently
followed by the Fund.

- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of the New York Stock Exchange (the "Exchange"), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for trading. Securities may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. Securities traded on a registered U.S.
securities exchange 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 whose principal exchange is NASDAQ(R) are valued based on the closing
price reported 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 traded on foreign
exchanges are valued based on the last sale price on the principal exchange on
which the security is traded, as identified by the portfolio pricing service,
prior to the time when the Fund's assets are valued. In the absence of a sale,
the security is valued at the official closing price on the principal exchange.
Corporate, government and municipal debt instruments having a remaining maturity
in excess of sixty days and all mortgage-backed securities, collateralized
mortgage obligations and other asset-backed securities will be valued at the
mean between the "bid" and "asked" prices. Securities for which market
quotations are not readily available are valued 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 exchanges will be fair valued. Fair value is
determined in good faith using consistently applied procedures under the
supervision of the Board of Trustees. Shares of a registered investment company
that are not traded on an exchange are valued at the acquired investment
company's net asset value per share. "Money market-type" debt instruments with
remaining maturities of sixty days or less are valued at cost adjusted by the
amortization of discount or premium to maturity (amortized cost), which
approximates market value.

- --------------------------------------------------------------------------------
SECURITIES ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS. The Fund may purchase
securities on a "when-issued" basis, and may purchase or sell securities on a
"delayed delivery" basis. "When-issued" or "delayed delivery" refers to
securities whose terms and indenture are available and for which a market
exists, but which are not available for immediate delivery. Delivery and payment
for securities that have been purchased by the Fund on a when-issued basis
normally takes place within six months and possibly as long as two years or more
after the trade date. During this period, such securities do not earn interest,
are subject to market fluctuation and may increase or decrease in value prior to
their delivery. The purchase of securities on a when-issued basis may increase
the volatility of the Fund's net asset value to the extent the Fund executes
such transactions while remaining substantially fully invested. When the Fund
engages in when-issued or delayed delivery transactions, it relies on the buyer
or seller, as the case may be, to complete the transaction. Their failure to do
so may cause the Fund to lose the opportunity to obtain or dispose of the
security at a price and yield it considers advantageous. The Fund maintains
internally designated assets with a market value equal to or greater than the
amount of its purchase commitments. The Fund may also sell securities that it
purchased on a when-issued basis or forward commitment prior to settlement of
the original purchase.

As of December 31, 2007, the Fund had purchased securities issued on a
when-issued or delayed delivery basis and sold securities issued on a delayed
delivery basis as follows:

                                        WHEN-ISSUED OR DELAYED
                                   DELIVERY BASIS TRANSACTIONS
            --------------------------------------------------
            Purchased securities                   $30,488,769
            Sold securities                          1,142,094

The Fund may enter into "forward roll" transactions with respect to
mortgage-related securities. In this type of transaction, the Fund sells a
mortgage-related security to a buyer and simultaneously agrees to repurchase a
similar security (same type, coupon and maturity) at a later date at a set
price. During the period between the sale and the repurchase, the Fund will not
be entitled to receive interest and principal payments on the securities that
have been sold. The Fund records the incremental difference between the forward
purchase and sale of each forward roll as realized gain (loss) on investments or
as fee income in the case of such transactions that have an associated fee in
lieu of a difference in the forward purchase and sale price.

      Risks of entering into forward roll transactions include the potential
inability of the counterparty to meet the terms of the agreement; the potential
of the Fund to receive inferior securities at redelivery as compared to the
securities sold to the counterparty; counterparty credit risk. To assure its
future payment of the purchase price, the Fund maintains internally designated
assets with a market value equal to or greater than the payment obligation under
the roll.

- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in
U.S. dollars. The values of securities denominated in foreign currencies and
amounts related to the purchase and sale of foreign securities and foreign
investment income are translated into U.S. dollars as of the close of the
Exchange, normally 4:00 P.M. Eastern time, on each day the Exchange is open for
trading. Foreign exchange rates may be valued primarily using a reliable bank,
dealer or service authorized by the Board of Trustees.

      Reported net realized gains and losses from foreign currency transactions
arise from sales of portfolio securities, sales and maturities of short-term
securities, sales of foreign currencies, exchange rate fluctuations between the
trade and settlement dates on securities transactions, and the difference
between the amounts of dividends, interest, and foreign withholding taxes
recorded on the Fund's books and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized appreciation and depreciation on the
translation of assets and liabilities denominated in foreign currencies arise
from changes in the values of assets and liabilities, including investments in
securities at fiscal period end, resulting from changes in exchange rates.

      The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.

- --------------------------------------------------------------------------------
INVESTMENT IN OPPENHEIMER INSTITUTIONAL MONEY MARKET FUND. The Fund is permitted
to invest daily available cash balances in an affiliated money market fund. The
Fund may invest the available cash in Class E shares of Oppenheimer
Institutional Money Market Fund ("IMMF") to seek current income while preserving
liquidity. IMMF is a registered open-end management investment company,
regulated as a money market fund under the Investment Company Act of 1940, as
amended. The Manager is also the investment adviser of IMMF. The Fund's
investment in IMMF is included in the Statement of Investments. As a
shareholder, the Fund is subject to its proportional share of IMMF's Class E
expenses, including its management fee. The Manager will waive fees and/or
reimburse Fund expenses in an amount equal to the indirect management fees
incurred through the Fund's investment in IMMF.

- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated funds
advised by the Manager, may transfer uninvested cash balances into joint trading
accounts on a daily basis. These balances are invested in one or more repurchase
agreements. Securities pledged as collateral for repurchase agreements are held
by a custodian bank until the agreements mature. Each agreement requires that
the market value of the collateral be sufficient to cover payments of interest
and principal. If the seller of the agreement defaults and the value of the
collateral declines, or if the seller enters an insolvency proceeding,
realization of the value of the collateral by the Fund may be delayed or
limited.

- --------------------------------------------------------------------------------
INVESTMENTS WITH OFF-BALANCE SHEET RISK. The Fund enters into financial
instrument transactions (such as swaps, futures, options and other derivatives)
that may have off-balance sheet market risk. Off-balance sheet market risk
exists when the maximum potential loss on a particular financial instrument is
greater than the value of such financial instrument, as reflected in the Fund's
Statement of Assets and Liabilities.

- --------------------------------------------------------------------------------
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. 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
remain open for the three preceding fiscal reporting period ends.

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
                                                                    DEPRECIATION
                                                             BASED ON COST OF
                                                               SECURITIES AND
   UNDISTRIBUTED    UNDISTRIBUTED            ACCUMULATED    OTHER INVESTMENTS
   NET INVESTMENT       LONG-TERM                   LOSS   FOR FEDERAL INCOME
   INCOME                    GAIN   CARRYFORWARD 1,2,3,4         TAX PURPOSES
   --------------------------------------------------------------------------
   $17,146,896                $--            $37,500,155             $668,979

1. As of December 31, 2007, the Fund had $37,269,804 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, 2007,
details of the capital loss carryforwards were as follows:

                   EXPIRING
                   ------------------------------------------
                   2010                          $ 29,885,554
                   2013                                57,295
                   2014                             6,081,496
                   2015                             1,245,459
                                                 ------------
                   Total                         $ 37,269,804
                                                 ============

2. As of December 31, 2007, the Fund had $230,351 of post-October losses
available to offset future realized capital gains, if any. Such losses, if
unutilized, will expire in 2016.

3. During the fiscal year ended December 31, 2007, the Fund did not utilize any
capital loss carryforward.

4. During the fiscal year ended December 31, 2006, the Fund did not utilize any
capital loss carryforward.

Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Fund.


Accordingly, the following amounts have been reclassified for December 31, 2007.
Net assets of the Fund were unaffected by the reclassifications.

                 REDUCTION TO                  REDUCTION TO
                  ACCUMULATED               ACCUMULATED NET
               NET INVESTMENT                 REALIZED LOSS
                       INCOME                ON INVESTMENTS
               --------------------------------------------
                   $2,017,014                    $2,017,014

The tax character of distributions paid during the years ended December 31, 2007
and December 31, 2006 was as follows:

                                        YEAR ENDED          YEAR ENDED
                                 DECEMBER 31, 2007   DECEMBER 31, 2006
      ----------------------------------------------------------------
      Distributions paid from:
      Ordinary income                  $20,746,953         $22,411,593

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, 2007 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            $  458,197,688
      Federal  tax  cost of other investments      (60,925,720)
                                                --------------
      Total federal tax cost                    $  397,271,968
                                                ==============

      Gross unrealized appreciation             $   10,079,441
      Gross unrealized depreciation                (10,748,420)
                                                --------------
      Net unrealized depreciation               $     (668,979)
                                                ==============

- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a compensation
deferral plan for independent trustees that enables trustees to elect to defer
receipt of all or a portion of the annual compensation they are entitled to
receive from the Fund. For purposes of determining the amount owed to the
Trustee under the plan, deferred amounts are treated as though equal dollar
amounts had been invested in shares of the Fund or in other Oppenheimer funds
selected by the Trustee. The Fund purchases shares of the funds selected for
deferral by the Trustee in amounts equal to his or her deemed investment,
resulting in a Fund asset equal to the deferred compensation liability. Such
assets are included as a component of "Other" within the asset section of the
Statement of Assets and Liabilities. Deferral of trustees' fees under the plan
will not affect the net assets of the Fund, and will not materially affect the
Fund's assets, liabilities or net investment income per share. Amounts will be
deferred until distributed in accordance to the compensation deferral plan.

- --------------------------------------------------------------------------------
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. generally accepted accounting principles, are recorded on
the ex-dividend date. Income and capital gain distributions, if any, are
declared and paid annually or at other times as deemed necessary by the Manager.

- --------------------------------------------------------------------------------
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 is recognized on an accrual basis. Market 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 0.50%. The "Reduction to custodian expenses" line item,
if applicable, represents earnings on cash balances maintained by the Fund
during the period. Such interest expense and other custodian fees may be paid
with these earnings.

- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.

- --------------------------------------------------------------------------------
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.

- --------------------------------------------------------------------------------
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 increases and
decreases in net assets from operations 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, 2007   YEAR ENDED DECEMBER 31, 2006
                                                          SHARES          AMOUNT       SHARES            AMOUNT
- ----------------------------------------------------------------------------------------------------------------

NON-SERVICE SHARES
Sold                                                   1,273,250   $  13,904,774      953,894   $    10,320,632
Dividends and/or distributions reinvested              1,704,683      18,342,384    2,058,871        21,803,446
Redeemed                                              (6,416,114)    (69,950,741)  (8,604,369)      (93,223,980)
                                                     -----------------------------------------------------------
Net decrease                                          (3,438,181)  $ (37,703,583)  (5,591,604)  $   (61,099,902)
                                                     ===========================================================
- ----------------------------------------------------------------------------------------------------------------
SERVICE SHARES
Sold                                                   6,555,320   $  70,649,282    2,826,656   $    30,522,972
Dividends and/or distributions reinvested                224,516       2,404,569       57,590           608,147
Redeemed                                              (1,059,398)    (11,528,790)    (170,116)       (1,842,086)
                                                     -----------------------------------------------------------
Net increase                                           5,720,438   $  61,525,061    2,714,130   $    29,289,033
                                                     ===========================================================


- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES

The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations and investments in IMMF, for the year ended December
31, 2007, were as follows:

                                                       PURCHASES           SALES
- --------------------------------------------------------------------------------
Investment securities                               $213,589,856   $ 238,809,894
U.S. government and government agency obligations    107,959,273     115,802,561
To Be Announced (TBA) mortgage-related securities    662,784,931     678,316,693


- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES

MANAGEMENT FEES. Under the investment advisory agreement, the Fund pays the
Manager a management fee based on the daily net assets of the Fund at an annual
rate as shown in the following table:


FEE SCHEDULE FOR MAY 1, 2007 TO DEC. 31, 2007   FEE SCHEDULE FOR JAN. 1, 2007 TO APRIL 30, 2007
- ---------------------------------------------   -----------------------------------------------

Up to $1 billion                        0.60%   Up to $200 million                        0.75%
Over $1 billion                         0.50    Next $200 million                         0.72
                                                Next $200 million                         0.69
                                                Next $200 million                         0.66
                                                Next $200 million                         0.60
                                                Over $1 billion                           0.50


- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.

- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services ("OFS"), a division of the
Manager, acts as the transfer and shareholder servicing agent for the Fund. The
Fund pays OFS a per account fee. For the year ended December 31, 2007, the Fund
paid $20,112 to OFS for services to the Fund.

      Additionally, funds offered in variable annuity separate accounts are
subject to minimum fees of $10,000 per class, for class level assets of $10
million or more. Each class is subject to the minimum fee in the event that the
per account fee does not equal or exceed the applicable minimum fee.

- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN FOR SERVICE SHARES. The Fund has adopted a
Distribution and Service Plan (the "Plan") in accordance with Rule 12b-1 under
the Investment Company Act of 1940 for Service shares to pay OppenheimerFunds
Distributor, Inc. (the "Distributor"), for distribution related services,
personal service and account maintenance for the Fund's Service shares. Under
the Plan, payments are made periodically at an annual rate of up to 0.25% of the
average annual net assets of Service shares of the Fund. The Distributor
currently uses all of those fees to compensate sponsor(s) of the insurance
product that offers Fund shares, for providing personal service and maintenance
of accounts of their variable contract owners that hold Service shares. These
fees are paid out of the Fund's assets on an on-going basis and increase
operating expenses of the Service shares, which results in lower performance
compared to the Fund's shares that are not subject to a service fee. Fees
incurred by the Fund under the Plan are detailed in the Statement of Operations.

- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit
transfer and shareholder servicing agent fees for all classes to 0.35% of
average annual net assets per class. This undertaking may be amended or
withdrawn at any time.

      The Manager will waive fees and/or reimburse Fund expenses in an amount
equal to the indirect management fees incurred through the Fund's investment in
IMMF. During the year ended December 31, 2007, the Manager waived $10,315 for
IMMF management fees.

