REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Trustees and Shareholders of Oppenheimer Variable Account Funds:

We have audited the accompanying statement of assets and liabilities of Oppenheimer Balanced Fund/VA (one of the portfolios constituting the Oppenheimer Variable Account Funds ), including the statement of investments, as of December 31, 2010, the related statement of operations for the year then ended, and the statements of changes in net assets and the financial highlights for each of the years in the two-year 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. The accompanying financial highlights of Oppenheimer Balanced Fund/VA for the years ended prior to January 1, 2009 were audited by other auditors whose report dated February 11, 2009 expressed an unqualified opinion on those financial highlights.

     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 audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2010, by correspondence with the custodian, transfer agent and brokers, or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Oppenheimer Balanced Fund/VA as of December 31, 2010, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for each of the years in the two-year period then ended, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG llp

Denver, Colorado
February 16, 2011 

STATEMENT OF INVESTMENTS December 31, 2010

	Shares		Value
Common Stocks—49.4%
Consumer Discretionary—1.9%
Media—1.9%
Jupiter Telecommunications Co. Ltd.		4,393	$	4,620,793
Consumer Staples—5.4%
Food & Staples Retailing—0.6%
CVS Caremark Corp.		44,100		1,533,357
Food Products—2.2%
Nestle SA		87,780		5,140,059
Tobacco—2.6%
Altria Group, Inc.		83,010		2,043,706
Lorillard, Inc.		50,660		4,157,160
				6,200,866
Energy—4.9%
Energy Equipment & Services—1.6%
Halliburton Co.		49,300		2,012,919
Schlumberger Ltd.		20,400		1,703,400
				3,716,319
Oil, Gas & Consumable Fuels—3.3%
BP plc, ADR		29,250		1,291,973
Chevron Corp.		56,870		5,189,388
CONSOL Energy, Inc.		31,300		1,525,562
				8,006,923
Financials—5.9%
Diversified Financial Services—2.3%
JPMorgan Chase & Co.		132,900		5,637,618
Insurance—3.6%
Assurant, Inc.		51,500		1,983,780
Everest Re Group Ltd.		34,210		2,901,692
MetLife, Inc.		82,200		3,652,968
				8,538,440
Health Care—9.8%
Biotechnology—4 .2%
Amgen, Inc.1		46,400		2,547,360
Genzyme Corp. (General Division)1		39,680		2,825,216
Gilead Sciences, Inc.1		77,790		2,819,110
Vanda Pharmaceuticals, Inc.1		199,000		1,882,540
				10,074,226
Health Care Providers & Services—1.4%
Humana, Inc.1		31,730		1,736,900
WellPoint, Inc.1		30,050		1,708,643
				3,445,543

	Shares		Value
Pharmaceuticals—4.2%
Merck & Co., Inc.		113,127	$	4,077,097
Mylan, Inc.1		281,030		5,938,164
				10,015,261
Industrials—1.2%
Aerospace & Defense—0.1%
AerCap Holdings NV1		9,000		127,080
Industrial Conglomerates—0.3%
Tyco International Ltd.		20,650		855,736
Machinery—0.8%
Navistar International Corp.1		33,720		1,952,725
Information Technology—17.8%
Communications Equipment—3.0%
Harris Corp.		33,050		1,497,165
Orbcomm, Inc.1		375		971
QUALCOMM, Inc.		113,360		5,610,186
				7,108,322
Internet Software & Services—4.1%
eBay, Inc.1		128,390		3,573,094
Google, Inc., Cl. A1		10,670		6,337,660
				9,910,754
IT Services—0.7%
MasterCard, Inc., Cl. A		7,300		1,636,003
Software—10.0%
Microsoft Corp.		73,290		2,046,257
Oracle Corp.		128,700		4,028,310
Take-Two Interactive Software, Inc.1		1,048,576		12,834,570
THQ, Inc.1		853,300		5,170,998
				24,080,135
Materials—1.8%
Chemicals—1.8%
Celanese Corp., Series A		46,000		1,893,820
Potash Corp. of Saskatchewan, Inc.		16,200		2,508,246
				4,402,066
Metals & Mining—0.0%
Kaiser Aluminum Corp.		114		5,710
Telecommunication Services—0.0%
Diversified Telecommunication Services—0.0%
XO Holdings, Inc.1		85		58
Utilities—0.7%
Electric Utilities—0.7%
Edison International, Inc.		40,500		1,563,300
Total Common Stocks (Cost $103,841,503)				118,571,294

	Principal
	Amount		Value
Asset-Backed Securities—3.8%
Ally Auto Receivables Trust 2010-2,
Automobile Receivables Nts.,
Series 2010-2, Cl. A2, 0.89%, 9/17/12	$	235,000	$	235,472
Ally Auto Receivables Trust 2010-4,
Automobile Receivables Nts.,
Series 2010-4, Cl. A3, 0.91%, 11/17/14		30,000		29,823
Ally Master Owner Trust 2010-1,
Asset-Backed Certificates,
Series 2010-1, Cl. A, 2.01%, 1/15/132,3		240,000		244,477
Ally Master Owner Trust 2010-3,
Asset-Backed Certificates,
Series 2010-3, Cl. A, 2.88%, 4/15/132		200,000		204,943
AmeriCredit Automobile Receivables
Trust 2009-1, Automobile
Receivables-Backed Nts.,
Series 2009-1, Cl. A3, 3.04%, 10/15/13		160,000		162,940
AmeriCredit Automobile Receivables
Trust 2010-4, Automobile
Receivables-Backed Nts.,
Series 2010-4, Cl. D, 4.20%, 11/8/16		120,000		118,275
AmeriCredit Prime Automobile
Receivables Trust 2010-1, Automobile
Receivables Nts., Series 2010-1,
Cl. A2, 0.97%, 1/15/13		66,685		66,715
AmeriCredit Prime Automobile
Receivables Trust 2010-2,
Automobile Receivables Nts.,
Series 2010-2, Cl. A2, 1.22%, 10/8/13		100,000		100,320
Bank of America Auto Trust 2010-2,
Automobile Receivables,
Series 2010-2, Cl. A2, 0.91%, 10/15/12		150,000		150,301
Capital One Multi-Asset
Execution Trust, Credit Card
Asset-Backed Certificates,
Series 2008-A5, Cl. A5, 4.85%, 2/18/14		260,000		263,252
CarMax Auto Owner Trust 2010-3,
Automobile Asset-Backed Nts.,
Series 2010-3, Cl. A3, 0.99%, 2/17/15		65,000		64,644
Centre Point Funding LLC,
Asset-Backed Nts., Series 2010-1A,
Cl. 1, 5.43%, 7/20/152		69,920		72,328
Chrysler Financial Lease Trust,
Asset-Backed Nts., Series 2010-A,
Cl. A2, 1.78%, 6/15/112		127,849		128,015
Citibank Credit Card Issuance Trust,
Credit Card Receivable Nts.,
Series 2003-C4, Cl. C4, 5%, 6/10/15		180,000		189,374
Citibank Omni Master Trust, Credit
Card Receivables, Series 2009-A8,
Cl. A8, 2.36%, 5/16/162,3		325,000		329,151
CNH Equipment Trust,
Asset-Backed Certificates:
Series 2009-B, Cl. A3, 2.97%, 3/15/13		81,004		81,358
Series 2010-A, Cl. A2, 0.81%, 3/25/15		243,480		243,593

	Principal
	Amount		Value
Asset-Backed Securities Continued
Countrywide Home Loans,
Asset-Backed Certificates:
Series 2002-4, Cl. A1, 1.001%, 2/25/333	$	13,799	$	12,529
Series 2005-16,Cl. 2AF2, 5.382%, 5/1/363		271,497		232,567
Series 2005-17, Cl. 1AF2, 5.363%, 5/1/363		153,866		123,797
CWABS Asset-Backed Certificates
Trust 2006-25, Asset-Backed
Certificates, Series 2006-25,
Cl. 2A2, 0.381%, 6/25/473		480,000		429,750
DaimlerChrysler Auto Trust 2007-A,
Automobile Receivable Nts.,
Series 2007-A, Cl. A4, 5.28%, 3/8/13		251,974		258,154
DT Auto Owner Trust,
Automobile Receivable Nts.,
Series 2009-1,Cl. A1, 2.98%, 10/15/152		135,196		136,247
Ford Credit Auto Lease Trust,
Automobile Receivable Nts.:
Series 2010-A, Cl. A, 1.04%, 3/15/132		130,670		130,788
Series 2010-B, Cl. A2, 0.75%, 10/15/124		245,000		245,000
Ford Credit Auto Owner Trust,
Automobile Receivable Nts.:
Series 2009-E, Cl. A2, 0.80%, 3/15/12		241,090		241,214
Series 2010-A, Cl. A4, 2.15%, 6/15/15		350,000		356,622
Ford Credit Floorplan Master Owner
Trust 2009-2, Asset-Backed Nts.,
Series 2009-2, Cl. A, 1.81%, 9/15/123		245,000		248,696
Ford Credit Floorplan Master Owner
Trust 2010-1, Asset-Backed Nts.,
Series 2010-1,Cl. A, 1.91%, 12/15/142,3		250,000		254,708
GE Capital Credit Card Master
Note Trust, Asset-Backed Nts.,
Series 2009-2, Cl. A, 3.69%, 7/15/15		105,000		109,111
Harley-Davidson Motorcycle
Trust 2006-3, Motorcycle
Contract-Backed Nts.,
Series 2006-3, Cl. A4, 5.22%, 6/15/13		210,185		213,927
Harley-Davidson Motorcycle
Trust 2009-2, Motorcycle
Contract-Backed Nts.,
Series 2009-2, Cl. A2, 2%, 7/15/12		18,072		18,083
Hertz Vehicle Financing LLC,
Automobile Receivable Nts.,
Series 2010-1A, Cl. A1, 2.60%, 2/15/142		240,000		242,319
HSBC Home Equity Loan Trust 2005-3,
Closed-End Home Equity Loan
Asset-Backed Certificates,
Series 2005-3, Cl. A1, 0.521%, 1/20/353		233,073		223,831
HSBC Home Equity Loan Trust 2006-4,
Closed-End Home Equity Loan
Asset-Backed Certificates,
Series 2006-4, Cl. A2V, 0.371%, 3/20/363		68,743		68,480
MBNA Credit Card Master Note Trust,
Credit Card Receivables,
Series 2003-C7, Cl. C7, 1.61%, 3/15/163		255,000		252,182

	Principal
	Amount		Value
Asset-Backed Securities Continued
Merrill Auto Trust Securitization 2007-1,
Asset-Backed Nts.,
Series 2007-1, Cl. A4, 0.32%, 12/15/133	$	156,440	$	156,030
Morgan Stanley Resecuritization Trust,
Automobile Receivable Nts.,
Series 2010-F, Cl. A, 0.511%, 6/17/112,3		485,000		483,920
Navistar Financial Dealer Note
Master Owner Trust, Asset-Backed Nts.,
Series 2010-1, Cl. A, 1.911%, 1/26/152,3		405,000		405,987
Nissan Auto Lease Trust 2010-B,
Automobile Asset-Backed Nts.,
Series 2010-B, Cl. A3, 1%, 12/15/13		220,000		219,733
Nissan Master Owner Trust,
Automobile Receivable Nts.,
Series 2010-AA, Cl. A, 1.41%, 1/15/132,3		240,000		242,834
RASC Series 2006-KS7 Trust,
Home Equity Mtg. Asset-Backed
Pass-Through Certificates,
Series 2006-KS7, Cl. A2, 0.361%, 9/25/363		110,085		109,488
Santander Drive Auto Receivables
Trust 2010-2, Automobile
Receivables Nts.,
Series 2010-2, Cl. A2, 0.95%, 8/15/13		225,000		225,301
Santander Drive Auto Receivables
Trust 2010-3, Automobile
Receivables Nts.,
Series 2010-3, Cl. C, 3.06%, 11/15/17		235,000		233,846
Volkswagen Auto Lease Trust 2010-A,
Automobile Receivable Nts.,
Series 2010-A, Cl. A3, 0.99%, 11/20/13		215,000		214,643
World Financial Network
Credit Card Master Note Trust,
Credit Card Receivables,
Series 2009-A, Cl. A, 4.60%, 9/15/15		245,000		251,935
Total Asset-Backed Securities (Cost $9,128,365)				9,026,703
Mortgage-Backed Obligations—28.2%
Government Agency—22.9%
FHLMC/FNMA/FHLB/Sponsored—22.8%
Federal Home Loan Mortgage Corp.:
5.50%, 9/1/39		1,254,824		1,338,203
7%, 10/1/37		1,036,026		1,171,236
Federal Home Loan Mortgage Corp.,
Gtd. Real Estate Mtg. Investment
Conduit Multiclass Pass-Through Certificates:
Series 2006-11, Cl. PS, 23.611%, 3/25/363		242,857		342,927
Series 2426, Cl. BG, 6%, 3/15/17		423,404		459,707
Series 2427, Cl. ZM, 6.50%, 3/15/32		452,949		504,856
Series 2626, Cl. TB, 5%, 6/1/33		695,185		747,297
Series 2638, Cl. KG, 4%, 11/1/27		619,589		625,254
Series 2648, Cl. JE, 3%, 2/1/30		156,599		157,315

	Principal
	Amount		Value
FHLMC/FNMA/FHLB/Sponsored Continued
Federal Home Loan Mortgage Corp.,
Gtd. Real Estate Mtg. Investment
Conduit Multiclass Pass-Through
Certificates: Continued
Series 2663, Cl. BA, 4%, 8/1/16	$	401,620	$	409,451
Series 2676, Cl. KB, 5%, 2/1/20		83,277		84,122
Series 2686, Cl. CD, 4.50%, 2/1/17		214,423		218,785
Series 2907, Cl. GC, 5%, 6/1/27		93,049		94,746
Series 2911, Cl. CU, 5%, 2/1/28		274,293		279,252
Series 2929, Cl. PC, 5%, 1/1/28		95,391		96,810
Series 2952, Cl. GJ, 4.50%, 12/1/28		46,059		46,499
Series 3019, Cl. MD, 4.75%, 1/1/31		288,920		296,968
Series 3025, Cl. SJ, 23.796%, 8/15/353		73,546		102,532
Series 3094, Cl. HS, 23.429%, 6/15/343		144,226		189,495
Series 3242, Cl. QA, 5.50%, 3/1/30		151,623		156,205
Series 3291, Cl. NA, 5.50%, 10/1/27		45,991		46,525
Series 3306, Cl. PA, 5.50%, 10/1/27		90,620		91,580
Series R001, Cl. AE, 4.375%, 4/1/15		67,162		68,504
Federal Home Loan Mortgage Corp.,
Interest-Only Stripped
Mtg.-Backed Security:
Series 183, Cl. IO, 13.857%, 4/1/275		184,821		36,101
Series 192, Cl. IO, 11.391%, 2/1/285		52,091		10,396
Series 2130, Cl. SC, 51.439%, 3/15/295		143,725		25,680
Series 243, Cl. 6, 2.173%, 12/15/325		178,613		34,795
Series 2527, Cl. SG, 36.64%, 2/15/325		55,905		2,657
Series 2531, Cl. ST, 62.465%, 2/15/305		828,182		52,229
Series 2796, Cl. SD, 68.671%, 7/15/265		213,166		37,771
Series 2802, Cl. AS, 96.397%, 4/15/335		200,043		17,804
Series 2920, Cl. S, 66.453%, 1/15/355		1,107,932		159,381
Series 3110, Cl. SL, 99.999%, 2/15/265		158,112		20,280
Federal Home Loan Mortgage Corp.,
Principal-Only Stripped Mtg.-Backed
Security, Series 176,
Cl. PO, 4.228%, 6/1/266		51,131		43,117
Federal National Mortgage Assn.:
3.50%, 1/1/26-1/1/417		3,820,000		3,798,436
4%, 1/1/417		5,645,000		5,616,775
4.50%, 1/1/26-1/1/417		8,112,000		8,361,163
5%, 1/1/417		6,502,000		6,836,242
5.50%, 9/25/20		12,029		13,063
5.50%, 1/1/26-1/1/417		5,949,000		6,367,157
6%, 12/1/34-3/1/37		2,133,786		2,340,847
6%, 1/1/417		1,785,000		1,940,352
6%, 11/1/348		1,037,093		1,137,765
6.50%, 1/1/417		1,780,000		1,978,303
7%, 11/1/178		197,380		211,435
7.50%, 1/1/33		210,293		241,182
8.50%, 7/1/32		5,976		6,732
Federal National Mortgage Assn.,
Gtd. Real Estate Mtg. Investment
Conduit Multiclass Pass-Through
Certificates:
Trust 1998-61, Cl. PL, 6%, 11/25/28		164,186		181,466
Trust 2004-101, Cl. BG, 5%, 1/25/20		1,000,000		1,069,508
Trust 2004-81, Cl. KC, 4.50%, 4/1/17		307,131		312,182

	Principal
	Amount		Value
FHLMC/FNMA/FHLB/Sponsored Continued
Federal National Mortgage Assn.,
Gtd. Real Estate Mtg. Investment
Conduit Multiclass Pass-Through
Certificates: Continued
Trust 2004-9, Cl. AB, 4%, 7/1/17	$	248,310	$	255,003
Trust 2005-104, Cl. MC, 5.50%, 12/25/25		700,000		764,473
Trust 2005-12, Cl. JC, 5%, 6/1/28		261,025		266,808
Trust 2005-22, Cl. EC, 5%, 10/1/28		99,698		102,030
Trust 2005-30, Cl. CU, 5%, 4/1/29		107,828		110,812
Trust 2005-69, Cl. LE, 5.50%, 11/1/33		444,231		475,644
Trust 2006-46, Cl. SW, 23.244%, 6/25/363		182,550		252,872
Trust 2006-57, Cl. PA, 5.50%, 8/25/27		151,066		152,256
Trust 2009-36, Cl. FA, 1.201%, 6/25/373		450,998		459,816
Trust 2009-37, Cl. HA, 4%, 4/1/19		624,544		659,448
Trust 2009-70, Cl. PA, 5%, 8/1/35		693,399		727,539
Federal National Mortgage Assn.,
Interest-Only Stripped Mtg.-Backed Security:
Trust 2001-65, Cl. S, 47.471%, 11/25/315		463,072		86,620
Trust 2001-81, Cl. S, 37.251%, 1/25/325		106,444		21,103
Trust 2002-47, Cl. NS, 35.776%, 4/25/325		238,789		44,845
Trust 2002-51, Cl. S, 36.064%, 8/25/325		219,265		41,144
Trust 2002-52, Cl. SD, 43.051%, 9/25/325		265,971		52,794
Trust 2002-77, Cl. SH, 47.715%, 12/18/325		152,104		28,488
Trust 2002-84, Cl. SA, 48.085%, 12/25/325		411,299		70,611
Trust 2002-9, Cl. MS, 36.237%, 3/25/325		160,864		29,098
Trust 2003-33, Cl. SP, 49.444%, 5/25/335		467,455		81,153
Trust 2003-4, Cl. S, 44.135%, 2/25/335		265,437		49,827
Trust 2003-46, Cl. IH, 0%, 6/1/335,9		1,489,043		184,504
Trust 2003-89, Cl. XS, 53.849%, 11/25/325		162,982		12,282
Trust 2004-54, Cl. DS, 51.415%, 11/25/305		219,066		27,885
Trust 2005-14, Cl. SE, 41.451%, 3/25/355		167,490		22,855
Trust 2005-40, Cl. SA, 65.702%, 5/25/355		618,618		103,439
Trust 2005-71, Cl. SA, 68.213%, 8/25/255		668,281		91,276
Trust 2005-93, Cl. SI, 17.83%, 10/25/355		116,055		14,343
Trust 2006-60, Cl. DI, 41.33%, 4/25/355		107,329		15,693
Trust 2007-88, Cl. XI, 22.457%, 6/25/375		670,648		93,534
Trust 2008-67, Cl. KS, 34.057%, 8/25/345		300,406		22,506
Trust 222, Cl. 2, 20.46%, 6/1/235		393,826		73,791
Trust 233, Cl. 2, 34.397%, 8/1/235		369,928		80,430
Trust 252, Cl. 2, 32.907%, 11/1/235		325,262		65,624
Trust 319, Cl. 2, 6.206%, 2/1/325		107,455		22,013
Trust 331, Cl. 9, 14.804%, 2/1/335		307,723		57,046
Trust 334, Cl. 17, 22.82%, 2/1/335		179,299		34,100
Trust 339, Cl. 12, 0%, 7/1/335,9		304,980		53,843
Trust 339, Cl. 7, 0%, 7/1/335,9		1,075,755		183,197
Trust 343, Cl. 13, 3.941%, 9/1/335		280,571		48,674
Trust 345, Cl. 9, 3.359%, 1/1/345		469,020		80,180
Trust 351, Cl. 10, 13.574%, 4/1/345		43,970		7,549
Trust 351, Cl. 8, 0%, 4/1/345,9		137,582		23,654
Trust 356, Cl. 10, 0%, 6/1/355,9		110,493		18,867
Trust 356, Cl. 12, 0%, 2/1/355,9		58,217		9,980
Trust 362, Cl. 13, 0.217%, 8/1/355		416,149		70,142
Trust 364, Cl. 16, 0%, 9/1/355,9		309,155		54,684

	Principal
	Amount		Value
FHLMC/FNMA/FHLB/Sponsored Continued
Federal National Mortgage Assn.,
Principal-Only Stripped
Mtg.-Backed Security,
Trust 1993-184, Cl. M, 4.788%, 9/25/236	$	144,937	$	129,378
				54,714,941
GNMA/Guaranteed—0.1%
Government National Mortgage Assn., 8%, 4/15/23		66,784		78,552
Government National Mortgage Assn.,
Interest-Only Stripped
Mtg.-Backed Security:
Series 2001-21, Cl. SB, 88.416%, 1/16/275		252,115		39,077
Series 2002-15, Cl. SM, 77.353%, 2/16/325		288,890		44,728
Series 2002-76, Cl. SY, 81.039%, 12/16/265		653,604		109,577
Series 2004-11, Cl. SM, 69.372%, 1/17/305		219,124		41,566
				313,500
Non-Agency—5.3%
Commercial—3.6%
Banc of America Commercial
Mortgage, Inc., Commercial
Mtg. Pass-Through Certificates:
Series 2006-1, Cl. AM, 5.421%, 9/1/45		530,000		539,017
Series 2007-1, Cl. A4, 5.451%, 1/1/17		355,000		370,895
Series 2007-1, Cl. AMFX, 5.482%, 1/1/49		455,000		445,551
Bear Stearns ARM Trust 2007-4,
Mtg. Pass-Through Certificates,
Series 2007-4, Cl. 22A1, 5.87%, 6/1/473		277,642		230,000
Citigroup, Inc./Deutsche Bank
2007-CD4 Commercial Mortgage Trust,
Commercial Mtg. Pass-Through
Certificates, Series 2007-CD4,
Cl. A4, 5.322%, 12/1/49		290,000		301,043
Deutsche Alt-B Securities, Inc.,
Mtg. Pass-Through Certificates,
Series 2006-AB4,
Cl. A1A, 6.005%, 10/25/36		282,819		166,817
Deutsche Mortgage & Asset
Receiving, Commercial Mtg.
Pass-Through Certificates,
Series 2010-C1, Cl. A1, 3.156%, 7/1/462		284,493		285,443
Deutsche Mortgage & Asset
Receiving, Commercial Mtg.
Pass-Through Certificates,
Interest-Only Stripped Mtg.-
Backed Security, Series 2010-C1,
Cl. XPA, 4.82%, 9/1/204,5		2,275,000		203,129
First Horizon Alternative Mortgage
Securities Trust 2004-FA2, Mtg.
Pass-Through Certificates,
Series 2004-FA2, Cl. 3A1, 6%, 1/25/35		263,429		264,518

	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	$	491,268	$	355,589
IndyMac INDX Mortgage Loan
Trust 2005-AR23, Mtg. Pass-Through
Certificates, Series 2005-AR23,
Cl. 6A1, 5.214%, 11/1/353		369,278		285,361
JPMorgan Chase Commercial
Mortgage Securities Corp.,
Commercial Mtg. Pass-Through
Certificates:
Series 2010-C2, Cl. A2, 3.616%, 11/1/432		340,000		329,680
Series 2007-LDPX, Cl. A2S2, 5.187%, 1/1/494		140,000		141,428
Series 2007-LDPX, Cl. A2S, 5.305%, 1/15/49		95,000		97,291
Series 2007-LDP10, Cl. A3S, 5.317%, 4/1/13		355,000		362,130
Series 2007-LDPX, Cl. A3, 5.42%, 1/15/49		40,000		41,666
Series 2007-LD11, Cl. A2, 5.802%, 6/15/493		270,000		279,747
JPMorgan Chase Commercial
Mortgage Securities Trust
2006-LDP7, Commercial Mtg.
Pass-Through Certificates,
Series 2006-LDP7, 5.872%, 4/1/453		515,000		534,949
JPMorgan Mortgage Trust 2007-S3,
Mtg. Pass-Through Certificates,
Series 2007-S3, Cl. 1A90, 7%, 7/1/37		377,210		294,574
LB-UBS Commercial Mortgage
Trust 2006-C3, Commercial
Mtg. Pass-Through Certificates,
Series 2006-C3, Cl. AM, 5.712%, 3/11/39		90,000		91,262
LB-UBS Commercial Mortgage
Trust 2007-C1, Commercial
Mtg. Pass-Through Certificates,
Series 2007-C1, Cl. A2, 5.318%, 1/15/12		210,000		215,399
Mastr Adjustable Rate Mortgages
Trust 2004-13, Mtg. Pass-Through
Certificates, Series 2004-13,
Cl. 2A2, 2.83%, 4/1/343		236,800		239,476
Mastr Alternative Loan Trust 2004-6,
Mtg. Pass-Through Certificates,
Series 2004-6, Cl. 10A1, 6%, 7/25/34		544,413		543,405
Merrill Lynch Mortgage Investors
Trust 2005-A5, Mtg. Pass-Through
Certificates, Series 2005-A5,
Cl. A9, 2.752%, 6/1/353		311,496		276,396
ML-CFC Commercial Mortgage
Trust 2006-3, Commercial
Mtg. Pass-Through Certificates,
Series 2006-3, Cl. AM, 5.456%, 7/12/46		475,000		480,249
NCUA Guaranteed Notes,
Asset-Backed Nts., Series 2010-R3,
Cl. 2A, 0.825%, 12/8/203		380,000		379,525

	Principal
	Amount		Value
Commercial Continued
Wachovia Bank Commercial Mortgage
Trust 2007-C34, Commercial
Mtg. Pass-Through Certificates,
Series 2007-C34, Cl. A3, 5.678%, 7/1/17	$	260,000	$	271,730
WaMu Mortgage Pass-Through
Certificates 2005-AR14 Trust,
Mtg. Pass-Through Certificates,
Series 2005-AR14, Cl. 1A4,
2.671%, 12/1/353		174,279		150,187
Wells Fargo Commercial Mortgage
Trust 2010-C1, Commercial
Mtg. Pass-Through Certificates,
Series 2010-C1, Cl. A1, 3.349%, 10/1/572		188,970		189,566
Wells Fargo Mortgage-Backed
Securities 2007-AR8 Trust,
Mtg. Pass-Through Certificates,
Series 2007-AR8, Cl. A1, 6.134%, 11/1/373		259,269		210,482
				8,576,505
Multifamily—0.5%
Citigroup Mortgage Loan Trust, Inc.
2006-AR3, Mtg. Pass-Through
Certificates, Series 2006-AR3,
Cl. 1A2A, 5.77%, 6/1/363		244,352		227,871
GE Capital Commercial
Mortgage Corp., Commercial
Mtg. Pass-Through Certificates,
Series 2001-3, Cl. A2, 6.07%, 6/1/38		330,000		338,915
Wells Fargo Mortgage-Backed
Securities 2006-AR6 Trust,
Mtg. Pass-Through Certificates,
Series 2006-AR6,
Cl. 3A1, 3.203%, 3/25/363		604,695		538,743
				1,105,529
Other—0.1%
Greenwich Capital Commercial
Funding Corp./Commercial
Mortgage Trust 2007-GG9,
Commercial Mtg. Pass-Through
Certificates, Series 2007-GG9,
Cl. A4, 5.444%, 3/1/39		320,000		337,624
Residential—1.1%
Banc of America Mortgage
Securities, Inc., Mtg. Pass-Through
Certificates, Series 2004-E,
Cl. 2A6, 2.87%, 6/1/343		155,264		147,746
CHL Mortgage Pass-Through
Trust 2006-6, Mtg. Pass-Through
Certificates, Series 2006-6,
Cl. A3, 6%, 4/1/36		270,397		247,470
Citigroup Commercial Mortgage
Trust 2008-C7, Commercial
Mtg. Pass-Through Certificates,
Series 2008-C7, Cl. A4, 6.293%, 12/1/493		300,000		322,989

	Principal
	Amount		Value
Residential Continued
Countrywide Alternative Loan
Trust 2005-29CB, Mtg. Pass-Through
Certificates, Series 2005-29CB,
Cl. A4, 5%, 7/1/35	$	790,362	$	632,155
GSR Mortgage Loan Trust 2006-5F,
Mtg. Pass-Through Certificates,
Series 2006-5F, Cl. 2A1, 6%, 6/1/36		273,058		263,102
JPMorgan Alternative Loan
Trust 2006-S4, Mtg. Pass-Through
Certificates, Series 2006-S4,
Cl. A6, 5.71%, 12/1/36		126,415		113,990
RALI Series 2003-QS1 Trust,
Mtg. Asset-Backed Pass-Through
Certificates, Series 2003-QS1,
Cl. A2, 5.75%, 1/25/33		157,665		158,846
RALI Series 2006-QS13 Trust,
Mtg. Asset-Backed Pass-Through
Certificates, Series 2006-QS13,
Cl. 1A8, 6%, 9/25/36		28,707		18,211
WaMu Mortgage Pass-Through
Certificates 2007-HY7 Trust,
Mtg. Pass-Through Certificates,
Series 2007-HY7, Cl. 2A1, 5.629%, 7/1/373		316,555		222,951
WaMu Mortgage Pass-Through
Certificates Series 2007-HY5
Trust, Mtg. Pass-Through
Certificates, Series 2007-HY5,
Cl. 3A1, 5.743%, 5/1/373		245,189		224,262
Wells Fargo Alternative Loan
2007-PA5 Trust, Mtg.
Asset-Backed Pass-Through
Certificates, Series 2007-PA5,
Cl. 1A1, 6.25%, 11/1/37		202,463		177,066
Wells Fargo Mortgage-Backed
Securities 2004-R Trust, Mtg.
Pass-Through Certificates,
Series 2004-R, Cl. 2A1, 2.872%, 9/1/343		101,025		98,078
				2,626,866
Total Mortgage-Backed Obligations (Cost $66,341,678)				67,674,965
U.S. Government Obligations—0.5%
Federal Home Loan Mortgage Corp. Nts.:
1.75%, 9/10/15		310,000		305,048
5%, 2/16/17		115,000		129,652
5.25%, 4/18/16		195,000		223,318
Federal National Mortgage Assn. Nts.:
1.625%, 10/26/15		295,000		287,861
4.875%, 12/15/16		90,000		101,027
5%, 3/15/16		120,000		135,725
Total U.S. Government Obligations (Cost $1,180,417)				1,182,631

	Principal
	Amount		Value
Non-Convertible Corporate Bonds and Notes—13.4%
Consumer Discretionary—1.7%
Auto Components—0.1%
BorgWarner, Inc., 4.625%
Sr. Unsec. Unsub. Nts., 9/15/20	$	209,000	$	206,737
Diversified Consumer Services—0.1%
Service Corp. International, 6.75%
Sr. Unsec. Nts., 4/1/15		230,000		236,900
Hotels, Restaurants & Leisure—0.3%
Hyatt Hotels Corp., 5.75%
Sr. Unsec. Unsub. Nts., 8/15/152		340,000		355,981
Marriott International, Inc., 6.20%
Sr. Unsec. Unsub. Nts., 6/15/16		255,000		279,127
				635,108
Household Durables—0.2%
Fortune Brands, Inc., 6.375%
Sr. Unsec. Unsub. Nts., 6/15/14		173,000		187,637
Jarden Corp., 6.125%
Sr. Unsec. Nts., 11/15/22		240,000		230,100
Whirlpool Corp., 8%
Sr. Unsec. Nts., 5/1/12		180,000		194,033
				611,770
Leisure Equipment & Products—0.2%
Mattel, Inc.:
5.625% Sr. Unsec. Nts., 3/15/13		215,000		231,267
6.125% Sr. Unsec. Nts., 6/15/11		230,000		234,895
				466,162
Media—0.7%
Comcast Cable Communications
Holdings, Inc., 9.455%
Sr. Unsec. Nts., 11/15/22		138,000		191,311
DirecTV Holdings LLC/DirecTV
Financing Co., Inc., 7.625%
Sr. Unsec. Unsub. Nts., 5/15/16		405,000		449,542
Interpublic Group of Co., Inc.
(The), 10% Sr. Unsec. Nts., 7/15/17		196,000		230,300
Lamar Media Corp., 9.75%
Sr. Unsec. Nts., 4/1/14		218,000		251,790
Time Warner Entertainment
Co. LP, 8.375% Sr. Nts., 7/15/33		122,000		154,400
Viacom, Inc., 7.875%
Sr. Unsec. Debs., 7/30/30		130,000		153,900
Virgin Media Secured Finance plc,
6.50% Sr. Sec. Nts., 1/15/18		230,000		243,225
				1,674,468
Specialty Retail—0.1%
Staples, Inc., 7.75%
Sr. Unsec. Unsub. Nts., 4/1/11		350,000		355,655

	Principal
	Amount		Value
Consumer Staples—0.7%
Beverages—0.2%
Anheuser-Busch InBev Worldwide, Inc.,
7.75% Sr. Unsec. Unsub. Nts., 1/15/192	$	340,000	$	423,737
Constellation Brands, Inc., 8.375%
Sr. Nts., 12/15/14		220,000		241,450
				665,187
Food & Staples Retailing—0.1%
Delhaize Group, 5.70% Sr. Unsec. Nts., 10/1/402		148,000		141,370
Food Products—0.2%
Bunge Ltd. Finance Corp.:
5.35% Sr. Unsec. Unsub. Nts., 4/15/14		29,000		30,505
8.50% Sr. Unsec. Nts., 6/15/19		155,000		182,024
TreeHouse Foods, Inc., 7.75%
Sr. Unsec. Nts., 3/1/18		240,000		260,700
				473,229
Tobacco—0.2%
Altria Group, Inc., 10.20%
Sr. Unsec. Nts., 2/6/39		255,000		369,635
Lorillard Tobacco Co., 8.125%
Sr. Unsec. Nts., 5/1/40		142,000		146,014
				515,649
Energy—1.4%
Energy Equipment & Services—0.2%
Rowan Cos., Inc., 5%
Sr. Unsec. Nts., 9/1/17		205,000		207,075
Weatherford International Ltd., 6.50%
Sr. Unsec. Bonds, 8/1/36		150,000		153,681
				360,756
Oil, Gas & Consumable Fuels—1.2%
Cloud Peak Energy Resources LLC,
8.25% Sr. Unsec. Unsub. Nts., 12/15/17		215,000		231,931
Energy Transfer Partners LP:
5.65% Sr. Unsec. Unsub. Nts., 8/1/12		91,000		96,451
7.50% Sr. Unsec. Unsub. Bonds, 7/1/38		160,000		186,691
Enterprise Products Operating LLP,
7.50% Sr. Unsec. Unsub. Nts., 2/1/11		195,000		195,865
Kaneb Pipe Line Operating Partnership
LP, 5.875% Sr. Unsec. Nts., 6/1/13		440,000		476,552
Kinder Morgan Energy Partners LP,
6.50% Sr. Unsec. Unsub. Nts., 9/1/39		185,000		191,742
Nexen, Inc., 6.40% Sr. Unsec. Unsub.
Bonds, 5/15/37		121,000		117,601
ONEOK Partners LP, 7.10%
Sr. Unsec. Nts., 3/15/11		100,000		101,206
Range Resources Corp., 8%
Sr. Unsec. Sub. Nts., 5/15/19		150,000		164,063

	Principal
	Amount		Value
Oil, Gas & Consumable Fuels Continued
Ras Laffan Liquefied Natural Gas Co.
Ltd. III, 5.50% Sr. Sec. Nts., 9/30/142	$	140,000	$	151,481
Rockies Express Pipeline LLC:
3.90% Sr. Unsec. Unsub. Nts., 4/15/152		255,000		252,464
5.625% Sr. Unsec. Unsub. Nts., 4/15/202		163,000		157,840
Southwestern Energy Co., 7.50%
Sr. Nts., 2/1/18		225,000		254,813
Woodside Finance Ltd., 4.50% Nts., 11/10/142		335,000		352,421
				2,931,121
Financials—5.2%
Capital Markets—0.9%
Blackstone Holdings Finance Co. LLC,
6.625% Sr. Unsec. Nts., 8/15/192		340,000		350,069
Goldman Sachs Capital, Inc. (The),
6.345% Sub. Bonds, 2/15/34		255,000		243,693
Macquarie Group Ltd., 4.875%
Sr. Unsec. Nts., 8/10/172		378,000		370,616
Morgan Stanley:
5.50% Sr. Unsec. Unsub. Nts., 7/24/202		90,000		91,092
5.55% Sr. Unsec. Unsub. Nts.,
Series F, 4/27/17		570,000		594,614
TD Ameritrade Holding Corp., 2.95%
Sr. Unsec. Unsub. Nts., 12/1/12		225,000		230,321
UBS AG Stamford, CT, 2.25%
Sr. Unsec. Nts., 8/12/13		234,000		236,145
				2,116,550
Commercial Banks—1.3%
ANZ National International Ltd.,
2.375% Sr. Unsec. Nts., 12/21/122		230,000		233,660
Barclays Bank plc, 6.278%
Perpetual Bonds10		510,000		433,500
BNP Paribas SA, 5.186% Sub.
Perpetual Nts.2,10		245,000		224,788
Fifth Third Cap Trust IV, 6.50%
Jr. Unsec. Sub. Nts., 4/15/37		322,000		308,315
HSBC Finance Capital Trust IX,
5.911% Nts., 11/30/353		600,000		558,000
Huntington BancShares, Inc.,
7% Sub. Nts., 12/15/20		381,000		401,873
Lloyds TSB Bank plc, 6.50% Unsec.
Sub. Nts., 9/14/202		230,000		211,976
Sanwa Bank Ltd. (The),
7.40% Sub. Nts., 6/15/11		219,000		223,176
Wells Fargo & Co., 7.98%
Jr. Sub. Perpetual Bonds, Series K10		476,000		504,560
				3,099,848

	Principal
	Amount		Value
Consumer Finance—0.2%
American Express Bank FSB, 5.55%
Sr. Unsec. Nts., 10/17/12	$	205,000	$	219,365
Capital One Capital IV, 6.745%
Sub. Bonds, 2/17/373		370,000		369,075
				588,440
Diversified Financial Services—0.9%
Bank of America Corp., 5.875%
Sr. Unsec. Unsub. Nts., 1/5/21		95,000		98,473
Citigroup, Inc.:
5.375% Sr. Unsec. Nts., 8/9/20		457,000		475,715
6.01% Sr. Unsec. Nts., 1/15/15		232,000		254,739
ING Groep NV, 5.775% Jr. Unsec.
Sub. Perpetual Bonds10		255,000		220,575
JPMorgan Chase & Co., 7.90%
Perpetual Bonds, Series 110		660,000		703,937
Merrill Lynch & Co., Inc., 7.75%
Jr. Sub. Bonds, 5/14/38		340,000		353,883
				2,107,322
Insurance—1.5%
American International Group, Inc.:
5.85% Sr. Unsec. Nts., Series G, 1/16/18		218,000		225,434
6.40% Sr. Unsec. Unsub. Nts., 12/15/20		230,000		241,762
CNS Financial Corp., 5.875%
Sr. Unsec. Unsub. Bonds, 8/15/20		235,000		234,408
Genworth Financial, Inc., 8.625%
Sr. Unsec. Unsub. Nts., 12/15/16		207,000		233,068
Gulf South Pipeline Co. LP, 5.75%
Sr. Unsec. Nts., 8/15/122		212,000		224,952
Hartford Financial Services Group, Inc.
(The), 5.25% Sr. Unsec. Nts., 10/15/11		242,000		249,184
Irish Life & Permanent Group
Holdings plc, 3.60% Sr. Unsec. Unsub.
Nts., 1/14/132		320,000		287,181
Lincoln National Corp., 6.05%
Jr. Unsec. Sub. Bonds, 4/20/67		455,000		424,288
Manulife Financial Corp., 4.90%
Sr. Unsec. Unsub. Nts., 9/17/20		135,000		128,720
PartnerRe Finance B LLC, 5.50%
Sr. Unsec. Nts., 6/1/20		217,000		218,922
Prudential Financial, Inc., 3.625%
Sr. Unsec. Unsub. Nts., 9/17/12		227,000		235,681
RenRe North America Holdings, Inc.,
5.75% Sr. Unsec. Nts., 3/15/20		238,000		239,361
Swiss Re Capital I LP, 6.854%
Perpetual Bonds2,10		442,000		424,441
ZFS Finance USA Trust IV, 5.875%
Sub. Bonds, 5/9/322		270,000		264,500
				3,631,902

	Principal
	Amount		Value
Real Estate Investment Trusts—0.4%
AvalonBay Communities, Inc., 6.625%
Sr. Unsec. Unsub. Nts., 9/15/11	$	100,000	$	103,799
Brandywine Operating Partnership LP,
5.75% Sr. Unsec. Unsub. Nts., 4/1/12		123,000		127,404
Liberty Property LP, 7.25%
Sr. Unsec. Unsub. Nts., 3/15/11		240,000		242,759
Mack-Cali Realty LP, 5.25%
Sr. Unsec. Unsub. Nts., 1/15/12		93,000		95,443
Simon Property Group LP, 5%
Sr. Unsec. Unsub. Nts., 3/1/12		225,000		231,262
WCI Finance LLC/WEA Finance LLC,
5.40% Sr. Unsec. Unsub. Nts., 10/1/122		105,000		111,359
				912,026
Health Care—0.6%
Biotechnology—0.2%
Celgene Corp., 5.70% Sr. Unsec.
Nts., 10/15/40		235,000		228,576
Genzyme Corp., 5% Sr. Unsec.
Nts., 6/15/20		225,000		236,665
				465,241
Health Care Providers & Services—0.3%
Laboratory Corp. of America Holdings,
4.625% Nts., 11/15/20		173,000		171,776
Quest Diagnostic, Inc., 5.75%
Sr. Unsec. Nts., 1/30/40		252,000		240,873
WellPoint, Inc., 5% Sr. Unsec. Unsub.
Nts., 1/15/11		220,000		220,234
				632,883
Pharmaceuticals—0.1%
Hospira, Inc., 5.60% Sr. Unsec. Unsub.
Nts., 9/15/40		75,000		73,978
Mylan, Inc., 6% Sr. Nts., 11/15/182		245,000		241,325
				315,303
Industrials—0.9%
Aerospace & Defense—0.2%
Alliant Techsystems, Inc., 6.75%
Sr. Sub. Nts., 4/1/16		230,000		239,488
BE Aerospace, Inc., 8.50%
Sr. Unsec. Nts., 7/1/18		205,000		224,988
				464,476
Commercial Services & Supplies—0.3%
Browning-Ferris Industries, Inc.,
7.40% Sr. Unsec. Debs., 9/15/35		78,000		92,576
Corrections Corp. of America,
7.75% Sr. Nts., 6/1/17		235,000		250,569

	Principal
	Amount		Value
Commercial Services & Supplies
Continued
R.R. Donnelley & Sons Co., 5.625%
Sr. Unsec. Nts., 1/15/12	$	230,000	$	235,589
Republic Services, Inc., 6.75%
Sr. Unsec. Unsub. Nts., 8/15/11		195,000		201,331
				780,065
Industrial Conglomerates—0.2%
General Electric Capital Corp., 4.25%
Sr. Unsec. Nts., Series A, 6/15/12		215,000		223,671
Tyco International Ltd./Tyco
International Finance SA, 6.875%
Sr. Unsec. Unsub. Nts., 1/15/21		192,000		231,439
				455,110
Machinery—0.1%
SPX Corp., 7.625% Sr. Unsec.
Nts., 12/15/14		265,000		289,513
Professional Services—0.1%
FTI Consulting, Inc.,
6.75% Sr. Nts., 10/1/202		240,000		239,400
Information Technology—0.6%
Communications Equipment—0.3%
Harris Corp., 6.15%
Sr. Unsec. Nts., 12/15/40		425,000		436,473
Motorola, Inc., 8%
Sr. Unsec. Nts., 11/1/11		220,000		231,741
				668,214
Electronic Equipment & Instruments—0.1%
Arrow Electronics, Inc., 3.375%
Sr. Unsec. Unsub. Nts., 11/1/15		430,000		417,300
IT Services—0.1%
SAIC, Inc., 5.95% Sr. Unsec. Unsub.
Nts., 12/1/402		142,000		144,495
Software—0.1%
Symantec Corp., 4.20%
Sr. Unsec. Unsub. Nts., 9/15/20		303,000		278,512
Materials—1.1%
Chemicals—0.5%
Agrium, Inc., 6.125% Sr. Unsec.
Nts., 1/15/41		359,000		381,562
Airgas, Inc., 3.25% Sr. Nts., 10/1/15		198,000		195,807
Ashland, Inc., 9.125% Sr. Unsec.
Nts., 6/1/17		210,000		243,075
CF Industries, Inc., 6.875%
Sr. Unsec. Unsub. Nts., 5/1/18		230,000		246,675
Potash Corp., 5.625%
Sr. Unsec. Unsub. Nts., 12/1/40		140,000		141,803
				1,208,922

	Principal
	Amount		Value
Containers & Packaging—0.3%
Ball Corp., 7.125% Sr. Unsec.
Nts., 9/1/16	$	250,000	$	270,625
Sealed Air Corp., 7.875%
Sr. Nts., 6/15/17		277,000		305,004
Sonoco Products Co., 5.75%
Sr. Unsec. Unsub. Nts., 11/1/40		118,000		114,154
				689,783
Metals & Mining—0.3%
Freeport-McMoRan Copper & Gold,
Inc., 8.375% Sr. Nts., 4/1/17		330,000		365,510
Vale Inco Ltd., 5.70% Sr. Unsec. Unsub.
Nts., 10/15/15		14,000		15,097
Xstrata Canada Corp.:
5.375% Sr. Unsec. Unsub. Nts., 6/1/15		75,000		79,573
6% Sr. Unsec. Unsub. Nts., 10/15/15		132,000		144,534
Xstrata Finance Canada Ltd., 5.80%
Sr. Unsec. Unsub. Bonds, 11/15/162		35,000		38,441
				643,155
Telecommunication Services—0.7%
Diversified Telecommunication Services—0.6%
AT&T, Inc., 6.30% Sr. Unsec. Bonds,
1/15/38		213,000		225,451
British Telecommunications plc,
9.875% Bonds, 12/15/30		142,000		189,740
Embarq Corp., 6.738%
Sr. Unsec. Nts., 6/1/13		225,000		244,535
Frontier Communications Corp.,
8.25% Sr. Unsec. Nts., 4/15/17		230,000		253,575
Qwest Corp., 7.625% Sr. Unsec.
Unsub. Nts., 6/15/15		210,000		237,825
Telus Corp., 8% Nts., 6/1/11		101,000		103,765
Verizon Communications, Inc., 6.40%
Sr. Unsec. Nts., 2/15/38		140,000		155,389
				1,410,280
Wireless Telecommunication Services—0.1%
American Tower Corp., 7%
Sr. Unsec. Nts., 10/15/17		162,000		182,908
Utilities—0.5%
Electric Utilities—0.4%
Allegheny Energy Supply Co. LLC,
8.25% Bonds, 4/15/122		202,000		216,789
FirstEnergy Solutions Corp., 6.80%
Sr. Unsec. Nts., 8/15/39		138,000		134,163
Great Plains Energy, Inc., 2.75%
Sr. Unsec. Unsub. Nts., 8/15/13		155,000		156,677
Northeast Utilities, 7.25% Sr. Unsec.
Nts., 4/1/12		230,000		246,038

	Principal
	Amount		Value
Electric Utilities Continued
Texas-New Mexico Power Co., 9.50%
Sec. Nts., 4/1/192	$	235,000	$	299,659
				1,053,326
Gas Utilities—0.1%
AmeriGas Partners LP, 7.25%
Sr. Unsec. Nts., 5/20/15		224,000		231,274
Total Non-Convertible Corporate Bonds and Notes (Cost $31,183,263)				32,300,360

	Shares			Value
Investment Companies—19.0%
JPMorgan U.S. Treasury Plus Money
Market Fund, Agency Shares, 0.00%11,12		15,063		$	15,063
Oppenheimer Institutional Money
Market Fund, Cl. E, 0.21%11,13		45,755,638			45,755,638
Total Investment Companies (Cost $45,770,701)					45,770,701
Total Investments, at Value (Cost $257,445,927)		114.3	%		274,526,654
Liabilities in Excess of Other Assets		(14.3	)		(34,324,857	)
Net Assets		100.0	%	$	240,201,797

Footnotes to Statement of Investments

1.	Non-income producing security.
2.	Represents securities sold under Rule 144A, which are exempt from registration under the Securities Act of 1933, as amended. These securities have been determined to be liquid under guidelines established by the Board of Trustees. These securities amount to $9,490,443 or 3.95% of the Fund’s net assets as of December 31, 2010.
3.	Represents the current interest rate for a variable or increasing rate security.
4.	Restricted security. The aggregate value of restricted securities as of December 31, 2010 was $589,557, which represents 0.25% of the Fund’s net assets. See Note 6 of the accompanying Notes. Information concerning restricted securities is as follows:

							Unrealized
	Acquisition						Appreciation
Security	Date		Cost		Value		(Depreciation)
Deutsche Mortgage & Asset Receiving, Commercial Mtg. Pass-Through Certificates, Interest-Only Stripped Mtg.- Backed Security, Series 2010-C1, Cl. XPA, 4.82%, 9/1/20		10/27/10	$	207,598	$	203,129	$	(4,469	)
Ford Credit Auto Lease Trust, Automobile Receivable Nts., Series 2010-B, Cl. A2, 0.75%, 10/15/12		10/21/10		244,995		245,000		5
JPMorgan Chase Commercial Mortgage Securities Corp., Commercial Mtg. Pass-Through Certificates, Series 2007-LDPX, Cl. A2S2, 5.187%,1/1/49		7/14/10		138,250		141,428		3,178
			$	590,843	$	589,557	$	(1,286	)

5.	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 $2,812,945 or 1.17% of the Fund’s net assets as of December 31, 2010.
6.	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 $172,495 or 0.07% of the Fund’s net assets as of December 31, 2010.
7.	When-issued security or delayed delivery to be delivered and settled after December 31, 2010. See Note 1 of the accompanying Notes.
8.	All or a portion of the security position is held in collateralized accounts to cover initial margin requirements on open futures contracts and written options on futures, if applicable. The aggregate market value of such securities is $271,005. See Note 5 of the accompanying Notes.
9.	The current amortization rate of the security’s cost basis exceeds the future interest payments currently estimated to be received. Both the amortization rate and interest payments are contingent on future mortgage pre-payment speeds and are therefore subject to change.
10.	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.
11.	Rate shown is the 7-day yield as of December 31, 2010.

12.	Interest rate is less than 0.0005%.
13.	Is or was an affiliate, as defined in the Investment Company Act of 1940, at or during the period ended December 31, 2010, 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, 2009		Additions		Reductions		December 31, 2010
OFI Liquid Assets Fund, LLC		—		474,837		474,837		—
Oppenheimer Institutional Money Market Fund, Cl. E		30,151,515		103,813,278		88,209,155		45,755,638

	Value		Income
OFI Liquid Assets Fund, LLC	$	—	$	8	a
Oppenheimer Institutional Money Market Fund, Cl. E		45,755,638		55,153
	$	45,755,638	$	55,161

a. Net of compensation to the securities lending agent and rebates paid to the borrowing counterparties.

Valuation Inputs

Various data inputs are used in determining the value of each of the Fund’s investments as of the reporting period end. These data inputs are categorized in the following hierarchy under applicable financial accounting standards:

1)	Level 1—unadjusted quoted prices in active markets for identical assets or liabilities (including securities actively traded on a securities exchange)
2)	Level 2—inputs other than unadjusted quoted prices that are observable for the asset or liability (such as unadjusted quoted prices for similar assets and market corroborated inputs such as interest rates, prepayment speeds, credit risks, etc.)
3)	Level 3—significant unobservable inputs (including the Manager’s own judgments about assumptions that market participants would use in pricing the asset or liability).

The table below categorizes amounts that are included in the Fund’s Statement of Assets and Liabilities as of December 31, 2010 based on valuation input level:

					Level 3 —
	Level 1 —		Level 2 —		Significant
	Unadjusted		Other Significant		Unobservable
	Quoted Prices		Observable Inputs		Inputs		Value
Assets Table
Investments, at Value:
Common Stocks
Consumer Discretionary	$	4,620,793	$	—	$	—	$	4,620,793
Consumer Staples		12,874,282		—		—		12,874,282
Energy		11,723,242		—		—		11,723,242
Financials		14,176,058		—		—		14,176,058
Health Care		23,535,030		—		—		23,535,030
Industrials		2,935,541		—		—		2,935,541
Information Technology		42,735,214		—		—		42,735,214
Materials		4,407,776		—		—		4,407,776
Telecommunication Services		58		—		—		58
Utilities		1,563,300		—		—		1,563,300
Asset-Backed Securities		—		9,026,703		—		9,026,703
Mortgage-Backed Obligations		—		67,674,965		—		67,674,965
U.S. Government Obligations		—		1,182,631		—		1,182,631
Non-Convertible Corporate Bonds and Notes		—		32,300,360		—		32,300,360
Investment Companies		45,770,701		—		—		45,770,701
Total Investments, at Value		164,341,995		110,184,659		—		274,526,654
Other Financial Instruments:
Futures margins		52,512		—		—		52,512
Total Assets	$	164,394,507	$	110,184,659	$	—	$	274,579,166

						Level 3 —
	Level 1 —			Level 2 —		Significant
	Unadjusted			Other Significant		Unobservable
	Quoted Prices			Observable Inputs		Inputs		Value
Liabilities Table
Other Financial Instruments:
Futures margins	$	(14,250	)	$	—	$	—	$	(14,250	)
Total Liabilities	$	(14,250	)	$	—	$	—	$	(14,250	)

Currency contracts and forwards, if any, are reported at their unrealized appreciation/depreciation at measurement date, which represents the change in the contract’s value from trade date. Futures, if any, are reported at their variation margin at measurement date, which represents the amount due to/from the Fund at that date. All additional assets and liabilities included in the above table are reported at their market value at measurement date.

See the accompanying Notes for further discussion of the methods used in determining value of the Fund’s investments, and a summary of changes to the valuation methodologies, if any, during the reporting period.

Futures Contracts as of December 31, 2010 are as follows:

								Unrealized
		Number of		Expiration				Appreciation
Contract Description	Buy/Sell	Contracts		Date		Value		(Depreciation)
U.S. Treasury Long Bonds, 20 yr.	Buy		45		3/22/11	$	5,495,625	$	(22,972	)
U.S. Treasury Nts., 2 yr.	Sell		37		3/31/11		8,099,531		1,196
U.S. Treasury Nts., 5 yr.	Sell		5		3/31/11		588,594		11,112
U.S. Treasury Nts., 10 yr.	Sell		5		3/22/11		602,188		319
U.S. Ultra Bonds	Buy		2		3/22/11		254,188		2,673
								$	(7,672	)

STATEMENT OF ASSETS AND LIABILITIES December 31, 2010.

Assets
Investments, at value—see accompanying statement of investments:
Unaffiliated companies (cost $211,690,289)	$	228,771,016
Affiliated companies (cost $45,755,638)		45,755,638
		274,526,654
Receivables and other assets:
Investments sold (including $3,511,651 sold on a when-issued or delayed delivery basis)		3,649,301
Interest, dividends and principal paydowns		815,182
Futures margins		52,512
Other		14,675
Total assets		279,058,324
Liabilities
Payables and other liabilities:
Investments purchased (including $38,535,628 purchased on a when-issued or delayed delivery basis)		38,562,101
Shares of beneficial interest redeemed		108,495
Distribution and service plan fees		53,658
Shareholder communications		44,975
Transfer and shareholder servicing agent fees		20,265
Futures margins		14,250
Trustees’ compensation		12,883
Other		39,900
Total liabilities		38,856,527
Net Assets	$	240,201,797
Composition of Net Assets
Par value of shares of beneficial interest	$	21,026
Additional paid-in capital		292,273,661
Accumulated net investment income		5,128,069
Accumulated net realized loss on investments and foreign currency transactions		(74,298,660	)
Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies		17,077,701
Net Assets	$	240,201,797
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 $150,621,790 and 13,130,034 shares of beneficial interest outstanding)	$	11.47
Service Shares:
Net asset value, redemption price per share and offering price per share (based on net assets of $89,580,007 and 7,895,970 shares of beneficial interest outstanding)	$	11.35

STATEMENT OF OPERATIONS For the Year Ended December 31, 2010

Investment Income
Interest (net of foreign withholding taxes of $1,117)	$	4,519,752
Dividends:
Unaffiliated companies (net of foreign withholding taxes of $26,938)		2,054,137
Affiliated companies		55,153
Income from investment of securities lending cash collateral—net, affiliated companies		8
Total investment income		6,629,050
Expenses
Management fees		1,780,237
Distribution and service plan fees—Service shares		218,194
Transfer and shareholder servicing agent fees:
Non-Service shares		151,632
Service shares		87,288
Shareholder communications:
Non-Service shares		35,610
Service shares		20,549
Custodian fees and expenses		15,263
Trustees’ compensation		12,419
Administration service fees		1,500
Other		61,602
Total expenses		2,384,294
Less waivers and reimbursements of expenses		(614,948	)
Net expenses		1,769,346
Net Investment Income		4,859,704
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments from unaffiliated companies		15,190,576
Closing and expiration of futures contracts		976,981
Foreign currency transactions		(95,048	)
Short positions		(31,177	)
Swap contracts		4,460
Increase from payment by affiliate		873
Net realized gain		16,046,665
Net change in unrealized appreciation/depreciation on:
Investments		6,229,756
Translation of assets and liabilities denominated in foreign currencies		1,036,724
Futures contracts		321,322
Swap contracts		35,332
Net change in unrealized appreciation/depreciation		7,623,134
Net Increase in Net Assets Resulting from Operations	$	28,529,503

STATEMENTS OF CHANGES IN NET ASSETS

Year Ended December 31,	2010			2009
Operations
Net investment income	$	4,859,704		$	6,170,062
Net realized gain (loss)		16,046,665			(30,890,935	)
Net change in unrealized appreciation/depreciation		7,623,134			70,642,719
Net increase in net assets resulting from operations		28,529,503			45,921,846
Dividends and/or Distributions to Shareholders
Dividends from net investment income:
Non-Service shares		(2,184,050	)		—
Service shares		(1,027,757	)		—
		(3,211,807	)		—
Beneficial Interest Transactions
Net increase (decrease) in net assets resulting from beneficial interest transactions:
Non-Service shares		(25,243,141	)		(40,306,895	)
Service shares		(8,416,068	)		4,509,086
		(33,659,209	)		(35,797,809	)
Net Assets
Total increase (decrease)		(8,341,513	)		10,124,037
Beginning of period		248,543,310			238,419,273
End of period (including accumulated net investment income of $5,128,069 and $3,221,774, respectively)	$	240,201,797		$	248,543,310

FINANCIAL HIGHLIGHTS

Non-Service Shares    Year Ended December 31,	2010			2009			2008			2007			2006
Per Share Operating Data
Net asset value, beginning of period	$	10.30		$	8.45		$	16.41		$	17.69		$	17.07
Income (loss) from investment operations:
Net investment income1		.23			.25			.41			.43			.40
Net realized and unrealized gain (loss)		1.09			1.60			(7.03	)		.19			1.38
Total from investment operations		1.32			1.85			(6.62	)		.62			1.78
Dividends and/or distributions to shareholders:
Dividends from net investment income		(.15	)		—			(.39	)		(.46	)		(.36	)
Distributions from net realized gain		—			—			(.95	)		(1.44	)		(.80	)
Total dividends and/or distributions to shareholders		(.15	)		—			(1.34	)		(1.90	)		(1.16	)
Net asset value, end of period	$	11.47		$	10.30		$	8.45		$	16.41		$	17.69
Total Return, at Net Asset Value2		12.91	%		21.89	%		(43.47	)%		3.79	%		11.15	%
Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	150,622		$	159,797		$	169,621		$	385,948		$	435,639
Average net assets (in thousands)	$	151,620		$	159,013		$	295,669		$	418,103		$	456,513
Ratios to average net assets:3
Net investment income		2.13	%		2.71	%		3.14	%		2.55	%		2.42	%
Total expenses4		0.91	%		0.89	%		0.76	%		0.75	%		0.75	%
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses		0.65	%		0.60	%		0.67	%		0.73	%		0.75	%
Portfolio turnover rate5		54	%		87	%		67	%		68	%		76	%

1.	Per share amounts calculated based on the average shares outstanding during the period.
2.	Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
3.	Annualized for periods less than one full year.
4.	Total expenses including indirect expenses from affiliated fund were as follows:

Year Ended December 31, 2010	0.92	%
Year Ended December 31, 2009	0.91	%
Year Ended December 31, 2008	0.76	%
Year Ended December 31, 2007	0.75	%
Year Ended December 31, 2006	0.75	%

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, 2010	$	412,930,431	$	414,511,903
Year Ended December 31, 2009	$	504,698,365	$	520,212,670
Year Ended December 31, 2008	$	474,582,075	$	434,587,487
Year Ended December 31, 2007	$	296,201,319	$	315,527,720
Year Ended December 31, 2006	$	612,825,833	$	666,549,894

Service Shares    Year Ended December 31,	2010			2009			2008			2007			2006
Per Share Operating Data
Net asset value, beginning of period	$	10.19		$	8.38		$	16.28		$	17.57		$	16.97
Income (loss) from investment operations:
Net investment income1		.20			.22			.37			.38			.36
Net realized and unrealized gain (loss)		1.08			1.59			(6.97	)		.19			1.37
Total from investment operations		1.28			1.81			(6.60	)		.57			1.73
Dividends and/or distributions to shareholders:
Dividends from net investment income		(.12	)		—			(.35	)		(.42	)		(.33	)
Distributions from net realized gain		—			—			(.95	)		(1.44	)		(.80	)
Total dividends and/or distributions to shareholders		(.12	)		—			(1.30	)		(1.86	)		(1.13	)
Net asset value, end of period	$	11.35		$	10.19		$	8.38		$	16.28		$	17.57
Total Return, at Net Asset Value2		12.68	%		21.60	%		(43.62	)%		3.49	%		10.86	%
Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	89,580		$	88,746		$	68,798		$	121,399		$	111,363
Average net assets (in thousands)	$	87,280		$	77,101		$	100,164		$	117,012		$	100,010
Ratios to average net assets:3
Net investment income		1.87	%		2.42	%		2.90	%		2.30	%		2.17	%
Total expenses4		1.16	%		1.15	%		1.01	%		1.00	%		1.01	%
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses		0.90	%		0.85	%		0.92	%		0.98	%		1.01	%
Portfolio turnover rate5		54	%		87	%		67	%		68	%		76	%

1.	Per share amounts calculated based on the average shares outstanding during the period.
2.	Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
3.	Annualized for periods less than one full year.
4.	Total expenses including indirect expenses from affiliated fund were as follows:

Year Ended December 31, 2010	1.17	%
Year Ended December 31, 2009	1.17	%
Year Ended December 31, 2008	1.01	%
Year Ended December 31, 2007	1.00	%
Year Ended December 31, 2006	1.01	%

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, 2010	$	412,930,431	$	414,511,903
Year Ended December 31, 2009	$	504,698,365	$	520,212,670
Year Ended December 31, 2008	$	474,582,075	$	434,587,487
Year Ended December 31, 2007	$	296,201,319	$	315,527,720
Year Ended December 31, 2006	$	612,825,833	$	666,549,894

NOTES TO FINANCIAL STATEMENTS

1. Significant Accounting Policies

Oppenheimer Balanced 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 investment objective is to seek high total investment return, which includes current income and capital appreciation. 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.

     Each investment asset or liability of the Fund is assigned a level at measurement date based on the significance and source of the inputs to its valuation. Unadjusted quoted prices in active markets for identical securities are classified as “Level 1,” inputs other than unadjusted quoted prices for an asset that are observable are classified as “Level 2” and significant unobservable inputs, including the Manager’s judgment about the assumptions that a market participant would use in pricing an asset or liability, are classified as “Level 3.” The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. A table summarizing the Fund’s investments under these levels of classification is included following the Statement of Investments.

     Securities are valued using unadjusted quoted market prices, when available, as supplied primarily by portfolio pricing services approved by the Board of Trustees or dealers.

     Securities traded on a registered U.S. securities exchange are valued based on the last sale price of the security reported on the principal exchange on which it is traded, prior to the time when the Fund’s assets are valued. Securities whose principal exchange is NASDAQ^® are valued based on the official closing prices 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 current day’s closing “bid” and “asked” prices, and if not, at the current day’s closing bid price. A foreign security traded on a foreign exchange is valued based on the last sale price on the principal exchange on which the security is traded, as identified by the portfolio pricing service used by the Manager, prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the most recent official closing price on the principal exchange on which it is traded.

     Shares of a registered investment company that are not traded on an exchange are valued at that investment company’s net asset value per share.

     U.S. domestic and international debt instruments (including corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed securities) and “money market-type” debt instruments with a remaining maturity in excess of sixty days are valued at the mean between the “bid” and “asked” prices utilizing price quotations obtained from independent pricing services or broker-dealers. Such prices are typically determined based upon information obtained from market participants including reported trade data, broker-dealer price quotations and inputs such as benchmark yields and issuer spreads from identical or similar securities.

     “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.

     In the absence of a readily available unadjusted quoted market price, including for 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 the securities’ respective exchanges, the Manager, acting through its internal valuation committee, in good faith determines the fair valuation of that asset using consistently applied procedures under the supervision of the Board of Trustees (which reviews those fair valuations by the Manager). Those procedures include certain standardized methodologies to fair value securities. Such methodologies include, but are not limited to, pricing securities initially at cost and subsequently adjusting the value based on: changes in company specific fundamentals, changes in an appropriate securities index, or changes in the value of similar securities which may be adjusted for any discounts related to resale restrictions. When possible, such methodologies use observable market inputs such as unadjusted quoted prices of similar securities, observable interest rates, currency rates and yield curves. The methodologies used for valuing securities are not necessarily an indication of the risks associated with investing in those securities.

     There have been no significant changes to the fair valuation methodologies of the Fund during the period .

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 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, 2010, 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	$	38,535,628
Sold securities		3,511,651

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.

     Forward roll transactions may be deemed to entail embedded leverage since the Fund purchases mortgage-related securities with extended settlement dates rather than paying for the securities under a normal settlement cycle. This embedded leverage increases the Fund’s market value of investments relative to its net assets which can incrementally increase the volatility of the Fund’s performance. Forward roll transactions can be replicated over multiple settlement periods.

     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; and counterparty credit risk.

Securities Sold Short. The Fund may short sell when-issued securities for future settlement. The value of the open short position is recorded as a liability, and the Fund records an unrealized gain or loss for the change in value of the open short position. The Fund records a realized gain or loss when the short position is closed out.

     As of December 31, 2010, the Fund had no outstanding securities sold short. 

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. When applicable, the Fund’s investment in IMMF is included in the Statement of Investments. Shares of IMMF are valued at their net asset value per share. 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.

Investment in OFI Liquid Assets Fund, LLC. The Fund is permitted to invest cash collateral received in connection with its securities lending activities. Pursuant to the Fund’s Securities Lending Procedures, the Fund may invest cash collateral in, among other investments, an affiliated money market fund. OFI Liquid Assets Fund, LLC (“LAF”) is a limited liability company whose investment objective is to seek current income and stability of principal. The Manager is also the investment adviser of LAF. LAF is not registered under the Investment Company Act of 1940. However, LAF does comply with the investment restrictions applicable to registered money market funds set forth in Rule 2a-7 adopted under the Investment Company Act. When applicable, the Fund’s investment in LAF is included in the Statement of Investments. Shares of LAF are valued at their net asset value per share. As a shareholder, the Fund is subject to its proportional share of LAF’s expenses, including its management fee of 0.08%.

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.

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

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

					Net Unrealized
					Appreciation
					Based on Cost of
					Securities and
Undistributed	Undistributed		Accumulated		Other Investments
Net Investment	Long-Term		Loss		for Federal Income
Income	Gain		Carryforward1,2,3,4		Tax Purposes
$5,132,304	$	—	$	73,401,146	$	16,188,828

1. As of December 31, 2010, the Fund had $73,280,658 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, 2010, details of the capital loss carryforwards were as follows:

Expiring
2016	$	28,551,951
2017		44,728,707
Total	$	73,280,658

2.	The Fund had $120,488 of straddle losses which were deferred.
3.	During the fiscal year ended December 31, 2010, the Fund utilized $15,850,155 of capital loss carryforward to offset capital gains realized in that fiscal year.
4.	During the fiscal year ended December 31, 2009, 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, 2010. Net assets of the Fund were unaffected by the reclassifications.

Increase		Increase to
to Accumulated Net		Accumulated Net Realized
Investment Income		Loss on Investments
$	258,398	$	258,398

The tax character of distributions paid during the years ended December 31, 2010 and December 31, 2009 was as follows:

	Year Ended		Year Ended
	December 31, 2010		December 31, 2009
Distributions paid from:
Ordinary income	$	3,211,807	$	—

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, 2010 are noted in the following table. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss.

Federal tax cost of securities	$	258,342,473
Federal tax cost of other investments		(3,540,501	)
Total federal tax cost	$	254,801,972
Gross unrealized appreciation	$	29,102,763
Gross unrealized depreciation		(12,913,935	)
Net unrealized appreciation	$	16,188,828

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 with 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. 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.

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, 2010						Year Ended December 31, 2009
	Shares			Amount			Shares			Amount
Non-Service Shares
Sold		272,126		$	2,909,287			484,890		$	4,273,547
Dividends and/or distributions reinvested		209,000			2,184,050			—			—
Redeemed		(2,866,355	)		(30,336,478	)		(5,041,004	)		(44,580,442	)
Net decrease		(2,385,229	)	$	(25,243,141	)		(4,556,114	)	$	(40,306,895	)
Service Shares
Sold		627,983		$	6,716,376			1,886,160		$	16,689,571
Dividends and/or distributions reinvested		99,204			1,027,757			—			—
Redeemed		(1,542,514	)		(16,160,201	)		(1,382,728	)		(12,180,485	)
Net increase (decrease)		(815,327	)	$	(8,416,068	)		503,432		$	4,509,086

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 and LAF, for the year ended December 31, 2010, were as follows:

	Purchases		Sales
Investment securities	$	106,307,480	$	148,393,656
U.S. government and government agency obligations		2,602,331		2,837,036
To Be Announced (TBA) mortgage-related securities		412,930,431		414,511,903

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
Up to $200 million	0.75	%
Next $200 million	0.72
Next $200 million	0.69
Next $200 million	0.66
Over $800 million	0.60

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 fees at an annual rate of 0.10% of the daily net assets of each class of shares. For the year ended December 31, 2010, the Fund paid $239,666 to OFS for services to the Fund.

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 0.25% of the daily net assets of Service shares of the Fund. The Distributor currently uses all of those fees to compensate sponsors 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. The Manager has voluntarily agreed to waive a portion of the advisory fee and/or reimburse certain expenses so that the “Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses” will not exceed 0.67% of average annual net assets for Non-Service shares and 0.92% of average annual net assets for Service shares. During the year ended December 31, 2010, the Manager waived fees and/or reimbursed the Fund $343,597 and $197,835 for Non-Service and Service shares, respectively.

     From April 1, 2009 through March 31, 2010, the Manager voluntarily waived the advisory fee by 0.08% of the Fund’s average annual net assets. That voluntary waiver was applied after all other waivers and/or reimbursements. During the year ended December 31, 2010, the Manager waived $48,729.

     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, 2010, the Manager waived fees and/or reimbursed the Fund $24,787 for IMMF management fees.

     Some of these undertakings may be modified or terminated at any time; some may not be modified or terminated until after one year from the date of the current prospectus, as indicated therein.

     During the year ended December 31, 2010, the Manager voluntarily reimbursed the Fund $873 for certain transactions. The payment is reported separately in the Statement of Operations and increased the Fund’s total returns by less than 0.01%.

5. Risk Exposures and the Use of Derivative Instruments

The Fund’s investment objectives not only permit the Fund to purchase investment securities, they also allow the Fund to enter into various types of derivatives contracts, including, but not limited to, futures contracts, forward foreign currency exchange contracts, credit default swaps, interest rate swaps, total return swaps, and purchased and written options. In doing so, the Fund will employ strategies in differing combinations to permit it to increase, decrease, or change the level or types of exposure to market risk factors. Central to those strategies are features inherent to derivatives that make them more attractive for this purpose than equity and debt securities: they require little or no initial cash investment, they can focus exposure on only certain selected risk factors, and they may not require the ultimate receipt or delivery of the underlying security (or securities) to the contract. This may allow the Fund to pursue its objectives more quickly and efficiently than if it were to make direct purchases or sales of securities capable of effecting a similar response to market factors.

Market Risk Factors. In accordance with its investment objectives, the Fund may use derivatives to increase or decrease its exposure to one or more of the following market risk factors:

Commodity Risk. Commodity risk relates to the change in value of commodities or commodity indexes as they relate to increases or decreases in the commodities market. Commodities are physical assets that have tangible properties. Examples of these types of assets are crude oil, heating oil, metals, livestock, and agricultural products.

Credit Risk. Credit risk relates to the ability of the issuer to meet interest and principal payments, or both, as they come due. In general, lower-grade, higher-yield bonds are subject to credit risk to a greater extent than lower-yield, higher-quality bonds.

Equity Risk. Equity risk relates to the change in value of equity securities as they relate to increases or decreases in the general market.

Foreign Exchange Rate Risk. Foreign exchange rate risk relates to the change in the U.S. dollar value of a security held that is denominated in a foreign currency. The U.S. dollar value of a foreign currency denominated security will decrease as the dollar appreciates against the currency, while the U.S. dollar value will increase as the dollar depreciates against the currency.

Interest Rate Risk. Interest rate risk refers to the fluctuations in value of fixed-income securities resulting from the inverse relationship between price and yield. For example, an increase in general interest rates will tend to reduce the market value of already issued fixed-income investments, and a decline in general interest rates will tend to increase their value. In addition, debt securities with longer maturities, which tend to have higher yields, are subject to potentially greater fluctuations in value from changes in interest rates than obligations with shorter maturities.

Volatility Risk. Volatility risk refers to the magnitude of the movement, but not the direction of the movement, in a financial instrument’s price over a defined time period. Large increases or decreases in a financial instrument’s price over a relative time period typically indicate greater volatility risk, while small increases or decreases in its price typically indicate lower volatility risk.

The Fund’s actual exposures to these market risk factors during the period are discussed in further detail, by derivative type, below.

Risks of Investing in Derivatives. The Fund’s use of derivatives can result in losses due to unanticipated changes in the market risk factors and the overall market. In instances where the Fund is using derivatives to decrease, or hedge, exposures to market risk factors for securities held by the Fund, there are also risks that those derivatives may not perform as expected resulting in losses for the combined or hedged positions.

     Derivatives may have little or no initial cash investment relative to their market value exposure and therefore can produce significant gains or losses in excess of their cost. This use of embedded leverage allows the Fund to increase its market value exposure relative to its net assets and can substantially increase the volatility of the Fund’s performance.

     Additional associated risks from investing in derivatives also exist and potentially could have significant effects on the valuation of the derivative and the Fund. Typically, the associated risks are not the risks that the Fund is attempting to increase or decrease exposure to, per its investment objectives, but are the additional risks from investing in derivatives. Examples of these associated risks are liquidity risk, which is the risk that the Fund will not be able to sell the derivative in the open market in a timely manner, and counterparty credit risk, which is the risk that the counterparty will not fulfill its obligation to the Fund. Associated risks can be different for each type of derivative and are discussed by each derivative type in the notes that follow.

Counterparty Credit Risk. Certain derivative positions are subject to counterparty credit risk, which is the risk that the counterparty will not fulfill its obligation to the Fund. The Fund’s derivative counterparties are financial institutions who are subject to market conditions that may weaken their financial position. The Fund intends to enter into financial transactions with counterparties that the Manager believes to be creditworthy at the time of the transaction.

Credit Related Contingent Features. The Fund’s agreements with derivative counterparties have several credit related contingent features that if triggered would allow its derivatives counterparties to close out and demand payment or additional collateral to cover their exposure from the Fund. Credit related contingent features are established between the Fund and its derivatives counterparties to reduce the risk that the Fund will not fulfill its payment obligations to its counterparties. These triggering features include, but are not limited to, a percentage decrease in the Fund’s net assets and or a percentage decrease in the Fund’s Net Asset Value or NAV. The contingent features are established within the Fund’s International Swap and Derivatives Association, Inc. master agreements which govern certain positions in swaps, over-the-counter options and swaptions, and forward currency exchange contracts for each individual counterparty. 

Valuations of derivative instruments as of December 31, 2010 are as follows:

	Asset Derivatives				Liability Derivatives
	Statement				Statement
Derivatives Not	of Assets				of Assets
Accounted for as	and Liabilities				and Liabilities
Hedging Instruments	Location	Value			Location	Value
Interest rate contracts	Futures margins	$	52,512	*	Futures margins	$	14,250	*

* Includes only the current day’s variation margin. Prior variation margin movements have been reflected in cash on the Statement of Assets and Liabilities upon receipt or payment.

The effect of derivative instruments on the Statement of Operations is as follows:

Amount of Realized Gain or (Loss) Recognized on Derivatives
Derivatives Not	Closing and
Accounted for as	expiration of futures
Hedging Instruments	contracts		Swap contracts		Total
Credit contracts	$	—	$	4,460	$	4,460
Interest rate contracts		976,981		—		976,981
Total	$	976,981	$	4,460	$	981,441

Amount of Change in Unrealized Gain or (Loss) Recognized on Derivatives
Derivatives Not
Accounted for as
Hedging Instruments	Futures contracts		Swap contracts		Total
Credit contracts	$	—	$	35,332	$	35,332
Interest rate contracts		321,322		—		321,322
Total	$	321,322	$	35,332	$	356,654

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 Fund may buy and sell futures contracts and 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.

     The Fund has purchased futures contracts on various bonds and notes to increase exposure to interest rate risk.

     The Fund has sold futures contracts on various bonds and notes to decrease exposure to interest rate risk.

     During the year ended December 31, 2010, the Fund had an average market value of $13,735,596 and $11,462,097 on futures contracts purchased and sold, respectively.

     Additional associated 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.

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 values of swap contracts are aggregated by positive and negative values and disclosed separately on the Statement of Assets and Liabilities by contracts in unrealized appreciation and depreciation positions. Upfront payments paid or received, if any, affect the value of the respective swap. Therefore, to determine the unrealized appreciation (depreciation) on swaps, upfront payments paid should be subtracted from, while upfront payments received should be added to, the value of contracts reported as an asset on the Statement of Assets and Liabilities. Conversely, upfront payments paid should be added to, while upfront payments received should be subtracted from the value of contracts reported as a liability. 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.

     Swap contract agreements are exposed to the market risk factor of the specific underlying reference asset. Swap contracts are typically more attractively priced compared to similar investments in related cash securities because they isolate the risk to one market risk factor and eliminate the other market risk factors. Investments in cash securities (for instance bonds) have exposure to multiple risk factors (credit and interest rate risk). Because swaps require little or no initial cash investment, they can expose the Fund to substantial risk in the isolated market risk factor.

     Credit Default Swap Contracts. A credit default swap is a bilateral contract that enables an investor to buy or sell protection on a debt security against a defined-issuer credit event, such as the issuer’s failure to make timely payments of interest or principal on the debt security, bankruptcy or restructuring. The Fund may enter into credit default swaps either by buying or selling protection on a single security or a basket of securities (the “reference asset”).

     The buyer of protection pays a periodic fee to the seller of protection based on the notional amount of debt securities underlying the swap contract. The seller of protection agrees to compensate the buyer of protection for future potential losses as a result of a credit event on the reference asset. The contract effectively transfers the credit event risk of the reference asset from the buyer of protection to the seller of protection.

     The ongoing value of the contract will fluctuate throughout the term of the contract based primarily on the credit risk of the reference asset. If the credit quality of the reference asset improves relative to the credit quality at contract initiation, the buyer of protection may have an unrealized loss greater than the anticipated periodic fee owed. This unrealized loss would be the result of current credit protection being cheaper than the cost of credit protection at contract initiation. If the buyer elects to terminate the contract prior to its maturity, and there has been no credit event, this unrealized loss will become realized. If the contract is held to maturity, and there has been no credit event, the realized loss will be equal to the periodic fee paid over the life of the contract.

     If there is a credit event, the buyer of protection can exercise its rights under the contract and receive a payment from the seller of protection equal to the notional amount of the reference asset less the market value of the reference asset. Upon exercise of the contract the difference between the value of the underlying reference asset and the notional amount is recorded as realized gain (loss) and is included on the Statement of Operations. 

     The Fund has engaged in pairs trades by purchasing protection through a credit default swap referenced to the debt of an issuer, and simultaneously selling protection through a credit default swap referenced to the debt of a different issuer with the intent to realize gains from the pricing differences of the two issuers who are expected to have similar market risks. Pairs trades attempt to gain exposure to credit risk while hedging or offsetting the effects of overall market movements.

     For the year ended December 31, 2010, the Fund had average notional amounts of $758,077 and $758,077 on credit default swaps to buy protection and credit default swaps to sell protection, respectively.

     Additional associated risks to the Fund include counterparty credit risk and liquidity risk.

      As of December 31, 2010, the Fund had no such credit default swaps outstanding.

6. Restricted Securities

As of December 31, 2010, investments in securities included issues that are restricted. A restricted security may have a contractual restriction on its resale and is valued under methods approved by the Board of Trustees as reflecting fair value. Securities that are restricted are marked with an applicable footnote on the Statement of Investments. Restricted securities are reported on a schedule following the Statement of Investments.

7. 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, 2010, the Fund had no securities on loan.

8. Pending Litigation

Since 2009, a number of lawsuits have been pending in federal courts against the Manager, the Distributor, and certain mutual funds (“Defendant Funds”) advised by the Manager and distributed by the Distributor (but not including the Fund). The lawsuits naming the Defendant Funds also name as defendants certain officers and current and former trustees of the respective Defendant Funds. The plaintiffs seek class action status on behalf of purchasers of shares of the respective Defendant Fund during a particular time period. The lawsuits raise claims under federal securities laws alleging that, among other things, the disclosure documents of the respective Defendant Fund contained misrepresentations and omissions, that such Defendant Fund’s investment policies were not followed, and that such Defendant Fund and the other defendants violated federal securities laws and regulations. The plaintiffs seek unspecified damages, equitable relief and an award of attorneys’ fees and litigation expenses.

     In 2009, what are claimed to be derivative lawsuits were filed in state court against the Manager and a subsidiary (but not against the Fund), on behalf of the New Mexico Education Plan Trust. These lawsuits allege breach of contract, breach of fiduciary duty, negligence and violation of state securities laws, and seek compensatory damages, equitable relief and an award of attorneys’ fees and litigation expenses.

     Other lawsuits have been filed since 2008 in various state and federal courts, against the Manager and certain of its affiliates. Those lawsuits were filed by investors who made investments through an affiliate of the Manager, and relate to the alleged investment fraud perpetrated by Bernard Madoffand his firm (“Madoff”) . Those suits allege a variety of claims, including breach of fiduciary duty, fraud, negligent misrepresentation, unjust enrichment, and violation of federal and state securities laws and regulations, among others. They seek unspecified damages, equitable relief and an award of attorneys’ fees and litigation expenses. None of the suits have named the Distributor, any of the Oppenheimer mutual funds or any of their independent Trustees or Directors as defendants. None of the Oppenheimer funds invested in any funds or accounts managed by Madoff.

     The Manager believes that the lawsuits described above are without legal merit and is defending against them vigorously. The Defendant Funds’ Boards of Trustees have also engaged counsel to defend the suits brought against those Funds and the present and former Independent Trustees named in those suits. While it is premature to render any opinion as to the outcome in these lawsuits, or whether any costs that the Defendant Funds may bear in defending the suits might not be reimbursed by insurance, the Manager believes that these suits should not impair the ability of the Manager or the Distributor to perform their respective duties to the Fund, and that the outcome of all of the suits together should not have any material effect on the operations of any of the Oppenheimer funds.

9. Subsequent Event

The Regulated Investment Company Modernization Act of 2010 (the “Act”) was signed into law on December 22, 2010. The Act makes changes to a number of tax rules impacting the Fund. Under the Act, future capital losses generated by a fund may be carried over indefinitely, but these losses must be used prior to the utilization of any pre-enactment capital losses. Since pre-enactment capital losses may only be carried forward for eight years, there may be a greater likelihood that all or a portion of a fund’s pre-enactment capital losses will expire unused. In general, the provisions of the Act will be effective for the Fund’s fiscal year ending December 31, 2011. Specific information regarding the impact of the Act on the Fund will be contained within the “Federal Taxes” section of the financial statement notes for the fiscal year ending December 31, 2011.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Trustees and Shareholders of Oppenheimer Variable Account Funds:

We have audited the accompanying statement of assets and liabilities of Oppenheimer Capital Appreciation Fund/VA (one of the portfolios constituting the Oppenheimer Variable Account Funds), including the statement of investments, as of December 31, 2010, the related statement of operations for the year then ended, and the statements of changes in net assets and the financial highlights for each of the years in the two-year 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. The accompanying financial highlights of Oppenheimer Capital Appreciation Fund/VA for the years ended prior to January 1, 2009 were audited by other auditors whose report dated February 11, 2009 expressed an unqualified opinion on those financial highlights.

     We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2010, by correspondence with the custodian and transfer agent. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Oppenheimer Capital Appreciation Fund/VA as of December 31, 2010, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for each of the years in the two-year period then ended, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG llp

Denver, Colorado
February 16, 2011

STATEMENT OF INVESTMENTS December 31, 2010

	Shares		Value
Common Stocks—100.2%
Consumer Discretionary—12.4%
Hotels, Restaurants & Leisure—1.6%
McDonald’s Corp.		248,240	$	19,054,901
Internet & Catalog Retail—1.5%
Amazon.com, Inc.1		97,124		17,482,320
Media—2.0%
McGraw-Hill Cos., Inc. (The)		248,450		9,046,065
Walt Disney Co. (The)		407,570		15,287,951
				24,334,016
Multiline Retail—0.3%
Target Corp.		57,250		3,442,443
Specialty Retail—3.1%
Bed Bath & Beyond, Inc.1		262,900		12,921,535
O’Reilly Automotive, Inc.1		194,740		11,766,191
TJX Cos., Inc. (The)		273,070		12,121,577
				36,809,303
Textiles, Apparel & Luxury Goods—3.9%
Coach, Inc.		288,630		15,964,125
Nike, Inc., Cl. B		205,160		17,524,767
Polo Ralph Lauren Corp., Cl. A		119,640		13,270,469
				46,759,361
Consumer Staples—9.1%
Beverages—1.5%
Brown-Forman Corp., Cl. B		34,450		2,398,409
PepsiCo, Inc.		240,250		15,695,533
				18,093,942
Food & Staples Retailing—1.5%
Costco Wholesale Corp.		247,550		17,875,586
Food Products—4.8%
DANONE SA		235,730		14,811,680
General Mills, Inc.		368,033		13,098,294
Nestle SA		295,586		17,308,378
Unilever NV CVA		368,700		11,479,842
				56,698,194
Household Products—1.3%
Colgate-Palmolive Co.		198,240		15,932,549
Energy—9.6%
Energy Equipment & Services—3.1%
Halliburton Co.		402,720		16,443,058
Schlumberger Ltd.		254,890		21,283,315
				37,726,373
Oil, Gas & Consumable Fuels—6.5%
Chevron Corp.		173,200		15,804,500
ConocoPhillips		321,330		21,882,573
EOG Resources, Inc.		129,930		11,876,901
Occidental Petroleum Corp.		282,860		27,748,566
				77,312,540
Financials—5.7%
Commercial Banks—2.4%
U.S. Bancorp		548,930		14,804,642
Wells Fargo & Co.		452,580		14,025,454
				28,830,096
Diversified Financial Services—3.3%
BM&F BOVESPA SA		1,269,560		10,041,761
CME Group, Inc.		29,610		9,527,018
IntercontinentalExchange, Inc.1		72,720		8,664,588
JPMorgan Chase & Co.		267,710		11,356,258
				39,589,625
Health Care—13.5%
Biotechnology—1.3%
Celgene Corp.1		255,860		15,131,560
Health Care Equipment & Supplies—2.1%
Baxter International, Inc.		271,150		13,725,613
Stryker Corp.		218,840		11,751,708
				25,477,321
Health Care Providers & Services—2.3%
Express Scripts, Inc.1		240,780		13,014,159
Medco Health Solutions, Inc.1		232,640		14,253,853
				27,268,012
Life Sciences Tools & Services—2.3%
Mettler-Toledo International, Inc.1		56,650		8,566,047
Thermo Fisher Scientific, Inc.1		347,210		19,221,546
				27,787,593
Pharmaceuticals—5.5%
Allergan, Inc.		288,600		19,818,162
Bristol-Myers Squibb Co.		543,080		14,380,758
Novo Nordisk AS, Cl. B		165,769		18,692,680
Roche Holding AG		82,488		12,086,477
				64,978,077
Industrials—14.5%
Aerospace & Defense—2.8%
Goodrich Corp.		216,332		19,052,359
United Technologies Corp.		186,350		14,669,472
				33,721,831
Air Freight & Logistics—1.3%
United Parcel Service, Inc., Cl. B		208,910		15,162,688

	Shares			Value
Electrical Equipment—2.9%
ABB Ltd.		599,978		$	13,366,355
Emerson Electric Co.		362,610			20,730,414
					34,096,769
Machinery—6.2%
Caterpillar, Inc.		210,700			19,734,162
Danaher Corp.		329,280			15,532,138
Joy Global, Inc.		211,607			18,356,907
Parker-Hannifin Corp.		234,330			20,222,679
					73,845,886
Road & Rail—1.3%
Union Pacific Corp.		170,770			15,823,548
Information Technology—30.0%
Communications Equipment—7.8%
Cisco Systems, Inc.1		1,187,670			24,026,564
Juniper Networks, Inc.1		646,920			23,884,286
QUALCOMM, Inc.		915,390			45,302,651
					93,213,501
Computers & Peripherals—5.1%
Apple, Inc.1		189,280			61,054,157
Electronic Equipment & Instruments—1.3%
Corning, Inc.		783,180			15,131,038
Internet Software & Services—5.9%
Akamai Technologies, Inc.1		287,860			13,543,813
eBay, Inc.1		515,230			14,338,851
Google, Inc., Cl. A1		72,920			43,312,292
					71,194,956
IT Services—3.5%
Cognizant Technology Solutions Corp.1		214,730			15,737,562
International Business Machines Corp.		88,240			12,950,102
Visa, Inc., Cl. A		180,027			12,670,300
					41,357,964
Semiconductors & Semiconductor Equipment—1.6%
Broadcom Corp., Cl. A		455,600			19,841,380
Software—4.8%
Intuit, Inc.1		233,840			11,528,312
Oracle Corp.		1,014,540			31,755,102
Vmware, Inc., Cl. A1		155,930			13,863,736
					57,147,150
Materials—4.2%
Chemicals—2.5%
Ecolab, Inc.		239,720			12,086,682
Praxair, Inc.		188,212			17,968,600
					30,055,282
Metals & Mining—1.7%
Barrick Gold Corp.		243,240			12,935,503
Freeport-McMoRan Copper & Gold, Inc., Cl. B		64,150			7,703,774
					20,639,277
Telecommunication Services—1.2%
Wireless Telecommunication Services—1.2%
NII Holdings, Inc.1		319,600			14,273,336
Total Common Stocks (Cost $856,088,482)					1,197,142,575
Investment Companies—0.0%
JPMorgan U.S. Treasury Plus Money Market Fund, Agency Shares, 0.00%2,3		9,530			9,530
Oppenheimer Institutional Money Market Fund, Cl. E, 0.21%2,4		72,534			72,534
Total Investment Companies (Cost $82,064)					82,064
Total Investments, at Value (Cost $856,170,546)		100.2	%		1,197,224,639
Liabilities in Excess of Other Assets		(0.2	)		(2,149,238	)
Net Assets		100.0	%	$	1,195,075,401

Footnotes to Statement of Investments

1.	Non-income producing security.
2.	Rate shown is the 7-day yield as of December 31, 2010.
3.	Interest rate is less than 0.0005%.
4.	Is or was an affiliate, as defined in the Investment Company Act of 1940, at or during the period ended December 31, 2010, 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, 2009		Additions		Reductions		December 31, 2010
Oppenheimer Institutional Money Market Fund, Cl. E		7,898,767		269,513,524		277,339,757		72,534

	Value		Income
Oppenheimer Institutional Money Market Fund, Cl. E	$	72,534	$	33,991

Valuation Inputs

Various data inputs are used in determining the value of each of the Fund’s investments as of the reporting period end. These data inputs are categorized in the following hierarchy under applicable financial accounting standards:

1) Level 1—unadjusted quoted prices in active markets for identical assets or liabilities (including securities actively traded on a securities exchange)

2) Level 2—inputs other than unadjusted quoted prices that are observable for the asset or liability (such as unadjusted quoted prices for similar assets and market corroborated inputs such as interest rates, prepayment speeds, credit risks, etc.)

3) Level 3—significant unobservable inputs (including the Manager’s own judgments about assumptions that market participants would use in pricing the asset or liability).

The table below categorizes amounts that are included in the Fund’s Statement of Assets and Liabilities as of December 31, 2010 based on valuation input level:

						Level 3–
	Level 1–		Level 2–			Significant
	Unadjusted		Other Significant			Unobservable
	Quoted Prices		Observable Inputs			Inputs		Value
Assets Table
Investments, at Value:
Common Stocks
Consumer Discretionary	$	147,882,344	$	—		$	—	$	147,882,344
Consumer Staples		108,600,271		—			—		108,600,271
Energy		115,038,913		—			—		115,038,913
Financials		68,419,721		—			—		68,419,721
Health Care		160,642,563		—			—		160,642,563
Industrials		172,650,722		—			—		172,650,722
Information Technology		358,940,146		—			—		358,940,146
Materials		50,694,559		—			—		50,694,559
Telecommunication Services		14,273,336		—			—		14,273,336
Investment Companies		82,064		—			—		82,064
Total Assets	$	1,197,224,639	$	—		$	—	$	1,197,224,639
Liabilities Table
Other Financial Instruments:
Foreign currency exchange contracts	$	—	$	(1,356	)	$	—	$	(1,356	)
Total Liabilities	$	—	$	(1,356	)	$	—	$	(1,356	)

Currency contracts and forwards, if any, are reported at their unrealized appreciation/depreciation at measurement date, which represents the change in the contract’s value from trade date. Futures, if any, are reported at their variation margin at measurement date, which represents the amount due to/from the Fund at that date. All additional assets and liabilities included in the above table are reported at their market value at measurement date. 

The table below shows the significant transfers between Level 1 and Level 2. The Fund’s policy is to recognize transfers in and transfers out as of the beginning of the reporting period.

	Transfers into Level 1*		Transfers out of Level 2*
Assets Table
Investments, at Value:
Common Stocks
Financials		$ 11,587,906		$ (11,587,906	)
Industrials		19,626,598		(19,626,598	)
Total Assets		$ 31,214,504		$ (31,214,504	)

* Transferred from Level 2 to Level 1 due to the presence of a readily available unadjusted quoted market price. As of the prior reporting period end, these securities were absent of a readily available unadjusted quoted market price due to a significant event occurring before the Fund’s assets were valued but after the close of the securities’ respective exchanges.

Foreign Currency Exchange Contracts as of December 31, 2010 are as follows:

		Contract
		Amount	Expiration				Unrealized
Counterparty/Contract Description	Buy/Sell	(000’s)	Date		Value		Depreciation
Deutsche Bank Capital Corp.
Danish Krone (DKK)	Sell	399 DKK		1/3/11	$	71,482	$	1,356

See the accompanying Notes for further discussion of the methods used in determining value of the Fund’s investments, and a summary of changes to the valuation methodologies, if any, during the reporting period.

STATEMENT OF ASSETS AND LIABILITIES December 31, 2010

Assets
Investments, at value—see accompanying statement of investments:
Unaffiliated companies (cost $856,098,012)	$	1,197,152,105
Affiliated companies (cost $72,534)		72,534
		1,197,224,639
Receivables and other assets:
Dividends		2,631,496
Shares of beneficial interest sold		136,457
Investments sold		71,483
Other		37,236
Total assets		1,200,101,311
Liabilities
Unrealized depreciation on foreign currency exchange contracts		1,356
Payables and other liabilities:
Shares of beneficial interest redeemed		4,343,554
Distribution and service plan fees		271,331
Shareholder communications		218,390
Transfer and shareholder servicing agent fees		111,056
Trustees’ compensation		34,751
Other		45,472
Total liabilities		5,025,910
Net Assets	$	1,195,075,401
Composition of Net Assets
Par value of shares of beneficial interest	$	29,715
Additional paid-in capital		1,209,571,625
Accumulated net investment income		1,761,658
Accumulated net realized loss on investments and foreign currency transactions		(357,604,256	)
Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies		341,316,659
Net Assets	$	1,195,075,401
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 $771,086,429 and 19,112,005 shares of beneficial interest outstanding)	$	40.35
Service Shares:
Net asset value, redemption price per share and offering price per share (based on net assets of $423,988,972 and 10,602,603 shares of beneficial interest outstanding)	$	39.99

STATEMENT OF OPERATIONS For the Year Ended December 31, 2010

Investment Income
Dividends:
Unaffiliated companies (net of foreign withholding taxes of $387,126)	$	15,344,362
Affiliated companies		33,991
Interest		714
Total investment income		15,379,067
Expenses
Management fees		9,268,654
Distribution and service plan fees—Service shares		1,058,768
Transfer and shareholder servicing agent fees:
Non-Service shares		976,827
Service shares		427,935
Shareholder communications:
Non-Service shares		154,704
Service shares		68,283
Trustees’ compensation		54,830
Custodian fees and expenses		40,925
Administration service fees		1,500
Other		109,303
Total expenses		12,161,729
Less waivers and reimbursements of expenses		(22,303	)
Net expenses		12,139,426
Net Investment Income		3,239,641
Realized and Unrealized Gain (Loss)
Net realized gain on:
Investments from unaffiliated companies		85,546,977
In-kind redemptions		72,760,040
Foreign currency transactions		973,183
Net realized gain		159,280,200
Net change in unrealized appreciation/depreciation on:
Investments		(42,832,009	)
Translation of assets and liabilities denominated in foreign currencies		3,890,351
Net change in unrealized appreciation/depreciation		(38,941,658	)
Net Increase in Net Assets Resulting from Operations	$	123,578,183

STATEMENTS OF CHANGES IN NET ASSETS

Year Ended December 31,	2010			2009
Operations
Net investment income	$	3,239,641		$	2,793,303
Net realized gain (loss)		159,280,200			(43,296,323	)
Net change in unrealized appreciation/depreciation		(38,941,658	)		521,300,083
Net increase in net assets resulting from operations		123,578,183			480,797,063
Dividends and/or Distributions to Shareholders
Dividends from net investment income:
Non-Service shares		(1,796,034	)		(2,975,281	)
Service shares		—			(24,236	)
		(1,796,034	)		(2,999,517	)
Beneficial Interest Transactions
Net decrease in net assets resulting from beneficial interest transactions:
Non-Service shares		(385,079,054	)		(97,375,095	)
Service shares		(59,987,624	)		(5,924,734	)
		(445,066,678	)		(103,299,829	)
Net Assets
Total increase (decrease)		(323,284,529	)		374,497,717
Beginning of period		1,518,359,930			1,143,862,213
End of period (including accumulated net investment income of $1,761,658 and $434,803, respectively)	$	1,195,075,401		$	1,518,359,930

FINANCIAL HIGHLIGHTS

Non-Service Shares      Year Ended December 31,	2010			2009			2008			2007			2006
Per Share Operating Data
Net asset value, beginning of period	$	36.94		$	25.67		$	47.18		$	41.43		$	38.52
Income (loss) from investment operations:
Net investment income1		.11			.09			.10			.07			.07
Net realized and unrealized gain (loss)		3.36			11.27			(21.55	)		5.78			2.98
Total from investment operations		3.47			11.36			(21.45	)		5.85			3.05
Dividends and/or distributions to shareholders:
Dividends from net investment income		(.06	)		(.09	)		(.06	)		(.10	)		(.14	)
Net asset value, end of period	$	40.35		$	36.94		$	25.67		$	47.18		$	41.43
Total Return, at Net Asset Value2		9.42	%		44.52	%		(45.52	)%		14.15	%		7.95	%
Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	771,086		$	1,074,190		$	829,931		$	1,631,791		$	1,598,967
Average net assets (in thousands)	$	976,242		$	927,670		$	1,256,525		$	1,631,686		$	1,615,352
Ratios to average net assets:3
Net investment income		0.31	%		0.29	%		0.25	%		0.15	%		0.17	%
Total expenses4		0.79	%		0.78	%		0.66	%		0.65	%		0.67	%
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses		0.79	%		0.78	%		0.66	%		0.65	%		0.67	%
Portfolio turnover rate		58	%		46	%		67	%		59	%		47	%

1.	Per share amounts calculated based on the average shares outstanding during the period.
2.	Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
3.	Annualized for periods less than one full year.
4.	Total expenses including indirect expenses from affiliated fund were as follows:

Year Ended December 31, 2010	0.79	%
Year Ended December 31, 2009	0.78	%
Year Ended December 31, 2008	0.66	%
Year Ended December 31, 2007	0.65	%
Year Ended December 31, 2006	0.67	%

Service Shares      Year Ended December 31,	2010			2009			2008			2007			2006
Per Share Operating Data
Net asset value, beginning of period	$	36.64		$	25.42		$	46.78		$	41.09		$	38.23
Income (loss) from investment operations:
Net investment income (loss)1		.02			.01			—	2		(.05	)		(.03	)
Net realized and unrealized gain (loss)		3.33			11.21			(21.36	)		5.74			2.96
Total from investment operations		3.35			11.22			(21.36	)		5.69			2.93
Dividends and/or distributions to shareholders:
Dividends from net investment income		—			—	2		—			—	2		(.07	)
Net asset value, end of period	$	39.99		$	36.64		$	25.42		$	46.78		$	41.09
Total Return, at Net Asset Value3		9.15	%		44.15	%		(45.66	)%		13.86	%		7.68	%
Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	423,989		$	444,170		$	313,931		$	546,887		$	463,140
Average net assets (in thousands)	$	427,640		$	368,634		$	454,558		$	510,874		$	426,539
Ratios to average net assets:4
Net investment income (loss)		0.06	%		0.03	%		0.00	%5		(0.10	)%		(0.08	)%
Total expenses6		1.04	%		1.04	%		0.91	%		0.91	%		0.92	%
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses		1.04	%		1.03	%		0.91	%		0.91	%		0.92	%
Portfolio turnover rate		58	%		46	%		67	%		59	%		47	%

1.	Per share amounts calculated based on the average shares outstanding during the period.
2.	Less than $0.005 per share.
3.	Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
4.	Annualized for periods less than one full year.
5.	Less than 0.005%.
6.	Total expenses including indirect expenses from affiliated fund were as follows:

Year Ended December 31, 2010	1.04	%
Year Ended December 31, 2009	1.04	%
Year Ended December 31, 2008	0.91	%
Year Ended December 31, 2007	0.91	%
Year Ended December 31, 2006	0.92	%

NOTES TO FINANCIAL STATEMENTS

1. Significant Accounting Policies

Oppenheimer Capital Appreciation 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 investment objective is to seek capital appreciation by investing in securities of well-known, established companies. 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.

     Each investment asset or liability of the Fund is assigned a level at measurement date based on the significance and source of the inputs to its valuation. Unadjusted quoted prices in active markets for identical securities are classified as “Level 1,” inputs other than unadjusted quoted prices for an asset that are observable are classified as “Level 2” and significant unobservable inputs, including the Manager’s judgment about the assumptions that a market participant would use in pricing an asset or liability, are classified as “Level 3.” The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. A table summarizing the Fund’s investments under these levels of classification is included following the Statement of Investments.

     Securities are valued using unadjusted quoted market prices, when available, as supplied primarily by portfolio pricing services approved by the Board of Trustees or dealers.

     Securities traded on a registered U.S. securities exchange are valued based on the last sale price of the security reported on the principal exchange on which it is traded, prior to the time when the Fund’s assets are valued. Securities whose principal exchange is NASDAQ^® are valued based on the official closing prices 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 current day’s closing “bid” and “asked” prices, and if not, at the current day’s closing bid price. A foreign security traded on a foreign exchange is valued based on the last sale price on the principal exchange on which the security is traded, as identified by the portfolio pricing service used by the Manager, prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the most recent official closing price on the principal exchange on which it is traded.

     Shares of a registered investment company that are not traded on an exchange are valued at that investment company’s net asset value per share.

     U.S. domestic and international debt instruments (including corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed securities) and “money market-type” debt instruments with a remaining maturity in excess of sixty days are valued at the mean between the “bid” and “asked” prices utilizing price quotations obtained from independent pricing services or broker-dealers. Such prices are typically determined based upon information obtained from market participants including reported trade data, broker-dealer price quotations and inputs such as benchmark yields and issuer spreads from identical or similar securities.

     Forward foreign currency exchange contracts are valued utilizing current and forward currency rates obtained from independent pricing services.

     “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. 

In the absence of a readily available unadjusted quoted market price, including for 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 the securities’ respective exchanges, the Manager, acting through its internal valuation committee, in good faith determines the fair valuation of that asset using consistently applied procedures under the supervision of the Board of Trustees (which reviews those fair valuations by the Manager). Those procedures include certain standardized methodologies to fair value securities. Such methodologies include, but are not limited to, pricing securities initially at cost and subsequently adjusting the value based on: changes in company specific fundamentals, changes in an appropriate securities index, or changes in the value of similar securities which may be adjusted for any discounts related to resale restrictions. When possible, such methodologies use observable market inputs such as unadjusted quoted prices of similar securities, observable interest rates, currency rates and yield curves. The methodologies used for valuing securities are not necessarily an indication of the risks associated with investing in those securities.

     There have been no significant changes to the fair valuation methodologies of the Fund during the period.

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. When applicable, the Fund’s investment in IMMF is included in the Statement of Investments. Shares of IMMF are valued at their net asset value per share. 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.

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.

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

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

					Net Unrealized
					Appreciation
					Based on Cost of
Undistributed	Undistributed		Accumulated		Securities and Other
Net Investment	Long-Term		Loss		Investments for Federal
Income	Gain		Carryforward1,2,3		Income Tax Purposes
$3,118,651		$—		$352,318,773		$335,891,539

1. As of December 31, 2010, the Fund had $352,318,773 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, 2010, details of the capital loss carryforwards were as follows:

Expiring
2011	$	23,369,993
2013		34,677,838
2016		113,637,770
2017		180,633,172
Total	$	352,318,773

2.	During the fiscal year ended December 31, 2010, the Fund utilized $72,900,879 of capital loss carryforward to offset capital gains realized in that fiscal year.
3.	During the fiscal year ended December 31, 2009, 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, 2010. Net assets of the Fund were unaffected by the reclassifications.

	Reduction		Increase
	to Accumulated		to Accumulated Net
Increase	Net Investment		Realized Loss
to Paid-in Capital	Income		on Investments
$70,658,398		$116,752		$70,541,646

The tax character of distributions paid during the years ended December 31, 2010 and December 31, 2009 was as follows:

	Year Ended		Year Ended
	December 31, 2010		December 31, 2009
Distributions paid from:
Ordinary income		$1,796,034		$2,999,517

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, 2010 are noted in the following table. 

The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss.

Federal tax cost of securities	$	861,595,666
Federal tax cost of other investments		(70,126	)
Total federal tax cost	$	861,525,540
Gross unrealized appreciation	$	341,183,635
Gross unrealized depreciation		(5,292,096	)
Net unrealized appreciation	$	335,891,539

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 with 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. 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, 2010						Year Ended December 31, 2009
	Shares			Amount			Shares			Amount
Non-Service Shares
Sold		2,554,247		$	93,160,063			2,978,928		$	88,352,509
Dividends and/or distributions reinvested		48,307			1,796,034			134,506			2,975,281
Redeemed		(12,572,941	)		(480,035,151	)		(6,361,581	)		(188,702,885	)
Net decrease		(9,970,387	)	$	(385,079,054	)		(3,248,147	)	$	(97,375,095	)
Service Shares
Sold		1,613,467		$	57,695,403			2,097,785		$	61,332,284
Dividends and/or distributions reinvested		—			—			1,099			24,157
Redeemed		(3,133,549	)		(117,683,027	)		(2,325,106	)		(67,281,175	)
Net decrease		(1,520,082	)	$	(59,987,624	)		(226,222	)	$	(5,924,734	)

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, 2010, were as follows:

	Purchases		Sales
Investment securities	$	786,778,432	$	1,200,250,724

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
Up to $200 million	0.75	%
Next $200 million	0.72
Next $200 million	0.69
Next $200 million	0.66
Over $800 million	0.60

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 fees at an annual rate of 0.10% of the daily net assets of each class of shares. For the year ended December 31, 2010, the Fund paid $1,421,342 to OFS for services to the Fund.

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 0.25% of the daily net assets of Service shares of the Fund. The Distributor currently uses all of those fees to compensate sponsors 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. The Manager has voluntarily agreed to limit the Fund’s total annual operating expenses so that those expenses, as percentages of daily net assets, will not exceed the annual rate of 0.80% for Non-Service shares and 1.05% for Service shares. During the year ended December 31, 2010, the Manager waived fees and/or reimbursed the Fund $5,467 and $2,227 for Non-Service and Service shares, respectively.

     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, 2010, the Manager waived fees and/or reimbursed the Fund $14,609 for IMMF management fees.

     Some of these undertakings may be modified or terminated at any time; some may not be modified or terminated until after one year from the date of the current prospectus, as indicated therein.

5. Risk Exposures and the Use of Derivative Instruments

The Fund’s investment objectives not only permit the Fund to purchase investment securities, they also allow the Fund to enter into various types of derivatives contracts, including, but not limited to, futures contracts, forward foreign currency exchange contracts, credit default swaps, interest rate swaps, total return swaps, and purchased and written options. In doing so, the Fund will employ strategies in differing combinations to permit it to increase, decrease, or change the level or types of exposure to market risk factors. Central to those strategies are features inherent to derivatives that make them more attractive for this purpose than equity and debt securities: they require little or no initial cash investment, they can focus exposure on only certain selected risk factors, and they may not require the ultimate receipt or delivery of the underlying security (or securities) to the contract. This may allow the Fund to pursue its objectives more quickly and efficiently than if it were to make direct purchases or sales of securities capable of effecting a similar response to market factors.

Market Risk Factors. In accordance with its investment objectives, the Fund may use derivatives to increase or decrease its exposure to one or more of the following market risk factors:

Commodity Risk. Commodity risk relates to the change in value of commodities or commodity indexes as they relate to increases or decreases in the commodities market. Commodities are physical assets that have tangible properties. Examples of these types of assets are crude oil, heating oil, metals, livestock, and agricultural products.

Credit Risk. Credit risk relates to the ability of the issuer to meet interest and principal payments, or both, as they come due. In general, lower-grade, higher-yield bonds are subject to credit risk to a greater extent than lower-yield, higher-quality bonds.

Equity Risk. Equity risk relates to the change in value of equity securities as they relate to increases or decreases in the general market.

Foreign Exchange Rate Risk. Foreign exchange rate risk relates to the change in the U.S. dollar value of a security held that is denominated in a foreign currency. The U.S. dollar value of a foreign currency denominated security will decrease as the dollar appreciates against the currency, while the U.S. dollar value will increase as the dollar depreciates against the currency.

Interest Rate Risk. Interest rate risk refers to the fluctuations in value of fixed-income securities resulting from the inverse relationship between price and yield. For example, an increase in general interest rates will tend to reduce the market value of already issued fixed-income investments, and a decline in general interest rates will tend to increase their value. In addition, debt securities with longer maturities, which tend to have higher yields, are subject to potentially greater fluctuations in value from changes in interest rates than obligations with shorter maturities.

Volatility Risk. Volatility risk refers to the magnitude of the movement, but not the direction of the movement, in a financial instrument’s price over a defined time period. Large increases or decreases in a financial instrument’s price over a relative time period typically indicate greater volatility risk, while small increases or decreases in its price typically indicate lower volatility risk.

The Fund’s actual exposures to these market risk factors during the period are discussed in further detail, by derivative type, below.

Risks of Investing in Derivatives. The Fund’s use of derivatives can result in losses due to unanticipated changes in the market risk factors and the overall market. In instances where the Fund is using derivatives to decrease, or hedge, exposures to market risk factors for securities held by the Fund, there are also risks that those derivatives may not perform as expected resulting in losses for the combined or hedged positions.

     Derivatives may have little or no initial cash investment relative to their market value exposure and therefore can produce significant gains or losses in excess of their cost. This use of embedded leverage allows the Fund to increase its market value exposure relative to its net assets and can substantially increase the volatility of the Fund’s performance.

     Additional associated risks from investing in derivatives also exist and potentially could have significant effects on the valuation of the derivative and the Fund. Typically, the associated risks are not the risks that the Fund is attempting to increase or decrease exposure to, per its investment objectives, but are the additional risks from investing in derivatives. Examples of these associated risks are liquidity risk, which is the risk that the Fund will not be able to sell the derivative in the open market in a timely manner, and counterparty credit risk, which is the risk that the counterparty will not fulfill its obligation to the Fund. Associated risks can be different for each type of derivative and are discussed by each derivative type in the notes that follow.

Counterparty Credit Risk. Certain derivative positions are subject to counterparty credit risk, which is the risk that the counterparty will not fulfill its obligation to the Fund. The Fund’s derivative counterparties are financial institutions who are subject to market conditions that may weaken their financial position. The Fund intends to enter into financial transactions with counterparties that the Manager believes to be creditworthy at the time of the transaction.

Credit Related Contingent Features. The Fund’s agreements with derivative counterparties have several credit related contingent features that if triggered would allow its derivatives counterparties to close out and demand payment or additional collateral to cover their exposure from the Fund. Credit related contingent features are established between the Fund and its derivatives counterparties to reduce the risk that the Fund will not fulfill its payment obligations to its counterparties. These triggering features include, but are not limited to, a percentage decrease in the Fund’s net assets and or a percentage decrease in the Fund’s Net Asset Value or NAV. The contingent features are established within the Fund’s International Swap and Derivatives Association, Inc. master agreements which govern certain positions in swaps, over-the-counter options and swaptions, and forward currency exchange contracts for each individual counterparty. 

Valuations of derivative instruments as of December 31, 2010 are as follows:

	Liability Derivatives
Derivatives Not Accounted	Statement of Assets and
for as Hedging Instruments	Liabilities Location	Value
Foreign exchange contracts	Unrealized depreciation
	on foreign currency
	exchange contracts	$1,356

The effect of derivative instruments on the Statement of Operations is as follows:

Amount of Realized Gain or (Loss) Recognized on Derivatives
Derivatives Not Accounted for
as Hedging Instruments	Foreign currency transactions
Foreign exchange contracts	$173,812

Amount of Change in Unrealized Gain or (Loss) Recognized on Derivatives
Derivatives Not Accounted for	Translation of assets and liabilities
as Hedging Instruments	denominated in foreign currencies
Foreign exchange contracts	$(5,751)

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.

     Forward 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.

     The Fund has purchased and sold certain forward foreign currency exchange contracts of different currencies in order to acquire currencies to pay for related foreign securities purchase transactions, or to convert foreign currencies to U.S. dollars from related foreign securities sale transactions. These foreign currency exchange contracts are negotiated at the current spot exchange rate with settlement typically within two business days thereafter.

     The Fund has entered into forward foreign currency exchange contracts with the obligation to purchase specified foreign currencies in the future at a currently negotiated forward rate in order to take a positive investment perspective on the related currency. These forward foreign currency exchange contracts seek to increase exposure to foreign exchange rate risk.

     The Fund has entered into forward foreign currency exchange contracts with the obligation to purchase specified foreign currencies in the future at a currently negotiated forward rate in order to decrease exposure to foreign exchange rate risk associated with foreign currency denominated securities held by the Fund.

     The Fund has entered into forward foreign currency exchange contracts with the obligation to sell specified foreign currencies in the future at a currently negotiated forward rate in order to take a negative investment perspective on the related currency. These forward foreign currency exchange contracts seek to increase exposure to foreign exchange rate risk.

     The Fund has entered into forward foreign currency exchange contracts with the obligation to sell specified foreign currencies in the future at a currently negotiated forward rate in order to decrease exposure to foreign exchange rate risk associated with foreign currency denominated securities held by the Fund.

     During the year ended December 31, 2010, the Fund had average contract amounts on forward foreign currency contracts to buy and sell of $576,973 and $1,253,051, respectively.

     Additional associated risk to the Fund includes counterparty credit risk. Counterparty credit risk arises from the possibility that the counterparty will default.

6. Pending Litigation

Since 2009, a number of lawsuits have been pending in federal courts against the Manager, the Distributor, and certain mutual funds (“Defendant Funds”) advised by the Manager and distributed by the Distributor (but not including the Fund). The lawsuits naming the Defendant Funds also name as defendants certain officers and current and former trustees of the respective Defendant Funds. The plaintiffs seek class action status on behalf of purchasers of shares of the respective Defendant Fund during a particular time period. The lawsuits raise claims under federal securities laws alleging that, among other things, the disclosure documents of the respective Defendant Fund contained misrepresentations and omissions, that such Defendant Fund’s investment policies were not followed, and that such Defendant Fund and the other defendants violated federal securities laws and regulations. The plaintiffs seek unspecified damages, equitable relief and an award of attorneys’ fees and litigation expenses.

     In 2009, what are claimed to be derivative lawsuits were filed in state court against the Manager and a subsidiary (but not against the Fund), on behalf of the New Mexico Education Plan Trust. These lawsuits allege breach of contract, breach of fiduciary duty, negligence and violation of state securities laws, and seek compensatory damages, equitable relief and an award of attorneys’ fees and litigation expenses.

     Other lawsuits have been filed since 2008 in various state and federal courts, against the Manager and certain of its affiliates. Those lawsuits were filed by investors who made investments through an affiliate of the Manager, and relate to the alleged investment fraud perpetrated by Bernard Madoff and his firm (“Madoff ”). Those suits allege a variety of claims, including breach of fiduciary duty, fraud, negligent misrepresentation, unjust enrichment, and violation of federal and state securities laws and regulations, among others. They seek unspecified damages, equitable relief and an award of attorneys’ fees and litigation expenses. None of the suits have named the Distributor, any of the Oppenheimer mutual funds or any of their independent Trustees or Directors as defendants. None of the Oppenheimer funds invested in any funds or accounts managed by Madoff.

     The Manager believes that the lawsuits described above are without legal merit and is defending against them vigorously. The Defendant Funds’ Boards of Trustees have also engaged counsel to defend the suits brought against those Funds and the present and former Independent Trustees named in those suits. While it is premature to render any opinion as to the outcome in these lawsuits, or whether any costs that the Defendant Funds may bear in defending the suits might not be reimbursed by insurance, the Manager believes that these suits should not impair the ability of the Manager or the Distributor to perform their respective duties to the Fund, and that the outcome of all of the suits together should not have any material effect on the operations of any of the Oppenheimer funds.

7. Subsequent Event

The Regulated Investment Company Modernization Act of 2010 (the “Act”) was signed into law on December 22, 2010. The Act makes changes to a number of tax rules impacting the Fund. Under the Act, future capital losses generated by a fund may be carried over indefinitely, but these losses must be used prior to the utilization of any pre-enactment capital losses. Since pre-enactment capital losses may only be carried forward for eight years, there may be a greater likelihood that all or a portion of a fund’s pre-enactment capital losses will expire unused. In general, the provisions of the Act will be effective for the Fund’s fiscal year ending December 31, 2011. Specific information regarding the impact of the Act on the Fund will be contained within the “Federal Taxes” section of the financial statement notes for the fiscal year ending December 31, 2011.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Trustees and Shareholders of Oppenheimer Variable Account Funds:

We have audited the accompanying statement of assets and liabilities of Oppenheimer Core Bond Fund/VA (one of the portfolios constituting the Oppenheimer Variable Account Funds), including the statement of investments, as of December 31, 2010, the related statement of operations for the year then ended, and the statements of changes in net assets and the financial highlights for each of the years in the two-year 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. The accompanying financial highlights of Oppenheimer Core Bond Fund/VA for the years ended prior to January 1, 2009 were audited by other auditors whose report dated February 11, 2009 expressed an unqualified opinion on those financial highlights.

     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 audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2010, by correspondence with the custodian, transfer agent and brokers, or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Oppenheimer Core Bond Fund/VA as of December 31, 2010, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for each of the years in the two-year period then ended, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG llp

Denver, Colorado
February 16, 2011

STATEMENT OF INVESTMENTS December 31, 2010

	Principal
	Amount		Value
Asset-Backed Securities—9.1%
Ally Auto Receivables Trust 2010-2, Automobile Receivables Nts., Series 2010-2, Cl. A2, 0.89%, 9/17/12	$	485,000	$	485,960
Ally Auto Receivables Trust 2010-4, Automobile Receivables Nts., Series 2010-4, Cl. A3, 0.91%, 11/17/14		280,000		278,349
Ally Master Owner Trust 2010-1, Asset-Backed Certificates, Series 2010-1, Cl. A, 2.01%, 1/15/131,2		480,000		488,955
Ally Master Owner Trust 2010-3, Asset-Backed Certificates, Series 2010-3, Cl. A, 2.88%, 4/15/131		660,000		676,311
AmeriCredit Automobile Receivables Trust 2009-1, Automobile Receivables-Backed Nts., Series 2009-1, Cl. A3, 3.04%, 10/15/13		35,000		35,643
AmeriCredit Automobile Receivables Trust 2010-3, Automobile Receivables-Backed Nts., Series 2010-3, Cl. A2, 0.77%, 12/9/13		550,000		550,246
AmeriCredit Automobile Receivables Trust 2010-4, Automobile Receivables-Backed Nts., Series 2010-4, Cl. D, 4.20%, 11/8/16		240,000		236,550
AmeriCredit Prime Automobile Receivables Trust 2010-1, Automobile Receivables Nts., Series 2010-1, Cl. A2, 0.97%, 1/15/13		133,371		133,430
AmeriCredit Prime Automobile Receivables Trust 2010-2, Automobile Receivables Nts., Series 2010-2, Cl. A2, 1.22%, 10/8/13		195,000		195,624
Argent Securities Trust 2006-M3, Asset-Backed Pass-Through Certificates, Series 2006-M3, Cl. A2B, 0.361%, 9/25/362		20,792		7,793
Bank of America Auto Trust 2010-2, Automobile Receivables, Series 2010-2, Cl. A2, 0.91%, 10/15/12		530,000		531,062
Capital One Multi-Asset Execution Trust, Credit Card Asset-Backed Certificates, Series 2008-A5, Cl. A5, 4.85%, 2/18/14		550,000		556,880
Centre Point Funding LLC, Asset-Backed Nts., Series 2010-1A, Cl. 1, 5.43%, 7/20/151		135,471		140,136
Chrysler Financial Lease Trust, Asset-Backed Nts., Series 2010-A, Cl. A2, 1.78%, 6/15/111		253,239		253,567
Citibank Credit Card Issuance Trust, Credit Card Receivable Nts., Series 2003-C4, Cl. C4, 5%, 6/10/15		310,000		326,145
Citibank Omni Master Trust, Credit Card Receivables, Series 2009-A8, Cl. A8, 2.36%, 5/16/161,2		620,000		627,919
CNH Equipment Trust, Asset-Backed Certificates:
Series 2009-B, Cl. A3, 2.97%, 3/15/13		156,782		157,468
Series 2010-A, Cl. A2, 0.81%, 3/25/15		467,003		467,219
Countrywide Home Loans, Asset-Backed Certificates:
Series 2002-4, Cl. A1, 1.001%, 2/25/332		26,188		23,777
Series 2005-16, Cl. 2AF2, 5.382%, 5/1/362		527,911		452,214
Series 2005-17, Cl. 1AF2, 5.363%, 5/1/362		294,910		237,278
CWABS Asset-Backed Certificates Trust 2006-25, Asset-Backed Certificates, Series 2006-25, Cl. 2A2, 0.381%, 6/25/472		40,000		35,813
DaimlerChrysler Auto Trust 2007-A, Automobile Receivable Nts., Series 2007-A, Cl. A4, 5.28%, 3/8/13		503,949		516,307
DT Auto Owner Trust, Automobile Receivable Nts., Series 2009-1, Cl. A1, 2.98%, 10/15/151		270,393		272,493
First Franklin Mortgage Loan Trust 2006-FF10, Mtg. Pass-Through Certificates, Series 2006-FF10, Cl. A3, 0.351%, 7/25/362		8,728		8,584
First Franklin Mortgage Loan Trust 2006-FF9, Mtg. Pass-Through Certificates, Series 2006-FF9, Cl. 2A2, 0.371%, 7/7/362		5,313		5,061
Ford Credit Auto Lease Trust, Automobile Receivable Nts.:
Series 2010-A, Cl. A, 1.04%, 3/15/131		261,340		261,575
Series 2010-B, Cl. A2, 0.75%, 10/15/123		505,000		505,001
Ford Credit Auto Owner Trust, Automobile Receivable Nts.:
Series 2009-E, Cl. A2, 0.80%, 3/15/12		467,857		468,098
Series 2010-A, Cl. A4, 2.15%, 6/15/15		670,000		682,676
Ford Credit Floorplan Master Owner Trust 2009-2, Asset-Backed Nts., Series 2009-2, Cl. A, 1.81%, 9/15/122		470,000		477,090
Ford Credit Floorplan Master Owner Trust 2010-1, Asset-Backed Nts., Series 2010-1, Cl. A, 1.91%, 12/15/141,2		490,000		499,227
Harley-Davidson Motorcycle Trust 2006-3, Motorcycle Contract-Backed Nts., Series 2006-3, Cl. A4, 5.22%, 6/15/13		338,508		344,535

	Principal
	Amount		Value
Asset-Backed Securities Continued
Harley-Davidson Motorcycle Trust 2009-2, Motorcycle Contract-Backed Nts., Series 2009-2, Cl. A2, 2%, 7/15/12	$	33,356	$	33,376
Hertz Vehicle Financing LLC, Automobile Receivable Nts., Series 2010-1A, Cl. A1, 2.60%, 2/15/141		495,000		499,783
HSBC Home Equity Loan Trust 2005-3, Closed-End Home Equity Loan Asset-Backed Certificates, Series 2005-3, Cl. A1, 0.521%, 1/20/352		463,268		444,898
HSBC Home Equity Loan Trust 2006-4, Closed-End Home Equity Loan Asset-Backed Certificates, Series 2006-4, Cl. A2V, 0.371%, 3/20/362		9,548		9,511
Mastr Asset-Backed Securities Trust 2006-WMC3, Mtg. Pass-Through Certificates, Series 2006-WMC3, Cl. A3, 0.361%, 8/25/362		67,138		25,045
Merrill Auto Trust Securitization 2007-1, Asset-Backed Nts., Series 2007-1, Cl. A4, 0.32%, 12/15/132		301,902		301,111
Morgan Stanley Resecuritization Trust, Automobile Receivable Nts., Series 2010-F, Cl. A, 0.511%, 6/17/111,2		340,000		339,243
Navistar Financial Dealer Note Master Owner Trust, Asset-Backed Nts., Series 2010-1, Cl. A, 1.911%, 1/26/151,2		790,000		791,926
NC Finance Trust, Collateralized Mtg. Obligation Pass-Through Certificates, Series 1999-I, Cl. ECFD, 1/25/293,4		3,370,016		404,402
Nissan Auto Lease Trust 2010-B, Automobile Asset-Backed Nts., Series 2010-B, Cl. A3, 1%, 12/15/13		440,000		439,465
Nissan Master Owner Trust, Automobile Receivable Nts., Series 2010-AA, Cl. A, 1.41%, 1/15/131,2		485,000		490,727
RASC Series 2006-KS7 Trust, Home Equity Mtg. Asset-Backed Pass-Through Certificates, Series 2006-KS7, Cl. A2, 0.361%, 9/25/362		8,256		8,212
Santander Drive Auto Receivables Trust 2010-2, Automobile Receivables Nts., Series 2010-2, Cl. A2, 0.95%, 8/15/13		485,000		485,648
Santander Drive Auto Receivables Trust 2010-3, Automobile Receivables Nts., Series 2010-3, Cl. C, 3.06%, 11/15/17		485,000		482,619
Toyota Auto Receivable Owner Trust 2010-B, Automobile Receivable Nts., Series 2010-B, Cl. A2, 0.74%, 7/16/12		575,000		575,855
Volkswagen Auto Lease Trust 2010-A, Automobile Receivable Nts., Series 2010-A, Cl. A3, 0.99%, 11/20/13		440,000		439,269
World Financial Network Credit Card Master Note Trust, Credit Card Receivables, Series 2009-A, Cl. A, 4.60%, 9/15/15		465,000		478,162
Total Asset-Backed Securities (Cost $20,162,819)				17,188,238
Mortgage-Backed Obligations—75.9%
Government Agency—62.8%
FHLMC/FNMA/FHLB/Sponsored—62.5%
Federal Home Loan Mortgage Corp.:
5%, 12/15/34		27,202		28,721
5.50%, 9/1/39		1,585,041		1,690,362
6%, 5/15/18-10/15/29		3,390,794		3,721,858
6.50%, 4/15/18-4/1/34		744,930		830,301
7%, 8/15/16-10/1/37		430,772		484,671
7%, 10/1/315		471,399		537,618
8%, 4/1/16		240,914		265,089
9%, 8/1/22-5/1/25		79,653		90,199
10.50%, 11/14/20		2,932		3,370
Federal Home Loan Mortgage Corp., Gtd. Real Estate Mtg. Investment Conduit Multiclass Pass-Through Certificates:
Series 151, Cl. F, 9%, 5/15/21		18,409		21,289
Series 1674, Cl. Z, 6.75%, 2/15/24		60,071		67,245
Series 2006-11, Cl. PS, 23.611%, 3/25/362		466,948		659,355
Series 2034, Cl. Z, 6.50%, 2/15/28		7,160		8,021
Series 2042, Cl. N, 6.50%, 3/15/28		20,672		23,804
Series 2043, Cl. ZP, 6.50%, 4/15/28		748,125		777,736
Series 2046, Cl. G, 6.50%, 4/15/28		59,597		63,823
Series 2053, Cl. Z, 6.50%, 4/15/28		8,540		9,657
Series 2066, Cl. Z, 6.50%, 6/15/28		1,091,677		1,223,406
Series 2195, Cl. LH, 6.50%, 10/15/29		716,652		817,040
Series 2220, Cl. PD, 8%, 3/15/30		3,107		3,636
Series 2326, Cl. ZP, 6.50%, 6/15/31		209,156		241,004
Series 2461, Cl. PZ, 6.50%, 6/15/32		971,948		1,083,950
Series 2470, Cl. LF, 1.26%, 2/15/322		9,009		9,211
Series 2500, Cl. FD, 0.76%, 3/15/322		178,918		180,022
Series 2526, Cl. FE, 0.66%, 6/15/292		269,493		270,537
Series 2538, Cl. F, 0.86%, 12/15/322		1,227,874		1,240,157
Series 2551, Cl. FD, 0.66%, 1/15/332		184,696		185,382
Series 2638, Cl. KG, 4%, 11/1/27		1,177,219		1,187,982
Series 2648, Cl. JE, 3%, 2/1/30		303,718		305,106
Series 2663, Cl. BA, 4%, 8/1/16		373,729		381,017
Series 2686, Cl. CD, 4.50%, 2/1/17		319,551		326,051
Series 2750, Cl. XG, 5%, 2/1/34		130,000		135,783

	Principal
	Amount		Value
FHLMC/FNMA/FHLB/Sponsored Continued
Federal Home Loan Mortgage Corp., Gtd. Real Estate Mtg. Investment Conduit Multiclass Pass-Through Certificates: Continued
Series 2890, Cl. PE, 5%, 11/1/34	$	130,000	$	135,762
Series 2907, Cl. GC, 5%, 6/1/27		217,931		221,905
Series 2911, Cl. CU, 5%, 2/1/28		538,138		547,867
Series 2929, Cl. PC, 5%, 1/1/28		218,837		222,094
Series 2936, Cl. PE, 5%, 2/1/35		69,000		72,199
Series 2939, Cl. PE, 5%, 2/15/35		247,000		258,136
Series 2952, Cl. GJ, 4.50%, 12/1/28		105,046		106,051
Series 3019, Cl. MD, 4.75%, 1/1/31		438,539		450,755
Series 3025, Cl. SJ, 23.796%, 8/15/352		93,159		129,874
Series 3094, Cl. HS, 23.429%, 6/15/342		266,263		349,837
Series 3242, Cl. QA, 5.50%, 3/1/30		314,076		323,567
Series 3291, Cl. NA, 5.50%, 10/1/27		92,982		94,062
Series 3306, Cl. PA, 5.50%, 10/1/27		320,845		324,241
Series R001, Cl. AE, 4.375%, 4/1/15		208,022		212,180
Federal Home Loan Mortgage Corp., Interest-Only Stripped Mtg.-Backed Security:
Series 205, Cl. IO, 9.41%, 9/1/296		23,220		4,877
Series 206, Cl. IO, 0%, 12/1/296,7		290,274		71,906
Series 2074, Cl. S, 57.597%, 7/17/286		4,941		970
Series 2079, Cl. S, 73.347%, 7/17/286		8,629		1,809
Series 2130, Cl. SC, 51.625%, 3/15/296		336,726		60,164
Series 243, Cl. 6, 2.173%, 12/15/326		348,919		67,972
Series 2526, Cl. SE, 42.143%, 6/15/296		12,171		2,173
Series 2527, Cl. SG, 40.749%, 2/15/326		650,286		30,901
Series 2531, Cl. ST, 58.869%, 2/15/306		250,173		15,777
Series 2796, Cl. SD, 68.618%, 7/15/266		555,394		98,411
Series 2802, Cl. AS, 96.534%, 4/15/336		392,608		34,942
Series 2819, Cl. S, 53.547%, 6/15/346		108,890		19,087
Series 2920, Cl. S, 66.499%, 1/15/356		1,977,742		284,507
Series 3004, Cl. SB, 99.999%, 7/15/356		118,947		16,857
Series 3110, Cl. SL, 99.999%, 2/15/266		316,224		40,560
Federal Home Loan Mortgage Corp., Principal-Only Stripped Mtg.-Backed Security, Series 176, Cl. PO, 4.219%, 6/1/268		127,827		107,791
Federal National Mortgage Assn.:
3.50%, 1/1/26-1/1/419		7,785,000		7,740,579
4%, 1/1/419		10,880,000		10,825,600
4.50%, 1/1/26-1/1/419		16,140,000		16,631,401
5%, 2/25/22-7/25/22		21,421		22,742
5%, 1/1/419		13,273,000		13,955,312
5.285%, 10/1/36		233,549		244,802
5.50%, 1/1/26-1/1/419		13,066,000		13,983,208
6%, 11/1/34-6/1/35		3,858,695		4,248,310
6%, 1/1/419		3,215,000		3,494,808
6.50%, 3/25/11-1/1/34		1,249,685		1,367,450
6.50%, 8/25/175		213,824		234,004
6.50%, 1/1/419		2,816,000		3,129,719
7%, 11/1/17-7/25/35		708,621		775,519
7.50%, 1/1/33		13,438		15,412
8.50%, 7/1/32		21,912		24,686
Federal National Mortgage Assn., Gtd. Real Estate Mtg. Investment Conduit Multiclass Pass-Through Certificates:
Trust 1989-17, Cl. E, 10.40%, 4/25/19		16,927		21,032
Trust 1993-87, Cl. Z, 6.50%, 6/25/23		695,596		775,466
Trust 1998-58, Cl. PC, 6.50%, 10/25/28		591,167		652,231
Trust 1998-61, Cl. PL, 6%, 11/25/28		309,056		341,584
Trust 1999-54, Cl. LH, 6.50%, 11/25/29		463,992		512,432
Trust 2001-44, Cl. QC, 6%, 9/25/16		28,924		31,271
Trust 2001-51, Cl. OD, 6.50%, 10/25/31		35,605		40,620
Trust 2001-74, Cl. QE, 6%, 12/25/31		876,487		968,288
Trust 2002-12, Cl. PG, 6%, 3/25/17		14,869		16,133
Trust 2003-28, Cl. KG, 5.50%, 4/25/23		3,964,000		4,335,208
Trust 2004-101, Cl. BG, 5%, 1/25/20		1,975,000		2,112,279
Trust 2004-81, Cl. KC, 4.50%, 4/1/17		234,679		238,539
Trust 2004-9, Cl. AB, 4%, 7/1/17		661,604		679,437
Trust 2005-100, Cl. BQ, 5.50%, 11/25/25		1,160,000		1,249,380
Trust 2005-12, Cl. JC, 5%, 6/1/28		513,807		525,190
Trust 2005-22, Cl. EC, 5%, 10/1/28		202,328		207,062
Trust 2005-30, Cl. CU, 5%, 4/1/29		190,118		195,379
Trust 2006-110, Cl. PW, 5.50%, 5/25/28		47,490		48,408
Trust 2006-46, Cl. SW, 23.244%, 6/25/362		355,768		492,818
Trust 2006-50, Cl. KS, 23.244%, 6/25/362		582,911		795,267
Trust 2006-57, Cl. PA, 5.50%, 8/25/27		320,242		322,765
Trust 2009-36, Cl. FA, 1.201%, 6/25/372		709,683		723,559
Federal National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security:
Trust 2001-61, Cl. SH, 50.113%, 11/18/316		35,960		6,735
Trust 2001-63, Cl. SD, 41.204%, 12/18/316		10,970		2,026
Trust 2001-65, Cl. S, 47.552%, 11/25/316		902,242		168,768
Trust 2001-68, Cl. SC, 32.641%, 11/25/316		7,521		1,371
Trust 2001-81, Cl. S, 37.52%, 1/25/326		240,840		47,747
Trust 2002-28, Cl. SA, 40.314%, 4/25/326		6,246		1,083
Trust 2002-38, Cl. SO, 58.831%, 4/25/326		14,936		2,674
Trust 2002-39, Cl. SD, 45.877%, 3/18/326		9,876		1,950
Trust 2002-47, Cl. NS, 35.828%, 4/25/326		621,556		116,728
Trust 2002-48, Cl. S, 36.642%, 7/25/326		10,314		1,893
Trust 2002-51, Cl. S, 36.117%, 8/25/326		570,591		107,070
Trust 2002-52, Cl. SD, 42.698%, 9/25/326		695,123		137,979
Trust 2002-52, Cl. SL, 38.254%, 9/25/326		6,456		1,213
Trust 2002-53, Cl. SK, 43.546%, 4/25/326		34,412		6,722
Trust 2002-56, Cl. SN, 39.116%, 7/25/326		14,063		2,582
Trust 2002-60, Cl. SM, 45.772%, 8/25/326		119,586		17,842
Trust 2002-7, Cl. SK, 45.81%, 1/25/326		55,778		8,550
Trust 2002-77, Cl. BS, 40.651%, 12/18/326		73,919		12,027
Trust 2002-77, Cl. IS, 52.767%, 12/18/326		25,447		4,977
Trust 2002-77, Cl. JS, 36.871%, 12/18/326		120,370		19,100
Trust 2002-77, Cl. SA, 38.391%, 12/18/326		114,356		18,673
Trust 2002-77, Cl. SH, 47.759%, 12/18/326		317,493		59,464
Trust 2002-84, Cl. SA, 48.202%, 12/25/326		803,065		137,869
Trust 2002-9, Cl. MS, 36.577%, 3/25/326		11,952		2,162
Trust 2002-90, Cl. SN, 47.493%, 8/25/326		61,521		9,182
Trust 2002-90, Cl. SY, 51.565%, 9/25/326		40,192		6,185
Trust 2003-26, Cl. DI, 8.559%, 4/25/336		23,580		4,972
Trust 2003-33, Cl. SP, 49.559%, 5/25/336		858,985		149,124

	Principal
	Amount		Value
FHLMC/FNMA/FHLB/Sponsored Continued
Federal National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security: Continued
Trust 2003-4, Cl. S, 44.233%, 2/25/336	$	558,979	$	104,929
Trust 2003-89, Cl. XS, 53.473%, 11/25/326		478,215		36,036
Trust 2004-54, Cl. DS, 51.461%, 11/25/306		487,091		62,003
Trust 2005-14, Cl. SE, 41.477%, 3/25/356		399,494		54,513
Trust 2005-40, Cl. SA, 65.797%, 5/25/356		1,115,101		186,456
Trust 2005-40, Cl. SB, 80.731%, 5/25/356		53,400		8,452
Trust 2005-71, Cl. SA, 68.363%, 8/25/256		1,379,284		188,386
Trust 2005-93, Cl. SI, 17.83%, 10/25/356		1,029,019		127,177
Trust 2006-60, Cl. DI, 41.383%, 4/25/356		287,488		42,034
Trust 2008-67, Cl. KS, 34.057%, 8/25/346		2,800,395		209,805
Trust 221, Cl. 2, 32.909%, 5/1/236		8,585		1,715
Trust 222, Cl. 2, 21.249%, 6/1/236		994,525		186,343
Trust 252, Cl. 2, 32.983%, 11/1/236		850,922		171,681
Trust 294, Cl. 2, 11.431%, 2/1/286		93,434		18,520
Trust 301, Cl. 2, 2.60%, 4/1/296		11,277		2,263
Trust 303, Cl. IO, 5.001%, 11/1/296		146,700		36,363
Trust 320, Cl. 2, 9.699%, 4/1/326		672,824		185,123
Trust 321, Cl. 2, 0.909%, 4/1/326		2,145,325		552,680
Trust 324, Cl. 2, 0.035%, 7/1/326		22,483		4,828
Trust 331, Cl. 5, 0%, 2/1/336,7		30,194		5,422
Trust 331, Cl. 9, 14.883%, 2/1/336		542,709		100,608
Trust 334, Cl. 12, 0%, 2/1/336,7		53,933		9,421
Trust 334, Cl. 17, 22.94%, 2/1/336		378,513		71,988
Trust 339, Cl. 12, 0%, 7/1/336,7		731,423		129,129
Trust 339, Cl. 7, 0%, 7/1/336,7		1,810,011		308,237
Trust 343, Cl. 13, 3.941%, 9/1/336		669,434		116,134
Trust 343, Cl. 18, 5.387%, 5/1/346		193,443		33,564
Trust 345, Cl. 9, 3.322%, 1/1/346		891,758		152,449
Trust 351, Cl. 10, 13.571%, 4/1/346		266,260		45,713
Trust 351, Cl. 8, 0%, 4/1/346,7		418,833		72,009
Trust 356, Cl. 10, 0%, 6/1/356,7		348,841		59,567
Trust 356, Cl. 12, 0%, 2/1/356,7		174,652		29,941
Trust 362, Cl. 13, 0.217%, 8/1/356		615,095		103,675
Trust 364, Cl. 15, 0%, 9/1/356,7		38,231		6,214
Trust 364, Cl. 16, 0%, 9/1/356,7		742,332		131,305
Trust 365, Cl. 16, 0%, 3/1/366,7		1,131,912		215,792
Federal National Mortgage Assn., Principal-Only Stripped Mtg.-Backed Security, Trust 1993-184, Cl. M, 4.754%, 9/25/238		306,670		273,750
				118,259,430
GNMA/Guaranteed—0.3%
Government National Mortgage Assn.:
7%, 12/29/23-3/15/26		31,252		35,743
8.50%, 8/1/17-12/15/17		116,827		131,447
Government National Mortgage Assn., Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates:
Series 1999-32, Cl. ZB, 8%, 9/16/29		84,459		101,662
Series 2000-7, Cl. Z, 8%, 1/16/30		36,181		42,262
Government National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security:
Series 1998-19, Cl. SB, 61.128%, 7/16/286		17,912		3,806
Series 2001-21, Cl. SB, 88.689%, 1/16/276		650,598		100,840
Series 2002-15, Cl. SM, 77.353%, 2/16/326		669,738		103,694
Series 2004-11, Cl. SM, 69.385%, 1/17/306		500,369		94,915
				614,369
Non-Agency—13.1%
Commercial—9.9%
Asset Securitization Corp., Commercial Interest-Only Stripped Mtg.-Backed Security, Series 1997-D4, Cl. PS1, 0.174%, 4/14/296		7,900,610		248,515
Banc of America Commercial Mortgage, Inc., Commercial Mtg. Pass-Through Certificates:
Series 2006-1, Cl. AM, 5.421%, 9/1/45		1,280,000		1,301,778
Series 2007-1, Cl. A4, 5.451%, 1/1/17		710,000		741,791
Series 2007-1, Cl. AMFX, 5.482%, 1/1/49		900,000		881,309
Capital Lease Funding Securitization LP, Interest-Only Corporate-Backed Pass-Through Certificates, Series 1997-CTL1, 0%, 6/22/241,6,7		5,456,973		253,300
CHL Mortgage Pass-Through Trust 2005-17, Mtg. Pass-Through Certificates, Series 2005-17, Cl. 1A8, 5.50%, 9/1/35		75,767		67,227
Citigroup, Inc./Deutsche Bank 2007-CD4 Commercial Mortgage Trust, Commercial Mtg. Pass-Through Certificates, Series 2007-CD4, Cl. A2B, 5.205%, 12/11/49		380,000		390,930
Deutsche Mortgage & Asset Receiving, Commercial Mtg. Pass-Through Certificates, Series 2010-C1, Cl. A1, 3.156%, 7/1/461		593,941		595,926
Deutsche Mortgage & Asset Receiving, Commercial Mtg. Pass-Through Certificates, Interest-Only Stripped Mtg.-Backed Security, Series 2010-C1, Cl. XPA, 4.82%, 9/1/203,6		4,765,000		425,456

	Principal
	Amount		Value
Commercial Continued
First Horizon Alternative Mortgage Securities Trust 2004-FA2, Mtg. Pass-Through Certificates, Series 2004-FA2, Cl. 3A1, 6%, 1/25/35	$	544,419	$	546,671
First Horizon Alternative Mortgage Securities Trust 2007-FA2, Mtg. Pass-Through Certificates, Series 2007-FA2, Cl. 1A1, 5.50%, 4/25/37		218,573		158,207
First Horizon Mortgage Pass-Through Trust 2007-AR3, Mtg. Pass-Through Certificates, Series 2007-AR3, Cl. 1A1, 6.052%, 11/1/372		449,542		367,655
GE Capital Commercial Mortgage Corp., Commercial Mtg. Obligations, Series 2004-C3, Cl. A2, 4.433%, 7/10/39		7,056		7,097
Impac CMB Trust Series 2005-4, Collateralized Asset-Backed Bonds, Series 2005-4, Cl. 1A1A, 0.801%, 5/25/352		619,888		468,810
IndyMac INDX Mortgage Loan Trust 2005-AR23, Mtg. Pass-Through Certificates, Series 2005-AR23, Cl. 6A1, 5.214%, 11/1/352		767,364		592,984
JPMorgan Chase Commercial Mortgage Securities Corp., Commercial Mtg. Pass-Through Certificates:
Series 2010-C2, Cl. A2, 3.616%, 11/1/431		710,000		688,449
Series 2007-LDPX, Cl. A2S2, 5.187%, 1/1/493		2,310,000		2,333,562
Series 2007-LDPX, Cl. A2S, 5.305%, 1/15/49		1,640,000		1,679,544
JPMorgan Chase Commercial Mortgage Securities Trust 2006-LDP7, Commercial Mtg. Pass-Through Certificates, Series 2006-LDP7, 5.872%, 4/1/452		1,175,000		1,220,516
JPMorgan Mortgage Trust 2007-S3, Mtg. Pass-Through Certificates, Series 2007-S3, Cl. 1A90, 7%, 7/1/37		733,464		572,783
LB-UBS Commercial Mortgage Trust 2006-C3, Commercial Mtg. Pass-Through Certificates, Series 2006-C3, Cl. AM, 5.712%, 3/11/39		85,000		86,192
LB-UBS Commercial Mortgage Trust 2007-C1, Commercial Mtg. Pass-Through Certificates, Series 2007-C1, Cl. A2, 5.318%, 1/15/12		465,000		476,955
Lehman Brothers Commercial Conduit Mortgage Trust, Interest-Only Stripped Mtg.-Backed Security, Series 1998-C1, Cl. IO, 0%, 2/18/306,7		3,652,229		83,661
Lehman Structured Securities Corp., Commercial Mtg. Pass-Through Certificates, Series 2002-GE1, Cl. A, 2.514%, 7/1/241		163,342		121,406
Mastr Alternative Loan Trust 2004-6, Mtg. Pass-Through Certificates, Series 2004-6, Cl. 10A1, 6%, 7/25/34		1,047,699		1,045,760
Merrill Lynch Mortgage Investors Trust 2005-A5, Mtg. Pass-Through Certificates, Series 2005-A5, Cl. A9, 2.752%, 6/1/352		591,391		524,751
ML-CFC Commercial Mortgage Trust 2006-3, Commercial Mtg. Pass-Through Certificates, Series 2006-3, Cl. AM, 5.456%, 7/12/46		1,000,000		1,011,051
Salomon Brothers Mortgage Securities VII, Inc., Interest-Only Commercial Mtg. Pass-Through Certificates, Series 1999-C1, Cl. X, 0%, 5/18/326,7		45,455,038		170,775
Wachovia Bank Commercial Mortgage Trust 2007-C34, Commercial Mtg. Pass-Through Certificates, Series 2007-C34, Cl. A3, 5.678%, 7/1/17		520,000		543,460
WaMu Mortgage Pass-Through Certificates 2005-AR14 Trust, Mtg. Pass-Through Certificates, Series 2005-AR14, Cl. 1A4, 2.671%, 12/1/352		408,310		351,867
Wells Fargo Commercial Mortgage Trust 2010-C1, Commercial Mtg. Pass-Through Certificates, Series 2010-C1, Cl. A1, 3.349%, 10/1/571		382,914		384,121
Wells Fargo Mortgage-Backed Securities 2007-AR8 Trust, Mtg. Pass-Through Certificates, Series 2007-AR8, Cl. A1, 6.134%, 11/1/372		552,898		448,859
				18,791,368
Multifamily—0.9%
Citigroup Mortgage Loan Trust, Inc. 2006-AR3, Mtg. Pass-Through Certificates, Series 2006-AR3, Cl. 1 A2A, 5.77%, 6/1/362		499,685		465,983
GE Capital Commercial Mortgage Corp., Commercial Mtg. Pass-Through Certificates, Series 2001-3, Cl. A2, 6.07%, 6/1/38		640,000		657,289