- --------------------------------------------------------------------------------
5. FOREIGN CURRENCY EXCHANGE CONTRACTS

The Fund may enter into foreign currency exchange contracts ("forward
contracts") for the purchase or sale of a foreign currency at a negotiated rate
at a future date.

      Foreign currency exchange contracts are reported on a schedule following
the Statement of Investments. Forward contracts will be valued daily based upon
the closing prices of the forward currency rates determined at the close of the
Exchange as provided by a bank, dealer or pricing service. The resulting
unrealized appreciation (depreciation) is reported in the Statement of Assets
and Liabilities as a receivable or payable and in the Statement of Operations
within the change in unrealized appreciation (depreciation). At contract close,
the difference between the original cost of the contract and the value at the
close date is recorded as a realized gain (loss) in the Statement of Operations.



NOTES TO FINANCIAL STATEMENTS  Continued
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
5. FOREIGN CURRENCY EXCHANGE CONTRACTS Continued

      Risks to the Fund include both market and credit risk. Market risk is the
risk that the value of the forward contract will depreciate due to unfavorable
changes in the exchange rates. Credit risk arises from the possibility that the
counterparty will default. If the counterparty defaults, the Fund's loss will
consist of the net amount of contractual payments that the Fund has not yet
received.

      As of December 31, 2007, the Fund had no outstanding forward contracts.

- --------------------------------------------------------------------------------
6. FUTURES CONTRACTS

A futures contract is a commitment to buy or sell a specific amount of a
financial instrument at a negotiated price on a stipulated future date. The
Portfolio may buy and sell futures contracts that relate to broadly based
securities indices (financial futures), debt securities (interest rate futures)
and various commodities (commodity index futures). The Fund may also buy or
write put or call options on these futures contracts.

      Futures contracts traded on a commodities or futures exchange will be
valued at the final settlement price or official closing price on the principal
exchange as reported by such principal exchange at its trading session ending
at, or most recently prior to, the time when the Fund's assets are valued.

      Upon entering into a futures contract, the Fund is required to deposit
either cash or securities (initial margin) in an amount equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Fund each day. The variation margin payments are equal
to the daily changes in the contract value and are recorded as unrealized gains
and losses.

      Futures contracts are reported on a schedule following the Statement of
Investments. Securities held in collateralized accounts to cover initial margin
requirements on open futures contracts are noted in the Statement of
Investments. Cash held by the broker to cover initial margin requirements on
open futures contracts and the receivable and/or payable for the daily mark to
market for the variation margin are noted in the Statement of Assets and
Liabilities. The net change in unrealized appreciation and depreciation is
reported in the Statement of Operations. Realized gains (losses) are reported in
the Statement of Operations at the closing or expiration of futures contracts.

      Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market where the Fund is unable to
liquidate the contract or enter into an offsetting position and, if used for
hedging purposes, the risk that the price of the contract will correlate
imperfectly with the prices of the Fund's securities.

- --------------------------------------------------------------------------------
7. SWAP CONTRACTS

The Fund may enter into swap contract agreements with a counterparty to exchange
a series of cash flows based on either specified reference rates, or the
occurrence of a credit event, over a specified period. Such contracts may
include interest rate, equity, debt, index, total return, credit and currency
swaps.

      Swaps are marked to market daily using primarily quotations from pricing
services, counterparties and brokers. Swap contracts are reported on a schedule
following the Statement of Investments. The value of the contracts is separately
disclosed on the Statement of Assets and Liabilities. The unrealized
appreciation (depreciation) related to the change in the valuation of the
notional amount of the swap is combined with the accrued interest due to (owed
by) the Fund at termination or settlement. The net change in this amount during
the period is included on the Statement of Operations. The Fund also records any
periodic payments received from (paid to) the counterparty, including at
termination, under such contracts as realized gain (loss) on the Statement of
Operations.

      Risks of entering into swap contracts include credit, market and liquidity
risk. Credit risk arises from the possibility that the counterparty will
default. If the counterparty defaults, the Fund's loss will consist of the net
amount of contractual payments that the Fund has not yet received. Market risk
is the risk that the value of the contract will depreciate due to unfavorable
changes in the reference asset. If there is an illiquid market for the
agreement, the Fund may be unable to close the contract prior to contract
termination.


- --------------------------------------------------------------------------------
CREDIT DEFAULT SWAP CONTRACTS. A credit default swap is a bilateral contract
that enables an investor to buy or sell protection against a defined-issuer
credit event. The Fund may enter into credit default swaps on a single security,
or a basket of securities.

      In a credit default swap contract, the purchaser of the contract will pay
a periodic interest fee, similar to an insurance premium, on the notional amount
of the swap contract to the counterparty (the seller of the contract). If there
is a credit event (for example, bankruptcy or a failure to timely pay interest
or principal), the purchaser will exercise the contract and will receive a
payment from the seller of the contract equal to the notional value of the
credit default swap contract less the value of the underlying security. In the
event that the credit default swap is exercised due to a credit event, the
difference between the value of the underlying security and the notional amount
is recorded as realized gain (loss) and is included on the Statement of
Operations.

      Risks of credit default swaps include, but are not limited to, the cost of
paying for credit protection if there are no credit events.

- --------------------------------------------------------------------------------
INTEREST RATE SWAP CONTRACTS. An interest rate swap is an agreement between
counterparties to exchange periodic interest payments on the notional amount of
the contract. One cash flow stream will typically be a floating rate payment
based upon a specified index while the other is typically a fixed rate.

      Interest rate swap agreements include interest rate risk. There is a risk,
based on movements of interest rates in the future, the payments made by the
Fund under a swap agreement will be greater than the payments it received.

- --------------------------------------------------------------------------------
TOTAL RETURN SWAP CONTRACTS. A total return swap is an agreement between
counterparties to exchange a set of future cash flows on the notional amount of
the contract. One cash flow is typically based on a reference interest rate or
index and the other on the total return of a reference asset such as a security,
a basket of securities, or an index. The total return includes appreciation or
depreciation on the reference asset, plus any interest or dividend payments.

- --------------------------------------------------------------------------------
8. ILLIQUID SECURITIES

As of December 31, 2007, investments in securities included issues that are
illiquid. Investments may be illiquid because they do not have an active trading
market, making it difficult to value them or dispose of them promptly at an
acceptable price. The Fund will not invest more than 15% of its net assets
(determined at the time of purchase and reviewed periodically) in illiquid
securities. Securities that are illiquid are marked with an applicable footnote
on the Statement of Investments.

- --------------------------------------------------------------------------------
9. SECURITIES LENDING

The Fund lends portfolio securities from time to time in order to earn
additional income in the form of fees or interest on securities received as
collateral or the investment of any cash received as collateral. The loans are
secured by collateral (either securities, letters of credit, or cash) in an
amount not less than 100% of the market value of the loaned securities during
the period of the loan. The market value of the loaned securities is determined
at the close of each business day and any additional required collateral is
delivered to the Fund on the next business day. If the borrower defaults on its
obligation to return the securities loaned because of insolvency or other
reasons, the Fund could experience delays and cost in recovering the securities
loaned or in gaining access to the collateral. The Fund continues to receive the
economic benefit of interest or dividends paid on the securities loaned in the
form of a substitute payment received from the borrower and recognizes the gain
or loss in the fair value of the securities loaned that may occur during the
term of the loan. The Fund has the right under the lending agreement to recover
the securities from the borrower on demand. As of December 31, 2007, the Fund
had on loan securities valued at $3,290,065. Collateral of $3,331,648 was
received for the loans, all of which was received in cash and subsequently
invested in approved instruments.


NOTES TO FINANCIAL STATEMENTS  Continued
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
10. RECENT ACCOUNTING PRONOUNCEMENT

In September 2006, Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 157, FAIR VALUE
MEASUREMENTS. This standard establishes a single authoritative definition of
fair value, sets out a framework for measuring fair value and expands
disclosures about fair value measurements. SFAS No. 157 applies to fair value
measurements already required or permitted by existing standards. SFAS No. 157
is effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. As of December
31, 2007, the Manager does not believe the adoption of SFAS No. 157 will
materially impact the financial statement amounts; however, additional
disclosures may be required about the inputs used to develop the measurements
and the effect of certain of the measurements on changes in net assets for the
period.

- --------------------------------------------------------------------------------
11. FUND REORGANIZATION

On November 30, 2007, the Board of Directors of Government Securites Portfolio
(the "Portfolio"), a series of Panorama Series Fund, Inc., determined that it is
in the best interest of the Portfolio's shareholders that the Portfolio
reorganize with and into the Fund. The Board of Directors of the Portfolio
unanimously approved an Agreement and Plan of Reorganization to be entered into
between the Portfolio and the Fund, whereby the Fund will acquire all of the
assets of the Portfolio in exchange for newly-issued shares of the Fund (the
"Reorganization"). If the Reorganization takes place, Portfolio shareholders
will receive Non-Service shares of the Fund.

      The Reorganization is conditioned upon, among other things, approval by
the Portfolio's shareholders. The anticipated date for the shareholder meeting
is on or about April 25, 2008 and, if approved by shareholders, the
Reorganization would take place shortly thereafter.




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF GOVERNMENT SECURITIES PORTFOLIO:

We have audited the accompanying statement of assets and liabilities of
Government Securities Portfolio (the "Portfolio"), a series of Panorama Series
Fund, Inc., including the statement of investments, as of December 31, 2007, 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 each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Portfolio's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.

     We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
The Portfolio is not required to have, nor were we engaged to perform, an audit
of its internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Portfolio's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. Our procedures
included confirmation of securities owned as of December 31, 2007, by
correspondence with the custodian and brokers; where replies were not received
from brokers, we performed other auditing procedures. 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 the
Portfolio as of December 31, 2007, 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 each of the five years in
the period then ended, in conformity with accounting principles generally
accepted in the United States of America.

DELOITTE & TOUCHE LLP
/S/DELOITTE & TOUCHE LLP

Denver, Colorado
February 13, 2008


STATEMENT OF INVESTMENTS  December 31, 2007
- --------------------------------------------------------------------------------

                                                         PRINCIPAL
                                                            AMOUNT        VALUE
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--4.8%
- --------------------------------------------------------------------------------
Ace Securities Corp. Home Equity
Loan Trust 2005-HE7, Asset-
Backed Pass-Through Certificates,
Series 2005-HE7, Cl. A2B, 5.045%,
11/25/35 1                                               $  29,381   $   29,263
- --------------------------------------------------------------------------------
Argent Securities Trust 2004-W8,
Asset-Backed Pass-Through
Certificates, Series 2004-W8, Cl. A2,
5.345%, 5/25/34 1                                           61,343       57,790
- --------------------------------------------------------------------------------
Argent Securities Trust 2006-M3,
Asset-Backed Pass-Through
Certificates, Series 2006-M3, Cl. A2B,
4.965%, 9/25/36 1                                           30,000       28,974
- --------------------------------------------------------------------------------
Argent Securities Trust 2006-W5,
Asset-Backed Pass-Through
Certificates, Series 2006-W5, Cl. A2B,
4.965%, 5/26/36 1                                           50,000       48,713
- --------------------------------------------------------------------------------
Centex Home Equity Loan Trust
2006-A, Asset-Backed Certificates,
Series 2006-A, Cl. AV2, 4.965%,
5/16/36 1                                                   60,000       58,964
- --------------------------------------------------------------------------------
CWABS Asset-Backed Certificates Trust
2005-16, Asset-Backed Certificates, Series 2005-16, Cl. 2AF2,
5.382%, 5/25/36 1                                           30,000       28,915
- --------------------------------------------------------------------------------
CWABS Asset-Backed Certificates Trust 2005-17, Asset-Backed Certificates:
Series 2005-17, Cl. 1AF1,
5.096%, 5/25/36 1                                            6,437        6,427
Series 2005-17, Cl. 1AF2, 5.363%,
5/25/36 1                                                   20,000       19,847
- --------------------------------------------------------------------------------
CWABS Asset-Backed Certificates Trust
2006-25, Asset-Backed Certificates, Series 2006-25, Cl. 2A2,
4.985%, 12/25/29 1                                          40,000       37,440
- --------------------------------------------------------------------------------
First Franklin Mortgage Loan Trust
2005-FF10, Mtg. Pass-Through
Certificates, Series 2005-FF10, Cl. A3,
5.075%, 11/25/35 1                                          78,373       77,878
- --------------------------------------------------------------------------------
First Franklin Mortgage Loan Trust
2006-FF10, Mtg. Pass-Through
Certificates, Series 2006-FF10, Cl. A3,
4.955%, 7/25/36 1                                           50,000       47,682
- --------------------------------------------------------------------------------
First Franklin Mortgage Loan Trust
2006-FF5, Mtg. Pass-Through
Certificates, Series 2006-FF5, Cl. 2A1,
4.915%, 5/15/36 1                                           11,188       11,068
- --------------------------------------------------------------------------------
First Franklin Mortgage Loan Trust
2006-FF9, Mtg. Pass-Through
Certificates, Series 2006-FF9, Cl. 2A2,
4.975%, 7/7/36 1                                            30,000       28,637