	Principal
	Amount		Value
Multifamily Continued
Wells Fargo Mortgage-Backed Securities 2006-AR6 Trust, Mtg. Pass-Through Certificates, Series 2006-AR6, Cl. 3A1, 3.203%, 3/25/362	$	589,946	$	525,603
				1,648,875
Other—0.0%
Salomon Brothers Mortgage Securities VI, Inc., Interest-Only Stripped Mtg.-Backed Security, Series 1987-3, Cl. B, 0%, 10/23/176,7		9		1
Salomon Brothers Mortgage Securities VI, Inc., Principal-Only Stripped Mtg.-Backed Security, Series 1987-3, Cl. A, 4.173%, 10/23/178		1,277		1,247
				1,248
Residential—2.3%
CHL Mortgage Pass-Through Trust 2005-30, Mtg. Pass-Through Certificates, Series 2005-30, Cl. A5, 5.50%, 1/1/36		471,181		455,428
CHL Mortgage Pass-Through Trust 2005-J4, Mtg. Pass-Through Certificates, Series 2005-J4, Cl. A7, 5.50%, 11/1/35		39,582		32,566
GSR Mortgage Loan Trust 2006-5F, Mtg. Pass-Through Certificates, Series 2006-5F, Cl. 2A1, 6%, 6/1/36		613,494		591,126
JPMorgan Alternative Loan Trust 2006-S4, Mtg. Pass-Through Certificates, Series 2006-S4, Cl. A6, 5.71%, 12/1/36		552,479		498,176
Merrill Lynch Mortgage Investors Trust 2006-3, Mtg. Pass-Through Certificates, Series MLCC 2006-3, Cl. 2A1, 6.025%, 10/25/362		54,930		50,912
RALI Series 2003-QS1 Trust, Mtg. Asset-Backed Pass-Through Certificates, Series 2003-QS1, Cl. A2, 5.75%, 1/25/33		314,306		316,660
RALI Series 2006-QS13 Trust:
Mtg. Asset-Backed Pass-Through Certificates, Series 2006-QS13, Cl. 1A5, 6%, 9/25/36		64,822		41,120
Mtg. Asset-Backed Pass-Through Certificates, Series 2006-QS13, Cl. 1A8, 6%, 9/25/36		2,272		1,441
RALI Series 2007-QS6 Trust, Mtg. Asset-Backed Pass-Through Certificates, Series 2007-QS6, Cl. A28, 5.75%, 4/25/37		27,853		17,412
Structured Adjustable Rate Mortgage Loan Trust, Mtg. Pass-Through Certificates, Series 2004-5, Cl. 3A1, 2.602%, 5/1/342		259,845		245,800
WaMu Mortgage Pass-Through Certificates 2007-HY1 Trust, Mtg. Pass-Through Certificates, Series 2007-HY1, Cl. 4A1, 5%, 2/1/372		66,129		52,339
WaMu Mortgage Pass-Through Certificates 2007-HY7 Trust, Mtg. Pass-Through Certificates, Series 2007-HY7, Cl. 2A1, 5.629%, 7/1/372		603,739		425,215
WaMu Mortgage Pass-Through Certificates Series 2007-HY5 Trust, Mtg. Pass-Through Certificates, Series 2007-HY5, Cl. 3A1, 5.743%, 5/1/372		1,018,966		931,998
Wells Fargo Alternative Loan 2007-PA5 Trust, Mtg. Asset-Backed Pass-Through Certificates, Series 2007-PA5, Cl. 1A1, 6.25%, 11/1/37		412,424		360,689
Wells Fargo Mortgage-Backed Securities 2004-R Trust, Mtg. Pass-Through Certificates, Series 2004-R, Cl. 2A1, 2.872%, 9/1/342		273,041		265,076
				4,285,958
Total Mortgage-Backed Obligations (Cost $140,426,578)				143,601,248
U.S. Government Obligations—1.6%
Federal Home Loan Mortgage Corp. Nts.:
1.75%, 9/10/15		820,000		806,901
5%, 2/16/17		295,000		332,586
5.25%, 4/18/16		515,000		589,789
Federal National Mortgage Assn. Nts.:
1.625%, 10/26/15		745,000		726,970
4.875%, 12/15/16		240,000		269,404
5%, 3/15/16		320,000		361,932
Total U.S. Government Obligations (Cost $3,080,620)				3,087,582
Corporate Bonds and Notes—35.1%
Consumer Discretionary—4.6%
Auto Components—0.2%
BorgWarner, Inc., 4.625% Sr. Unsec. Unsub. Nts., 9/15/20		424,000		419,409
Diversified Consumer Services—0.3%
Service Corp. International, 6.75% Sr. Unsec. Nts., 4/1/15		475,000		489,250

	Principal
	Amount		Value
Hotels, Restaurants & Leisure—0.7%
Hyatt Hotels Corp., 5.75% Sr. Unsec. Unsub. Nts., 8/15/151	$	725,000	$	759,076
Marriott International, Inc., 6.20% Sr. Unsec. Unsub. Nts., 6/15/16		526,000		575,767
				1,334,843
Household Durables—0.7%
Fortune Brands, Inc., 6.375% Sr. Unsec. Unsub. Nts., 6/15/14		370,000		401,304
Jarden Corp., 6.125% Sr. Unsec. Nts., 11/15/22		489,000		468,829
Whirlpool Corp., 8% Sr. Unsec. Nts., 5/1/12		380,000		409,625
				1,279,758
Leisure Equipment & Products—0.5%
Mattel, Inc.:
5.625% Sr. Unsec. Nts., 3/15/13		395,000		424,885
6.125% Sr. Unsec. Nts., 6/15/11		455,000		464,683
				889,568
Media—1.8%
Comcast Cable Communications Holdings, Inc., 9.455% Sr. Unsec. Nts., 11/15/22		292,000		404,803
DirecTV Holdings LLC/ DirecTV Financing Co., Inc., 7.625% Sr. Unsec. Unsub. Nts., 5/15/16		850,000		943,483
Interpublic Group of Co., Inc. (The), 10% Sr. Unsec. Nts., 7/15/17		405,000		475,875
Lamar Media Corp., 9.75% Sr. Unsec. Nts., 4/1/14		438,000		505,890
Time Warner Entertainment Co. LP, 8.375% Sr. Nts., 7/15/33		257,000		325,251
Viacom, Inc., 7.875% Sr. Unsec. Debs., 7/30/30		270,000		319,638
Virgin Media Secured Finance plc, 6.50% Sr. Sec. Nts., 1/15/18		480,000		507,600
				3,482,540
Specialty Retail—0.4%
Staples, Inc., 7.75% Sr. Unsec. Unsub. Nts., 4/1/11		680,000		690,987
Consumer Staples—1.9%
Beverages—0.7%
Anheuser-Busch InBev Worldwide, Inc., 7.75% Sr. Unsec. Unsub. Nts., 1/15/191		700,000		872,400
Constellation Brands, Inc., 8.375% Sr. Nts., 12/15/14		445,000		488,388
				1,360,788
Food & Staples Retailing—0.2%
Delhaize Group, 5.70% Sr. Unsec. Nts., 10/1/401		305,000		291,336
Food Products—0.5%
Bunge Ltd. Finance Corp.:
5.35% Sr. Unsec. Unsub. Nts., 4/15/14		210,000		220,900
8.50% Sr. Unsec. Nts., 6/15/19		200,000		234,869
TreeHouse Foods, Inc., 7.75% Sr. Unsec. Nts., 3/1/18		470,000		510,538
				966,307
Tobacco—0.5%
Altria Group, Inc., 10.20% Sr. Unsec. Nts., 2/6/39		515,000		746,518
Lorillard Tobacco Co., 8.125% Sr. Unsec. Nts., 5/1/40		270,000		277,632
				1,024,150
Energy—3.6%
Energy Equipment & Services—0.4%
Rowan Cos., Inc., 5% Sr. Unsec. Nts., 9/1/17		400,000		404,049
Weatherford International Ltd., 6.50% Sr. Unsec. Bonds, 8/1/36		308,000		315,559
				719,608
Oil, Gas & Consumable Fuels—3.2%
Cloud Peak Energy Resources LLC, 8.25% Sr. Unsec. Unsub. Nts., 12/15/17		445,000		480,044
Energy Transfer Partners LP:
5.65% Sr. Unsec. Unsub. Nts., 8/1/12		179,000		189,723
7.50% Sr. Unsec. Unsub. Bonds, 7/1/38		345,000		402,552
Enterprise Products Operating LLP, 7.50% Sr. Unsec. Unsub. Nts., 2/1/11		515,000		517,284
Kaneb Pipe Line Operating Partnership LP, 5.875% Sr. Unsec. Nts., 6/1/13		840,000		909,780
Kinder Morgan Energy Partners LP, 6.50% Sr. Unsec. Unsub. Nts., 9/1/39		360,000		373,119
Nexen, Inc., 6.40% Sr. Unsec. Unsub. Bonds, 5/15/37		237,000		230,341
ONEOK Partners LP, 7.10% Sr. Unsec. Nts., 3/15/11		206,000		208,485
Range Resources Corp., 8% Sr. Unsec. Sub. Nts., 5/15/19		303,000		331,406
Ras Laffan Liquefied Natural Gas Co. Ltd. III, 5.50% Sr. Sec. Nts., 9/30/141		270,000		292,142
Rockies Express Pipeline LLC:
3.90% Sr. Unsec. Unsub. Nts., 4/15/151		532,000		526,710
5.625% Sr. Unsec. Unsub. Nts., 4/15/201		326,000		315,680
Southwestern Energy Co., 7.50% Sr. Nts., 2/1/18		465,000		526,613
Woodside Finance Ltd., 4.50% Nts., 11/10/141		702,000		738,506
				6,042,385

	Principal
	Amount		Value
Financials—13.5%
Capital Markets—2.3%
Blackstone Holdings Finance Co. LLC, 6.625% Sr. Unsec. Nts., 8/15/191	$	705,000	$	725,879
Goldman Sachs Capital, Inc. (The), 6.345% Sub. Bonds, 2/15/34		515,000		492,164
Macquarie Group Ltd., 4.875% Sr. Unsec. Nts., 8/10/171		780,000		764,763
Morgan Stanley:
5.50% Sr. Unsec. Unsub. Nts., 7/24/201		178,000		180,161
5.55% Sr. Unsec. Unsub. Nts., Series F, 4/27/17		1,205,000		1,257,036
TD Ameritrade Holding Corp., 2.95% Sr. Unsec. Unsub. Nts., 12/1/12		475,000		486,233
UBS AG Stamford, CT, 2.25% Sr. Unsec. Nts., 8/12/13		482,000		486,419
				4,392,655
Commercial Banks—3.4%
ANZ National International Ltd., 2.375% Sr. Unsec. Nts., 12/21/121		475,000		482,559
Barclays Bank plc, 6.278% Perpetual Bonds10		1,050,000		892,500
BNP Paribas SA, 5.186% Sub. Perpetual Nts.1,10		515,000		472,513
Fifth Third Cap Trust IV, 6.50% Jr. Unsec. Sub. Nts., 4/15/37		631,000		604,183
HSBC Finance Capital Trust IX, 5.911% Nts., 11/30/352		1,270,000		1,181,100
Huntington BancShares, Inc., 7% Sub. Nts., 12/15/20		745,000		785,814
Lloyds TSB Bank plc, 6.50% Unsec. Sub. Nts., 9/14/201		493,000		454,366
Sanwa Bank Ltd. (The), 7.40% Sub. Nts., 6/15/11		465,000		473,867
Wells Fargo & Co., 7.98% Jr. Sub. Perpetual Bonds, Series K10		1,010,000		1,070,600
				6,417,502
Consumer Finance—0.6%
American Express Bank FSB, 5.55% Sr. Unsec. Nts., 10/17/12		415,000		444,081
Capital One Capital IV, 6.745% Sub. Bonds, 2/17/372		780,000		778,050
				1,222,131
Diversified Financial Services—2.3%
Bank of America Corp., 5.875% Sr. Unsec. Unsub. Nts., 1/5/21		140,000		145,119
Citigroup, Inc.:
5.375% Sr. Unsec. Nts., 8/9/20		924,000		961,840
6.01% Sr. Unsec. Nts., 1/15/15		480,000		527,046
ING Groep NV, 5.775% Jr. Unsec. Sub. Perpetual Bonds10		535,000		462,775
JPMorgan Chase & Co., 7.90% Perpetual Bonds, Series 110		1,430,000		1,525,197
Merrill Lynch & Co., Inc., 7.75% Jr. Sub. Bonds, 5/14/38		709,000		737,951
				4,359,928
Insurance—3.9%
American International Group, Inc.:
5.85% Sr. Unsec. Nts., Series G, 1/16/18		445,000		460,176
6.40% Sr. Unsec. Unsub. Nts., 12/15/20		470,000		494,036
CNS Financial Corp., 5.875% Sr. Unsec. Unsub. Bonds, 8/15/20		460,000		458,842
Genworth Financial, Inc., 8.625% Sr. Unsec. Unsub. Nts., 12/15/16		419,000		471,765
Gulf South Pipeline Co. LP, 5.75% Sr. Unsec. Nts., 8/15/121		455,000		482,799
Hartford Financial Services Group, Inc. (The), 5.25% Sr. Unsec. Nts., 10/15/11		465,000		478,804
Irish Life & Permanent Group Holdings plc, 3.60% Sr. Unsec. Unsub. Nts., 1/14/131		620,000		556,413
Lincoln National Corp., 6.05% Jr. Unsec. Sub. Bonds, 4/20/67		945,000		881,213
Manulife Financial Corp., 4.90% Sr. Unsec. Unsub. Nts., 9/17/20		260,000		247,905
PartnerRe Finance B LLC, 5.50% Sr. Unsec. Nts., 6/1/20		454,000		458,022
Prudential Financial, Inc., 3.625% Sr. Unsec. Unsub. Nts., 9/17/12		465,000		482,783
RenRe North America Holdings, Inc., 5.75% Sr. Unsec. Nts., 3/15/20		480,000		482,745
Swiss Re Capital I LP, 6.854% Perpetual Bonds1,10		926,000		889,213
ZFS Finance USA Trust IV, 5.875% Sub. Bonds, 5/9/321		532,000		521,163
				7,365,879
Real Estate Investment Trusts—1.0%
AvalonBay Communities, Inc., 6.625% Sr. Unsec. Unsub. Nts., 9/15/11		202,000		209,675
Brandywine Operating Partnership LP, 5.75% Sr. Unsec. Unsub. Nts., 4/1/12		237,000		245,486
Liberty Property LP, 7.25% Sr. Unsec. Unsub. Nts., 3/15/11		465,000		470,345
Mack-Cali Realty LP, 5.25% Sr. Unsec. Unsub. Nts., 1/15/12		180,000		184,728
Simon Property Group LP, 5% Sr. Unsec. Unsub. Nts., 3/1/12		470,000		483,082
WCI Finance LLC/WEA Finance LLC, 5.40% Sr. Unsec. Unsub. Nts., 10/1/121		220,000		233,325
				1,826,641

	Principal
	Amount		Value
Health Care—1.5%
Biotechnology—0.5%
Celgene Corp., 5.70% Sr. Unsec. Nts., 10/15/40	$	495,000	$	481,469
Genzyme Corp., 5% Sr. Unsec. Nts., 6/15/20		465,000		489,107
				970,576
Health Care Providers & Services—0.7%
Laboratory Corp. of America Holdings, 4.625% Nts., 11/15/20		356,000		353,481
Quest Diagnostic, Inc., 5.75% Sr. Unsec. Nts., 1/30/40		520,000		497,040
WellPoint, Inc., 5% Sr. Unsec. Unsub. Nts., 1/15/11		435,000		435,462
				1,285,983
Pharmaceuticals—0.3%
Hospira, Inc., 5.60% Sr. Unsec. Unsub. Nts., 9/15/40		148,000		145,983
Mylan, Inc., 6% Sr. Nts., 11/15/181		495,000		487,575
				633,558
Industrials—2.4%
Aerospace & Defense—0.5%
Alliant Techsystems, Inc., 6.75% Sr. Sub. Nts., 4/1/16		477,000		496,676
BE Aerospace, Inc., 8.50% Sr. Unsec. Nts., 7/1/18		420,000		460,950
				957,626
Commercial Services & Supplies—0.8%
Browning-Ferris Industries, Inc., 7.40% Sr. Unsec. Debs., 9/15/35		165,000		195,833
Corrections Corp. of America, 7.75% Sr. Nts., 6/1/17		473,000		504,336
R.R. Donnelley & Sons Co., 5.625% Sr. Unsec. Nts., 1/15/12		455,000		466,057
Republic Services, Inc., 6.75% Sr. Unsec. Unsub. Nts., 8/15/11		295,000		304,577
				1,470,803
Industrial Conglomerates—0.5%
General Electric Capital Corp., 4.25% Sr. Unsec. Nts., Series A, 6/15/12		460,000		478,551
Tyco International Ltd./Tyco International Finance SA, 6.875% Sr. Unsec. Unsub. Nts., 1/15/21		405,000		488,193
				966,744
Machinery—0.3%
SPX Corp., 7.625% Sr. Unsec. Nts., 12/15/14		510,000		557,175
Professional Services—0.3%
FTI Consulting, Inc., 6.75% Sr. Nts., 10/1/201		482,000		480,795
Information Technology—1.6%
Communications Equipment—0.7%
Harris Corp., 6.15% Sr. Unsec. Nts., 12/15/40		871,000		894,514
Motorola, Inc., 8% Sr. Unsec. Nts., 11/1/11		450,000		474,017
				1,368,531
Electronic Equipment & Instruments—0.4%
Arrow Electronics, Inc., 3.375% Sr. Unsec. Unsub. Nts., 11/1/15		875,000		849,157
IT Services—0.2%
SAIC, Inc., 5.95% Sr. Unsec. Unsub. Nts., 12/1/401		282,000		286,955
Software—0.3%
Symantec Corp., 4.20% Sr. Unsec. Unsub. Nts., 9/15/20		618,000		568,054
Materials—2.8%
Chemicals—1.3%
Agrium, Inc., 6.125% Sr. Unsec. Nts., 1/15/41		702,000		746,118
Airgas, Inc., 3.25% Sr. Nts., 10/1/15		417,000		412,382
Ashland, Inc., 9.125% Sr. Unsec. Nts., 6/1/17		440,000		509,300
CF Industries, Inc., 6.875% Sr. Unsec. Unsub. Nts., 5/1/18		480,000		514,800
Potash Corp., 5.625% Sr. Unsec. Unsub. Nts., 12/1/40		285,000		288,670
				2,471,270
Containers & Packaging—0.7%
Ball Corp., 7.125% Sr. Unsec. Nts., 9/1/16		486,000		526,095
Sealed Air Corp., 7.875% Sr. Nts., 6/15/17		572,000		629,829
Sonoco Products Co., 5.75% Sr. Unsec. Unsub. Nts., 11/1/40		243,000		235,079
				1,391,003
Metals & Mining—0.8%
Freeport-McMoRan Copper & Gold, Inc., 8.375% Sr. Nts., 4/1/17		698,000		773,110
Vale Inco Ltd., 5.70% Sr. Unsec. Unsub. Nts., 10/15/15		28,000		30,194
Xstrata Canada Corp.:
5.375% Sr. Unsec. Unsub. Nts., 6/1/15		245,000		259,937
6% Sr. Unsec. Unsub. Nts., 10/15/15		347,000		379,949
				1,443,190

	Principal
	Amount		Value
Telecommunication Services—1.8%
Diversified Telecommunication Services—1.6%
AT&T, Inc., 6.30% Sr. Unsec. Bonds, 1/15/38	$	440,000	$	465,721
British Telecommunications plc, 9.875% Bonds, 12/15/30		298,000		398,186
Embarq Corp., 6.738% Sr. Unsec. Nts., 6/1/13		440,000		478,201
Frontier Communications Corp., 8.25% Sr. Unsec. Nts., 4/15/17		477,000		525,893
Qwest Corp., 7.625% Sr. Unsec. Unsub. Nts., 6/15/15		447,000		506,228
Telus Corp., 8% Nts., 6/1/11		266,000		273,281
Verizon Communications, Inc., 6.40% Sr. Unsec. Nts., 2/15/38		289,000		320,767
				2,968,277
Wireless Telecommunication Services—0.2%
American Tower Corp., 7% Sr. Unsec. Nts., 10/15/17		337,000		380,495
Utilities—1.4%
Electric Utilities—1.2%
Allegheny Energy Supply Co. LLC, 8.25% Bonds, 4/15/121		428,000		459,336
FirstEnergy Solutions Corp., 6.80% Sr. Unsec. Nts., 8/15/39		292,000		283,880
Great Plains Energy, Inc., 2.75% Sr. Unsec. Unsub. Nts., 8/15/13		320,000		323,462
Northeast Utilities, 7.25% Sr. Unsec. Nts., 4/1/12		470,000		502,774
Texas-New Mexico Power Co., 9.50% Sec. Nts., 4/1/191		510,000		650,324
				2,219,776
Gas Utilities—0.2%
AmeriGas Partners LP, 7.25% Sr. Unsec. Nts., 5/20/15		462,000		477,015
Total Corporate Bonds and Notes (Cost $64,189,945)				66,322,648

	Shares
Investment Companies—14.7%
JPMorgan U.S. Treasury Plus Money Market Fund, Agency Shares, 0.00%11,12		1,838,966			1,838,966
Oppenheimer Institutional Money Market Fund, Cl. E, 0.21%11,13		25,899,825			25,899,825
Total Investment Companies (Cost $27,738,791)					27,738,791
Total Investments, at Value (Cost $255,598,753)		136.4	%		257,938,507
Liabilities in Excess of Other Assets		(36.4	)		(68,819,104	)
Net Assets		100.0	%	$	189,119,403

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 $19,309,053 or 10.21% of the Fund’s net assets as of December 31, 2010.
2.	Represents the current interest rate for a variable or increasing rate security.
3.	Restricted security. The aggregate value of restricted securities as of December 31, 2010 was $3,668,421, which represents 1.94% of the Fund’s net assets. See Note 6 of the accompanying Notes. Information concerning restricted securities is as follows:

							Unrealized
	Acquisition						Appreciation
Security	Date		Cost		Value		(Depreciation)
Deutsche Mortgage & Asset Receiving, Commercial Mtg. Pass-Through Certificates, Interest-Only Stripped Mtg.-Backed Security, Series 2010-C1, Cl. XPA, 4.82%, 9/1/20		10/27/10	$	434,816	$	425,456	$	(9,360	)
Ford Credit Auto Lease Trust, Automobile Receivable Nts., Series 2010-B, Cl. A2, 0.75%, 10/15/12		10/21/10		504,990		505,001		11
JPMorgan Chase Commercial Mortgage Securities Corp., Commercial Mtg. Pass-Through Certificates, Series 2007-LDPX, Cl. A2S2, 5.187%, 1/1/49		7/14/10		2,281,125		2,333,562		52,437
NC Finance Trust, Collateralized Mtg. Obligation Pass-Through Certificates, Series 1999-I, Cl. ECFD, 1/25/29		8/10/10		3,281,116		404,402		(2,876,714	)
			$	6,502,047	$	3,668,421	$	(2,833,626	)

Footnotes to Statement of Investments Continued
4.	Issue is in default. See Note 1 of the accompanying Notes.
5.	All or a portion of the security position is held in collateralized accounts to cover initial margin requirements on open futures contracts and written options on futures, if applicable. The aggregate market value of such securities is $575,411. See Note 5 of the accompanying Notes.
6.	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 $7,063,019 or 3.73% of the Fund’s net assets as of December 31, 2010.
7.	The current amortization rate of the security’s cost basis exceeds the future interest payments currently estimated to be received. Both the amortization rate and interest payments are contingent on future mortgage pre-payment speeds and are therefore subject to change.
8.	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 $382,788 or 0.20% of the Fund’s net assets as of December 31, 2010.
9.	When-issued security or delayed delivery to be delivered and settled after December 31, 2010. See Note 1 of the accompanying Notes.
10.	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.
11.	Rate shown is the 7-day yield as of December 31, 2010.
12.	Interest rate is less than 0.0005%.
13.	Is or was an affiliate, as defined in the Investment Company Act of 1940, at or during the period ended December 31, 2010, 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, 2009		Additions		Reductions		December 31, 2010
OFI Liquid Assets Fund, LLC		—		1,252,854		1,252,854		—
Oppenheimer Institutional Money Market Fund, Cl. E		23,853,396		97,238,514		95,192,085		25,899,825

	Value		Income
OFI Liquid Assets Fund, LLC	$	—	$	24	a
Oppenheimer Institutional Money Market Fund, Cl. E		25,899,825		41,805
	$	25,899,825	$	41,829

a. Net of compensation to the securities lending agent and rebates paid to the borrowing counterparties.

Valuation Inputs

Various data inputs are used in determining the value of each of the Fund’s investments as of the reporting period end. These data inputs are categorized in the following hierarchy under applicable financial accounting standards:

1)	Level 1—unadjusted quoted prices in active markets for identical assets or liabilities (including securities actively traded on a securities exchange)
2)	Level 2—inputs other than unadjusted quoted prices that are observable for the asset or liability (such as unadjusted quoted prices for similar assets and market corroborated inputs such as interest rates, prepayment speeds, credit risks, etc.)
3)	Level 3—significant unobservable inputs (including the Manager’s own judgments about assumptions that market participants would use in pricing the asset or liability).

The table below categorizes amounts that are included in the Fund’s Statement of Assets and Liabilities as of December 31, 2010 based on valuation input level:

						Level 3—
	Level 1—			Level 2—		Significant
	Unadjusted			Other Significant		Unobservable
	Quoted Prices			Observable Inputs		Inputs		Value
Assets Table
Investments, at Value:
Asset-Backed Securities	$	—		$	17,188,238	$	—	$	17,188,238
Mortgage-Backed Obligations		—			143,601,248		—		143,601,248
U.S. Government Obligations		—			3,087,582		—		3,087,582
Corporate Bonds and Notes		—			66,322,648		—		66,322,648
Investment Companies		27,738,791			—		—		27,738,791
Total Investments, at Value		27,738,791			230,199,716		—		257,938,507
Other Financial Instruments:
Futures margins		100,654			—		—		100,654
Total Assets	$	27,839,445		$	230,199,716	$	—	$	258,039,161
Liabilities Table
Other Financial Instruments:
Futures margins	$	(64,245	)	$	—	$	—	$	(64,245	)
Total Liabilities	$	(64,245	)	$	—	$	—	$	(64,245	)

Currency contracts and forwards, if any, are reported at their unrealized appreciation/depreciation at measurement date, which represents the change in the contract’s value from trade date. Futures, if any, are reported at their variation margin at measurement date, which represents the amount due to/from the Fund at that date. All additional assets and liabilities included in the above table are reported at their market value at measurement date.

See the accompanying Notes for further discussion of the methods used in determining value of the Fund’s investments, and a summary of changes to the valuation methodologies, if any, during the reporting period.

Futures Contracts as of December 31, 2010 are as follows:

								Unrealized
		Number of		Expiration				Appreciation
Contract Description	Buy/Sell	Contracts		Date		Value		(Depreciation)
U.S. Treasury Long Bonds, 20 yr.	Buy		82		3/22/11	$	10,014,250	$	57,602
U.S. Treasury Nts., 2 yr.	Sell		114		3/31/11		24,955,313		(7,776	)
U.S. Treasury Nts., 5 yr.	Sell		11		3/31/11		1,294,906		20,181
U.S. Treasury Nts., 10 yr.	Sell		60		3/22/11		7,226,250		(65,938	)
U.S. Ultra Bonds	Buy		5		3/22/11		635,469		10,153
								$	14,222

STATEMENT OF ASSETS AND LIABILITIES December 31, 2010

Assets
Investments, at value—see accompanying statement of investments:
Unaffiliated companies (cost $229,698,928)	$	232,038,682
Affiliated companies (cost $25,899,825)		25,899,825
		257,938,507
Receivables and other assets:
Investments sold (including $7,519,105 sold on a when-issued or delayed delivery basis)		7,768,284
Interest, dividends and principal paydowns		1,372,961
Futures margins		100,654
Other		20,983
Total assets		267,201,389
Liabilities
Payables and other liabilities:
Investments purchased (including $77,615,627 purchased on a when-issued or delayed delivery basis)		77,677,043
Shares of beneficial interest redeemed		163,713
Futures margins		64,245
Shareholder communications		52,495
Distribution and service plan fees		36,273
Transfer and shareholder servicing agent fees		16,011
Trustees’ compensation		15,787
Other		56,419
Total liabilities		78,081,986
Net Assets	$	189,119,403
Composition of Net Assets
Par value of shares of beneficial interest	$	24,539
Additional paid-in capital		272,678,943
Accumulated net investment income		10,595,621
Accumulated net realized loss on investments		(96,533,676	)
Net unrealized appreciation on investments		2,353,976
Net Assets	$	189,119,403
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 $132,557,001 and 17,145,808 shares of beneficial interest outstanding)	$	7.73
Service Shares:
Net asset value, redemption price per share and offering price per share (based on net assets of $56,562,402 and 7,393,102 shares of beneficial interest outstanding)	$	7.65

STATEMENT OF OPERATIONS For the Year Ended December 31, 2010

Investment Income
Interest (net of foreign withholding taxes of $2,319)	$	10,291,972
Dividends:
Affiliated companies		41,805
Unaffiliated companies		20
Fee income on when-issued securities		1,319,549
Income from investment of securities lending cash collateral, net—affiliated companies		24
Total investment income		11,653,370
Expenses
Management fees		1,161,961
Distribution and service plan fees—Service shares		143,251
Transfer and shareholder servicing agent fees:
Non-Service shares		136,342
Service shares		57,316
Shareholder communications:
Non-Service shares		52,362
Service shares		22,192
Trustees’ compensation		15,554
Custodian fees and expenses		14,503
Administration service fees		1,500
Other		60,384
Total expenses		1,665,365
Less waivers and reimbursements of expenses		(158,675	)
Net expenses		1,506,690
Net Investment Income		10,146,680
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments from unaffiliated companies		6,542,835
Closing and expiration of futures contracts		1,687,026
Short positions		(90,347	)
Swap contracts		8,330
Net realized gain		8,147,844
Net change in unrealized appreciation/depreciation on:
Investments		1,899,205
Futures contracts		753,266
Swap contracts		65,987
Net change in unrealized appreciation/depreciation		2,718,458
Net Increase in Net Assets Resulting from Operations	$	21,012,982

STATEMENTS OF CHANGES IN NET ASSETS

Year Ended December 31,	2010			2009
Operations
Net investment income	$	10,146,680		$	13,959,437
Net realized gain (loss)		8,147,844			(69,315,102	)
Net change in unrealized appreciation/depreciation		2,718,458			69,885,948
Net increase in net assets resulting from operations		21,012,982			14,530,283
Dividends and/or Distributions to Shareholders
Dividends from net investment income:
Non-Service shares		(2,543,053	)		—
Service shares		(932,463	)		—
		(3,475,516	)		—
Beneficial Interest Transactions
Net decrease in net assets resulting from beneficial interest transactions:
Non-Service shares		(17,432,675	)		(29,962,563	)
Service shares		(5,299,305	)		(9,685,378	)
		(22,731,980	)		(39,647,941	)
Net Assets
Total decrease		(5,194,514	)		(25,117,658	)
Beginning of period		194,313,917			219,431,575
End of period (including accumulated net investment income of $10,595,621 and $3,511,374, respectively)	$	189,119,403		$	194,313,917

FINANCIAL HIGHLIGHTS

Non-Service Shares     Year Ended December 31,	2010			2009			2008			2007			2006
Per Share Operating Data
Net asset value, beginning of period	$	7.07		$	6.45		$	11.06		$	11.16		$	11.19
Income (loss) from investment operations:
Net investment income1		.40			.48			.66			.55			.53
Net realized and unrealized gain (loss)		.40			.14			(4.82	)		(.08	)		.03
Total from investment operations		.80			.62			(4.16	)		.47			.56
Dividends and/or distributions to shareholders:
Dividends from net investment income		(.14	)		—			(.45	)		(.57	)		(.59	)
Net asset value, end of period	$	7.73		$	7.07		$	6.45		$	11.06		$	11.16
Total Return, at Net Asset Value2		11.42	%		9.61	%		(39.05	)%		4.39	%		5.28	%
Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	132,557		$	137,597		$	156,339		$	325,661		$	367,106
Average net assets (in thousands)	$	136,333		$	137,631		$	271,355		$	345,723		$	391,750
Ratios to average net assets:3
Net investment income		5.32	%		7.40	%		6.76	%		5.07	%		4.83	%
Total expenses4		0.79	%		0.75	%		0.63	%		0.68	%		0.77	%
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses		0.70	%		0.61	%		0.62	%		0.68	%		0.77	%
Portfolio turnover rate5		98	%		143	%		51	%		89	%		114	%

1.	Per share amounts calculated based on the average shares outstanding during the period.
2.	Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
3.	Annualized for periods less than one full year.
4.	Total expenses including indirect expenses from affiliated fund were as follows:

Year Ended December 31, 2010	0.80	%
Year Ended December 31, 2009	0.76	%
Year Ended December 31, 2008	0.63	%
Year Ended December 31, 2007	0.68	%
Year Ended December 31, 2006	0.77	%

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, 2010	$	775,240,942	$	766,486,357
Year Ended December 31, 2009	$	977,840,247	$	1,009,549,121
Year Ended December 31, 2008	$	1,019,711,829	$	963,377,934
Year Ended December 31, 2007	$	662,784,931	$	678,316,693
Year Ended December 31, 2006	$	1,168,229,255	$	1,270,329,129

Service Shares     Year Ended December 31,	2010			2009			2008			2007			2006
Per Share Operating Data
Net asset value, beginning of period	$	6.99		$	6.41		$	10.98		$	11.10		$	11.15
Income (loss) from investment operations:
Net investment income1		.37			.46			.63			.52			.49
Net realized and unrealized gain (loss)		.41			.12			(4.77	)		(.08	)		.03
Total from investment operations		.78			.58			(4.14	)		.44			.52
Dividends and/or distributions to shareholders:
Dividends from net investment income		(.12	)		—			(.43	)		(.56	)		(.57	)
Net asset value, end of period	$	7.65		$	6.99		$	6.41		$	10.98		$	11.10
Total Return, at Net Asset Value2		11.28	%		9.05	%		(39.07	)%		4.09	%		4.93	%
Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	56,562		$	56,717		$	63,093		$	103,542		$	41,191
Average net assets (in thousands)	$	57,313		$	52,648		$	101,597		$	70,116		$	21,265
Ratios to average net assets:3
Net investment income		5.06	%		7.16	%		6.55	%		4.85	%		4.56	%
Total expenses4		1.04	%		1.01	%		0.88	%		0.92	%		1.06	%
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses		0.95	%		0.86	%		0.87	%		0.92	%		1.06	%
Portfolio turnover rate5		98	%		143	%		51	%		89	%		114	%

1.	Per share amounts calculated based on the average shares outstanding during the period.
2.	Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
3.	Annualized for periods less than one full year.
4.	Total expenses including indirect expenses from affiliated fund were as follows:

Year Ended December 31, 2010	1.05	%
Year Ended December 31, 2009	1.02	%
Year Ended December 31, 2008	0.88	%
Year Ended December 31, 2007	0.92	%
Year Ended December 31, 2006	1.06	%

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, 2010	$	775,240,942	$	766,486,357
Year Ended December 31, 2009	$	977,840,247	$	1,009,549,121
Year Ended December 31, 2008	$	1,019,711,829	$	963,377,934
Year Ended December 31, 2007	$	662,784,931	$	678,316,693
Year Ended December 31, 2006	$	1,168,229,255	$	1,270,329,129

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.

     Each investment asset or liability of the Fund is assigned a level at measurement date based on the significance and source of the inputs to its valuation. Unadjusted quoted prices in active markets for identical securities are classified as “Level 1,” inputs other than unadjusted quoted prices for an asset that are observable are classified as “Level 2” and significant unobservable inputs, including the Manager’s judgment about the assumptions that a market participant would use in pricing an asset or liability, are classified as “Level 3.” The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. A table summarizing the Fund’s investments under these levels of classification is included following the Statement of Investments.

     Securities are valued using unadjusted quoted market prices, when available, as supplied primarily by portfolio pricing services approved by the Board of Trustees or dealers.

     Securities traded on a registered U.S. securities exchange are valued based on the last sale price of the security reported on the principal exchange on which it is traded, prior to the time when the Fund’s assets are valued. Securities whose principal exchange is NASDAQ^® are valued based on the official closing prices 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 current day’s closing “bid” and “asked” prices, and if not, at the current day’s closing bid price. A foreign security traded on a foreign exchange is valued based on the last sale price on the principal exchange on which the security is traded, as identified by the portfolio pricing service used by the Manager, prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the most recent official closing price on the principal exchange on which it is traded.

     Shares of a registered investment company that are not traded on an exchange are valued at that investment company’s net asset value per share.

     U.S. domestic and international debt instruments (including corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed securities) and “money market-type” debt instruments with a remaining maturity in excess of sixty days are valued at the mean between the “bid” and “asked” prices utilizing price quotations obtained from independent pricing services or broker-dealers. Such prices are typically determined based upon information obtained from market participants including reported trade data, broker-dealer price quotations and inputs such as benchmark yields and issuer spreads from identical or similar securities.

     “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.

     In the absence of a readily available unadjusted quoted market price, including for 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 the securities’ respective exchanges, the Manager, acting through its internal valuation committee, in good faith determines the fair valuation of that asset using consistently applied procedures under the supervision of the Board of Trustees (which reviews those fair valuations by the Manager). Those procedures include certain standardized methodologies to fair value securities. Such methodologies include, but are not limited to, pricing securities initially at cost and subsequently adjusting the value based on: changes in company specific fundamentals, changes in an appropriate securities index, or changes in the value of similar securities which may be adjusted for any discounts related to resale restrictions. When possible, such methodologies use observable market inputs such as unadjusted quoted prices of similar securities, observable interest rates, currency rates and yield curves. The methodologies used for valuing securities are not necessarily an indication of the risks associated with investing in those securities.

     There have been no significant changes to the fair valuation methodologies of the Fund during the period.

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 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, 2010, 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	$	77,615,627
Sold securities		7,519,105

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.

     Forward roll transactions may be deemed to entail embedded leverage since the Fund purchases mortgage-related securities with extended settlement dates rather than paying for the securities under a normal settlement cycle. This embedded leverage increases the Fund’s market value of investments relative to its net assets which can incrementally increase the volatility of the Fund’s performance. Forward roll transactions can be replicated over multiple settlement periods.

     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; and counterparty credit risk.

Securities Sold Short. The Fund may short sell when-issued securities for future settlement. The value of the open short position is recorded as a liability, and the Fund records an unrealized gain or loss for the change in value of the open short position. The Fund records a realized gain or loss when the short position is closed out.

     As of December 31, 2010, the Fund had no outstanding securities sold short.

Credit Risk. The Fund invests in high-yield, non-investment-grade bonds, which may be subject to a greater degree of credit risk. Credit risk relates to the ability of the issuer to meet interest or principal payments or both as they become due. The Fund may acquire securities in default, and is not obligated to dispose of securities whose issuers or underlying obligors subsequently default. Information concerning securities in default as of December 31, 2010 is as follows:

Cost	$	3,281,116
Market Value	$	404,402
Market Value as a % of Net Assets		0.21	%

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. When applicable, the Fund’s investment in IMMF is included in the Statement of Investments. Shares of IMMF are valued at their net asset value per share. 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.

Investment in OFI Liquid Assets Fund, LLC. The Fund is permitted to invest cash collateral received in connection with its securities lending activities. Pursuant to the Fund’s Securities Lending Procedures, the Fund may invest cash collateral in, among other investments, an affiliated money market fund. OFI Liquid Assets Fund, LLC (“LAF”) is a limited liability company whose investment objective is to seek current income and stability of principal. The Manager is also the investment adviser of LAF. LAF is not registered under the Investment Company Act of 1940. However, LAF does comply with the investment restrictions applicable to registered money market funds set forth in Rule 2a-7 adopted under the Investment Company Act. When applicable, the Fund’s investment in LAF is included in the Statement of Investments. Shares of LAF are valued at their net asset value per share. As a shareholder, the Fund is subject to its proportional share of LAF’s expenses, including its management fee of 0.08%.

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.

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

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

					Net Unrealized
					Appreciation Based on Cost
Undistributed	Undistributed				of Securities and Other
Net Investment	Long-Term		Accumulated Loss		Investments for Federal
Income	Gain		Carryforward1,2,3,4,5		Income Tax Purposes
$10,681,504	$	—	$	96,469,932	$	2,277,091

1. As of December 31, 2010, the Fund had $95,426,697 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, 2010, details of the capital loss carryforwards were as follows:

Expiring
2013	$	226,262
2014		6,107,275
2015		1,245,459
2016		12,777,851
2017		75,069,850
Total	$	95,426,697

2.	As of December 31, 2010, the Fund had $1,043,235 of post-October losses available to offset future realized capital gains, if any. Such losses, if unutilized, will expire in 2019.
3.	During the fiscal year ended December 31, 2010, the Fund utilized $8,990,701 of capital loss carryforward to offset capital gains realized in that fiscal year.
4.	During the fiscal year ended December 31, 2009, the Fund did not utilize any capital loss carryforward.
5.	During the fiscal year ended December 31, 2010, $20,894,853 of unused capital loss carryforward expired.

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, 2010. Net assets of the Fund were unaffected by the reclassifications.

			Reduction to
	Increase to		Accumulated Net
Reduction to	Accumulated Net		Realized Loss
Paid-in Capital	Investment Income		on Investments
$20,894,853	$	413,083	$	20,481,770

The tax character of distributions paid during the years ended December 31, 2010 and December 31, 2009 was as follows:

	Year Ended		Year Ended
	December 31, 2010		December 31, 2009
Distributions paid from:
Ordinary income	$	3,475,516	$	—

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, 2010 are noted in the following table. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss.

Federal tax cost of securities	$	255,661,416
Federal tax cost of other investments		(22,826,750	)
Total federal tax cost	$	232,834,666
Gross unrealized appreciation	$	7,759,279
Gross unrealized depreciation		(5,482,188	)
Net unrealized appreciation	$	2,277,091

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 with 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. 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, 2010						Year Ended December 31, 2009
	Shares			Amount			Shares			Amount
Non-Service Shares
Sold		1,228,005		$	9,215,341			1,228,549		$	7,870,664
Dividends and/or distributions reinvested		357,672			2,543,053			—			—
Redeemed		(3,913,294	)		(29,191,069	)		(5,976,436	)		(37,833,227	)
Net decrease		(2,327,617	)	$	(17,432,675	)		(4,747,887	)	$	(29,962,563	)
Service Shares
Sold		1,784,838		$	13,294,523			1,841,099		$	11,758,361
Dividends and/or distributions reinvested		132,264			932,463			—			—
Redeemed		(2,632,411	)		(19,526,291	)		(3,581,065	)		(21,443,739	)
Net decrease		(715,309	)	$	(5,299,305	)		(1,739,966	)	$	(9,685,378	)

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 and LAF, for the year ended December 31, 2010, were as follows:

	Purchases		Sales
Investment securities	$	143,632,778	$	154,349,874
U.S. government and government agency obligations		6,781,932		7,419,795
To Be Announced (TBA) mortgage-related securities		775,240,942		766,486,357

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
Up to $1 billion	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 fees at an annual rate of 0.10% of the daily net assets of each class of shares. For the year ended December 31, 2010, the Fund paid $194,204 to OFS for services to the Fund. 

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 0.25% of the daily net assets of Service shares of the Fund. The Distributor currently uses all of those fees to compensate sponsors 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. The Manager has voluntarily agreed to limit the Fund’s total annual operating expenses so that those expenses, as percentages of daily net assets, will not exceed the annual rate of 0.75% for Non-Service shares and 1.00% for Service shares. During the year ended December 31, 2010, the Manager waived fees and/or reimbursed the Fund $38,287 and $16,296 for Non-Service and Service shares, respectively.

     From April 1, 2009 through March 31, 2010, the Manager voluntarily waived the management fee by 0.18% of the Fund’s average annual net assets. This voluntary waiver was applied after all other waivers and/or reimbursements. During the year ended December 31, 2010, the Manager waived $85,957.

     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, 2010, the Manager waived fees and/or reimbursed the Fund $18,135 for IMMF management fees.

     Some of these undertakings may be modified or terminated at any time; some may not be modified or terminated until after one year from the date of the current prospectus, as indicated therein.

5. Risk Exposures and the Use of Derivative Instruments

The Fund’s investment objectives not only permit the Fund to purchase investment securities, they also allow the Fund to enter into various types of derivatives contracts, including, but not limited to, futures contracts, forward foreign currency exchange contracts, credit default swaps, interest rate swaps, total return swaps, and purchased and written options. In doing so, the Fund will employ strategies in differing combinations to permit it to increase, decrease, or change the level or types of exposure to market risk factors. Central to those strategies are features inherent to derivatives that make them more attractive for this purpose than equity and debt securities: they require little or no initial cash investment, they can focus exposure on only certain selected risk factors, and they may not require the ultimate receipt or delivery of the underlying security (or securities) to the contract. This may allow the Fund to pursue its objectives more quickly and efficiently than if it were to make direct purchases or sales of securities capable of effecting a similar response to market factors.

Market Risk Factors. In accordance with its investment objectives, the Fund may use derivatives to increase or decrease its exposure to one or more of the following market risk factors:

Commodity Risk. Commodity risk relates to the change in value of commodities or commodity indexes as they relate to increases or decreases in the commodities market. Commodities are physical assets that have tangible properties. Examples of these types of assets are crude oil, heating oil, metals, livestock, and agricultural products.

Credit Risk. Credit risk relates to the ability of the issuer to meet interest and principal payments, or both, as they come due. In general, lower-grade, higher-yield bonds are subject to credit risk to a greater extent than lower-yield, higher-quality bonds.

Equity Risk. Equity risk relates to the change in value of equity securities as they relate to increases or decreases in the general market.

Foreign Exchange Rate Risk. Foreign exchange rate risk relates to the change in the U.S. dollar value of a security held that is denominated in a foreign currency. The U.S. dollar value of a foreign currency denominated security will decrease as the dollar appreciates against the currency, while the U.S. dollar value will increase as the dollar depreciates against the currency.

Interest Rate Risk. Interest rate risk refers to the fluctuations in value of fixed-income securities resulting from the inverse relationship between price and yield. For example, an increase in general interest rates will tend to reduce the market value of already issued fixed-income investments, and a decline in general interest rates will tend to increase their value. In addition, debt securities with longer maturities, which tend to have higher yields, are subject to potentially greater fluctuations in value from changes in interest rates than obligations with shorter maturities.

Volatility Risk. Volatility risk refers to the magnitude of the movement, but not the direction of the movement, in a financial instrument’s price over a defined time period. Large increases or decreases in a financial instrument’s price over a relative time period typically indicate greater volatility risk, while small increases or decreases in its price typically indicate lower volatility risk.

The Fund’s actual exposures to these market risk factors during the period are discussed in further detail, by derivative type, below.

Risks of Investing in Derivatives. The Fund’s use of derivatives can result in losses due to unanticipated changes in the market risk factors and the overall market. In instances where the Fund is using derivatives to decrease, or hedge, exposures to market risk factors for securities held by the Fund, there are also risks that those derivatives may not perform as expected resulting in losses for the combined or hedged positions.

     Derivatives may have little or no initial cash investment relative to their market value exposure and therefore can produce significant gains or losses in excess of their cost. This use of embedded leverage allows the Fund to increase its market value exposure relative to its net assets and can substantially increase the volatility of the Fund’s performance.

     Additional associated risks from investing in derivatives also exist and potentially could have significant effects on the valuation of the derivative and the Fund. Typically, the associated risks are not the risks that the Fund is attempting to increase or decrease exposure to, per its investment objectives, but are the additional risks from investing in derivatives. Examples of these associated risks are liquidity risk, which is the risk that the Fund will not be able to sell the derivative in the open market in a timely manner, and counterparty credit risk, which is the risk that the counterparty will not fulfill its obligation to the Fund. Associated risks can be different for each type of derivative and are discussed by each derivative type in the notes that follow.

Counterparty Credit Risk. Certain derivative positions are subject to counterparty credit risk, which is the risk that the counterparty will not fulfill its obligation to the Fund. The Fund’s derivative counterparties are financial institutions who are subject to market conditions that may weaken their financial position. The Fund intends to enter into financial transactions with counterparties that the Manager believes to be creditworthy at the time of the transaction.

Credit Related Contingent Features. The Fund’s agreements with derivative counterparties have several credit related contingent features that if triggered would allow its derivatives counterparties to close out and demand payment or additional collateral to cover their exposure from the Fund. Credit related contingent features are established between the Fund and its derivatives counterparties to reduce the risk that the Fund will not fulfill its payment obligations to its counterparties. These triggering features include, but are not limited to, a percentage decrease in the Fund’s net assets and or a percentage decrease in the Fund’s Net Asset Value or NAV. The contingent features are established within the Fund’s International Swap and Derivatives Association, Inc. master agreements which govern certain positions in swaps, over-the-counter options and swaptions, and forward currency exchange contracts for each individual counterparty. 

Valuations of derivative instruments as of December 31, 2010 are as follows:

	Asset Derivatives				Liability Derivatives
	Statement				Statement
Derivatives Not	of Assets				of Assets
Accounted for as	and Liabilities				and Liabilities
Hedging Instruments	Location	Value			Location	Value
Interest rate contracts	Futures margins	$	100,654	*	Futures margins	$	64,245	*

* Includes only the current day’s variation margin. Prior variation margin movements have been reflected in cash on the Statement of Assets and Liabilities upon receipt or payment.

The effect of derivative instruments on the Statement of Operations is as follows:

Amount of Realized Gain or (Loss) Recognized on Derivatives
Derivatives Not	Closing and
Accounted for as	expiration of
Hedging Instruments	futures contracts		Swap contracts		Total
Credit contracts	$	—	$	8,330	$	8,330
Interest rate contracts		1,687,026		—		1,687,026
Total	$	1,687,026	$	8,330	$	1,695,356

Amount of Change in Unrealized Gain or (Loss) Recognized on Derivatives
Derivatives Not
Accounted for as
Hedging Instruments	Futures contracts		Swap contracts		Total
Credit contracts	$	—	$	65,987	$	65,987
Interest rate contracts		753,266		—		753,266
Total	$	753,266	$	65,987	$	819,253

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 Fund may buy and sell futures contracts and 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.

     The Fund has purchased futures contracts on various bonds and notes to increase exposure to interest rate risk.

The Fund has sold futures contracts on various bonds and notes to decrease exposure to interest rate risk.

     During the year ended December 31, 2010, the Fund had an average market value of $25,954,050 and $25,073,744 on futures contracts purchased and sold, respectively.

     Additional associated 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.

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 values of swap contracts are aggregated by positive and negative values and disclosed separately on the Statement of Assets and Liabilities by contracts in unrealized appreciation and depreciation positions. Upfront payments paid or received, if any, affect the value of the respective swap. Therefore, to determine the unrealized appreciation (depreciation) on swaps, upfront payments paid should be subtracted from, while upfront payments received should be added to, the value of contracts reported as an asset on the Statement of Assets and Liabilities. Conversely, upfront payments paid should be added to, while upfront payments received should be subtracted from the value of contracts reported as a liability. 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.

     Swap contract agreements are exposed to the market risk factor of the specific underlying reference asset. Swap contracts are typically more attractively priced compared to similar investments in related cash securities because they isolate the risk to one market risk factor and eliminate the other market risk factors. Investments in cash securities (for instance bonds) have exposure to multiple risk factors (credit and interest rate risk). Because swaps require little or no initial cash investment, they can expose the Fund to substantial risk in the isolated market risk factor.

Credit Default Swap Contracts. A credit default swap is a bilateral contract that enables an investor to buy or sell protection on a debt security against a defined-issuer credit event, such as the issuer’s failure to make timely payments of interest or principal on the debt security, bankruptcy or restructuring. The Fund may enter into credit default swaps either by buying or selling protection on a single security or a basket of securities (the “reference asset”).

     The buyer of protection pays a periodic fee to the seller of protection based on the notional amount of debt securities underlying the swap contract. The seller of protection agrees to compensate the buyer of protection for future potential losses as a result of a credit event on the reference asset. The contract effectively transfers the credit event risk of the reference asset from the buyer of protection to the seller of protection.

     The ongoing value of the contract will fluctuate throughout the term of the contract based primarily on the credit risk of the reference asset. If the credit quality of the reference asset improves relative to the credit quality at contract initiation, the buyer of protection may have an unrealized loss greater than the anticipated periodic fee owed. This unrealized loss would be the result of current credit protection being cheaper than the cost of credit protection at contract initiation. If the buyer elects to terminate the contract prior to its maturity, and there has been no credit event, this unrealized loss will become realized. If the contract is held to maturity, and there has been no credit event, the realized loss will be equal to the periodic fee paid over the life of the contract. 

     If there is a credit event, the buyer of protection can exercise its rights under the contract and receive a payment from the seller of protection equal to the notional amount of the reference asset less the market value of the reference asset. Upon exercise of the contract the difference between the value of the underlying reference asset and the notional amount is recorded as realized gain (loss) and is included on the Statement of Operations.

     The Fund has engaged in pairs trades by purchasing protection through a credit default swap referenced to the debt of an issuer, and simultaneously selling protection through a credit default swap referenced to the debt of a different issuer with the intent to realize gains from the pricing differences of the two issuers who are expected to have similar market risks. Pairs trades attempt to gain exposure to credit risk while hedging or offsetting the effects of overall market movements.

     For the year ended December 31, 2010, the Fund had average notional amounts of $1,415,769 and $1,415,769 on credit default swaps to buy protection and credit default swaps to sell protection, respectively.

     Additional associated risks to the Fund include counterparty credit risk and liquidity risk.

     As of December 31, 2010, the Fund had no such credit default swaps outstanding.

6. Restricted Securities

As of December 31, 2010, investments in securities included issues that are restricted. A restricted security may have a contractual restriction on its resale and is valued under methods approved by the Board of Trustees as reflecting fair value. Securities that are restricted are marked with an applicable footnote on the Statement of Investments. Restricted securities are reported on a schedule following the Statement of Investments.

7. 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, 2010, the Fund had no securities on loan.

8. Pending Litigation

Since 2009, a number of lawsuits have been pending in federal courts against the Manager, the Distributor, and certain mutual funds (“Defendant Funds”) advised by the Manager and distributed by the Distributor (but not including the Fund). The lawsuits naming the Defendant Funds also name as defendants certain officers and current and former trustees of the respective Defendant Funds. The plaintiffs seek class action status on behalf of purchasers of shares of the respective Defendant Fund during a particular time period. The lawsuits raise claims under federal securities laws alleging that, among other things, the disclosure documents of the respective Defendant Fund contained misrepresentations and omissions, that such Defendant Fund’s investment policies were not followed, and that such Defendant Fund and the other defendants violated federal securities laws and regulations. The plaintiffs seek unspecified damages, equitable relief and an award of attorneys’ fees and litigation expenses.

     In 2009, what are claimed to be derivative lawsuits were filed in state court against the Manager and a subsidiary (but not against the Fund), on behalf of the New Mexico Education Plan Trust. These lawsuits allege breach of contract, breach of fiduciary duty, negligence and violation of state securities laws, and seek compensatory damages, equitable relief and an award of attorneys’ fees and litigation expenses.

     Other lawsuits have been filed since 2008 in various state and federal courts, against the Manager and certain of its affiliates. Those lawsuits were filed by investors who made investments through an affiliate of the Manager, and relate to the alleged investment fraud perpetrated by Bernard Madoff and his firm (“Madoff”). Those suits allege a variety of claims, including breach of fiduciary duty, fraud, negligent misrepresentation, unjust enrichment, and violation of federal and state securities laws and regulations, among others. They seek unspecified damages, equitable relief and an award of attorneys’ fees and litigation expenses. None of the suits have named the Distributor, any of the Oppenheimer mutual funds or any of their independent Trustees or Directors as defendants. None of the Oppenheimer funds invested in any funds or accounts managed by Madoff.

     The Manager believes that the lawsuits described above are without legal merit and is defending against them vigorously. The Defendant Funds’ Boards of Trustees have also engaged counsel to defend the suits brought against those Funds and the present and former Independent Trustees named in those suits. While it is premature to render any opinion as to the outcome in these lawsuits, or whether any costs that the Defendant Funds may bear in defending the suits might not be reimbursed by insurance, the Manager believes that these suits should not impair the ability of the Manager or the Distributor to perform their respective duties to the Fund, and that the outcome of all of the suits together should not have any material effect on the operations of any of the Oppenheimer funds.

9. Subsequent Event

The Regulated Investment Company Modernization Act of 2010 (the “Act”) was signed into law on December 22, 2010. The Act makes changes to a number of tax rules impacting the Fund. Under the Act, future capital losses generated by a fund may be carried over indefinitely, but these losses must be used prior to the utilization of any pre-enactment capital losses. Since pre-enactment capital losses may only be carried forward for eight years, there may be a greater likelihood that all or a portion of a fund’s pre-enactment capital losses will expire unused. In general, the provisions of the Act will be effective for the Fund’s fiscal year ending December 31, 2011. Specific information regarding the impact of the Act on the Fund will be contained within the “Federal Taxes” section of the financial statement notes for the fiscal year ending December 31, 2011.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Trustees and Shareholders of Oppenheimer Variable Account Funds:

We have audited the accompanying statement of assets and liabilities of Oppenheimer Global Securities Fund/VA (one of the portfolios constituting the Oppenheimer Variable Account Funds), including the statement of investments, as of December 31, 2010, the related statement of operations for the year then ended, and the statements of changes in net assets and the financial highlights for each of the years in the two-year 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. The accompanying financial highlights of Oppenheimer Global Securities Fund/VA for the years ended prior to January 1, 2009 were audited by other auditors whose report dated February 11, 2009 expressed an unqualified opinion on those financial highlights.

     We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2010, by correspondence with the custodian and transfer agent. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Oppenheimer Global Securities Fund/VA as of December 31, 2010, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for each of the years in the two-year period then ended, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG llp

Denver, Colorado
February 16, 2011

STATEMENT OF INVESTMENTS December 31, 2010

	Shares		Value
Common Stocks—98.7%
Consumer Discretionary—17.3%
Automobiles—1.5%
Bayerische Motoren Werke (BMW) AG		75,529	$	5,925,604
Bayerische Motoren Werke (BMW) AG, Preference		705,262		36,336,077
				42,261,681
Diversified Consumer Services—0.0%
Zee Learn Ltd.		492,103		302,646
Hotels, Restaurants & Leisure—3.8%
Carnival Corp.		1,090,646		50,289,687
Lottomatica SpA		417,500		5,174,605
McDonald’s Corp.		567,920		43,593,539
Shuffle Master, Inc.1		616,100		7,054,345
				106,112,176
Household Durables—1.6%
Sony Corp.		1,288,800		46,462,835
Media—3.7%
Grupo Televisa SA, Sponsored GDR1		1,358,076		35,214,911
McGraw-Hill Cos., Inc. (The)		278,970		10,157,298
Walt Disney Co. (The)		1,179,900		44,258,049
Wire & Wireless India Ltd.1		2,281,600		622,510
Zee Entertainment Enterprises Ltd.		3,936,820		12,964,257
				103,217,025
Specialty Retail—3.2%
Industria de Diseno Textil SA		481,087		36,020,612
Tiffany & Co.		843,600		52,530,972
				88,551,584
Textiles, Apparel & Luxury Goods—3.5%
Bulgari SpA		1,732,778		18,721,032
LVMH Moet Hennessy Louis Vuitton SA		319,840		52,613,558
Tod’s SpA		269,399		26,604,020
				97,938,610
Consumer Staples—8.3%
Beverages—3.2%
Companhia de Bebidas das Americas, Sponsored ADR, Preference		930,575		28,875,742
Fomento Economico Mexicano SA de CV, UBD		6,736,224		37,662,856
Grupo Modelo SA de CV, Series C		3,411,977		21,203,987
				87,742,585
Food & Staples Retailing—1.4%
Shinsegae Department Store Co.		10,507		5,684,464
Wal-Mart Stores, Inc.		624,870		33,699,239
				39,383,703
Food Products—2.3%
Nestle SA		525,225		30,755,154
Unilever plc		1,126,403		34,473,481
				65,228,635
Household Products—1.4%
Colgate-Palmolive Co.		478,210		38,433,738
Energy—3.7%
Energy Equipment & Services—2.6%
Technip SA		412,260		38,067,652
Transocean Ltd.1		477,252		33,173,787
				71,241,439
Oil, Gas & Consumable Fuels—1.1%
Total SA		585,890		31,043,174
Financials—16.3%
Capital Markets—4.9%
3i Group plc		2,576,148		13,194,023
Credit Suisse Group AG		1,473,595		59,369,330
Goldman Sachs Group, Inc. (The)		179,390		30,166,222
UBS AG1		2,085,366		34,235,688
				136,965,263
Commercial Banks—3.7%
Banco Bilbao Vizcaya Argentaria SA		2,721,385		27,492,778
HSBC Holdings plc		3,566,173		36,566,487
Societe Generale SA, Cl. A		320,542		17,227,960
Sumitomo Mitsui Financial Group, Inc.		653,300		23,270,644
				104,557,869
Consumer Finance—0.7%
SLM Corp.1		1,477,640		18,603,488
Diversified Financial Services—1.1%
Investor AB, B Shares		1,419,138		30,363,453
Insurance—5.9%
AFLAC, Inc.		479,390		27,051,978
Allianz SE		305,932		36,368,595
Dai-ichi Life Insurance Co.		20,806		33,801,101
Fidelity National Financial, Inc., Cl. A		942,400		12,892,032
Prudential plc		2,843,067		29,609,741
XL Group plc		1,204,570		26,283,717
				166,007,164
Health Care—7.1%
Biotechnology—1.8%
Amylin Pharmaceuticals, Inc.1		1,095,038		16,108,009
Basilea Pharmaceutica AG1		19,039		1,323,567
Dendreon Corp.1		207,690		7,252,535
Gilead Sciences, Inc.1		240,500		8,715,720
Regeneron Pharmaceuticals, Inc.1		96,552		3,169,802
Theravance, Inc.1		569,100		14,267,337
				50,836,970

	Shares		Value
Health Care Equipment & Supplies—1.0%
Zimmer Holdings, Inc.1		537,690	$	28,863,199
Health Care Providers & Services—2.3%
Aetna, Inc.		1,013,500		30,921,885
WellPoint, Inc.1		598,535		34,032,700
				64,954,585
Pharmaceuticals—2.0%
Bayer AG		355,486		26,150,902
Mitsubishi Tanabe Pharma Corp.		799,000		13,492,167
Roche Holding AG		103,595		15,179,160
				54,822,229
Industrials—14.1%
Aerospace & Defense—2.9%
Embraer SA, ADR		886,753		26,070,538
European Aeronautic Defense & Space Co.1		1,386,180		32,305,239
Lockheed Martin Corp.		163,960		11,462,444
Raytheon Co.		256,560		11,888,990
				81,727,211
Air Freight & Logistics—0.7%
TNT NV		739,827		19,525,588
Building Products—1.6%
Assa Abloy AB, Cl. B		1,580,496		44,531,605
Commercial Services & Supplies—0.7%
Secom Co. Ltd.		403,900		19,127,916
Electrical Equipment—2.0%
Emerson Electric Co.		443,340		25,345,748
Nidec Corp.		173,900		17,584,912
Prysmian SpA		679,000		11,568,760
				54,499,420
Industrial Conglomerates—5.5%
3M Co.		428,790		37,004,577
Koninklijke Philips Electronics NV		1,160,800		35,553,213
Siemens AG		663,147		82,564,385
				155,122,175
Machinery—0.7%
Fanuc Ltd.		130,300		20,012,822
Information Technology—28.1%
Communications Equipment—6.1%
Juniper Networks, Inc.1		1,583,440		58,460,605
Telefonaktiebolaget LM Ericsson, B Shares		9,698,309		112,303,619
				170,764,224
Electronic Equipment & Instruments—4.7%
Corning, Inc.		1,383,320		26,725,742
Hoya Corp.		1,035,000		25,138,810
Keyence Corp.		95,274		27,600,006
Kyocera Corp.		161,800		16,520,778
Murata Manufacturing Co. Ltd.		529,800		37,129,720
				133,115,056
Internet Software & Services—2.5%
eBay, Inc.1		2,500,090		69,577,505
IT Services—2.7%
Automatic Data Processing, Inc.		571,840		26,464,755
Infosys Technologies Ltd.		630,108		48,514,018
				74,978,773
Semiconductors & Semiconductor Equipment—5.1%
Altera Corp.		1,528,710		54,391,502
Maxim Integrated Products, Inc.		1,415,335		33,430,213
MediaTek, Inc.		1,531,891		21,858,907
Taiwan Semiconductor Manufacturing Co. Ltd.		13,575,184		33,057,399
				142,738,021
Software—7.0%
Adobe Systems, Inc.1		1,074,443		33,071,356
Intuit, Inc.1		1,038,730		51,209,389
Microsoft Corp.		1,699,710		47,455,903
Nintendo Co. Ltd.		60,600		17,786,649
SAP AG		912,028		46,221,135
				195,744,432
Materials—0.7%
Chemicals—0.7%
Linde AG		120,238		18,333,029
Telecommunication Services—2.2%
Wireless Telecommunication Services—2.2%
America Movil SAB de CV, ADR, Series L		121,380		6,959,929
KDDI Corp.		4,772		27,565,809
Vodafone Group plc		10,676,562		27,798,495
				62,324,233
Utilities—0.9%
Electric Utilities—0.9%
Fortum OYJ		786,400		23,857,723
Total Common Stocks (Cost $2,072,185,389)				2,759,873,784

	Shares			Value
Investment Companies—1.2%
JPMorgan U.S. Treasury Plus Money Market Fund, Agency Shares, 0.00%2,3		720,713		$	720,713
Oppenheimer Institutional Money Market Fund, Cl. E, 0.21%2,4		32,313,050			32,313,050
Total Investment Companies (Cost $33,033,763)					33,033,763
Total Investments, at Value (Cost $2,105,219,152)		99.9	%	$	2,792,907,547
Other Assets
Net of Liabilities		0.1			3,927,591
Net Assets		100.0	%	$	2,796,835,138

Footnotes to Statement of Investments
1.	Non-income producing security.
2.	Rate shown is the 7-day yield as of December 31, 2010.
3.	Interest rate is less than 0.0005%.
4.	Is or was an affiliate, as defined in the Investment Company Act of 1940, at or during the period ended December 31, 2010, 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, 2009		Additions		Reductions		December 31, 2010
Oppenheimer Institutional Money Market Fund, Cl. E		30,907,869		307,699,375		306,294,194		32,313,050

	Value		Income
Oppenheimer Institutional Money Market Fund, Cl. E	$	32,313,050	$	71,454

Valuation Inputs

Various data inputs are used in determining the value of each of the Fund’s investments as of the reporting period end. These data inputs are categorized in the following hierarchy under applicable financial accounting standards:

1)	Level 1 — unadjusted quoted prices in active markets for identical assets or liabilities (including securities actively traded on a securities exchange)
2)	Level 2 — inputs other than unadjusted quoted prices that are observable for the asset or liability (such as unadjusted quoted prices for similar assets and market corroborated inputs such as interest rates, prepayment speeds, credit risks, etc.)
3)	Level 3 — significant unobservable inputs (including the Manager’s own judgments about assumptions that market participants would use in pricing the asset or liability).

The table below categorizes amounts that are included in the Fund’s Statement of Assets and Liabilities as of December 31, 2010 based on valuation input level:

						Level 3–
	Level 1–		Level 2–			Significant
	Unadjusted		Other Significant			Unobservable
	Quoted Prices		Observable Inputs			Inputs		Value
Assets Table
Investments, at Value:
Common Stocks
Consumer Discretionary	$	484,846,557	$	—		$	—	$	484,846,557
Consumer Staples		230,788,661		—			—		230,788,661
Energy		102,284,613		—			—		102,284,613
Financials		456,497,237		—			—		456,497,237
Health Care		199,476,983		—			—		199,476,983
Industrials		394,546,737		—			—		394,546,737
Information Technology		652,755,485		134,162,526			—		786,918,011
Materials		18,333,029		—			—		18,333,029
Telecommunication Services		34,525,738		27,798,495			—		62,324,233
Utilities		—		23,857,723			—		23,857,723
Investment Companies		33,033,763		—			—		33,033,763
Total Assets	$	2,607,088,803	$	185,818,744		$	—	$	2,792,907,547
Liabilities Table
Other Financial Instruments:
Foreign currency exchange contracts	$	—	$	(2,260	)	$	—	$	(2,260	)
Total Liabilities	$	—	$	(2,260	)	$	—	$	(2,260	)

Currency contracts and forwards, if any, are reported at their unrealized appreciation/depreciation at measurement date, which represents the change in the contract’s value from trade date. Futures, if any, are reported at their variation margin at measurement date, which represents the amount due to/from the Fund at that date. All additional assets and liabilities included in the above table are reported at their market value at measurement date.

The table below shows the significant transfers between Level 1 and Level 2. The Fund’s policy is to recognize transfers in and transfers out as of the beginning of the reporting period.

	Transfers into		Transfers out			Transfers into		Transfers out
	Level 1*		of Level 1**			Level 2**		of Level 2*
Assets Table
Investments, at Value:
Common Stocks
Consumer Discretionary	$	107,682,363	$	—		$	—	$	(107,682,363	)
Consumer Staples		28,024,056		—			—		(28,024,056	)
Energy		75,498,991		—			—		(75,498,991	)
Financials		273,414,697		—			—		(273,414,697	)
Health Care		13,379,033		—			—		(13,379,033	)
Industrials		190,599,385		—			—		(190,599,385	)
Information Technology		163,218,218		(99,532,566	)		99,532,566		(163,218,218	)
Telecommunication Services		28,924,502		(24,532,360	)		24,532,360		(28,924,502	)
Total Assets	$	880,741,245	$	(124,064,926	)	$	124,064,926	$	(880,741,245	)

*	Transferred from Level 2 to Level 1 due to the presence of a readily available unadjusted quoted market price. As of the prior reporting period end, these securities were absent of a readily available unadjusted quoted market price due to a significant event occuring before the Fund’s assets were valued but after the close of the securities’ respective exchanges.
**	Transferred from Level 1 to Level 2 because of the absence of a readily available unadjusted quoted market price due to a significant event occurring before the Fund’s assets were valued but after the close of the securities’ respective exchanges.

See the accompanying Notes for further discussion of the methods used in determining value of the Fund’s investments, and a summary of changes to the valuation methodologies, if any, during the reporting period.

Distribution of investments representing geographic holdings, as a percentage of total investments at value, is as follows:

Geographic Holdings	Value		Percent
United States	$	1,064,758,053		38.1	%
Japan		325,494,169		11.7
Germany		251,899,727		9.0
Sweden		187,198,677		6.7
France		171,257,583		6.1
United Kingdom		141,642,227		5.1
Switzerland		140,862,899		5.0
Mexico		101,041,683		3.6
Spain		63,513,390		2.3
India		62,403,431		2.2
Italy		62,068,417		2.2
The Netherlands		55,078,801		2.0
Brazil		54,946,280		2.0
Taiwan		54,916,306		2.0
Ireland		26,283,717		0.9
Finland		23,857,723		0.9
Korea, Republic of South		5,684,464		0.2
Total	$	2,792,907,547		100.0	%

Foreign Currency Exchange Contracts as of December 31, 2010 are as follows:

		Contract Amount		Expiration				Unrealized
Counterparty/Contract Description	Buy/Sell	(000’s)		Date		Value		Depreciation
Brown Brothers Harriman
Swedish Krona (SEK)	Sell	4,788	SEK		1/5/11	$	711,836	$	2,260

STATEMENT OF ASSETS AND LIABILITIES December 31, 2010

Assets
Investments, at value—see accompanying statement of investments:
Unaffiliated companies (cost $2,072,906,102)	$	2,760,594,497
Affiliated companies (cost $32,313,050)		32,313,050
		2,792,907,547
Receivables and other assets:
Interest and dividends		3,493,590
Investments sold		3,477,867
Other		227,093
Total assets		2,800,106,097
Liabilities
Unrealized depreciation on foreign currency exchange contracts		2,260
Payables and other liabilities:
Shares of beneficial interest redeemed		1,821,252
Distribution and service plan fees		711,545
Shareholder communications		286,508
Transfer and shareholder servicing agent fees		235,897
Trustees’ compensation		50,727
Legal, auditing and other professional fees		36,375
Other		126,395
Total liabilities		3,270,959
Net Assets	$	2,796,835,138
Composition of Net Assets
Par value of shares of beneficial interest	$	92,604
Additional paid-in capital		2,133,608,934
Accumulated net investment income		23,680,132
Accumulated net realized loss on investments and foreign currency transactions		(48,567,034	)
Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies		688,020,502
Net Assets	$	2,796,835,138
Net Asset Value Per Share
Non-Service Shares:
Net asset value, redemption price per share and offering price per share (based on net assets of $1,410,763,429 and 46,563,559 shares of beneficial interest outstanding)	$	30.30
Service Shares:
Net asset value, redemption price per share and offering price per share (based on net assets of $1,101,584,428 and 36,675,663 shares of beneficial interest outstanding)	$	30.04
Class 3 Shares:
Net asset value, redemption price per share and offering price per share (based on net assets of $202,621,365 and 6,643,369 shares of beneficial interest outstanding)	$	30.50
Class 4 Shares:
Net asset value, redemption price per share and offering price per share (based on net assets of $81,865,916 and 2,721,393 shares of beneficial interest outstanding)	$	30.08

STATEMENT OF OPERATIONS For the Year Ended December 31, 2010

Investment Income
Dividends:
Unaffiliated companies (net of foreign withholding taxes of $4,749,919)	$	51,422,607
Affiliated companies		71,454
Interest		44,489
Total investment income		51,538,550
Expenses
Management fees		16,477,772
Distribution and service plan fees:
Service shares		2,487,757
Class 4 shares		191,270
Transfer and shareholder servicing agent fees:
Non-Service shares		1,335,869
Service shares		997,433
Class 3 shares		196,460
Class 4 shares		76,505
Shareholder communications:
Non-Service shares		165,185
Service shares		124,272
Class 3 shares		24,187
Class 4 shares		9,474
Custodian fees and expenses		284,724
Trustees’ compensation		56,368
Administration service fees		1,500
Other		143,515
Total expenses		22,572,291
Less waivers and reimbursements of expenses		(31,932	)
Net expenses		22,540,359
Net Investment Income		28,998,191
Realized and Unrealized Gain
Net realized gain on:
Investments from unaffiliated companies (net of foreign capital gains tax of $264,531)		35,894,050
Foreign currency transactions		25,571,948
Net realized gain		61,465,998
Net change in unrealized appreciation/depreciation on:
Investments		288,320,153
Translation of assets and liabilities denominated in foreign currencies		9,675,167
Net change in unrealized appreciation/depreciation		297,995,320
Net Increase in Net Assets Resulting from Operations	$	388,459,509

STATEMENTS OF CHANGES IN NET ASSETS

Year Ended December 31,	2010			2009
Operations
Net investment income	$	28,998,191		$	31,953,433
Net realized gain (loss)		61,465,998			(65,102,360	)
Net change in unrealized appreciation/depreciation		297,995,320			806,598,818
Net increase in net assets resulting from operations		388,459,509			773,449,891
Dividends and/or Distributions to Shareholders
Dividends from net investment income:
Non-Service shares		(19,240,136	)		(27,800,589	)
Service shares		(12,039,643	)		(16,163,769	)
Class 3 shares		(2,863,873	)		(4,130,611	)
Class 4 shares		(934,492	)		(1,262,683	)
		(35,078,144	)		(49,357,652	)
Distributions from net realized gain:
Non-Service shares		—			(26,507,538	)
Service shares		—			(17,924,453	)
Class 3 shares		—			(3,946,570	)
Class 4 shares		—			(1,437,851	)
		—			(49,816,412	)
Beneficial Interest Transactions
Net decrease in net assets resulting from beneficial interest transactions:
Non-Service shares		(133,425,702	)		(140,936,466	)
Service shares		(16,572,723	)		(37,527,816	)
Class 3 shares		(29,607,611	)		(22,954,318	)
Class 4 shares		(6,420,742	)		(4,666,393	)
		(186,026,778	)		(206,084,993	)
Net Assets
Total increase		167,354,587			468,190,834
Beginning of period		2,629,480,551			2,161,289,717
End of period (including accumulated net investment income of $23,680,132 and $30,325,856, respectively)	$	2,796,835,138		$	2,629,480,551

FINANCIAL HIGHLIGHTS

Non-Service Shares   Year Ended December 31,	2010			2009			2008			2007			2006
Per Share Operating Data
Net asset value, beginning of period	$	26.50		$	20.21		$	36.60		$	36.79		$	33.38
Income (loss) from investment operations:
Net investment income1		.33			.33			.55			.45			.43
Net realized and unrealized gain (loss)		3.85			6.94			(14.46	)		1.69			5.20
Total from investment operations		4.18			7.27			(13.91	)		2.14			5.63
Dividends and/or distributions to shareholders:
Dividends from net investment income		(.38	)		(.50	)		(.46	)		(.50	)		(.36	)
Distributions from net realized gain		—			(.48	)		(2.02	)		(1.83	)		(1.86	)
Total dividends and/or distributions to shareholders		(.38	)		(.98	)		(2.48	)		(2.33	)		(2.22	)
Net asset value, end of period	$	30.30		$	26.50		$	20.21		$	36.60		$	36.79
Total Return, at Net Asset Value2		15.96	%		39.77	%		(40.19	)%		6.32	%		17.69	%
Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	1,410,764		$	1,364,597		$	1,150,113		$	2,193,638		$	2,297,315
Average net assets (in thousands)	$	1,336,110		$	1,206,240		$	1,679,720		$	2,302,726		$	2,189,511
Ratios to average net assets:3
Net investment income		1.22	%		1.51	%		1.95	%		1.21	%		1.27	%
Total expenses4		0.76	%		0.75	%		0.65	%		0.65	%		0.66	%
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses		0.76	%		0.75	%		0.65	%		0.65	%		0.66	%
Portfolio turnover rate		15	%		11	%		19	%		18	%		21	%

1.	Per share amounts calculated based on the average shares outstanding during the period.
2.	Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
3.	Annualized for periods less than one full year.
4.	Total expenses including indirect expenses from affiliated fund were as follows:

Year Ended December 31, 2010	0.76	%
Year Ended December 31, 2009	0.75	%
Year Ended December 31, 2008	0.65	%
Year Ended December 31, 2007	0.65	%
Year Ended December 31, 2006	0.66	%

Service Shares     Year Ended December 31,	2010			2009			2008			2007			2006
Per Share Operating Data
Net asset value, beginning of period	$	26.28		$	20.02		$	36.27		$	36.49		$	33.16
Income (loss) from investment operations:
Net investment income1		.26			.27			.47			.33			.33
Net realized and unrealized gain (loss)		3.82			6.90			(14.32	)		1.72			5.16
Total from investment operations		4.08			7.17			(13.85	)		2.05			5.49
Dividends and/or distributions to shareholders:
Dividends from net investment income		(.32	)		(.43	)		(.38	)		(.44	)		(.30	)
Distributions from net realized gain		—			(.48	)		(2.02	)		(1.83	)		(1.86	)
Total dividends and/or distributions to shareholders		(.32	)		(.91	)		(2.40	)		(2.27	)		(2.16	)
Net asset value, end of period	$	30.04		$	26.28		$	20.02		$	36.27		$	36.49
Total Return, at Net Asset Value2		15.70	%		39.36	%		(40.33	)%		6.08	%		17.36	%
Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	1,101,584		$	980,485		$	772,107		$	1,300,989		$	983,558
Average net assets (in thousands)	$	997,627		$	830,887		$	1,051,239		$	1,180,656		$	750,499
Ratios to average net assets:3
Net investment income		0.96	%		1.23	%		1.70	%		0.91	%		0.98	%
Total expenses4		1.01	%		1.00	%		0.90	%		0.89	%		0.91	%
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses		1.01	%		1.00	%		0.90	%		0.89	%		0.91	%
Portfolio turnover rate		15	%		11	%		19	%		18	%		21	%

1.	Per share amounts calculated based on the average shares outstanding during the period.
2.	Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
3.	Annualized for periods less than one full year.
4.	Total expenses including indirect expenses from affiliated fund were as follows:

Year Ended December 31, 2010	1.01	%
Year Ended December 31, 2009	1.00	%
Year Ended December 31, 2008	0.90	%
Year Ended December 31, 2007	0.89	%
Year Ended December 31, 2006	0.91	%

Class 3 Shares     Year Ended December 31,	2010			2009			2008			2007			2006
Per Share Operating Data
Net asset value, beginning of period	$	26.67		$	20.34		$	36.82		$	36.99		$	33.55
Income (loss) from investment operations:
Net investment income1		.33			.33			.56			.45			.43
Net realized and unrealized gain (loss)		3.88			6.98			(14.56	)		1.71			5.23
Total from investment operations		4.21			7.31			(14.00	)		2.16			5.66
Dividends and/or distributions to shareholders:
Dividends from net investment income		(.38	)		(.50	)		(.46	)		(.50	)		(.36	)
Distributions from net realized gain		—			(.48	)		(2.02	)		(1.83	)		(1.86	)
Total dividends and/or distributions to shareholders		(.38	)		(.98	)		(2.48	)		(2.33	)		(2.22	)
Net asset value, end of period	$	30.50		$	26.67		$	20.34		$	36.82		$	36.99
Total Return, at Net Asset Value2		15.97	%		39.70	%		(40.19	)%		6.34	%		17.69	%
Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	202,621		$	206,356		$	175,971		$	361,621		$	395,901
Average net assets (in thousands)	$	196,495		$	182,553		$	269,650		$	391,270		$	369,406
Ratios to average net assets:3
Net investment income		1.22	%		1.49	%		1.95	%		1.22	%		1.26	%
Total expenses4		0.76	%		0.75	%		0.65	%		0.65	%		0.66	%
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses		0.76	%		0.75	%		0.65	%		0.65	%		0.66	%
Portfolio turnover rate		15	%		11	%		19	%		18	%		21	%

1.	Per share amounts calculated based on the average shares outstanding during the period.
2.	Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
3.	Annualized for periods less than one full year.
4.	Total expenses including indirect expenses from affiliated fund were as follows:

Year Ended December 31, 2010	0.76	%
Year Ended December 31, 2009	0.75	%
Year Ended December 31, 2008	0.65	%
Year Ended December 31, 2007	0.65	%
Year Ended December 31, 2006	0.66	%

Class 4 Shares       Year Ended December 31,	2010			2009			2008			2007			2006
Per Share Operating Data
Net asset value, beginning of period	$	26.32		$	20.03		$	36.28		$	36.49		$	33.15
Income (loss) from investment operations:
Net investment income1		.26			.27			.47			.34			.34
Net realized and unrealized gain (loss)		3.82			6.92			(14.34	)		1.70			5.16
Total from investment operations		4.08			7.19			(13.87	)		2.04			5.50
Dividends and/or distributions to shareholders:
Dividends from net investment income		(.32	)		(.42	)		(.36	)		(.42	)		(.30	)
Distributions from net realized gain		—			(.48	)		(2.02	)		(1.83	)		(1.86	)
Total dividends and/or distributions to shareholders		(.32	)		(.90	)		(2.38	)		(2.25	)		(2.16	)
Net asset value, end of period	$	30.08		$	26.32		$	20.03		$	36.28		$	36.49
Total Return, at Net Asset Value2		15.67	%		39.38	%		(40.35	)%		6.06	%		17.40	%
Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	81,866		$	78,043		$	63,099		$	123,542		$	114,232
Average net assets (in thousands)	$	76,519		$	66,965		$	93,909		$	122,385		$	100,973
Ratios to average net assets:3
Net investment income		0.97	%		1.22	%		1.69	%		0.93	%		1.00	%
Total expenses4		1.01	%		1.00	%		0.91	%		0.90	%		0.91	%
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses		1.01	%		1.00	%		0.91	%		0.90	%		0.91	%
Portfolio turnover rate		15	%		11	%		19	%		18	%		21	%

1.	Per share amounts calculated based on the average shares outstanding during the period.
2.	Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
3.	Annualized for periods less than one full year.
4.	Total expenses including indirect expenses from affiliated fund were as follows:

Year Ended December 31, 2010	1.01	%
Year Ended December 31, 2009	1.00	%
Year Ended December 31, 2008	0.91	%
Year Ended December 31, 2007	0.90	%
Year Ended December 31, 2006	0.91	%

NOTES TO FINANCIAL STATEMENTS

1. Significant Accounting Policies

Oppenheimer Global Securities 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 investment objective is to seek long-term capital appreciation by investing a substantial portion of its assets in securities of foreign issuers, “growth-type” companies, cyclical industries and special situations that are considered to have appreciation possibilities. The Fund’s investment adviser is OppenheimerFunds, Inc. (the “Manager”).