                                                         PRINCIPAL
                                                            AMOUNT        VALUE
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
- --------------------------------------------------------------------------------
Household Home Equity Loan Trust,
Home Equity Loan Pass-Through
Certificates:
Series 2005-3, Cl. A1,
5%, 1/20/35 1                                            $  26,062   $   25,469
Series 2006-4, Cl. A2V, 5.059%, 3/20/36 1                   25,000       23,556
- --------------------------------------------------------------------------------
Lehman XS Trust, Mtg. Pass-Through
Certificates:
Series 2005-10, Cl. 2A3B, 5.55%, 1/25/36                    28,729       28,781
Series 2005-2, Cl. 2A1B, 5.18%, 8/25/35 1                   21,300       21,366
Series 2005-4, Cl. 2A1B, 5.17%, 10/25/35                    16,334       16,359
- --------------------------------------------------------------------------------
Mastr Asset-Backed Securities Trust
2006-WMC3, Mtg. Pass-Through
Certificates, Series 2006-WMC3, Cl. A3,
4.965%, 8/25/36 1                                           70,000       65,426
- --------------------------------------------------------------------------------
Popular ABS Mortgage Pass-Through
Trust 2005-6, Mtg. Pass-Through
Certificates, Series 2005-6, Cl. A3,
5.68%, 1/25/36 1                                            30,000       29,744
- --------------------------------------------------------------------------------
RAMP Series 2006-RS4 Trust, Mtg.
Asset-Backed Pass-Through
Certificates, Series 2006-RS4, Cl. A1,
4.945%, 7/25/36 1                                           10,963       10,767
- --------------------------------------------------------------------------------
RASC Series 2006-KS7 Trust, Home
Equity Mtg. Asset-Backed Pass-
Through Certificates, Series 2006-KS7,
Cl. A2, 4.965%, 9/25/36 1                                   60,000       58,690
- --------------------------------------------------------------------------------
Structured Asset Investment Loan
Trust, Mtg. Pass-Through Certificates,
Series 2006-2, Cl. A1, 4.925%, 4/25/36 1                     7,350        7,301
- --------------------------------------------------------------------------------
Wells Fargo Home Equity Asset-Backed
Securities 2006-2 Trust, Home Equity
Asset-Backed Certificates,
Series 2006-2, Cl. A2, 4.965%, 7/25/36 1                    50,000       48,730
                                                                     -----------
Total Asset-Backed Securities
(Cost $842,987)                                                         817,787

- --------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS--89.2%
- --------------------------------------------------------------------------------
GOVERNMENT AGENCY--75.4%
- --------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED--73.4%
Fannie Mae Trust 2004-W9, Pass-
Through Certificates, Trust 2004-W9,
Cl. 2A2, 7%, 2/25/44                                        73,023       77,471
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.:
4.50%, 5/15/19                                             117,824      115,880
5%, 8/15/33-12/15/34                                       207,104      202,413
6%, 10/15/22-3/15/33                                       221,652      226,158
6.50%, 4/15/18-12/15/30                                    212,561      220,362
7%, 8/15/16-10/15/31                                       187,590      196,114
10.50%, 11/14/20                                             5,779        6,698



STATEMENT OF INVESTMENTS  Continued
- --------------------------------------------------------------------------------

                                                         PRINCIPAL
                                                            AMOUNT        VALUE
- --------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal Home Loan Mortgage Corp.,
CMO Gtd. Multiclass Mtg.
Participation Certificates:
Series 2042, Cl. N, 6.50%, 3/15/28                      $   38,464   $   39,788
Series 2046, Cl. G, 6.50%, 4/15/28                         115,481      120,692
Series 2736, Cl. DB, 3.30%, 11/15/26                       132,472      130,193
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
Gtd. Real Estate Mtg. Investment
Conduit Multiclass Pass-Through
Certificates:
Series 1674, Cl. Z, 6.75%, 2/15/24                         100,937      106,687
Series 2003-11, Cl. FA, 5.865%, 9/25/32 1                    4,667        4,713
Series 2006-11, Cl. PS, 6.728%, 3/25/36 1                   26,902       29,860
Series 2034, Cl. Z, 6.50%, 2/15/28                          13,594       14,137
Series 2053, Cl. Z, 6.50%, 4/15/28                          17,593       18,379
Series 2055, Cl. ZM, 6.50%, 5/15/28                         23,508       24,307
Series 2080, Cl. Z, 6.50%, 8/15/28                          15,972       16,663
Series 2220, Cl. PD, 8%, 3/15/30                             5,495        5,884
Series 2326, Cl. ZP, 6.50%, 6/15/31                         13,868       14,523
Series 2435, Cl. EQ, 6%, 5/15/31                            57,208       58,047
Series 2470, Cl. LF, 6.028%, 2/15/32 1                      19,903       20,272
Series 2526, Cl. FE, 5.428%, 6/15/29 1                      14,388       14,353
Series 2641, Cl. CE, 3.50%, 9/15/25                         28,660       28,286
Series 2676, Cl. KY, 5%, 9/15/23                           113,000      109,913
Series 2727, Cl. UA, 3.50%, 10/15/22                        13,732       13,624
Series 2750, Cl. XG, 5%, 2/1/34                            130,000      121,703
Series 2777, Cl. PJ, 4%, 5/15/24                            13,445       13,366
Series 2890, Cl. PE, 5%, 11/1/34                           130,000      123,117
Series 2936, Cl. PE, 5%, 2/1/35                             69,000       65,011
Series 2939, Cl. PE, 5%, 2/15/35                           247,000      233,103
Series 3025, Cl. SJ, 6.316%, 8/15/35 1                       7,833        8,913
Series 3035, Cl. DM, 5.50%, 11/15/25                        91,127       91,789
Series 3138, Cl. PA, 5.50%, 2/15/27                         82,885       83,875
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
Interest-Only Stripped Mtg.-Backed
Security:
Series 192, Cl. IO, 8.183%, 2/1/28 2                         6,981        1,694
Series 200, Cl. IO, 7.26%, 1/1/29 2                          8,315        1,932
Series 2003-26, Cl. DI, 9.526%, 4/25/33 2                   44,900        9,361
Series 205, Cl. IO, 2.827%, 9/1/29 2                        43,496       10,244
Series 2074, Cl. S, 3.027%, 7/17/28 2                        8,765          979
Series 2079, Cl. S, 2.871%, 7/17/28 2                       14,315        1,698
Series 216, Cl. IO, 9.04%, 2/1/31 2                         15,195        3,682
Series 224, Cl. IO, 5.645%, 3/1/33 2                        44,062       10,343
Series 243, Cl. 6, 15.199%, 12/15/32 2                      25,167        5,309
Series 2526, Cl. SE, (0.972)%, 6/15/29 2                    23,698        1,596
Series 2802, Cl. AS, 5.232%, 4/15/33 2                      41,904        2,829
Series 2819, Cl. S, (5.728)%, 6/15/34 2                    191,207       18,751
Series 2920, Cl. S, (4.806)%, 1/15/35 2                    124,777        8,873
Series 3000, Cl. SE, 11.89%, 7/15/25 2                     152,930        8,203
Series 3004, Cl. SB, 33.208%, 7/15/35 2                    218,249       13,522
Series 3110, Cl. SL, 24.357%, 2/15/26 2                     21,922        1,120

                                                         PRINCIPAL
                                                            AMOUNT        VALUE
- --------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal Home Loan Mortgage Corp.,
Principal-Only Stripped Mtg.-Backed
Security, Series 192, Cl. PO,
7.631%, 2/1/28 3                                        $    6,981   $    5,521
- --------------------------------------------------------------------------------
Federal National Mortgage Assn.:
4.50%, 5/25/18-8/25/20                                     708,499      697,293
5%, 12/25/17-8/25/34                                     1,933,183    1,918,199
5.296%, 10/1/36                                            601,651      606,046
5.50%, 12/25/32-11/1/34                                  2,230,639    2,233,857
5.50%, 8/25/33 4                                           368,132      368,462
6%, 7/25/24-10/25/33                                       698,664      712,762
6%, 1/1/22 5                                               623,000      637,504
6.50%, 2/25/09-11/25/31                                    556,760      577,694
7%, 11/25/13-4/25/34                                       406,716      428,073
8.50%, 7/25/32                                               1,228        1,323
- --------------------------------------------------------------------------------
Federal National Mortgage Assn.,
Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates:
Trust 1999-54, Cl. LH, 6.50%, 11/25/29                      34,949       36,729
Trust 2001-44, Cl. QC, 6%, 9/25/16                          71,915       74,422
Trust 2001-50, Cl. NE, 6%, 8/25/30                             233          233
Trust 2001-51, Cl. OD, 6.50%, 10/25/31                      62,530       65,077
Trust 2001-70, Cl. LR, 6%, 9/25/30                           5,279        5,296
Trust 2002-12, Cl. PG, 6%, 3/25/17                          33,495       34,661
Trust 2002-9, Cl. PC, 6%, 3/25/17                           56,659       58,632
Trust 2003-130, Cl. CS, 4.37%, 12/25/33 1                   15,940       15,073
Trust 2003-23, Cl. EQ, 5.50%, 4/25/23                      137,000      137,252
Trust 2003-84, Cl. AJ, 3%, 4/25/13                          29,791       29,542
Trust 2003-84, Cl. PW, 3%, 6/25/22                          20,862       20,728
Trust 2004-101, Cl. BG, 5%, 1/25/20                         67,000       67,223
Trust 2005-100, Cl. BQ, 5.50%, 11/25/25                     40,000       40,184
Trust 2005-117, Cl. LA, 5.50%, 12/25/27                    190,140      191,703
Trust 2005-59, Cl. NQ, 4.713%, 5/25/35 1                    29,155       29,158
Trust 2006-110, Cl. PW, 5.50%, 5/25/28                     238,316      241,163
Trust 2006-46, Cl. SW, 6.362%, 6/25/36 1                    16,137       17,707
Trust 2006-50, Cl. KS, 6.362%, 6/25/36 1                    88,745       94,462
Trust 2006-50, Cl. SA, 6.362%, 6/25/36 1                    23,204       24,732
Trust 2006-50, Cl. SK, 6.362%, 6/25/36 1                    15,571       16,564
- --------------------------------------------------------------------------------
Federal National Mortgage Assn.,
Interest-Only Stripped Mtg.-Backed
Security:
Trust 2001-61, Cl. SH, 11.44%, 11/18/31 2                   74,605        6,978
Trust 2001-63, Cl. SD, 4.86%, 12/18/31 2                    21,936        2,942
Trust 2001-68, Cl. SC, 3.745%, 11/25/31 2                   15,122        1,568
Trust 2001-81, Cl. S, 3.721%, 1/25/32 2                     15,590        1,679
Trust 2002-28, Cl. SA, 3.632%, 4/25/32 2                    11,780        1,472
Trust 2002-38, Cl. IO, (0.995)%, 4/25/32 2                  25,614        2,693
Trust 2002-39, Cl. SD, (0.495)%, 3/18/32 2                  16,937        2,599
Trust 2002-48, Cl. S, 3.808%, 7/25/32 2                     19,928        2,146
Trust 2002-52, Cl. SL, 3.81%, 9/25/32 2                     12,176        1,328
Trust 2002-53, Cl. SK, (0.04)%, 4/25/32 2                   59,012        6,259
Trust 2002-56, Cl. SN, 4.913%, 7/25/32 2                    27,171        2,921
Trust 2002-77, Cl. IS, 2.733%, 12/18/32 2                   43,639        7,323
Trust 2002-77, Cl. SH, 5.015%, 12/18/32 2                   19,217        1,895
Trust 2002-9, Cl. MS, 3.652%, 3/25/32 2                     22,687        2,452
Trust 2003-118, Cl. S, 9.431%, 12/25/33 2                  126,915       21,814
Trust 2003-4, Cl. S, 12.143%, 2/25/33 2                     41,045        5,006



                                                         PRINCIPAL
                                                            AMOUNT        VALUE
- --------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal Home Loan Mortgage Corp.,
Interest-Only Stripped Mtg.-Backed
Security: Continued
Trust 2005-40, Cl. SA, 0.805%, 5/25/35 2                 $  68,851  $     4,738
Trust 2005-40, Cl. SB, 4.444%, 5/25/35 2                    92,913        4,633
Trust 2005-71, Cl. SA, 8.892%, 8/25/25 2                    96,531        7,510
Trust 2005-87, Cl. SE, 12.322%, 10/25/35 2                 201,766       14,076
Trust 2005-87, Cl. SG, 14.11%, 10/25/35 2                  204,320       19,145
Trust 2006-33, Cl. SP, 15.444%, 5/25/36 2                  411,896       38,044
Trust 221, Cl. 2, 15.448%, 5/1/23 2                         15,090        3,478
Trust 240, Cl. 2, 21.985%, 9/1/23 2                         24,516        5,637
Trust 294, Cl. 2, 6.878%, 2/1/28 2                         162,315       37,554
Trust 301, Cl. 2, 5.716%, 4/1/29 2                          20,566        4,622
Trust 319, Cl. 2, 11.045%, 2/1/32 2                         14,021        3,257
Trust 321, Cl. 2, 10.965%, 4/1/32 2                         61,690       14,299
Trust 324, Cl. 2, 5.743%, 7/1/32 2                          77,293       17,720
Trust 331, Cl. 5, 15.576%, 2/1/33 2                         63,679       13,961
Trust 334, Cl. 12, 11.497%, 2/1/33 2                       110,293       24,080
Trust 334, Cl. 5, 13.838%, 5/1/33 2                         74,780       17,369
Trust 339, Cl. 7, 10.182%, 7/1/33 2                        123,116       29,094
Trust 342, Cl. 2, 6.635%, 9/1/33 2                          31,929        7,476
Trust 344, Cl. 2, 4.464%, 12/1/33 2                        179,457       41,148
Trust 345, Cl. 9, 8.864%, 1/1/34 2                          59,363       14,124
Trust 362, Cl. 12, 9.377%, 8/1/35 2                         79,440       18,388
Trust 362, Cl. 13, 9.359%, 8/1/35 2                         44,046       10,115
Trust 364, Cl. 15, 12.358%, 9/1/35 2                        77,879       17,826
- --------------------------------------------------------------------------------
Federal National Mortgage Assn.,
Principal-Only Stripped Mtg.-Backed
Security, Trust 324, Cl. 1, 6.135%, 7/1/32 3                19,301       15,821
                                                                    ------------
                                                                      12,498,895

- --------------------------------------------------------------------------------
GNMA/GUARANTEED--2.0%
Government National Mortgage
Assn., 7%, 10/29/23-3/15/26                                 84,206       89,432
- --------------------------------------------------------------------------------
Government National Mortgage Assn.,
Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates:
Series 1999-32, Cl. ZB, 8%, 9/16/29                        134,938      144,693
Series 2000-7, Cl. Z, 8%, 1/16/30                           62,198       66,644
- --------------------------------------------------------------------------------
Government National Mortgage Assn.,
Interest-Only Stripped Mtg.-Backed
Security:
Series 1998-19, Cl. SB, 5.816%, 7/16/28 2                   28,927        3,125
Series 2001-21, Cl. SB, 8.438%, 1/16/27 2                  142,996       14,391
Series 2006-47, Cl. SA, 31.192%, 8/16/36 2                 243,581       19,208
                                                                    ------------
                                                                         337,493