     The Fund offers Non-Service, Service, Class 3 and Class 4 shares. All 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 being designated as Service shares and Class 4 shares are subject to a distribution and service plan. All classes of shares have identical rights and voting privileges with respect to the Fund in general and exclusive voting rights on matters that affect that class alone. Earnings, net assets and net asset value per share may differ 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 Fund assesses a 1% fee on the proceeds of Class 3 and Class 4 shares that are redeemed (either by selling or exchanging to another Oppenheimer fund or other investment option offered through your variable life insurance or variable annuity contract) within 60 days of their purchase. The fee, which is retained by the Fund, is accounted for as an addition to paid-in capital.

     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.

     Each investment asset or liability of the Fund is assigned a level at measurement date based on the significance and source of the inputs to its valuation. Unadjusted quoted prices in active markets for identical securities are classified as “Level 1,” inputs other than unadjusted quoted prices for an asset that are observable are classified as “Level 2” and significant unobservable inputs, including the Manager’s judgment about the assumptions that a market participant would use in pricing an asset or liability, are classified as “Level 3.” The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. A table summarizing the Fund’s investments under these levels of classification is included following the Statement of Investments.

     Securities are valued using unadjusted quoted market prices, when available, as supplied primarily by portfolio pricing services approved by the Board of Trustees or dealers.

     Securities traded on a registered U.S. securities exchange are valued based on the last sale price of the security reported on the principal exchange on which it is traded, prior to the time when the Fund’s assets are valued. Securities whose principal exchange is NASDAQ^® are valued based on the official closing prices 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 current day’s closing “bid” and “asked” prices, and if not, at the current day’s closing bid price. A foreign security traded on a foreign exchange is valued based on the last sale price on the principal exchange on which the security is traded, as identified by the portfolio pricing service used by the Manager, prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the most recent official closing price on the principal exchange on which it is traded.

     Shares of a registered investment company that are not traded on an exchange are valued at that investment company’s net asset value per share.

     U.S. domestic and international debt instruments (including corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed securities) and “money market-type” debt instruments with a remaining maturity in excess of sixty days are valued at the mean between the “bid” and “asked” prices utilizing price quotations obtained from independent pricing services or broker-dealers. Such prices are typically determined based upon information obtained from market participants including reported trade data, broker-dealer price quotations and inputs such as benchmark yields and issuer spreads from identical or similar securities.

     Forward foreign currency exchange contracts are valued utilizing current and forward currency rates obtained from independent pricing services.

     “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.

     In the absence of a readily available unadjusted quoted market price, including for 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 the securities’ respective exchanges, the Manager, acting through its internal valuation committee, in good faith determines the fair valuation of that asset using consistently applied procedures under the supervision of the Board of Trustees (which reviews those fair valuations by the Manager). Those procedures include certain standardized methodologies to fair value securities. Such methodologies include, but are not limited to, pricing securities initially at cost and subsequently adjusting the value based on: changes in company specific fundamentals, changes in an appropriate securities index, or changes in the value of similar securities which may be adjusted for any discounts related to resale restrictions. When possible, such methodologies use observable market inputs such as unadjusted quoted prices of similar securities, observable interest rates, currency rates and yield curves. The methodologies used for valuing securities are not necessarily an indication of the risks associated with investing in those securities.

     There have been no significant changes to the fair valuation methodologies of the Fund during the period.

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. When applicable, the Fund’s investment in IMMF is included in the Statement of Investments. Shares of IMMF are valued at their net asset value per share. 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.

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.

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

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

					Net Unrealized
					Appreciation
					Based on Cost of
Undistributed	Undistributed		Accumulated		Securities and Other
Net Investment	Long-Term		Loss		Investments for Federal
Income	Gain		Carryforward1,2,3		Income Tax Purposes
$31,700,131	$	—	$	17,214,823	$	648,698,863

1. As of December 31, 2010, the Fund had $17,214,823 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, 2010, details of the capital loss carryforward were as follows:

Expiring
2017	$	17,214,823

2.	During the fiscal year ended December 31, 2010, the Fund utilized $61,984,330 of capital loss carryforward to offset capital gains realized in that fiscal year.
3.	During the fiscal year ended December 31, 2009, 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, 2010. Net assets of the Fund were unaffected by the reclassifications.

Reduction	Reduction
to Accumulated	to Accumulated
Net Investment	Net Realized Loss
Income	on Investments
$565,771	$	565,771

The tax character of distributions paid during the years ended December 31, 2010 and December 31, 2009 was as follows:

	Year Ended		Year Ended
	December 31, 2010		December 31, 2009
Distributions paid from:
Ordinary income	$	35,078,144	$	49,392,292
Long-term capital gain		—		49,781,772
Total	$	35,078,144	$	99,174,064

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, 2010 are noted in the following table. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss.

Federal tax cost of securities	$	2,144,543,051
Federal tax cost of other investments		(711,836	)
Total federal tax cost	$	2,143,831,215
Gross unrealized appreciation	$	713,036,000
Gross unrealized depreciation		(64,337,137	)
Net unrealized appreciation	$	648,698,863

Certain foreign countries impose a tax on capital gains which is accrued by the Fund based on unrealized appreciation, if any, on affected securities. The tax is paid when the gain is realized.

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 with 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. 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, 2010						Year Ended December 31, 2009
	Shares			Amount			Shares			Amount
Non-Service Shares
Sold		3,002,141		$	81,399,571			4,700,539		$	96,201,259
Dividends and/or distributions reinvested		719,257			19,240,136			3,644,841			54,308,127
Redeemed		(8,659,048	)		(234,065,409	)		(13,740,529	)		(291,445,852	)
Net decrease		(4,937,650	)	$	(133,425,702	)		(5,395,149	)	$	(140,936,466	)
Service Shares
Sold		4,081,506		$	109,511,274			2,545,715		$	56,464,839
Dividends and/or distributions reinvested		453,129			12,039,643			2,301,703			34,088,222
Redeemed		(5,166,594	)		(138,123,640	)		(6,110,959	)		(128,080,877	)
Net decrease		(631,959	)	$	(16,572,723	)		(1,263,541	)	$	(37,527,816	)
Class 3 Shares
Sold		201,269		$	5,485,318			250,961		$	5,397,159
Dividends and/or distributions reinvested		106,384			2,863,873			538,120			8,077,181
Redeemed		(1,401,659	)		(37,956,802	)1		(1,702,099	)		(36,428,658	)2
Net decrease		(1,094,006	)	$	(29,607,611	)		(913,018	)	$	(22,954,318	)
Class 4 Shares
Sold		83,546		$	2,267,578			131,734		$	2,846,292
Dividends and/or distributions reinvested		35,118			934,492			181,977			2,700,534
Redeemed		(362,658	)		(9,622,812	)1		(497,765	)		(10,213,219	)2
Net decrease		(243,994	)	$	(6,420,742	)		(184,054	)	$	(4,666,393	)

1.	Net of redemption fees of $3,781 and $2,816 for Class 3 and Class 4, respectively.
2.	Net of redemption fees of $5,246 and $4,411 for Class 3 and Class 4, respectively.

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, 2010, were as follows:

	Purchases		Sales
Investment securities	$	386,662,911	$	583,878,682

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
Up to $200 million	0.75	%
Next $200 million	0.72
Next $200 million	0.69
Next $200 million	0.66
Over $800 million	0.60

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 fees at an annual rate of 0.10% of the daily net assets of each class of shares. For the year ended December 31, 2010, the Fund paid $2,593,552 to OFS for services to the Fund.

Distribution and Service Plan for Service Shares and Class 4 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 and Class 4 shares to pay OppenheimerFunds Distributor, Inc. (the “Distributor”), for distribution related services, personal service and account maintenance for the Fund’s Service shares and Class 4 shares. Under the Plan, payments are made periodically at an annual rate of 0.25% of the daily net assets of Service shares and Class 4 shares of the Fund. The Distributor currently uses all of those fees to compensate sponsors 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 and Class 4 shares. These fees are paid out of the Fund’s assets on an on-going basis and increase operating expenses of the Service shares and Class 4 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. The Manager has voluntarily agreed to limit the Fund’s total annual operating expenses so that those expenses, as percentages of daily net assets, will not exceed the annual rate of 1.00% for Non-Service and Class 3 shares and 1.25% for Service and Class 4 shares.

     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, 2010, the Manager waived fees and/or reimbursed the Fund $31,932 for IMMF management fees.

     Some of these undertakings may be modified or terminated at any time; some may not be modified or terminated until after one year from the date of the current prospectus, as indicated therein.

5. Risk Exposures and the Use of Derivative Instruments

The Fund’s investment objectives not only permit the Fund to purchase investment securities, they also allow the Fund to enter into various types of derivatives contracts, including, but not limited to, futures contracts, forward foreign currency exchange contracts, credit default swaps, interest rate swaps, total return swaps, and purchased and written options. In doing so, the Fund will employ strategies in differing combinations to permit it to increase, decrease, or change the level or types of exposure to market risk factors. Central to those strategies are features inherent to derivatives that make them more attractive for this purpose than equity and debt securities: they require little or no initial cash investment, they can focus exposure on only certain selected risk factors, and they may not require the ultimate receipt or delivery of the underlying security (or securities) to the contract. This may allow the Fund to pursue its objectives more quickly and efficiently than if it were to make direct purchases or sales of securities capable of effecting a similar response to market factors.

Market Risk Factors. In accordance with its investment objectives, the Fund may use derivatives to increase or decrease its exposure to one or more of the following market risk factors:

Commodity Risk. Commodity risk relates to the change in value of commodities or commodity indexes as they relate to increases or decreases in the commodities market. Commodities are physical assets that have tangible properties. Examples of these types of assets are crude oil, heating oil, metals, livestock, and agricultural products.

Credit Risk. Credit risk relates to the ability of the issuer to meet interest and principal payments, or both, as they come due. In general, lower-grade, higher-yield bonds are subject to credit risk to a greater extent than lower-yield, higher-quality bonds.

Equity Risk. Equity risk relates to the change in value of equity securities as they relate to increases or decreases in the general market.

Foreign Exchange Rate Risk. Foreign exchange rate risk relates to the change in the U.S. dollar value of a security held that is denominated in a foreign currency. The U.S. dollar value of a foreign currency denominated security will decrease as the dollar appreciates against the currency, while the U.S. dollar value will increase as the dollar depreciates against the currency.

Interest Rate Risk. Interest rate risk refers to the fluctuations in value of fixed-income securities resulting from the inverse relationship between price and yield. For example, an increase in general interest rates will tend to reduce the market value of already issued fixed-income investments, and a decline in general interest rates will tend to increase their value. In addition, debt securities with longer maturities, which tend to have higher yields, are subject to potentially greater fluctuations in value from changes in interest rates than obligations with shorter maturities.

Volatility Risk. Volatility risk refers to the magnitude of the movement, but not the direction of the movement, in a financial instrument’s price over a defined time period. Large increases or decreases in a financial instrument’s price over a relative time period typically indicate greater volatility risk, while small increases or decreases in its price typically indicate lower volatility risk.

The Fund’s actual exposures to these market risk factors during the period are discussed in further detail, by derivative type, below.

Risks of Investing in Derivatives. The Fund’s use of derivatives can result in losses due to unanticipated changes in the market risk factors and the overall market. In instances where the Fund is using derivatives to decrease, or hedge, exposures to market risk factors for securities held by the Fund, there are also risks that those derivatives may not perform as expected resulting in losses for the combined or hedged positions.

     Derivatives may have little or no initial cash investment relative to their market value exposure and therefore can produce significant gains or losses in excess of their cost. This use of embedded leverage allows the Fund to increase its market value exposure relative to its net assets and can substantially increase the volatility of the Fund’s performance.

     Additional associated risks from investing in derivatives also exist and potentially could have significant effects on the valuation of the derivative and the Fund. Typically, the associated risks are not the risks that the Fund is attempting to increase or decrease exposure to, per its investment objectives, but are the additional risks from investing in derivatives. Examples of these associated risks are liquidity risk, which is the risk that the Fund will not be able to sell the derivative in the open market in a timely manner, and counterparty credit risk, which is the risk that the counterparty will not fulfill its obligation to the Fund. Associated risks can be different for each type of derivative and are discussed by each derivative type in the notes that follow.

Counterparty Credit Risk. Certain derivative positions are subject to counterparty credit risk, which is the risk that the counterparty will not fulfill its obligation to the Fund. The Fund’s derivative counterparties are financial institutions who are subject to market conditions that may weaken their financial position. The Fund intends to enter into financial transactions with counterparties that the Manager believes to be creditworthy at the time of the transaction.

Credit Related Contingent Features. The Fund’s agreements with derivative counterparties have several credit related contingent features that if triggered would allow its derivatives counterparties to close out and demand payment or additional collateral to cover their exposure from the Fund. Credit related contingent features are established between the Fund and its derivatives counterparties to reduce the risk that the Fund will not fulfill its payment obligations to its counterparties. These triggering features include, but are not limited to, a percentage decrease in the Fund’s net assets and or a percentage decrease in the Fund’s Net Asset Value or NAV. The contingent features are established within the Fund’s International Swap and Derivatives Association, Inc. master agreements which govern certain positions in swaps, over-the-counter options and swaptions, and forward currency exchange contracts for each individual counterparty.

Valuations of derivative instruments as of December 31, 2010 are as follows:

	Liability Derivatives
Derivatives Not Accounted	Statement of Assets and
for as Hedging Instruments	Liabilities Location	Value
Foreign exchange contracts	Unrealized depreciation on foreign currency exchange contracts		$2,260

The effect of derivative instruments on the Statement of Operations is as follows:

Amount of Realized Gain or (Loss) Recognized on Derivatives

Derivatives Not Accounted for
as Hedging Instruments	Foreign currency transactions
Foreign exchange contracts	$	(1,362,614	)

Amount of Change in Unrealized Gain or (Loss) Recognized on Derivatives

Derivatives Not Accounted for	Translation of assets and liabilities
as Hedging Instruments	denominated in foreign currencies
Foreign exchange contracts	$	(2,260	)

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.

     Forward 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.

     The Fund has purchased and sold certain forward foreign currency exchange contracts of different currencies in order to acquire currencies to pay for related foreign securities purchase transactions, or to convert foreign currencies to U.S. dollars from related foreign securities sale transactions. These foreign currency exchange contracts are negotiated at the current spot exchange rate with settlement typically within two business days thereafter. 

     The Fund has entered into forward foreign currency exchange contracts with the obligation to purchase specified foreign currencies in the future at a currently negotiated forward rate in order to take a positive investment perspective on the related currency. These forward foreign currency exchange contracts seek to increase exposure to foreign exchange rate risk.

     The Fund has entered into forward foreign currency exchange contracts with the obligation to purchase specified foreign currencies in the future at a currently negotiated forward rate in order to decrease exposure to foreign exchange rate risk associated with foreign currency denominated securities held by the Fund.

     The Fund has entered into forward foreign currency exchange contracts with the obligation to sell specified foreign currencies in the future at a currently negotiated forward rate in order to take a negative investment perspective on the related currency. These forward foreign currency exchange contracts seek to increase exposure to foreign exchange rate risk.

     The Fund has entered into forward foreign currency exchange contracts with the obligation to sell specified foreign currencies in the future at a currently negotiated forward rate in order to decrease exposure to foreign exchange rate risk associated with foreign currency denominated securities held by the Fund.

     During the year ended December 31, 2010, the Fund had average contract amounts on forward foreign currency contracts to buy and sell of $2,571,248 and $3,566,990, respectively.

     Additional associated risk to the Fund includes counterparty credit risk. Counterparty credit risk arises from the possibility that the counterparty will default.

6. Pending Litigation

Since 2009, a number of lawsuits have been pending federal courts against the Manager, the Distributor, and certain mutual funds (“Defendant Funds”) advised by the Manager and distributed by the Distributor (but not including the Fund). The lawsuits naming the Defendant Funds also name as defendants certain officers and current and former trustees of the respective Defendant Funds. The plaintiffs seek class action status on behalf of purchasers of shares of the respective Defendant Fund during a particular time period. The lawsuits raise claims under federal securities laws alleging that, among other things, the disclosure documents of the respective Defendant Fund contained misrepresentations and omissions, that such Defendant Fund’s investment policies were not followed, and that such Defendant Fund and the other defendants violated federal securities laws and regulations. The plaintiffs seek unspecified damages, equitable relief and an award of attorneys’ fees and litigation expenses.

     In 2009, what are claimed to be derivative lawsuits were filed in state court against the Manager and a subsidiary (but not against the Fund), on behalf of the New Mexico Education Plan Trust. These lawsuits allege breach of contract, breach of fiduciary duty, negligence and violation of state securities laws, and seek compensatory damages, equitable relief and an award of attorneys’ fees and litigation expenses.

     Other lawsuits have been filed since 2008 in various state and federal courts, against the Manager and certain of its affiliates. Those lawsuits were filed by investors who made investments through an affiliate of the Manager, and relate to the alleged investment fraud perpetrated by Bernard Madoff and his firm (“Madoff”). Those suits allege a variety of claims, including breach of fiduciary duty, fraud, negligent misrepresentation, unjust enrichment, and violation of federal and state securities laws and regulations, among others. They seek unspecified damages, equitable relief and an award of attorneys’ fees and litigation expenses. None of the suits have named the Distributor, any of the Oppenheimer mutual funds or any of their independent Trustees or Directors as defendants. None of the Oppenheimer funds invested in any funds or accounts managed by Madoff.

     The Manager believes that the lawsuits described above are without legal merit and is defending against them vigorously. The Defendant Funds’ Boards of Trustees have also engaged counsel to defend the suits brought against those Funds and the present and former Independent Trustees named in those suits. While it is premature to render any opinion as to the outcome in these lawsuits, or whether any costs that the Defendant Funds may bear in defending the suits might not be reimbursed by insurance, the Manager believes that these suits should not impair the ability of the Manager or the Distributor to perform their respective duties to the Fund, and that the outcome of all of the suits together should not have any material effect on the operations of any of the Oppenheimer funds.

7. Subsequent Event

The Regulated Investment Company Modernization Act of 2010 (the “Act”) was signed into law on December 22, 2010. The Act makes changes to a number of tax rules impacting the Fund. Under the Act, future capital losses generated by a fund may be carried over indefinitely, but these losses must be used prior to the utilization of any pre-enactment capital losses. Since pre-enactment capital losses may only be carried forward for eight years, there may be a greater likelihood that all or a portion of a fund’s pre-enactment capital losses will expire unused. In general, the provisions of the Act will be effective for the Fund’s fiscal year ending December 31, 2011. Specific information regarding the impact of the Act on the Fund will be contained within the “Federal Taxes” section of the financial statement notes for the fiscal year ending December 31, 2011.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Trustees and Shareholders of Oppenheimer Variable Account Funds:

We have audited the accompanying statement of assets and liabilities of Oppenheimer Global Strategic Income Fund/VA, formerly known as Oppenheimer Strategic Bond Fund/VA (one of the portfolios constituting the Oppenheimer Variable Account Funds), including the statement of investments, as of December 31, 2010, the related statement of operations for the year then ended, and the statements of changes in net assets and the financial highlights for each of the years in the two-year 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. The accompanying financial highlights of Oppenheimer Global Strategic Income Fund/VA for the years ended prior to January 1, 2009 were audited by other auditors whose report dated February 11, 2009 expressed an unqualified opinion on those financial highlights.

     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 audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2010, by correspondence with the custodian, transfer agent and brokers, or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Oppenheimer Global Strategic Income Fund/VA as of December 31, 2010, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for each of the years in the two-year period then ended, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG llp

Denver,Colorado

February 16, 2011

STATEMENT OF INVESTMENTS December 31, 2010

	Principal
	Amount		Value
Asset-Backed Securities—1.5%
Ally Auto Receivables Trust 2010-2, Automobile Receivables Nts., Series 2010-2, Cl. A4, 2.09%, 5/15/15	$	115,000	$	116,534
Ally Auto Receivables Trust 2010-4, Automobile Receivables Nts., Series 2010-4, Cl. A3, 0.91%, 11/17/14		140,000		139,175
AmeriCredit Automobile Receivables Trust 2010-4, Automobile Receivables-Backed Nts., Series 2010-4, Cl. A3, 1.27%, 4/8/15		230,000		229,935
AmeriCredit Prime Automobile Receivables Trust 2007-1, Automobile Receivables Nts., Series 2007-1, Cl. D, 5.62%, 9/8/14		1,319,000		1,348,956
AmeriCredit Prime Automobile Receivables Trust 2010-1, Automobile Receivables Nts., Series 2010-1, Cl. A2, 0.97%, 1/15/13		438,219		438,412
Argent Securities Trust 2004-W8, Asset-Backed Pass-Through Certificates, Series 2004-W8, Cl. A2, 1.221%, 5/25/341		924,857		820,857
Argent Securities Trust 2006-M3, Asset-Backed Pass-Through Certificates, Series 2006-M3, Cl. A2B, 0.361%, 9/25/361		367,322		137,673
Bank of America Auto Trust 2010-2, Automobile Receivables, Series 2010-2, Cl. A4, 1.94%, 6/15/17		60,000		60,670
Bank of America Credit Card Trust, Credit Card Asset-Backed Certificates, Series 2010-A1, Cl. A1, 0.56%, 9/15/151		1,140,000		1,140,305
BMW Vehicle Owner Trust 2010-A, Asset-Backed Nts., Series 2010-A, Cl. A3, 1.39%, 4/25/14		850,000		856,676
Capital Auto Receivables Asset Trust 2007-1, Automobile Asset-Backed Securities, Series 2007-1, Cl. B, 5.15%, 9/17/12		262,000		269,828
Capital One Auto Finance Trust, Automobile Receivables, Series 2006-C, Cl. A4, 0.29%, 5/15/131		623,068		619,739
Capital One Multi-Asset Execution Trust, Credit Card Asset-Backed Certificates, Series 2008-A5, Cl. A5, 4.85%, 2/18/14		655,000		663,193
CarMax Auto Owner Trust 2010-2, Asset-Backed Certificates, Series 2010-2, Cl. A3, 1.41%, 2/16/15		100,000		100,714
Citibank Omni Master Trust, Credit Card Receivables, Series 2009-A8, Cl. A8, 2.36%, 5/16/161,2		205,000		207,618
Citigroup Mortgage Loan Trust, Inc. 2006-WFH3, Asset-Backed Pass-Through Certificates, Series 2006-W FH3, Cl. A2, 0.361%, 10/25/361		56,261		56,146
CNH Equipment Trust, Asset-Backed Certificates:
Series 2009-B, Cl. A3, 2.97%, 3/15/13		329,242		330,683
Series 2010-A, Cl. A2, 0.81%, 3/25/15		1,117,614		1,118,131
Countrywide Home Loans, Asset-Backed Certificates:
Series 2005-16, Cl. 2AF2, 5.382%, 5/1/361		1,153,863		988,410
Series 2005-17, Cl. 1AF2, 5.363%, 5/1/361		160,277		128,956
CWABS Asset-Backed Certificates Trust 2006-25, Asset-Backed Certificates, Series 2006-25, Cl. 2A2, 0.381%, 6/25/471		1,050,000		940,079
CWHEQ Revolving Home Equity Loan Trust, Asset-Backed Certificates:
Series 2005-G, Cl. 2A, 0.49%, 12/15/351		191,794		103,979
Series 2006-H, Cl. 2A1A, 0.41%, 11/15/361		72,099		27,100
Discover Card Master Trust, Credit Card Receivables, Series 2009-A1, Cl. A1, 1.56%, 12/15/141		1,130,000		1,145,327
Embarcadero Aircraft Securitization Trust, Airplane Receivable Nts., Series 2000-A, Cl. B, 8/15/253,4,5		1,820,063		—
First Franklin Mortgage Loan Trust 2006-FF10, Mtg. Pass-Through Certificates, Series 2006-FF10, Cl. A3, 0.351%, 7/25/361		174,552		171,674
First Franklin Mortgage Loan Trust 2006-FF9, Mtg. Pass-Through Certificates, Series 2006-FF9, Cl. 2A2, 0.371%, 7/7/361		76,155		72,537
Ford Credit Auto Lease Trust, Automobile Receivable Nts.:
Series 2010-A, Cl. A, 1.04%, 3/15/132		601,082		601,624
Series 2010-B, Cl. A2, 0.75%, 10/15/124		620,000		620,001
Ford Credit Auto Owner Trust, Automobile Receivable Nts., Series 2010-A, Cl. A4, 2.15%, 6/15/15		1,635,000		1,665,933
GE Capital Credit Card Master Note Trust, Asset-Backed Nts., Series 2009-2, Cl. A, 3.69%, 7/15/15		1,140,000		1,184,635

	Principal
	Amount		Value
Asset-Backed Securities Continued
GE Equipment Midticket LLC, Asset-Backed Certificates, Series 2010-1, Cl. A2, 0.61%, 1/14/132	$	845,000	$	845,246
Harley-Davidson Motorcycle Trust 2010-1, Motorcycle Contract-Backed Nts., Series 2010-1, Cl. A3, 1.16%, 2/15/15		430,000		429,561
Home Equity Mortgage Trust 2005-1, Mtg. Pass-Through Certificates, Series 2005-1, Cl. M6, 5.863%, 6/1/35		1,046,000		547,293
HSBC Home Equity Loan Trust 2005-3, Closed-End Home Equity Loan Asset-Backed Certificates, Series 2005-3, Cl. A1, 0.521%, 1/20/351		187,034		179,617
HSBC Home Equity Loan Trust 2006-4, Closed-End Home Equity Loan Asset-Backed Certificates, Series 2006-4, Cl. A2V, 0.371%, 3/20/361		168,037		167,395
Hyundai Auto Receivables Trust 2010-A, Automobile Receivable Nts., Series 2010-A, Cl. A3, 1.50%, 10/15/14		625,000		631,456
Ice 1 Em CLO Ltd./Ice 1 Em CLO Corp., Sr. Sec. Sub. Term Nts.:
Series 2007-1A, Cl. B, 2.294%, 8/15/221,4		7,870,000		4,879,400
Series 2007-1A, Cl. C, 3.594%, 8/15/221,4		5,270,000		2,951,200
Series 2007-1A, Cl. D, 5.594%, 8/15/221,4		5,270,000		2,740,400
Mastr Asset-Backed Securities Trust 2006-WMC3, Mtg. Pass-Through Certificates, Series 2006-WMC3, Cl. A3, 0.361%, 8/25/361		1,256,448		468,690
Merrill Auto Trust Securitization 2007-1, Asset-Backed Nts., Series 2007-1, Cl. A4, 0.32%, 12/15/131		930,408		927,970
NC Finance Trust, Collateralized Mtg. Obligation Pass-Through Certificates, Series 1999-I, Cl. ECFD, 1/25/293,4		66,744		8,009
Nissan Auto Lease Trust 2010-B, Automobile Asset-Backed Nts., Series 2010-B, Cl. A3, 1%, 12/15/13		550,000		549,332
Popular ABS Mortgage Pass-Through Trust 2005-6, Mtg. Pass-Through Certificates, Series 2005-6, Cl. A3, 5.68%, 1/25/361		221,242		203,870
RASC Series 2006-KS7 Trust, Home Equity Mtg. Asset-Backed Pass-Through Certificates, Series 2006-KS7, Cl. A2, 0.361%, 9/25/361		181,640		180,656
Santander Drive Auto Receivables Trust 2010-3, Automobile Receivables Nts., Series 2010-3, Cl. A3, 1.20%, 6/16/14		340,000		340,162
Securitized Asset-Backed Receivables LLC Trust 2007-BR2, Asset-Backed Securities, Series 2007-BR2, Cl. A2, 0.491%, 2/25/371		585,229		281,292
SLM Student Loan Trust, Student Loan Receivables, Series 2005-B, Cl. B, 0.702%, 6/15/391		2,487,000		1,112,964
Terwin Mortgage Trust, Home Equity Asset-Backed Securities, Series 2006-4SL, Cl. A1, 4.50%, 5/1/371,2		183,142		57,477
Toyota Auto Receivable Owner Trust 2010-B, Automobile Receivable Nts., Series 2010-B, Cl. A2, 0.74%, 7/16/12		690,000		691,026
Volkswagen Auto Lease Trust 2010-A, Automobile Receivable Nts., Series 2010-A, Cl. A3, 0.99%, 11/20/13		545,000		544,094
Wachovia Auto Owner Trust 2007-A, Automobile Receivable Nts., Series 2007-A, Cl. A4, 5.49%, 4/22/13		427,957		436,200
World Financial Network Credit Card Master Note Trust, Credit Card Receivables, Series 2009-A, Cl. A, 4.60%, 9/15/15		515,000		529,577
Total Asset-Backed Securities (Cost $46,326,853)				36,008,387
Mortgage-Backed Obligations—15.0%
Government Agency—7.3%
FHLMC/FNMA/FHLB/Sponsored—7.1%
Federal Home Loan Mortgage Corp.:
5%, 9/15/33		2,002,978		2,114,788
5.50%, 9/1/39		1,725,383		1,840,029
6%, 5/15/18-10/15/29		1,029,043		1,129,696
6.50%, 3/15/18-8/15/32		2,217,132		2,463,754
7%, 10/1/31-10/1/37		586,994		665,008
7.50%, 4/25/36		846,159		970,100
Federal Home Loan Mortgage Corp., Gtd. Real Estate Mtg. Investment Conduit Multiclass Pass-Through Certificates:
Series 1360, Cl. PZ, 7.50%, 9/15/22		998,520		1,128,313
Series 151, Cl. F, 9%, 5/15/21		27,613		31,934

	Principal
	Amount		Value
FHLMC/FNMA/FHLB/Sponsored Continued
Federal Home Loan Mortgage Corp., Gtd. Real Estate Mtg. Investment Conduit Multiclass Pass-Through Certificates: Continued
Series 1674, Cl. Z, 6.75%, 2/15/24	$	810,963	$	907,809
Series 1897, Cl. K, 7%, 9/15/26		1,852,619		2,095,081
Series 2006-11, Cl. PS, 23.611%, 3/25/361		540,909		763,792
Series 2043, Cl. ZP, 6.50%, 4/15/28		665,000		691,321
Series 2106, Cl. FG, 0.71%, 12/15/281		1,284,840		1,289,885
Series 2122, Cl. F, 0.71%, 2/15/291		38,570		38,674
Series 2148, Cl. ZA, 6%, 4/15/29		1,098,083		1,186,349
Series 2195, Cl. LH, 6.50%, 10/15/29		572,940		653,197
Series 2326, Cl. ZP, 6.50%, 6/15/31		80,445		92,694
Series 2344, Cl. FP, 1.21%, 8/15/311		386,159		393,020
Series 2368, Cl. PR, 6.50%, 10/15/31		326,423		358,540
Series 2412, Cl. GF, 1.21%, 2/15/321		767,806		783,048
Series 2449, Cl. FL, 0.81%, 1/15/321		497,318		501,477
Series 2451, Cl. FD, 1.26%, 3/15/321		257,149		262,491
Series 2453, Cl. BD, 6%, 5/15/17		127,957		138,481
Series 2461, Cl. PZ, 6.50%, 6/15/32		1,170,778		1,305,692
Series 2464, Cl. FI, 1.26%, 2/15/321		249,240		253,900
Series 2470, Cl. AF, 1.26%, 3/15/321		441,204		452,958
Series 2470, Cl. LF, 1.26%, 2/15/321		255,061		260,791
Series 2471, Cl. FD, 1.26%, 3/15/321		405,171		413,856
Series 2477, Cl. FZ, 0.81%, 6/15/311		992,636		1,000,531
Series 2500, Cl. FD, 0.76%, 3/15/321		30,050		30,235
Series 2517, Cl. GF, 1.26%, 2/15/321		221,762		226,636
Series 2526, Cl. FE, 0.66%, 6/15/291		59,549		59,780
Series 2551, Cl. FD, 0.66%, 1/15/331		28,574		28,680
Series 2676, Cl. KY, 5%, 9/15/23		3,843,000		4,141,698
Series 2750, Cl. XG, 5%, 2/1/34		6,037,000		6,305,539
Series 2907, Cl. GC, 5%, 6/1/27		979,466		997,325
Series 2947, Cl. HE, 5%, 3/1/35		1,650,000		1,725,340
Series 3019, Cl. MD, 4.75%, 1/1/31		1,031,856		1,060,600
Series 3025, Cl. SJ, 23.796%, 8/15/351		622,692		868,106
Series 3094, Cl. HS, 23.429%, 6/15/341		355,017		466,450
Federal Home Loan Mortgage Corp., Interest-Only Stripped Mtg.-Backed Security:
Series 192, Cl. IO, 11.357%, 2/1/286		27,993		5,587
Series 205, Cl. IO, 9.397%, 9/1/296		143,448		30,131
Series 2074, Cl. S, 57.198%, 7/17/286		37,881		7,439
Series 2079, Cl. S, 73.19%, 7/17/286		64,879		13,598
Series 2136, Cl. SG, 84.946%, 3/15/296		1,739,359		304,667
Series 2399, Cl. SG, 78.061%, 12/15/266		1,020,053		205,420
Series 243, Cl. 6, 2.166%, 12/15/326		423,687		82,538
Series 2437, Cl. SB, 90.668%, 4/15/326		2,965,552		587,577
Series 2526, Cl. SE, 41.061%, 6/15/296		74,763		13,349
Series 2802, Cl. AS, 96.146%, 4/15/336		514,129		45,757
Series 2920, Cl. S, 66.523%, 1/15/356		644,529		92,718
Series 3110, Cl. SL, 17.819%, 2/15/266		401,065		51,442
Federal National Mortgage Assn.:
3.50%, 1/1/26-1/1/417		9,580,000		9,524,878
4%, 1/1/417		13,160,000		13,094,200
4.50%, 1/1/26-1/1/417		18,865,000		19,450,101
5%, 11/25/21-7/25/33		2,897,453		3,068,249
5%, 1/1/417		10,235,000		10,761,140
5.285%, 10/1/36		5,407,200		5,667,730
5.50%, 4/25/21-1/1/36		1,153,144		1,240,502
5.50%, 1/1/26-1/1/417		14,678,000		15,711,570
6%, 10/25/16-4/1/35		8,907,567		9,766,931
6%, 11/1/16-1/1/417		2,485,000		2,701,275
6.50%, 4/25/17-1/1/34		2,856,391		3,210,232
7%, 11/1/17-6/25/34		2,906,656		3,302,117
7.50%, 2/25/27-3/25/33		3,172,192		3,637,003
8.50%, 7/1/32		3,209		3,616
Federal National Mortgage Assn., Gtd. Real Estate Mtg. Investment Conduit Multiclass Pass-Through Certificates:
Trust 1999-54, Cl. LH, 6.50%, 11/25/29		558,684		617,009
Trust 2001-51, Cl. OD, 6.50%, 10/25/31		302,645		345,271
Trust 2001-69, Cl. PF, 1.261%, 12/25/311		579,274		594,231
Trust 2001-80, Cl. ZB, 6%, 1/25/32		659,394		728,732
Trust 2002-12, Cl. PG, 6%, 3/25/17		402,940		437,191
Trust 2002-29, Cl. F, 1.261%, 4/25/321		290,385		297,929
Trust 2002-60, Cl. FH, 1.261%, 8/25/321		586,040		599,804
Trust 2002-64, Cl. FJ, 1.261%, 4/25/321		89,419		91,742
Trust 2002-68, Cl. FH, 0.761%, 10/18/321		202,636		203,981
Trust 2002-84, Cl. FB, 1.261%, 12/25/321		1,197,256		1,228,470
Trust 2002-9, Cl. PC, 6%, 3/25/17		408,457		443,188
Trust 2002-9, Cl. PR, 6%, 3/25/17		500,136		542,663
Trust 2002-90, Cl. FH, 0.761%, 9/25/321		669,868		674,412
Trust 2003-11, Cl. FA, 1.261%, 9/25/321		1,197,283		1,228,499
Trust 2003-116, Cl. FA, 0.661%, 11/25/331		86,715		87,126
Trust 2004-101, Cl. BG, 5%, 1/25/20		1,825,000		1,951,853
Trust 2005-100, Cl. BQ, 5.50%, 11/25/25		571,000		614,997
Trust 2005-109, Cl. AH, 5.50%, 12/25/25		2,160,000		2,327,304
Trust 2005-12, Cl. JC, 5%, 6/1/28		1,137,520		1,162,721
Trust 2005-25, Cl. PS, 27.013%, 4/25/351		565,143		910,965
Trust 2005-31, Cl. PB, 5.50%, 4/25/35		560,000		614,138
Trust 2005-71, Cl. DB, 4.50%, 8/25/25		480,000		511,227
Trust 2006-46, Cl. SW, 23.244%, 6/25/361		937,827		1,299,101
Trust 2009-36, Cl. FA, 1.201%, 6/25/371		485,035		494,519

	Principal
	Amount		Value
FHLMC/FNMA/FHLB/Sponsored Continued
Federal National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security:
Trust 2001-61, Cl. SH, 49.191%, 11/18/316	$	330,391	$	61,876
Trust 2001-63, Cl. SD, 40.451%, 12/18/316		78,786		14,549
Trust 2001-68, Cl. SC, 32.468%, 11/25/316		53,903		9,823
Trust 2001-81, Cl. S, 37.64%, 1/25/326		65,521		12,990
Trust 2002-28, Cl. SA, 40.121%, 4/25/326		39,682		6,882
Trust 2002-38, Cl. SO, 58.634%, 4/25/326		210,261		37,638
Trust 2002-48, Cl. S, 36.458%, 7/25/326		62,281		11,430
Trust 2002-52, Cl. SL, 38.133%, 9/25/326		39,874		7,491
Trust 2002-56, Cl. SN, 38.919%, 7/25/326		85,582		15,713
Trust 2002-77, Cl. IS, 51.996%, 12/18/326		358,223		70,056
Trust 2002-77, Cl. SH, 47.893%, 12/18/326		91,171		17,075
Trust 2002-9, Cl. MS, 36.451%, 3/25/326		83,985		15,192
Trust 2003-13, Cl. IO, 11.738%, 3/25/336		668,812		131,349
Trust 2003-26, Cl. DI, 8.71%, 4/25/336		478,222		100,826
Trust 2003-33, Cl. SP, 49.764%, 5/25/336		559,755		97,176
Trust 2003-38, Cl. SA, 48.764%, 3/25/236		913,133		120,284
Trust 2003-4, Cl. S, 44.39%, 2/25/336		167,069		31,362
Trust 2004-56, Cl. SE, 17.592%, 10/25/336		2,352,602		388,385
Trust 2005-14, Cl. SE, 41.633%, 3/25/356		2,162,478		295,079
Trust 2005-40, Cl. SA, 66.018%, 5/25/356		1,816,125		303,674
Trust 2005-40, Cl. SB, 96.973%, 5/25/356		3,050,975		482,872
Trust 2005-63, Cl. SA, 78.237%, 10/25/316		132,250		19,469
Trust 2005-71, Cl. SA, 68.612%, 8/25/256		439,418		60,017
Trust 2006-51, Cl. SA, 20.783%, 6/25/366		11,323,048		1,634,860
Trust 2006-60, Cl. DI, 41.559%, 4/25/356		2,027,751		296,483
Trust 2006-90, Cl. SX, 99.999%, 9/25/366		1,842,616		359,496
Trust 2007-88, Cl. XI, 22.457%, 6/25/376		3,049,353		425,288
Trust 214, Cl. 2, 36.506%, 3/1/236		456,115		90,934
Trust 221, Cl. 2, 32.847%, 5/1/236		51,436		10,275
Trust 254, Cl. 2, 26.575%, 1/1/246		849,756		172,222
Trust 2682, Cl. TQ, 99.999%, 10/15/336		675,929		108,434
Trust 2981, Cl. BS, 99.999%, 5/15/356		1,197,873		178,545
Trust 301, Cl. 2, 2.576%, 4/1/296		206,554		41,446
Trust 313, Cl. 2, 29.991%, 6/1/316		2,205,643		540,997
Trust 319, Cl. 2, 3.355%, 2/1/326		1,004,860		205,854
Trust 321, Cl. 2, 6.089%, 4/1/326		260,983		67,235
Trust 324, Cl. 2, 0%, 7/1/326,8		274,482		58,936
Trust 328, Cl. 2, 0%, 12/1/326,8		695,242		145,796
Trust 331, Cl. 5, 0%, 2/1/336,8		987,672		177,352
Trust 332, Cl. 2, 0%, 3/1/336,8		6,172,065		1,287,855
Trust 334, Cl. 12, 0%, 2/1/336,8		866,402		151,340
Trust 339, Cl. 15, 6.971%, 7/1/336		2,488,197		479,345
Trust 345, Cl. 9, 3.342%, 1/1/346		1,248,565		213,446
Trust 351, Cl. 10, 13.858%, 4/1/346		522,749		89,749
Trust 351, Cl. 8, 0%, 4/1/346,8		853,493		146,739
Trust 356, Cl. 10, 0%, 6/1/356,8		713,466		121,829
Trust 356, Cl. 12, 0%, 2/1/356,8		358,037		61,380
Trust 362, Cl. 13, 0.195%, 8/1/356		425,121		71,655
				170,133,137
GNMA/Guaranteed—0.2%
Government National Mortgage Assn.:
3.125%, 12/9/251		5,682		5,850
7%, 3/29/28-7/29/28		254,158		291,429
7.50%, 3/1/27		13,700		15,824
8%, 11/29/25-5/29/26		95,638		110,963
Government National Mortgage Assn., Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates:
Series 1999-32, Cl. ZB, 8%, 9/16/29		1,066,292		1,283,487
Series 2000-12,Cl. ZA, 8%, 2/16/30		2,440,200		2,936,983
Government National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security:
Series 1998-19, Cl. SB, 60.571%, 7/16/286		134,493		28,575
Series 1998-6, Cl. SA, 74.511%, 3/16/286		79,110		16,071
Series 2001-21, Cl. SB, 89.757%, 1/16/276		609,086		94,406
				4,783,588
Non-Agency—7.7%
Commercial—3.3%
Banc of America Commercial Mortgage, Inc., Commercial Mtg. Pass-Through Certificates:
Series 2007-1, Cl. AMFX, 5.482%, 1/1/49		4,159,386		4,073,005
Series 2008-1, Cl. AM, 6.195%, 2/10/511		3,415,000		3,387,930
CHL Mortgage Pass-Through Trust 2005-17, Mtg. Pass-Through Certificates, Series 2005-17, Cl. 1A8, 5.50%, 9/1/35		3,542,118		3,142,851

	Principal
	Amount		Value
Commercial Continued
CHL Mortgage Pass-Through Trust 2005-HYB8, Mtg. Pass-Through Certificates, Series 2005-HYB8, Cl. 4A1, 5.303%, 12/20/351	$	181,627	$	149,041
Citigroup, Inc./Deutsche Bank 2007-CD4 Commercial Mortgage Trust, Commercial Mtg. Pass-Through Certificates, Series 2007-CD4, Cl. A4, 5.322%, 12/1/49		955,000		991,367
Deutsche Alt-A Securities, Inc., Mtg. Pass-Through Certificates, Series 2007-RS1, Cl. A2, 0.761%, 1/27/371,4		1,436,738		400,042
Deutsche Alt-B Securities, Inc., Mtg. Pass-Through Certificates:
Series 2006-AB2, Cl. A1, 5.888%, 6/25/36		377,592		349,860
Series 2006-AB4, Cl. A1A, 6.005%, 10/25/36		775,422		457,372
Deutsche Mortgage & Asset Receiving, Commercial Mtg. Pass-Through Certificates, Series 2010-C1, Cl. A1, 3.156%, 7/1/462		728,701		731,136
Deutsche Mortgage & Asset Receiving, Commercial Mtg. Pass-Through Certificates, Interest-Only Stripped Mtg.-Backed Security, Series 2010-C1, Cl. XPA, 4.82%, 9/1/204,6		5,825,000		520,100
First Horizon Alternative Mortgage Securities Trust 2007-FA2, Mtg. Pass-Through Certificates, Series 2007-FA2, Cl. 1A1, 5.50%, 4/25/37		670,290		485,168
First Horizon Mortgage Pass-Through Trust 2007-AR3, Mtg. Pass-Through Certificates, Series 2007-AR3, Cl. 1A1, 6.052%, 11/1/371		3,932,141		3,215,876
GE Capital Commercial Mortgage Corp., Commercial Mtg. Obligations, Series 2004-C3, Cl. A2, 4.433%, 7/10/39		301,300		303,031
GMAC Commercial Mortgage Securities, Inc., Commercial Mtg. Pass-Through Certificates, Series 1998-C1, Cl. F, 6.975%, 5/15/301		1,567,000		1,571,717
GS Mortgage Securities Corp. II, Commercial Mtg. Obligations, Series 2006-GG8, Cl. A4, 5.56%, 11/1/39		775,000		823,180
Indymac Index Mortgage Loan Trust 2005-AR31, Mtg. Pass-Through Certificates, Series 2005-AR31, Cl. 2 A2, 2.829%, 1/1/361		176,627		5,583
IndyMac INDX Mortgage Loan Trust 2005-AR23, Mtg. Pass-Through Certificates, Series 2005-AR23, Cl. 6A1, 5.214%, 11/1/351		1,880,436		1,453,115
JPMorgan Chase Commercial Mortgage Securities Corp., Commercial Mtg. Pass-Through Certificates:
Series 2006-LDP9, Cl. A3, 5.336%, 5/1/47		1,235,000		1,283,622
Series 2007-CB18, Cl. A4, 5.44%, 6/1/47		2,315,000		2,429,495
Series 2007-CB18, Cl. AM, 5.466%, 6/1/47		6,400,000		6,310,392
Series 2007-LDP10, Cl. A3S, 5.317%, 4/1/13		1,405,000		1,433,218
Series 2007-LDPX, Cl. A2S, 5.305%, 1/15/49		990,000		1,013,871
Series 2007-LDPX, Cl. A2S2, 5.187%, 1/1/494		1,390,000		1,404,178
Series 2008-C2, Cl. A4, 6.068%, 2/1/51		7,075,000		7,366,518
Series 2008-C2, Cl. AM, 6.57%, 2/1/511		4,990,000		3,333,949
Series 2010-C2, Cl. A2, 3.616%, 11/1/432		860,000		833,896
JPMorgan Chase Commercial Mortgage Securities Trust 2007-LDP11, Commercial Mtg. Pass-Through Certificates, Series 2007-LDP11, Cl. ASB, 5.817%, 6/1/491		570,000		605,075
JPMorgan Mortgage Trust 2006-A7, Mtg. Pass-Through Certificates, Series 2006-A7, Cl. 2A2, 5.723%, 1/1/371		406,325		304,794
LB-UBS Commercial Mortgage Trust 2008-C1, Commercial Mtg. Pass-Through Certificates, Series 2008-C1, Cl. AM, 6.154%, 4/11/411		2,610,000		2,570,034
Lehman Structured Securities Corp., Mtg.-Backed Security, 6%, 5/1/29		18,190		3,765
Mastr Alternative Loan Trust 2004-6, Mtg. Pass-Through Certificates, Series 2004-6, Cl. 10A1, 6%, 7/25/34		300,481		299,925
Morgan Stanley Capital I Trust, Commercial Mtg. Pass-Through Certificates, Series 2006-HQ10, Cl. AM, 5.36%, 11/1/41		8,500,000		8,480,668

	Principal
	Amount		Value
Commercial Continued
NCUA Guaranteed Notes Trust 2010-C1, Gtd. Nts.:
Series 2010-C1, Cl. A1, 1.60%, 10/29/20	$	569,728	$	558,699
Series 2010-C1, Cl. A2, 2.90%, 10/29/20		805,000		783,947
RALI Series 2005-QA4 Trust, Mtg. Asset-Backed Pass-Through Certificates, Series 2005-QA4, Cl. A32, 3.359%, 4/25/351		126,239		23,988
Residential Asset Securitization Trust 2006-A12, Mtg. Pass-Through Certificates, Series 2006-A12, Cl. 1A, 6.25%, 11/1/36		817,850		583,135
STARM Mortgage Loan Trust 2007-1, Mtg. Pass-Through Certificates, Series 2007-1, Cl. 2A1, 5.834%, 2/1/371		10,945,672		8,535,599
WaMu Mortgage Pass-Through Certificates 2006-AR15 Trust, Mtg. Pass-Through Certificates, Series 2006-AR15, Cl. 1A, 1.168%, 11/1/461		1,289,895		912,847
WaMu Mortgage Pass-Through Certificates 2007-OA3 Trust, Mtg. Pass-Through Certificates, Series 2007-OA3, Cl. 5A, 2.904%, 4/1/471		915,048		514,858
Wells Fargo Commercial Mortgage Trust 2010-C1, Commercial Mtg. Pass-Through Certificates, Series 2010-C1, Cl. A1, 3.349%, 10/1/572		472,426		473,916
Wells Fargo Mortgage-Backed Securities 2004-W Trust, Mtg. Pass-Through Certificates, Series 2004-W, Cl. B2, 2.762%, 11/1/341		1,071,516		231,394
Wells Fargo Mortgage-Backed Securities 2005-AR1 Trust, Mtg. Pass-Through Certificates, Series 2005-AR1, Cl. 1A1, 2.839%, 2/1/351		4,275,544		3,925,195
Wells Fargo Mortgage-Backed Securities 2006-AR8 Trust, Mtg. Pass-Through Certificates, Series 2006-AR8, Cl. 1A3, 2.853%, 4/25/361		2,692,904		2,561,115
				78,838,467
Multifamily—0.2%
Citigroup Mortgage Loan Trust, Inc. 2006-AR3, Mtg. Pass-Through Certificates, Series 2006-AR3, Cl. 1 A2A, 5.77%, 6/1/361		1,721,443		1,605,339
Wells Fargo Mortgage-Backed Securities 2005-AR15 Trust, Mtg. Pass-Through Certificates, Series 2005-AR15, Cl. 1A2, 5.067%, 9/1/351		513,316		493,065
Wells Fargo Mortgage-Backed Securities 2006-AR6 Trust, Mtg. Pass-Through Certificates, Series 2006-AR6, Cl. 3A1, 3.203%, 3/25/361		3,849,398		3,429,557
				5,527,961
Other—0.2%
Greenwich Capital Commercial Funding Corp./Commercial Mortgage Trust 2007-GG9, Commercial Mtg. Pass-Through Certificates, Series 2007-GG9, Cl. A4, 5.444%, 3/1/39		2,315,000		2,442,496
National Credit Union Administration, Gtd. Nts., Series 2010-R1, Cl. 1A, 0.655%, 10/7/201		1,222,883		1,221,355
				3,663,851
Residential—4.0%
Banc of America Commercial Mortgage, Inc., Commercial Mtg. Pass-Through Certificates, Series 2007-4, Cl. AM, 5.809%, 8/1/171		3,960,000		3,952,184
Bear Stearns ARM Trust 2004-2, Mtg. Pass-Through Certificates, Series 2004-2, Cl. 12A2, 3.02%, 5/1/341		3,594,457		3,252,020
Bear Stearns ARM Trust 2004-9, Mtg. Pass-Through Certificates, Series 2004-9, Cl. 23A1, 4.963%, 11/1/341		1,301,948		1,294,031
Chase Mortgage Finance Trust 2007-A1, Multiclass Mtg. Pass-Through Certificates, Series 2007-A1, Cl. 9A1, 3.939%, 2/1/371		1,658,024		1,672,702
CHL Mortgage Pass-Through Trust 2005-J4, Mtg. Pass-Through Certificates, Series 2005-J4, Cl. A7, 5.50%, 11/1/35		2,087,937		1,717,854
CHL Mortgage Pass-Through Trust 2006-6, Mtg. Pass-Through Certificates, Series 2006-6, Cl. A3, 6%, 4/1/36		1,057,323		967,671
CHL Mortgage Pass-Through Trust 2007-HY3, Mtg. Pass-Through Certificates, Series 2007-HY3, Cl. 1A1, 3.789%, 6/1/471		2,329,464		1,542,523

	Principal
	Amount		Value
Residential Continued
Citigroup Mortgage Loan Trust, Inc. 2005-2, Mtg. Pass-Through Certificates, Series 2005-2, Cl. 1A3, 4.956%, 5/1/351	$	2,881,526	$	2,572,009
Citigroup Mortgage Loan Trust, Inc. 2005-3, Mtg. Pass-Through Certificates, Series 2005-3, Cl. 2A4, 5.138%, 8/1/351		5,702,365		4,199,422
Citigroup, Inc./Deutsche Bank 2007-CD4 Commercial Mortgage Trust, Commercial Mtg. Pass-Through Certificates, Series 2007-CD4, Cl. AMFX, 5.366%, 12/1/49		5,700,000		5,465,987
CitiMortgage Alternative Loan Trust 2006-A5, Real Estate Mtg. Investment Conduit Pass-Through Certificates, Series 2006-A5, Cl. 2A1, 5.50%, 10/1/21		1,857,171		1,581,294
Countrywide Alternative Loan Trust 2006-43CB, Mtg. Pass-Through Certificates, Series 2006-43CB, Cl.1A10, 6%, 2/1/37		11,180,545		7,730,816
GSR Mortgage Loan Trust 2004-5, Mtg. Pass-Through Certificates, Series 2004-5, Cl. 2A1, 2.899%, 5/1/341		3,522,998		3,029,687
GSR Mortgage Loan Trust 2005-AR7, Mtg. Pass-Through Certificates, Series 2005-AR7, Cl. 4A1, 5.317%, 11/1/351		3,710,312		3,099,159
GSR Mortgage Loan Trust 2006-5F, Mtg. Pass-Through Certificates, Series 2006-5F, Cl. 2A1, 6%, 6/1/36		1,705,726		1,643,534
JPMorgan Alternative Loan Trust 2006-S4, Mtg. Pass-Through Certificates, Series 2006-S4, Cl. A6, 5.71%, 12/1/36		323,060		291,307
LB-UBS Commercial Mortgage Trust 2007-C7, Commercial Mtg. Pass-Through Certificates, Series 2007-C7, Cl. AM, 6.166%, 9/11/451		10,430,000		10,041,479
Merrill Lynch Mortgage Investors Trust 2006-3, Mtg. Pass-Through Certificates, Series MLCC 2006-3, Cl. 2A1, 6.025%, 10/25/361		2,055,691		1,905,341
RALI Series 2006-QS13 Trust:
Mtg. Asset-Backed Pass-Through Certificates, Series 2006-QS13, Cl. 1A5, 6%, 9/25/36		2,273,091		1,441,938
Mtg. Asset-Backed Pass-Through Certificates, Series 2006-QS13, Cl. 1A8, 6%, 9/25/36		45,436		28,822
RALI Series 2007-QS6 Trust, Mtg. Asset-Backed Pass-Through Certificates, Series 2007-QS6, Cl. A28, 5.75%, 4/25/37		1,086,264		679,047
Residential Asset Securitization Trust 2005-A14, Mtg. Pass-Through Certificates, Series 2005-A14, Cl. A1, 5.50%, 12/1/35		3,658,508		2,962,404
Residential Asset Securitization Trust 2005-A6CB, Mtg. Pass-Through Certificates, Series 2005-A6CB, Cl. A7, 6%, 6/1/35		5,032,914		4,378,582
WaMu Mortgage Pass-Through Certificates 2005-AR12 Trust, Mtg. Pass-Through Certificates, Series 2007-AR12, Cl. 1A8, 2.721%, 10/1/351		2,692,944		2,341,419
WaMu Mortgage Pass-Through Certificates 2006-AR10 Trust, Mtg. Pass-Through Certificates, Series 2006-AR10, Cl. 1A2, 5.854%, 9/1/361		1,877,044		1,718,875
WaMu Mortgage Pass-Through Certificates 2007-HY1 Trust, Mtg. Pass-Through Certificates:
Series 2007-HY1, Cl. 4A1, 5%, 2/1/371		15,421,297		12,205,478
Series 2007-HY1, Cl. 5A1, 5.532%, 2/1/371		9,399,776		6,864,097
WaMu Mortgage Pass-Through Certificates 2007-HY7 Trust, Mtg. Pass-Through Certificates, Series 2007-HY7, Cl. 2A1, 5.629%, 7/1/371		2,499,806		1,760,622
WaMu Mortgage Pass-Through Certificates Series 2007-HY5 Trust, Mtg. Pass-Through Certificates, Series 2007-HY5, Cl. 3A1, 5.743%, 5/1/371		1,321,472		1,208,684
Wells Fargo Mortgage-Backed Securities 2005-AR16 Trust, Mtg. Pass-Through Certificates, Series 2005-AR16, Cl. 2A1, 2.847%, 10/1/351		1,660,871		1,581,480
Wells Fargo Mortgage-Backed Securities 2006-AR8 Trust, Mtg. Pass-Through Certificates, Series 2006-AR8, Cl. 2A1, 2.913%, 4/1/361		1,894,999		1,661,940
				94,792,408
Total Mortgage-Backed Obligations (Cost $352,121,044)				357,739,412

	Principal
	Amount			Value
U.S. Government Obligations—3.3%
Federal Home Loan Mortgage Corp. Nts.:
1.125%, 7/27/12	$	17,545,000		$	17,709,851
5%, 2/16/17		6,500,000			7,328,159
5.125%, 11/17/17		4,000,000			4,561,536
Federal National Mortgage Assn. Nts.:
1.125%, 7/30/12		16,180,000			16,327,837
4.375%, 10/15/159		4,000,000			4,407,760
5.375%, 6/12/17		6,500,000			7,494,325
U.S. Treasury Bills, 0.165%, 3/3/119,10		16,800,000			16,796,909
U.S. Treasury Bonds:
STRIPS, 4.201%, 2/15/1110,11		900,000			899,916
STRIPS, 4.833%, 2/15/1610,11		2,116,000			1,898,027
Total U.S. Government Obligations (Cost $76,908,457)					77,424,320
Foreign Government Obligations—23.3%
Argentina—1.0%
Argentina (Republic of) Bonds:
2.50%, 12/31/381		6,075,000			2,748,938
Series GDP, 0%, 12/15/351,12		4,930,000			771,545
Series VII, 7%, 9/12/13		2,950,000			2,897,965
Argentina (Republic of) Sr. Unsec. Bonds, 0%, 12/15/351,12		6,980,000	EUR		1,184,584
Argentina (Republic of) Sr. Unsec. Nts., 6.976%, 10/3/15		11,080,000			10,491,837
Argentina (Republic of) Sr. Unsec. Unsub. Nts., 7.267%, 12/31/331		12,572,574	ARP		4,912,389
Argentina (Republic of) Sr. Unsecured Nts., 13.625%, 1/30/141		1,280,000	ARP		312,418
					23,319,676
Australia—0.3%
Australia (Commonwealth of) Sr. Unsec. Bonds:
Series 119, 6.25%, 4/15/15		705,000	AUD		746,279
Series 120, 6%, 2/15/17		390,000	AUD		410,784
Queensland Treasury Corp. Sr. Unsec. Unsub. Nts., Series 16, 6%, 4/21/16		4,850,000	AUD		4,966,767
					6,123,830
Austria—0.1%
Austria (Republic of) Bonds, 4.35%, 3/15/192		615,000	EUR		887,430
Austria (Republic of) Sr. Unsec. Unsub. Bonds, Series 2, 4.65%, 1/15/18		645,000	EUR		952,010
					1,839,440
Belgium—0.1%
Belgium (Kingdom of) Sr. Bonds, Series 40, 5.50%, 9/28/17		1,905,000	EUR		2,828,655
Belize—0.0%
Belize (Government of) Unsec. Unsub. Bonds, 6%, 2/20/291,4		830,000			734,550
Brazil—2.6%
Brazil (Federal Republic of) Bonds, 7.125%, 1/20/37		560,000			670,600
Brazil (Federal Republic of) Nota Do Tesouro Nacional Nts.:
10%, 1/1/17		61,453,000	BRR		33,934,515
10%, 1/1/21		33,538,000	BRR		17,843,428
11.433%, 5/15/4516		6,470,000	BRR		8,294,389
Brazil (Federal Republic of) Sr. Unsec. Unsub. Nts., 5.625%, 1/7/41		1,930,000			1,925,175
					62,668,107
Canada—0.3%
Canada (Government of) Nts.:
3%, 12/1/15		4,645,000	CAD		4,797,762
3.75%, 6/1/19		1,145,000	CAD		1,213,864
4%, 6/1/17		1,710,000	CAD		1,850,439
					7,862,065
Colombia—0.8%
Bogota Distrio Capital
Sr. Bonds, 9.75%, 7/26/282		3,058,000,000	COP		2,152,370
Colombia (Republic of) Bonds:
7.375%, 9/18/37		1,445,000			1,719,550
12%, 10/22/15		6,763,000,000	COP		4,710,148
Colombia (Republic of) Sr. Nts., 7.375%, 3/18/19		1,980,000			2,385,900
Colombia (Republic of) Sr. Unsec. Bonds, 6.125%, 1/18/41		3,050,000			3,141,500
Colombia (Republic of) Sr. Unsec. Unsub. Bonds, 7.75%, 4/14/21		4,866,000,000	COP		3,022,242
Colombia (Republic of) Unsec. Nts., 7.375%, 1/27/17		1,340,000			1,587,900
					18,719,610
Denmark—0.0%
Denmark (Kingdom of) Bonds, 4%, 11/15/19		4,965,000	DKK		961,735
Dominican Republic—0.1%
Dominican Republic Bonds, 7.50%, 5/6/212		1,700,000			1,840,250

	Principal
	Amount			Value
Egypt—0.8%
Egypt (The Arab Republic of) Sr. Unsec. Unsub. Nts.:
5.75%, 4/29/202	$	985,000		$	1,019,475
6.875%, 4/30/402		1,075,000			1,139,500
Egypt (The Arab Republic of) Treasury Bills:
Series 182, 8.729%, 2/15/1111		3,925,000	EGP		669,366
Series 182, 9.731%, 2/1/1111		15,350,000	EGP		2,624,876
Series 182, 9.819%, 3/22/1111		7,175,000	EGP		1,210,740
Series 182, 10.031%, 1/18/1111		4,775,000	EGP		819,359
Series 273, 9.789%, 4/5/1111		10,825,000	EGP		1,820,539
Series 273, 9.845%, 7/5/1111		9,600,000	EGP		1,575,458
Series 364, 9.008%, 2/8/1111		10,000,000	EGP		1,708,355
Series 364, 9.038%, 3/29/1111		13,300,000	EGP		2,241,938
Series 364, 10.046%, 5/10/1111		5,775,000	EGP		963,972
Series 364, 10.064%, 7/12/1111		11,725,000	EGP		1,917,810
Series 364, 10.508%, 3/8/1111		4,400,000	EGP		745,154
					18,456,542
Finland—0.0%
Finland (Republic of) Sr. Unsec. Unsub. Nts., 3.875%, 9/15/17		400,000	EUR		576,642
France—0.0%
France (Government of) Bonds, 4%, 4/25/60		390,000	EUR		529,069
Germany—0.5%
Germany (Federal Republic of) Bonds:
0.50%, 6/15/12		1,470,000	EUR		1,959,053
3.50%, 7/4/19		2,805,000	EUR		3,936,716
Series 07, 4.25%, 7/4/39		725,000	EUR		1,107,146
Series 157, 2.25%, 4/10/15		2,955,000	EUR		4,040,274
					11,043,189
Ghana—0.1%
Ghana (Republic of) Bonds, 8.50%, 10/4/172		2,475,000			2,790,563
Greece—0.4%
Hellenic Republic Bonds, 4.30%, 3/20/12		2,655,000	EUR		3,270,099
Hellenic Republic Sr. Unsec. Unsub. Bonds:
30 yr., 4.50%, 9/20/37		5,250,000	EUR		3,811,938
30 yr., 4.60%, 9/20/40		2,310,000	EUR		1,671,233
					8,753,270
Hungary—0.2%
Hungary (Republic of) Bonds:
Series 17/B, 6.75%, 2/24/17		299,200,000	HUF		1,360,914
Series 19/A, 6.50%, 6/24/19		675,000,000	HUF		2,942,729
					4,303,643
Indonesia—0.6%
Indonesia (Republic of) Nts., 6.875%, 1/17/182		5,325,000			6,230,250
Indonesia (Republic of) Sr. Unsec. Nts., 7.75%, 1/17/382		2,540,000			3,111,500
Indonesia (Republic of) Sr. Unsec. Unsub. Bonds:
5.875%, 3/13/202		1,670,000			1,841,175
6.625% 2/17/372		1,050,000			1,155,000
Indonesia (Republic of) Unsec. Nts., 8.50%, 10/12/352		2,030,000			2,679,600
					15,017,525
Ireland—0.0%
Ireland (Republic of) Treasury Nts., 5.90%, 10/18/19		525,000	EUR		574,895
Israel—0.8%
Israel (State of) Bonds:
5%, 1/31/20		31,680,000	ILS		9,136,594
6%, 2/28/19		29,640,000	ILS		9,214,140
					18,350,734
Italy—0.4%
Italy (Republic of) Bonds:
3.75%, 3/1/21		1,795,000	EUR		2,208,939
4%, 9/1/20		2,785,000	EUR		3,529,369
5%, 9/1/40		725,000	EUR		912,465
Italy (Republic of) Treasury Bonds, 3.75%, 12/15/13		2,870,000	EUR		3,882,433
					10,533,206
Japan—2.7%
Japan (Government of) Bonds, 20 yr., Series 112, 2.10%, 6/20/29		739,000,000	JPY		9,507,022
Japan (Government of) Sr. Unsec. Bonds:
2 yr., 0.20%, 1/15/12		826,000,000	JPY		10,176,678
5 yr., 0.50%, 12/20/14		1,278,000,000	JPY		15,856,818
10 yr., Series 308, 1.30%, 6/20/20		835,000,000	JPY		10,507,291
Japan (Government of) Sr. Unsec. Unsub. Bonds:
5 yr., Series 91, 0.40%, 9/20/15		1,184,000,000	JPY		14,599,847
10 yr., Series 311, 0.80%, 9/20/20		303,000,000	JPY		3,632,231
					64,279,887
Korea, Republic of South—1.2%
Korea (Republic of) Sr. Unsec. Bonds, Series 2006, 5%, 6/10/20		11,491,000,000	KRW		10,533,224
Korea (Republic of) Sr. Unsec. Monetary Stabilization Bonds:
Series 1208, 3.81%, 8/2/12		10,222,000,000	KRW		9,096,490
Series 1210, 3.28%, 10/2/12		4,948,000,000	KRW		4,362,995

	Principal
	Amount			Value
Korea, Republic of South Continued
Korea (Republic of) Sr. Unsec. Unsub. Nts.:
5.125%, 12/7/16	$	1,635,000		$	1,762,262
7.125%, 4/16/19		2,535,000			3,028,686
					28,783,657
Malaysia—0.1%
1Malaysia Sukuk Global Bhd Sr. Unsec. Unsub. Nts., 3.928%, 6/4/152		2,470,000			2,569,136
Malaysia (Government of) Bonds, Series 0110, 3.835%, 8/12/15		3,045,000	MYR		1,004,483
					3,573,619
Mexico—1.8%
United Mexican States Bonds:
5.625%, 1/15/17		3,780,000			4,199,580
Series M10, 7.25%, 12/15/161		6,040,000	MXN		508,827
Series M20, 7.50%, 6/3/27		129,280,000	MXN		10,488,952
Series M10, 7.75%, 12/14/17		6,825,000	MXN		588,718
Series M10, 8%, 12/17/15		44,000,000	MXN		3,806,623
Series M10, 8.50%, 12/13/18		45,520,000	MXN		4,077,693
Series M20, 10%, 12/5/24		181,400,000	MXN		18,347,104
United Mexican States Sr. Nts., 5.75%, 10/12/2110		1,170,000			1,044,225
					43,061,722
New Zealand—0.2%
New Zealand (Government of) Sr. Unsec. Bonds, Series 415, 6%, 4/15/15		5,985,000	NZD		4,885,052
Norway—0.0%
Norway (Kingdom of) Bonds, Series 471, 5%, 5/15/15		1,515,000	NOK		281,362
Panama—0.3%
Panama (Republic of) Bonds:
7.25%, 3/15/15		3,120,000			3,619,200
8.875%, 9/30/27		110,000			151,250
9.375%, 4/1/29		1,100,000			1,548,250
Panama (Republic of) Unsec. Bonds, 7.125%, 1/29/26		1,175,000			1,418,813
					6,737,513
Peru—0.2%
Peru (Republic of) Sr. Unsec. Nts., 7.84%, 8/12/204		6,530,000	PEN		2,652,722
Peru (Republic of) Sr. Unsec. Unsub. Bonds, 5.625%, 11/18/502		1,580,000			1,469,400
					4,122,122
Philippines—0.0%
Philippines (Republic of the) Sr. Unsec. Unsub. Nts., 4.95%, 1/31/21		40,000,000	PHP		965,070
Poland—1.4%
Poland (Republic of) Bonds:
5.25%, 10/25/20		20,110,000	PLZ		6,446,965
Series 0415, 5.50%, 4/25/15		59,445,000	PLZ		20,245,577
Series 1015, 6.25%, 10/24/15		16,725,000	PLZ		5,857,953
Series 1017, 5.25%, 10/25/17		380,000	PLZ		125,501
					32,675,996
Qatar—0.1%
Qatar (State of) Sr. Nts., 5.25%, 1/20/202		1,595,000			1,690,700
South Africa—1.8%
South Africa (Republic of) Bonds:
5.50%, 3/9/20		2,860,000			3,056,625
Series R208, 6.75%, 3/31/21		33,370,000	ZAR		4,587,158
Series R207, 7.25%, 1/15/20		115,470,000	ZAR		16,583,455
Series R204, 8%, 12/21/18		44,800,000	ZAR		6,790,578
Series R186, 10.50%, 12/21/26		69,680,000	ZAR		12,625,646
					43,643,462
Spain—0.2%
Spain (Kingdom of) Bonds, 5.50%, 7/30/17		2,040,000	EUR		2,814,449
Spain (Kingdom of) Sr. Unsub. Bonds, 4.10%, 7/30/18		1,225,000	EUR		1,531,066
					4,345,515
Sri Lanka—0.1%
Sri Lanka (Democratic Socialist Republic of) Sr. Unsec. Nts., 6.25%, 10/4/202		1,330,000			1,354,938
Sweden—0.0%
Sweden (Kingdom of) Bonds, Series 1051, 3.75%, 8/12/17		4,580,000	SEK		709,807
The Netherlands—0.1%
Netherlands (Kingdom of the) Bonds, 4%, 7/15/18		990,000	EUR		1,428,068
Netherlands (Kingdom of the) Nts., 4.50%, 7/15/17		750,000	EUR		1,116,253
					2,544,321
Turkey—1.9%
Turkey (Republic of) Bonds:
6.75%, 4/3/18		3,440,000			3,938,800
6.875%, 3/17/36		225,000			252,000
7%, 3/11/19		1,360,000			1,577,600
10.50%, 1/15/201		8,430,000	TRY		6,112,296
11%, 8/6/14		21,440,000	TRY		15,297,662
16%, 3/7/121		5,345,000	TRY		3,823,648
Series CPI, 14.047%, 8/14/131		6,930,000	TRY		6,774,742
Turkey (Republic of) Nts.:
7%, 6/5/20		1,225,000			1,421,000
7.50%, 7/14/17		1,780,000			2,113,750
Turkey (Republic of) Sr. Unsec. Nts., 7.50%, 11/7/19		2,120,000			2,533,400

	Principal
	Amount			Value
Turkey Continued
Turkey (Republic of) Unsec. Nts.:
6.75%, 5/30/40	$	1,150,000		$	1,259,250
7.25%, 3/5/38		1,180,000			1,379,125
					46,483,273
Ukraine—0.4%
Financing of Infrastructural Projects State Enterprise Gtd. Nts., 8.375%, 11/3/172		1,980,000			2,079,455
Ukraine (Republic of) Bonds, 7.75%, 9/23/202		2,010,000			2,055,225
Ukraine (Republic of) Sr. Unsec. Nts., 6.75%, 11/14/172		510,000			511,020
Ukraine (Republic of) Sr. Unsec. Unsub. Bonds, 6.58%, 11/21/162		55,000			55,275
Ukraine (Republic of) Unsec. Bonds, 6.385%, 6/26/122		3,650,000			3,740,520
					8,441,495
United Kingdom—0.4%
United Kingdom Treasury Bonds:
2.25%, 3/7/14		1,515,000	GBP		2,412,346
4.75%, 3/7/20		2,015,000	GBP		3,476,239
4.75%, 12/7/38		1,455,000	GBP		2,481,195
					8,369,780
Uruguay—0.4%
Uruguay (Oriental Republic of) Bonds, 7.625%, 3/21/36		2,325,000			2,772,563
Uruguay (Oriental Republic of) Sr. Nts., 6.875%, 9/28/25		1,950,000			2,232,750
Uruguay (Oriental Republic of) Unsec. Bonds, 8%, 11/18/22		3,475,000			4,317,688
					9,323,001
Venezuela—0.9%
Venezuela (Republic of) Bonds:
9%, 5/7/23		2,800,000			1,953,000
9.25%, 9/15/27		1,280,000			960,000
Venezuela (Republic of) Nts.:
8.25%, 10/13/24		1,160,000			759,800
8.50%, 10/8/14		2,690,000			2,286,500
Venezuela (Republic of) Sr. Unsec. Unsub. Nts.:
7.75%, 10/13/19		2,790,000			1,904,175
12.75%, 8/23/22		390,000			345,150
Venezuela (Republic of) Unsec. Bonds:
7%, 3/31/38		4,015,000			2,318,663
7.65%, 4/21/25		6,935,000			4,386,388
9.375%, 1/13/34		2,040,000			1,392,300
Venezuela (Republic of) Unsec. Nts., 13.625%, 8/15/182		5,465,000			5,328,375
					21,634,351
Total Foreign Government Obligations (Cost $520,545,243)					555,733,839
Loan Participations—0.5%
Entegra Holdings LLC, Sr. Sec. Credit Facilities 3rd Lien Term Loan:
Tranche B, 10/19/157,13,14		3,580,729			2,132,324
Tranche B, 3.745%, 10/19/151,13		5,153,606			3,068,972
Tranche B, 3.745%, 10/19/151,7,13		994,062			591,964
Nuveen Investments, Inc., Sr. Sec. Credit Facilities 2nd Lien Term Loan, 12.50%, 7/20/157		4,916,875			5,331,736
Polymer Group, Inc., Sr. Sec. Credit Facilities 1st Lien Term Loan, 0.75%, 10/4/111		3,065,000			—
Total Loan Participations (Cost $10,286,281)					11,124,996
Corporate Bonds and Notes—30.1%
Consumer Discretionary—4.6%
Auto Components—0.4%
Goodyear Tire & Rubber Co. (The), 8.25% Sr. Unsec. Unsub. Nts., 8/15/20		2,390,000			2,485,600
Tower Automotive Holdings USA LLC/TA Holdings Finance, Inc., 10.625% Sr. Sec. Nts., 9/1/174		5,608,000			6,056,640
					8,542,240
Hotels, Restaurants & Leisure—1.9%
Grupo Posadas SAB de CV, 9.25% Sr. Unsec. Nts., 1/15/152		1,110,000			1,026,750
Harrah’s Operating Co., Inc., 10% Sr. Sec. Nts., 12/15/18		10,682,000			9,800,735
Isle of Capri Casinos, Inc., 7% Sr. Unsec. Sub. Nts., 3/1/14		2,955,000			2,910,675
Landry’s Restaurants, Inc., 11.625% Sr. Sec. Nts., 12/1/15		2,500,000			2,681,250
Mashantucket Pequot Tribe, 8.50% Bonds, Series A, 11/15/152,3,5		6,335,000			863,144
MGM Mirage, Inc.:
5.875% Sr. Nts., 2/27/14		1,885,000			1,748,338
6.75% Sr. Unsec. Nts., 4/1/13		4,290,000			4,285,710
Mohegan Tribal Gaming Authority:
6.125% Sr. Unsec. Sub. Nts., 2/15/13		6,335,000			5,289,725
6.875% Sr. Unsec. Sub. Nts., 2/15/15		1,317,000			819,833

	Principal
	Amount			Value
Hotels, Restaurants & Leisure Continued
Mohegan Tribal Gaming Authority: Continued
8% Sr. Sub. Nts., 4/1/12	$	5,065,000		$	4,254,600
11.50% Sr. Sec. Nts., 11/1/172		2,960,000			2,745,400
Penn National Gaming, Inc., 8.75% Sr. Unsec. Sub. Nts., 8/15/19		2,510,000			2,779,825
Premier Cruise Ltd., 11% Sr. Nts., 3/15/082,3,5		250,000			—
Station Casinos, Inc., 6.50% Sr. Unsec. Sub. Nts., 2/1/143,5		10,465,000			1,047
Travelport LLC, 11.875% Sr. Unsec. Sub. Nts., 9/1/16		2,545,000			2,513,188
Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp., 7.75% Sec. Nts., 8/15/20		2,545,000			2,767,688
					44,487,908
Household Durables—0.4%
Beazer Homes USA, Inc.:
6.875% Sr. Unsec. Nts., 7/15/15		2,910,000			2,829,975
9.125% Sr. Nts., 5/15/192		2,800,000			2,667,000
K. Hovnanian Enterprises, Inc., 8.875% Sr. Sub. Nts., 4/1/12		2,065,000			2,034,025
Reynolds Group Issuer, Inc./Reynolds Group Issuer LLC/Reynolds Group Issuer Luxembourg SA:
8.50% Sr. Nts., 5/15/182		995,000			1,004,950
9% Sr. Nts., 4/15/192		1,635,000			1,702,444
					10,238,394
Leisure Equipment & Products—0.4%
Eastman Kodak Co., 9.75% Sr. Sec. Nts., 3/1/182		9,580,000			9,819,500
Media—1.5%
Affinion Group Holdings, Inc., 11.625% Sr. Nts., 11/15/152		1,770,000			1,845,225
Affinion Group, Inc., 7.875% Sr. Nts., 12/15/182		3,055,000			2,993,900
American Media Operations, Inc., 13.50% 2nd Lien Nts., 6/15/183,5		337			337
Belo (A.H.) Corp.:
7.25% Sr. Unsec. Unsub. Bonds, 9/15/27		465,000			405,713
7.75% Sr. Unsec. Unsub. Debs., 6/1/27		2,983,000			2,699,615
Cengage Learning Acquisitions, Inc., 10.50% Sr. Nts., 1/15/152		5,325,000			5,524,688
Cequel Communications Holdings I LLC, 8.625% Sr. Unsec. Nts., 11/15/172		1,735,000			1,821,750
Clear Channel Communications, Inc., 10.75% Sr. Unsec. Unsub. Nts., 8/1/16		3,610,000			3,249,000
Entravison Communications Corp., 8.75% Sr. Sec. Nts., 8/1/172		640,000			678,400
Fisher Communications, Inc., 8.625% Sr. Unsec. Nts., 9/15/14		670,000			683,400
Gray Television, Inc., 10.50% Sr. Sec. Nts., 6/29/15		5,365,000			5,432,063
Interactive Data Corp., 10.25% Sr. Nts., 8/1/184		965,000			1,056,675
Newport Television LLC/NTV Finance Corp., 12.44% Sr. Nts., 3/15/172,13		2,495,000			2,357,775
Nexstar Broadcasting, Inc., 8.875% Sr. Sec. Nts., 4/15/172		1,780,000			1,900,150
Radio One, Inc., 12.50% Sr. Unsec. Sub. Nts., 5/11/162		669,750			659,704
Sinclair Television Group, Inc., 8.375% Sr. Nts., 10/15/182		2,630,000			2,728,625
Univision Communications, Inc.:
7.875% Sr. Sec. Nts., 11/1/202		460,000			485,300
8.50% Sr. Unsec. Nts., 5/15/212		610,000			620,675
Visant Corp., 10% Sr. Sec. Nts., 10/1/172		600,000			639,000
					35,781,995
Multiline Retail—0.0%
Bon-Ton Stores, Inc. (The), 10.25% Sr. Unsec. Unsub. Nts., 3/15/14		485,000			497,125
Consumer Staples—0.8%
Beverages—0.1%
AmBev International Finance Co. Ltd., 9.50% Sr. Unsec. Unsub. Nts., 7/24/171	2,080,000		BRR		1,231,084
Food & Staples Retailing—0.0%
Real Time Data Co., 11% Nts., 5/31/093,4,5,13		142,981			—
Food Products—0.7%
American Seafoods Group LLC, 10.75% Sr. Sub. Nts., 5/15/162		3,850,000			4,119,500
Arcor, 7.25% Sr. Unsec. Nts., 11/9/172		785,000			839,950
ASG Consolidated LLC, 14.10% Sr. Nts., 5/15/172,13		4,340,291			4,188,381
Bumble Bee Acquisition Corp., 9% Sr. Sec. Nts., 12/15/172		2,830,000			2,957,350
MHP SA, 10.25% Sr. Unsec. Nts., 4/29/152		1,493,000			1,580,788
Pilgrim’s Pride Corp., 7.875% Sr. Nts., 12/15/182		2,425,000			2,425,000
Southern States Cooperative, Inc., 11.25% Sr. Nts., 5/15/154		2,540,000			2,705,100
					18,816,069

	Principal
	Amount		Value
Energy—5.3%
Energy Equipment & Services—0.5%
Frac Tech Services LLC/Frac Tech Finance, Inc., 7.125% Sr. Nts., 11/15/182	$	765,000	$	778,388
PHI, Inc., 8.625% Sr. Unsec. Nts., 10/15/182		2,995,000		3,084,850
Precision Drilling Corp., 6.625% Sr. Unsec. Nts., 11/15/202		2,295,000		2,340,900
Thermon Industries, Inc., 9.50% Sr. Sec. Nts., 5/1/172		2,440,000		2,610,800
Vantage Drilling Co., 11.50% Sr. Sec. Nts., 8/1/152		2,565,000		2,795,850
				11,610,788
Oil, Gas & Consumable Fuels—4.8%
Alliance Oil Co. Ltd., 9.875% Sr. Unsec. Nts., 3/11/152		1,500,000		1,584,300
Alon Refining Krotz Springs, Inc., 13.50% Sr. Sec. Nts., 10/15/14		915,000		882,975
Antero Resources Finance Corp., 9.375% Sr. Unsec. Nts., 12/1/17		2,955,000		3,106,444
Atlas Energy Resources LLC, 10.75% Sr. Unsec. Nts., 2/1/18		4,740,000		5,812,425
Atlas Pipeline Partners LP, 8.125% Sr. Unsec. Nts., 12/15/15		2,285,000		2,364,975
ATP Oil & Gas Corp., 11.875% Sr. Sec. Nts., 5/1/152		8,195,000		7,785,250
Berry Petroleum Co., 8.25% Sr. Sub. Nts., 11/1/16		1,475,000		1,545,063
Bill Barrett Corp., 9.875% Sr. Nts., 7/15/16		2,365,000		2,607,413
BreitBurn Energy Partners LP, 8.625% Sr. Unsec. Nts., 10/15/202		2,805,000		2,833,050
Chaparral Energy, Inc.:
8.875% Sr. Unsec. Nts., 2/1/17		2,680,000		2,733,600
9.875% Sr. Nts., 10/1/202		2,715,000		2,877,900
Crosstex Energy LP/Crosstex Energy Finance Corp., 8.875% Sr. Unsec. Nts., 2/15/18		795,000		855,619
Empresa Nacional del Petroleo, 5.25% Unsec. Nts., 8/10/202		815,000		817,822
Gaz Capital SA:
6.212% Sr. Unsec. Unsub. Nts., 11/22/162		1,910,000		2,034,150
7.288% Sr. Sec. Nts., 8/16/372		4,415,000		4,613,675
8.125% Nts., 7/31/142		1,530,000		1,736,550
8.146% Sr. Sec. Nts., 4/11/182		2,680,000		3,115,500
8.625% Sr. Sec. Nts., 4/28/342		1,680,000		2,024,400
9.25% Sr. Unsec. Unsub. Nts., 4/23/192		3,175,000		3,917,315
KMG Finance Sub BV:
7% Sr. Unsec. Nts., 5/5/202		1,150,000		1,201,750
9.125% Nts., 7/2/182		3,580,000		4,206,500
11.75% Sr. Unsec. Nts., 1/23/152		85,000		105,927
Linn Energy LLC, 8.625% Sr. Unsec. Nts., 4/15/202		4,015,000		4,346,238
Lukoil International Finance BV:
6.125% Sr. Unsec. Nts., 11/9/202		3,560,000		3,582,072
6.656% Sr. Unsec. Unsub. Bonds, 6/7/222		610,000		620,675
7.25% Sr. Unsec. Unsub. Nts., 11/5/192		595,000		645,575
MarkWest Energy Partners LP/MarkWest Energy Finance Corp., 6.75% Sr. Unsec. Nts., 11/1/20		300,000		301,500
Murray Energy Corp., 10.25% Sr. Sec. Nts., 10/15/152		6,535,000		6,894,425
Nak Naftogaz Ukraine, 9.50% Unsec. Nts., 9/30/14		4,360,000		4,774,200
Odebrecht Drilling Norbe VIII/IX Ltd., 6.35% Sr. Sec. Nts., 6/30/212		1,190,000		1,243,550
Pan American Energy LLC, 7.875% Sr. Unsec. Nts., 5/7/212		2,270,000		2,423,225
Pemex Project Funding Master Trust, 6.625% Sr. Unsec. Unsub. Nts., 6/15/38		1,510,000		1,541,296
Petrobras International Finance Co.:
5.75% Sr. Unsec. Unsub. Nts., 1/20/20		1,120,000		1,167,676
5.875% Sr. Unsec. Nts., 3/1/18		680,000		727,476
7.875% Sr. Unsec. Nts., 3/15/19		3,040,000		3,608,997
Petroleos de Venezuela SA, 5.25% Sr. Unsec. Unsub. Nts., 4/12/17		860,000		494,500
Petroleos Mexicanos:
5.50% Sr. Unsec. Unsub. Nts., 1/21/21		1,650,000		1,678,875
6% Sr. Unsec. Unsub. Nts., 3/5/20		1,380,000		1,469,700
8% Unsec. Unsub. Nts., 5/3/19		940,000		1,137,400
Petroleum Co. of Trinidad & Tobago Ltd., 9.75% Sr. Unsec. Nts., 8/14/192		2,380,000		2,867,900
Petroleum Export Ltd. Cayman SPV, 5.265% Sr. Nts., Cl. A3, 6/15/112		348,893		348,296
PT Adaro Indonesia, 7.625% Nts., 10/22/192		2,060,000		2,260,850
Quicksilver Resources, Inc., 11.75% Sr. Nts., 1/1/16		2,260,000		2,644,200
Range Resources Corp.:
7.50% Sr. Unsec. Unsub. Nts., 10/1/17		1,020,000		1,079,925
8% Sr. Unsec. Sub. Nts., 5/15/19		2,530,000		2,767,188

	Principal
	Amount			Value
Oil, Gas & Consumable Fuels Continued
SandRidge Energy, Inc.:
8.75% Sr. Unsec. Nts., 1/15/20	$	2,925,000		$	3,020,063
9.875% Sr. Unsec. Nts., 5/15/162		1,290,000			1,370,625
Tengizchevroil LLP, 6.124% Nts., 11/15/144		1,068,156			1,124,235
TransCapitalInvest Ltd. for OJSC AK Transneft, 5.67% Sec. Bonds, 3/5/142		1,700,000			1,804,023
					114,707,288
Financials—4.5%
Capital Markets—0.8%
American General Finance, 6.90% Nts., Series J, 12/15/17		3,375,000			2,742,188
Berry Plastics Holding Corp., 10.25% Sr. Unsec. Sub. Nts., 3/1/16		1,230,000			1,213,088
Credit Suisse First Boston International, Export-Import Bank of Ukraine, 7.65% Sr. Sec. Bonds, 9/7/11		700,000			712,250
FoxCo Acquisition Sub LLC, 13.375% Sr. Nts., 7/15/162		165,000			181,500
IPIC GMTN Ltd., 5% Nts., 11/15/202		1,580,000			1,554,205
Nationstar Mortgage LLC/ Nationstar Capital Corp., 10.875% Sr. Nts., 4/1/152		7,205,000			7,114,938
Nuveen Investments, Inc., 5.50% Sr. Unsec. Nts., 9/15/15		1,095,000			944,438
Pinafore LLC/Pinafore, Inc., 9% Sr. Sec. Nts., 10/1/182		3,005,000			3,260,425
					17,723,032
Commercial Banks—2.3%
Akbank TAS, 5.125% Sr. Unsec. Nts., 7/22/152		2,050,000			2,080,750
Alfa Bank/Alfa Bond Issuance plc, 7.875% Nts., 9/25/172		1,610,000			1,646,225
Banco BMG SA:
9.15% Nts., 1/15/164		2,660,000			2,860,830
9.95% Unsec. Unsub. Nts., 11/5/192		1,150,000			1,227,625
Banco Cruzeiro do Sul SA, 8.875% Sub. Nts., 9/22/202		800,000			800,800
Banco de Credito del Peru:
5.375% Sr. Nts., 9/16/202		1,200,000			1,188,000
6.95% Sub. Nts., 11/7/211,4		1,510,000			1,585,500
9.75% Jr. Sub. Nts., 11/6/694		800,000			932,000
Banco do Brasil SA:
5.375% Unsec. Sub. Nts., 1/15/212		1,410,000			1,388,850
8.50% Jr. Sub. Perpetual Bonds2,15		1,500,000			1,734,300
Banco PanAmericano SA, 8.50% Sr. Unsec. Sub. Nts., 4/23/202		900,000			889,200
Bank of Scotland plc:
4.375% Sr. Sec. Nts., 7/13/16		2,065,000	EUR		2,831,591
4.50% Sr. Sec. Nts., 7/13/21		1,414,000	EUR		1,863,253
CIT Group, Inc., 7% Sr. Sec. Bonds, 5/1/17		5,635,000			5,663,175
HSBK Europe BV:
7.25% Unsec. Unsub. Nts., 5/3/172		710,000			724,200
9.25% Sr. Nts., 10/16/134		8,420,000			9,240,950
ICICI Bank Ltd.:
5.50% Sr. Unsec. Nts., 3/25/152		3,050,000			3,177,057
6.375% Bonds, 4/30/221,2		3,060,000			3,075,731
Ongko International Finance Co. BV, 10.50% Sec. Nts., 3/29/042,3,5		90,000			—
PrivatBank JSC/UK SPV Credit Finance plc, 8% Sr. Sec. Nts., 2/6/122		1,240,000			1,230,700
Salisbury International Investments Ltd., 4.439% Sec. Nts., Series 2006-003, Tranche E, 7/20/111,4		1,100,000			999,460
VEB Finance Ltd., 6.902% Sr. Unsec. Unsub. Nts., 7/9/202		3,530,000			3,706,500
VTB Capital SA:
6.465% Sr. Sec. Unsub. Nts., 3/4/152		2,350,000			2,458,570
6.551% Sr. Unsec. Nts., 10/13/202		1,560,000			1,540,500
6.875% Sr. Sec. Nts., 5/29/182		705,000			749,063
Yapi ve Kredit Bankasi/Unicredit Luxembourg SA, 5.188% Sr. Unsec. Nts., 10/13/154		1,170,000			1,211,184
					54,806,014
Consumer Finance—0.1%
JSC Astana Finance, 9.16% Nts., 3/14/123,5		7,200,000			930,240
TMX Finance LLC/TitleMax Finance Corp., 13.25% Sr. Sec. Nts., 7/15/152		2,410,000			2,663,050
					3,593,290
Diversified Financial Services—0.7%
Autopistas del Nordeste Cayman Ltd., 9.39% Nts., 1/15/264		2,809,723			2,542,799
BA Covered Bond Issuer, 4.25% Sec. Nts., 4/5/17		425,000	EUR		577,594
Banco Invex SA, 29.174% Mtg.-Backed Certificates, Series 062U, 3/13/341,16		4,830,734	MXN		1,234,068
BM&F BOVESPA SA, 5.50% Sr. Unsec. Nts., 7/16/202		1,640,000			1,677,005
GMAC LLC, 8% Sr. Unsec. Nts., 11/1/31		2,785,000			3,014,763

	Principal
	Amount			Value
Diversified Financial Services Continued
ING Groep NV, 5.775% Jr. Unsec. Sub. Perpetual Bonds15	$	2,935,000		$	2,538,775
JPMorgan Hipotecaria su Casita:
7.555% Sec. Nts., 8/26/354	5,808,600		MXN		458,574
27.591% Mtg.-Backed Certificates, Series 06U, 9/25/351	1,895,532		MXN		307,158
Tiers-BSP, 0%/8.60% Collateralized Trust, Cl. A, 6/15/972,17		6,360,000			3,572,062
TNK-BP Finance SA, 7.25% Sr. Unsec. Unsub. Bonds, 2/2/202		900,000			983,250
					16,906,048
Insurance—0.1%
International Lease Finance Corp.:
5.875% Unsec. Unsub. Nts., 5/1/13		1,190,000			1,209,338
8.75% Sr. Unsec. Unsub. Nts., 3/15/172		1,475,000			1,585,625
8.875% Sr. Unsec. Nts., 9/1/17		295,000			319,706
					3,114,669
Real Estate Management & Development—0.3%
Realogy Corp., 10.50% Sr. Unsec. Nts., 4/15/14		4,515,000			4,458,563
Wallace Theater Holdings, Inc., 12.50% Sr. Sec. Nts., 6/15/131,4		2,230,000			2,280,175
					6,738,738
Thrifts & Mortgage Finance—0.2%
Banco Hipotecario SA, 9.75% Sr. Unsec. Nts., 4/27/162		785,000			812,475
WM Covered Bond Program:
4% Sec. Mtg. Nts., Series 2, 9/27/16	2,720,000		EUR		3,701,607
4.375% Sec. Nts., 5/19/14	355,000		EUR		495,717
					5,009,799
Health Care—1.4%
Health Care Equipment & Supplies—0.4%
Accellent, Inc., 10% Sr. Sub. Nts., 11/1/172		2,305,000			2,183,988
Alere, Inc., 8.625% Sr. Sub. Nts., 10/1/182		1,040,000			1,058,200
Biomet, Inc., 11.625% Sr. Unsec. Sub. Nts., 10/15/17		1,911,000			2,121,210
DJO Finance LLC/DJO Finance Corp., 9.75% Sr. Sub. Nts., 10/15/172		735,000			760,725
Inverness Medical Innovations, Inc., 7.875% Sr. Unsec. Unsub. Nts., 2/1/16		1,630,000			1,642,225
Universal Hospital Services, Inc., 8.50% Sr. Sec. Nts., 6/1/1513		1,390,000			1,435,175
					9,201,523
Health Care Providers & Services—0.8%
Capella Healthcare, Inc., 9.25% Sr. Unsec. Nts., 7/1/172		405,000			430,313
Catalent Pharma Solutions, Inc., 10.25% Sr. Unsec. Nts., 4/15/1513		2,603,400			2,642,451
Gentiva Health Services, Inc., 11.50% Sr. Unsec. Unsub. Nts., 9/1/18		2,405,000			2,633,475
HCA, Inc., 6.375% Nts., 1/15/15		2,260,000			2,231,750
HEALTHSOUTH Corp.:
7.25% Sr. Unsec. Nts., 10/1/18		1,475,000			1,508,188
7.75% Sr. Unsec. Nts., 9/15/22		550,000			569,250
inVentiv Health, Inc., 10% Sr. Unsec. Nts., 8/15/182		1,120,000			1,125,600
Multiplan, Inc., 9.875% Sr. Nts., 9/1/182		1,920,000			2,044,800
OnCure Holdings, Inc., 11.75% Sr. Sec. Nts., 5/15/172		1,095,000			1,040,250
Radiation Therapy Services, Inc., 9.875% Sr. Sub. Nts., 4/15/172		1,065,000			1,067,663
UHS Escrow Corp., 7% Sr. Nts., 10/1/182		225,000			231,750
US Oncology, Inc., 9.125% Sr. Sec. Nts., 8/15/17		1,305,000			1,614,938
Vanguard Health Holding Co. II LLC/Vanguard Holding Co. II, Inc., 8% Sr. Nts., 2/1/18		1,595,000			1,642,850
					18,783,278
Health Care Technology—0.0%
MedAssets, Inc., 8% Sr. Nts., 11/15/182		920,000			929,200
Pharmaceuticals—0.2%
Mylan, Inc., 6% Sr. Nts., 11/15/182		810,000			797,850
Valeant Pharmaceuticals International, Inc., 6.875% Sr. Unsec. Nts., 12/1/182		765,000			763,088
Warner Chilcott Co. LLC, 7.75% Sr. Nts., 9/15/182		3,340,000			3,390,100
					4,951,038
Industrials—3.3%
Aerospace & Defense—0.8%
BE Aerospace, Inc., 6.875% Sr. Nts., 10/1/20		605,000			627,688
DynCorp International, Inc., 10.375% Sr. Unsec. Nts., 7/1/172		4,910,000			5,057,300
Hawker Beechcraft Acquisition Co. LLC, 8.50% Sr. Unsec. Nts., 4/1/15		7,305,000			5,460,488
TransDigm, Inc., 7.75% Sr. Sub. Nts., 12/15/182		6,480,000			6,739,200
					17,884,676

	Principal
	Amount			Value
Air Freight & Logistics—0.0%
AMGH Merger Sub, Inc., 9.25% Sr. Sec. Nts., 11/1/182	$	770,000		$	812,350
Airlines—0.2%
Delta Air Lines, Inc., 12.25% Sr. Sec. Nts., 3/15/152		3,845,000			4,354,463
Building Products—0.3%
Associated Materials LLC, 9.125% Sr. Sec. Nts., 11/1/172		1,105,000			1,157,488
Ply Gem Industries, Inc., 13.125% Sr. Unsec. Sub. Nts., 7/15/14		5,190,000			5,540,325
Roofing Supply Group LLC/ Roofing Supply Finance, Inc., 8.625% Sr. Sec. Nts., 12/1/172		1,100,000			1,138,500
					7,836,313
Commercial Services & Supplies—0.2%
West Corp.:
7.875% Sr. Nts., 1/15/192		1,220,000			1,244,400
8.625% Sr. Unsec. Nts., 10/1/182		2,665,000			2,838,225
					4,082,625
Construction & Engineering—0.2%
IIRSA Norte Finance Ltd., 8.75% Sr. Nts., 5/30/242		3,876,077			4,331,516
Odebrecht Finance Ltd., 7% Sr. Unsec. Nts., 4/21/202		780,000			842,400
					5,173,916
Industrial Conglomerates—0.1%
Sequa Corp., 11.75% Sr. Unsec. Nts., 12/1/152		2,525,000			2,714,375
Machinery—0.5%
Cleaver-Brooks, Inc., 12.25% Sr. Sec. Nts., 5/1/162		2,540,000			2,708,275
Manitowoc Co., Inc. (The), 8.50% Sr. Unsec. Nts., 11/1/20		2,805,000			2,994,338
Terex Corp., 8% Sr. Unsec. Sub. Nts., 11/15/17		5,275,000			5,354,125
Thermadyne Holdings Corp., 9% Sr. Sec. Nts., 12/15/172		1,325,000			1,373,031
					12,429,769
Marine—0.2%
Marquette Transportation Co., 10.875% Sr. Sec. Nts., 1/15/172		2,930,000			3,003,250
Navios Maritime Acquisition Corp., 8.625% Sr. Sec. Nts., 11/1/172		735,000			755,213
Navios Maritime Holdings, Inc.,/ Navios Maritime Finance U.S., Inc., 8.875% Sr. Sec. Nts., 11/1/17		1,240,000			1,348,500
					5,106,963
Professional Services—0.2%
Altegrity, Inc., 10.50% Sr. Unsec. Sub. Nts., 11/1/152		3,515,000			3,624,844
TransUnion LLC/TransUnion Financing Corp., 11.375% Sr. Unsec. Nts., 6/15/182		660,000			755,700
					4,380,544
Road & Rail—0.4%
Hertz Corp., 7.50% Sr. Unsec. Nts., 10/15/182		5,330,000			5,556,525
Kazakhstan Temir Zholy Finance BV, 6.375% Sr. Unsec. Nts., 10/6/202		785,000			823,308
Panama Canal Railway Co., 7% Sr. Sec. Nts., 11/1/264		1,425,760			1,290,313
Transnet Ltd., 10.80% Sr. Unsec. Nts., 11/6/23	10,000,000		ZAR		1,665,411
					9,335,557
Trading Companies & Distributors—0.2%
Ashtead Capital, Inc., 9% Nts., 8/15/164		1,060,000			1,110,350
RSC Equipment Rental, Inc., 10% Sr. Sec. Nts., 7/15/172		470,000			531,100
United Rentals North America, Inc.:
8.375% Sr. Unsec. Sub. Nts., 9/15/20		460,000			470,350
9.25% Sr. Unsec. Unsub. Nts., 12/15/19		1,020,000			1,139,850
					3,251,650
Transportation Infrastructure—0.0%
Aeropuertos Argentina 2000 SA, 10.75% Sr. Sec. Nts., 12/1/204		570,000			595,650
Information Technology—2.0%
Computers & Peripherals—0.2%
CDW LLC/CDW Finance Corp., 11% Sr. Unsec. Nts., 10/12/15		1,295,000			1,350,038
Seagate HDD Cayman, 6.875% Sr. Unsec. Nts., 5/1/202		2,740,000			2,630,400
					3,980,438
Electronic Equipment & Instruments—0.1%
RBS Global, Inc./Rexnord Corp., 11.75% Sr. Unsec. Sub. Nts., 8/1/16		2,955,000			3,184,013
Internet Software & Services—0.5%
Bankrate, Inc., 11.75% Sr. Sec. Nts., 7/15/152		1,620,000			1,806,300
ITC DeltaCom, Inc., 10.50% Sr. Sec. Nts., 4/1/16		5,135,000			5,609,988
Telcordia Technologies, Inc., 11% Sr. Sec. Nts., 5/1/182		3,970,000			4,009,700
					11,425,988

	Principal
	Amount		Value
IT Services—0.5%
Ceridian Corp., 11.25% Sr. Unsec. Nts., 11/15/15	$	2,145,000	$	2,134,275
First Data Corp.:
8.875% Sr. Sec. Nts., 8/15/202		2,390,000		2,533,400
9.875% Sr. Unsec. Nts., 9/24/15		6,510,000		6,233,325
SunGard Data Systems, Inc.:
7.375% Sr. Unsec. Nts., 11/15/182		765,000		772,650
7.625% Sr. Unsec. Nts., 11/15/202		765,000		778,388
				12,452,038
Semiconductors & Semiconductor Equipment—0.7%
Advanced Micro Devices, Inc., 7.75% Sr. Unsec. Nts., 8/1/202		1,340,000		1,396,950
Amkor Technology, Inc., 7.375% Sr. Unsec. Nts., 5/1/18		1,445,000		1,510,025
Freescale Semiconductor, Inc.:
9.25% Sr. Sec. Nts., 4/15/182		1,710,000		1,889,550
10.75% Sr. Unsec. Nts., 8/1/202		4,430,000		4,850,850
NXP BV/NXP Funding LLC:
7.875% Sr. Sec. Nts., 10/15/14		1,765,000		1,844,425
9.50% Sr. Unsec. Unsub. Nts., 10/15/15		2,950,000		3,163,875
9.75% Sr. Sec. Nts., 8/1/182		1,125,000		1,271,250
				15,926,925
Materials—3.3%
Chemicals—0.9%
Braskem Finance Ltd., 7.25% Sr. Unsec. Nts., 6/5/182		2,135,000		2,252,425
Braskem SA, 7% Sr. Unsec. Nts., 5/7/202		1,150,000		1,193,125
Ferro Corp., 7.875% Sr. Unsec. Nts., 8/15/18		2,650,000		2,809,000
Hexion U.S. Finance Corp./Hexion Nova Scotia Finance ULC:
8.875% Sr. Sec. Nts., 2/1/18		3,845,000		4,128,569
9% Sr. Sec. Nts., 11/15/202		1,410,000		1,494,600
Huntsman International LLC, 8.625% Sr. Sub. Nts., 3/15/212		300,000		325,500
Momentive Performance Materials, Inc.:
9% Sec. Nts., 1/15/212		2,815,000		2,976,863
11.50% Sr. Unsec. Sub. Nts., 12/1/16		2,455,000		2,675,950
Nalco Co., 6.625% Sr. Nts., 1/15/192		485,000		498,338
Rhodia SA, 6.875% Sr. Nts., 9/15/202		2,810,000		2,862,688
				21,217,058
Construction Materials—0.1%
CEMEX Espana SA, 9.25% Sr. Sec. Nts., 5/12/202		872,000		861,100
CEMEX Finance LLC, 9.50% Sr. Sec. Bonds, 12/14/162		1,275,000		1,321,219
Rearden G Holdings Eins GmbH, 7.875% Sr. Unsec. Nts., 3/30/202		990,000		1,049,400
				3,231,719
Containers & Packaging—0.3%
Berry Plastics Corp., 9.75% Sr. Sec. Nts., 1/15/212		3,830,000		3,810,850
Jefferson Smurfit Corp. (Escrow):
7.50% Sr. Unsec. Unsub. Nts., 6/1/133,5		920,000		34,500
8.25% Sr. Unsec. Nts., 10/1/123,5		2,560,000		96,000
Smurfit-Stone Container Corp. (Escrow):
8% Sr. Unsec. Unsub. Nts., 3/15/173,5		1,780,000		84,550
8.375% Sr. Nts., 7/1/123,5		925,000		34,688
Solo Cup Co., 8.50% Sr. Sub. Nts., 2/15/14		3,140,000		2,841,700
				6,902,288
Metals & Mining—0.8%
Alrosa Finance SA, 7.75% Nts., 11/3/202		1,580,000		1,664,925
CSN Islands XI Corp., 6.875% Sr. Unsec. Nts., 9/21/192		750,000		813,750
Edgen Murray Corp., 12.25% Sr. Sec. Nts., 1/15/15		3,340,000		2,922,500
JSC Severstal, 6.70% Nts., 10/25/172		1,940,000		1,925,450
Steel Capital SA for OAO Severstal, 9.75% Sec. Nts., 7/29/132		2,160,000		2,416,608
Vedanta Resources plc, 9.50% Sr. Unsec. Nts., 7/18/182		7,715,000		8,476,856
				18,220,089
Paper & Forest Products—1.2%
ABI Escrow Corp., 10.25% Sr. Sec. Nts., 10/15/182		2,255,000		2,480,500
Abitibi-Consolidated Co. of Canada (Escrow):
6% Sr. Unsec. Unsub. Nts., 6/20/133,5		2,020,000		22,725
7.75% Sr. Unsec. Bonds, 6/15/113,5		1,120,000		12,600
8.375% Sr. Unsec. Sub. Nts., 4/1/153,5		2,705,000		30,431
8.85% Unsec. Bonds, 8/1/303,5		1,010,000		12,625
Ainsworth Lumber Co. Ltd., 11% Sr. Unsec. Unsub. Nts., 7/29/152,13		3,274,875		3,095,117
Appleton Papers, Inc., 10.50% Sr. Sec. Nts., 6/15/152		5,630,000		5,601,850
Bowater Pulp & Paper Canada, Inc., 10.60% Sr. Unsec. Nts., 1/15/113,5		2,760,000		745,200

	Principal
	Amount			Value
Paper & Forest Products Continued
Bowater, Inc. (Escrow):
6.50% Sr. Unsec. Nts., 6/15/133,5	$	3,280,000		$	147,600
9% Sr. Unsec. Nts., 8/1/093,5		840,000			37,800
Catalyst Paper Corp., 11% Sr. Sec. Nts., 12/15/162		3,611,000			3,421,423
Grupo Papelero Scribe SA, 8.875% Sr. Nts., 4/7/202		1,315,000			1,301,850
Mercer International, Inc., 9.50% Sr. Unsec. Nts., 12/1/172		2,290,000			2,364,425
NewPage Corp., 11.375% Sr. Sec. Nts., 12/31/14		4,165,000			3,935,925
Verso Paper Holdings LLC, 11.375% Sr. Unsec. Sub. Nts., Series B, 8/1/16		5,275,000			5,314,563
					28,524,634
Telecommunication Services—2.2%
Diversified Telecommunication Services—1.3%
Axtel SAB de CV, 9% Sr. Unsec. Nts., 9/22/192		2,490,000			2,377,950
Broadview Networks Holdings, Inc., 11.375% Sr. Sec. Nts., 9/1/12		1,485,000			1,459,013
Cincinnati Bell, Inc.:
8.25% Sr. Nts., 10/15/17		1,310,000			1,303,450
8.75% Sr. Unsec. Sub. Nts., 3/15/18		2,020,000			1,903,850
Intelsat Bermuda Ltd.:
11.25% Sr. Unsec. Nts., 2/4/17		2,755,000			3,016,725
12.50% Sr. Unsec. Nts., 2/4/1713		1,381,250			1,533,188
Intelsat Jackson Holdings SA, 7.25% Sr. Unsec. Nts., 10/15/202		755,000			766,325
Level 3 Financing, Inc., 9.25% Sr. Unsec. Unsub. Nts., 11/1/14		4,780,000			4,768,050
PAETEC Holding Corp., 9.50% Sr. Unsec. Unsub. Nts., 7/15/15		5,595,000			5,818,800
Telemar Norte Leste SA, 5.50% Sr. Unsec. Nts., 10/23/202		4,162,000			4,026,735
Wind Acquisition Finance SA, 7.25% Sr. Sec. Nts., 2/15/182		1,190,000			1,213,800
Windstream Corp., 8.125% Sr. Unsec. Unsub. Nts., 9/1/18		1,295,000			1,366,225
Winstar Communications, Inc., 12.75% Sr. Nts., 4/15/103,5		250,000			—
					29,554,111
Wireless Telecommunication Services—0.9%
America Movil SAB de CV:
6.125% Sr. Unsec. Unsub. Nts., 3/30/40		925,000			985,569
8.46% Sr. Unsec. Unsub. Bonds, 12/18/36	52,700,000		MXN		3,952,969
Cricket Communications, Inc., 7.75% Sr. Unsec. Nts., 10/15/202		5,335,000			5,094,925
MetroPCS Wireless, Inc.:
6.625% Sr. Unsec. Nts., 11/15/20		2,755,000			2,631,025
7.875% Sr. Unsec. Nts., 9/1/18		2,520,000			2,627,100
MTS International Funding Ltd., 8.625% Sr. Unsec. Nts., 6/22/202		1,650,000			1,882,980
Teligent, Inc., 11.50% Sr. Nts., 12/1/083,5		500,000			—
VIP Finance Ireland Ltd., 9.125% Bonds, 4/30/182		4,190,000			4,787,075
					21,961,643
Utilities—2.7%
Electric Utilities—1.5%
Centrais Eletricas Brasileiras SA, 6.875% Sr. Unsec. Unsub. Nts., 7/30/192		1,350,000			1,532,250
Edison Mission Energy, 7% Sr. Unsec. Nts., 5/15/17		3,935,000			3,138,163
Empresas Publicas de Medellin ESP, 7.625% Sr. Unsec. Nts., 7/29/192		1,435,000			1,650,250
Energy Future Intermediate Holding Co. LLC, 10% Sr. Sec. Nts., 12/1/20		2,817,000			2,919,181
Eskom Holdings Ltd., 10% Nts., Series ES23, 1/25/23	34,000,000		ZAR		5,632,196
Eskom Holdings Ltd., 9.25% Bonds, Series ES18, 4/20/18	10,000,000		ZAR		1,568,575
Israel Electric Corp. Ltd., 7.25% Nts., 1/15/192		4,550,000			5,015,174
Majapahit Holding BV:
7.75% Nts., 10/17/162		2,250,000			2,610,000
8% Sr. Unsec. Nts., 8/7/192		1,150,000			1,349,813
National Power Corp., 5.875% Unsec. Unsub. Bonds, 12/19/16	109,600,000		PHP		2,765,272
Texas Competitive Electric Holdings Co. LLC:
10.25% Sr. Unsec. Nts., Series A, 11/1/15		10,405,000			5,930,850
10.25% Sr. Unsec. Nts., Series B, 11/1/15		1,520,000			858,800
TGI International Ltd., 9.50% Nts., 10/3/172		1,442,000			1,625,855
					36,596,379
Energy Traders—1.0%
Colbun SA, 6% Sr. Unsec. Nts., 1/21/202		1,640,000			1,711,657
Dynegy Holdings, Inc., 8.375% Sr. Unsec. Nts., 5/1/16		3,215,000			2,419,288
Energy Future Holdings Corp., 10% Sr. Sec. Nts., 1/15/202		3,100,000			3,204,696

	Principal
	Amount		Value
Energy Traders Continued
Foresight Energy LLC, 9.625% Sr. Unsec. Nts., 8/15/172	$	5,395,000	$	5,772,650
GenOn Escrow Corp.:
9.50% Sr. Unsec. Nts., 10/15/182		1,505,000		1,503,119
9.875% Sr. Nts., 10/15/202		1,500,000		1,496,250
Power Sector Assets & Liabilities Management Corp.:
7.25% Sr. Gtd. Unsec. Nts., 5/27/192		1,280,000		1,510,400
7.39% Sr. Gtd. Unsec. Nts., 12/2/242		1,270,000		1,511,300
PT Cikarang Listindo/Listindo Capital BV, 9.25% Sr. Nts., 1/29/152		1,150,000		1,298,161
United Maritime Group LLC, 11.75% Sr. Sec. Nts., 6/15/15		3,645,000		3,672,338
				24,099,859
Gas Utilities—0.1%
Ferrellgas LP/Ferrellgas Finance Corp., 6.50% Sr. Nts., 5/1/212		2,295,000		2,249,100
Water Utilities—0.1%
Cia de Saneamento Basico do Estado de Sao Paulo, 6.25% Sr. Unsec. Nts., 12/16/202		1,055,000		1,072,935
Total Corporate Bonds and Notes (Cost $690,263,841)				716,047,088

	Shares
Preferred Stocks—0.5%
Ally Financial, Inc., 7%, Non-Vtg.2		7,436	7,028,182
AmeriKing, Inc., 13% Cum. Sr. Exchangeable, Non-Vtg.5,13		4,253	—
Eagle-Picher Holdings, Inc., 11.75% Cum. Exchangeable, Series B, Non-Vtg.5		5,000	—
Greektown Holdings LLC, Preferred5		45,600	4,844,088
ICG Holdings, Inc., 14.25% Exchangeable, Non-Vtg.5,13		151	—
Total Preferred Stocks (Cost $11,475,299)			11,872,270
Common Stocks—1.0%
AbitibiBowater, Inc.5		116,803	2,764,727
American Media Operations, Inc.5		161,731	2,637,137
American Media, Inc.4,5		1,562	—
Arco Capital Corp. Ltd.4,5		690,638	1,381,276
Charter Communications, Inc., Cl. A5		64,672	2,518,328
Global Aviation Holdings, Inc.5		100	1,000
Greektown Superholdings, Inc.5		3,450	340,929
Kaiser Aluminum Corp.		229	11,471
MHP SA, GDR 2,5		56,610	968,031
Orbcomm, Inc.5		375	971
Premier Holdings Ltd.5		18,514	—
Smurfit-Stone Container Corp.5		279,168	7,146,701
Visteon Corp. 5		98,473	6,649,094
Total Common Stocks (Cost $32,033,407)			24,419,665

	Units
Rights, Warrants and Certificates—0.0%
ASG Warrant Corp. Wts., Strike Price $0.01, Exp. 5/15/184,5		4,275	534,375
Global Aero Logistics, Inc. Wts., Strike Price $10, Exp. 2/28/115		266	3
MediaNews Group, Inc. Wts., Strike Price $0.001, Exp. 3/19/175		11,668	420
Total Rights, Warrants and Certificates (Cost $191,025)			534,798

	Principal
	Amount
Structured Securities—6.3%
Barclays Bank plc:
Indonesia (Republic of) Total Return Linked Bonds, 10.50%, 8/19/30	10,440,000,000		IDR	1,284,836
Indonesia (Republic of) Total Return Linked Bonds, 10.50%, 8/19/30	13,870,000,000		IDR	1,706,961
Indonesia (Republic of) Total Return Linked Bonds, Series 22, 11%, 9/17/25	10,380,000,000		IDR	1,346,507
Indonesia (Republic of) Total Return Linked Nts., 10%, 9/18/24	9,240,000,000		IDR	1,123,631
Indonesia (Republic of) Total Return Linked Nts., 10%, 9/18/24	15,630,000,000		IDR	1,900,688
Indonesia (Republic of) Total Return Linked Nts., Series 51, 10.50%, 8/19/30	2,650,000,000		IDR	326,132
Indonesia (Republic of) Total Return Linked Nts., Series 51, 11%, 9/17/25	2,650,000,000		IDR	343,761
Citigroup Funding, Inc.:
Indonesia (Republic of) Credit Linked Nts., 10%, 9/19/24	12,730,000,000		IDR	1,548,033
Indonesia (Republic of) Credit Linked Nts., Series 23, 11%, 9/17/25	6,920,000,000		IDR	897,671
Indonesia (Republic of) Total Return Linked Nts., 11%, 9/17/25	2,100,000,000		IDR	272,415
Instituto Costarricense De Eletricidad Total Return Linked Nts., 2.288%, 10/25/111		1,960,000		1,968,017
Kenya (Republic of) Credit Linked Bonds, Series 5, 14%, 3/9/114	1,920,000		GHS	1,296,065
Ukraine (Republic of) Credit Linked Nts., 5.50%, 9/1/151,4	19,540,000		UAH	2,116,230

	Principal
	Amount			Value
Structured Securities Continued
Citigroup Global Markets Holdings, Inc.:
Colombia (Republic of) Credit Linked Bonds, 11.25%, 10/25/184	3,255,000,000		COP	$	2,043,672
Colombia (Republic of) Credit Linked Nts., 13.37%, 2/26/154,16	2,199,000,000		COP		2,566,672
Colombia (Republic of) Credit Linked Nts., Series 01, 13.37%, 2/26/154,16	811,000,000		COP		946,599
Colombia (Republic of) Credit Linked Nts., Series 02, 13.37%, 2/26/154,16	1,345,000,000		COP		1,569,883
Colombia (Republic of) Total Return Linked Bonds, Series 2, 11%, 7/27/20	2,665,000,000		COP		1,688,883
Dominican Republic Unsec. Credit Linked Nts., 15%, 3/12/124	49,300,000		DOP		1,356,633
Credit Suisse First Boston International:
Moitk Total Return Linked Nts., 21%, 3/30/115,20	53,910,000		RUR		5,294
Russian Oreniz Total Return Linked Nts., 9.24%, 2/24/121	105,151,500		RUR		3,240,051
Credit Suisse First Boston, Inc. (Nassau Branch), Russian Specialized Construction & Installation Administration Total Return Linked Nts., 5/20/105,20	97,250,000		RUR		318
Credit Suisse Group AG, Russian Moscoblgaz Finance Total Return Linked Nts., 9.25%, 6/27/12	74,550,000		RUR		2,233,059
Credit Suisse International:
OAO Gazprom Total Return Linked Nts., 13.12%, 6/28/121	41,550,000		RUR		1,487,378
OAO Gazprom Total Return Linked Nts., 13.12%, 6/28/121	30,880,000		RUR		1,105,421
OAO Gazprom Total Return Linked Nts., 13.12%, 6/28/121	44,460,000		RUR		1,591,548
Deutsche Bank AG:
Arrendadora Capita Corp. SA de CV/Capita Corp. (The) de Mexico SA de CV Credit Linked Nts., 9.09%, 1/7/11	405,418		MXN		31,432
Arrendadora Capita Corp. SA de CV/Capita Corp. (The) de Mexico SA de CV Credit Linked Nts., 9.65%, 1/7/11	269,791		MXN		20,917
Coriolanus Ltd. Sec. Credit Linked Bonds, Series 128, 3.01%, 4/30/254,11		1,966,981			1,266,194
Coriolanus Ltd. Sec. Credit Linked Bonds, 3.064%, 4/30/254,11		2,506,237			1,613,327
Coriolanus Ltd. Sec. Credit Linked Bonds, 3.103%, 4/30/254,11		2,163,734			1,392,849
Deutsche Bank AG: Continued Coriolanus Ltd. Sec. Credit Linked Bonds, 3.138%, 4/30/254,11		1,934,106			1,245,032
Coriolanus Ltd. Sec. Credit Linked Bonds, 3.191%, 4/30/254,11		2,408,118			1,550,165
Coriolanus Ltd. Sec. Credit Linked Bonds, 3.242%, 4/30/254,11		2,748,501			1,769,278
Coriolanus Ltd. Sec. Credit Linked Bonds, 3.269%, 4/30/254,11		2,195,731			1,413,446
Coriolanus Ltd. Sec. Credit Linked Bonds, 3.346%, 4/30/254,11		2,063,894			1,328,580
Coriolanus Ltd. Sec. Credit Linked Nts., 10.855%, 12/31/174,16	17,990,000		BRR		9,118,855
Coriolanus Ltd. Sec. Credit Linked Nts., Series 113, 9%, 4/26/111,4		655,000			717,618
Indonesia (Republic of) Credit Linked Nts., 10.50%, 8/23/30	40,660,000,000		IDR		5,003,969
Indonesia (Republic of) Credit Linked Nts., 12.80%, 6/22/21	11,690,000,000		IDR		1,747,590
Indonesia (Republic of) Credit Linked Nts., Series 02, 12.80%, 6/22/21	14,700,000,000		IDR		2,197,568
Indonesia (Republic of) Credit Linked Nts., Series 03, 11%, 9/17/25	6,740,000,000		IDR		874,322
JSC Gazprom Total Return Linked Nts., 13.12%, 6/28/121	38,600,000		RUR		1,381,776
Opic Reforma I Credit Linked Nts., Cl. 1A, 7.905%, 9/24/141,4	14,850,000		MXN		1,205,113
Opic Reforma I Credit Linked Nts., Cl. 1B, 7.905%, 9/24/141,4	2,970,000		MXN		241,023
Opic Reforma I Credit Linked Nts., Cl. 1C, 7.905%, 9/24/141,4	4,950,000		MXN		401,704
Opic Reforma I Credit Linked Nts., Cl. 1D, 7.905%, 9/24/141,4	2,475,000		MXN		200,852
Opic Reforma I Credit Linked Nts., Cl. 1E, 7.905%, 9/24/141,4	3,465,000		MXN		281,193
Opic Reforma I Credit Linked Nts., Cl. 2A, 8.405%, 5/22/151,4	1,417,014		MXN		114,994
Opic Reforma I Credit Linked Nts., Cl. 2B, 8.405%, 5/22/151,4	2,479,100		MXN		201,185
Opic Reforma I Credit Linked Nts., Cl. 2C, 8.405%, 5/22/151,4	37,378,810		MXN		3,033,380
Opic Reforma I Credit Linked Nts., Cl. 2D, 8.405%, 5/22/151,4	2,724,116		MXN		221,069
Opic Reforma I Credit Linked Nts., Cl. 2E, 8.405%, 5/22/151,4	1,979,122		MXN		160,610
Opic Reforma I Credit Linked Nts., Cl. 2F, 8.405%, 5/22/151,4	1,263,966		MXN		102,574
Opic Reforma I Credit Linked Nts., Cl. 2G, 8.405%, 5/22/151,4	232,771		MXN		18,890
Ukraine (Republic of) 5.5 yr. Total Return Linked Nts., 4.05%, 3/1/11		885,000			858,848

	Principal
	Amount			Value
Structured Securities Continued
Deutsche Bank AG: Continued
Ukraine (Republic of) 6 yr. Total Return Linked Nts., 4.05%, 8/30/11	$	885,000		$	760,472
Ukraine (Republic of) 6.5 yr. Total Return Linked Nts., 4.05%, 2/29/12		885,000			674,441
Ukraine (Republic of) 7 yr. Total Return Linked Nts., 4.05%, 8/30/12		885,000			607,800
United Mexican States Credit Linked Nts., 9.52%, 1/7/11	268,599		MXN		20,825
Eirles Two Ltd. Sec. Nts.:
Series 324, 3.653%, 4/30/121,4		4,100,000			3,685,900
Series 335, 2.103%, 4/30/121,4		6,300,000			5,993,190
Goldman Sachs & Co., Turkey (Republic of) Credit Linked Nts., 14.802%, 3/29/172,11	21,980,000		TRY		7,535,666
Goldman Sachs Capital Markets LP, Colombia (Republic of) Credit Linked Nts., 10.476%, 2/8/374,11	63,720,800,000		COP		1,954,768
Hallertau SPC Credit Linked Nts.:
Series 2007-01, 2.51%, 12/20/171,4		6,250,000			5,625,000
Series 2008-01, 9.888%, 8/2/104,5,11,20	14,337,604		BRR		863,711
Series 2008-2A, 6.752%, 9/17/131,4		13,358,125			13,653,340
JPMorgan Chase & Co.:
Colombia (Republic of) Credit Linked Nts., 11%, 7/28/204	1,315,000,000		COP		833,313
Indonesia (Republic of) Credit Linked Bonds, 8.25%, 7/19/212	13,410,000,000		IDR		1,531,103
Indonesia (Republic of) Credit Linked Bonds, Series 04, 11%, 9/17/252	2,650,000,000		IDR		343,761
Indonesia (Republic of) Credit Linked Nts., Series 04, 10.50%, 8/19/302	6,700,000,000		IDR		824,560
Indonesia (Republic of) Total Return Linked Nts., 10.50%, 8/19/302	1,190,000,000		IDR		146,452
Indonesia (Republic of) Total Return Linked Nts., Series 53, 11%, 9/17/252	2,100,000,000		IDR		272,415
JSC Gazprom Credit Linked Nts., Series 4, 13.12%, 6/28/121	45,990,000		RUR		1,646,318
JPMorgan Chase Bank NA:
Export-Import Bank Total Return Linked Bonds, 6.55%, 3/13/13	225,000,000		INR		4,806,944
Indonesia (Republic of) Credit Linked Nts., Series 2, 10.50%, 8/19/302	24,100,000,000		IDR		2,965,953
Indonesia (Republic of) Credit Linked Nts., Series 2, 11%, 9/17/252	15,710,000,000		IDR		2,037,922
Indonesia (Republic of) Credit Linked Nts., Series 3, 11%, 9/17/252	7,420,000,000		IDR		962,532
Russian Federation Credit Linked Bonds, 10%, 9/30/111,2	130,790,000		RUR		4,440,930
LB Peru Trust II Certificates, Series 1998-A, 2/28/1620		363,871			36,387
Lehman Brothers Treasury Co. BV, Microvest Capital Management LLC Credit Linked Nts., 7.55%, 5/24/124		2,058,126			1,246,813
Merrill Lynch, Colombia (Republic of) Credit Linked Nts., 10%, 11/17/164	1,784,000,000		COP		999,876
Morgan Stanley:
Peru (Republic of) Credit Linked Nts., 6.25%, 3/23/172	4,885,000		PEN		1,495,935
Russian Federation Total Return Linked Bonds, Series 007, Cl. VR, 5%, 8/22/34	74,728,733		RUR		1,154,894
Morgan Stanley Capital Services, Inc.:
Brazil (Federal Republic of) Credit Linked Nts., 12.551%, 1/5/222,11	28,914,000		BRR		2,586,201
GISAD Sr. Unsec. Credit Linked Nts., 166.572%, 4/2/1311	6,386,000		EUR		426,683
United Mexican States Credit Linked Nts., 5.64%, 11/20/154		2,000,000			1,803,200
Standard Bank Group Ltd., Ghana (Republic of) Credit Linked Bonds, 10.915%, 3/23/114,11	1,200,000		GHS		786,057
Standard Charter Bank, Kenya (Republic of) Credit Linked Bonds, 14%, 3/9/111,4	730,000		GHS		492,636
UBS AG, Ghana (Republic of) Credit Linked Nts., 14.47%, 12/28/114	1,222,052		GHS		838,824
Total Structured Securities (Cost $166,068,663)					149,735,533
Event-Linked Bonds—1.8%
Akibare Ltd. Catastrophe Linked Nts., Cl. A, 3.234%, 5/22/121,2		1,484,000			1,494,388
Atlas V Capital Ltd. Catastrophe Linked Nts., Series 2, 11.79%, 2/24/121,2		644,000			676,071
Blue Fin Ltd. Catastrophe Linked Nts., 9.25%, 5/28/131,2		334,000			341,749
Caelus Re Ltd. Catastrophe Linked Nts., 6.50%, 6/7/111,2		449,000			453,277

	Principal
	Amount			Value
Event-Linked Bonds Continued
Calypso Capital Ltd. Catastrophe Linked Nts., Series 2010-1, Cl. A, 4.514%, 1/10/141,2	608,000		EUR	$	809,693
East Lane Re II Ltd. Catastrophe Linked Nts., 14.79%, 4/7/111,2		2,207,000			2,250,974
East Lane Re III Ltd. Catastrophe Linked Nts., 10.54%, 3/16/121,2		2,651,000			2,759,691
Fhu-Jin Ltd. Catastrophe Linked Nts., Cl. B, 4.186%, 8/10/111,2		2,263,000			2,279,746
Foundation Re III Ltd. Catastrophe Linked Nts., Series 1-A, 5.75%, 2/3/141,2		985,000			980,272
Lodestone Re Ltd. Catastrophe Linked Nts., Series A-2, 7.25%, 1/8/141		1,020,000			1,021,352
Longpoint Re Ltd. Catastrophe Linked Nts.:
5.40%, 12/18/131,2		1,505,000			1,523,512
5.40%, 12/24/121,2		1,287,000			1,306,949
Mariah Re Ltd. Catastrophe Linked Nts.:
6.25%, 1/8/141,2		311,000			313,939
Series 2010, 8.50%, 1/8/171,2		649,000			650,574
Merna Reinsurance II Ltd. Catastrophe Linked Nts., 3.65%, 4/8/131,2		1,532,000			1,551,610
Midori Ltd. Catastrophe Linked Nts., 3.039%, 10/24/121,2		2,604,000			2,601,656
Montana Re Ltd. Catastrophe Linked Nts.:
9.803%, 1/8/141,2		1,129,000			1,129,790
12.203%, 1/8/141,2		370,000			370,148
16.703%, 1/8/141,2		541,000			540,973
Multicat Mexico 2009 Ltd. Catastrophe Linked Nts.:
10.372%, 10/19/121,2		471,000			499,684
11.622%, 10/19/121,2		1,407,000			1,505,771
Muteki Ltd. Catastrophe Linked Nts., 4.684%, 5/24/111,2		1,650,000			1,658,250
Redwood Capital XI Ltd. Catastrophe Linked Nts., 6.25%, 1/10/111,2		1,046,000			1,045,974
Residential Reinsurance 2007 Ltd. Catastrophe Linked Nts., Series CL2, 11.796%, 6/6/111,2		2,035,000			2,093,608
Residential Reinsurance Ltd. Catastrophe Linked Nts.:
6.60%, 6/6/131,2		710,000			714,562
8.90%, 6/6/131,2		421,000			435,556
13%, 6/6/131,2		421,000			439,503
13%, 6/6/131,2		710,000			723,277
Series CL1, 6.377%, 6/6/131,2		830,000			825,186
Series CL2, 7.377%, 6/6/131,2		467,000			466,510
Series CL3, 10.877%, 6/6/131,2		250,000			249,494
Successor X Ltd. Catastrophe Linked Nts.:
12.887%, 12/13/131,2		498,000			498,560
14.637%, 12/13/131,2		332,000			332,365
16.75%, 4/4/131,2		1,394,000			1,307,363
Vega Capital Ltd. Catastrophe Linked Nts.:
5.65%, 12/13/131,2		669,000			670,221
Series D, 0%, 6/24/112,11		3,304,000			6,434,540
Total Event-Linked Bonds (Cost $39,421,616)					42,956,788

	Expiration		Strike
	Date		Price		Contracts
Options Purchased—0.0%
Polish Zloty (PLZ) Put5		1/6/11	$	2.97		117,685,000	284,994
Polish Zloty (PLZ) Put5		1/6/11		3.00		118,900,000	166,044
Polish Zloty (PLZ) Put5		1/14/11		3.00		118,920,000	391,445
Total Options Purchased (Cost $1,592,838)							842,483

	Shares
Investment Companies—18.5%
JPMorgan U.S. Treasury Plus Money Market Fund, Agency Shares, 0.00%12,18		2,438,711			2,438,711
Oppenheimer Institutional Money Market Fund, Cl. E, 0.21%18,19		83,436,389			83,436,389
Oppenheimer Master Event-Linked Bond Fund, LLC19		1,103,918			12,419,505
Oppenheimer Master Loan Fund, LLC19		29,466,809			341,533,974
Total Investment Companies (Cost $431,488,334)					439,828,579
Total Investments, at Value (Cost $2,378,722,901)		101.8	%		2,424,268,158
Liabilities in Excess of Other Assets		(1.8	)		(42,173,546	)
Net Assets		100.0	%	$	2,382,094,612

Footnotes to Statement of Investments

Principal amount is reported in U.S. Dollars, except for those denoted in the following currencies:

ARP	Argentine Peso
AUD	Australian Dollar
BRR	Brazilian Real
CAD	Canadian Dollar
COP	Colombian Peso
DKK	Danish Krone
DOP	Dominican Republic Peso
EGP	Egyptian Pound
EUR	Euro
GBP	British Pound Sterling
GHS	Ghana Cedi
HUF	Hungarian Forint
IDR	Indonesia Rupiah
ILS	Israeli Shekel
INR	Indian Rupee
JPY	Japanese Yen
KRW	South Korean Won
MXN	Mexican Nuevo Peso
MYR	Malaysian Ringgit
NOK	Norwegian Krone
NZD	New Zealand Dollar
PEN	Peruvian New Sol
PHP	Philippines Peso
PLZ	Polish Zloty
RUR	Russian Ruble
SEK	Swedish Krona
TRY	New Turkish Lira
UAH	Ukraine Hryvnia
ZAR	South African Rand

1.	Represents the current interest rate for a variable or increasing rate security.
2.	Represents securities sold under Rule 144A, which are exempt from registration under the Securities Act of 1933, as amended. These securities have been determined to be liquid under guidelines established by the Board of Trustees. These securities amount to $508,214,125 or 21.33% of the Fund’s net assets as of December 31, 2010.
3.	Issue is in default. See Note 1 of the accompanying Notes.
4.	Restricted security. The aggregate value of restricted securities as of December 31, 2010 was $133,147,001, which represents 5.59% of the Fund’s net assets.

See Note 6 of the accompanying Notes. Information concerning restricted securities is as follows:

							Unrealized
	Acquisition						Appreciation
Security	Dates		Cost		Value		(Depreciation)
Aeropuertos Argentina 2000 SA, 10.75% Sr. Sec. Nts., 12/1/20		12/15/10	$	570,000	$	595,650	$	25,650
American Media, Inc.		2/2/09		34,604		—		(34,604	)
Arco Capital Corp. Ltd.		2/27/07		10,359,570		1,381,276		(8,978,294	)
ASG Warrant Corp. Wts., Strike Price $0.01, Exp. 5/15/18		4/28/10-8/19/10		189,000		534,375		345,375
Ashtead Capital, Inc., 9% Nts., 8/15/16		12/18/09-2/11/10		1,065,330		1,110,350		45,020
Autopistas del Nordeste Cayman Ltd., 9.39% Nts., 1/15/26		11/21/06-10/20/09		2,609,456		2,542,799		(66,657	)
Banco BMG SA, 9.15% Nts., 1/15/16		12/15/05-7/31/07		2,661,099		2,860,830		199,731
Banco de Credito del Peru, 9.75% Jr. Sub. Nts., 11/6/69		10/30/09		800,000		932,000		132,000
Banco de Credito del Peru, 6.95% Sub. Nts., 11/7/21		10/31/06-11/18/09		1,502,244		1,585,500		83,256
Belize (Government of) Unsec. Unsub. Bonds, 6%, 2/20/29		2/9/10-3/3/10		538,279		734,550		196,271
Citigroup Funding, Inc., Kenya (Republic of) Credit Linked Bonds, Series 5, 14%, 3/9/11		9/28/10		1,362,380		1,296,065		(66,315	)
Citigroup Funding, Inc., Ukraine (Republic of) Credit Linked Nts., 5.50%, 9/1/15		9/7/10		2,016,865		2,116,230		99,365
Citigroup Global Markets Holdings, Inc., Colombia (Republic of) Credit Linked Bonds, 11.25%, 10/25/18		12/9/08		1,373,150		2,043,672		670,522
Citigroup Global Markets Holdings, Inc., Colombia (Republic of) Credit Linked Nts., 13.37%, 2/26/15		7/18/08		1,905,640		2,566,672		661,032
Citigroup Global Markets Holdings, Inc., Colombia (Republic of) Credit Linked Nts., Series 01, 13.37%, 2/26/15		7/31/08		711,003		946,599		235,596
Citigroup Global Markets Holdings, Inc., Colombia (Republic of) Credit Linked Nts., Series 02, 13.37%, 2/26/15		8/8/08		1,188,111		1,569,883		381,772
Citigroup Global Markets Holdings, Inc., Dominican Republic Unsec. Credit Linked Nts., 15%, 3/12/12		3/7/07		1,479,820		1,356,633		(123,187	)
Deutsche Alt-A Securities, Inc., Mtg. Pass-Through Certificates, Series 2007-RS1, Cl. A2, 0.761%, 1/27/37		5/29/08		1,038,846		400,042		(638,804	)
Deutsche Bank AG, Coriolanus Ltd. Sec. Credit Linked Bonds, 3.346%, 4/30/25		4/16/09		1,302,929		1,328,580		25,651
Deutsche Bank AG, Coriolanus Ltd. Sec. Credit Linked Bonds, 3.269%, 4/30/25		8/18/09		1,395,976		1,413,446		17,470
Deutsche Bank AG, Coriolanus Ltd. Sec. Credit Linked Bonds, 3.242%, 4/30/25		9/25/09		1,751,716		1,769,278		17,562
Deutsche Bank AG, Coriolanus Ltd. Sec. Credit Linked Bonds, 3.191%, 4/30/25		12/17/09		1,542,421		1,550,165		7,744
Deutsche Bank AG, Coriolanus Ltd. Sec. Credit Linked Bonds, 3.138%, 4/30/25		3/30/10		1,245,315		1,245,032		(283	)
Deutsche Bank AG, Coriolanus Ltd. Sec. Credit Linked Bonds, 3.103%, 4/30/25		5/18/10		1,398,472		1,392,849		(5,623	)

							Unrealized
	Acquisition						Appreciation
Security	Dates		Cost		Value		(Depreciation)
Deutsche Bank AG, Coriolanus Ltd. Sec. Credit Linked Bonds, 3.064%, 4/30/25		7/16/10	$	1,626,190	$	1,613,327	$	(12,863	)
Deutsche Bank AG, Coriolanus Ltd. Sec. Credit Linked Bonds, Series 128, 3.01%, 4/30/25		10/8/10		1,284,012		1,266,194		(17,818	)
Deutsche Bank AG, Coriolanus Ltd. Sec. Credit Linked Nts., Series 113, 9%, 4/26/11		12/8/08		653,473		717,618		64,145
Deutsche Bank AG, Coriolanus Ltd. Sec. Credit Linked Nts., 10.855%, 12/31/17		9/19/07		7,651,611		9,118,855		1,467,244
Deutsche Bank AG, Opic Reforma I Credit Linked Nts., Cl. 1A, 7.905%, 9/24/14		12/27/07		1,364,764		1,205,113		(159,651	)
Deutsche Bank AG, Opic Reforma I Credit Linked Nts., Cl. 1B, 7.905%, 9/24/14		6/12/08		286,334		241,023		(45,311	)
Deutsche Bank AG, Opic Reforma I Credit Linked Nts., Cl. 1C, 7.905%, 9/24/14		8/12/08		487,085		401,704		(85,381	)
Deutsche Bank AG, Opic Reforma I Credit Linked Nts., Cl. 1D, 7.905%, 9/24/14		8/6/09		189,935		200,852		10,917
Deutsche Bank AG, Opic Reforma I Credit Linked Nts., Cl. 1E, 7.905%, 9/24/14		9/10/09		259,017		281,193		22,176
Deutsche Bank AG, Opic Reforma I Credit Linked Nts., Cl. 2A, 8.405%, 5/22/15		5/21/08		136,622		114,994		(21,628	)
Deutsche Bank AG, Opic Reforma I Credit Linked Nts., Cl. 2B, 8.405%, 5/22/15		6/12/08		239,007		201,185		(37,822	)
Deutsche Bank AG, Opic Reforma I Credit Linked Nts., Cl. 2C, 8.405%, 5/22/15		6/18/08		3,626,317		3,033,380		(592,937	)
Deutsche Bank AG, Opic Reforma I Credit Linked Nts., Cl. 2D, 8.405%, 5/22/15		7/8/08		264,086		221,069		(43,017	)
Deutsche Bank AG, Opic Reforma I Credit Linked Nts., Cl. 2E, 8.405%, 5/22/15		7/15/08		192,185		160,610		(31,575	)
Deutsche Bank AG, Opic Reforma I Credit Linked Nts., Cl. 2F, 8.405%, 5/22/15		8/8/08		124,426		102,574		(21,852	)
Deutsche Bank AG, Opic Reforma I Credit Linked Nts., Cl. 2G, 8.405%, 5/22/15		8/22/08		22,959		18,890		(4,069	)
Deutsche Mortgage & Asset Receiving, Commercial Mtg. Pass-Through Certificates, Interest-Only Stripped Mtg. Backed Security, Series 2010-C1, Cl. XPA, 4.82%, 9/1/20		10/27/10		531,543		520,100		(11,443	)
Eirles Two Ltd. Sec. Nts., Series 324, 3.653%, 4/30/12		4/17/07		4,103,577		3,685,900		(417,677	)
Eirles Two Ltd. Sec. Nts., Series 335, 2.103%, 4/30/12		9/17/07		6,230,062		5,993,190		(236,872	)
Embarcadero Aircraft Securitization Trust, Airplane Receivable Nts., Series 2000-A, Cl. B, 8/15/25		8/17/00		1,820,063		—		(1,820,063	)
Ford Credit Auto Lease Trust, Automobile Receivable Nts., Series 2010-B, Cl. A2, 0.75%, 10/15/12		10/21/10		619,988		620,001		13
Goldman Sachs Capital Markets LP, Colombia (Republic of) Credit Linked Nts., 10.476%, 2/8/37		1/18/07		5,278,228		1,954,768		(3,323,460	)
Hallertau SPC Credit Linked Nts., Series 2007-01, 2.51%, 12/20/17		12/13/07		6,250,000		5,625,000		(625,000	)
Hallertau SPC Credit Linked Nts., Series 2008-01, 9.888%, 8/2/10		4/18/08-10/1/08		7,188,001		863,711		(6,324,290	)
Hallertau SPC Credit Linked Nts., Series 2008-2A, 6.752%, 9/17/13		10/23/08		13,478,173		13,653,340		175,167
HSBK Europe BV, 9.25% Sr. Nts., 10/16/13		4/9/08-1/11/10		8,540,143		9,240,950		700,807
Ice 1 Em CLO Ltd./Ice 1 Em CLO Corp., Sr. Sec. Sub. Term Nts., Series 2007-1A, Cl. B, 2.294%, 8/15/22		11/6/07		6,952,926		4,879,400		(2,073,526	)
Ice 1 Em CLO Ltd./Ice 1 Em CLO Corp., Sr. Sec. Sub. Term Nts., Series 2007-1A, Cl. C, 3.594%, 8/15/22		6/8/07		5,270,000		2,951,200		(2,318,800	)
Ice 1 Em CLO Ltd./Ice 1 Em CLO Corp., Sr. Sec. Sub. Term Nts., Series 2007-1A, Cl. D, 5.594%, 8/15/22		6/8/07		5,270,000		2,740,400		(2,529,600	)
Interactive Data Corp., 10.25% Sr. Nts., 8/1/18		7/20/10		965,000		1,056,675		91,675
JPMorgan Chase & Co., Colombia (Republic of) Credit Linked Nts., 11%, 7/28/20		8/24/10		917,005		833,313		(83,692	)
JPMorgan Chase Commercial Mortgage Securities Corp., Commercial Mtg. Pass-Through Certificates, Series 2007-LDPX, Cl. A2S2, 5.187%, 1/1/49		7/14/10		1,372,625		1,404,178		31,553
JPMorgan Hipotecaria su Casita, 7.555% Sec. Nts., 8/26/35		3/21/07		526,714		458,574		(68,140	)
Lehman Brothers Treasury Co. BV, Microvest Capital Management LLC Credit Linked Nts., 7.55%, 5/24/12		6/20/07		2,067,984		1,246,813		(821,171	)
Merrill Lynch, Colombia (Republic of) Credit Linked Nts., 10%, 11/17/16		10/20/06		762,393		999,876		237,483
Morgan Stanley Capital Services, Inc., United Mexican States Credit Linked Nts., 5.64%, 11/20/15		11/3/05		2,000,000		1,803,200		(196,800	)
NC Finance Trust, Collateralized Mtg. Obligation Pass-Through Certificates, Series 1999-I, Cl. ECFD, 1/25/29		8/10/10		66,025		8,009		(58,016	)
Panama Canal Railway Co., 7% Sr. Sec. Nts., 11/1/26		10/29/07-2/28/08		1,399,291		1,290,313		(108,978	)
Peru (Republic of) Sr. Unsec. Nts., 7.84%, 8/12/20		11/10/10		2,674,159		2,652,722		(21,437	)
Real Time Data Co., 11% Nts., 5/31/09		6/30/99-5/31/01		110,538		—		(110,538	)

							Unrealized
	Acquisition						Appreciation
Security	Dates		Cost		Value		(Depreciation)
Salisbury International Investments Ltd., 4.439% Sec. Nts., Series 2006-003, Tranche E, 7/20/11		7/12/06	$	1,100,000	$	999,460	$	(100,540	)
Southern States Cooperative, Inc., 11.25% Sr. Nts., 5/15/15		9/22/10-9/23/10		2,700,941		2,705,100		4,159
Standard Bank Group Ltd., Ghana (Republic of) Credit Linked Bonds, 10.915%, 3/23/11		9/22/10		820,477		786,057		(34,420	)
Standard Charter Bank, Kenya (Republic of) Credit Linked Bonds, 14%, 3/9/11		9/23/10		514,654		492,636		(22,018	)
Tengizchevroil LLP, 6.124% Nts., 11/15/14		4/29/05-3/16/10		1,110,357		1,124,235		13,878
Tower Automotive Holdings USA LLC/TA Holdings Finance, Inc., 10.625% Sr. Sec. Nts., 9/1/17		8/13/10-12/31/10		5,487,635		6,056,640		569,005
UBS AG, Ghana (Republic of) Credit Linked Nts., 14.47%, 12/28/11		12/22/06		1,335,951		838,824		(497,127	)
Wallace Theater Holdings, Inc., 12.50% Sr. Sec. Nts., 6/15/13		9/30/10-10/6/10		2,267,713		2,280,175		12,462
Yapi ve Kredit Bankasi/Unicredit Luxembourg SA, 5.188% Sr. Unsec. Nts., 10/13/15		10/4/10		1,170,000		1,211,184		41,184
			$	159,352,415	$	133,147,001	$	(26,205,414	)

5.	Non-income producing security.
6.	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 $11,548,074 or 0.48% of the Fund’s net assets as of December 31, 2010.
7.	When-issued security or delayed delivery to be delivered and settled after December 31, 2010. See Note 1 of the accompanying Notes.
8.	The current amortization rate of the security’s cost basis exceeds the future interest payments currently estimated to be received. Both the amortization rate and interest payments are contingent on future mortgage pre-payment speeds and are therefore subject to change.
9.	All or a portion of the security position is held in collateral accounts to cover the Fund’s obligations under certain derivative contracts. The aggregate market value of such securities is $2,608,409 See Note 5 of the accompanying Notes.
10.	All or a portion of the security position is held in collateralized accounts to cover initial margin requirements on open futures contracts and written options on futures, if applicable. The aggregate market value of such securities is $10,692,420. See Note 5 of the accompanying Notes.
11.	Zero coupon bond reflects effective yield on the date of purchase.
12.	Interest rate is less than 0.0005%.
13.	Interest or dividend is paid-in-kind, when applicable.
14.	This Senior Loan will settle after December 31, 2010, at which time the interest rate will be determined.
15.	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.
16.	Denotes an inflation-indexed security: coupon and principal are indexed to a consumer price index.
17.	Denotes a step bond: a zero coupon bond that converts to a fixed or variable interest rate at a designated future date.
18.	Rate shown is the 7-day yield as of December 31, 2010.
19.	Is or was an affiliate, as defined in the Investment Company Act of 1940, at or during the period ended December 31, 2010, 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, 2009		Additions		Reductions		December 31, 2010
OFI Liquid Assets Fund, LLC		37,599,500		37,255,066		74,854,566		—
Oppenheimer Institutional Money Market Fund, Cl. E		76,771,099		2,814,490,231		2,807,824,941		83,436,389
Oppenheimer Master Event-Linked Bond Fund, LLC		1,404,749		—		300,831		1,103,918
Oppenheimer Master Loan Fund, LLC		33,609,439		19,048,496		23,191,126		29,466,809

						Realized
	Value		Income			Gain (Loss)
OFI Liquid Assets Fund, LLC	$	—	$	36,907	a	$	—
Oppenheimer Institutional Money Market Fund, Cl. E		83,436,389		298,773			—
Oppenheimer Master Event-Linked Bond Fund, LLC		12,419,505		1,165,940	b		(91,384	)b
Oppenheimer Master Loan Fund, LLC		341,533,974		33,499,603	c		11,177,915	c
	$	437,389,868	$	35,001,223		$	11,086,531

a.	Net of compensation to the securities lending agent and rebates paid to the borrowing counterparties.
b.	Represents the amount allocated to the Fund from Oppenheimer Master Event-Linked Bond Fund, LLC.
c.	Represents the amount allocated to the Fund from Oppenheimer Master Loan Fund, LLC.