- --------------------------------------------------------------------------------
NON-AGENCY--13.8%
- --------------------------------------------------------------------------------
COMMERCIAL--11.2%
Banc of America Commercial
Mortgage, Inc., Commercial Mtg.
Pass-Through Certificates, Series
2005-3, Cl. A2, 4.501%, 7/10/43                             80,000       79,065

                                                         PRINCIPAL
                                                            AMOUNT        VALUE
- --------------------------------------------------------------------------------
COMMERCIAL Continued
Banc of America Funding Corp., CMO
Pass-Through Certificates, Series
2004-2, Cl. 2A1, 6.50%, 7/20/32                         $   50,296  $    51,153
- --------------------------------------------------------------------------------
Banc of America Mortgage Securities,
Inc., CMO Pass-Through Certificates,
Series 2004-8, Cl. 5A1, 6.50%, 5/25/32                      39,396       40,152
- --------------------------------------------------------------------------------
ChaseFlex Trust 2006-2, Multiclass
Mtg. Pass-Through Certificates, Series
2006-2, Cl. A1B, 4.965%, 8/25/08 1                          19,038       19,021
- --------------------------------------------------------------------------------
Citigroup/Deutsche Bank 2007-CD4
Commercial Mortgage Trust,
Commercial Mtg. Pass-Through
Certificates, Series 2007-CD4, Cl. A2B,
5.205%, 12/11/49                                            80,000       79,987
- --------------------------------------------------------------------------------
CitiMortgage Alternative Loan Trust
Series 2006-A5, Real Estate Mtg.
Investment Conduit Pass-Through
Certificates, Series 2006-A5, Cl. 1A13,
5.315%, 10/25/36 1                                          65,205       63,756
- --------------------------------------------------------------------------------
Countrywide Alternative Loan Trust,
Mtg. Pass-Through Certificates, Series
2007-8CB, Cl. A1, 5.50%, 5/25/37                           162,712      159,970
- --------------------------------------------------------------------------------
Deutsche Alt-A Securities Mortgage
Loan Trust, Mtg. Pass-Through
Certificates:
Series 2006-AB2, Cl. A7, 5.961%, 6/25/36                    34,563       34,557
Series 2006-AB4, Cl. A1A, 6.005%, 10/25/36                  74,958       74,954
Series 2006-AB3, Cl. A7, 6.36%, 7/1/36                      11,546       11,555
- --------------------------------------------------------------------------------
First Horizon Alternative Mortgage
Securities Trust 2007-FA2, Mtg. Pass-
Through Certificates, Series 2007-FA2,
Cl. 1A1, 5.50%, 4/25/37                                     34,545       34,126
- --------------------------------------------------------------------------------
First Union National Bank/Lehman
Brothers/Bank of America Commercial
Mtg. Trust, Pass-Through Certificates,
Series 1998-C2, Cl. A2, 6.56%, 11/18/35                     22,467       22,452
- --------------------------------------------------------------------------------
GE Capital Commercial Mortgage
Corp., Commercial Mtg. Obligations:
Series 2004-C3, Cl. A2, 4.433%, 7/10/39                     50,000       49,826
Series 2005-C3, Cl. A2, 4.853%, 7/10/45                     50,000       49,828
- --------------------------------------------------------------------------------
Greenwich Capital Commercial
Funding Corp., Commercial Mtg. Pass-
Through Certificates:
Series 2005-GG3, Cl. A2, 4.305%, 8/10/42                    50,000       49,403
Series 2005-GG5, Cl. A2, 5.117%,
4/10/37                                                     50,000       50,119
Series 2007-GG9, Cl. A2, 5.381%,
3/10/39                                                     60,000       60,371
- --------------------------------------------------------------------------------
JPMorgan Chase Commercial Mortgage
Securities Corp., Commercial
Mtg. Pass-Through Certificates:
Series 2005-LDP2, Cl. A2, 4.575%, 7/15/42                   20,000       19,795
Series 2005-LDP4, Cl. A2, 4.79%, 10/15/42                   70,000       69,575
Series 2007-LDPX, Cl. A2S, 5.305%, 1/15/49                  70,000       70,102
Series 2007-LD12, Cl. A2, 5.827%, 2/15/51                   40,000       40,853



STATEMENT OF INVESTMENTS  Continued
- --------------------------------------------------------------------------------

                                                         PRINCIPAL
                                                            AMOUNT        VALUE
- --------------------------------------------------------------------------------
COMMERCIAL Continued
JPMorgan Chase Commercial
Mortgage Securities Trust 2007-LDP11,
Commercial Mtg. Pass-Through
Certificates, Series 2007-LD11, Cl.
A2, 5.992%, 6/15/49 1                                    $  80,000   $   81,854
- --------------------------------------------------------------------------------
LB-UBS Commercial Mortgage Trust,
Commercial Mtg. Pass-Through
Certificates:
Series 2005-C5, Cl. A2, 4.885%, 9/15/30                     50,000       49,925
Series 2007-C1, Cl. A2, 5.318%, 1/15/12                     70,000       70,339
- --------------------------------------------------------------------------------
Mastr Alternative Loan Trust, CMO
Pass-Through Certificates:
Series 2004-9, Cl. A3, 4.70%, 8/25/34 1                        949          946
Series 2004-6, Cl. 10A1, 6%, 7/25/34                        54,339       53,817
- --------------------------------------------------------------------------------
Mastr Asset Securitization Trust
2006-3, Mtg. Pass-Through
Certificates, Series 2006-3, Cl. 2A1,
5.239%, 10/25/36 1                                         167,490      165,022
- --------------------------------------------------------------------------------
Nomura Asset Securities Corp.,
Commercial Mtg. Pass-Through
Certificates, Series 1998-D6, Cl. A1B,
6.59%, 3/15/30                                               9,230        9,252
- --------------------------------------------------------------------------------
Prudential Mortgage Capital Co. II
LLC, Commercial Mtg. Pass-Through
Certificates, Series PRU-HTG 2000-C1,
Cl. A2, 7.306%, 10/6/15                                     96,000      101,805
- --------------------------------------------------------------------------------
RALI Series 2007-QS6 Trust, Mtg.
Asset-Backed Pass-Through
Certificates, Series 2007-QS6, Cl.
A114, 5.75%, 4/25/37                                        54,310       53,685
- --------------------------------------------------------------------------------
Residential Asset Securitization Trust
2006-A9CB, CMO Pass-Through
Certificates, Series 2006-A9CB, Cl. A5,
6%, 9/25/36                                                 74,758       74,621
- --------------------------------------------------------------------------------
Wachovia Bank Commercial
Mortgage Trust 2005-C17,
Commercial Mtg. Pass-Through
Certificates, Series 2005-C17, Cl. A2,
4.782%, 3/15/42                                             90,000       89,614
- --------------------------------------------------------------------------------
Wachovia Bank Commercial
Mortgage Trust 2006-C29,
Commercial Mtg. Pass-Through
Certificates, Series 2006-C29, Cl. A2,
5.272%, 11/15/48                                            15,000       15,035
                                                                     -----------
                                                                       1,896,535

- --------------------------------------------------------------------------------
MULTIFAMILY--0.0%
WaMu, Mtg. Pass-Through
Certificates, Series 2005-AR8, Cl.
2AB1, 5.115%, 7/25/45 1                                      1,479        1,476

                                                        PRINCIPAL
                                                           AMOUNT         VALUE
- --------------------------------------------------------------------------------
OTHER--0.5%
JPMorgan Mortgage Trust, CMO
Pass-Through Certificates, Series
2005-S2, Cl. 3A1, 6.756%, 2/25/32 1                     $  87,626   $    89,089
- --------------------------------------------------------------------------------
RESIDENTIAL--2.1%
Countrywide Alternative Loan Trust,
CMO, Series 2005-J1, Cl. 3A1, 6.50%,
8/25/32                                                    87,466        89,368
- --------------------------------------------------------------------------------
RALI Series 2006-QS13 Trust:
Mtg. Asset-Backed Pass-Through
Certificates, Series 2006-QS13, Cl. 1A5,
6%, 9/25/36                                               123,471       123,815
Mtg. Asset-Backed Pass-Through Certificates, Series 2006-QS13, Cl. 1A8,
6%, 9/25/36                                                54,719        54,699
- --------------------------------------------------------------------------------
RALI Series 2006-QS5 Trust, Mtg.
Asset-Backed Pass-Through Certificates,
Series 2006-QS5, Cl. 2A2, 6%, 4/25/08                      43,220        43,172
- --------------------------------------------------------------------------------
RALI Series 2007-QS6 Trust, Mtg.
Asset-Backed Pass-Through Certificates,
Series 2007-QS6, Cl. A28, 5.75%, 4/25/37                   45,258        44,846
                                                                   -------------
                                                                         355,900
                                                                   -------------
Total Mortgage-Backed Obligations
(Cost $14,917,744)                                                   15,179,388

- --------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--2.6%
- --------------------------------------------------------------------------------
Resolution Funding Corp. Bonds,
Residual Funding STRIPS, 5.218%, 1/15/21 6,7
(Cost $421,950)                                           825,000       448,774

- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--1.6%
- --------------------------------------------------------------------------------
Undivided interest of 0.63% in joint repurchase agreement (Principal
Amount/Value $42,898,000, with a maturity value of $42,908,605) with UBS Warburg
LLC, 4.45%, dated 12/31/07, to be repurchased at $270,067 on 1/2/08,
collateralized by Federal Home Loan Mortgage Corp., 4.50%, 5/1/36, with a
value of $43,867,966 (Cost $270,000)                      270,000       270,000

- --------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $16,452,681)                                           98.2%   16,715,949
- --------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES                               1.8       307,971
                                                         -----------------------
NET ASSETS                                                  100.0%  $17,023,920
                                                         =======================

INDUSTRY CLASSIFICATIONS ARE UNAUDITED.



FOOTNOTES TO STATEMENT OF INVESTMENTS

1. Represents the current interest rate for a variable or increasing rate
security.

2. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline. Most other fixed income securities
increase in price when interest rates decline. The principal amount of the
underlying pool represents the notional amount on which current interest is
calculated. The price of these securities is typically more sensitive to changes
in prepayment rates than traditional mortgage-backed securities (for example,
GNMA pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future cash
flows. These securities amount to $576,229 or 3.38% of the Portfolio's net
assets as of December 31, 2007.

3. Principal-Only Strips represent the right to receive the monthly principal
payments on an underlying pool of mortgage loans. The value of these securities
generally increases as interest rates decline and prepayment rates rise. The
price of these securities is typically more volatile than that of coupon-bearing
bonds of the same maturity. Interest rates disclosed represent current yields
based upon the current cost basis and estimated timing of future cash flows.
These securities amount to $21,342 or 0.13% of the Portfolio's net assets as of
December 31, 2007.

4. All or a portion of the security is held in collateralized accounts to cover
initial margin requirements on open futures contracts. The aggregate market
value of such securities is $327,001. See Note 5 of accompanying Notes.

5. When-issued security or delayed delivery to be delivered and settled after
December 31, 2007. See Note 1 of accompanying Notes.

6. Zero coupon bond reflects effective yield on the date of purchase.

7. Partial or fully-loaned security. See Note 7 of accompanying Notes.

- --------------------------------------------------------------------------------
FUTURES CONTRACTS AS OF DECEMBER 31, 2007 ARE AS FOLLOWS:
- --------------------------------------------------------------------------------


                                                                                                    UNREALIZED
                                                           NUMBER OF   EXPIRATION                 APPRECIATION
CONTRACT DESCRIPTION                            BUY/SELL   CONTRACTS         DATE       VALUE   (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------------------

U.S. Long Bonds                                      Buy          20      3/19/08  $2,327,500   $      (12,885)
U.S. Treasury Nts., 2 yr.                           Sell           7      3/31/08   1,471,750              866
U.S. Treasury Nts., 5 yr.                           Sell           6      3/31/08     661,688           (2,515)
U.S. Treasury Nts., 10 yr.                           Buy          10      3/19/08   1,133,906              712
                                                                                                ---------------
                                                                                                $      (13,822)
                                                                                                ===============


- --------------------------------------------------------------------------------
CREDIT DEFAULT SWAPS AS OF DECEMBER 31, 2007 ARE AS FOLLOWS:
- --------------------------------------------------------------------------------


                                                    SELL  NOTIONAL  RECEIVE
                                                  CREDIT    AMOUNT    FIXED  TERMINATION    PREMIUM
COUNTERPARTY               REFERENCE EQUITY   PROTECTION    (000S)     RATE         DATE   RECEIVED      VALUE
- ---------------------------------------------------------------------------------------------------------------

Deutsche Bank AG:
                      ABX.HE.AAA.06-2 Index         Sell       $40     0.11%     5/25/46   $  2,000  $  (5,018)
                      ABX.HE.AAA.06-2 Index         Sell        40     0.11      5/25/46      1,999     (5,018)
- ---------------------------------------------------------------------------------------------------------------
Goldman Sachs
Capital
Markets LP            ABX.HE.AAA.06-2 Index         Sell        20     0.11      5/25/46      2,212     (2,700)
                                                                                           --------------------
                                                                                           $  6,211  $ (12,736)
                                                                                           ====================



STATEMENT OF INVESTMENTS  Continued
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
TOTAL RETURN SWAPS AS OF DECEMBER 31, 2007 ARE AS FOLLOWS:
- --------------------------------------------------------------------------------


                            NOTIONAL                                                                   TERMINATION
SWAP COUNTERPARTY             AMOUNT         PAID BY THE PORTFOLIO        RECEIVED BY THE PORTFOLIO           DATE       VALUE
- ------------------------------------------------------------------------------------------------------------------------------

                                         If negative, the absolute    If positive, the Total Return
                                               value of the Lehman           of the Lehman Brothers
                                            Brothers U.S. CMBS AAA         U.S. CMBS AAA 8.5+ Index
Deutsche Bank AG            $260,000                    8.5+ Index             plus 60 basis points         2/1/08   $   4,762
- ------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Special
Financing,Inc.:
                                         If negative, the absolute    If positive, the Total Return
                                               value of the Lehman           of the Lehman Brothers
                                            Brothers U.S. CMBS AAA         U.S. CMBS AAA 8.5+ Index
                              50,000                    8.5+ Index            minus 25 basis points         5/1/08         874