20. The reference asset underlying the structured security is in default. See Note 1 of the accompanying Notes.

Valuation Inputs

Various data inputs are used in determining the value of each of the Fund’s investments as of the reporting period end. These data inputs are categorized in the following hierarchy under applicable financial accounting standards:

1) Level 1—unadjusted quoted prices in active markets for identical assets or liabilities (including securities actively traded on a securities exchange)

2) Level 2—inputs other than unadjusted quoted prices that are observable for the asset or liability (such as unadjusted quoted prices for similar assets and market corroborated inputs such as interest rates, prepayment speeds, credit risks, etc.) 3)

3) Level 3—significant unobservable inputs (including the Manager’s own judgments about assumptions that market participants would use in pricing the asset or liability).

The table below categorizes amounts that are included in the Fund’s Statement of Assets and Liabilities as of December 31, 2010 based on valuation input level:

							Level 3 –
	Level 1 –			Level 2 –			Significant
	Unadjusted			Other Significant			Unobservable
	Quoted Prices			Observable Inputs			Inputs		Value
Assets Table
Investments, at Value:
Asset-Backed Securities	$	—		$	25,207,452		$	10,800,935	$	36,008,387
Mortgage-Backed Obligations		—			356,158,118			1,581,294		357,739,412
U.S. Government Obligations		—			77,424,320			—		77,424,320
Foreign Government Obligations		—			555,733,839			—		555,733,839
Loan Participations		—			11,124,996			—		11,124,996
Corporate Bonds and Notes		—			714,302,091			1,744,997		716,047,088
Preferred Stocks		—			7,028,182			4,844,088		11,872,270
Common Stocks		13,410,229			6,649,094			4,360,342		24,419,665
Rights, Warrants and Certificates		—			534,375			423		534,798
Structured Securities		—			148,446,721			1,288,812		149,735,533
Event-Linked Bonds		—			42,956,788			—		42,956,788
Options Purchased		—			842,483			—		842,483
Investment Companies		439,828,579			—			—		439,828,579
Total Investments, at Value		453,238,808			1,946,408,459			24,620,891		2,424,268,158
Other Financial Instruments:
Appreciated swaps, at value		—			4,207,790			—		4,207,790
Depreciated swaps, at value		—			213,971			—		213,971
Futures margins		1,746,212			—			—		1,746,212
Foreign currency exchange contracts		—			4,596,926			—		4,596,926
Total Assets	$	454,985,020		$	1,955,427,146		$	24,620,891	$	2,435,033,057
Liabilities Table
Other Financial Instruments:
Appreciated swaps, at value	$	—		$	(656,155	)	$	—	$	(656,155	)
Depreciated swaps, at value		—			(8,160,199	)		—		(8,160,199	)
Futures margins		(609,835	)		—			—		(609,835	)
Foreign currency exchange contracts		—			(13,070,372	)		—		(13,070,372	)
Total Liabilities	$	(609,835	)	$	(21,886,726	)	$	—	$	(22,496,561	)

Currency contracts and forwards, if any, are reported at their unrealized appreciation/depreciation at measurement date, which represents the change in the contract’s value from trade date. Futures, if any, are reported at their variation margin at measurement date, which represents the amount due to/from the Fund at that date. All additional assets and liabilities included in the above table are reported at their market value at measurement date.

See the accompanying Notes for further discussion of the methods used in determining value of the Fund’s investments, and a summary of changes to the valuation methodologies, if any, during the reporting period.

The table below shows the significant transfers between Level 2 and Level 3. The Fund’s policy is to recognize transfers in and transfers out as of the beginning of the reporting period.

	Transfers out of			Transfers into
	Level 2*			Level 3*
Assets Table
Investments, at Value:
Common Stocks
Consumer Discretionary	$	(16	)	$	16
Financials		(1,726,595	)		1,726,595
Asset-Backed Securities		(9,465,000	)		9,465,000
Mortgage-Backed Obligations		(1,581,294	)		1,581,294
Corporate Bonds and Notes		(902,993	)		902,993
Structured Securities		(32,500	)		32,500
Total Assets	$	(13,708,398	)	$	13,708,398

* Transferred from Level 2 to Level 3 because of the lack of observable market data due to a decrease in market activity for these securities.

The following is a reconciliation of assets in which significant unobservable inputs (level 3) were used in determining fair value:

						Change in			Accretion/
						Unrealized			(Amortization)			Net			Transfers in			Value as of
	Value as of		Realized			Appreciation/			of Premium/			Purchases			and/or out			December 31,
	December 31, 2009		Gain (Loss)			Depreciation			Discount1			(Sales)			of Level 3			2010
Assets Table
Investments, at Value:
Asset-Backed Securities	$	1,445,549	$	—		$	1,201,850		$	6,973		$	(1,318,437	)	$	9,465,000		$	10,800,935
Mortgage-Backed Obligations		—		—			45,749			41,375			(712,696	)		2,206,866			1,581,294
Foreign Government Obligations		290,296		—			—			—			—			(290,296	)		—
Corporate Bonds and Notes		—		(3,162,655	)		3,262,017			—			731,723			913,912			1,744,997
Preferred Stocks		—		—			284,088			—			4,560,000			—			4,844,088
Common Stocks		2,168		1,168			(3,885,767	)		—			6,516,162			1,726,611			4,360,342
Rights, Warrants and Certificates		3		—			420			—			—			—			423
Structured Securities		7,574,561		(1,894,128	)		851,452			(90,646	)		(5,475,222	)		322,795			1,288,812
Total Assets	$	9,312,577	$	(5,055,615	)	$	1,759,809		$	(42,298	)	$	4,301,530		$	14,344,888		$	24,620,891

1. Included in net investment income.

Distribution of investments representing geographic holdings, as a percentage of total investments at value, is as follows:

Geographic Holdings	Value		Percent
United States	$	1,437,863,268		59.3	%
Brazil		120,230,627		5.0
Mexico		72,780,616		3.0
Japan		72,313,927		3.0
Russia		68,443,986		2.8
Turkey		57,737,556		2.4
South Africa		52,509,644		2.2
Indonesia		52,195,131		2.1
Colombia		34,599,381		1.4
Poland		33,518,479		1.4
Supranational		33,410,175		1.4
Korea, Republic of South		28,783,657		1.2
Argentina		27,990,976		1.1
Peru		25,270,331		1.0
Israel		23,365,908		1.0
Ukraine		22,725,255		0.9
Venezuela		22,128,851		0.9
Canada		21,256,301		0.9
India		19,536,588		0.8
Egypt		18,804,838		0.8
Kazakhstan		18,357,110		0.8
Philippines		15,949,104		0.7
United Kingdom		13,064,624		0.5
Italy		11,747,006		0.5
The Netherlands		11,362,646		0.5
Germany		11,043,189		0.5
Uruguay		9,323,001		0.4
Greece		8,753,270		0.4
Panama		8,027,826		0.3
Ghana		6,204,145		0.3
Australia		6,123,830		0.2
Dominican Republic		5,739,682		0.2
New Zealand		4,885,052		0.2
Spain		4,345,515		0.2
Hungary		4,303,643		0.2
Ireland		3,964,995		0.2
Malaysia		3,573,619		0.1
France		3,391,757		0.1
Bermuda		3,016,725		0.1
Trinidad & Tobago		2,867,900		0.1
Belgium		2,828,655		0.1
Cayman Islands		2,630,400		0.1
Chile		2,529,479		0.1
Costa Rica		1,968,017		0.1
Austria		1,839,440		0.1
Qatar		1,690,700		0.1
United Arab Emirates		1,554,205		0.1
Luxembourg		1,533,188		0.1
Sri Lanka		1,354,938		0.1
Denmark		961,735		—
European Union		809,693		—

Geographic Holdings Continued	Value		Percent
Marshall Islands	$	755,213		—	%
Belize		734,550		—
Sweden		709,807		—
Finland		576,642		—
Norway		281,362		—
Total	$	2,424,268,158		100.0	%

Foreign Currency Exchange Contracts as of December 31, 2010 are as follows:

		Contract
Counterparty/		Amount		Expiration				Unrealized		Unrealized
Contract Description	Buy/Sell	(000's)		Dates		Value		Appreciation		Depreciation
Banc of America:
Argentine Peso (ARP)	Buy	24,885	ARP		1/18/11-3/29/11	$	6,213,506	$	57,953	$	—
Chinese Renminbi (Yuan) (CNY)	Buy	49,300	CNY		6/7/11		7,489,117		186,615		2,035
Euro (EUR)	Sell	6,205	EUR		4/6/11		8,288,880		201,980		—
Indian Rupee (INR)	Buy	213,500	INR		1/13/11		4,763,295		4,044		—
Indonesia Rupiah (IDR)	Buy	4,439,000	IDR		1/10/11		491,894		11		1,163
Malaysian Ringgit (MYR)	Buy	24,210	MYR		2/18/11		7,825,923		164,046		—
Philippines Peso (PHP)	Sell	207,000	PHP		1/13/11		4,725,650		—		44,510
South Korean Won (KRW)	Buy	4,514,000	KRW		1/24/11		3,971,706		—		10,825
South Korean Won (KRW)	Sell	8,450,000	KRW		1/24/11		7,434,851		—		121,999
Swedish Krona (SEK)	Buy	7,500	SEK		2/22/11		1,113,091		20,688		—
									635,337		180,532
Bank Paribas Asia—FGN
Swedish Krona (SEK)	Buy	130,565	SEK		2/9/11		19,386,336		—		396,765
Barclay’s Capital:
Australian Dollar (AUD)	Buy	3,300	AUD		2/4/11		3,359,514		18,825		—
British Pound Sterling (GBP)	Sell	710	GBP		2/22/11		1,106,496		2,481		—
Colombian Peso (COP)	Buy	1,906,000	COP		7/5/11		999,474		—		6,331
Euro (EUR)	Buy	1,650	EUR		2/22/11		2,204,566		24,421		—
Hong Kong Dollar (HKD)	Buy	36,300	HKD		1/3/11		4,670,270		6,618		—
Hong Kong Dollar (HKD)	Sell	36,300	HKD		2/28/11		4,672,444		—		6,634
Hungarian Forint (HUF)	Buy	795,000	HUF		2/10/11		3,804,889		—		182,072
Japanese Yen (JPY)	Sell	294,000	JPY		1/7/11		3,621,435		—		130,988
Norwegian Krone (NOK)	Buy	6,900	NOK		2/22/11		1,179,427		29,789		—
South African Rand (ZAR)	Buy	272,300	ZAR		2/9/11		41,091,691		1,452,996		—
									1,535,130		326,025
Citigroup:
Chilean Peso (CLP)	Buy	1,474,000	CLP		2/3/11-2/4/11		3,140,691		—		9,902
Chilean Peso (CLP)	Sell	242,000	CLP		1/7/11-1/14/11		516,784		281		228
Colombian Peso (COP)	Buy	1,270,000	COP		7/5/11		665,966		—		7,774
Euro (EUR)	Sell	21,860	EUR		1/7/11-5/10/11		29,207,099		12,535		496,557
Swiss Franc (CHF)	Sell	4,680	CHF		1/14/11		5,006,322		—		318,447
									12,816		832,908
Citigroup EM:
Chilean Peso (CLP)	Buy	248,000	CLP		1/14/11		529,308		8,300		—
Colombian Peso (COP)	Sell	9,047,000	COP		2/18/11		4,756,668		27,929		—
Indian Rupee (INR)	Buy	334,700	INR		3/3/11		7,401,392		53,423		—
Indonesia Rupiah (IDR)	Buy	26,941,000	IDR		2/18/11		2,967,740		—		13,119
Mexican Nuevo Peso (MXN)	Buy	135,490	MXN		1/18/11		10,957,419		—		62,263
									89,652		75,382

Counterparty/		Amount		Expiration				Unrealized		Unrealized
Contract Description	Buy/Sell	(000's)		Dates		Value		Appreciation		Depreciation
Credit Suisse:
British Pound Sterling (GBP)	Buy	1,400	GBP		3/22/11	$	2,181,324	$	—	$	3,558
Chilean Peso (CLP)	Sell	822,000	CLP		1/6/11		1,755,549		—		16,786
Euro (EUR)	Sell	7,725	EUR		2/10/11		10,321,928		373,671		—
Hungarian Forint (HUF)	Buy	924,000	HUF		2/10/11		4,422,286		14,241		189,417
Japanese Yen (JPY)	Sell	424,000	JPY		1/12/11		5,223,058		—		66,695
New Turkish Lira (TRY)	Buy	64,385	TRY		2/9/11-2/10/11		41,500,542		—		3,517,940
Polish Zloty (PLZ)	Buy	1,900	PLZ		2/2/11		640,428		—		16,852
South African Rand (ZAR)	Buy	6,760	ZAR		1/7/11		1,025,084		45,307		—
Swedish Krona (SEK)	Buy	11,200	SEK		2/22/11		1,662,216		30,251		—
Swedish Krona (SEK)	Sell	10,100	SEK		2/22/11		1,498,963		—		27,280
Swiss Franc (CHF)	Buy	2,070	CHF		2/22/11		2,215,391		60,827		—
Swiss Franc (CHF)	Sell	3,450	CHF		2/22/11		3,692,318		—		135,618
									524,297		3,974,146
Credit Suisse EM:
Chilean Peso (CLP)	Buy	822,000	CLP		1/6/11		1,755,549		64,365		—
Egyptian Pounds (EGP)	Buy	26,900	EGP		1/10/11		4,622,998		9,487		—
									73,852		—
Deutsche Bank Capital Corp.:
Australian Dollar (AUD)	Sell	611	AUD		1/7/11		624,336		—		39,853
British Pound Sterling (GBP)	Sell	1,520	GBP		1/7/11		2,369,687		—		3,807
Canadian Dollar (CAD)	Buy	1,420	CAD		2/22/11		1,426,593		16,884		—
Canadian Dollar (CAD)	Sell	6,020	CAD		1/7/11-2/22/11		6,050,305		—		119,576
Kazakhstan Tenge (KZT)	Buy	186,200	KZT		2/28/11		1,265,856		—		5,134
Swiss Franc (CHF)	Sell	587	CHF		1/7/11		627,869		—		42,128
									16,884		210,498
Deutsche Bank EM:
Kazakhstan Tenge (KZT)	Sell	186,200	KZT		2/28/11		1,265,856		—		11,984
Russian Ruble (RUR)	Sell	5,140	RUR		1/12/11		168,095		3,238		—
									3,238		11,984
Goldman Sachs EM:
Brazilian Real (BRR)	Buy	9,190	BRR		2/2/11		5,493,407		77,969		—
Brazilian Real (BRR)	Sell	27,615	BRR		2/2/11		16,507,120		—		149,758
Mexican Nuevo Peso (MXN)	Buy	154,990	MXN		2/16/11		12,507,742		11,026		46,944
Mexican Nuevo Peso (MXN)	Sell	41,400	MXN		2/2/11		3,344,612		—		136,304
South African Rand (ZAR)	Buy	14,640	zAR		2/1/11		2,211,585		8,325		—
									97,320		333,006
HSBC EM:
Brazilian Real (BRR)	Sell	10,650	BRR		2/2/11		6,366,136		—		6,028
Israeli Shekel (ILS)	Sell	23,900	ILS		1/31/11		6,731,952		—		180,417
									—		186,445
JP Morgan Chase:
Chilean Peso (CLP)	Buy	230,000	CLP		1/7/11		491,172		14,241		—
Euro (EUR)	Buy	28,135	EUR		2/9/11		37,593,366		—		2,016,494
Euro (EUR)	Sell	6,870	EUR		2/10/11		9,179,501		326,714		—
Malaysian Ringgit (MYR)	Buy	5,070	MYR		2/10/11-2/18/11		1,638,887		53		3,213
Mexican Nuevo Peso (MXN)	Buy	34,800	MXN		2/22/11		2,807,067		25,293		—
New Taiwan Dollar (TWD)	Sell	150,000	TWD		1/12/11		5,146,558		—		154,047
Norwegian Krone (NOK)	Buy	114,030	NOK		2/9/11		19,503,430		—		216,415

		Contract
Counterparty/		Amount		Expiration				Unrealized		Unrealized
Contract Description	Buy/Sell	(000’s)		Dates		Value		Appreciation		Depreciation
JP Morgan Chase: Continued
Norwegian Krone (NOK)	Sell	6,900	NOK		2/22/11	$	1,179,427	$	—	$	29,225
Philippines Peso (PHP)	Buy	73,000	PHP		1/4/11		1,666,362		7,648		—
Singapore Dollar (SGD)	Buy	560	SGD		5/10/11		436,371		1,538		—
									375,487		2,419,394
JP Morgan EM:
Argentine Peso (ARP)	Buy	6,735	ARP		3/29/11		1,662,120		37,271		—
Chinese Renminbi (Yuan) (CNY)	Buy	51,890	CNY		6/7/11-6/20/11		7,882,693		217,015		—
Indonesia Rupiah (IDR)	Buy	54,365,000	IDR		1/13/11		6,021,467		6,975		—
Malaysian Ringgit (MYR)	Buy	25,260	MYR		2/18/11		8,165,337		136,859		—
Malaysian Ringgit (MYR)	Sell	1,350	MYR		2/10/11		436,578		669		—
Philippines Peso (PHP)	Buy	361,000	PHP		3/4/11		8,239,940		59,564		—
Philippines Peso (PHP)	Sell	73,000	PHP		1/4/11		1,666,362		—		15,152
									458,353		15,152
Morgan Stanley & Co., Inc.
Kazakhstan Tenge (KZT)	Buy	186,000	KZT		2/28/11		1,264,496		—		6,430
Morgan Stanley EM:
Indian Rupee (INR)	Buy	334,700	INR		2/1/11		7,441,346		17,591		—
Kazakhstan Tenge (KZT)	Sell	186,000	KZT		2/28/11		1,264,496		—		4,760
									17,591		4,760
Nomura Securities:
Japanese Yen (JPY)	Buy	986,000	JPY		3/22/11		12,154,886		72,516		—
Japanese Yen (JPY)	Sell	146,000	JPY		2/22/11		1,799,264		—		63,425
New Zealand Dollar (NZD)	Buy	1,190	NZD		2/22/11		923,304		50,429		—
New Zealand Dollar (NZD)	Sell	2,140	NZD		2/22/11		1,660,396		—		90,706
Norwegian Krone (NOK)	Buy	113,920	NOK		2/9/11		19,484,616		—		245,379
Polish Zloty (PLZ)	Buy	109,800	PLZ		2/9/11		36,994,345		—		2,384,770
Polish Zloty (PLZ)	Sell	9,080	PLZ		2/2/11		3,060,571		—		11,698
South African Rand (ZAR)	Buy	11,140	ZAR		2/1/11		1,682,859		6,942		—
									129,887		2,795,978
RBS Greenwich Capital:
Euro (EUR)	Sell	610	EUR		2/17/11		815,039		15,781		—
Swedish Krona (SEK)	Buy	130,565	SEK		2/9/11		19,386,336		—		390,696
Swiss Franc (CHF)	Buy	595	CHF		5/10/11		637,477		19,616		—
									35,397		390,696
Standard NY EM
South African Rand (ZAR)	Sell	31,290	ZAR		2/1/11		4,726,810		—		349,502
State Street:
Australian Dollar (AUD)	Buy	5,110	AUD		2/22/11		5,191,188		197,747		—
Australian Dollar (AUD)	Sell	1,630	AUD		2/22/11		1,655,897		—		63,078
British Pound Sterling (GBP)	Sell	700	GBP		2/22/11		1,090,912		294		2,679
Hong Kong Dollar (HKD)	Sell	36,300	HKD		1/3/11		4,670,270		14,266		—
Polish Zloty (PLZ)	Buy	22,045	PLZ		2/2/11		7,430,647		—		252,947
South African Rand (ZAR)	Buy	33,300	ZAR		2/1/11		5,030,449		379,378		—
South African Rand (ZAR)	Sell	21,300	ZAR		2/1/11		3,217,675		—		242,065
									591,685		560,769
Total unrealized appreciation and depreciation								$	4,596,926	$	13,070,372

Futures Contracts as of December 31, 2010 are as follows:

								Unrealized
		Number of		Expiration				Appreciation
Contract Description	Buy/Sell	Contracts		Date		Value		(Depreciation)
DAX Index	Buy		20		3/18/11	$	4,628,306	$	(48,874	)
Euro-Bundesobligation	Buy		68		3/8/11		11,386,795		(67,146	)
Japan (Government of) Bonds, 10 yr.	Buy		3		3/10/11		5,195,591		17,242
Japan (Government of) E-Mini Bonds, 10 yr.	Sell		35		3/9/11		6,061,522		(1,076	)
NASDAQ 100 E-Mini Index	Buy		213		3/18/11		9,440,160		6,965
New Financial Times Stock Exchange 100 Index	Buy		9		3/18/11		826,894		9,228
New Financial Times Stock Exchange 100 Index	Sell		72		3/18/11		6,615,154		(73,880	)
NIKKEI 225 Index	Buy		13		3/10/11		817,404		(4,768	)
NIKKEI 225 Index	Sell		64		3/10/11		8,048,282		(1,962	)
Standard & Poor’s 500 E-Mini	Sell		520		3/18/11		32,578,000		(421,876	)
U.S. Treasury Long Bonds, 20 yr.	Buy		416		3/22/11		50,804,000		(1,309,384	)
U.S. Treasury Long Bonds, 20 yr.	Sell		312		3/22/11		38,103,000		976,754
U.S. Treasury Nts., 2 yr.	Buy		6		3/31/11		1,313,438		1,106
U.S. Treasury Nts., 2 yr.	Sell		529		3/31/11		115,801,406		169,758
U.S. Treasury Nts., 5 yr.	Buy		196		3/31/11		23,072,875		(293,804	)
U.S. Treasury Nts., 5 yr.	Sell		30		3/31/11		3,531,563		61,111
U.S. Treasury Nts., 10 yr.	Buy		2,303		3/22/11		277,367,563		(7,532,469	)
U.S. Treasury Nts., 10 yr.	Sell		91		3/22/11		10,959,813		134,290
U.S. Ultra Bonds	Buy		35		3/22/11		4,448,281		112,718
United Kingdom Long Gilt	Buy		7		3/29/11		1,304,069		1,180
								$	(8,264,887	)

Credit Default Swap Contracts as of December 31, 2010 are as follows:

				Pay/					Upfront
	Buy/Sell	Notional		Receive					Payment						Unrealized
Reference Entity/	Credit	Amount		Fixed			Termination		Received/						Appreciation
Swap Counterparty	Protection	(000's)		Rate			Date		(Paid)			Value			(Depreciation)
American General Finance
JPMorgan Chase Bank NA, NY Branch	Sell	$	4,670		1.00	%		12/20/15	$	296,045		$	(256,722	)	$	39,323
	Total		4,670							296,045			(256,722	)		39,323
Bolivarian Republic of Venezuela
Credit Suisse International	Buy		850		5.00			9/20/15		(222,771	)		168,728			(54,043	)
	Total		850							(222,771	)		168,728			(54,043	)
Campbell Soup Co.
Credit Suisse International	Buy		4,670		1.00			12/20/15		136,545			(125,893	)		10,652
	Total		4,670							136,545			(125,893	)		10,652
Caterpillar, Inc.
Morgan Stanley Capital Services, Inc.	Sell		4,670		1.00			12/20/15		(56,045	)		45,243			(10,802	)
	Total		4,670							(56,045	)		45,243			(10,802	)
Cisco Systems, Inc.
Barclays Bank plc	Buy		4,730		1.00			12/20/15		112,601			(113,730	)		(1,129	)
	Total		4,730							112,601			(113,730	)		(1,129	)
Development Bank of Kazakhstan JSC
Credit Suisse International	Sell		4,440		3.75			2/20/13		—			184,535			184,535
	Total		4,440							—			184,535			184,535
Fortune Brands, Inc.
Credit Suisse International	Sell		4,670		1.00			12/20/15		186,630			(187,055	)		(425	)
	Total		4,670							186,630			(187,055	)		(425	)

				Pay/					Upfront
	Buy/Sell	Notional		Receive					Payment						Unrealized
Reference Entity/	Credit	Amount		Fixed			Termination		Received/						Appreciation
Swap Counterparty	Protection	(000's)		Rate			Date		(Paid)			Value			(Depreciation)
Istanbul Bond Co. SA for Finansbank AS
Morgan Stanley & Co. International Ltd.	Sell	$	3,100		1.30	%		3/24/13	$	—		$	(192,617	)	$	(192,617	)
	Total		3,100							—			(192,617	)		(192,617	)
Lockheed Martin Corp.
Credit Suisse International	Buy		4,730		1.00			12/20/15		155,246			(150,630	)		4,616
	Total		4,730							155,246			(150,630	)		4,616
Markit CDX Emerging Market Index, Series 14:
Barclays Bank plc	Buy		9,200		5.00			12/20/15		1,201,878			(1,324,291	)		(122,413	)
Goldman Sachs International	Buy		6,200		5.00			12/20/15		825,461			(892,457	)		(66,996	)
Merrill Lynch International	Buy		7,600		5.00			12/20/15		1,011,856			(1,093,979	)		(82,123	)
	Total		23,000							3,039,195			(3,310,727	)		(271,532	)
McKesson Corp.
Morgan Stanley Capital Services, Inc.	Buy		4,670		1.00			12/20/15		120,354			(125,745	)		(5,391	)
	Total		4,670							120,354			(125,745	)		(5,391	)
Morgan Stanley
Credit Suisse International	Buy		16,500		1.00			9/20/11		7,792			137,049			144,841
	Total		16,500							7,792			137,049			144,841
Raytheon Co.
Citibank NA, New York	Buy		4,730		1.00			12/20/15		123,354			(122,910	)		444
	Total		4,730							123,354			(122,910	)		444
Republic of Peru:
Barclays Bank plc	Buy		3,270		1.76			12/20/14		—			(73,381	)		(73,381	)
Citibank NA, New York	Buy		10,000		1.00			9/20/15		11,275			41,070			52,345
Deutsche Bank AG	Buy		1,900		1.71			12/20/16		—			(63,879	)		(63,879	)
JPMorgan Chase Bank NA, London Branch	Buy		4,900		1.74			12/20/14		—			(106,228	)		(106,228	)
Citibank NA, New York	Sell		1,570		5.10			3/20/13		—			(36,847	)		(36,847	)
	Total		21,640							11,275			(239,265	)		(227,990	)
SLM Corp.:
Citibank NA, New York	Sell		3,720		5.00			12/20/15		(35,247	)		207,929			172,682
UBS AG	Sell		1,010		5.00			12/20/15		(9,570	)		56,454			46,884
	Total		4,730							(44,817	)		264,383			219,566
Xerox Corp.
Citibank NA, New York	Sell		4,670		1.00			12/20/15		58,192			(58,681	)		(489	)
	Total		4,670							58,192			(58,681	)		(489	)
				Grand Total Buys						3,483,591			(3,846,276	)		(362,685	)
				Grand Total Sells						440,005			(237,761	)		202,244
		Total Credit Default Swaps							$	3,923,596		$	(4,084,037	)	$	(160,441	)

The table that follows shows the undiscounted maximum potential payment by the Fund related to selling credit protection in credit default swaps:

Type of Reference	Total Maximum Potential				Reference Asset
Asset on which the	Payments for Selling Credit				Rating Range**
Fund Sold Protection	Protection (Undiscounted)		Amount Recoverable*		(unaudited)
Investment Grade Single Name Corporate Debt	$	23,410,000	$	—	A to BBB-
Investment Grade Sovereign Debt		7,540,000		—	BBB to BBB-
Non-Investment Grade Sovereign Debt		1,570,000		—		B-
Total	$	32,520,000	$	—

*	The Fund has no amounts recoverable from related purchased protection. In addition, the Fund has no recourse provisions under the credit derivatives and holds no collateral which can offset or reduce potential payments under a triggering event.
**	The period end reference asset security ratings, as rated by any rating organization, are included in the equivalent Standard & Poor’s rating category. The reference asset rating represents the likelihood of a potential credit event on the reference asset which would result in a related payment by the Fund.

Interest Rate Swap Contracts as of December 31, 2010 are as follows:

	Notional
Interest Rate/	Amount		Paid by			Received by			Termination
Swap Counterparty	(000's)		the Fund			the Fund			Date		Value
BZDI:
Banco Santander SA, Inc.	9,870	BRR	BZDI				12.320	%		1/2/17	$	107,315
Goldman Sachs Group, Inc. (The)	10,600	BRR	BZDI				11.390			1/5/15		(95,659	)
Goldman Sachs Group, Inc. (The)	5,190	BRR	BZDI				12.800			1/2/17		163,191
Goldman Sachs Group, Inc. (The)	9,900	BRR	BZDI				11.420			1/3/14		(76,668	)
JPMorgan Chase Bank NA	15,800	BRR	BZDI				13.900			1/2/17		880,146
Total	51,360	BRR										978,325
MXN TIIE BANXICO:
Bank of America Merrill Lynch	87,500	MXN	MXN TIIE BANXICO				5.875			12/6/12		(8,675	)
Bank of America Merrill Lynch	220,000	MXN	MXN TIIE BANXICO				5.735			11/29/12		(32,311	)
Bank of America Merrill Lynch	134,500	MXN	MXN TIIE BANXICO				5.750			12/5/12		(17,628	)
Goldman Sachs Group, Inc. (The)	216,900	MXN	MXN TIIE BANXICO				5.880			12/14/12		(18,500	)
Total	658,900	MXN										(77,114	)
Six-Month AUD BBR BBSW
						Six-Month
Westpac Banking Corp.	12,810	AUD		5.660	%	AUD BBR BBSW				8/6/20		338,077
Six-Month CZK PRIBOR PRBO:
						Six-Month CZK
Barclays Bank plc	183,000	CZK		3.200		PRIBOR PRBO				12/21/15		(13,999	)
						Six-Month CZK
Morgan Stanley	173,300	CZK		3.060		PRIBOR PRBO				12/16/15		9,579
Total	356,300	CZK										(4,420	)
Six-Month EUR EURIBOR:
			Six-Month EUR
Barclays Bank plc	7,120	EUR	EURIBOR				3.580			12/21/15		22,312
			Six-Month EUR
Morgan Stanley	6,910	EUR	EURIBOR				3.410			12/16/15		(5,640	)
Total	14,030	EUR										16,672
Six-Month GBP BBA LIBOR
			Six-Month GBP
Barclays Bank plc	7,360	GBP	BBA LIBOR				3.328			8/3/20		(50,934	)

	Notional
Interest Rate/	Amount			Paid by			Received by			Termination
Swap Counterparty	(000’s)			the Fund			the Fund			Date	Value
Six-Month JPY BBA LIBOR:
Citibank NA		553,000	JPY		1.391	%	Six-Month JPY BBA LIBOR			10/6/19	$	(132,950	)
JPMorgan Chase Bank NA		290,000	JPY		1.077		Six-Month JPY BBA LIBOR			8/7/20		50,778
JPMorgan Chase Bank NA		168,000	JPY		1.563		Six-Month JPY BBA LIBOR			11/9/19		(69,827	)
Total		1,011,000	JPY									(151,999	)
Three-Month USD BBA LIBOR
				Three-Month USD
Barclays Bank plc		11,800		BBA LIBOR				2.500	%	9/2/20		(698,620	)
							Total Interest Rate Swaps				$	349,987

Notional amount is reported in U.S. Dollars (USD), except for those denoted in the following currencies:
AUD	Australian Dollar
BRR	Brazilian Real
CZK	Czech Koruna
EUR	Euro
GBP	British Pound Sterling
JPY	Japanese Yen
MXN	Mexican Nuevo Peso
Abbreviations/Definitions are as follows:
BANIXCO	Banco de Mexico
BBA LIBOR	British Bankers’ Association London-Interbank Offered Rate
BBR BBSW	Bank Bill Swap Reference Rate (Australian Financial Market)
BZDI	Brazil Interbank Deposit Rate
EURIBOR	Euro Interbank Offered Rate
PRIBOR PRBO	Prague Interbank Offering Rate
TIIE	Interbank Equilibrium Interest Rate

Total Return Swap Contracts as of December 31, 2010 are as follows:

	Notional
Reference Entity/	Amount		Paid by	Received by	Termination
Swap Counterparty	(000’s)		the Fund	the Fund	Date	Value
Consumer Staples Select Sector Index:
Morgan Stanley	$	1,846	One-Month USD BBA LIBOR plus 15 basis points and if negative, the absolute value of the Total Return of the Consumer Staples Select Sector Index	If positive, the Total Return of the Consumer Staples Select Sector Index	3/9/11	$	52,661
Morgan Stanley		1	One-Month USD BBA LIBOR plus 15 basis points and if negative, the absolute value of the Total Return of the Consumer Staples Select Sector Index	If positive, the Total Return of the Consumer Staples Select Sector Index	9/14/11		23
				Reference Entity Total			52,684

	Notional
Reference Entity/	Amount			Paid by	Received by	Termination
Swap Counterparty	(000’s)			the Fund	the Fund	Date	Value
Custom Basket of Securities:
Citibank NA		1,892	CHF	One-Month CHF BBA LIBOR plus 30 basis points and if negative, the absolute value of the Total Return of a custom basket of securities	If positive, the Total Return of a custom basket of securities	1/12/11	$	5,268
Citibank NA		3,165	EUR	One-Month EURIBOR plus 30 basis points and if negative, the absolute value of the Total Return of a custom basket of securities	If positive, the Total Return of a custom basket of securities	1/12/11		59,948
Citibank NA		1,584	GBP	One-Month GBP BBA LIBOR plus 30 basis points and if negative, the absolute value of the Total Return of a custom basket of securities	If positive, the Total Return of a custom basket of securities	1/12/11		98,892
Citibank NA		5,259	SEK	One-Month SEK STIBOR SIDE plus 30 basis points and if negative, the absolute value of the Total Return of a custom basket of securities	If positive, the Total Return of a custom basket of securities	1/12/11		8,653
Citibank NA, New York		1,122,840	JPY	One-Month JPY BBA LIBOR plus 53 basis points and if negative, the absolute value of the Total Return of a custom basket of securities	If positive, the Total Return of a custom basket of securities	4/14/11		269,894
Goldman Sachs Group, Inc. (The)		23,340		One-Month USD BBA LIBOR plus 18 basis points and if negative, the absolute value of the Total Return of a custom basket of securities	If positive, the Total Return of a custom basket of securities	9/9/11		238,401
Morgan Stanley		4,577	GBP	One-Month GBP BBA LIBOR plus 50 basis points and if negative, the absolute value of the Total Return of a custom basket of securities	If positive, the Total Return of a custom basket of securities	1/14/11		265,117
					Reference Entity Total			946,173

	Notional
Reference Entity/	Amount		Paid by	Received by	Termination
Swap Counterparty	(000’s)		the Fund	the Fund	Date	Value
Energy Select Sector Index
Morgan Stanley	$	1,671	One-Month USD BBA LIBOR plus 10 basis points and if negative, the absolute value of the Total Return of the Energy Select Sector Index	If positive, the Total Return of the Energy Select Sector Index	10/13/11	$	88,131
Health Care Select Sector Index
UBS AG		1,965	One-Month USD BBA LIBOR plus 8 basis points and if negative, the absolute value of the Total Return of the Health Care Select Sector Index	If positive, the Total Return of the Health Care Select Sector Index	11/4/11		46,623
MSCI Daily TR Gross EAFE USD Index:
Citibank NA		791	If positive, the Total Return of the MSCI Daily Gross EAFE USD Index	One-Month USD BBA LIBOR plus 15 basis points and if negative, the absolute value of the Total Return of the MSCI Daily Gross EAFE USD Index	10/7/11		(63,220	)
Goldman Sachs Group, Inc. (The)		120	If positive, the Total Return of the MSCI Daily Gross EAFE USD Index	One-Month USD LIBOR minus 5 basis points and if negative, the absolute value of the Total Return of the MSCI Daily Gross EAFE USD Index	7/8/11		(4,883	)
Goldman Sachs Group, Inc. (The)		1,655	If positive, the Total Return of the MSCI Daily Gross EAFE USD Index	One-Month USD BBA LIBOR plus 10 basis points and if negative, the absolute value of the Total Return of the MSCI Daily Gross EAFE USD Index	5/11/11		(50,163	)
Goldman Sachs Group, Inc. (The)		563	If positive, the Total Return of the MSCI Daily Gross EAFE USD Index	One-Month USD LIBOR minus 5 basis points and if negative, the absolute value of the Total Return of the MSCI Daily Gross EAFE USD Index	7/8/11		(25,164	)

	Notional
Reference Entity/	Amount			Paid by	Received by	Termination
Swap Counterparty	(000’s)			the Fund	the Fund	Date	Value
MSCI Daily TR Gross EAFE USD Index: Continued
UBS AG		6,935		If positive, the Total Return of the MSCI Daily Gross EAFE USD Index	One-Month USD BBA LIBOR minus 10 basis points and if negative, the absolute value of the Total Return of the MSCI Daily Gross EAFE USD Index	10/7/11	$	(441,086	)
					Reference Entity Total			(584,516	)
MSCI Daily TR Gross Europe Euro Index:
Citibank NA		1,881	EUR	If positive, the Total Return of the MSCI Daily Gross Europe Euro Index	One-Month EURIBOR minus 60 basis points and if negative, the absolute value of the Total Return of the MSCI Daily Gross Europe Euro Index	1/12/11		(17,868	)
Goldman Sachs Group, Inc. (The)		358	EUR	If positive, the Total Return of the MSCI Daily Gross Europe Euro Index	One-Month Europe EURIBOR minus 3 basis points and if negative, the absolute value of the Total Return of the MSCI Daily Gross Europe Euro Index	1/17/11		(1,971	)
Morgan Stanley		3,840	EUR	If positive, the Total Return of the MSCI Daily Gross Europe Euro Index	One-Month EURIBOR minus 30 basis points and if negative, the absolute value of the Total Return of the MSCI Daily Gross Europe Euro Index	1/12/11		(71,763	)
					Reference Entity Total			(91,602	)
MSCI Daily TR Italy USD Index:
Goldman Sachs Group, Inc. (The)	$	315		One-Month USD BBA LIBOR minus 25 basis points and if negative, the absolute value of the Total Return of the MSCI Daily Italy USD Index	If positive, the Total Return of the MSCI Daily Italy USD Index	3/4/11		18,845
Goldman Sachs Group, Inc. (The)		1,724		One-Month USD BBA LIBOR minus 25 basis points and if negative, the absolute value of the Total Return of the MSCI Daily Italy USD Index	If positive, the Total Return of the MSCI Daily Italy USD Index	3/4/11		95,818

	Notional
Reference Entity/	Amount			Paid by	Received by	Termination
Swap Counterparty	(000’s)			the Fund	the Fund	Date	Value
MSCI Daily TR Italy USD Index: Continued
Goldman Sachs Group, Inc. (The)	$	475		One-Month USD BBA LIBOR minus 25 basis points and if negative, the absolute value of the Total Return of the MSCI Daily Italy USD Index	If positive, the Total Return of the MSCI Daily Italy USD Index	3/4/11	$	28,834
					Reference Entity Total			143,497
MSCI Daily TR Net Emerging Markets Korea Price Return Index
UBS AG		2,177		One-Month USD BBA LIBOR plus 30 basis points and if negative, the absolute value of the Total Return of the MSCI Daily Net Emerging Markets Korea Price Return Index	If positive, the Total Return of the MSCI Daily Net Emerging Markets Korea Price Return Index	8/8/11		212,645
MSCI Daily TR Net Hong Kong USD Index
UBS AG		2,405		One-Month USD BBA LIBOR plus 46 basis points and if negative, the absolute value of the Total Return of the MSCI Daily Net Hong Kong USD Index	If positive, the Total Return of the MSCI Daily Net Hong Kong USD Index	12/7/11		(52,257	)
MSCI Daily TR Net Japan USD Index
Deutsche Bank AG		2,385		One-Month USD BBA LIBOR plus 20 basis points and if negative, the absolute value of the Total Return of the MSCI Daily Net Japan USD Index	If positive, the Total Return of the MSCI Daily Net Japan USD Index	12/12/11		129,314
MSCI Daily TR Net Singapore USD Index
Morgan Stanley		2,406		One-Month USD BBA LIBOR plus 39 basis points and if negative, the absolute value of the Total Return of the MSCI Daily Net Singapore USD Index	If positive, the Total Return of the MSCI Daily Net Singapore USD Index	12/7/11		52,062
Ordinary shares of Novo Nordisk AS
Citibank NA		1,065	DKK	One-Month DKK BBA LIBOR plus 30 basis points and if negative, the absolute value of the Total Return of the ordinary shares of Novo Nordisk AS	If positive, the absolute value of the ordinary shares of Novo Nordisk AS	4/11/11		17,299

	Notional
Reference Entity/	Amount		Paid by	Received by	Termination
Swap Counterparty	(000’s)		the Fund	the Fund	Date	Value
S&P 500 Value Index
Goldman Sachs Group, Inc. (The)	$	5,844	If positive, the Total Return of the S&P 500 Value Index	One-Month USD LIBOR minus 35 basis points and if negative, the absolute value of the Total Return of the S&P 500 Value Index	12/8/11	$	(275,967	)
S&P 600 Smallcap Index
UBS AG		5,884	One-Month USD BBA LIBOR minus 16 basis points and if negative, the absolute value of the Total Return of the S&P 600 Smallcap Index	If positive, the Total Return of the S&P 600 Smallcap Index	12/8/11		217,847
				Total of Total Return Swaps		$	901,933

Notional amount is reported in U.S. Dollars (USD), except for those denoted in the following currencies:
CHF	Swiss Franc
DKK	Danish Krone
EUR	Euro
GBP	British Pounds Sterling
JPY	Japanese Yen
SEK	Swedish Krona
Abbreviations are as follows:
BBA LIBOR	British Bankers’ Association London-Interbank Offered Rate
EAFE	Europe, Australasia, Far East
EURIBOR	Euro Interbank Offered Rate
LIBOR	London-Interbank Offered Rate
MSCI	Morgan Stanley Capital International
S&P	Standard & Poor’s
TR	Total Return

Currency Swaps as of December 31, 2010 are as follows:

	Notional
Reference Entity/	Amount	Paid by	Received by	Termination
Swap Counterparty	(000’s)	the Fund	the Fund	Date	Value
Each of JSC “Rushydro” (Open Joint Stock Company, Federal Hydrogeneration Company) and OJSC Saratovskaya HPP and any Successor(s) to these Reference Entities
Morgan Stanley Capital Services, Inc.	271,430 RUR	Three-Month USD BBA LIBOR	7.75% from debt obligations of JSC Rushydro and OJSC Saratovskaya HPP	12/26/13	$	(1,564,189	)

Notional amount is reported in U.S. Dollars (USD), except for those denoted in the following currency:
RUR	Russian Ruble
Abbreviations definitions is as follows:
BBA LIBOR	British Bankers’ Association London-Interbank Offered Rate

Volatility Swaps as of December 31, 2010 are as follows:

	Notional
Reference Entity/	Amount	Paid by	Received by			Termination
Swap Counterparty	(000’s)	the Fund	the Fund			Date	Value
AUD/JPY Exchange Rate
Citibank NA	13 AUD	The Historic Volatility of the mid AUD/JPY spot exchange rate during the Observation Period		12.15	%	2/7/11	$	2,771
CHF/SEK Exchange Rate:
Citibank NA	13 CHF	The Historic Volatility of the mid CHF/SEK spot exchange rate during the Observation Period		10.30		1/14/11		(1,391	)
Credit Suisse International	12 CHF	The Historic Volatility of the mid CHF/SEK spot exchange rate during the Observation Period		10.00		1/18/11		(13,254	)
Credit Suisse International	12 CHF	The Historic Volatility of the mid CHF/SEK spot exchange rate during the Observation Period		9.95		1/18/11		(10,637	)
Credit Suisse International	13 CHF	The Historic Volatility of the mid CHF/SEK spot exchange rate during the Observation Period		10.55		1/13/11		1,499
Deutsche Bank AG	12 CHF	The Historic Volatility of the mid CHF/SEK spot exchange rate during the Observation Period		10.55		1/18/11		(11,173	)
Deutsche Bank AG	13 CHF	The Historic Volatility of the mid CHF/SEK spot exchange rate during the Observation Period		11.60		1/10/11		16,294
			Reference Entity Total					(18,662	)
EUR/NZD Exchange Rate:
Bank of America Merrill Lynch	10 EUR	The Historic Volatility of the mid EUR/NZD spot exchange rate during the Observation Period		9.30		1/10/11		(7,465	)
Citibank NA	10 EUR	The Historic Volatility of the mid EUR/NZD spot exchange rate during the Observation Period		9.50		1/10/11		(9,832	)
Credit Suisse International	10 EUR	The Historic Volatility of the mid EUR/NZD spot exchange rate during the Observation Period		10.01		1/6/11		(1,781	)
Deutsche Bank AG	10 EUR	The Historic Volatility of the mid EUR/NZD spot exchange rate during the Observation Period		9.60		1/7/11		(8,507	)
			Reference Entity Total					(27,585	)

	Notional
Reference Entity/	Amount		Paid by	Received by			Termination
Swap Counterparty	(000’s)		the Fund	the Fund			Date	Value
USD/SEK Exchange Rate:
Bank of America Merrill Lynch		13	The Historic Volatility of the mid USD/SEK spot exchange rate during the Observation Period		13.20	%	1/28/11	$	5,376
Bank of America Merrill Lynch		13	The Historic Volatility of the mid USD/SEK spot exchange rate during the Observation Period		13.40		1/27/11		12,253
Credit Suisse International		13	The Historic Volatility of the mid USD/SEK spot exchange rate during the Observation Period		13.70		1/21/11		20,254
Credit Suisse International		13	The Historic Volatility of the mid USD/SEK spot exchange rate during the Observation Period		13.00		1/24/11		6,514
Credit Suisse International		13	The Historic Volatility of the mid USD/SEK spot exchange rate during the Observation Period		12.90		2/3/11		(16,739	)
Credit Suisse International		13	The Historic Volatility of the mid USD/SEK spot exchange rate during the Observation Period		14.00		1/20/11		27,651
Credit Suisse International		13	The Historic Volatility of the mid USD/SEK spot exchange rate during the Observation Period		12.95		1/31/11		(9,539	)
Deutsche Bank AG		13	The Historic Volatility of the mid USD/SEK spot exchange rate during the Observation Period		13.00		1/31/11		(11,049	)
Deutsche Bank AG		13	The Historic Volatility of the mid USD/SEK spot exchange rate during the Observation Period		13.50		1/24/11		10,468
				Reference Entity Total					45,189
				Total Volatility Swaps				$	1,713

Notional amount is reported in U.S. Dollars (USD), except for those denoted in the following currencies:
AUD	Australian Dollar
CHF	Swiss Franc
EUR	Euro
JPY	Japanese Yen
NZD	New Zealand Dollar
SEK	Swedish Krona

Swap Summary as of December 31, 2010 is as follows:

The following table aggregates, as of period end, the amount receivable from/(payable to) each counterparty with whom the Fund has entered into a swap agreement. Swaps are individually disclosed in the preceding tables.

		Notional
	Swap Type from	Amount
Swap Counterparty	Fund Perspective	(000’s)			Value
Banco Santander SA, Inc.	Interest Rate		9,870	BRR	$	107,315
Bank of America Merrill Lynch:
	Interest Rate		442,000	MXN		(58,614	)
	Volatility		10	EUR		(7,465	)
	Volatility		26			17,629
						(48,450	)
Barclays Bank plc:
	Credit Default Buy Protection		17,200			(1,511,402	)
	Interest Rate		183,000	CZK		(13,999	)
	Interest Rate		7,120	EUR		22,312
	Interest Rate		7,360	GBP		(50,934	)
	Interest Rate		11,800			(698,620	)
						(2,252,643	)
Citibank NA:
	Interest Rate		553,000	JPY		(132,950	)
	Total Return		1,892	CHF		5,268
	Total Return		1,065	DKK		17,299
	Total Return		5,046	EUR		42,080
	Total Return		1,584	GBP		98,892
	Total Return		5,259	SEK		8,653
	Total Return		791			(63,220	)
	Volatility		13	AUD		2,771
	Volatility		13	CHF		(1,391	)
	Volatility		10	EUR		(9,832	)
						(32,430	)
Citibank NA, New York:
	Credit Default Buy Protection		14,730			(81,840	)
	Credit Default Sell Protection		9,960			112,401
	Total Return		1,122,840	JPY		269,894
						300,455
Credit Suisse International:
	Credit Default Buy Protection		26,750			29,254
	Credit Default Sell Protection		9,110			(2,520	)
	Volatility		37	CHF		(22,392	)
	Volatility		10	EUR		(1,781	)
	Volatility		65			28,141
						30,702
Deutsche Bank AG:
	Credit Default Buy Protection		1,900			(63,879	)
	Total Return		2,385			129,314
	Volatility		25	CHF		5,121
	Volatility		10	EUR		(8,507	)
	Volatility		26			(581	)
						61,468
Goldman Sachs Group, Inc. (The):
	Interest Rate		25,690	BRR		(9,136	)
	Interest Rate		216,900	MXN		(18,500	)
	Total Return		358	EUR		(1,971	)
	Total Return		34,036			25,721
						(3,886	)
Goldman Sachs International	Credit Default Buy Protection		6,200			(892,457	)
JPMorgan Chase Bank NA:
	Interest Rate		15,800	BRR		880,146
	Interest Rate		458,000	JPY		(19,049	)
						861,097

		Notional
	Swap Type from	Amount
Swap Counterparty	Fund Perspective	(000’s)			Value
JPMorgan Chase Bank NA, London Branch	Credit Default Buy Protection	$	4,900		$	(106,228	)
JPMorgan Chase Bank NA, NY Branch	Credit Default Sell Protection		4,670			(256,722	)
Merrill Lynch International	Credit Default Buy Protection		7,600			(1,093,979	)
Morgan Stanley:
	Interest Rate		173,300	CZK		9,579
	Interest Rate		6,910	EUR		(5,640	)
	Total Return		3,840	EUR		(71,763	)
	Total Return		4,577	GBP		265,117
	Total Return		5,924			192,877
						390,170
Morgan Stanley & Co. International Ltd.	Credit Default Sell Protection		3,100			(192,617	)
Morgan Stanley Capital Services, Inc.:
	Credit Default Buy Protection		4,670			(125,745	)
	Credit Default Sell Protection		4,670			45,243
	Currency		271,430	RUR		(1,564,189	)
						(1,644,691	)
UBS AG:
	Credit Default Sell Protection		1,010			56,454
	Total Return		19,366			(16,228	)
						40,226
Westpac Banking Corp.	Interest Rate		12,810	AUD		338,077
		Total Swaps			$	(4,394,593	)

Notional amount is reported in U.S.Dollars (USD), except for those denoted in the following currencies:
AUD	Australian Dollar
BRR	Brazilian Real
CHF	Swiss Franc
CZK	Czech Koruna
DKK	Danish Krone
EUR	Euro
GBP	British Pound Sterling
JPY	Japanese Yen
MXN	Mexican Nuevo Peso
RUR	Russian Ruble
SEK	Swedish Krona

STATEMENT OF ASSETS AND LIABILITIES December 31, 2010

Assets
Investments, at value—see accompanying statement of investments:
Unaffiliated companies (cost $1,949,673,278)	$	1,986,878,290
Affiliated companies (cost $429,049,623)		437,389,868
		2,424,268,158
Cash—foreign currencies (cost $787,100)		788,782
Unrealized appreciation on foreign currency exchange contracts		4,596,926
Appreciated swaps, at value (net upfront payments paid $25,750)		4,207,790
Depreciated swaps, at value (upfront payments paid $278,816)		213,971
Receivables and other assets:
Interest, dividends and principal paydowns		31,404,070
Shares of beneficial interest sold		12,555,765
Investments sold (including $8,024,024 sold on a when-issued or delayed delivery basis)		9,300,568
Closed foreign currency contracts		2,052,229
Futures margins		1,746,212
Other		48,449
Total assets		2,491,182,920
Liabilities
Unrealized depreciation on foreign currency exchange contracts		13,070,372
Appreciated swaps, at value (upfront payments received $711,190)		656,155
Depreciated swaps, at value (upfront payments received $3,516,972)		8,160,199
Payables and other liabilities:
Investments purchased (including $80,598,752 purchased on a when-issued or delayed delivery basis)		81,460,360
Closed foreign currency contracts		2,446,688
Distribution and service plan fees		1,054,043
Shares of beneficial interest redeemed		852,291
Futures margins		609,835
Shareholder communications		290,984
Transfer and shareholder servicing agent fees		198,661
Foreign capital gains tax		59,775
Trustees’ compensation		37,125
Other		191,820
Total liabilities		109,088,308
Net Assets	$	2,382,094,612
Composition of Net Assets
Par value of shares of beneficial interest	$	421,868
Additional paid-in capital		2,277,058,848
Accumulated net investment income		5,967,605
Accumulated net realized gain on investments and foreign currency transactions		70,418,191
Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies		28,228,100
Net Assets	$	2,382,094,612
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 $711,754,539 and 127,577,947 shares of beneficial interest outstanding)	$	5.58
Service Shares:
Net asset value, redemption price per share and offering price per share (based on net assets of $1,670,340,073 and 294,290,027 shares of beneficial interest outstanding)	$	5.68

STATEMENT OF OPERATIONS For the Year Ended December 31, 2010

Allocation of Income and Expenses from master funds1
Net investment income allocated from Oppenheimer Master Event-Linked Bond Fund, LLC:
Interest	$	1,163,541
Dividends		2,399
Expenses2		(82,531	)
Net investment income allocated from Oppenheimer Master Event-Linked Bond Fund, LLC		1,083,409
Net investment income allocated from Oppenheimer Master Loan Fund, LLC:
Interest		33,462,757
Dividends		36,846
Expenses3		(1,266,974	)
Net investment income allocated from Oppenheimer Master Loan Fund, LLC		32,232,629
Total allocation of net investment income from master funds		33,316,038
Investment Income
Interest (net of foreign withholding taxes of $317,603)	$	192,345,595
Dividends:
Unaffiliated companies		103,748
Affiliated companies		298,773
Fee income on when-issued securities		1,798,776
Income from investment of securities lending cash collateral, net affiliated companies		36,907
Total investment income		194,583,799
Expenses
Management fees		17,980,400
Distribution and service plan fees — Service shares		6,223,086
Transfer and shareholder servicing agent fees:
Non-Service shares		738,529
Service shares		2,489,526
Shareholder communications:
Non-Service shares		138,144
Service shares		414,524
Custodian fees and expenses		433,373
Trustees’ compensation		86,931
Administration service fees		1,500
Other		271,561
Total expenses		28,777,574
Less waivers and reimbursements of expenses		(1,357,650	)
Net expenses		27,419,924
Net Investment Income		200,479,913

Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments from unaffiliated companies (including premiums on options exercised)	$	133,639,673
Closing and expiration of option contracts written		2,845,386
Closing and expiration of futures contracts		59,951,528
Foreign currency transactions		(25,566,426	)
Short positions		(117,061	)
Swap contracts		11,894,798
Increase from payment by affiliate		7,302
Net realized gain (loss) allocated from:
Oppenheimer Master Event-Linked Bond Fund, LLC		(91,384	)
Oppenheimer Master Loan Fund, LLC		11,177,915
Net realized gain		193,741,731
Net change in unrealized appreciation/depreciation on:
Investments (net of foreign capital gains tax of $59,775)		29,994,171
Translation of assets and liabilities denominated in foreign currencies		(12,612,946	)
Futures contracts		4,914,034
Option contracts written		(11,637	)
Swap contracts		(13,046,067	)
Unfunded purchase agreements		354,545
Net change in unrealized appreciation/deprecation allocated from:
Oppenheimer Master Event-Linked Bond Fund, LLC		291,009
Oppenheimer Master Loan Fund, LLC		1,506,228
Net change in unrealized appreciation/depreciation		11,389,337
Net Increase in Net Assets Resulting from Operations	$	405,610,981

1.	The Fund invests in certain affiliated mutual funds that expect to be treated as partnerships for tax purposes. See Note 1 of accompanying Notes.
2.	Net of expense waivers and/or reimbursements of $1,197.
3.	Net of expense waivers and/or reimbursements of $18,160.

STATEMENTS OF CHANGES IN NET ASSETS

Year Ended December 31,	2010			2009
Operations
Net investment income	$	200,479,913		$	229,320,159
Net realized gain (loss)		193,741,731			(159,435,499	)
Net change in unrealized appreciation/depreciation		11,389,337			592,195,964
Net increase in net assets resulting from operations		405,610,981			662,080,624
Dividends and/or Distributions to Shareholders
Dividends from net investment income:
Non-Service shares		(66,430,241	)		(3,468,223	)
Service shares		(313,790,173	)		(7,263,543	)
		(380,220,414	)		(10,731,766	)
Distributions from net realized gain:
Non-Service shares		—			(522,726	)
Service shares		—			(2,276,448	)
		—			(2,799,174	)
Beneficial Interest Transactions
Net increase (decrease) in net assets resulting from beneficial interest transactions:
Non-Service shares		(81,259,481	)		(5,135,048	)
Service shares		(1,976,534,500	)		312,198,649
		(2,057,793,981	)		307,063,601
Net Assets
Total increase (decrease)		(2,032,403,414	)		955,613,285
Beginning of period		4,414,498,026			3,458,884,741
End of period (including accumulated net investment income of $5,967,605 and $241,824,892, respectively)	$	2,382,094,612		$	4,414,498,026

FINANCIAL HIGHLIGHTS

Non-Service Shares Year Ended December 31,	2010			2009			2008			2007			2006
Per Share Operating Data
Net asset value, beginning of period	$	5.30		$	4.49		$	5.56		$	5.26		$	5.11
Income (loss) from investment operations:
Net investment income1		.34			.30			.30			.28			.26
Net realized and unrealized gain (loss)		.40			.53			(1.04	)		.21			.11
Total from investment operations		.74			.83			(.74	)		.49			.37
Dividends and/or distributions to shareholders:
Dividends from net investment income		(.46	)		(.02	)		(.27	)		(.19	)		(.22	)
Distributions from net realized gain		—			—2			(.06	)		—			—
Total dividends and distributions to shareholders		(.46	)		(.02	)		(.33	)		(.19	)		(.22	)
Net asset value, end of period	$	5.58		$	5.30		$	4.49		$	5.56		$	5.26
Total Return, at Net Asset Value3		14.97	%		18.83	%		(14.21	)%		9.69	%		7.49	%
Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	711,755		$	757,772		$	648,570		$	734,611		$	606,632
Average net assets (in thousands)	$	737,071		$	681,926		$	753,062		$	664,668		$	564,248
Ratios to average net assets:4,5
Net investment income		6.47	%		6.20	%		5.78	%		5.34	%		5.05	%
Total expenses6		0.75	%		0.67	%		0.59	%		0.59	%		0.64	%
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses		0.71	%		0.64	%		0.57	%		0.57	%		0.63	%
Portfolio turnover rate7		99	%		110	%		86	%		76	%		93	%

1.	Per share amounts calculated based on the average shares outstanding during the period.
2.	Less than $0.005 per share.
3.	Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
4.	Annualized for periods less than one full year.
5.	Includes the Fund’s share of the allocated expenses and/or net investment income from the master funds.
6.	Total expenses including all affiliated fund expenses were as follows:

Year Ended December 31, 2010	0.75	%
Year Ended December 31, 2009	0.68	%
Year Ended December 31, 2008	0.60	%
Year Ended December 31, 2007	0.61	%
Year Ended December 31, 2006	0.64	%

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, 2010	$	1,034,550,699	$	1,085,289,655
Year Ended December 31, 2009	$	1,909,574,925	$	1,836,038,328
Year Ended December 31, 2008	$	634,319,548	$	594,845,589
Year Ended December 31, 2007	$	1,061,009,472	$	1,120,098,096
Year Ended December 31, 2006	$	742,785,501	$	749,719,239

Service Shares Year Ended December 31,	2010			2009			2008			2007			2006
Per Share Operating Data
Net asset value, beginning of period	$	5.38		$	4.56		$	5.65		$	5.34		$	5.19
Income (loss) from investment operations:
Net investment income1		.33			.29			.29			.28			.25
Net realized and unrealized gain (loss)		.42			.54			(1.06	)		.22			.11
Total from investment operations		.75			.83			(.77	)		.50			.36
Dividends and/or distributions to shareholders:
Dividends from net investment income		(.45	)		(.01	)		(.26	)		(.19	)		(.21	)
Distributions from net realized gain		—			—2			(.06	)		—			—
Total dividends and distributions to shareholders		(.45	)		(.01	)		(.32	)		(.19	)		(.21	)
Net asset value, end of period	$	5.68		$	5.38		$	4.56		$	5.65		$	5.34
Total Return, at Net Asset Value3		14.77	%		18.41	%		(14.49	)%		9.55	%		7.23	%
Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	1,670,340		$	3,656,726		$	2,810,315		$	2,876,016		$	1,396,188
Average net assets (in thousands)	$	2,485,427		$	3,143,836		$	3,152,967		$	2,075,028		$	1,016,582
Ratios to average net assets:4,5
Net investment income		6.15	%		5.95	%		5.54	%		5.08	%		4.83	%
Total expenses6		0.99	%		0.92	%		0.84	%		0.84	%		0.89	%
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses		0.95	%		0.89	%		0.82	%		0.82	%		0.88	%
Portfolio turnover rate7		99	%		110	%		86	%		76	%		93	%

1.	Per share amounts calculated based on the average shares outstanding during the period.
2.	Less than $0.005 per share.
3.	Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
4.	Annualized for periods less than one full year.
5.	Includes the Fund’s share of the allocated expenses and/or net investment income from the master funds.
6.	Total expenses including all affiliated fund expenses were as follows:

Year Ended December 31, 2010	0.99	%
Year Ended December 31, 2009	0.93	%
Year Ended December 31, 2008	0.85	%
Year Ended December 31, 2007	0.86	%
Year Ended December 31, 2006	0.89	%

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

	Purchase Transactions		Sale Transactions
Year Ended December 31, 2010	$	1,034,550,699	$	1,085,289,655
Year Ended December 31, 2009	$	1,909,574,925	$	1,836,038,328
Year Ended December 31, 2008	$	634,319,548	$	594,845,589
Year Ended December 31, 2007	$	1,061,009,472	$	1,120,098,096
Year Ended December 31, 2006	$	742,785,501	$	749,719,239

NOTES TO FINANCIAL STATEMENTS

1. Significant Accounting Policies

Oppenheimer Global Strategic Income Fund/VA (the “Fund”), formerly known as Oppenheimer Strategic Bond Fund/VA, 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 investment objective is to seek a high level of current income principally derived from interest on debt securities. 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.

     Each investment asset or liability of the Fund is assigned a level at measurement date based on the significance and source of the inputs to its valuation. Unadjusted quoted prices in active markets for identical securities are classified as “Level 1,” inputs other than unadjusted quoted prices for an asset that are observable are classified as “Level 2” and significant unobservable inputs, including the Manager’s judgment about the assumptions that a market participant would use in pricing an asset or liability, are classified as “Level 3.” The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. A table summarizing the Fund’s investments under these levels of classification is included following the Statement of Investments.

     Securities are valued using unadjusted quoted market prices, when available, as supplied primarily by portfolio pricing services approved by the Board of Trustees or dealers.

     Securities traded on a registered U.S. securities exchange are valued based on the last sale price of the security reported on the principal exchange on which it is traded, prior to the time when the Fund’s assets are valued. Securities whose principal exchange is NASDAQ^® are valued based on the official closing prices 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 current day’s closing “bid” and “asked” prices, and if not, at the current day’s closing bid price. A foreign security traded on a foreign exchange is valued based on the last sale price on the principal exchange on which the security is traded, as identified by the portfolio pricing service used by the Manager, prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the most recent official closing price on the principal exchange on which it is traded.

     Shares of a registered investment company that are not traded on an exchange are valued at that investment company’s net asset value per share.

     U.S. domestic and international debt instruments (including corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed securities) and “money market-type” debt instruments with a remaining maturity in excess of sixty days are valued at the mean between the “bid” and “asked” prices utilizing price quotations obtained from independent pricing services or broker-dealers. Such prices are typically determined based upon information obtained from market participants including reported trade data, broker-dealer price quotations and inputs such as benchmark yields and issuer spreads from identical or similar securities.

     Structured securities are valued utilizing price quotations obtained from broker-dealers or independent pricing services. Values are determined based upon market inputs which typically include the price of underlying financial instruments, stock market indices, foreign currencies, interest rate spreads, commodities, or the occurrence of other specific events.

     Event-linked bonds are valued at the mean between the “bid” and “asked” prices utilizing price quotations obtained from independent pricing services or broker-dealers. Prices are determined based upon information obtained from market participants including reported trade data and broker-dealer price quotations.

     Swap contracts are valued utilizing price quotations obtained from broker-dealer counterparties or independent pricing services. Values are determined based on relevant market information on the underlying reference assets which may include credit spreads, credit event probabilities, index values, individual security values, forward interest rates, variable interest rates, volatility measures and forward currency rates.

     Forward foreign currency exchange contracts are valued utilizing current and forward currency rates obtained from independent pricing services.

     “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.

     In the absence of a readily available unadjusted quoted market price, including for 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 the securities’ respective exchanges, the Manager, acting through its internal valuation committee, in good faith determines the fair valuation of that asset using consistently applied procedures under the supervision of the Board of Trustees (which reviews those fair valuations by the Manager). Those procedures include certain standardized methodologies to fair value securities. Such methodologies include, but are not limited to, pricing securities initially at cost and subsequently adjusting the value based on: changes in company specific fundamentals, changes in an appropriate securities index, or changes in the value of similar securities which may be adjusted for any discounts related to resale restrictions. When possible, such methodologies use observable market inputs such as unadjusted quoted prices of similar securities, observable interest rates, currency rates and yield curves. The methodologies used for valuing securities are not necessarily an indication of the risks associated with investing in those securities.

     There have been no significant changes to the fair valuation methodologies of the Fund during the period.

Structured Securities. The Fund invests in structured securities whose market values, interest rates and/or redemption prices are linked to the performance of underlying foreign currencies, interest rate spreads, stock market indices, prices of individual securities, commodities or other financial instruments or the occurrence of other specific events. The structured securities are often leveraged, increasing the volatility of each note’s market value relative to the change in the underlying linked financial element or event. Fluctuations in value of these securities are recorded as unrealized gains and losses in the accompanying Statement of Operations. The Fund records a realized gain or loss when a structured security is sold or matures.

Event-Linked Bonds. The Fund may invest in “event-linked” bonds. Event-linked bonds, which are sometimes referred to as “catastrophe” bonds, are fixed income securities for which the return of principal and payment of interest is contingent on the non-occurrence of a specific trigger event, such as a hurricane, earthquake, or other occurrence that leads to physical or economic loss. If the trigger event occurs prior to maturity, the Fund may lose all or a portion of its principal in addition to interest otherwise due from the security. Event-linked bonds may expose the Fund to certain other risks, including issuer default, adverse regulatory or jurisdictional interpretations, liquidity risk and adverse tax consequences. The Fund records the net change in market value of event-linked bonds on the Statement of Operations as a change in unrealized appreciation or depreciation on investments. The Fund records a realized gain or loss on the Statement of Operations upon the sale or maturity of such securities.

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 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, 2010, 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	$	80,598,752
Sold securities		8,024,024

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.

     Forward roll transactions may be deemed to entail embedded leverage since the Fund purchases mortgage-related securities with extended settlement dates rather than paying for the securities under a normal settlement cycle. This embedded leverage increases the Fund’s market value of investments relative to its net assets which can incrementally increase the volatility of the Fund’s performance. Forward roll transactions can be replicated over multiple settlement periods.

     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; and counterparty credit risk.

Securities Sold Short. The Fund may short sell when-issued securities for future settlement. The value of the open short position is recorded as a liability, and the Fund records an unrealized gain or loss for the change in value of the open short position. The Fund records a realized gain or loss when the short position is closed out.

     As of December 31, 2010 the Fund had no outstanding securities sold short.

Credit Risk. The Fund invests in high-yield, non-investment-grade bonds, which may be subject to a greater degree of credit risk. Credit risk relates to the ability of the issuer to meet interest or principal payments or both as they become due. The Fund may acquire securities in default, and is not obligated to dispose of securities whose issuers or underlying obligors subsequently default. Information concerning securities in default as of December 31, 2010 is as follows:

Cost	$	31,574,515
Market Value	$	3,967,206
Market Value as a % of Net Assets		0.17	%

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. When applicable, the Fund’s investment in IMMF is included in the Statement of Investments. Shares of IMMF are valued at their net asset value per share. 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.

Investment in OFI Liquid Assets Fund, LLC. The Fund is permitted to invest cash collateral received in connection with its securities lending activities. Pursuant to the Fund’s Securities Lending Procedures, the Fund may invest cash collateral in, among other investments, an affiliated money market fund. OFI Liquid Assets Fund, LLC (“LAF”) is a limited liability company whose investment objective is to seek current income and stability of principal. The Manager is also the investment adviser of LAF. LAF is not registered under the Investment Company Act of 1940. However, LAF does comply with the investment restrictions applicable to registered money market funds set forth in Rule 2a-7 adopted under the Investment Company Act. When applicable, the Fund’s investment in LAF is included in the Statement of Investments. Shares of LAF are valued at their net asset value per share. As a shareholder, the Fund is subject to its proportional share of LAF’s expenses, including its management fee of 0.08%.

Investment in Oppenheimer master funds. The Fund is permitted to invest in entities sponsored and/or advised by the Manager or an affiliate. Certain of these entities in which the Fund invests are mutual funds registered under the Investment Company Act of 1940 that expect to be treated as partnerships for tax purposes, specifically Oppenheimer Master Loan Fund, LLC and Oppenheimer Master Event-Linked Bond Fund, LLC (the “master funds”). Each master fund has its own investment risks, and those risks can affect the value of the Fund’s investments and therefore the value of the Fund’s shares. To the extent that the Fund invests more of its assets in one master fund than in another, the Fund will have greater exposure to the risks of that master fund.

     The investment objective of Oppenheimer Master Loan Fund, LLC is to seek as high a level of current income and preservation of capital as is consistent with investing primarily in loans and other debt securities. The investment objective of Oppenheimer Master Event-Linked Bond Fund, LLC is to seek a high level of current income principally derived from interest on debt securities. The Fund’s investments in the master funds are included in the Statement of Investments. The Fund recognizes income and gain/(loss) on its investments in each master fund according to its allocated pro-rata share, based on its relative proportion of total outstanding master fund shares held, of the total net income earned and the net gain/(loss) realized on investments sold by the master funds. As a shareholder, the Fund is subject to its proportional share of the master funds’ expenses, including their 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 the master funds.

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. 

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

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

					Net Unrealized
					Appreciation
					Based on Cost of
					Securities and
Undistributed	Undistributed		Accumulated		Other Investments
Net Investment	Long-Term		Loss		for Federal Income
Income	Gain		Carryforward1,2,3,4		Tax Purposes
$69,476,241	$	29,075,393	$	42,891,185	$	51,983,802

1.	As of December 31, 2010, the Fund had $42,644,008 of post-October losses available to offset future realized capital gains, if any. Such losses, if unutilized, will expire in 2019.
2.	The Fund had $247,177 of straddle losses which were deferred.
3.	During the fiscal year ended December 31, 2010, the Fund utilized $161,264,243 of capital loss carryforward to offset capital gains realized in that fiscal year.
4.	During the fiscal year ended December 31, 2009, 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, 2010. Net assets of the Fund were unaffected by the reclassifications.

	Reduction		Increase
	to Accumulated		to Accumulated Net
Increase to	Net Investment		Realized Gain
Paid-in Capital	Income		on Investments5
$10,644,059	$	56,116,786	$	45,472,727

5. $10,424,041, all of which was long-term capital gain, was distributed in connection with Fund share redemptions.

The tax character of distributions paid during the years ended December 31, 2010 and December 31, 2009 was as follows:

	Year Ended		Year Ended
	December 31, 2010		December 31, 2009
Distributions paid from:
Ordinary income	$	380,220,414	$	13,530,940

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, 2010 are noted in the following table. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss.

Federal tax cost of securities	$	2,368,504,118
Federal tax cost of other investments		422,724,985
Total federal tax cost	$	2,791,229,103
Gross unrealized appreciation	$	175,594,942
Gross unrealized depreciation		(123,611,140	)
Net unrealized appreciation	$	51,983,802

Certain foreign countries impose a tax on capital gains which is accrued by the Fund based on unrealized appreciation, if any, on affected securities. The tax is paid when the gain is realized.