                                         If negative, the absolute    If positive, the Total Return
                                               value of the Lehman           of the Lehman Brothers
                                            Brothers U.S. CMBS AAA         U.S. CMBS AAA 8.5+ Index
                             100,000                    8.5+ Index            minus 20 basis points         5/1/08       1,756

                                         If negative, the absolute    If positive, the Total Return
                                               value of the Lehman           of the Lehman Brothers
                                            Brothers U.S. CMBS AAA         U.S. CMBS AAA 8.5+ Index
                              95,000                    8.5+ Index             plus 60 basis points         2/1/08       1,720

                                         If negative, the absolute    If positive, the Total Return
                                               value of the Lehman           of the Lehman Brothers
                                            Brothers U.S. CMBS AAA         U.S. CMBS AAA 8.5+ Index
                             260,000                    8.5+ Index             plus 55 basis points         5/1/08       4,698

                                         If negative, the absolute    If positive, the Total Return
                                               value of the Lehman           of the Lehman Brothers
                                            Brothers U.S. CMBS AAA         U.S. CMBS AAA 8.5+ Index
                             120,000                    8.5+ Index            minus 25 basis points         3/1/08       2,096

                                         If negative, the absolute    If positive, the Total Return
                                               value of the Lehman           of the Lehman Brothers
                                            Brothers U.S. CMBS AAA         U.S. CMBS AAA 8.5+ Index
                             344,000                    8.5+ Index             plus 45 basis points         5/1/08       6,190
- ------------------------------------------------------------------------------------------------------------------------------
UBS AG:
                                         If negative, the absolute    If positive, the Total Return
                                               value of the Lehman           of the Lehman Brothers
                                            Brothers U.S. CMBS AAA         U.S. CMBS AAA 8.5+ Index
                             100,000                    8.5+ Index            minus 20 basis points         5/1/08       1,768

                                         If negative, the absolute    If positive, the Total Return
                                               value of the Lehman           of the Lehman Brothers
                                            Brothers U.S. CMBS AAA         U.S. CMBS AAA 8.5+ Index
                             119,000                    8.5+ Index             plus 60 basis points         2/1/08       2,186
                                                                                                                     ---------
                                                                                                                     $  26,050
                                                                                                                     =========


Index abbreviation is as follows:

CMBS     Commercial Mortgage Backed Securities

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.



STATEMENT OF ASSETS AND LIABILITIES  December 31, 2007
- --------------------------------------------------------------------------------


- ------------------------------------------------------------------------------------------------------

ASSETS
- ------------------------------------------------------------------------------------------------------
Investments, at value (cost $16,452,681)--see accompanying statement of investments   $    16,715,949
- ------------------------------------------------------------------------------------------------------
Cash                                                                                           25,884
- ------------------------------------------------------------------------------------------------------
Swaps, at value                                                                                26,050
- ------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold on a when-issued or delayed delivery basis                                 1,383,195
Interest and principal paydowns                                                                77,614
Futures margins                                                                                 9,577
Shares of capital stock sold                                                                      198
Other                                                                                           4,894
                                                                                      ----------------
Total assets                                                                               18,243,361

- ------------------------------------------------------------------------------------------------------
LIABILITIES
- ------------------------------------------------------------------------------------------------------
Swaps, at value (premiums received $6,211)                                                     12,736
- ------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased on a when-issued or delayed delivery basis                            1,166,545
Shareholder communications                                                                      6,625
Directors' compensation                                                                         3,561
Transfer and shareholder servicing agent fees                                                     865
Other                                                                                          29,109
                                                                                      ----------------
Total liabilities                                                                           1,219,441

- ------------------------------------------------------------------------------------------------------
NET ASSETS                                                                            $    17,023,920
                                                                                      ================

- ------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- ------------------------------------------------------------------------------------------------------
Par value of shares of capital stock                                                  $        15,742
- ------------------------------------------------------------------------------------------------------
Additional paid-in capital                                                                 16,239,637
- ------------------------------------------------------------------------------------------------------
Accumulated net investment income                                                             696,067
- ------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments                                                 (196,497)
- ------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments                                                    268,971
                                                                                      ----------------
NET ASSETS--applicable to 15,741,980 shares of capital stock outstanding              $    17,023,920
                                                                                      ================

- ------------------------------------------------------------------------------------------------------
NET ASSET VALUE, REDEMPTION PRICE PER SHARE AND OFFERING PRICE PER SHARE              $          1.08


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.



STATEMENT OF OPERATIONS  For the Year Ended December 31, 2007
- --------------------------------------------------------------------------------


- ------------------------------------------------------------------------------------------------------

INVESTMENT INCOME
- ------------------------------------------------------------------------------------------------------
Interest                                                                              $       913,808
- ------------------------------------------------------------------------------------------------------
Portfolio lending fees                                                                          2,261
                                                                                      ----------------
Total investment income                                                                       916,069

- ------------------------------------------------------------------------------------------------------
EXPENSES
- ------------------------------------------------------------------------------------------------------
Management fees                                                                                88,051
- ------------------------------------------------------------------------------------------------------
Legal, auditing and other professional fees                                                    25,276
- ------------------------------------------------------------------------------------------------------
Accounting service fees                                                                        15,000
- ------------------------------------------------------------------------------------------------------
Shareholder communications                                                                     12,963
- ------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees                                                  10,016
- ------------------------------------------------------------------------------------------------------
Directors' compensation                                                                         6,416
- ------------------------------------------------------------------------------------------------------
Custodian fees and expenses                                                                     1,956
- ------------------------------------------------------------------------------------------------------
Administration service fees                                                                     1,500
- ------------------------------------------------------------------------------------------------------
Other                                                                                          10,045
                                                                                      ----------------
Total expenses                                                                                171,223

- ------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME                                                                         744,846

- ------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- ------------------------------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments                                                                                       699
Closing and expiration of futures contracts                                                   (26,018)
Swap contracts                                                                                (63,125)
                                                                                      ----------------
Net realized loss                                                                             (88,444)
- ------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation on:
Investments                                                                                   343,061
Futures contracts                                                                              20,960
Swap contracts                                                                                 19,525
                                                                                      ----------------
Net change in unrealized appreciation                                                         383,546

- ------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS                                  $     1,039,948
                                                                                      ================


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------


YEAR ENDED DECEMBER 31,                                                                          2007           2006
- ---------------------------------------------------------------------------------------------------------------------

OPERATIONS
- ---------------------------------------------------------------------------------------------------------------------
Net investment income                                                                 $       744,846   $    686,029
- ---------------------------------------------------------------------------------------------------------------------
Net realized loss                                                                             (88,444)       (52,842)
- ---------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation)                                          383,546         (6,321)
                                                                                      -------------------------------
Net increase in net assets resulting from operations                                        1,039,948        626,866

- ---------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------------------
Dividends from net investment income                                                         (725,257)      (610,210)

- ---------------------------------------------------------------------------------------------------------------------
CAPITAL STOCK TRANSACTIONS
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from capital stock transactions                26,277       (571,528)

- ---------------------------------------------------------------------------------------------------------------------
NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------
Total increase (decrease)                                                                     340,968       (554,872)
- ---------------------------------------------------------------------------------------------------------------------
Beginning of period                                                                        16,682,952     17,237,824
                                                                                      -------------------------------
End of period (including accumulated net investment income of
 $696,067 and $718,442, respectively)                                                 $    17,023,920   $ 16,682,952
                                                                                      ===============================


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------


YEAR ENDED DECEMBER 31,                                      2007            2006            2005            2004           2003
- -----------------------------------------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period                   $     1.06      $     1.06      $     1.12      $     1.14      $    1.16
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                         .05 1           .04 1           .03 1           .03 1          .04
Net realized and unrealized gain (loss)                       .02              --            (.01)            .01           (.01)
                                                       ----------------------------------------------------------------------------
Total from investment operations                              .07             .04             .02             .04            .03
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                         (.05)           (.04)           (.04)           (.04)          (.05)
Distributions from net realized gain                           --              --            (.04)           (.02)            --
                                                       ----------------------------------------------------------------------------
Total dividends and/or distributions to shareholders         (.05)           (.04)           (.08)           (.06)          (.05)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                         $     1.08      $     1.06      $     1.06      $     1.12      $    1.14
                                                       ============================================================================

- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                           6.48%           3.74%           1.48%           4.17%          2.58%
- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)               $   17,024      $   16,683      $   17,238      $   18,103      $  19,537
- -----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                      $   16,773      $   16,764      $   17,696      $   18,464      $  20,743
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                        4.44%           4.09%           3.18%           2.83%          3.43%
Total expenses                                               1.02%           0.88% 4         0.88% 4         0.85% 4        0.84% 4
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                        84% 5           82% 5           84% 5           99% 5          43%


1. Per share amounts calculated based on the average shares outstanding during
the period.

2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Total returns are not annualized for
periods less than one full year. Total return information does not reflect
expenses that apply at the separate account level or to related insurance
products. Inclusion of these charges would reduce the total return figures for
all periods shown. Returns do not reflect the deduction of taxes that a
shareholder would pay on portfolio distributions or the redemption of portfolio
shares.

3. Annualized for periods less than one full year.

4. Reduction to custodian expenses less than 0.005%.

5. The portfolio turnover rate excludes purchase and sale transactions of To Be
Announced (TBA) mortgage-related securities as follows:

                                     PURCHASE TRANSACTIONS SALE TRANSACTIONS
   -------------------------------------------------------------------------
   Year Ended December 31, 2007               $ 29,502,958      $ 30,957,841
   Year Ended December 31, 2006               $ 44,327,351      $ 48,590,182
   Year Ended December 31, 2005               $ 93,525,147      $ 93,213,905
   Year Ended December 31, 2004               $121,615,587      $127,136,434

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES

Government Securities Portfolio (the "Portfolio") is a series of Panorama Series
Fund, Inc., which is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company. The Portfolio's
investment objective is to seek a high level of current income with a high
degree of safety of principal, by investing primarily (at least 80% of its net
assets, plus borrowings for investment purposes, under normal market conditions)
in U.S. government securities and U.S. government-related securities. The
Portfolio's investment adviser is OppenheimerFunds, Inc. (the "Manager"). Shares
of the Portfolio are sold only to separate accounts of life insurance companies.
A majority of such shares are held by separate accounts of Massachusetts Mutual
Life Insurance Co., an affiliate of the Manager.

      The following is a summary of significant accounting policies consistently
followed by the Portfolio.

- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Portfolio calculates the net asset value of its shares
as of the close of the New York Stock Exchange (the "Exchange"), normally 4:00
P.M. Eastern time, on each day the Exchange is open for trading. Securities may
be valued primarily using dealer-supplied valuations or a portfolio pricing
service authorized by the Board of Directors. Securities traded on a registered
U.S. securities exchange are valued based on the last sale price of the security
traded on that exchange prior to the time when the Portfolio's assets are
valued. Securities whose principal exchange is NASDAQ(R) are valued based on the
closing price reported by NASDAQ prior to the time when the Portfolio'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 traded on
foreign exchanges are valued based on the last sale price on the principal
exchange on which the security is traded, as identified by the portfolio pricing
service, prior to the time when the Portfolio's assets are valued. In the
absence of a sale, the security is valued at the official closing price on the
principal exchange. Corporate, government and municipal debt instruments having
a remaining maturity in excess of sixty days and all mortgage-backed securities,
collateralized mortgage obligations and other asset-backed securities will be
valued at the mean between the "bid" and "asked" prices. Securities for which
market quotations are not readily available are valued at their fair value.
Securities whose values have been materially affected by what the Manager
identifies as a significant event occurring before the Portfolio's assets are
valued but after the close of their respective exchanges will be fair valued.
Fair value is determined in good faith using consistently applied procedures
under the supervision of the Board of Directors. Shares of a registered
investment company that are not traded on an exchange are valued at the acquired
investment company's net asset value per share. "Money market-type" debt
instruments with remaining maturities of sixty days or less are valued at cost
adjusted by the amortization of discount or premium to maturity (amortized
cost), which approximates market value.

- --------------------------------------------------------------------------------
SECURITIES ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS. The Portfolio may
purchase securities on a "when-issued" basis, and may purchase or sell
securities on a "delayed delivery" basis. "When-issued" or "delayed delivery"
refers to securities whose terms and indenture are available and for which a
market exists, but which are not available for immediate delivery. Delivery and
payment for securities that have been purchased by the Portfolio on a
when-issued basis normally takes place within six months and possibly as long as
two years or more after the trade date. During this period, such securities do
not earn interest, are subject to market fluctuation and may increase or
decrease in value prior to their delivery. The purchase of securities on a
when-issued basis may increase the volatility of the Portfolio's net asset value
to the extent the Portfolio executes such transactions while remaining
substantially fully invested. When the Portfolio engages in when-issued or
delayed delivery transactions, it relies on the buyer or seller, as the case may
be, to complete the transaction. Their failure to do so may cause the Portfolio
to lose the opportunity to obtain or dispose of the security at a price and
yield it considers advantageous. The Portfolio maintains internally designated
assets with a market value equal to or greater than the amount of its purchase
commitments. The Portfolio may also sell securities that it purchased on a
when-issued basis or forward commitment prior to settlement of the original
purchase.


NOTES TO FINANCIAL STATEMENTS  Continued
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued

As of December 31, 2007, the Portfolio had purchased securities issued on a
when-issued or delayed delivery basis and sold securities issued on a delayed
delivery basis as follows:

                                          WHEN-ISSUED OR DELAYED
                                     DELIVERY BASIS TRANSACTIONS
              --------------------------------------------------
              Purchased securities                    $1,166,545
              Sold securities                          1,383,195

- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Portfolio, along with other affiliated
funds advised by the Manager, may transfer uninvested cash balances into joint
trading accounts on a daily basis. These balances are invested in one or more
repurchase agreements. Securities pledged as collateral for repurchase
agreements are held by a custodian bank until the agreements mature. Each
agreement requires that the market value of the collateral be sufficient to
cover payments of interest and principal. If the seller of the agreement
defaults and the value of the collateral declines, or if the seller enters an
insolvency proceeding, realization of the value of the collateral by the
Portfolio may be delayed or limited.

- --------------------------------------------------------------------------------
INVESTMENTS WITH OFF-BALANCE SHEET RISK. The Portfolio enters into financial
instrument transactions (such as swaps, futures, options and other derivatives)
that may have off-balance sheet market risk. Off-balance sheet market risk
exists when the maximum potential loss on a particular financial instrument is
greater than the value of such financial instrument, as reflected in the
Portfolio's Statement of Assets and Liabilities.

- --------------------------------------------------------------------------------
FEDERAL TAXES. The Portfolio 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. Therefore, no federal income or excise tax provision is
required. The Portfolio files income tax returns in U.S. federal and applicable
state jurisdictions. The statute of limitations on the Portfolio's tax return
filings remain open for the three preceding fiscal reporting period ends.

The tax components of capital shown in the table below represent distribution
requirements the Portfolio must satisfy under the income tax regulations, losses
the Portfolio may be able to offset against income and gains realized in future
years and unrealized appreciation or depreciation of securities and other
investments for federal income tax purposes.

                                                             NET UNREALIZED
                                                               APPRECIATION
                                                           BASED ON COST OF
                                                             SECURITIES AND
   UNDISTRIBUTED    UNDISTRIBUTED          ACCUMULATED    OTHER INVESTMENTS
   NET INVESTMENT       LONG-TERM                 LOSS   FOR FEDERAL INCOME
   INCOME                    GAIN   CARRYFORWARD 1,2,3         TAX PURPOSES
   ------------------------------------------------------------------------
   $719,151                   $--             $210,319             $263,268

1. As of December 31, 2007, the Portfolio had $210,319 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, 2007,
details of the capital loss carryforwards were as follows:

            EXPIRING
            ----------------------------
            2013            $     15,147
            2014                 169,393
            2015                  25,779
                            ------------
            Total           $    210,319
                            ============

2. During the fiscal year ended December 31, 2007, the Portfolio did not utilize
any capital loss carryforward.

3. During the fiscal year ended December 31, 2006, the Portfolio did not utilize
any capital loss carryforward.

Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Portfolio.

Accordingly, the following amounts have been reclassified for December 31, 2007.
Net assets of the Portfolio were unaffected by the reclassifications.

                             REDUCTION TO
      REDUCTION TO        ACCUMULATED NET
      ACCUMULATED NET       REALIZED LOSS
      INVESTMENT INCOME    ON INVESTMENTS
      -----------------------------------
      $41,964                     $41,964

The tax character of distributions paid during the years ended December 31, 2007
and December 31, 2006 was as follows:

                                        YEAR ENDED          YEAR ENDED
                                 DECEMBER 31, 2007   DECEMBER 31, 2006
      ----------------------------------------------------------------
      Distributions paid from:
      Ordinary income                     $725,257            $610,210

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, 2007 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          $ 16,452,681
      Federal tax cost of other investments      1,341,282
                                              ------------
      Total federal tax cost                  $ 17,793,963
                                              ============
      Gross unrealized appreciation           $    334,286
      Gross unrealized depreciation                (71,018)
                                              ------------
      Net unrealized appreciation             $    263,268
                                              ============

- --------------------------------------------------------------------------------
DIRECTORS' COMPENSATION. The Board of Directors has adopted a compensation
deferral plan for independent directors that enables directors to elect to defer
receipt of all or a portion of the annual compensation they are entitled to
receive from the Portfolio. For purposes of determining the amount owed to the
Director under the plan, deferred amounts are treated as though equal dollar
amounts had been invested in shares of the Portfolio or in other Oppenheimer
funds selected by the Director. The Portfolio purchases shares of the funds
selected for deferral by the Director in amounts equal to his or her deemed
investment, resulting in a Portfolio asset equal to the deferred compensation
liability. Such assets are included as a component of "Other" within the asset
section of the Statement of Assets and Liabilities. Deferral of directors' fees
under the plan will not affect the net assets of the Portfolio, and will not
materially affect the Portfolio's assets, liabilities or net investment income
per share. Amounts will be deferred until distributed in accordance to the
compensation deferral plan.

- --------------------------------------------------------------------------------
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. generally accepted accounting principles, are recorded on
the ex-dividend date. Income and capital gain distributions, if any, are
declared and paid annually or at other times as deemed necessary by the Manager.

- --------------------------------------------------------------------------------
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 is recognized on an accrual basis. Market discount and
premium, which are included in interest income on the Statement of Operations,
are amortized or accreted daily.


NOTES TO FINANCIAL STATEMENTS  Continued
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued

CUSTODIAN FEES. "Custodian fees and expenses" in the Statement of Operations may
include interest expense incurred by the Portfolio 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 Portfolio pays
interest to its custodian on such cash overdrafts, to the extent they are not
offset by positive cash balances maintained by the Portfolio, at a rate equal to
the Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line
item, if applicable, represents earnings on cash balances maintained by the
Portfolio during the period. Such interest expense and other custodian fees may
be paid with these earnings.

- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.

- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Portfolio's organizational documents provide current and
former directors and officers with a limited indemnification against liabilities
arising in connection with the performance of their duties to the Portfolio. In
the normal course of business, the Portfolio may also enter into contracts that
provide general indemnifications. The Portfolio's maximum exposure under these
arrangements is unknown as this would be dependent on future claims that may be
made against the Portfolio. The risk of material loss from such claims is
considered remote.

- --------------------------------------------------------------------------------
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 increases and
decreases in net assets from operations during the reporting period. Actual
results could differ from those estimates.

- --------------------------------------------------------------------------------
2. SHARES OF CAPITAL STOCK

The Portfolio has authorized 160 million shares of $0.001 par value capital
stock. Transactions in shares of capital stock were as follows:



                                            YEAR ENDED DECEMBER 31, 2007   YEAR ENDED DECEMBER 31, 2006
                                              SHARES              AMOUNT       SHARES            AMOUNT
- --------------------------------------------------------------------------------------------------------

Sold                                         259,704         $   271,890       70,753       $    74,254
Dividends and/or distributions reinvested    704,133             725,257      598,245           610,210
Redeemed                                    (923,017)           (970,870)  (1,207,744)       (1,255,992)
                                            ------------------------------------------------------------
Net increase (decrease)                       40,820         $    26,277     (538,746)      $  (571,528)
                                            ============================================================


- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES

The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations and investments in Oppenheimer Institutional Money
Market Fund, for the year ended December 31, 2007, were as follows:

                                                      PURCHASES         SALES
- -----------------------------------------------------------------------------
Investment securities                               $ 9,643,766   $ 6,271,523
U.S. government and government agency obligations     3,721,020     5,530,645
To Be Announced (TBA) mortgage-related securities    29,502,958    30,957,841

- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES

MANAGEMENT FEES. Under the investment advisory agreement, the Portfolio pays the
Manager a management fee based on the daily net assets of the Portfolio at an
annual rate as shown in the following table:

            FEE SCHEDULE
            ----------------------------------
            Up to $300 million          0.525%
            Next $100 million           0.500
            Over $400 million           0.450



- --------------------------------------------------------------------------------
ACCOUNTING SERVICE FEES. The Manager acts as the accounting agent for the
Portfolio at an annual fee of $15,000, plus out-of-pocket costs and expenses
reasonably incurred.

- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Portfolio pays the Manager a fee of $1,500 per
year for preparing and filing the Portfolio's tax returns.

- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services ("OFS"), a division of the
Manager, acts as the transfer and shareholder servicing agent for the Portfolio.
The Portfolio pays OFS a per account fee. For the year ended December 31, 2007,
the Portfolio paid $10,000 to OFS for services to the Portfolio.

     Additionally, funds offered in variable annuity separate accounts are
subject to minimum fees of $10,000 for assets of $10 million or more. The
Portfolio is subject to the minimum fee in the event that the per account fee
does not equal or exceed the applicable minimum fee.

- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit
transfer and shareholder servicing agent fees to 0.35% of average annual net
assets of the Portfolio. This undertaking may be amended or withdrawn at any
time.

- --------------------------------------------------------------------------------
5. FUTURES CONTRACTS

A futures contract is a commitment to buy or sell a specific amount of a
financial instrument at a negotiated price on a stipulated future date. The
Portfolio may buy and sell futures contracts that relate to broadly based
securities indices (financial futures), debt securities (interest rate futures)
and various commodities (commodity index futures). The Portfolio may also buy or
write put or call options on these futures contracts.

     Futures contracts traded on a commodities or futures exchange will be
valued at the final settlement price or official closing price on the principal
exchange as reported by such principal exchange at its trading session ending
at, or most recently prior to, the time when the Portfolio's assets are valued.

     Upon entering into a futures contract, the Portfolio is required to deposit
either cash or securities (initial margin) in an amount equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Portfolio each day. The variation margin payments are
equal to the daily changes in the contract value and are recorded as unrealized
gains and losses.

     Futures contracts are reported on a schedule following the Statement of
Investments. Securities held in collateralized accounts to cover initial margin
requirements on open futures contracts are noted in the Statement of
Investments. Cash held by the broker to cover initial margin requirements on
open futures contracts and the receivable and/or payable for the daily mark to
market for the variation margin are noted in the Statement of Assets and
Liabilities. The net change in unrealized appreciation and depreciation is
reported in the Statement of Operations. Realized gains (losses) are reported in
the Statement of Operations at the closing or expiration of futures contracts.

     Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market where the Portfolio is unable
to liquidate the contract or enter into an offsetting position and, if used for
hedging purposes, the risk that the price of the contract will correlate
imperfectly with the prices of the Portfolio's securities.

- --------------------------------------------------------------------------------
6. SWAP CONTRACTS

The Portfolio may enter into swap contract agreements with a counterparty to
exchange a series of cash flows based on either specified reference rates, or
the occurrence of a credit event, over a specified period. Such contracts may
include interest rate, equity, debt, index, total return, credit and currency
swaps.

     Swaps are marked to market daily using primarily quotations from pricing
services, counterparties and brokers. Swap contracts are reported on a schedule
following the Statement of Investments. The value of the contracts is separately
disclosed on the Statement of Assets and Liabilities. The unrealized
appreciation (depreciation) related to the change in the valuation of the
notional amount of the swap is combined with the accrued interest due to (owed
by) the Portfolio at termination or settlement. The net change in this amount
during the period is included on the Statement


NOTES TO FINANCIAL STATEMENTS  Continued
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
6. SWAP CONTRACTS Continued

of Operations. The Portfolio also records any periodic payments received from
(paid to) the counterparty, including at termination, under such contracts as
realized gain (loss) on the Statement of Operations.

     Risks of entering into swap contracts include credit, market and liquidity
risk. Credit risk arises from the possibility that the counterparty will
default. If the counterparty defaults, the Portfolio's loss will consist of the
net amount of contractual payments that the Portfolio has not yet received.
Market risk is the risk that the value of the contract will depreciate due to
unfavorable changes in the reference asset. If there is an illiquid market for
the agreement, the Portfolio may be unable to close the contract prior to
contract termination.

- --------------------------------------------------------------------------------
CREDIT DEFAULT SWAP CONTRACTS. A credit default swap is a bilateral contract
that enables an investor to buy or sell protection against a defined-issuer
credit event. The Portfolio may enter into credit default swaps on a single
security, or a basket of securities.

     In a credit default swap contract, the purchaser of the contract will pay a
periodic interest fee, similar to an insurance premium, on the notional amount
of the swap contract to the counterparty (the seller of the contract). If there
is a credit event (for example, bankruptcy or a failure to timely pay interest
or principal), the purchaser will exercise the contract and will receive a
payment from the seller of the contract equal to the notional value of the
credit default swap contract less the value of the underlying security. In the
event that the credit default swap is exercised due to a credit event, the
difference between the value of the underlying security and the notional amount
is recorded as realized gain (loss) and is included on the Statement of
Operations.

     Risks of credit default swaps include, but are not limited to, the cost of
paying for credit protection if there are no credit events.

- --------------------------------------------------------------------------------
TOTAL RETURN SWAP CONTRACTS. A total return swap is an agreement between
counterparties to exchange a set of future cash flows on the notional amount of
the contract. One cash flow is typically based on a reference interest rate or
index and the other on the total return of a reference asset such as a security,
a basket of securities, or an index. The total return includes appreciation or
depreciation on the reference asset, plus any interest or dividend payments.

- --------------------------------------------------------------------------------
7. SECURITIES LENDING

The Portfolio lends portfolio securities from time to time in order to earn
additional income in the form of fees or interest on securities received as
collateral or the investment of any cash received as collateral. The loans are
secured by collateral (either securities, letters of credit, or cash) in an
amount not less than 100% of the market value of the loaned securities during
the period of the loan. The market value of the loaned securities is determined
at the close of each business day and any additional required collateral is
delivered to the Portfolio on the next business day. If the borrower defaults on
its obligation to return the securities loaned because of insolvency or other
reasons, the Portfolio could experience delays and cost in recovering the
securities loaned or in gaining access to the collateral. The Portfolio
continues to receive the economic benefit of interest or dividends paid on the
securities loaned in the form of a substitute payment received from the borrower
and recognizes the gain or loss in the fair value of the securities loaned that
may occur during the term of the loan. The Portfolio has the right under the
lending agreement to recover the securities from the borrower on demand. As of
December 31, 2007, the Portfolio had on loan securities valued at $447,663.
Collateral was received in the form of securities.

- --------------------------------------------------------------------------------
8. RECENT ACCOUNTING PRONOUNCEMENT

In September 2006, Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 157, FAIR VALUE
MEASUREMENTS. This standard establishes a single authoritative definition of
fair value, sets out a framework for measuring fair value and expands
disclosures about fair value measurements. SFAS No. 157 applies to fair value
measurements already required or permitted by existing standards. SFAS No. 157
is effective for financial statements issued for fiscal years beginning
after November 15, 2007, and interim periods within those fiscal years. As of
December 31, 2007, the Manager does not believe the adoption of SFAS No. 157
will materially impact the financial statement amounts; however, additional
disclosures may be required about the inputs used to develop the measurements
and the effect of certain of the measurements on changes in net assets for the
period.