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 with 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. 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, 2010						Year Ended December 31, 2009
	Shares			Amount			Shares			Amount
Non-Service Shares
Sold		13,659,013		$	73,616,257			24,677,592		$	117,209,141
Dividends and/or distributions reinvested		13,002,895			66,430,241			952,494			3,990,949
Redeemed		(42,045,616	)		(221,305,979	)		(27,020,460	)		(126,335,138	)
Net decrease		(15,383,708	)	$	(81,259,481	)		(1,390,374	)	$	(5,135,048	)
Service Shares
Sold		39,118,559		$	211,931,885			88,989,960		$	433,996,423
Dividends and/or distributions reinvested		60,274,068			313,790,173			2,234,190			9,539,991
Redeemed		(484,576,971	)		(2,502,256,558	)		(28,146,787	)		(131,337,765	)
Net increase (decrease)		(385,184,344	)	$	(1,976,534,500	)		63,077,363		$	312,198,649

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, LAF and the master funds, for the year ended December 31, 2010, were as follows:

	Purchases		Sales
Investment securities	$	2,121,150,554	$	3,364,220,703
U.S. government and government agency obligations		107,549,007		105,042,838
To Be Announced (TBA) mortgage-related securities		1,034,550,699		1,085,289,655

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
Up to $200 million	0.75	%
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 fees at an annual rate of 0.10% of the daily net assets of each class of shares. For the year ended December 31, 2010, the Fund paid $3,402,620 to OFS for services to the Fund.

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 0.25% of the daily net assets of Service shares of the Fund. The Distributor currently uses all of those fees to compensate sponsors 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. The Manager has voluntarily agreed to limit the Fund’s total annual operating expenses so that those expenses, as percentages of daily net assets, will not exceed the annual rate of 0.75% for Non-Service shares and 1.00% for Service shares. During the year ended December 31, 2010, the Manager waived fees and/or reimbursed the Fund $46,695 for Service shares.

     The Manager will waive fees and/or reimburse Fund expenses in an amount equal to the indirect management fees incurred through the Fund’s investments in IMMF and the master funds. During the year ended December 31, 2010, the Manager waived fees and/or reimbursed the Fund $1,310,955 for management fees.

     Some of these undertakings may be modified or terminated at any time; some may not be modified or terminated until after one year from the date of the current prospectus, as indicated therein.

     During the year ended December 31, 2010, the Manager voluntarily reimbursed the Fund $7,302 for certain transactions. The payment is reported separately in the Statement of Operations and increased the Fund’s total returns by less than 0.01%.

5. Risk Exposures and the Use of Derivative Instruments

The Fund’s investment objectives not only permit the Fund to purchase investment securities, they also allow the Fund to enter into various types of derivatives contracts, including, but not limited to, futures contracts, forward foreign currency exchange contracts, credit default swaps, interest rate swaps, total return swaps, and purchased and written options. In doing so, the Fund will employ strategies in differing combinations to permit it to increase, decrease, or change the level or types of exposure to market risk factors. Central to those strategies are features inherent to derivatives that make them more attractive for this purpose than equity and debt securities: they require little or no initial cash investment, they can focus exposure on only certain selected risk factors, and they may not require the ultimate receipt or delivery of the underlying security (or securities) to the contract. This may allow the Fund to pursue its objectives more quickly and efficiently than if it were to make direct purchases or sales of securities capable of effecting a similar response to market factors.

Market Risk Factors. In accordance with its investment objectives, the Fund may use derivatives to increase or decrease its exposure to one or more of the following market risk factors:

Commodity Risk. Commodity risk relates to the change in value of commodities or commodity indexes as they relate to increases or decreases in the commodities market. Commodities are physical assets that have tangible properties. Examples of these types of assets are crude oil, heating oil, metals, livestock, and agricultural products.

Credit Risk. Credit risk relates to the ability of the issuer to meet interest and principal payments, or both, as they come due. In general, lower-grade, higher-yield bonds are subject to credit risk to a greater extent than lower-yield, higher-quality bonds.

Equity Risk. Equity risk relates to the change in value of equity securities as they relate to increases or decreases in the general market.

Foreign Exchange Rate Risk. Foreign exchange rate risk relates to the change in the U.S. dollar value of a security held that is denominated in a foreign currency. The U.S. dollar value of a foreign currency denominated security will decrease as the dollar appreciates against the currency, while the U.S. dollar value will increase as the dollar depreciates against the currency.

Interest Rate Risk. Interest rate risk refers to the fluctuations in value of fixed-income securities resulting from the inverse relationship between price and yield. For example, an increase in general interest rates will tend to reduce the market value of already issued fixed-income investments, and a decline in general interest rates will tend to increase their value. In addition, debt securities with longer maturities, which tend to have higher yields, are subject to potentially greater fluctuations in value from changes in interest rates than obligations with shorter maturities.

Volatility Risk. Volatility risk refers to the magnitude of the movement, but not the direction of the movement, in a financial instrument’s price over a defined time period. Large increases or decreases in a financial instrument’s price over a relative time period typically indicate greater volatility risk, while small increases or decreases in its price typically indicate lower volatility risk.

The Fund’s actual exposures to these market risk factors during the period are discussed in further detail, by derivative type, below.

Risks of Investing in Derivatives. The Fund’s use of derivatives can result in losses due to unanticipated changes in the market risk factors and the overall market. In instances where the Fund is using derivatives to decrease, or hedge, exposures to market risk factors for securities held by the Fund, there are also risks that those derivatives may not perform as expected resulting in losses for the combined or hedged positions.

     Derivatives may have little or no initial cash investment relative to their market value exposure and therefore can produce significant gains or losses in excess of their cost. This use of embedded leverage allows the Fund to increase its market value exposure relative to its net assets and can substantially increase the volatility of the Fund’s performance.

     Additional associated risks from investing in derivatives also exist and potentially could have significant effects on the valuation of the derivative and the Fund. Typically, the associated risks are not the risks that the Fund is attempting to increase or decrease exposure to, per its investment objectives, but are the additional risks from investing in derivatives. Examples of these associated risks are liquidity risk, which is the risk that the Fund will not be able to sell the derivative in the open market in a timely manner, and counterparty credit risk, which is the risk that the counterparty will not fulfill its obligation to the Fund. Associated risks can be different for each type of derivative and are discussed by each derivative type in the notes that follow.

Counterparty Credit Risk. Certain derivative positions are subject to counterparty credit risk, which is the risk that the counterparty will not fulfill its obligation to the Fund. The Fund’s derivative counterparties are financial institutions who are subject to market conditions that may weaken their financial position. The Fund intends to enter into financial transactions with counterparties that the Manager believes to be creditworthy at the time of the transaction. As of December 31, 2010, the maximum amount of loss that the Fund would incur if the counterparties to its derivative transactions failed to perform would be $11,913,399, which represents gross payments to be received by the Fund on these derivative contracts were they to be unwound as of period end. To reduce this risk the Fund has entered into master netting arrangements, established within the Fund’s International Swap and Derivatives Association, Inc. master agreements, which allow the Fund to net unrealized appreciation and depreciation for certain positions in swaps, over-the-counter options, swaptions, and forward currency exchange contracts for each individual counterparty. The amount of loss that the Fund would incur taking into account these master netting arrangements would be $1,348,498 as of December 31, 2010. In addition, the Fund may require that certain counterparties post cash and/or securities in collateral accounts to cover their net payment obligations for those derivative contracts subject to International Swap and Derivatives Association, Inc. master agreements. If the counterparty fails to perform under these contracts and agreements, the cash and/or securities will be made available to the Fund.

As of December 31, 2010, the Fund has required certain counterparties to post collateral of $3,829,349.

Credit Related Contingent Features. The Fund’s agreements with derivative counterparties have several credit related contingent features that if triggered would allow its derivatives counterparties to close out and demand payment or additional collateral to cover their exposure from the Fund. Credit related contingent features are established between the Fund and its derivatives counterparties to reduce the risk that the Fund will not fulfill its payment obligations to its counterparties. These triggering features include, but are not limited to, a percentage decrease in the Fund’s net assets and or a percentage decrease in the Fund’s Net Asset Value or NAV. The contingent features are established within the

Fund’s International Swap and Derivatives Association, Inc. master agreements which govern certain positions in swaps, over-the-counter options and swaptions, and forward currency exchange contracts for each individual counterparty.

     As of December 31, 2010, the aggregate fair value of derivative instruments with credit related contingent features in a net liability position was $11,185,271 for which the Fund has posted collateral of $2,608,409. If a contingent feature would have been triggered as of December 31, 2010, the Fund could have been required to pay this amount in cash to its counterparties. If the Fund fails to perform under these contracts and agreements, the cash and/or securities posted as collateral will be made available to the counterparty. Cash posted as collateral for these contracts, if any, is reported on the Statement of Assets and Liabilities; securities posted as collateral, if any, are reported on the Statement of Investments.

Valuations of derivative instruments as of December 31, 2010 are as follows:

	Asset Derivatives				Liability Derivatives
	Statement				Statement
Derivatives Not	of Assets				of Assets
Accounted for as	and Liabilities				and Liabilities
Hedging Instruments	Location	Value			Location	Value
Credit contracts	Appreciated swaps,				Appreciated swaps,
	at value	$	627,037		at value	$	656,155
Credit contracts	Depreciated swaps,				Depreciated swaps,
	at value		213,971		at value		4,268,890
Equity contracts	Appreciated swaps,				Depreciated swaps,
	at value		1,906,275		at value		1,004,342
Foreign exchange contracts					Depreciated swaps,
					at value		1,564,189
Interest rate contracts	Appreciated swaps,				Depreciated swaps,
	at value		1,571,398		at value		1,221,411
Volatility contracts	Appreciated swaps,				Depreciated swaps,
	at value		103,080		at value		101,367
Equity contracts	Futures margins		81,657	*	Futures margins		41,542	*
Interest rate contracts	Futures margins		1,664,555	*	Futures margins		568,293	*
Foreign exchange contracts	Unrealized appreciation on foreign currency				Unrealized depreciation on foreign currency
	exchange contracts		4,596,926		exchange contracts		13,070,372
Foreign exchange contracts	Investments, at value		842,483	**
Total		$	11,607,382			$	22,496,561

*	Includes only the current day’s variation margin. Prior variation margin movements have been reflected in cash on the Statement of Assets and Liabilities upon receipt or payment.
**	Amounts relate to purchased options.

     The effect of derivative instruments on the Statement of Operations is as follows:

Amount of Realized Gain or (Loss) Recognized on Derivatives
	Investments from
	unaffiliated			Closing and
	companies			expiration		Closing and
Derivatives Not	(including			of option		expiration of			Foreign
Accounted for as	premiums on			contracts		futures			currency
Hedging Instruments	options exercised)*			written		contracts			transactions		Swap contracts			Total
Credit contracts	$	—		$	—	$	—		$	—	$	(9,993,530	)	$	(9,993,530	)
Equity contracts		—			—		(4,207,258	)		—		3,436,375			(770,883	)
Foreign exchange contracts		(6,616,013	)		2,845,386		—			23,651,271		1,077,321			20,957,965
Interest rate contracts		(7,684,568	)		—		64,158,786			—		17,583,191			74,057,409
Volatility contracts		—			—		—			—		(208,559	)		(208,559	)
Total	$	(14,300,581	)	$	2,845,386	$	59,951,528		$	23,651,271	$	11,894,798		$	84,042,402

* Includes purchased option contracts, purchased swaption contracts and written option contracts exercised, if any.

Amount of Change in Unrealized Gain or (Loss) Recognized on Derivatives
									Translation of
									assets and
									liabilities
Derivatives Not			Option						denominated
Accounted for as			contracts			Futures			in foreign
Hedging Instruments	Investments*		written			contracts			currencies			Swap contracts			Total
Credit contracts	$	—	$	—		$	—		$	—		$	(5,263,513	)	$	(5,263,513	)
Equity contracts		—		—			(37,459	)		—			(264,287	)		(301,746	)
Foreign exchange contracts		7,057,466		(11,637	)		—			(26,101,974	)		465,690			(18,590,455	)
Interest rate contracts		—		—			4,951,493			—			(7,985,670	)		(3,034,177	)
Volatility contracts		—		—			—			—			1,713			1,713
Total	$	7,057,466	$	(11,637	)	$	4,914,034		$	(26,101,974	)	$	(13,046,067	)	$	(27,188,178	)

* Includes purchased option contracts and purchased swaption contracts, if any.

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.

     Forward 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.

     The Fund has purchased and sold certain forward foreign currency exchange contracts of different currencies in order to acquire currencies to pay for related foreign securities purchase transactions, or to convert foreign currencies to U.S. dollars from related foreign securities sale transactions. These foreign currency exchange contracts are negotiated at the current spot exchange rate with settlement typically within two business days thereafter.

     The Fund has entered into forward foreign currency exchange contracts with the obligation to purchase specified foreign currencies in the future at a currently negotiated forward rate in order to take a positive investment perspective on the related currency. These forward foreign currency exchange contracts seek to increase exposure to foreign exchange rate risk.

     The Fund has entered into forward foreign currency exchange contracts with the obligation to purchase specified foreign currencies in the future at a currently negotiated forward rate in order to decrease exposure to foreign exchange rate risk associated with foreign currency denominated securities held by the Fund.

     The Fund has entered into forward foreign currency exchange contracts with the obligation to sell specified foreign currencies in the future at a currently negotiated forward rate in order to take a negative investment perspective on the related currency. These forward foreign currency exchange contracts seek to increase exposure to foreign exchange rate risk.

     The Fund has entered into forward foreign currency exchange contracts with the obligation to sell specified foreign currencies in the future at a currently negotiated forward rate in order to decrease exposure to foreign exchange rate risk associated with foreign currency denominated securities held by the Fund.

     During the year ended December 31, 2010, the Fund had average contract amounts on forward foreign currency contracts to buy and sell of $391,435,404 and $304,958,369, respectively.

     Additional associated risk to the Fund includes counterparty credit risk. Counterparty credit risk arises from the possibility that the counterparty will default.

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 Fund may buy and sell futures contracts and 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.

     The Fund has purchased futures contracts on various bonds and notes to increase exposure to interest rate risk.

     The Fund has sold futures contracts on various bonds and notes to decrease exposure to interest rate risk.

     The Fund has purchased futures contracts on various equity indexes to increase exposure to equity risk.

     The Fund has sold futures contracts on various equity indexes to decrease exposure to equity risk.

     During the year ended December 31, 2010, the Fund had an average market value of $997,966,693 and $386,162,073 on futures contracts purchased and sold, respectively.

     Additional associated 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.

Option Activity

The Fund may buy and sell put and call options, or write put and call options. When an option is written, the Fund receives a premium and becomes obligated to sell or purchase the underlying security at a fixed price, upon exercise of the option.

     Options are valued daily based upon the last sale price on the principal exchange on which the option is traded. The difference between the premium received or paid, and market value of the option, is recorded as unrealized appreciation or depreciation. The net change in unrealized appreciation or depreciation is reported in the Statement of Operations. When an option is exercised, the cost of the security purchased or the proceeds of the security sale are adjusted by the amount of premium received or paid. Upon the expiration or closing of the option transaction, a gain or loss is reported in the Statement of Operations.

     The Fund has purchased call options on currencies to increase exposure to foreign exchange rate risk. A purchased call option becomes more valuable as the price of the underlying financial instrument appreciates relative to the strike price.

     The Fund has purchased put options on currencies to decrease exposure to foreign exchange rate risk. A purchased put option becomes more valuable as the price of the underlying financial instrument depreciates relative to the strike price.

     The Fund has purchased call options on individual equity securities and, or, equity indexes to increase exposure to equity risk. A purchased call option becomes more valuable as the price of the underlying financial instrument appreciates relative to the strike price.

     The Fund has purchased put options on individual equity securities and, or, equity indexes to decrease exposure to equity risk. A purchased put option becomes more valuable as the price of the underlying financial instrument depreciates relative to the strike price. 

     The Fund has purchased call options on treasury futures to increase exposure to interest rate risk. A purchased call options becomes more valuable as the price of the underlying financial instruments appreciates relative to the strike price.

     During the year ended December 31, 2010, the Fund had an average market value of $1,357,121 and $552,097 on purchased call options and purchased put options, respectively.

     Options written, if any, are reported in a schedule following the Statement of Investments and as a liability in the Statement of Assets and Liabilities. Securities held in collateralized accounts to cover potential obligations with respect to outstanding written options are noted in the Statement of Investments.

     The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk that there may be an illiquid market where the Fund is unable to close the contract.

     The Fund has written put options on currencies to increase exposure to foreign exchange rate risk. A written put option becomes more valuable as the price of the underlying financial instrument appreciates relative to the strike price.

     The Fund has written call options on currencies to decrease exposure to foreign exchange rate risk. A written call option becomes more valuable as the price of the underlying financial instrument depreciates relative to the strike price.

     During the year ended December 31, 2010, the Fund had an average market value of $93,102 and $36,113 on written call options and written put options, respectively.

     Additional associated risks to the Fund include counterparty credit risk for over-the-counter options and liquidity risk.

Written option activity for the year ended December 31, 2010 was as follows:

	Call Options						Put Options
	Number of			Amount of			Number of			Amount of
	Contracts			Premiums			Contracts			Premiums
Options outstanding as of December 31, 2009		—		$	—			108,600,000		$	106,195
Options written		4,682,735,000			2,624,848			2,621,035,000			2,230,086
Options closed or expired		(3,021,700,000	)		(1,679,267	)		(1,782,935,000	)		(1,166,119	)
Options exercised		(1,661,035,000	)		(945,581	)		(946,700,000	)		(1,170,162	)
Options outstanding as of December 31, 2010		—		$	—			—		$	—

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 values of swap contracts are aggregated by positive and negative values and disclosed separately on the Statement of Assets and Liabilities by contracts in unrealized appreciation and depreciation positions. Upfront payments paid or received, if any, affect the value of the respective swap. Therefore, to determine the unrealized appreciation (depreciation) on swaps, upfront payments paid should be subtracted from, while upfront payments received should be added to, the value of contracts reported as an asset on the Statement of Assets and Liabilities. Conversely, upfront payments paid should be added to, while upfront payments received should be subtracted from the value of contracts reported as a liability. 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.

     Swap contract agreements are exposed to the market risk factor of the specific underlying reference asset. Swap contracts are typically more attractively priced compared to similar investments in related cash securities because they isolate the risk to one market risk factor and eliminate the other market risk factors. Investments in cash securities (for instance bonds) have exposure to multiple risk factors (credit and interest rate risk). Because swaps require little or no initial cash investment, they can expose the Fund to substantial risk in the isolated market risk factor.

Credit Default Swap Contracts. A credit default swap is a bilateral contract that enables an investor to buy or sell protection on a debt security against a defined-issuer credit event, such as the issuer’s failure to make timely payments of interest or principal on the debt security, bankruptcy or restructuring. The Fund may enter into credit default swaps either by buying or selling protection on a single security, sovereign debt, or a basket of securities (the “reference asset”).

     The buyer of protection pays a periodic fee to the seller of protection based on the notional amount of debt securities underlying the swap contract. The seller of protection agrees to compensate the buyer of protection for future potential losses as a result of a credit event on the reference asset. The contract effectively transfers the credit event risk of the reference asset from the buyer of protection to the seller of protection.

    The ongoing value of the contract will fluctuate throughout the term of the contract based primarily on the credit risk of the reference asset. If the credit quality of the reference asset improves relative to the credit quality at contract initiation, the buyer of protection may have an unrealized loss greater than the anticipated periodic fee owed. This unrealized loss would be the result of current credit protection being cheaper than the cost of credit protection at contract initiation. If the buyer elects to terminate the contract prior to its maturity, and there has been no credit event, this unrealized loss will become realized. If the contract is held to maturity, and there has been no credit event, the realized loss will be equal to the periodic fee paid over the life of the contract.

     If there is a credit event, the buyer of protection can exercise its rights under the contract and receive a payment from the seller of protection equal to the notional amount of the reference asset less the market value of the reference asset. Upon exercise of the contract the difference between the value of the underlying reference asset and the notional amount is recorded as realized gain (loss) and is included on the Statement of Operations.

     The Fund has sold credit protection through credit default swaps to increase exposure to the credit risk of individual securities and/or, indexes that are either unavailable or considered to be less attractive in the bond market.

     The Fund has purchased credit protection through credit default swaps to decrease exposure to the credit risk of individual securities and/or, indexes.

     For the year ended December 31, 2010, the Fund had average notional amounts of $47,818,154 and $155,346,954 on credit default swaps to buy protection and credit default swaps to sell protection, respectively.

     Additional associated risks to the Fund include counterparty credit risk and liquidity risk.

Interest Rate Swap Contracts. An interest rate swap is an agreement between counterparties to exchange periodic payments based on interest rates. One cash flow stream will typically be a floating rate payment based upon a specified interest rate while the other is typically a fixed interest rate.

     The Fund has entered into interest rate swaps in which it pays a floating interest rate and receives a fixed interest rate in order to increase exposure to interest rate risk. Typically, if relative interest rates rise, payments made by the Fund under a swap agreement will be greater than the payments received by the Fund.

     The Fund has entered into interest rate swaps in which it pays a fixed interest rate and receives a floating interest rate in order to decrease exposure to interest rate risk. Typically, if relative interest rates rise, payments received by the Fund under the swap agreement will be greater than the payments made by the Fund.

     For the December 31, 2010, the Fund had average notional amounts of $59,856,494 and $162,928,645 on interest rate swaps which pay a fixed rate and interest rate swaps which receive a fixed rate, respectively.

     Additional associated risks to the Fund include counterparty credit risk and liquidity risk.

Total Return Swap Contracts. A total return swap is an agreement between counterparties to exchange periodic payments based on asset or non-asset references. One cash flow is typically based on a non-asset reference (such as an interest rate or index) and the other on the total return of a reference asset (such as a security or a basket of securities). The total return of the reference asset typically includes appreciation or depreciation on the reference asset, plus any interest or dividend payments.

     Total return swap contracts are exposed to the market risk factor of the specific underlying financial instrument or index. Total return swaps are less standard in structure than other types of swaps and can isolate and/or, include multiple types of market risk factors including equity risk, credit risk, and interest rate risk.

     The Fund has entered into total return swaps on various equity securities or indexes to increase exposure to equity risk. These equity risk related total return swaps require the Fund to pay a floating reference interest rate, or an amount equal to the negative price movement of securities or an index multiplied by the notional amount of the contract. The Fund will receive payments equal to the positive price movement of the same securities or index multiplied by the notional amount of the contract.

     The Fund has entered into total return swaps on various equity securities or indexes to decrease exposure to equity risk. These equity risk related total return swaps require the Fund to pay an amount equal to the positive price movement of securities or an index multiplied by the notional amount of the contract. The Fund will receive payments of a floating reference interest rate or an amount equal to the negative price movement of the same securities or index multiplied by the notional amount of the contract.

     For the year ended December 31, 2010, the Fund had average notional amounts of $7,104,778,237 and $32,460,703 on total return swaps which are long the reference asset and total return swaps which are short the reference asset, respectively.

     Additional associated risks to the Fund include counterparty credit risk and liquidity risk.

     Currency Swaps. A currency swap is an agreement between counterparties to exchange different currencies equivalent to the notional value at contract inception and reverse the exchange of the same notional values of those currencies at contract termination. The contract may also include periodic exchanges of cash flows based on a specified index or interest rate.

     The Fund has entered into currency swap contracts with the obligation to pay an interest rate on various foreign currency notional amounts and receive an interest rate on the dollar notional amount in order to take a negative investment perspective on the related currencies for which the Fund receives a payment. These currency swap contracts seek to decrease exposure to foreign exchange rate risk.

     For the year ended December 31, 2010, the Fund had average notional amounts of $9,313,666 on currency swaps.

     Additional associated risks to the Fund include counterparty credit risk and liquidity risk.

     Volatility Swap Contracts. A volatility swap is an agreement between counterparties to exchange periodic payments based on the measured volatility of a reference security, index, currency or other reference investment over a specified time frame. One cash flow is typically based on the volatility of the reference investment as measured by changes in its price or level while the other cash flow is based on an interest rate or the measured volatility of a different reference investment. The appreciation or depreciation on a volatility swap will typically depend on the magnitude of the reference investment’s volatility, or size of the movement, rather than general directional increases or decreases in its price.

     Volatility swaps are less standard in structure than other types of swaps and provide pure, or isolated, exposure to volatility risk of the specific underlying reference investment. Volatility swaps are typically used to speculate on future volatility levels, to trade the spread between realized and expected volatility, or to decrease the volatility exposure of investments held by the Fund.

     The Fund has entered into volatility swaps to increase exposure to the volatility risk of various reference investments. These types of volatility swaps require the fund to pay the measured volatility and receive a fixed interest payment over the period of the contract. If the measured volatility of the related reference investment increases over the period, the swaps will depreciate in value. Conversely, if the measured volatility of the related reference investment decreases over the period, the swaps will appreciate in value.

The Fund has entered into volatility swaps to decrease exposure to the volatility risk of various reference investments. These types of volatility swaps require the fund to pay a fixed interest payment and receive the measured volatility over the period of the contract. If the measured volatility of the related reference investment increases over the period, the swaps will appreciate in value. Conversely, if the measured volatility of the related reference investment decreases over the period, the swaps will depreciate in value.

     For the year ended December 31, 2010, the Fund had average notional amounts of $66,351 and $204,577 on volatility swaps which pay volatility and volatility swaps which receive volatility, respectively.

     Additional associated risks to the Fund include counterparty credit risk and liquidity risk.

6. Restricted Securities

As of December 31, 2010, investments in securities included issues that are restricted. A restricted security may have a contractual restriction on its resale and is valued under methods approved by the Board of Directors as reflecting fair value. Securities that are restricted are marked with an applicable footnote on the Statement of Investments. Restricted securities are reported on a schedule following the Statement of Investments.

7. 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, 2010, the Fund had no securities on loan.

8. Unfunded Purchase Agreements

Pursuant to the terms of certain indenture agreements, the Fund has unfunded purchase agreements of $8,676,183 at December 31, 2010. The following agreements are subject to funding based on the borrower’s discretion. The Fund is obligated to fund these agreements at the time of the request by the borrower. These agreements have been excluded from the Statement of Investments.

As of December 31, 2010, the Fund had unfunded purchase agreements as follows:

	Commitment		Unfunded
	Termination Date		Amount
Deutsche Bank AG, Opic Reforma I Credit Linked Nts.		10/23/13	$	8,676,183

9. Pending Litigation

Since 2009, a number of lawsuits have been pending in federal courts against the Manager, the Distributor, and certain mutual funds (“Defendant Funds”) advised by the Manager and distributed by the Distributor (but not including the Fund). The lawsuits naming the Defendant Funds also name as defendants certain officers and current and former trustees of the respective Defendant Funds. The plaintiffs seek class action status on behalf of purchasers of shares of the respective Defendant Fund during a particular time period. The lawsuits raise claims under federal securities laws alleging that, among other things, the disclosure documents of the respective Defendant Fund contained misrepresentations and omissions, that such Defendant Fund’s investment policies were not followed, and that such Defendant Fund and the other defendants violated federal securities laws and regulations. The plaintiffs seek unspecified damages, equitable relief and an award of attorneys’ fees and litigation expenses.

     In 2009, what are claimed to be derivative lawsuits were filed in state court against the Manager and a subsidiary (but not against the Fund), on behalf of the New Mexico Education Plan Trust. These lawsuits allege breach of contract, breach of fiduciary duty, negligence and violation of state securities laws, and seek compensatory damages, equitable relief and an award of attorneys’ fees and litigation expenses.

     Other lawsuits have been filed since 2008 in various state and federal courts, against the Manager and certain of its affiliates. Those lawsuits were filed by investors who made investments through an affiliate of the Manager, and relate to the alleged investment fraud perpetrated by Bernard Madoff and his firm (“Madoff”). Those suits allege a variety of claims, including breach of fiduciary duty, fraud, negligent misrepresentation, unjust enrichment, and violation of federal and state securities laws and regulations, among others. They seek unspecified damages, equitable relief and an award of attorneys’ fees and litigation expenses. None of the suits have named the Distributor, any of the Oppenheimer mutual funds or any of their independent Trustees or Directors as defendants. None of the Oppenheimer funds invested in any funds or accounts managed by Madoff.

     The Manager believes that the lawsuits described above are without legal merit and is defending against them vigorously. The Defendant Funds’ Boards of Trustees have also engaged counsel to defend the suits brought against those Funds and the present and former Independent Trustees named in those suits. While it is premature to render any opinion as to the outcome in these lawsuits, or whether any costs that the Defendant Funds may bear in defending the suits might not be reimbursed by insurance, the Manager believes that these suits should not impair the ability of the Manager or the Distributor to perform their respective duties to the Fund, and that the outcome of all of the suits together should not have any material effect on the operations of any of the Oppenheimer funds.

10. Subsequent Event

The Regulated Investment Company Modernization Act of 2010 (the “Act”) was signed into law on December 22, 2010. The Act makes changes to a number of tax rules impacting the Fund. Under the Act, future capital losses generated by a fund may be carried over indefinitely, but these losses must be used prior to the utilization of any pre-enactment capital losses. Since pre-enactment capital losses may only be carried forward for eight years, there may be a greater likelihood that all or a portion of a fund’s pre-enactment capital losses will expire unused. In general, the provisions of the Act will be effective for the Fund’s fiscal year ending December 31, 2011. Specific information regarding the impact of the Act on the Fund will be contained within the “Federal Taxes” section of the financial statement notes for the fiscal year ending December 31, 2011.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Trustees and Shareholders of Oppenheimer Variable Account Funds:

We have audited the accompanying statement of assets and liabilities of Oppenheimer High Income Fund/VA (one of the portfolios constituting the Oppenheimer Variable Account Funds), including the statement of investments, as of December 31, 2010, the related statement of operations for the year then ended, and the statements of changes in net assets and the financial highlights for each of the years in the two-year 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. The accompanying financial highlights of Oppenheimer High Income Fund/VA for the years ended prior to January 1, 2009 were audited by other auditors whose report dated February 11, 2009 expressed an unqualified opinion on those financial highlights.

     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 audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2010, by correspondence with the custodian, transfer agent and brokers, or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Oppenheimer High Income Fund/VA as of December 31, 2010, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for each of the years in the two-year period then ended, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG llp

Denver, Colorado
February 16, 2011

STATEMENT OF INVESTMENTS December 31, 2010

	Principal
	Amount		Value
Corporate Bonds and Notes—87.2%
Consumer Discretionary—18.8%
Auto Components—1.5%
Goodyear Tire & Rubber Co. (The), 8.25% Sr. Unsec. Unsub. Nts., 8/15/20	$	570,000	$	592,800
Tower Automotive Holdings USA LLC/TA Holdings Finance, Inc., 10.625% Sr. Sec. Nts., 9/1/171		1,389,000		1,500,120
				2,092,920
Hotels, Restaurants & Leisure—7.8%
Equinox Holdings, Inc., 9.50% Sr. Sec. Nts., 2/1/162		350,000		371,438
Harrah’s Operating Co., Inc., 10% Sr. Sec. Nts., 12/15/18		2,658,000		2,438,690
Isle of Capri Casinos, Inc., 7% Sr. Unsec. Sub. Nts., 3/1/14		705,000		694,425
Landry’s Restaurants, Inc., 11.625% Sr. Sec. Nts., 12/1/15		455,000		487,988
Mashantucket Pequot Tribe, 8.50% Bonds, Series A, 11/15/152,3,4		1,505,000		205,056
MGM Mirage, Inc.:
5.875% Sr. Nts., 2/27/14		430,000		398,825
6.75% Sr. Unsec. Nts., 4/1/13		965,000		964,035
Mohegan Tribal Gaming Authority:
6.125% Sr. Unsec. Sub. Nts., 2/15/13		1,550,000		1,294,250
6.875% Sr. Unsec. Sub. Nts., 2/15/15		322,000		200,445
8% Sr. Sub. Nts., 4/1/12		1,260,000		1,058,400
11.50% Sr. Sec. Nts., 11/1/172		675,000		626,063
Penn National Gaming, Inc., 8.75% Sr. Unsec. Sub. Nts., 8/15/19		605,000		670,038
Station Casinos, Inc., 6.50% Sr. Unsec. Sub. Nts., 2/1/143,4		2,595,000		260
Travelport LLC, 11.875% Sr. Unsec. Sub. Nts., 9/1/16		750,000		740,625
Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp., 7.75% Sec. Nts., 8/15/20		605,000		657,938
				10,808,476
Household Durables—1.8%
Beazer Homes USA, Inc.:
6.875% Sr. Unsec. Nts., 7/15/15		690,000		671,025
9.125% Sr. Nts., 5/15/192		690,000		657,225
K. Hovnanian Enterprises, Inc., 8.875% Sr. Sub. Nts., 4/1/12		490,000		482,650
Reynolds Group Issuer, Inc./Reynolds Group Issuer LLC/Reynolds Group Issuer Luxembourg SA:
9% Sr. Nts., 4/15/192		325,000		338,406
8.50% Sr. Nts., 5/15/182		320,000		323,200
				2,472,506
Leisure Equipment & Products—1.7%
Eastman Kodak Co., 9.75% Sr. Sec. Nts., 3/1/182		2,355,000		2,413,875
Media—5.9%
Affinion Group Holdings, Inc., 11.625% Sr. Nts., 11/15/152		420,000		437,850
Affinion Group, Inc., 7.875% Sr. Nts., 12/15/182		760,000		744,800
American Media Operations, Inc., 13.50% 2nd Lien Nts., 6/15/183,4		2,031		2,031
Belo (A.H.) Corp.:
7.25% Sr. Unsec. Unsub. Bonds, 9/15/27		115,000		100,338
7.75% Sr. Unsec. Unsub. Debs., 6/1/27		719,000		650,695
Cengage Learning Acquisitions, Inc.:
10.50% Sr. Nts., 1/15/152		825,000		855,938
13.25% Sr. Sub. Nts., 7/15/152		355,000		376,300
Clear Channel Communications, Inc., 10.75% Sr. Unsec. Unsub. Nts., 8/1/16		745,000		670,500
Entravison Communications Corp., 8.75% Sr. Sec. Nts., 8/1/172		155,000		164,300
Gray Television, Inc., 10.50% Sr. Sec. Nts., 6/29/15		1,270,000		1,285,875
Interactive Data Corp., 10.25% Sr. Nts., 8/1/181		230,000		251,850
Newport Television LLC/NTV Finance Corp., 12.44% Sr. Nts., 3/15/172,5		615,000		581,175
Nexstar Broadcasting, Inc., 8.875% Sr. Sec. Nts., 4/15/172		485,000		517,738
Radio One, Inc., 12.50% Sr. Unsec. Sub. Nts., 5/11/162		133,000		131,005
Sinclair Television Group, Inc., 8.375% Sr. Nts., 10/15/182		650,000		674,375
Univision Communications, Inc.:
7.875% Sr. Sec. Nts., 11/1/202		115,000		121,325
8.50% Sr. Unsec. Nts., 5/15/212		150,000		152,625
Visant Corp., 10% Sr. Sec. Nts., 10/1/172		145,000		154,425
WMG Holdings Corp., 9.50% Sr. Unsec. Nts., 12/15/14		360,000		346,500
				8,219,645
Multiline Retail—0.1%
Bon-Ton Stores, Inc. (The), 10.25% Sr. Unsec. Unsub. Nts., 3/15/14		115,000		117,875
Consumer Staples—2.8%
Food & Staples Retailing—0.0%
Real Time Data Co., 11% Nts., 5/31/091,3,4,5		476,601		—
Food Products—2.8%
American Seafoods Group LLC, 10.75% Sr. Sub. Nts., 5/15/162		925,000		989,750

	Principal
	Amount		Value
Food Products Continued
ASG Consolidated LLC, 14.10% Sr. Nts., 5/15/172,5	$	1,040,591	$	1,004,170
Bumble Bee Acquisition Corp., 9% Sr. Sec. Nts., 12/15/172		695,000		726,275
Pilgrim’s Pride Corp., 7.875% Sr. Nts., 12/15/182		595,000		595,000
Southern States Cooperative, Inc., 11.25% Sr. Nts., 5/15/151		595,000		633,675
				3,948,870
Energy—11.2%
Energy Equipment & Services—2.5%
Frac Tech Services LLC/Frac Tech Finance, Inc., 7.125% Sr. Nts., 11/15/182		190,000		193,325
Global Geophysical Services, Inc., 10.50% Sr. Unsec. Nts., 5/1/17		640,000		640,000
PHI, Inc., 8.625% Sr. Unsec. Nts., 10/15/182		705,000		726,150
Precision Drilling Corp., 6.625% Sr. Unsec. Nts., 11/15/202		565,000		576,300
Thermon Industries, Inc., 9.50% Sr. Sec. Nts., 5/1/172		575,000		615,250
Vantage Drilling Co., 11.50% Sr. Sec. Nts., 8/1/152		605,000		659,450
				3,410,475
Oil, Gas & Consumable Fuels—8.7%
Alon Refining Krotz Springs, Inc., 13.50% Sr. Sec. Nts., 10/15/14		200,000		193,000
Antero Resources Finance Corp., 9.375% Sr. Unsec. Nts., 12/1/17		645,000		678,056
Atlas Energy Resources LLC, 10.75% Sr. Unsec. Nts., 2/1/18		1,090,000		1,336,613
Atlas Pipeline Partners LP, 8.125% Sr. Unsec. Nts., 12/15/15		355,000		367,425
ATP Oil & Gas Corp., 11.875% Sr. Sec. Nts., 5/1/152		1,965,000		1,866,750
Berry Petroleum Co., 8.25% Sr. Sub. Nts., 11/1/16		220,000		230,450
Bill Barrett Corp., 9.875% Sr. Nts., 7/15/16		585,000		644,963
BreitBurn Energy Partners LP, 8.625% Sr. Unsec. Nts., 10/15/202		665,000		671,650
Chaparral Energy, Inc.:
8.875% Sr. Unsec. Nts., 2/1/17		640,000		652,800
9.875% Sr. Nts., 10/1/202		640,000		678,400
Crosstex Energy LP/Crosstex Energy Finance Corp., 8.875% Sr. Unsec. Nts., 2/15/18		75,000		80,719
Linn Energy LLC, 8.625% Sr. Unsec. Nts., 4/15/202		1,145,000		1,239,463
MarkWest Energy Partners LP/MarkWest Energy Finance Corp., 6.75% Sr. Unsec. Nts., 11/1/20		70,000		70,350
Murray Energy Corp., 10.25% Sr. Sec. Nts., 10/15/152		1,575,000		1,661,625
Quicksilver Resources, Inc., 11.75% Sr. Nts., 1/1/16		615,000		719,550
Range Resources Corp., 8% Sr. Unsec. Sub. Nts., 5/15/19		95,000		103,906
SandRidge Energy, Inc.:
8.75% Sr. Unsec. Nts., 1/15/20		560,000		578,200
9.875% Sr. Unsec. Nts., 5/15/162		305,000		324,063
				12,097,983
Financials—6.8%
Capital Markets—3.2%
American General Finance, 6.90% Nts., Series J, 12/15/17		535,000		434,688
Berry Plastics Holding Corp., 10.25% Sr. Unsec. Sub. Nts., 3/1/16		300,000		295,875
Nationstar Mortgage LLC/Nationstar Capital Corp., 10.875% Sr. Nts., 4/1/152		2,475,000		2,444,063
Nuveen Investments, Inc., 5.50% Sr. Unsec. Nts., 9/15/15		535,000		461,438
Pinafore LLC/Pinafore, Inc., 9% Sr. Sec. Nts., 10/1/182		715,000		775,775
				4,411,839
Commercial Banks—0.5%
CIT Group, Inc., 7% Sr. Sec. Bonds, 5/1/17		645,000		648,225
Consumer Finance—0.4%
TMX Finance LLC/TitleMax Finance Corp., 13.25% Sr. Sec. Nts., 7/15/152		570,000		629,850
Diversified Financial Services—0.7%
GMAC LLC, 8% Sr. Unsec. Nts., 11/1/31		375,000		405,938
ING Groep NV, 5.775% Jr. Unsec. Sub. Perpetual Bonds6		695,000		601,175
				1,007,113
Insurance—0.8%
International Lease Finance Corp.:
5.875% Unsec. Unsub. Nts., 5/1/13		205,000		208,331
8.625% Sr. Nts., 9/15/152		410,000		441,775
8.75% Sr. Unsec. Unsub. Nts., 3/15/172		350,000		376,250
8.875% Sr. Unsec. Nts., 9/1/17		70,000		75,863
				1,102,219

	Principal
	Amount		Value
Real Estate Management & Development—1.2%
Realogy Corp., 10.50% Sr. Unsec. Nts., 4/15/14	$	1,085,000	$	1,071,438
Wallace Theater Holdings, Inc., 12.50% Sr. Sec. Nts., 6/15/131,7		530,000		541,925
				1,613,363
Health Care—6.1%
Health Care Equipment & Supplies—2.1%
Accellent, Inc., 10% Sr. Sub. Nts., 11/1/172		570,000		540,075
Alere, Inc., 8.625% Sr. Sub. Nts., 10/1/182		245,000		249,288
Biomet, Inc.:
10.375% Sr. Unsec. Nts., 10/15/175		460,000		504,850
11.625% Sr. Unsec. Sub. Nts., 10/15/17		275,000		305,250
DJO Finance LLC/DJO Finance Corp., 9.75% Sr. Sub. Nts., 10/15/172		520,000		538,200
Inverness Medical Innovations, Inc., 7.875% Sr. Unsec. Unsub. Nts., 2/1/16		385,000		387,888
Universal Hospital Services, Inc., 8.50% Sr. Sec. Nts., 6/1/155		350,000		361,375
				2,886,926
Health Care Providers & Services—3.0%
Capella Healthcare, Inc., 9.25% Sr. Unsec. Nts., 7/1/172		95,000		100,938
Catalent Pharma Solutions, Inc., 10.25% Sr. Unsec. Nts., 4/15/155		495,151		502,578
Gentiva Health Services, Inc., 11.50% Sr. Unsec. Unsub. Nts., 9/1/18		575,000		629,625
HCA, Inc., 6.375% Nts., 1/15/15		380,000		375,250
HEALTHSOUTH Corp.:
7.25% Sr. Unsec. Nts., 10/1/18		350,000		357,875
7.75% Sr. Unsec. Nts., 9/15/22		130,000		134,550
inVentiv Health, Inc., 10% Sr. Unsec. Nts., 8/15/182		600,000		603,000
Multiplan, Inc., 9.875% Sr. Nts., 9/1/182		460,000		489,900
OnCure Holdings, Inc., 11.75% Sr. Sec. Nts., 5/15/172		265,000		251,750
Radiation Therapy Services, Inc., 9.875% Sr. Sub. Nts., 4/15/172		235,000		235,588
UHS Escrow Corp., 7% Sr. Nts., 10/1/182		55,000		56,650
Vanguard Health Holding Co. II LLC/ Vanguard Holding Co. II, Inc., 8% Sr. Nts., 2/1/18		375,000		386,250
				4,123,954
Health Care Technology—0.2%
MedAssets, Inc., 8% Sr. Nts., 11/15/182		225,000		227,250
Pharmaceuticals—0.8%
Mylan, Inc., 6% Sr. Nts., 11/15/182		200,000		197,000
Valeant Pharmaceuticals International, Inc., 6.875% Sr. Unsec. Nts., 12/1/182		190,000		189,525
Warner Chilcott Co. LLC, 7.75% Sr. Nts., 9/15/182		800,000		812,000
				1,198,525
Industrials—12.8%
Aerospace & Defense—3.7%
BE Aerospace, Inc., 6.875% Sr. Nts., 10/1/20		140,000		145,250
DynCorp International, Inc., 10.375% Sr. Unsec. Nts., 7/1/172		1,210,000		1,246,300
Hawker Beechcraft Acquisition Co. LLC, 8.50% Sr. Unsec. Nts., 4/1/15		1,435,000		1,072,663
TransDigm, Inc., 7.75% Sr. Sub. Nts., 12/15/182		1,585,000		1,648,400
Triumph Group, Inc., 8.625% Sr. Unsec. Nts., 7/15/18		895,000		982,263
				5,094,876
Air Freight & Logistics—0.4%
AMGH Merger Sub, Inc., 9.25% Sr. Sec. Nts., 11/1/182		510,000		538,050
Airlines—0.7%
Delta Air Lines, Inc., 12.25% Sr. Sec. Nts., 3/15/152		915,000		1,036,238
Building Products—1.2%
Associated Materials LLC, 9.125% Sr. Sec. Nts., 11/1/172		265,000		277,588
Ply Gem Industries, Inc., 13.125% Sr. Unsec. Sub. Nts., 7/15/14		1,225,000		1,307,688
Roofing Supply Group LLC/Roofing Supply Finance, Inc., 8.625% Sr. Sec. Nts., 12/1/172		75,000		77,625
				1,662,901
Commercial Services & Supplies—0.7%
American Pad & Paper Co., 13% Sr. Sub. Nts., Series B, 11/15/053,4		200,000		—
West Corp.:
7.875% Sr. Nts., 1/15/192		305,000		311,100
8.625% Sr. Unsec. Nts., 10/1/182		635,000		676,275
				987,375
Industrial Conglomerates—0.5%
Sequa Corp., 11.75% Sr. Unsec. Nts., 12/1/152		600,000		645,000
Machinery—2.1%
Cleaver-Brooks, Inc., 12.25% Sr. Sec. Nts., 5/1/162		590,000		629,088

	Principal
	Amount		Value
Machinery Continued
Manitowoc Co., Inc. (The), 8.50% Sr. Unsec. Nts., 11/1/20	$	685,000	$	731,238
Terex Corp., 8% Sr. Unsec. Sub. Nts., 11/15/17		1,260,000		1,278,900
Thermadyne Holdings Corp., 9% Sr. Sec. Nts., 12/15/172		335,000		347,144
				2,986,370
Marine—0.7%
Marquette Transportation Co., 10.875% Sr. Sec. Nts., 1/15/172		725,000		743,125
Navios Maritime Acquisition Corp., 8.625% Sr. Sec. Nts., 11/1/172		175,000		179,813
				922,938
Professional Services—0.7%
Altegrity, Inc., 10.50% Sr. Unsec. Sub. Nts., 11/1/152		855,000		881,719
TransUnion LLC/TransUnion Financing Corp., 11.375% Sr. Unsec. Nts., 6/15/182		150,000		171,750
				1,053,469
Road & Rail—1.6%
Hertz Corp., 7.50% Sr. Unsec. Nts., 10/15/182		1,265,000		1,318,763
Western Express, Inc., 12.50% Sr. Sec. Nts., 4/15/152		1,020,000		907,800
				2,226,563
Trading Companies & Distributors—0.5%
Ashtead Capital, Inc., 9% Nts., 8/15/161		220,000		230,450
United Rentals North America, Inc.:
8.375% Sr. Unsec. Sub. Nts., 9/15/20		115,000		117,588
9.25% Sr. Unsec. Unsub. Nts., 12/15/19		275,000		307,313
				655,351
Information Technology—7.7%
Computers & Peripherals—0.7%
CDW LLC/CDW Finance Corp., 11% Sr. Unsec. Nts., 10/12/15		310,000		323,175
Seagate HDD Cayman, 6.875% Sr. Unsec. Nts., 5/1/202		650,000		624,000
				947,175
Electronic Equipment & Instruments—0.5%
RBS Global, Inc./Rexnord Corp., 11.75% Sr. Unsec. Sub. Nts., 8/1/16		660,000		711,150
Internet Software & Services—1.9%
Bankrate, Inc., 11.75% Sr. Sec. Nts., 7/15/152		370,000		412,550
ITC DeltaCom, Inc., 10.50% Sr. Sec. Nts., 4/1/16		1,245,000		1,360,163
Telcordia Technologies, Inc., 11% Sr. Sec. Nts., 5/1/182		945,000		954,450
				2,727,163
IT Services—2.0%
Ceridian Corp., 11.25% Sr. Unsec. Nts., 11/15/15		535,000		532,325
First Data Corp.:
8.875% Sr. Sec. Nts., 8/15/202		570,000		604,200
9.875% Sr. Unsec. Nts., 9/24/15		1,260,000		1,206,450
SunGard Data Systems, Inc.:
7.375% Sr. Unsec. Nts., 11/15/182		190,000		191,900
7.625% Sr. Unsec. Nts., 11/15/202		190,000		193,325
				2,728,200
Semiconductors & Semiconductor Equipment—2.6%
Advanced Micro Devices, Inc., 7.75% Sr. Unsec. Nts., 8/1/202		315,000		328,388
Amkor Technology, Inc., 7.375% Sr. Unsec. Nts., 5/1/18		345,000		360,525
Freescale Semiconductor, Inc.:
9.25% Sr. Sec. Nts., 4/15/182		395,000		436,475
10.75% Sr. Unsec. Nts., 8/1/202		1,065,000		1,166,175
NXP BV/NXP Funding LLC:
7.875% Sr. Sec. Nts., 10/15/14		375,000		391,875
9.50% Sr. Unsec. Unsub. Nts., 10/15/15		625,000		670,313
9.75% Sr. Sec. Nts., 8/1/182		255,000		288,150
				3,641,901
Materials—9.8%
Chemicals—3.5%
Ferro Corp., 7.875% Sr. Unsec. Nts., 8/15/18		635,000		673,100
Hexion U.S. Finance Corp./Hexion Nova Scotia Finance ULC:
8.875% Sr. Sec. Nts., 2/1/18		950,000		1,020,063
9% Sr. Sec. Nts., 11/15/202		350,000		371,000
Huntsman International LLC:
8.625% Sr. Sub. Nts., 3/15/212		70,000		75,950
8.625% Sr. Unsec. Sub. Nts., 3/15/20		860,000		939,550
Momentive Performance Materials, Inc.:
9% Sec. Nts., 1/15/212		695,000		734,963
11.50% Sr. Unsec. Sub. Nts., 12/1/16		605,000		659,450
Nalco Co., 6.625% Sr. Nts., 1/15/192		120,000		123,300
Rhodia SA, 6.875% Sr. Nts., 9/15/202		230,000		234,313
				4,831,689
Containers & Packaging—1.2%
Berry Plastics Corp., 9.75% Sr. Sec. Nts., 1/15/212		940,000		935,300
Jefferson Smurfit Corp. (Escrow):
7.50% Sr. Unsec. Unsub. Nts., 6/1/133,4		205,000		7,688
8.25% Sr. Unsec. Nts., 10/1/123,4		595,000		22,313

	Principal
	Amount		Value
Containers & Packaging Continued
Smurfit-Stone Container Corp. (Escrow):
8% Sr. Unsec. Unsub. Nts., 3/15/173,4	$	395,000	$	18,763
8.375% Sr. Nts., 7/1/123,4		205,000		7,688
Solo Cup Co., 8.50% Sr. Sub. Nts., 2/15/14		755,000		683,275
				1,675,027
Metals & Mining—0.5%
Edgen Murray Corp., 12.25% Sr. Sec. Nts., 1/15/15		770,000		673,750
Paper & Forest Products—4.6%
ABI Escrow Corp., 10.25% Sr. Sec. Nts., 10/15/182		535,000		588,500
Abitibi-Consolidated Co. of Canada (Escrow):
6% Sr. Unsec. Unsub. Nts., 6/20/133,4		445,000		5,006
7.75% Sr. Unsec. Bonds, 6/15/113,4		225,000		2,531
8.375% Sr. Unsec. Sub. Nts., 4/1/153,4		615,000		6,919
8.85% Unsec. Bonds, 8/1/303,4		220,000		2,750
Ainsworth Lumber Co. Ltd., 11% Sr. Unsec. Unsub. Nts., 7/29/152,5		794,375		750,684
Appleton Papers, Inc., 10.50% Sr. Sec. Nts., 6/15/152		1,265,000		1,258,675
Bowater Pulp & Paper Canada, Inc., 10.60% Sr. Unsec. Nts., 1/15/113,4		315,000		85,050
Bowater, Inc. (Escrow):
6.50% Sr. Unsec. Nts., 6/15/133,4		725,000		32,625
9% Sr. Unsec. Nts., 8/1/093,4		185,000		8,325
Catalyst Paper Corp., 11% Sr. Sec. Nts., 12/15/162		847,000		802,533
Mercer International, Inc., 9.50% Sr. Unsec. Nts., 12/1/172		570,000		588,525
NewPage Corp., 11.375% Sr. Sec. Nts., 12/31/14		1,085,000		1,025,325
Verso Paper Holdings LLC, 11.375% Sr. Unsec. Sub. Nts., Series B, 8/1/16		1,310,000		1,319,825
				6,477,273
Telecommunication Services—5.7%
Diversified Telecommunication Services—3.4%
Broadview Networks Holdings, Inc., 11.375% Sr. Sec. Nts., 9/1/12		340,000		334,050
Cincinnati Bell, Inc.:
8.25% Sr. Nts., 10/15/17		305,000		303,475
8.75% Sr. Unsec. Sub. Nts., 3/15/18		325,000		306,313
Intelsat Bermuda Ltd.:
11.25% Sr. Unsec. Nts., 2/4/17		635,000		695,325
12.50% Sr. Unsec. Nts., 2/4/175		318,750		353,813
Intelsat Jackson Holdings SA, 7.25% Sr. Unsec. Nts., 10/15/202		175,000		177,625
Level 3 Financing, Inc., 9.25% Sr. Unsec. Unsub. Nts., 11/1/14		1,125,000		1,122,188
PAETEC Holding Corp., 9.50% Sr. Unsec. Unsub. Nts., 7/15/15		1,085,000		1,128,400
Windstream Corp., 8.125% Sr. Unsec. Unsub. Nts., 9/1/18		305,000		321,775
Winstar Communications, Inc., 12.75% Sr. Nts., 4/15/103,4		1,000,000		1
				4,742,965
Wireless Telecommunication Services—2.3%
Cricket Communications, Inc., 7.75% Sr. Unsec. Nts., 10/15/202		1,310,000		1,251,050
MetroPCS Wireless, Inc.:
6.625% Sr. Unsec. Nts., 11/15/20		680,000		649,400
7.875% Sr. Unsec. Nts., 9/1/18		1,165,000		1,214,513
Teligent, Inc., 11.50% Sr. Nts., 12/1/083,4		400,000		—
				3,114,963
Utilities—5.5%
Electric Utilities—2.1%
Edison Mission Energy, 7% Sr. Unsec. Nts., 5/15/17		945,000		753,638
Energy Future Intermediate Holding Co. LLC, 10% Sr. Sec. Nts., 12/1/20		682,000		706,738
Texas Competitive Electric Holdings Co. LLC:
10.25% Sr. Unsec. Nts., Series A, 11/1/15		2,110,000		1,202,700
10.25% Sr. Unsec. Nts., Series B, 11/1/15		290,000		163,850
				2,826,926
Energy Traders—3.0%
Dynegy Holdings, Inc., 8.375% Sr. Unsec. Nts., 5/1/16		770,000		579,425
Energy Future Holdings Corp., 10% Sr. Sec. Nts., 1/15/202		625,000		646,108
Foresight Energy LLC, 9.625% Sr. Unsec. Nts., 8/15/172		1,295,000		1,385,650
GenOn Escrow Corp.:
9.50% Sr. Unsec. Nts., 10/15/182		355,000		354,556
9.875% Sr. Nts., 10/15/202		355,000		354,113
United Maritime Group LLC, 11.75% Sr. Sec. Nts., 6/15/15		875,000		881,563
				4,201,415
Gas Utilities—0.4%
Ferrellgas LP/Ferrellgas Finance Corp., 6.50% Sr. Nts., 5/1/212		570,000		558,600
Total Corporate Bonds and Notes (Cost $119,574,530)				121,099,217

	Shares			Value
Preferred Stocks—2.1%
Ally Financial, Inc., 7%, Non-Vtg.2		1,822		$	1,722,075
AmeriKing, Inc., 13% Cum. Sr. Exchangeable, Non-Vtg.4,5		13,764			—
Eagle-Picher Holdings, Inc., 11.75% Cum. Exchangeable, Series B, Non-Vtg.4		8,000			—
Greektown Holdings LLC, Preferred4		11,550			1,226,957
ICG Holdings, Inc., 14.25% Exchangeable, Non-Vtg.4,5		342			—
Total Preferred Stocks (Cost $3,770,026)					2,949,032
Common Stocks—4.1%
AbitibiBowater, Inc.4		25,726			608,934
American Media Operations, Inc.4		58,065			946,791
American Media, Inc.1,4		9,424			1
Charter Communications, Inc., Cl. A4		26,844			1,045,305
Global Aviation Holdings, Inc.4		300			3,000
Greektown Superholdings, Inc.4		874			86,369
Kaiser Aluminum Corp.		458			22,941
Orbcomm, Inc.4		1,127			2,919
Smurfit-Stone Container Corp.4		67,428			1,726,157
Visteon Corp.4		18,823			1,270,967
Total Common Stocks (Cost $6,607,940)					5,713,384
	Units
Rights, Warrants and Certificates—0.1%
ASG Warrant Corp. Wts., Strike Price $0.01, Exp. 5/15/181,4		1,030			128,750
Global Aero Logistics, Inc. Wts., Strike Price $10, Exp. 2/28/114		570			6
MediaNews Group, Inc. Wts., Strike Price $0.001, Exp. 3/19/17		11,017			397
Total Rights, Warrants and Certificates (Cost $53,389)					129,153
	Principal
	Amount			Value
Loan Participations—1.9%
Entegra Holdings LLC, Sr. Sec. Credit Facilities 3rd Lien Term Loan:
Tranche B, 10/19/155,8,9	$	853,848		$	508,467
Tranche B, 3.745%, 10/19/155,7		459,727			273,767
Tranche B, 3.745%, 10/19/155,7,8		1,054,641			628,039
Nuveen Investments, Inc., Sr. Sec. Credit Facilities 2nd Lien Term Loan, 12.50%, 7/20/158		1,116,875			1,211,111
Polymer Group, Inc., Sr. Sec. Credit Facilities 1st Lien Term Loan, 0.75%, 10/4/117		760,000			—
Total Loan Participations (Cost $2,405,869)					2,621,384
	Shares
Investment Companies—3.0%
JPMorgan U.S. Treasury Plus Money Market Fund, Agency Shares, 0.00%10,11		91,595			91,595
Oppenheimer Institutional Money Market Fund, Cl. E, 0.21%10,12		4,033,152			4,033,152
Total Investment Companies (Cost $4,124,747)					4,124,747
Total Investments, at Value (Cost $136,536,501)		98.4	%		136,636,917
Other Assets Net of Liabilities		1.6			2,246,095
Net Assets		100.0	%	$	138,883,012

Footnotes to Statement of Investments

1. Restricted security. The aggregate value of restricted securities as of December 31, 2010 was $3,286,771, which represents 2.37% of the Fund’s net assets. See Note 6 of the accompanying Notes. Information concerning restricted securities is as follows:

						Unrealized
	Acquisition					Appreciation
Security	Date	Cost		Value		(Depreciation)
American Media, Inc.	2/2/09	$	208,776	$	1	$	(208,775	)
ASG Warrant Corp. Wts., Strike Price $0.01, Exp. 5/15/18	4/28/10-8/19/10		49,050		128,750		79,700
Ashtead Capital, Inc., 9% Nts., 8/15/16	12/18/09-1/25/10		221,070		230,450		9,380
Interactive Data Corp., 10.25% Sr. Nts., 8/1/18	7/20/10		230,000		251,850		21,850
Real Time Data Co., 11% Nts., 5/31/09	6/30/99-5/31/01		365,810		—		(365,810	)
Southern States Cooperative, Inc., 11.25% Sr. Nts., 5/15/15	4/28/10-9/23/10		599,122		633,675		34,553
Tower Automotive Holdings USA LLC/TA Holdings Finance, Inc., 10.625% Sr. Sec. Nts., 9/1/17	8/13/10-12/31/10		1,363,564		1,500,120		136,556
Wallace Theater Holdings, Inc., 12.50% Sr. Sec. Nts., 6/15/13	9/30/10-10/6/10		538,963		541,925		2,962
		$	3,576,355	$	3,286,771	$	(289,584	)

2.	Represents securities sold under Rule 144A, which are exempt from registration under the Securities Act of 1933, as amended. These securities have been determined to be liquid under guidelines established by the Board of Trustees. These securities amount to $61,282,528 or 44.13% of the Fund’s net assets as of December 31, 2010.
3.	Issue is in default. See Note 1 of the accompanying Notes.
4.	Non-income producing security.
5.	Interest or dividend is paid-in-kind, when applicable.
6.	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.
7.	Represents the current interest rate for a variable or increasing rate security.
8.	When-issued security or delayed delivery to be delivered and settled after December 31, 2010. See Note 1 of the accompanying Notes.
9.	This Senior Loan will settle after December 31, 2010, at which time the interest rate will be determined.
10.	Rate shown is the 7-day yield as of December 31, 2010.
11.	Interest rate is less than 0.0005%.
12.	Is or was an affiliate, as defined in the Investment Company Act of 1940, at or during the period ended December 31, 2010, 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, 2009		Additions		Reductions		December 31, 2010
Oppenheimer Institutional Money Market Fund, Cl. E		2,092,310		101,210,463		99,269,621		4,033,152

	Value		Income
Oppenheimer Institutional Money Market Fund, Cl. E	$	4,033,152	$	14,983

Valuation Inputs

Various data inputs are used in determining the value of each of the Fund’s investments as of the reporting period end. These data inputs are categorized in the following hierarchy under applicable financial accounting standards:

1)	Level 1—unadjusted quoted prices in active markets for identical assets or liabilities (including securities actively traded on a securities exchange)
2)	Level 2—inputs other than unadjusted quoted prices that are observable for the asset or liability (such as unadjusted quoted prices for similar assets and market corroborated inputs such as interest rates, prepayment speeds, credit risks, etc.)
3)	Level 3—significant unobservable inputs (including the Manager’s own judgments about assumptions that market participants would use in pricing the asset or liability).

The table below categorizes amounts that are included in the Fund’s Statement of Assets and Liabilities as of December 31, 2010 based on valuation input level:

					Level 3—
	Level 1—		Level 2—		Significant
	Unadjusted		Other Significant		Unobservable
	Quoted Prices		Observable Inputs		Inputs		Value
Assets Table
Investments, at Value:
Corporate Bonds and Notes	$	—	$	121,012,135	$	87,082	$	121,099,217
Preferred Stocks		—		1,722,075		1,226,957		2,949,032
Common Stocks
Consumer Discretionary		1,045,305		1,270,967		1,033,161		3,349,433
Industrials		—		—		3,000		3,000
Information Technology		2,919		—		—		2,919
Materials		2,358,032		—		—		2,358,032
Rights, Warrants and Certificates		—		128,750		403		129,153
Loan Participations		—		2,621,384		—		2,621,384
Investment Companies		4,124,747		—		—		4,124,747
Total Assets	$	7,531,003	$	126,755,311	$	2,350,603	$	136,636,917

Currency contracts and forwards, if any, are reported at their unrealized appreciation/depreciation at measurement date, which represents the change in the contract’s value from trade date. Futures, if any, are reported at their variation margin at measurement date, which represents the amount due to/from the Fund at that date. All additional assets and liabilities included in the above table are reported at their market value at measurement date.

The following is a reconciliation of assets in which significant unobservable inputs (level 3) were used in determining fair value:

					Change in			Accretion/
					unrealized			(amortization)					Transfers in
	Value as of		Realized		appreciation/			of premium/		Net purchases			and/or out of		Value as of
	December 31, 2009		gain		depreciation			discount1		(sales)			Level 3		December 31, 2010
Assets Table
Investments, at Value:
Corporate Bonds and Notes	$	—	$	—	$	1,657		$	2	$	85,413		$	10	$	87,082
Preferred Stocks		—		—		71,957			—		1,155,000			—		1,226,957
Common Stocks
Consumer Discretionary		—		—		(1,699,466	)		—		2,732,533			94		1,033,161
Industrials		4,647		1,647		(1,647	)				(1,647	)		—		3,000
Rights, Warrants and Certificates		6		—		—					—			397		403
Total Assets	$	4,653	$	1,647	$	(1,627,499	)	$	2	$	3,971,299		$	501	$	2,350,603

1. Included in net investment income.

See the accompanying Notes for further discussion of the methods used in determining value of the Fund’s investments, and a summary of changes to the valuation methodologies, if any, during the reporting period.

STATEMENT OF ASSETS AND LIABILITIES December 31, 2010

Assets
Investments, at value—see accompanying statement of investments:
Unaffiliated companies (cost $132,503,349)	$	132,603,765
Affiliated companies (cost $4,033,152)		4,033,152
		136,636,917
Receivables and other assets:
Interest, dividends and principal paydowns		2,816,907
Investments sold (including $84,766 sold on a when-issued or delayed delivery basis)		322,890
Shares of beneficial interest sold		2,394
Other		13,549
Total assets		139,792,657
Liabilities
Payables and other liabilities:
Investments purchased (including $504,501 purchased on a when-issued or delayed delivery basis)		673,444
Shares of beneficial interest redeemed		61,684
Shareholder communications		57,067
Distribution and service plan fees		45,053
Legal, auditing and other professional fees		33,382
Trustees’ compensation		11,822
Transfer and shareholder servicing agent fees		11,652
Other		15,541
Total liabilities		909,645
Net Assets	$	138,883,012
Composition of Net Assets
Par value of shares of beneficial interest	$	65,125
Additional paid-in capital		356,247,273
Accumulated net investment income		11,799,334
Accumulated net realized loss on investments		(229,329,136	)
Net unrealized appreciation on investments		100,416
Net Assets	$	138,883,012
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 $61,563,410 and 28,967,138 shares of beneficial interest outstanding)	$	2.13
Service Shares:
Net asset value, redemption price per share and offering price per share (based on net assets of $63,712,946 and 29,839,916 shares of beneficial interest outstanding)	$	2.14
Class 3 Shares:
Net asset value, redemption price per share and offering price per share (based on net assets of $6,033,911 and 2,816,850 shares of beneficial interest outstanding)	$	2.14
Class 4 Shares:
Net asset value, redemption price per share and offering price per share (based on net assets of $7,572,745 and 3,501,523 shares of beneficial interest outstanding)	$	2.16

STATEMENT OF OPERATIONS For the Year Ended December 31, 2010

Investment Income
Interest	$	13,110,036
Dividends:
Unaffiliated companies		38,472
Affiliated companies		14,983
Total investment income		13,163,491
Expenses
Management fees		1,018,717
Distribution and service plan fees:
Service shares		159,158
Class 4 shares		18,190
Transfer and shareholder servicing agent fees:
Non-Service shares		59,600
Service shares		63,670
Class 3 shares		5,280
Class 4 shares		7,278
Shareholder communications:
Non-Service shares		35,306
Service shares		37,424
Class 3 shares		3,268
Class 4 shares		4,292
Custodian fees and expenses		15,607
Trustees’ compensation		10,286
Administration service fees		1,500
Other		72,842
Total expenses		1,512,418
Less waivers and reimbursements of expenses		(405,850	)
Net expenses		1,106,568
Net Investment Income		12,056,923
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investment from unaffiliated companies		7,123,512
Swap contracts		(845,604	)
Increase from payment by affiliate		429
Net realized gain		6,278,337
Net change in unrealized appreciation/depreciation on:
Investments		(1,066,033	)
Swap contracts		816,702
Net change in unrealized appreciation/depreciation		(249,331	)
Net Increase in Net Assets Resulting from Operations	$	18,085,929

STATEMENTS OF CHANGES IN NET ASSETS

Year Ended December 31,	2010			2009
Operations
Net investment income	$	12,056,923		$	13,178,458
Net realized gain (loss)		6,278,337			(120,834,824	)
Net change in unrealized appreciation/depreciation		(249,331	)		134,090,272
Net increase in net assets resulting from operations		18,085,929			26,433,906
Dividends and/or Distributions to Shareholders
Dividends from net investment income:
Non-Service shares		(3,674,586	)		—
Service shares		(3,877,767	)		—
Class 3 shares		(304,126	)		—
Class 4 shares		(385,856	)		—
		(8,242,335	)		—
Beneficial Interest Transactions
Net increase (decrease) in net assets resulting from beneficial interest transactions:
Non-Service shares		(10,126,348	)		(54,571,861	)
Service shares		(5,260,981	)		7,675,335
Class 3 shares		929,124			2,128,095
Class 4 shares		(118,291	)		1,786,116
		(14,576,496	)		(42,982,315	)
Net Assets
Total decrease		(4,732,902	)		(16,548,409	)
Beginning of period		143,615,914			160,164,323
End of period (including accumulated net investment income of $11,799,334 and $10,001,371, respectively)	$	138,883,012		$	143,615,914

FINANCIAL HIGHLIGHTS

Non-Service Shares    Year Ended December 31,	2010			2009			2008			2007			2006
Per Share Operating Data
Net asset value, beginning of period	$	1.98		$	1.58		$	7.95		$	8.55		$	8.44
Income (loss) from investment operations:
Net investment income1		.18			.17			.54			.57			.58
Net realized and unrealized gain (loss)		.10			.23			(6.44	)		(.56	)		.17
Total from investment operations		.28			.40			(5.90	)		.01			.75
Dividends and/or distributions to shareholders:
Dividends from net investment income		(.13	)		—			(.47	)		(.61	)		(.64	)
Net asset value, end of period	$	2.13		$	1.98		$	1.58		$	7.95		$	8.55
Total Return, at Net Asset Value2		14.81	%		25.32	%		(78.67	)%		(0.10	)%		9.42	%
Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	61,563		$	67,385		$	111,040		$	294,819		$	361,445
Average net assets (in thousands)	$	59,598		$	71,782		$	211,186		$	335,702		$	365,154
Ratios to average net assets:3
Net investment income		9.01	%		9.78	%		9.30	%		6.96	%		7.05	%
Total expenses4		0.98	%		0.94	%		0.80	%		0.75	%		0.74	%
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses		0.69	%		0.57	%		0.78	%		0.74	%		0.74	%
Portfolio turnover rate		132	%		128	%		53	%5		67	%5		57	%

1.	Per share amounts calculated based on the average shares outstanding during the period.
2.	Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
3.	Annualized for periods less than one full year.
4.	Total expenses including indirect expenses from affiliated fund were as follows:

Year Ended December 31, 2010	0.98	%
Year Ended December 31, 2009	0.96	%
Year Ended December 31, 2008	0.80	%
Year Ended December 31, 2007	0.76	%
Year Ended December 31, 2006	0.74	%

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, 2008	$	40,240,084	$	41,196,921
Year Ended December 31, 2007	$	30,798,147	$	24,096,458

Service Shares    Year Ended December 31,	2010			2009			2008			2007			2006
Per Share Operating Data
Net asset value, beginning of period	$	1.99		$	1.58		$	7.89		$	8.50		$	8.39
Income (loss) from investment operations:
Net investment income1		.17			.16			.54			.55			.56
Net realized and unrealized gain (loss)		.10			.25			(6.40	)		(.57	)		.17
Total from investment operations		.27			.41			(5.86	)		(.02	)		.73
Dividends and/or distributions to shareholders:
Dividends from net investment income		(.12	)		—			(.45	)		(.59	)		(.62	)
Net asset value, end of period	$	2.14		$	1.99		$	1.58		$	7.89		$	8.50
Total Return, at Net Asset Value2		14.44	%		25.95	%		(78.57	)%		(0.47	)%		9.23	%
Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	63,713		$	64,440		$	43,375		$	157,333		$	173,299
Average net assets (in thousands)	$	63,661		$	54,202		$	116,236		$	169,569		$	160,703
Ratios to average net assets:3
Net investment income		8.76	%		9.60	%		9.13	%		6.71	%		6.80	%
Total expenses4		1.23	%		1.21	%		1.05	%		1.01	%		1.00	%
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses		0.94	%		0.80	%		1.03	%		1.00	%		1.00	%
Portfolio turnover rate		132	%		128	%		53	%5		67	%5		57	%

1.	Per share amounts calculated based on the average shares outstanding during the period.
2.	Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
3.	Annualized for periods less than one full year.
4.	Total expenses including indirect expenses from affiliated fund were as follows:

Year Ended December 31, 2010	1.23	%
Year Ended December 31, 2009	1.23	%
Year Ended December 31, 2008	1.05	%
Year Ended December 31, 2007	1.02	%
Year Ended December 31, 2006	1.00	%

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, 2008	$	40,240,084	$	41,196,921
Year Ended December 31, 2007	$	30,798,147	$	24,096,458

Class 3 Shares    Year Ended December 31,	2010			2009			2008			20071
Per Share Operating Data
Net asset value, beginning of period	$	1.99		$	1.57		$	7.98		$	8.26
Income (loss) from investment operations:
Net investment income2		.18			.17			.56			.37
Net realized and unrealized gain (loss)		.10			.25			(6.50	)		(.65	)
Total from investment operations		.28			.42			(5.94	)		(.28	)
Dividends and/or distributions to shareholders:
Dividends from net investment income		(.13	)		—			(.47	)		—
Net asset value, end of period	$	2.14		$	1.99		$	1.57		$	7.98
Total Return, at Net Asset Value3		14.69	%		26.75	%		(78.89	)%		(3.39	)%
Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	6,034		$	4,684		$	1,582		$	4,921
Average net assets (in thousands)	$	5,279		$	3,568		$	5,292		$	3,750
Ratios to average net assets:4
Net investment income		8.97	%		9.86	%		9.29	%		6.90	%
Total expenses5		0.99	%		0.97	%		0.80	%		0.76	%
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses		0.69	%		0.53	%		0.78	%		0.75	%
Portfolio turnover rate		132	%		128	%		53	%6		67	%6

1.	For the period from May 1, 2007 (inception of offering) to December 31, 2007.
2.	Per share amounts calculated based on the average shares outstanding during the period.
3.	Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
4.	Annualized for periods less than one full year.
5.	Total expenses including indirect expenses from affiliated fund were as follows:

Year Ended December 31, 2010	0.99	%
Year Ended December 31, 2009	0.99	%
Year Ended December 31, 2008	0.80	%
Period Ended December 31, 2007	0.77	%

6. 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, 2008	$	40,240,084	$	41,196,921
Period Ended December 31, 2007	$	30,798,147	$	24,096,458

Class 4 Shares    Year Ended December 31,	2010			2009			2008			20071
Per Share Operating Data
Net asset value, beginning of period	$	2.01		$	1.59		$	7.97		$	8.26
Income (loss) from investment operations:
Net investment income2		.18			.16			.54			.36
Net realized and unrealized gain (loss)		.09			.26			(6.46	)		(.65	)
Total from investment operations		.27			.42			(5.92	)		(.29	)
Dividends and/or distributions to shareholders:
Dividends from net investment income		(.12	)		—			(.46	)		—
Net asset value, end of period	$	2.16		$	2.01		$	1.59		$	7.97
Total Return, at Net Asset Value3		14.27	%		26.42	%		(78.63	)%		(3.51	)%
Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	7,573		$	7,107		$	4,167		$	9,476
Average net assets (in thousands)	$	7,278		$	6,285		$	10,658		$	7,201
Ratios to average net assets:4
Net investment income		8.74	%		9.62	%		9.00	%		6.61	%
Total expenses5		1.23	%		1.19	%		1.07	%		1.05	%
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses		0.94	%		0.80	%		1.05	%		1.04	%
Portfolio turnover rate		132	%		128	%		53	%6		67	%6

1.	For the period from May 1, 2007 (inception of offering) to December 31, 2007.
2.	Per share amounts calculated based on the average shares outstanding during the period.
3.	Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
4.	Annualized for periods less than one full year.
5.	Total expenses including indirect expenses from affiliated fund were as follows:

Year Ended December 31, 2010	1.23	%
Year Ended December 31, 2009	1.21	%
Year Ended December 31, 2008	1.07	%
Period Ended December 31, 2007	1.06	%

6. 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, 2008	$	40,240,084	$	41,196,921
Period Ended December 31, 2007	$	30,798,147	$	24,096,458

NOTES TO FINANCIAL STATEMENTS

1. Significant Accounting Policies

Oppenheimer High Income 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 investment objective is to seek a high level of current income from investment in high-yield, fixed-income securities. The Fund’s investment adviser is OppenheimerFunds, Inc. (the “Manager”).

     The Fund offers Non-Service, Service, Class 3 and Class 4 shares. All 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 being designated as Service shares and Class 4 shares are subject to a distribution and service plan. All classes of shares have identical rights and voting privileges with respect to the Fund in general and exclusive voting rights on matters that affect that class alone. Earnings, net assets and net asset value per share may differ 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 Fund assesses a 1% fee on the proceeds of Class 3 and Class 4 shares that are redeemed (either by selling or exchanging to another Oppenheimer fund or other investment option offered through your variable life insurance or variable annuity contract) within 60 days of their purchase. The fee, which is retained by the Fund, is accounted for as an addition to paid-in capital.

     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.

     Each investment asset or liability of the Fund is assigned a level at measurement date based on the significance and source of the inputs to its valuation. Unadjusted quoted prices in active markets for identical securities are classified as “Level 1,” inputs other than unadjusted quoted prices for an asset that are observable are classified as “Level 2” and significant unobservable inputs, including the Manager’s judgment about the assumptions that a market participant would use in pricing an asset or liability, are classified as “Level 3.” The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. A table summarizing the Fund’s investments under these levels of classification is included following the Statement of Investments.