- --------------------------------------------------------------------------------
9. PORTFOLIO REORGANIZATION

On November 30, 2007, the Board of Directors of the Portfolio determined that it
is in the best interest of the Portfolio's shareholders the Portfolio reorganize
with and into Oppenheimer Core Bond Fund/VA ("Core Bond Fund/VA"). The Board
unanimously approved an Agreement and Plan of Reorganization to be entered into
between the Portfolio and Core Bond Fund/VA, whereby Core Bond Fund/VA will
acquire all of the assets of the Portfolio in exchange for newly-issued shares
of Core Bond Fund/VA (the "Reorganization"). If the Reorganization takes place,
Portfolio shareholders will receive Non-Service shares of Core Bond Fund/VA.
Following the Reorganization, the Portfolio will liquidate and dissolve.

     The Reorganization is conditioned upon, among other things, approval by the
Portfolio's shareholders. The anticipated date for the shareholder meeting is on
or about April 25, 2008 and, if approved by shareholders, the Reorganization
would take place shortly thereafter.




                       OPPENHEIMER VARIABLE ACCOUNT FUNDS

                                   FORM N-14

                                     PART C

                               OTHER INFORMATION

Item 15. - Indemnification

Reference is made to the provisions of Article Seventh of Registrant's Amended
and Restated Declaration of Trust ("Declaration of Trust") filed as Exhibit
16(1) to this Registration Statement, and incorporated herein by reference.
In accordance with Section 17(h) and 17(i) of the Investment Company Act of
1940, as amended, no provision of the Declaration of Trust protects any person
against any liability to the Registrant or its shareholders to which such
person would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the conduct
of his or her office.

Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended (the "1933 Act") may be permitted to trustees, officers and
controlling persons of Registrant pursuant to the foregoing provisions or
otherwise, Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the 1933 Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities (other than the payment
by Registrant of expenses incurred or paid by a trustee, officer or
controlling person of Registrant in the successful defense of any action, suit
or proceeding) is asserted by such trustee, officer or controlling person,
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.


Item 16. - Exhibits

(1)  Seventeenth Amended and Restated Declaration of Trust dated 4/30/06:
Previously filed with Registrant's Post-Effective Amendment No. 48 (04/28/06),
and incorporated herein by reference.

(2)  Amended By-Laws dated 10/24/00: Previously filed with Registrant's
Post-Effective Amendment No. 36 (4/17/01), and incorporated herein by
reference.

(3)  Not Applicable.

(4)  Agreement and Plan of Reorganization dated November 30, 2007: Previously
filed with Registrant's Initial N-14 Registration Statement (1/18/08), and
incorporated by reference.

(5)      (i)     Oppenheimer Core Bond Fund/VA Non-Service Class Specimen Share
Certificate: Previously filed with Registrant's Post-Effective Amendment No.
45 (04/28/05), and incorporated herein by reference.

         (ii)     Oppenheimer Core Bond Fund/VA Service Class Specimen Share
Certificate: Previously filed with Registrant's Post-Effective Amendment No.
45 (04/28/05), and incorporated herein by reference.

(6)      (i)      Amendment No. 1 to the Amended and Restated investment
Advisory Agreement for Oppenheimer Core Bond Fund/VA dated 4/10/07:  Previously
filed with Registrant's Post-Effective Amendment No. 52 (4/24/07), and
incorporated herein by reference.

(7)      (i)      N/A

         (ii)     Form of Participation Agreement:  Previously filed with
Registrant's Post-Effective Amendment No. 52 (4/24/07), and incorporated herein
by reference.

(8)               Form of Oppenheimer Funds Compensation Deferral Plan, As
Amended and Restated Effective January 1, 2008: Previously filed with
Post-Effective Amendment No. 18 to the Registration Statement of Oppenheimer
International Bond Fund (Reg. No. 33-58383), (12/20/07), and incorporated
herein by reference

(9)      Global Custody Agreement dated August 16, 2002: Previously filed with
Post-Effective Amendment No. 51 to the Registration Statement of Oppenheimer
Capital Appreciation Fund (Reg. No. 2-69719), (10/23/06), and incorporated
herein by reference.

(10)     (i)      Amended and Restated Distribution and Service Plan and
Agreement for Service shares of Oppenheimer Core Bond Fund/VA dated 10/28/05:
Previously filed with Registrant's Post-Effective Amendment No. 48 (04/28/06),
and incorporated herein by reference.

(11)     Form of Opinion and Consent of Counsel:  Previously filed with
Registrant's Initial N-14 Registration Statement, (1/18/08), and incorporated
herein by reference.

(12)     Form of Tax Opinion: Form of Opinion and Consent of Counsel:
Previously filed with Registrant's Initial N-14 Registration Statement,
(1/18/08), and incorporated herein by reference.

(13)     Not applicable.

(14)     Independent Registered Public Accounting Firm's Consent: Filed
         herewith.

(15)     Not applicable.

(16)     Powers of Attorney for all Trustees/Directors and Principal
Officers:  Filed herewith.

(17)     Proxy Card: Filed herewith.

Item 17. - Undertakings

(1)      The undersigned  registrant  agrees that prior to any public reoffering
of the  securities  registered  through the use of a prospectus  which is a part
of this  registration  statement  by any  person or party who is deemed to be an
underwriter  within the  meaning of Rule  145(c) of the  Securities  Act [17 CFR
230.145c],  the reoffering  prospectus will contain the  information  called for
by the applicable  registration  form for the  reofferings by persons who may be
deemed  underwriters,  in  addition to the  information  called for by the other
items of the applicable form.

(2)      The undersigned  registrant  agrees that every prospectus that is filed
under  paragraph  (1)  above  will be  filed  as a part of an  amendment  to the
registration  statement  and will not be used until the  amendment is effective,
and that, in determining any liability  under the 1933 Act, each  post-effective
amendment shall be deemed to be a new  registration  statement or the securities
offered  therein,  and the  offering  of the  securities  at that time  shall be
deemed to be the initial bona fide offering of them.


                                   SIGNATURES


As required by the Securities Act of 1933, as amended, this registration
statement has been signed on behalf of the registrant, in the City of New York
and State of New York, on the 7th day of March, 2008.


                                                     Oppenheimer Variable
                                                     Account Funds

                                                     By:  /s/ John V. Murphy*

                                                     --------------------------
                                                     John V. Murphy, President,
                                                     Principal Executive
                                                     Officer & Trustee


Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities on
the dates indicated:

Signatures                      Title                           Date

William L. Armstrong*           Chairman of the                 March 7, 2008
William L. Armstrong            Board of Trustees


John V. Murphy*                 President, Principal            March 7, 2008
John V. Murphy                  Executive Officer and Trustee


Brian W. Wixted*                Treasurer, Principal            March 7, 2008
Brian W. Wixted                 Financial & Accounting Officer

George C. Bowen*                Trustee                         March 7, 2008
George C. Bowen


Edward L. Cameron*              Trustee                         March 7, 2008
Edward L. Cameron


Jon S. Fossel*                  Trustee                         March 7, 2008
Jon S. Fossel


Sam Freedman*                   Trustee                         March 7, 2008
Sam Freedman


Beverly L. Hamilton*            Trustee                         March 7, 2008
Beverly L. Hamilton


Robert J. Malone*               Trustee                         March 7, 2008
Robert J. Malone


F. William Marshall, Jr.*       Trustee                         March 7, 2008
F. William Marshall, Jr.


*By:     /s/ Mitchell J. Lindauer
         Mitchell J. Lindauer, Attorney-in-Fact


                       OPPENHEIMER VARIABLE ACCOUNT FUNDS


                                 EXHIBIT INDEX


Exhibit No.                         Description

(14)                                Independent Registered Public Accounting
                                    Firm's Consent

(16)                                Powers of Attorney for all Trustees and
                                    Principal Officers

(17)                                Proxy Card

EX-99.J

            CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the use in this Pre-Effective Amendment No. 1 to Registration
Statement No. 333-148748 on Form N-14/A of our report dated February 13, 2008,
relating to the financial statements and financial highlights of Government
Securities Portfolio, a series of Panorama Series Fund, Inc., appearing in the
Prospectus, which is part of this Registration Statement.

We also consent to the use in this Pre-Effective Amendment No. 1 to
Registration Statement No. 333-148748 on Form N-14/A of our report dated
February 13, 2008, relating to the financial statements and financial
highlights of Oppenheimer Core Bond Fund/VA, a series of Oppenheimer Variable
Account Funds, appearing in the Prospectus, which is part of this Registration
Statement.

    /s/ DELOITTE & TOUCHE LLP
    DELOITTE & TOUCHE LLP


Denver, Colorado
March 6, 2008

EX-99.16

                               POWER OF ATTORNEY


         I do hereby constitute and appoint, or any one Phillip S. Gillespie,
Mitchell J. Lindauer and Kathleen T. Ives of them, my true and lawful attorneys
to execute registration statements to be filed with the Securities and Exchange
Commission ("SEC") under the Securities Act of 1933, as amended (the "1933 Act")
and/or the Investment Company Act of 1940, as amended (the "1940 Act") and to do
any and all acts and things and to execute any and all instruments for me and in
my name in the capacities indicated below, which said attorneys, or any of them,
may deem necessary or advisable to enable Oppenheimer Variable Account Funds
(the "Trust") to comply with the 1933 Act and the 1940 Act, and any rules,
regulations and requirements of the SEC, in connection with such registration
statements, including specifically, but without limitation, power and authority
to sign for me in the capacity indicated below, the Trust's registration
statement on Form N-14 relating to the portfolio combination listed below and
any amendments (including pre-effective or post-effective amendments) thereto;
and I do hereby ratify and confirm all that the said attorneys, or any of them,
shall do or cause to be done by virtue of this power of attorney.

Portfolio Combination:
         Panorama Government Securities Portfolio into Oppenheimer Core Bond
         Fund/VA

IN WITNESS WHEREOF, each of the undersigned has hereunto set his or her hand
as of this 26th day of February, 2008.

/s/ William L. Armstrong                /s/ Richard F. Grabish
__________________________              _________________________
William L. Armstrong                    Richard F. Grabish


/s/ George C. Bowen                     /s/ Beverly L. Hamilton
__________________________              _________________________
George C. Bowen                         Beverly L. Hamilton


/s/ Edward Cameron                      /s/ Robert J. Malone
__________________________              _________________________
Edward Cameron                          Robert J. Malone


/s/ Jon S. Fossel                       /s/ F. William Marshall, Jr.
__________________________              _________________________
Jon S. Fossel                           F. William Marshall, Jr.


/s/ Sam Freedman                        /s/ John V. Murphy
__________________________              _________________________
Sam Freedman                            John V. Murphy


           /s/ Kathleen Ives
Witness:  _____________________
           Kathleen Ives
           Assistant Secretary

EX-99.17

                                                                      PROXY CARD

                           PANORAMA SERIES FUND, INC.

                        Government Securities Portfolio

    PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 25, 2008
The  undersigned,  revoking prior proxies,  hereby appoints Brian Wixted,  Brian
Szilagyi,  and  Kathleen  Ives,  and  each of  them,  as  attorneys-in-fact  and
proxies of the  undersigned,  with full power of  substitution,  to vote  shares
held in the name of the  undersigned  on the record date at the Special  Meeting
of  Shareholders  of  Government  Securities  Portfolio,  a series  of  Panorama
Series  Fund,  Inc.  ("Panorama  Fund"),  to be held at 6803 South  Tucson  Way,
Centennial,  Colorado,  80112, on April 25, 2008, at 1:00 P.M. Mountain Time, or
at any  adjournment  thereof,  upon the  proposal  described  in the  Notice  of
Meeting and accompanying  Combined  Prospectus and Proxy  Statement,  which have
been received by the undersigned.

This proxy is  solicited on behalf of the  Panorama  Fund's Board of  Directors,
and  the  proposal  (set  forth  below)  has  been  proposed  by  the  Board  of
Directors.
When  properly  executed,  this proxy will be voted as  indicated on the reverse
side or "FOR" the proposals if no choice is  indicated.  The proxy will be voted
in  accordance  with the proxy  holders'  best  judgment as to any other matters
that may arise at the Meeting.

                          Note: Please sign this proxy exactly as your name or
[ADDRESS LINE 1]          names appear hereon.  Each joint owner should sign.
[ADDRESS LINE 2]          Trustees and other fiduciaries should indicate the
[ADDRESS LINE 3]          capacity in which they sign. If a corporation,
[ADDRESS LINE 4]          partnership or other entity, this signature should be
[ADDRESS LINE 5]          that of a duly authorized individual who should state
[ADDRESS LINE 6]          his or her title.
[ADDRESS LINE 7]          _____________________________________________________
                          Signature                             Date

                          _____________________________________________________
                          Signature      (if held jointly)      Date

                          _____________________________________________________
                          Title if a corporation, partnership or other entity


                                  FOLD HERE

Your vote is important, no matter how many shares you own.  The matter
submitted for your consideration is significant to the Panorama Fund and to you
as a shareholder. Please take the time to read the proxy statement and cast
your vote.

THIS PROXY IS SOLICITED ON BEHALF OF THE PANORAMA FUND'S BOARD OF DIRECTORS,
AND THE PROPOSAL BELOW HAS BEEN PROPOSED BY THE BOARD OF DIRECTORS.

TO VOTE, MARK ONE BOX IN BLUE OR BLACK INK.  Example: [  ]

PROPOSAL:

1.       To approve an Agreement and Plan of Reorganization between Panorama
     Fund and Oppenheimer Core Bond Fund/VA ("Core Bond Fund/VA"), a series of
     Oppenheimer Variable Account Funds, and the transactions contemplated
     thereby, including: (a) the transfer of substantially all the assets of
     Panorama Fund to Core Bond Fund/VA in exchange for Non-Service shares of
     Core Bond Fund/VA; (b) the distribution of Non-Service shares of Core
     Bond Fund/VA to shareholders of Panorama Fund in complete liquidation of
     Panorama Fund; and (c) the cancellation of the outstanding shares of
     Panorama Fund.

                    FOR            AGAINST            ABSTAIN
                    [  ]            [  ]                [  ]


"Scanner Bar Code"

TAG ID:                                                             CUSIP:

COVER

                             OppenheimerFunds, Inc.
                           Two World Financial Center
                               225 Liberty Street
                            New York, New York 10281


March 7, 2008

VIA EDGAR

Securities and Exchange Commission
Mail Stop 0-7, Filer Support
6432 General Green Way
Alexandria, Virginia 22312

         Re:       Registration Statement on Form N-14/A for Oppenheimer
                   Variable Account Funds, with respect to Oppenheimer Core
                   Bond Fund/VA ("Core Bond Fund/VA"); Proxy Materials for
                   Panorama Series Fund, Inc., with respect to Government
                   Securities Portfolio ("Panorama Fund")

To the Securities and Exchange Commission:

         Enclosed for filing with the Securities and Exchange Commission
("Commission") under the Securities Act of 1933, as amended (the "1933 Act"),
is Pre-effective Amendment No. 1 to the Registration Statement on Form N-14
(the "Registration Statement") of Oppenheimer Variable Account Funds, with
respect to its series Oppenheimer Core Bond Fund/VA.  This Pre-Effective
Amendment is being filed to (i) include the financial statements in Part B of
the Registration Statement; (ii) revise disclosure to respond to Commission
staff comments and update information to reflect the audit of the Funds'
financial statements; and (iii) include a consent of the funds' Independent
Registered Public Accounting Firm.

         In separate correspondence included in this filing, Oppenheimer
Variable Account Funds and OppenheimerFunds Distributor Inc., the distributor
of Core Bond Fund/VA's shares, are requesting that effectiveness of the
Registration Statement be accelerated to March 7, 2008.  The solicitation of
Government Securities Portfolio shareholders is expected to commence shortly
thereafter.

         In accordance with the general instructions to Form N-14, the
preliminary proxy material which forms a part of the Registration Statement is
deemed to be filed pursuant to the Securities Exchange Act of 1934, as
amended.  No filing fee is due because the Registrant previously filed a
declaration to register an indefinite number of shares pursuant to Rule 24f-2
under the Investment Company Act of 1940, as amended.  In accordance with the
instructions to Item 14(a)2 of Form N-1, pro forma financials for the
Registrant reflecting the effect of the proposed reorganization are not
included because the net asset value of Panorama Government Securities
Portfolio does not exceed ten (10) percent of the Registrant's net asset value.

         The undersigned hereby acknowledges that (i) should the Commission or
the staff, acting pursuant to delegated authority, declare the filing
effective, it does not foreclose the Commission from taking any action with
respect to the filing; (ii) the action of the Commission or the staff, acting
pursuant to delegated authority, in declaring the filing effective, does not
relieve the Registrant from its full responsibility for the adequacy and
accuracy of the disclosure in the filing; and (iii) the Registrant may not
assert this action as defense in any proceeding initiated by the Commission or
any person under the federal securities laws of the United States.

         The Staff is requested to address any comments or questions you may
have on this filing to:

                                    Taylor Edwards
                                    Vice President and Assistant Counsel
                                    OppenheimerFunds, Inc.
                                    Two World Financial Center
                                    225 Liberty Street New York, NY  10281
                                    212.323.0310
                                    tedwards@oppenheimerfunds.com


         Thank you for your assistance.

                                                   Sincerely,

                                                   /s/ Robert W. Hawkins
                                                   ---------------------
                                                   Robert W. Hawkins
                                                   Vice President and
                                                   Assistant Counsel
                                                   Tel.: 212.323.5039
                                                   Fax: 212.323.4070
                                                   bhawkins@oppenheimerfunds.com


cc:      Mr. Michael Kosoff, Securities and Exchange Commission
         Bell, Boyd & Lloyd
         Myer, Swanson, Adams & Wolf, P.C.
         Deloitte & Touche LLP
         Gloria LaFond

CORRESP

                             OppenheimerFunds, Inc.
                           Two World Financial Center
                        225 Liberty Street - 11th Floor
                            New York, New York 10281



March 7, 2008

VIA EDGAR

Securities and Exchange Commission
Mail Stop 0-7, Filer Support
6432 General Green Way
Alexandria, Virginia 22312

         Re:      Registration Statement on Form N-14 for Oppenheimer Variable
                  Account Funds; Proxy Materials for Panorama Government
                  Securities Portfolio

To the Securities and Exchange Commission:

         In connection with the registration statement on Form N-14 (the
"Registration Statement") of Oppenheimer Variable Account Funds (the
"Registrant"), with respect to Non-Service shares of Oppenheimer Core Bond
Fund/VA, filed January 18, 2008, herein is our response to the comments to the
Registration Statement provided by Mr. Michael L. Kosoff, Division of
Investment Management, Securities and Exchange Commission, delivered in a
phone call among him, and Taylor Edwards and the undersigned of
OppenheimerFunds, Inc. on February 6, 2008.

         The Registrant is filing Pre-effective Amendment No. 1 to the
Registration Statement, including the consent of the Funds' auditor. In this
filing, but as separate correspondence, Oppenheimer Variable Account Funds, on
behalf of its series Core Bond Fund/VA, and OppenheimerFunds Distributor,
Inc., Core Bond Fund/VA's principal underwriter, are requesting acceleration
of the effective date of the Registration Statement to March 7, 2008, or as
soon thereafter as practicable. We plan to start mailing the combined Proxy
Statement and Prospectus ("Proxy Statement/Prospectus") to shareholders of
Panorama Government Securities Portfolio ("Panorama Fund") on or about March
7, 2008.

         Staff comments on the Registration Statement are shown in italics,
followed by our responses, and are as follows:

General Comments

1. Assure that all exhibits required by Form N-14 are filed with the next
amendment to the Registration Statement.

All exhibits required by Form N-14 have been filed with the Registration
Statement.

2. The Table of Contents to the Proxy Statement/Prospectus filed with the
Registration Statement includes a heading, "Other Shareholder Services", that
is not included in the main body of the document. Assure that the Table of
Contents corresponds to the headings used in the document.

We have revised the Proxy Statement/Prospectus to reconcile the Table of
Contents with the headings in the document.


Fee Table

3. Explain supplementally why the total expense ratio of Core Bond Fund/VA
(before the reorganization) and the pro forma total expense ratio of Core Bond
Fund/VA (after the reorganization) are the same but the expense examples for
pre- and post-reorganization Core Bond Fund/VA differ.

We have revised the expense examples to reflect that the expenses paid by
shareholders of Core Bond Fund/VA pre-reorganization are identical to those
that would be paid by shareholders of Core Bond Fund/VA post-reorganization.

4. Disclose whether it is expected that, if the reorganization does not occur,
Panorama Fund's "Other Expenses" would continue at the level disclosed in the
Proxy Statement/Prospectus.

We have disclosed that it is expected that Panorama Fund's "Other Expenses"
would continue at approximately the level disclosed in the Proxy
Statement/Prospectus so long as Panorama Fund's net asset level remains at
current levels.

Capitalization Table

5. Explain supplementally why, for each Fund, the number of shares multiplied
by the net asset value does not equal the Fund's net assets shown in the table.

The discrepancy was inadvertent. We have corrected the Capitalization Table.

Principal Risks

6. Explicitly state that Core Bond Fund/VA has greater risk than Panorama
Fund.

We have emphasized in the first paragraph of the risk section that an
investment in Core Bond Fund/VA is subject to greater risk because Core Bond
Fund/VA may invest in lower-rated debt securities and foreign securities and
may invest without limitation in private issuer debt securities.

7. Re-locate the discussion of the risks of the Funds so that this discussion
precedes the fee tables and expense examples.

We have moved the risk disclosure as requested.

8. Include a list of the risks of each Fund before the narrative discussion of
these risks.

We have added a table listing the risks of each Fund. This table precedes the
discussion of the Funds' risks.

Information about the Reorganization

9. The third paragraph of the sub-section "How will the Reorganization be
carried out" suggests that only shareholders that vote to approve the
Reorganization will have their shares redeemed. Revise the disclosure to make
clear that, if the Reorganization is approved, all shares of Panorama Fund
will be redeemed.

We have revised this paragraph as requested.


10. In the sub-section "Who will pay the expenses of the Reorganization",
define the term "OFI".

We have replaced the term "OFI" with the defined term "Manager."

11. In the sub-section "What are the tax consequences of the Reorganization",
confirm that the disclosure of tax consequences is applicable to a
reorganization of funds that serve as investment options under variable life
and other insurance products.

We have reviewed this disclosure and believe that it applies to the proposed
reorganization of Panorama Fund with and into Core Bond Fund/VA.

Voting Information

12. At the end of the first paragraph of the sub-section "Quorum and Required
Vote", disclose that proportional voting may result in a small number of
contract owners determining the outcome of the vote.

We have added the requested disclosure.

Other

12. Update the listed telephone number for the SEC's public reference room.

The telephone number has been updated as requested

13. Where a document is incorporated by reference, provide the SEC file number
for the document in accordance with Rule 411 under the Securities Act of 1933,
as amended.

We have provided file numbers as requested.

Part C

14. Add disclosure to Item 15 to discuss the application of Section 17(h) and
(i) of the Investment Company Act of 1940, as amended.

We have added the requested disclosure.

15. Please explain why Item 16 includes references to exhibits for funds whose
securities are not being offered through the Registration Statement.

We have revised this item to delete references to exhibits that do not relate
to Core Bond Fund/VA.

16. Please include as an exhibit the agreement by which OppenheimerFunds, Inc.
will reimburse Core Bond Fund/VA for the expenses attributed to it as a result
of the Reorganization.

OppenheimerFunds, Inc., the investment manager to Core Bond Fund/VA, has
undertaken to Core Bond Fund/VA's Board of Trustees that OppenheimerFunds,
Inc. will bear the expenses attributed to Core Bond Fund/VA as a result of the
Reorganization. OppenheimerFunds, Inc. will be billed for and pay these
expenses directly. OppenheimerFunds, Inc. has not entered into a separate
written agreement with Core Bond Fund/VA for this purpose.

17. File as an exhibit to the Registration Statement the power of attorney
pursuant to which Core Bond Fund/VA's Trustees have granted authority to a
representative to sign the Registration Statement on the Trustees' behalf.

We have filed the power of attorney as an exhibit to the Registration
Statement as requested.

18. Include Tandy representations in any response you provide to Commission
staff comments to the Registration Statement.

We hereby make the requested representations, which appear below.


         The undersigned hereby acknowledges that (i) should the Commission or
the Staff, acting pursuant to delegated authority, declare the filing
effective, it does not foreclose the Commission from taking any action with
respect to the filing; (ii) the action of the Commission or the Staff, acting
pursuant to delegated authority, in declaring the filing effective, does not
relieve the Registrant from its full responsibility for the adequacy and
accuracy of the disclosure in the filing; and (iii) the Registrant may not
assert this action as defense in any proceeding initiated by the Commission or
any person under the federal securities laws of the United States.

         The Staff is requested to address any comments or questions you may
have on this filing to:

                           Taylor V. Edwards
                           Vice President & Assistant Counsel
                           OppenheimerFunds, Inc.
                           Two World Financial Center
                           225 Liberty Street New York, NY 10281
                           212.323.0310
                           tedwards@oppenheimerfunds.com

         Thank you for your assistance.

                                                          Sincerely,

                                                          /s/ Robert W. Hawkins
                                                          Robert W. Hawkins
                                                          Vice President and
                                                          Assistant Counsel
                                                          Tel.: 212.323.5039
                                                          Fax: 212.912.6384


cc:      Michael L. Kosoff, Esq., U.S. Securities and Exchange Commission
         Taylor Edwards, Esq.
         Gloria LaFond
         Allan Adams, Esq., Myers, Swanson, Adams and Wolf PC
         Paul H. Dykstra, Esq., Bell, Boyd & Lloyd LLC
         Paulita A. Pike, Esq., Bell, Boyd & Lloyd LLC

CORRESP

    Request for Acceleration of Effective Date of Registration Statement of
                       Oppenheimer Variable Account Funds
       Pursuant to Rule 461 under the Securities Act of 1933, as amended


VIA EDGAR

March 7, 2008

Securities and Exchange Commission
Mail Stop 0-7, Filer Support
6432 General Green Way
Alexandria, Virginia 22312

     Re:  Form N-14 Registration Statement of Oppenheimer Variable Account Funds
          File No. 333-148748

To the Securities and Exchange Commission:

Oppenheimer Variable Account Funds (the "Registrant"), on behalf of its series
Oppenheimer Core Bond Fund/VA, and OppenheimerFunds Distributor, Inc., as
general distributor of the Registrant's shares ("OFDI"), hereby request
acceleration of Pre-Effective Amendment No. 1 to the Registrant's Form N-14
registration statement, which was filed with the Commission on March 7, 2008
("Registration Statement").  The Registrant and OFDI request that the effective
date of the Registration Statement be accelerated to March 7, 2008 (or as soon
thereafter as practicable).  The Registrant filed the initial Form N-14
registration statement on January 18, 2008.

         The undersigned hereby acknowledge that (i) should the Commission or
the staff, acting pursuant to delegated authority, declare the filing
effective, it does not foreclose the Commission from taking any action with
respect to the filing; (ii) the action of the Commission or the staff, acting
pursuant to delegated authority, in declaring the filing effective, does not
relieve the Registrant from its full responsibility for the adequacy and
accuracy of the disclosure in the filing; and (iii) the Registrant may not
assert this action as defense in any proceeding initiated by the Commission or
any person under the federal securities laws of the United States.

                                            Oppenheimer Variable Account Funds

                                            By:      /s/ Phillip S. Gillespie
                                                     ------------------------
                                                     Phillip S. Gillespie,
                                                     Assistant Secretary


                                            OppenheimerFunds Distributor, Inc.

                                            By:      /s/ Robert G. Zack
                                                     -----------------------
                                                     Robert G. Zack, General
                                                     Counsel and Director