     Securities are valued using unadjusted quoted market prices, when available, as supplied primarily by portfolio pricing services approved by the Board of Trustees or dealers.

     Securities traded on a registered U.S. securities exchange are valued based on the last sale price of the security reported on the principal exchange on which it is traded, prior to the time when the Fund’s assets are valued. Securities whose principal exchange is NASDAQ^® are valued based on the official closing prices 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 current day’s closing “bid” and “asked” prices, and if not, at the current day’s closing bid price. A foreign security traded on a foreign exchange is valued based on the last sale price on the principal exchange on which the security is traded, as identified by the portfolio pricing service used by the Manager, prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the most recent official closing price on the principal exchange on which it is traded.

     Shares of a registered investment company that are not traded on an exchange are valued at that investment company’s net asset value per share.

     U.S. domestic and international debt instruments (including corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed securities) and “money market-type” debt instruments with a remaining maturity in excess of sixty days are valued at the mean between the “bid” and “asked” prices utilizing price quotations obtained from independent pricing services or broker-dealers. Such prices are typically determined based upon information obtained from market participants including reported trade data, broker-dealer price quotations and inputs such as benchmark yields and issuer spreads from identical or similar securities. 

“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.

     In the absence of a readily available unadjusted quoted market price, including for 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 the securities’ respective exchanges, the Manager, acting through its internal valuation committee, in good faith determines the fair valuation of that asset using consistently applied procedures under the supervision of the Board of Trustees (which reviews those fair valuations by the Manager). Those procedures include certain standardized methodologies to fair value securities. Such methodologies include, but are not limited to, pricing securities initially at cost and subsequently adjusting the value based on: changes in company specific fundamentals, changes in an appropriate securities index, or changes in the value of similar securities which may be adjusted for any discounts related to resale restrictions. When possible, such methodologies use observable market inputs such as unadjusted quoted prices of similar securities, observable interest rates, currency rates and yield curves. The methodologies used for valuing securities are not necessarily an indication of the risks associated with investing in those securities.

     There have been no significant changes to the fair valuation methodologies of the Fund during the period.

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 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, 2010, 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	$	504,501
Sold securities		84,766

Credit Risk. The Fund invests in high-yield, non-investment-grade bonds, which may be subject to a greater degree of credit risk. Credit risk relates to the ability of the issuer to meet interest or principal payments or both as they become due. The Fund may acquire securities in default, and is not obligated to dispose of securities whose issuers or underlying obligors subsequently default. Information concerning securities in default as of December 31, 2010 is as follows:

Cost	$	4,625,679
Market Value	$	407,006
Market Value as a % of Net Assets		0.29	%

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. When applicable, the Fund’s investment in IMMF is included in the Statement of Investments. Shares of IMMF are valued at their net asset value per share. 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.

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

The tax components of capital shown in the following table 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
Undistributed	Undistributed		Accumulated		of Securities and Other
Net Investment	Long-Term		Loss		Investments for Federal
Income	Gain		Carryforward1,2,3,4		Income Tax Purposes
$12,095,248	$	—	$	229,091,469	$	244,167

1. As of December 31, 2010, the Fund had $229,091,469 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, 2010, details of the capital loss carryforwards were as follows:

Expiring
2011	$	8,529,303
2012		128,504
2016		48,495,519
2017		171,938,143
Total	$	229,091,469

2.	During the fiscal year ended December 31, 2010, the Fund utilized $4,432,223 of capital loss carryforward to offset capital gains realized in that fiscal year.
3.	During the fiscal year ended December 31, 2009, the Fund did not utilize any capital loss carryforward.
4.	During the fiscal year ended December 31, 2010, $51,629,168 of unused capital loss carryforward expired.

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, 2010. Net assets of the Fund were unaffected by the reclassifications.

			Reduction
	Reduction		to Accumulated
Reduction	to Accumulated Net		Net Realized
to Paid-in Capital	Investment Income		Loss on Investments
$51,628,739	$	2,016,625	$	53,645,364

The tax character of distributions paid during the years ended December 31, 2010 and December 31, 2009 was as follows:

	Year Ended		Year Ended
	December 31, 2010		December 31, 2009
Distributions paid from:
Ordinary income	$	8,242,335	$	—

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, 2010 are noted in the following table. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss.

Federal tax cost of securities	$	136,854,827
Federal tax cost of other investments		26,257
Total federal tax cost	$	136,881,084
Gross unrealized appreciation	$	11,479,090
Gross unrealized depreciation		(11,723,257	)
Net unrealized depreciation	$	(244,167	)

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 with 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. 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, 2010						Year Ended December 31, 2009
	Shares			Amount			Shares			Amount
Non-Service Shares
Sold		11,152,476		$	21,983,381			20,776,611		$	33,067,312
Dividends and/or distributions reinvested		1,954,567			3,674,586			—			—
Redeemed		(18,147,101	)		(35,784,315	)		(56,972,656	)		(87,639,173	)
Net decrease		(5,040,058	)	$	(10,126,348	)		(36,196,045	)	$	(54,571,861	)
Service Shares
Sold		2,939,505		$	5,849,488			10,597,049		$	17,230,535
Dividends and/or distributions reinvested		2,040,930			3,877,767			—			—
Redeemed		(7,528,455	)		(14,988,236	)		(5,702,302	)		(9,555,200	)
Net increase (decrease)		(2,548,020	)	$	(5,260,981	)		4,894,747		$	7,675,335
Class 3 Shares
Sold		2,054,702		$	4,093,320			2,785,296		$	4,527,494
Dividends and/or distributions reinvested		160,066			304,126			—			—
Redeemed		(1,747,107	)		(3,468,322	)1		(1,445,037	)		(2,399,399	)2
Net increase		467,661		$	929,124			1,340,259		$	2,128,095
Class 4 Shares
Sold		1,725,510		$	3,440,558			3,615,090		$	5,889,866
Dividends and/or distributions reinvested		200,967			385,856			—			—
Redeemed		(1,958,189	)		(3,944,705	)1		(2,698,668	)		(4,103,750	)2
Net increase (decrease)		(31,712	)	$	(118,291	)		916,422		$	1,786,116

1.	Net of redemption fees of $3,684 and $7,734 for Class 3 and Class 4 shares, respectively.
2.	Net of redemption fees of $3,548 and $4,585 for Class 3 and Class 4 shares, respectively.

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, 2010, were as follows:

	Purchases		Sales
Investment securities	$	145,915,009	$	141,635,036

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
Up to $200 million	0.75	%
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 fees at an annual rate of 0.10% of the daily net assets of each class of shares. For the year ended December 31, 2010, the Fund paid $136,311 to OFS for services to the Fund.

Distribution and Service Plan for Service Shares and Class 4 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 and Class 4 shares to pay OppenheimerFunds Distributor, Inc. (the “Distributor”), for distribution related services, personal service and account maintenance for the Fund’s Service shares and Class 4 shares. Under the Plan, payments are made periodically at an annual rate of 0.25% of the daily net assets of Service shares and Class 4 shares of the Fund. The Distributor currently uses all of those fees to compensate sponsors 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 and Class 4 shares. These fees are paid out of the Fund’s assets on an on-going basis and increase operating expenses of the Service shares and Class 4 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. From April 1, 2009 through March 31, 2010, the Manager voluntarily waived its advisory fee by 0.26% of the Fund’s average annual net assets. This voluntary waiver was applied after all other waivers and/or reimbursements. During the year ended December 31, 2010, the Manager waived $87,865.

     The Manager has voluntarily agreed to limit the Fund’s total annual operating expenses so that those expenses, as percentages of daily net assets, will not exceed the annual rate of 0.75% for Non-Service and Class 3 shares and 1.00% for Service and Class 4 shares. During the year ended December 31, 2010, the Manager waived fees and/or reimbursed the Fund $136,885, $145,405, $12,356 and $16,771 for Non-Service, Service, Class 3 and Class 4 shares, respectively.

     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, 2010, the Manager waived fees and/or reimbursed the Fund $6,568 for IMMF management fees.

     Some of these undertakings may be modified or terminated at any time; some may not be modified or terminated until after one year from the date of the current prospectus, as indicated therein.

     During the year ended December 31, 2010, the Manager voluntarily reimbursed the Fund $429 for certain transactions. The payment is reported separately in the Statement of Operations and increased the Fund’s total returns by less than 0.01%.

5. Risk Exposures and the Use of Derivative Instruments

The Fund’s investment objectives not only permit the Fund to purchase investment securities, they also allow the Fund to enter into various types of derivatives contracts, including, but not limited to, futures contracts, forward foreign currency exchange contracts, credit default swaps, interest rate swaps, total return swaps, and purchased and written options. In doing so, the Fund will employ strategies in differing combinations to permit it to increase, decrease, or change the level or types of exposure to market risk factors. Central to those strategies are features inherent to derivatives that make them more attractive for this purpose than equity and debt securities: they require little or no initial cash investment, they can focus exposure on only certain selected risk factors, and they may not require the ultimate receipt or delivery of the underlying security (or securities) to the contract. This may allow the Fund to pursue its objectives more quickly and efficiently than if it were to make direct purchases or sales of securities capable of effecting a similar response to market factors.

Market Risk Factors. In accordance with its investment objectives, the Fund may use derivatives to increase or decrease its exposure to one or more of the following market risk factors:

Commodity Risk. Commodity risk relates to the change in value of commodities or commodity indexes as they relate to increases or decreases in the commodities market. Commodities are physical assets that have tangible properties. Examples of these types of assets are crude oil, heating oil, metals, livestock, and agricultural products.

Credit Risk. Credit risk relates to the ability of the issuer to meet interest and principal payments, or both, as they come due. In general, lower-grade, higher-yield bonds are subject to credit risk to a greater extent than lower-yield, higher-quality bonds.

Equity Risk. Equity risk relates to the change in value of equity securities as they relate to increases or decreases in the general market.

Foreign Exchange Rate Risk. Foreign exchange rate risk relates to the change in the U.S. dollar value of a security held that is denominated in a foreign currency. The U.S. dollar value of a foreign currency denominated security will decrease as the dollar appreciates against the currency, while the U.S. dollar value will increase as the dollar depreciates against the currency.

Interest Rate Risk. Interest rate risk refers to the fluctuations in value of fixed-income securities resulting from the inverse relationship between price and yield. For example, an increase in general interest rates will tend to reduce the market value of already issued fixed-income investments, and a decline in general interest rates will tend to increase their value. In addition, debt securities with longer maturities, which tend to have higher yields, are subject to potentially greater fluctuations in value from changes in interest rates than obligations with shorter maturities.

Volatility Risk. Volatility risk refers to the magnitude of the movement, but not the direction of the movement, in a financial instrument’s price over a defined time period. Large increases or decreases in a financial instrument’s price over a relative time period typically indicate greater volatility risk, while small increases or decreases in its price typically indicate lower volatility risk.

     The Fund’s actual exposures to these market risk factors during the period are discussed in further detail, by derivative type, below.

Risks of Investing in Derivatives. The Fund’s use of derivatives can result in losses due to unanticipated changes in the market risk factors and the overall market. In instances where the Fund is using derivatives to decrease, or hedge, exposures to market risk factors for securities held by the Fund, there are also risks that those derivatives may not perform as expected resulting in losses for the combined or hedged positions.

     Derivatives may have little or no initial cash investment relative to their market value exposure and therefore can produce significant gains or losses in excess of their cost. This use of embedded leverage allows the Fund to increase its market value exposure relative to its net assets and can substantially increase the volatility of the Fund’s performance.

     Additional associated risks from investing in derivatives also exist and potentially could have significant effects on the valuation of the derivative and the Fund. Typically, the associated risks are not the risks that the Fund is attempting to increase or decrease exposure to, per its investment objectives, but are the additional risks from investing in derivatives. Examples of these associated risks are liquidity risk, which is the risk that the Fund will not be able to sell the derivative in the open market in a timely manner, and counterparty credit risk, which is the risk that the counterparty will not fulfill its obligation to the Fund. Associated risks can be different for each type of derivative and are discussed by each derivative type in the notes that follow. 

Counterparty Credit Risk. Certain derivative positions are subject to counterparty credit risk, which is the risk that the counterparty will not fulfill its obligation to the Fund. The Fund’s derivative counterparties are financial institutions who are subject to market conditions that may weaken their financial position. The Fund intends to enter into financial transactions with counterparties that the Manager believes to be creditworthy at the time of the transaction.

Credit Related Contingent Features. The Fund’s agreements with derivative counterparties have several credit related contingent features that if triggered would allow its derivatives counterparties to close out and demand payment or additional collateral to cover their exposure from the Fund. Credit related contingent features are established between the Fund and its derivatives counterparties to reduce the risk that the Fund will not fulfill its payment obligations to its counterparties. These triggering features include, but are not limited to, a percentage decrease in the Fund’s net assets and or a percentage decrease in the Fund’s Net Asset Value or NAV. The contingent features are established within the Fund’s International Swap and Derivatives Association, Inc. master agreements which govern certain positions in swaps, over-the-counter options and swaptions, and forward currency exchange contracts for each individual counterparty.

The effect of derivative instruments on the Statement of Operations is as follows:

Amount of Realized Gain or (Loss) Recognized on Derivatives
Derivatives Not Accounted
for as Hedging Instruments	Swap contracts
Credit contracts	$	(845,604	)

Amount of Change in Unrealized Gain or (Loss) Recognized on Derivatives
Derivatives Not Accounted
for as Hedging Instruments	Swap contracts
Credit contracts	$	816,702

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 values of swap contracts are aggregated by positive and negative values and disclosed separately on the Statement of Assets and Liabilities by contracts in unrealized appreciation and depreciation positions. Upfront payments paid or received, if any, affect the value of the respective swap. Therefore, to determine the unrealized appreciation (depreciation) on swaps, upfront payments paid should be subtracted from, while upfront payments received should be added to, the value of contracts reported as an asset on the Statement of Assets and Liabilities. Conversely, upfront payments paid should be added to, while upfront payments received should be subtracted from the value of contracts reported as a liability. 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.

     Swap contract agreements are exposed to the market risk factor of the specific underlying reference asset. Swap contracts are typically more attractively priced compared to similar investments in related cash securities because they isolate the risk to one market risk factor and eliminate the other market risk factors. Investments in cash securities (for instance bonds) have exposure to multiple risk factors (credit and interest rate risk). Because swaps require little or no initial cash investment, they can expose the Fund to substantial risk in the isolated market risk factor.

Credit Default Swap Contracts. A credit default swap is a bilateral contract that enables an investor to buy or sell protection on a debt security against a defined-issuer credit event, such as the issuer’s failure to make timely payments of interest or principal on the debt security, bankruptcy or restructuring. The Fund may enter into credit default swaps either by buying or selling protection on a single security or a basket of securities (the “reference asset”).

     The buyer of protection pays a periodic fee to the seller of protection based on the notional amount of debt securities underlying the swap contract. The seller of protection agrees to compensate the buyer of protection for future potential losses as a result of a credit event on the reference asset. The contract effectively transfers the credit event risk of the reference asset from the buyer of protection to the seller of protection.

     The ongoing value of the contract will fluctuate throughout the term of the contract based primarily on the credit risk of the reference asset. If the credit quality of the reference asset improves relative to the credit quality at contract initiation, the buyer of protection may have an unrealized loss greater than the anticipated periodic fee owed. This unrealized loss would be the result of current credit protection being cheaper than the cost of credit protection at contract initiation. If the buyer elects to terminate the contract prior to its maturity, and there has been no credit event, this unrealized loss will become realized. If the contract is held to maturity, and there has been no credit event, the realized loss will be equal to the periodic fee paid over the life of the contract.

     If there is a credit event, the buyer of protection can exercise its rights under the contract and receive a payment from the seller of protection equal to the notional amount of the reference asset less the market value of the reference asset. Upon exercise of the contract the difference between the value of the underlying reference asset and the notional amount is recorded as realized gain (loss) and is included on the Statement of Operations.

     The Fund has sold credit protection through credit default swaps to increase exposure to the credit risk of individual securities and/or, indexes that are either unavailable or considered to be less attractive in the bond market.

     The Fund has purchased credit protection through credit default swaps to decrease exposure to the credit risk of individual securities and/or, indexes.

     For the year ended December 31, 2010, the Fund had average notional amounts of $506,154 and $1,066,154 on credit default swaps to buy protection and credit default swaps to sell protection, respectively.

     Additional associated risks to the Fund include counterparty credit risk and liquidity risk.

     As of December 31, 2010, the Fund had no such credit default swaps outstanding.

6. Restricted Securities

As of December 31, 2010, investments in securities included issues that are restricted. A restricted security may have a contractual restriction on its resale and is valued under methods approved by the Board of Trustees as reflecting fair value. Securities that are restricted are marked with an applicable footnote on the Statement of Investments. Restricted securities are reported on a schedule following the Statement of Investments.

7. Pending Litigation

Since 2009, a number of lawsuits have been pending in federal courts against the Manager, the Distributor, and certain mutual funds (“Defendant Funds”) advised by the Manager and distributed by the Distributor (but not including the Fund). The lawsuits naming the Defendant Funds also name as defendants certain officers and current and former trustees of the respective Defendant Funds. The plaintiffs seek class action status on behalf of purchasers of shares of the respective Defendant Fund during a particular time period. The lawsuits raise claims under federal securities laws alleging that, among other things, the disclosure documents of the respective Defendant Fund contained misrepresentations and omissions, that such Defendant Fund’s investment policies were not followed, and that such Defendant Fund and the other defendants violated federal securities laws and regulations. The plaintiffs seek unspecified damages, equitable relief and an award of attorneys’ fees and litigation expenses. 

     In 2009, what are claimed to be derivative lawsuits were filed in state court against the Manager and a subsidiary (but not against the Fund), on behalf of the New Mexico Education Plan Trust. These lawsuits allege breach of contract, breach of fiduciary duty, negligence and violation of state securities laws, and seek compensatory damages, equitable relief and an award of attorneys’ fees and litigation expenses.

     Other lawsuits have been filed since 2008 in various state and federal courts, against the Manager and certain of its affiliates. Those lawsuits were filed by investors who made investments through an affiliate of the Manager, and relate to the alleged investment fraud perpetrated by Bernard Madoff and his firm (“Madoff”). Those suits allege a variety of claims, including breach of fiduciary duty, fraud, negligent misrepresentation, unjust enrichment, and violation of federal and state securities laws and regulations, among others. They seek unspecified damages, equitable relief and an award of attorneys’ fees and litigation expenses. None of the suits have named the Distributor, any of the Oppenheimer mutual funds or any of their independent Trustees or Directors as defendants. None of the Oppenheimer funds invested in any funds or accounts managed by Madoff.

     The Manager believes that the lawsuits described above are without legal merit and is defending against them vigorously. The Defendant Funds’ Boards of Trustees have also engaged counsel to defend the suits brought against those Funds and the present and former Independent Trustees named in those suits. While it is premature to render any opinion as to the outcome in these lawsuits, or whether any costs that the Defendant Funds may bear in defending the suits might not be reimbursed by insurance, the Manager believes that these suits should not impair the ability of the Manager or the Distributor to perform their respective duties to the Fund, and that the outcome of all of the suits together should not have any material effect on the operations of any of the Oppenheimer funds.

8. Subsequent Event

The Regulated Investment Company Modernization Act of 2010 (the “Act”) was signed into law on December 22, 2010. The Act makes changes to a number of tax rules impacting the Fund. Under the Act, future capital losses generated by a fund may be carried over indefinitely, but these losses must be used prior to the utilization of any pre-enactment capital losses. Since pre-enactment capital losses may only be carried forward for eight years, there may be a greater likelihood that all or a portion of a fund’s pre-enactment capital losses will expire unused. In general, the provisions of the Act will be effective for the Fund’s fiscal year ending December 31, 2011. Specific information regarding the impact of the Act on the Fund will be contained within the “Federal Taxes” section of the financial statement notes for the fiscal year ending December 31, 2011.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Trustees and Shareholders of Oppenheimer Variable Account Funds:

We have audited the accompanying statement of assets and liabilities of Oppenheimer Main Street Fund/VA, (one of the portfolios constituting the Oppenheimer Variable Account Funds), including the statement of investments, as of December 31, 2010, and the related statement of operations for the year then ended, and the statements of changes in net assets and the financial highlights for each of the years in the two-year 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. The accompanying financial highlights of Oppenheimer Main Street Fund/VA for the years ended prior to January 1, 2009 were audited by other auditors whose report dated February 11, 2009 expressed an unqualified opinion on those financial highlights.

     We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2010, by correspondence with the custodian and transfer agent. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Oppenheimer Main Street Fund/VA as of December 31, 2010, and the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for each of the years in the two-year period then ended, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG llp

Denver, Colorado
February 16, 2011

STATEMENT OF INVESTMENTS December 31, 2010

	Shares		Value
Common Stocks—98.8%
Consumer Discretionary—12.2%
Automobiles—3.0%
Ford Motor Co.1		2,943,130	$	49,415,153
Hotels, Restaurants & Leisure—4.4%
Hyatt Hotels Corp., Cl. A1		606,168		27,738,248
McDonald’s Corp.		580,416		44,552,732
				72,290,980
Media—2.9%
McGraw-Hill Cos., Inc. (The)		999,921		36,407,124
Washington Post Co. (The), Cl. B		25,568		11,237,136
				47,644,260
Multiline Retail—0.5%
Target Corp.		150,100		9,025,513
Specialty Retail—1.4%
AutoZone, Inc.1		87,760		23,922,498
Consumer Staples—9.2%
Food Products—5.0%
General Mills, Inc.		1,006,930		35,836,639
Mead Johnson Nutrition Co., Cl. A		457,252		28,463,937
Sara Lee Corp.		1,053,540		18,447,485
				82,748,061
Tobacco—4.2%
Philip Morris International, Inc.		1,185,519		69,388,427
Energy—11.4%
Oil, Gas & Consumable Fuels—11.4%
Chevron Corp.		717,269		65,450,796
Enterprise Products Partners LP		547,170		22,767,744
Noble Energy, Inc.		228,690		19,685,635
Occidental Petroleum Corp.		665,820		65,316,942
Plains All American Pipeline LP		234,811		14,743,783
				187,964,900
Financials—18.9%
Capital Markets—3.5%
Goldman Sachs Group, Inc. (The)		140,110		23,560,898
State Street Corp.		754,342		34,956,208
				58,517,106
Commercial Banks—7.0%
CIT Group, Inc.1		1,343,720		63,289,212
Wells Fargo & Co.		1,675,020		51,908,870
				115,198,082
Diversified Financial Services—4.7%
Bank of America Corp.		2,739,710		36,547,731
Citigroup, Inc.1		8,723,030		41,259,932
				77,807,663
Insurance—3.7%
AFLAC, Inc.		582,660		32,879,504
Progressive Corp.		1,382,750		27,475,243
				60,354,747
Health Care—11.4%
Biotechnology—1.9%
Celgene Corp.1		412,762		24,410,745
Human Genome Sciences, Inc.1		300,230		7,172,495
				31,583,240
Health Care Equipment & Supplies—1.1%
Medtronic, Inc.		497,120		18,438,181
Health Care Providers & Services—2.9%
Express Scripts, Inc.1		342,170		18,494,289
WellPoint, Inc.1		512,490		29,140,181
				47,634,470
Pharmaceuticals—5.5%
Abbott Laboratories		644,650		30,885,182
Merck & Co., Inc.		1,043,188		37,596,496
Perrigo Co.		72,610		4,598,391
Teva Pharmaceutical Industries Ltd., Sponsored ADR		342,210		17,839,407
				90,919,476
Industrials—10.2%
Aerospace & Defense—2.2%
Boeing Co. (The)		235,310		15,356,331
Precision Castparts Corp.		146,860		20,444,381
				35,800,712
Air Freight & Logistics—2.9%
United Parcel Service, Inc., Cl. B		662,320		48,071,186
Commercial Services & Supplies—1.7%
Republic Services, Inc.		952,124		28,430,420
Construction & Engineering—0.9%
KBR, Inc.		513,924		15,659,264
Industrial Conglomerates—2.5%
Tyco International Ltd.		993,210		41,158,622

	Shares			Value
Information Technology—18.8%
Communications Equipment—3.1%
QUALCOMM, Inc.		1,035,171		$	51,230,613
Computers & Peripherals—4.9%
Apple, Inc.1		221,572			71,470,264
Western Digital Corp.1		290,070			9,833,373
					81,303,637
Internet Software & Services—5.5%
eBay, Inc.1		1,723,975			47,978,224
Google, Inc., Cl. A1		72,530			43,080,644
					91,058,868
Semiconductors & Semiconductor Equipment—1.2%
Marvell Technology Group Ltd.1		1,028,970			19,087,394
Software—4.1%
Check Point Software Technologies Ltd.1		660,080			30,535,301
Microsoft Corp.		1,348,697			37,655,620
					68,190,921
Materials—1.6%
Chemicals—1.6%
Praxair, Inc.		280,970			26,824,206
Telecommunication Services—2.1%
Wireless Telecommunication Services—2.1%
America Movil SAB de CV, ADR, Series L		600,686			34,443,335
Utilities—3.0%
Energy Traders—3.0%
AES Corp. (The)1		4,129,100			50,292,438
Total Common Stocks (Cost $1,262,449,085)					1,634,404,373
Investment Companies—1.3%
JPMorgan U.S. Treasury Plus Money Market Fund, Agency Shares, 0.00%2,3		23,091			23,091
Oppenheimer Institutional Money Market Fund, Cl. E, 0.21%2,4		21,709,488			21,709,488
Total Investment Companies (Cost $21,732,579)					21,732,579
Total Investments, at Value (Cost $1,284,181,664)		100.1	%		1,656,136,952
Liabilities in Excess of Other Assets		(0.1	)		(961,284	)
Net Assets		100.0	%	$	1,655,175,668

Footnotes to Statement of Investments

1.	Non-income producing security.
2.	Rate shown is the 7-day yield as of December 31, 2010.
3.	Interest rate is less than 0.0005%.
4.	Is or was an affiliate, as defined in the Investment Company Act of 1940, at or during the period ended December 31, 2010, 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, 2009		Additions		Reductions		December 31, 2010
Oppenheimer Institutional Money Market Fund, Cl. E		2,607,806		511,917,457		492,815,775		21,709,488

	Value		Income
Oppenheimer Institutional Money Market Fund, Cl. E	$	21,709,488	$	33,536

Valuation Inputs

Various data inputs are used in determining the value of each of the Fund’s investments as of the reporting period end. These data inputs are categorized in the following hierarchy under applicable financial accounting standards:

1)	Level 1—unadjusted quoted prices in active markets for identical assets or liabilities (including securities actively traded on a securities exchange)
2)	Level 2—inputs other than unadjusted quoted prices that are observable for the asset or liability (such as unadjusted quoted prices for similar assets and market corroborated inputs such as interest rates, prepayment speeds, credit risks, etc.)
3)	Level 3—significant unobservable inputs (including the Manager’s own judgments about assumptions that market participants would use in pricing the asset or liability).

The table below categorizes amounts that are included in the Fund’s Statement of Assets and Liabilities as of December 31, 2010 based on valuation input level:

					Level 3—
	Level 1—		Level 2—		Significant
	Unadjusted		Other Significant		Unobservable
	Quoted Prices		Observable Inputs		Inputs		Value
Assets Table
Investments, at Value:
Common Stocks
Consumer Discretionary	$	202,298,404	$	—	$	—	$	202,298,404
Consumer Staples		152,136,488		—		—		152,136,488
Energy		187,964,900		—		—		187,964,900
Financials		311,877,598		—		—		311,877,598
Health Care		188,575,367		—		—		188,575,367
Industrials		169,120,204		—		—		169,120,204
Information Technology		310,871,433		—		—		310,871,433
Materials		26,824,206		—		—		26,824,206
Telecommunication Services		34,443,335		—		—		34,443,335
Utilities		50,292,438		—		—		50,292,438
Investment Companies		21,732,579		—		—		21,732,579
Total Assets	$	1,656,136,952	$	—	$	—	$	1,656,136,952

Currency contracts and forwards, if any, are reported at their unrealized appreciation/depreciation at measurement date, which represents the change in the contract’s value from trade date. Futures, if any, are reported at their variation margin at measurement date, which represents the amount due to/from the Fund at that date. All additional assets and liabilities included in the above table are reported at their market value at measurement date.

See the accompanying Notes for further discussion of the methods used in determining value of the Fund’s investments, and a summary of changes to the valuation methodologies, if any, during the reporting period.

STATEMENT OF ASSETS AND LIABILITIES December 31, 2010

Assets
Investments, at value—see accompanying statement of investments:
Unaffiliated companies (cost $1,262,472,176)	$	1,634,427,464
Affiliated companies (cost $21,709,488)		21,709,488
		1,656,136,952
Receivables and other assets:
Dividends		1,763,886
Other		36,024
Total assets		1,657,936,862
Liabilities
Payables and other liabilities:
Shares of beneficial interest redeemed		1,577,129
Distribution and service plan fees		725,708
Shareholder communications		242,543
Transfer and shareholder servicing agent fees		140,481
Trustees’ compensation		33,381
Other		41,952
Total liabilities		2,761,194
Net Assets	$	1,655,175,668
Composition of Net Assets
Par value of shares of beneficial interest	$	79,736
Additional paid-in capital		1,706,470,152
Accumulated net investment income		13,277,741
Accumulated net realized loss on investments		(436,607,249	)
Net unrealized appreciation on investments		371,955,288
Net Assets	$	1,655,175,668
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 $469,720,321 and 22,491,840 shares of beneficial interest outstanding)	$	20.88
Service Shares:
Net asset value, redemption price per share and offering price per share (based on net assets of $1,185,455,347 and 57,243,945 shares of beneficial interest outstanding)	$	20.71

STATEMENT OF OPERATIONS For the Year Ended December 31, 2010

Investment Income
Dividends:
Unaffiliated companies (net of foreign withholding taxes of $57,358)	$	28,062,673
Affiliated companies		33,536
Interest		796
Total investment income		28,097,005
Expenses
Management fees		10,730,968
Distribution and service plan fees—Service shares		2,959,203
Transfer and shareholder servicing agent fees:
Non-Service shares		454,922
Service shares		1,193,556
Shareholder communications:
Non-Service shares		68,705
Service shares		177,846
Trustees’ compensation		61,017
Custodian fees and expenses		9,526
Administration service fees		1,500
Other		121,559
Total expenses		15,778,802
Less waivers and reimbursements of expenses		(25,541	)
Net expenses		15,753,261
Net Investment Income		12,343,744
Realized and Unrealized Gain
Net realized gain on investments from unaffiliated companies		122,769,693
Net change in unrealized appreciation/depreciation on investments		110,123,026
Net Increase in Net Assets Resulting from Operations	$	245,236,463

STATEMENTS OF CHANGES IN NET ASSETS

Year Ended December 31,	2010			2009
Operations
Net investment income	$	12,343,744		$	17,132,592
Net realized gain (loss)		122,769,693			(277,476,159	)
Net change in unrealized appreciation/depreciation		110,123,026			638,505,737
Net increase in net assets resulting from operations		245,236,463			378,162,170
Dividends and/or Distributions to Shareholders
Dividends from net investment income:
Non-Service shares		(5,119,114	)		(8,430,011	)
Service shares		(11,011,249	)		(16,363,358	)
		(16,130,363	)		(24,793,369	)
Beneficial Interest Transactions
Net decrease in net assets resulting from beneficial interest transactions:
Non-Service shares		(66,941,748	)		(56,849,676	)
Service shares		(135,835,930	)		(120,134,918	)
		(202,777,678	)		(176,984,594	)
Net Assets
Total increase		26,328,422			176,384,207
Beginning of period		1,628,847,246			1,452,463,039
End of period (including accumulated net investment income of $13,277,741 and $17,048,397, respectively)	$	1,655,175,668		$	1,628,847,246

FINANCIAL HIGHLIGHTS

Non-Service Shares Year Ended December 31,	2010			2009			2008			2007			2006
Per Share Operating Data
Net asset value, beginning of period	$	18.18		$	14.56		$	25.61		$	24.78		$	21.79
Income (loss) from investment operations:
Net investment income1		.17			.21			.29			.33			.27
Net realized and unrealized gain (loss)		2.73			3.71			(9.64	)		.75			2.98
Total from investment operations		2.90			3.92			(9.35	)		1.08			3.25
Dividends and/or distributions to shareholders:
Dividends from net investment income		(.20	)		(.30	)		(.32	)		(.25	)		(.26	)
Distributions from net realized gain		—			—			(1.38	)		—			—
Total dividends and/or distributions to shareholders		(.20	)		(.30	)		(1.70	)		(.25	)		(.26	)
Net asset value, end of period	$	20.88		$	18.18		$	14.56		$	25.61		$	24.78
Total Return, at Net Asset Value2		16.11	%		28.29	%		(38.47	)%		4.43	%		15.03	%
Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	469,720		$	474,637		$	432,360		$	907,727		$	1,046,146
Average net assets (in thousands)	$	454,937		$	430,517		$	670,994		$	1,006,655		$	1,054,522
Ratios to average net assets3
Net investment income		0.93	%		1.35	%		1.42	%		1.28	%		1.19	%
Total expenses4		0.78	%		0.78	%		0.66	%		0.65	%		0.66	%
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses		0.78	%		0.78	%		0.66	%		0.65	%		0.66	%
Portfolio turnover rate		45	%		128	%		132	%		111	%		100	%

1.	Per share amounts calculated based on the average shares outstanding during the period.
2.	Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
3.	Annualized for periods less than one full year.
4.	Total expenses including indirect expenses from affiliated fund were as follows:

Year Ended December 31, 2010	0.78	%
Year Ended December 31, 2009	0.78	%
Year Ended December 31, 2008	0.66	%
Year Ended December 31, 2007	0.65	%
Year Ended December 31, 2006	0.66	%

FINANCIAL HIGHLIGHTS

Service Shares Year Ended December 31,	2010			2009			2008			2007			2006
Per Share Operating Data
Net asset value, beginning of period	$	18.04		$	14.42		$	25.38		$	24.58		$	21.63
Income (loss) from investment operations:
Net investment income1		.13			.17			.24			.26			.22
Net realized and unrealized gain (loss)		2.70			3.70			(9.56	)		.75			2.95
Total from investment operations		2.83			3.87			(9.32	)		1.01			3.17
Dividends and/or distributions to shareholders:
Dividends from net investment income		(.16	)		(.25	)		(.26	)		(.21	)		(.22	)
Distributions from net realized gain		—			—			(1.38	)		—			—
Total dividends and/or distributions to shareholders		(.16	)		(.25	)		(1.64	)		(.21	)		(.22	)
Net asset value, end of period	$	20.71		$	18.04		$	14.42		$	25.38		$	24.58
Total Return, at Net Asset Value2		15.83	%		27.99	%		(38.63	)%		4.15	%		14.76	%
Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	1,185,456		$	1,154,210		$	1,020,103		$	1,464,690		$	1,099,293
Average net assets (in thousands)	$	1,193,630		$	1,029,909		$	1,268,430		$	1,315,488		$	810,181
Ratios to average net assets:3
Net investment income		0.68	%		1.10	%		1.20	%		1.03	%		0.95	%
Total expenses4		1.03	%		1.03	%		0.91	%		0.90	%		0.91	%
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses		1.03	%		1.03	%		0.91	%		0.90	%		0.91	%
Portfolio turnover rate		45	%		128	%		132	%		111	%		100	%

1.	Per share amounts calculated based on the average shares outstanding during the period.
2.	Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
3.	Annualized for periods less than one full year.
4.	Total expenses including indirect expenses from affiliated fund were as follows:

Year Ended December 31, 2010	1.03	%
Year Ended December 31, 2009	1.03	%
Year Ended December 31, 2008	0.91	%
Year Ended December 31, 2007	0.90	%
Year Ended December 31, 2006	0.91	%

NOTES TO FINANCIAL STATEMENTS

1. Significant Accounting Policies

Oppenheimer Main Street 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 investment objective is to seek high total return. 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.

     Each investment asset or liability of the Fund is assigned a level at measurement date based on the significance and source of the inputs to its valuation. Unadjusted quoted prices in active markets for identical securities are classified as “Level 1,” inputs other than unadjusted quoted prices for an asset that are observable are classified as “Level 2” and significant unobservable inputs, including the Manager’s judgment about the assumptions that a market participant would use in pricing an asset or liability, are classified as “Level 3.” The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. A table summarizing the Fund’s investments under these levels of classification is included following the Statement of Investments.

     Securities are valued using unadjusted quoted market prices, when available, as supplied primarily by portfolio pricing services approved by the Board of Trustees or dealers.

     Securities traded on a registered U.S. securities exchange are valued based on the last sale price of the security reported on the principal exchange on which it is traded, prior to the time when the Fund’s assets are valued. Securities whose principal exchange is NASDAQ^® are valued based on the official closing prices 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 current day’s closing “bid” and “asked” prices, and if not, at the current day’s closing bid price. A foreign security traded on a foreign exchange is valued based on the last sale price on the principal exchange on which the security is traded, as identified by the portfolio pricing service used by the Manager, prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the most recent official closing price on the principal exchange on which it is traded.

     Shares of a registered investment company that are not traded on an exchange are valued at that investment company’s net asset value per share.

     U.S. domestic and international debt instruments (including corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed securities) and “money market-type” debt instruments with a remaining maturity in excess of sixty days are valued at the mean between the “bid” and “asked” prices utilizing price quotations obtained from independent pricing services or broker-dealers. Such prices are typically determined based upon information obtained from market participants including reported trade data, broker-dealer price quotations and inputs such as benchmark yields and issuer spreads from identical or similar securities.

     “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.

     In the absence of a readily available unadjusted quoted market price, including for 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 the securities’ respective exchanges, the Manager, acting through its internal valuation committee, in good faith determines the fair valuation of that asset using consistently applied procedures under the supervision of the Board of Trustees (which reviews those fair valuations by the Manager). Those procedures include certain standardized methodologies to fair value securities. Such methodologies include, but are not limited to, pricing securities initially at cost and subsequently adjusting the value based on: changes in company specific fundamentals, changes in an appropriate securities index, or changes in the value of similar securities which may be adjusted for any discounts related to resale restrictions. When possible, such methodologies use observable market inputs such as unadjusted quoted prices of similar securities, observable interest rates, currency rates and yield curves. The methodologies used for valuing securities are not necessarily an indication of the risks associated with investing in those securities.

     There have been no significant changes to the fair valuation methodologies of the Fund during the period.

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. When applicable, the Fund’s investment in IMMF is included in the Statement of Investments. Shares of IMMF are valued at their net asset value per share. 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.

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.

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

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

					Net Unrealized
					Appreciation
					Based on Cost of
Undistributed	Undistributed		Accumulated		Securities and Other
Net Investment	Long-Term		Loss		Investments for Federal
Income	Gain		Carryforward1,2,3		Income Tax Purposes
$10,058,130		$            —		$   431,808,304	$	370,409,328

1. As of December 31, 2010, the Fund had $431,808,304 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, 2010, details of the capital loss carryforwards were as follows:

Expiring
2016	$	99,612,647
2017		332,195,657
Total	$	431,808,304

2.	During the fiscal year ended December 31, 2010, the Fund utilized $118,380,559 of capital loss carryforward to offset capital gains realized in that fiscal year.
3.	During the fiscal year ended December 31, 2009, 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, 2010. Net assets of the Fund were unaffected by the reclassifications.

			Increase
	Increase		to Accumulated Net
Reduction	to Accumulated Net		Realized Loss
to Paid-in Capital	Investment Income		on Investments
$                 86	$	15,963	$	15,877

The tax character of distributions paid during the years ended December 31, 2010 and December 31, 2009 was as follows:

	Year Ended		Year Ended
	December 31, 2010		December 31, 2009
Distributions paid from:
Ordinary income	$	16,130,363	$	24,793,369

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, 2010 are noted in the following table. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss.

Federal tax cost of securities	$	1,285,727,624
Gross unrealized appreciation	$	374,188,913
Gross unrealized depreciation		(3,779,585	)
Net unrealized appreciation	$	370,409,328

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 with 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. 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, 2010						Year Ended December 31, 2009
	Shares			Amount			Shares			Amount
Non-Service Shares
Sold		2,851,462		$	52,574,153			2,817,732		$	41,817,781
Dividends and/or distributions reinvested		279,275			5,119,114			776,960			8,430,011
Redeemed		(6,743,462	)		(124,635,015	)		(7,176,221	)		(107,097,468	)
Net decrease		(3,612,725	)	$	(66,941,748	)		(3,581,529	)	$	(56,849,676	)
Service Shares
Sold		7,702,331		$	136,115,255			8,552,121		$	117,291,434
Dividends and/or distributions reinvested		604,682			11,011,249			1,515,498			16,352,225
Redeemed		(15,049,192	)		(282,962,434	)		(16,800,298	)		(253,778,577	)
Net decrease		(6,742,179	)	$	(135,835,930	)		(6,732,679	)	$	(120,134,918	)

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, 2010, were as follows:

	Purchases		Sales
Investment securities	$	729,725,493	$	941,031,383

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
Up to $200 million	0.75	%
Next $200 million	0.72
Next $200 million	0.69
Next $200 million	0.66
Over $800 million	0.60

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 fees at an annual rate of 0.10% of the daily net assets of each class of shares. For the year ended December 31, 2010, the Fund paid $1,647,091 to OFS for services to the Fund.

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 0.25% of the daily net assets of Service shares of the Fund. The Distributor currently uses all of those fees to compensate sponsors 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. The Manager has voluntarily agreed to limit the Fund’s total annual operating expenses so that those expenses, as percentages of daily net assets, will not exceed the annual rate of 0.80% for Non-Service shares and 1.05% for Service shares. During the year ended December 30, 2010, the Manager waived and/or reimbursed the Fund $2,971 and $7,176 for Non-Service and Service shares, respectively.

     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, 2010, the Manager waived fees and/or reimbursed the Fund $15,394 for IMMF management fees.

     Some of these undertakings may be modified or terminated at any time; some may not be modified or terminated until after one year from the date of the current prospectus, as indicated therein.

5. Pending Litigation

Since 2009, a number of lawsuits have been pending in federal courts against the Manager, the Distributor, and certain mutual funds (“Defendant Funds”) advised by the Manager and distributed by the Distributor (but not including the Fund). The lawsuits naming the Defendant Funds also name as defendants certain officers and current and former trustees of the respective Defendant Funds. The plaintiffs seek class action status on behalf of purchasers of shares of the respective Defendant Fund during a particular time period. The lawsuits raise claims under federal securities laws alleging that, among other things, the disclosure documents of the respective Defendant Fund contained misrepresentations and omissions, that such Defendant Fund’s investment policies were not followed, and that such Defendant Fund and the other defendants violated federal securities laws and regulations. The plaintiffs seek unspecified damages, equitable relief and an award of attorneys’ fees and litigation expenses.

     In 2009, what are claimed to be derivative lawsuits were filed in state court against the Manager and a subsidiary (but not against the Fund), on behalf of the New Mexico Education Plan Trust. These lawsuits allege breach of contract, breach of fiduciary duty, negligence and violation of state securities laws, and seek compensatory damages, equitable relief and an award of attorneys’ fees and litigation expenses.

     Other lawsuits have been filed since 2008 in various state and federal courts, against the Manager and certain of its affiliates. Those lawsuits were filed by investors who made investments through an affiliate of the Manager, and relate to the alleged investment fraud perpetrated by Bernard Madoff and his firm (“Madoff ”). Those suits allege a variety of claims, including breach of fiduciary duty, fraud, negligent misrepresentation, unjust enrichment, and violation of federal and state securities laws and regulations, among others. They seek unspecified damages, equitable relief and an award of attorneys’ fees and litigation expenses. None of the suits have named the Distributor, any of the Oppenheimer mutual funds or any of their independent Trustees or Directors as defendants. None of the Oppenheimer funds invested in any funds or accounts managed by Madoff.

     The Manager believes that the lawsuits described above are without legal merit and is defending against them vigorously. The Defendant Funds’ Boards of Trustees have also engaged counsel to defend the suits brought against those Funds and the present and former Independent Trustees named in those suits. While it is premature to render any opinion as to the outcome in these lawsuits, or whether any costs that the Defendant Funds may bear in defending the suits might not be reimbursed by insurance, the Manager believes that these suits should not impair the ability of the Manager or the Distributor to perform their respective duties to the Fund, and that the outcome of all of the suits together should not have any material effect on the operations of any of the Oppenheimer funds. 

6. Subsequent Event

The Regulated Investment Company Modernization Act of 2010 (the “Act”) was signed into law on December 22, 2010. The Act makes changes to a number of tax rules impacting the Fund. Under the Act, future capital losses generated by a fund may be carried over indefinitely, but these losses must be used prior to the utilization of any pre-enactment capital losses. Since pre-enactment capital losses may only be carried forward for eight years, there may be a greater likelihood that all or a portion of a fund’s pre-enactment capital losses will expire unused. In general, the provisions of the Act will be effective for the Fund’s fiscal year ending December 31, 2011. Specific information regarding the impact of the Act on the Fund will be contained within the “Federal Taxes” section of the financial statement notes for the fiscal year ending December 31, 2011.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Trustees and Shareholders of Oppenheimer Variable Account Funds:

We have audited the accompanying statement of assets and liabilities of Oppenheimer Main Street Small Cap Fund/VA (one of the portfolios constituting the Oppenheimer Variable Account Funds), including the statement of investments, as of December 31, 2010, the related statement of operations for the year then ended, and the statements of changes in net assets and the financial highlights for each of the years in the two-year 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. The accompanying financial highlights of Oppenheimer Main Street Small Cap Fund/VA for the years ended prior to January 1, 2009 were audited by other auditors whose report dated February 11, 2009 expressed an unqualified opinion on those financial highlights.

     We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2010, by correspondence with the custodian and transfer agent. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Oppenheimer Main Street Small Cap Fund/VA as of December 31, 2010, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for each of the years in the two-year period then ended, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG llp

Denver, Colorado
February 16, 2011

STATEMENT OF INVESTMENTS December 31, 2010

	Shares		Value
Common Stocks—97.3%
Consumer Discretionary—13.4%
Auto Components—0.9%
American Axle & Manufacturing Holdings, Inc.1		61,550	$	791,533
Cooper Tire & Rubber Co.		75,740		1,785,949
Dana Holding Corp.1		302,470		5,205,509
Federal-Mogul Corp.1		15,830		326,890
Fuel Systems Solutions, Inc.1		23,920		702,770
				8,812,651
Distributors—0.4%
Core-Mark Holding Co., Inc.1		2,620		93,246
Pool Corp.		165,170		3,722,932
				3,816,178
Diversified Consumer Services—1.5%
Bridgepoint Education, Inc.1		28,190		535,610
Capella Education Co.1		121,010		8,056,846
Career Education Corp.1		87,440		1,812,631
CPI Corp.		12,700		286,385
Hillenbrand, Inc.		21,160		440,340
ITT Educational Services, Inc.1		23,220		1,478,882
Lincoln Educational Services Corp.		51,440		797,834
Pre-Paid Legal Services, Inc.1		18,431		1,110,468
Sotheby’s		320		14,400
				14,533,396
Hotels, Restaurants & Leisure—2.1%
AFC Enterprises, Inc.1		35,172		488,891
Bally Technologies, Inc.1		221,520		9,345,929
Bob Evans Farms, Inc.		10,460		344,762
Brinker International, Inc.		79,430		1,658,498
CEC Entertainment, Inc.1		51,839		2,012,908
Cracker Barrel Old Country Store, Inc.		79,010		4,327,378
Papa John’s International, Inc.1		56,588		1,567,488
Ruby Tuesday, Inc.1		2,030		26,512
Speedway Motorsports, Inc.		34,599		530,057
				20,302,423
Household Durables—0.3%
American Greetings Corp., Cl. A		61,530		1,363,505
CSS Industries, Inc.		11,820		243,610
Helen of Troy Ltd.1		21,700		645,358
Kid Brands, Inc.1		42,230		361,067
				2,613,540
Internet & Catalog Retail—0.0%
NutriSystem, Inc.		8,400		176,652
Leisure Equipment & Products—0.4%
Eastman Kodak Co.1		38,770		207,807
JAKKS Pacific, Inc.1		57,740		1,052,023
Polaris Industries, Inc.		20,010		1,561,180
Sturm, Ruger & Co., Inc.		81,600		1,247,664
				4,068,674
Media—1.9%
China MediaExpress Holdings, Inc.1		46,010		728,798
Dex One Corp.1		24,460		182,472
Gannett Co., Inc.		120,920		1,824,683
Harte—Hanks, Inc.		745		9,514
Imax Corp.1		295,080		8,276,994
Journal Communications, Inc.1		54,900		277,245
Lee Enterprises, Inc.1		144,280		354,929
McClatchy Co., Cl. A1		91,210		425,951
Meredith Corp.		16,210		561,677
National CineMedia, Inc.		980		19,512
Scholastic Corp.		53,860		1,591,024
Sinclair Broadcast Group, Inc., Cl. A		152,583		1,248,129
Valassis Communications, Inc.1		46,560		1,506,216
Wiley (John) & Sons, Inc., Cl. A		13,840		626,122
				17,633,266
Multiline Retail—0.5%
Big Lots, Inc.1		51,927		1,581,696
Bon-Ton Stores, Inc.1		2,210		27,979
Dillard’s, Inc., Cl. A		61,340		2,327,240
Retail Ventures, Inc.1		21,780		355,014
				4,291,929
Specialty Retail—3.4%
Aeropostale, Inc.1		64,725		1,594,824
AnnTaylor Stores Corp.1		8,520		233,363
Books-A-Million, Inc.		24,410		141,578
Cato Corp., Cl. A		75,964		2,082,173
Children’s Place Retail Stores, Inc.1		162,680		8,075,435
Collective Brands, Inc.1		18,150		382,965
Dress Barn, Inc. (The)1		5,350		141,347
DSW, Inc., Cl. A1		42,150		1,648,065
Express, Inc.		36,000		676,800
Finish Line, Inc. (The), Cl. A		95,260		1,637,519
Jos. A. Banks Clothiers, Inc.1		28,735		1,158,595
Kirkland’s, Inc.1		97,513		1,368,107
Men’s Wearhouse, Inc. (The)		17,970		448,891

	Shares		Value
Specialty Retail Continued
Rent-A-Center, Inc.		68,830	$	2,221,832
Select Comfort Corp.1		75,260		687,124
Signet Jewelers Ltd.1		48,750		2,115,750
Stage Stores, Inc.		22,569		391,346
Tractor Supply Co.		161,750		7,843,258
				32,848,972
Textiles, Apparel & Luxury Goods—2.0%
Carter’s, Inc.1		460		13,575
Deckers Outdoor Corp.1		11,830		943,324
Fossil, Inc.1		77,697		5,476,085
Perry Ellis International, Inc.1		35,299		969,664
Phillips/Van Heusen Corp.		112,660		7,098,707
Timberland Co., Cl. A1		81,215		1,997,077
True Religion Apparel, Inc.1		20,980		467,015
Warnaco Group, Inc. (The)1		32,370		1,782,616
				18,748,063
Consumer Staples—2.1%
Beverages—0.2%
Cott Corp.1		177,900		1,602,879
Food & Staples Retailing—0.1%
Nash Finch Co.		21,730		923,742
Spartan Stores, Inc.		530		8,984
Weis Markets, Inc.		2,960		119,377
				1,052,103
Food Products—1.2%
B&G Foods, Inc., Cl. A		10,930		150,069
Cal-Maine Foods, Inc.		33,260		1,050,351
Corn Products International, Inc.		39,380		1,811,480
Flowers Foods, Inc.		6,930		186,486
Fresh Del Monte Produce, Inc.		21,068		525,647
Overhill Farms, Inc.1		39,140		226,229
TreeHouse Foods, Inc.1		150,896		7,709,277
				11,659,539
Household Products—0.2%
Central Garden & Pet Co., Cl. A1		147,304		1,455,364
Personal Products—0.4%
China Sky One Medical, Inc.1		18,100		126,157
Herbalife Ltd.		28,770		1,967,005
Inter Parfums, Inc.		10,030		189,066
Nu Skin Asia Pacific, Inc., Cl. A		13,670		413,654
Prestige Brands Holdings, Inc.1		102,300		1,222,485
				3,918,367
Energy—5.4%
Energy Equipment & Services—1.5%
Acergy SA, Sponsored ADR		95,963		2,335,739
Atwood Oceanics, Inc.1		42,930		1,604,294
Bolt Technology Corp.1		22,510		296,457
Cal Dive International, Inc.1		78,710		446,286
Compagnie Generale de Geophysique-Veritas, Sponsored ADR1		29,660		907,299
Complete Production Services, Inc.1		50,390		1,489,025
Hornbeck Offshore Services, Inc.1		7,840		163,699
North American Energy Partners, Inc.1		1,420		17,409
Oil States International, Inc.1		36,440		2,335,440
Precision Drilling Corp.1		145,820		1,412,996
Seacor Holdings, Inc.		10,620		1,073,576
Superior Energy Services, Inc.1		45,610		1,595,894
Tetra Technologies, Inc.1		57,190		678,845
TGC Industries, Inc.1		54,530		207,214
				14,564,173
Oil, Gas & Consumable Fuels—3.9%
Bill Barrett Corp.1		40,540		1,667,410
Callon Petroleum Co.1		67,740		401,021
Cloud Peak Energy, Inc.1		84,210		1,956,198
Contango Oil & Gas Co.1		10,980		636,071
CVR Energy, Inc.1		60,654		920,728
Dominion Resources Black Warrior Trust		16,510		255,080
Gran Tierra Energy, Inc.1		124,730		1,004,077
Green Plains Renewable Energy, Inc.1		6,470		72,852
Holly Corp.		335,440		13,675,889
James River Coal Co.1		36,700		929,611
MarkWest Energy Partners LP		135,078		5,850,228
PAA Natural Gas Storage LP		115,900		2,890,546
Pengrowth Energy Trust		132,480		1,703,693
Petrobras Argentina SA, ADR		13,540		357,185
PetroQuest Energy, Inc.1		95,510		719,190
PrimeEnergy Corp.1		6,384		123,786
Stone Energy Corp.1		76,330		1,701,396
Teekay Offshore Partners LP		28,840		800,310
VAALCO Energy, Inc.1		68,890		493,252
W&T Offshore, Inc.		51,380		918,161
				37,076,684
Financials—20.8%
Capital Markets—1.8%
American Capital Ltd.1		28,100		212,436
Calamos Asset Management, Inc., Cl. A		19,920		278,880

	Shares		Value
Capital Markets Continued
Federated Investors, Inc., Cl. B		49,430	$	1,293,583
Gladstone Investment Corp.		50,130		383,495
Investment Technology Group, Inc.1		300		4,911
Janus Capital Group, Inc.		103,430		1,341,487
Knight Capital Group, Inc., Cl. A1		138,886		1,915,238
MF Global Holdings Ltd.1		558,794		4,671,518
Oppenheimer Holdings, Inc., Cl. A, Non-Vtg.		2,920		76,533
optionsXpress Holdings, Inc.		148,190		2,322,137
Rodman & Renshaw Capital Group, Inc.1		43,600		116,848
Solar Capital Ltd.		20,660		511,955
Stifel Financial Corp.1		51,460		3,192,578
Triangle Capital Corp.		14,430		274,170
Waddell & Reed Financial, Inc., Cl. A		13,740		484,885
				17,080,654
Commercial Banks—2.2%
Alliance Financial Corp.		7,080		229,038
Banco Latinoamericano de Exportaciones SA, Cl. E		42,780		789,719
Banco Macro SA, ADR		35,245		1,769,299
BBVA Banco Frances SA, ADR		43,363		503,011
CapitalSource, Inc.		226,640		1,609,144
Century Bancorp, Inc., Cl. A		10,780		288,796
City Holding Co.		9,680		350,706
First Midwest Bancorp, Inc.		142,760		1,644,595
FirstMerit Corp.		126,310		2,499,675
Grupo Financiero Galicia SA1		290		4,440
IBERIABANK Corp.		101,622		6,008,909
International Bancshares Corp.		20,909		418,807
National Bankshares, Inc.		8,237		259,383
Northrim BanCorp, Inc.		15,070		291,152
Synovus Financial Corp.		822,410		2,171,162
Westamerica Bancorporation		46,720		2,591,558
				21,429,394
Consumer Finance—1.3%
Advance America Cash Advance Centers, Inc.		178,500		1,006,740
Cash America International, Inc.		54,987		2,030,670
Credit Acceptance Corp.1		17,720		1,112,284
EZCORP, Inc., Cl. A1		81,450		2,209,739
First Cash Financial Services, Inc.1		67,402		2,088,788
Nelnet, Inc., Cl. A		77,576		1,837,775
World Acceptance Corp.1		36,018		1,901,750
				12,187,746
Diversified Financial Services—1.3%
Encore Capital Group, Inc.1		40,700		954,415
Life Partners Holdings, Inc.		58,747		1,123,830
MSCI, Inc., Cl. A1		275,740		10,742,830
				12,821,075
Insurance—5.8%
Allied World Assurance Holdings Ltd.		27,841		1,654,869
American Equity Investment Life Holding Co.		117,950		1,480,273
American Safety Insurance Holdings Ltd.1		15,930		340,583
Amerisafe, Inc.1		43,408		759,640
AmTrust Financial Services, Inc.		93,278		1,632,365
Arch Capital Group Ltd.1		25,190		2,217,980
Argo Group International Holdings Ltd.		36,110		1,352,320
Aspen Insurance Holdings Ltd.		57,090		1,633,916
Berkley (W.R.) Corp.		83,810		2,294,718
Brown & Brown, Inc.		100,760		2,412,194
Delphi Financial Group, Inc., Cl. A		10,290		296,764
EMC Insurance Group, Inc.		11,130		251,983
Endurance Specialty Holdings Ltd.		47,350		2,181,415
Enstar Group Ltd.1		10,950		926,151
FBL Financial Group, Inc., Cl. A		37,810		1,084,013
First American Financial Corp.		15,780		235,753
Flagstone Reinsurance Holdings SA		84,540		1,065,204
FPIC Insurance Group, Inc.1		35,080		1,296,557
Hanover Insurance Group, Inc.		33,660		1,572,595
Harleysville Group, Inc.		20,410		749,863
Horace Mann Educators Corp.		65,849		1,187,916
Infinity Property & Casualty Corp.		38,714		2,392,525
Maiden Holdings Ltd.		46,030		361,796
MBIA, Inc.1		20,990		251,670
Meadowbrook Insurance Group, Inc.		89,200		914,300
Mercury General Corp.		35,720		1,536,317
Montpelier Re Holdings Ltd.		88,180		1,758,309
National Financial Partners Corp.1		40,990		549,266
National Interstate Corp.		9,690		207,366
National Western Life Insurance Co., Cl. A		2,630		438,474
Navigators Group, Inc. (The)1		13,300		669,655
OneBeacon Insurance Group Ltd.		51,490		780,588
Platinum Underwriters Holdings Ltd.		45,740		2,056,928
Primerica, Inc.		37,320		905,010
ProAssurance Corp.1		33,122		2,007,193
Protective Life Corp.		66,960		1,783,814
RLI Corp.		6,960		365,887

	Shares		Value
Insurance Continued
Safety Insurance Group, Inc.		41,049	$	1,952,701
Selective Insurance Group, Inc.		29,740		539,781
StanCorp Financial Group, Inc.		36,662		1,654,923
Symetra Financial Corp.		94,120		1,289,444
Torchmark Corp.		52,110		3,113,051
Unitrin, Inc.		65,970		1,618,904
Validus Holdings Ltd.		52,962		1,621,167
				55,396,141
Real Estate Investment Trusts—6.4%
Associated Estates Realty Corp.		22,170		338,979
Brandywine Realty Trust		269,230		3,136,530
BRE Properties, Inc., Cl. A		35,980		1,565,130
CBL & Associates Properties, Inc.		108,210		1,893,675
Chatham Lodging Trust		59,950		1,034,138
Colonial Properties Trust		12,350		222,918
Digital Realty Trust, Inc.		196,640		10,134,826
Entertainment Properties Trust		11,020		509,675
Essex Property Trust, Inc.		14,190		1,620,782
Extra Space Storage, Inc.		83,310		1,449,594
Getty Realty Corp.		4,440		138,883
Hatteras Financial Corp.		194,690		5,893,266
Home Properties of New York, Inc.		29,070		1,613,094
LaSalle Hotel Properties		190,110		5,018,904
Mid-America Apartment Communities, Inc.		116,369		7,388,268
Pebblebrook Hotel Trust		25,870		525,678
PS Business Parks, Inc.		17,820		992,930
Sabra Health Care REIT, Inc.		14,473		266,303
Saul Centers, Inc.		200		9,470
Sovran Self Storage, Inc.		570		20,982
Starwood Property Trust, Inc.		229,630		4,932,452
Strategic Hotels & Resorts, Inc.1		475,940		2,517,723
Tanger Factory Outlet Centers, Inc.		138,970		7,113,874
Taubman Centers, Inc.		32,640		1,647,667
U-Store-It Real Estate Investment Trust		106,660		1,016,470
Urstadt Biddle Properties, Inc., Cl. A		5,090		99,001
				61,101,212
Real Estate Management & Development—0.3%
Campus Crest Communities, Inc.		179,420		2,515,468
Thrifts & Mortgage Finance—1.7%
BofI Holding, Inc.1		15,070		233,736
Federal Agricultural Mortgage Corp., Non-Vtg.		1,470		23,990
First Defiance Financial Corp.1		30,150		358,785
First Niagara Financial Group, Inc.		372,310		5,204,894
MGIC Investment Corp.1		538,510		5,487,417
People’s United Financial, Inc.		219,300		3,072,393
Radian Group, Inc.		185,790		1,499,325
Viewpoint Financial Group		17,150		200,484
				16,081,024
Health Care—11.3%
Biotechnology—0.5%
Cubist Pharmaceuticals, Inc.1		68,310		1,461,834
Human Genome Sciences, Inc.1		58,940		1,408,077
Indevus Pharmaceuticals, Inc.1		2,500		25
Myriad Genetics, Inc.1		17,820		407,009
PDL BioPharma, Inc.		225,762		1,406,497
Targacept, Inc.1		2,150		56,975
				4,740,417
Health Care Equipment & Supplies—3.1%
Atrion Corp.		4,218		756,962
China Medical Technologies, Inc., Sponsored ADR1		32,200		361,928
Cooper Cos., Inc. (The)		20,490		1,154,407
Cyberonics, Inc.1		1,370		42,497
Dexcom, Inc.1		182,740		2,494,401
Greatbatch, Inc.1		164,690		3,977,264
Haemonetics Corp.1		4,860		307,055
Hill-Rom Holdings, Inc.		17,977		707,754
ICU Medical, Inc.1		9,420		343,830
Immucor, Inc.1		1,170		23,201
Integra LifeSciences Holdings1		99,170		4,690,741
Invacare Corp.		60,311		1,818,980
Kensey Nash Corp.1		34,758		967,315
Kinetic Concepts, Inc.1		40,524		1,697,145
Orthofix International NV1		81,060		2,350,740
Sirona Dental Systems, Inc.1		37,850		1,581,373
Steris Corp.		43,360		1,580,906
Teleflex, Inc.		4,200		226,002
Utah Medical Products, Inc.		8,370		223,228
Volcano Corp.1		143,260		3,912,431
Young Innovations, Inc.		9,350		299,294
				29,517,454
Health Care Providers & Services—3.9%
Air Methods Corp.1		3,920		220,578
Allied Healthcare International, Inc.1		83,460		209,485
Almost Family, Inc.1		20,210		776,468

	Shares		Value
Health Care Providers & Services Continued
Amedisys, Inc.1		29,250	$	979,875
AMERIGROUP Corp.1		36,420		1,599,566
AmSurg Corp.1		78,610		1,646,880
Chemed Corp.		25,110		1,594,736
Continucare Corp.1		79,680		372,902
CorVel Corp.1		5,500		265,925
Emergency Medical Services LP, Cl. A1		11,260		727,509
Ensign Group, Inc. (The)		22,250		553,358
Gentiva Health Services, Inc.1		46,546		1,238,124
Health Management Associates, Inc., Cl. A1		808,980		7,717,669
HEALTHSOUTH Corp.1		2,450		50,740
Healthspring, Inc.1		72,938		1,935,045
Healthways, Inc.1		9,620		107,359
HMS Holdings Corp.1		65,490		4,241,787
Kindred Healthcare, Inc.1		22,340		410,386
LHC Group, Inc.1		53,190		1,595,700
LifePoint Hospitals, Inc.1		44,521		1,636,147
Lincare Holdings, Inc.		59,236		1,589,302
Magellan Health Services, Inc.1		42,420		2,005,618
MEDNAX, Inc.1		13,380		900,340
Metropolitan Health Networks, Inc.1		113,320		506,540
NovaMed, Inc.1		18,630		214,804
Owens & Minor, Inc.		5,730		168,634
PharMerica Corp.1		19,160		219,382
Providence Service Corp.1		13,620		218,873
PSS World Medical, Inc.1		8,570		193,682
Triple-S Management Corp., Cl. B1		40,327		769,439
U.S. Physical Therapy, Inc.1		33,605		666,051
Universal American Corp.		65,130		1,331,909
Universal Health Services, Inc., Cl. B		392		17,021
				36,681,834
Health Care Technology—0.9%
Allscripts Healthcare Solutions, Inc.1		258,096		4,973,510
SXC Health Solutions Corp.1		81,990		3,514,091
				8,487,601
Life Sciences Tools & Services—0.3%
Bio-Rad Laboratories, Inc., Cl. A1		2,710		281,434
Bruker Corp.1		65,520		1,087,632
Cambrex Corp.1		89,970		465,145
eResearch Technology, Inc.1		48,910		359,489
Harvard Bioscience, Inc.1		65,210		266,709
ICON plc, Sponsored ADR1		31,830		697,077
				3,157,486
Pharmaceuticals—2.6%
Endo Pharmaceuticals Holdings, Inc.1		54,072		1,930,911
Hi-Tech Pharmacal Co., Inc.1		25,280		630,736
Impax Laboratories, Inc.1		71,090		1,429,620
Medicis Pharmaceutical Corp., Cl. A		57,576		1,542,461
Par Pharmaceutical Cos., Inc.1		44,970		1,731,795
Perrigo Co.		96,940		6,139,210
Questcor Pharmaceuticals, Inc.1		143,318		2,111,074
Salix Pharmaceuticals Ltd.1		161,710		7,593,902
Valeant Pharmaceuticals International, Inc.		20,620		583,340
ViroPharma, Inc.1		81,930		1,419,028
				25,112,077
Industrials—15.8%
Aerospace & Defense—2.0%
BE Aerospace, Inc.1		206,178		7,634,771
Ceradyne, Inc.1		66,470		2,095,799
Cubic Corp.		34,370		1,620,546
Ducommun, Inc.		15,720		342,382
Esterline Technologies Corp.1		850		58,302
Gencorp, Inc.1		190,600		985,402
LMI Aerospace, Inc.1		4,770		76,272
National Presto Industries, Inc.		15,191		1,974,982
Spirit Aerosystems Holdings, Inc., Cl. A1		162,060		3,372,469
Teledyne Technologies, Inc.1		10,890		478,833
				18,639,758
Air Freight & Logistics—0.8%
Atlas Air Worldwide Holdings, Inc.1		29,400		1,641,402
Hub Group, Inc., Cl. A1		176,000		6,184,640
				7,826,042
Airlines—1.0%
Alaska Air Group, Inc.1		32,180		1,824,284
Copa Holdings SA, Cl. A		5,540		325,974
Hawaiian Holdings, Inc.1		199,818		1,566,573
JetBlue Airways Corp.1		246,420		1,628,836
Pinnacle Airlines Corp.1		34,120		269,548
Republic Airways Holdings, Inc.1		119,350		873,642
United Continental Holdings, Inc.1		68,060		1,621,189
US Airways Group, Inc.1		119,370		1,194,894
				9,304,940
Building Products—0.1%
Quanex Building Products Corp.		20,490		388,695
Smith (A.O.) Corp.		22,015		838,331
				1,227,026

	Shares		Value
Commercial Services & Supplies—1.6%
APAC Teleservices, Inc.1		31,260	$	189,748
Brink’s Co. (The)		31,530		847,526
Consolidated Graphics, Inc.1		31,090		1,505,689
Deluxe Corp.		98,936		2,277,507
Ennis, Inc.		45,910		785,061
G&K Services, Inc., Cl. A		20,480		633,037
M&F Worldwide Corp.1		28,072		648,463
R.R. Donnelley & Sons Co.		80,010		1,397,775
Team, Inc.1		15,110		365,662
UniFirst Corp.		22,134		1,218,477
Waste Connections, Inc.		205,305		5,652,047
				15,520,992
Construction & Engineering—1.4%
Aecom Technology Corp.1		132,549		3,707,396
Baker (Michael) Corp.1		24,133		750,536
Chicago Bridge & Iron Co. NV1		60,540		1,991,766
Great Lakes Dredge & Dock Co.		156,190		1,151,120
KBR, Inc.		50,850		1,549,400
MasTec, Inc.1		32,320		471,549
Sterling Construction Co., Inc.1		27,750		361,860
Tutor Perini Corp.		165,573		3,544,918
				13,528,545
Electrical Equipment—1.7%
Advanced Battery Technologies, Inc.1		23,770		91,515
AZZ, Inc.		25,850		1,034,259
Brady Corp., Cl. A		16,770		546,870
Franklin Electric Co., Inc.		5,820		226,514
Fushi Copperweld, Inc.1		20,480		181,862
Generac Holdings, Inc.1		178,290		2,882,949
Hubbell, Inc., Cl. B		29,630		1,781,652
Lihua International, Inc.1		41,910		471,068
Powell Industries, Inc.1		45,950		1,510,836
Regal-Beloit Corp.		78,410		5,234,652
Thomas & Betts Corp.1		44,749		2,161,377
				16,123,554
Industrial Conglomerates—0.2%
Seaboard Corp.		440		876,040
Tredegar Corp.		54,094		1,048,342
				1,924,382
Machinery—3.4%
Alamo Group, Inc.		12,750		354,705
Blount International, Inc.1		10,540		166,110
Briggs & Stratton Corp.		65,510		1,289,892
China Yuchai International Ltd.		45,490		1,441,578
Crane Co.		11,110		456,288
Duoyuan Global Water, Inc., ADR1		23,230		296,647
Duoyuan Printing, Inc.1		77,210		226,225
EnPro Industries, Inc.1		97,763		4,063,030
Freightcar America, Inc.		74,440		2,154,294
Gardner Denver, Inc.		83,936		5,776,476
L.B. Foster Co., Cl. A1		1,590		65,095
NACCO Industries, Inc., Cl. A		3,695		400,427
Oshkosh Corp.1		53,770		1,894,855
Robbins & Myers, Inc.		24,590		879,830
Sauer-Danfoss, Inc.1		8,910		251,708
Terex Corp.1		98,820		3,067,373
Timken Co.		44,100		2,104,893
Toro Co. (The)		36,770		2,266,503
TriMas Corp.1		3,900		79,794
Twin Disc, Inc.		1,410		42,103
Valmont Industries, Inc.		180		15,971
Wabtec Corp.		90,170		4,769,091
Watts Water Technologies, Inc., Cl. A		4,330		158,435
				32,221,323
Marine—0.3%
Diana Shipping, Inc.1		99,720		1,198,634
Excel Maritime Carriers Ltd.1		123,180		693,503
Safe Bulkers, Inc.		118,040		1,045,834
				2,937,971
Professional Services—1.4%
CBIZ, Inc.1		170,700		1,065,168
Dolan Co. (The)1		91,910		1,279,387
FTI Consulting, Inc.1		15,670		584,178
GP Strategies Corp.1		32,050		328,192
Korn-Ferry International1		124,790		2,883,897
Navigant Consulting, Inc.1		8,560		78,752
Robert Half International, Inc.		238,490		7,297,794
				13,517,368
Road & Rail—1.6%
Amerco1		16,640		1,598,106
Avis Budget Group, Inc.1		1,080		16,805
Genesee & Wyoming, Inc., Cl. A1		63,471		3,360,789
Guangshen Railway Co. Ltd., Sponsored ADR		2,020		39,491
Heartland Express, Inc.		21,700		347,634
Old Dominion Freight Line, Inc.1		292,570		9,359,314
				14,722,139

	Shares		Value
Trading Companies & Distributors—0.3%
Aircastle Ltd.		73,190	$	764,836
Applied Industrial Technologies, Inc.		51,480		1,672,070
DXP Enterprises, Inc.1		14,327		343,848
Fly Leasing Ltd., ADR		20,920		285,767
				3,066,521
Information Technology—19.6%
Communications Equipment—2.3%
Arris Group, Inc.1		142,340		1,597,055
Black Box Corp.		24,145		924,512
Blue Coat Systems, Inc.1		392,988		11,738,552
Comtech Telecommunications Corp.		33,190		920,359
InterDigital, Inc.1		50,780		2,114,479
Ituran Location & Control Ltd.		18,131		316,205
Plantronics, Inc.		49,994		1,860,777
Polycom, Inc.1		60,650		2,364,137
				21,836,076
Computers & Peripherals—0.9%
China Digital TV Holding Co. Ltd., ADR		39,250		278,283
QLogic Corp.1		72,210		1,229,014
Rimage Corp.1		13,880		206,951
STEC, Inc.1		580		10,237
Synaptics, Inc.1		65,800		1,933,204
Western Digital Corp.1		134,640		4,564,296
				8,221,985
Electronic Equipment & Instruments—1.6%
Anixter International, Inc.		28,040		1,674,829
AVX Corp.		109,270		1,686,036
Brightpoint, Inc.1		23,200		202,536
Celestica, Inc.1		40,090		388,873
Coherent, Inc.1		19,880		897,383
Dolby Laboratories, Inc., Cl. A1		61,457		4,099,182
Insight Enterprises, Inc.1		91,966		1,210,273
KEMET Corp.1		46,880		683,510
Littlefuse, Inc.		950		44,707
MTS Systems Corp.		320		11,987
Multi-Fineline Electronix, Inc.1		50,632		1,341,242
Newport Corp.1		5,190		90,150
Park Electrochemical Corp.		830		24,900
Power-One, Inc.1		57,960		591,192
Spectrum Control, Inc.1		29,910		448,351
Vishay Intertechnology, Inc.1		131,960		1,937,173
				15,332,324
Internet Software & Services—1.7%
AOL, Inc.1		64,030		1,518,151
EarthLink, Inc.		214,238		1,842,447
j2 Global Communications, Inc.1		240,155		6,952,487
Open Text Corp.1		23,520		1,083,331
Saba Software, Inc.1		20,520		125,582
Sohu.com, Inc.1		27,420		1,740,896
United Online, Inc.		187,092		1,234,807
ValueClick, Inc.1		128,250		2,055,848
Web.com Group, Inc.1		8,800		74,360
				16,627,909
IT Services—3.0%
Acxiom Corp.1		92,730		1,590,320
Broadridge Financial Solutions, Inc.		79,458		1,742,514
CACI International, Inc., Cl. A1		101,150		5,401,410
Cass Information Systems, Inc.		2,570		97,506
Convergys Corp.1		87,987		1,158,789
CSG Systems International, Inc.1		79,831		1,511,999
DST Systems, Inc.		35,994		1,596,334
Euronet Worldwide, Inc.1		6,730		117,371
Forrester Research, Inc.		1,750		61,758
Global Cash Access, Inc.1		156,125		498,039
Henry (Jack) & Associates, Inc.		4,770		139,046
ManTech International Corp.1		10,700		442,231
Maximus, Inc.		24,110		1,581,134
NeuStar, Inc., Cl. A1		338,888		8,828,032
Patni Computer Systems Ltd., ADR		54,670		1,169,391
Satyam Computer Services Ltd., ADR1		890		2,599
Syntel, Inc.		3,350		160,097
TeleTech Holdings, Inc.1		109,396		2,252,464
Unisys Corp.1		18,650		482,849
				28,833,883
Office Electronics—0.0%
Zebra Technologies Corp., Cl. A1		11,550		438,785
Semiconductors & Semiconductor Equipment—5.5%
Amkor Technology, Inc.1		101,360		749,050
ASM International NV1		10,300		360,706
Atheros Communications, Inc.1		172,060		6,180,395
ATMI, Inc.1		20,030		399,398
Cabot Microelectronics Corp.1		24,650		1,021,743
China Sunergy Co. Ltd., ADR1		188,620		788,432
Cypress Semiconductor Corp.1		11,260		209,211
Entegris, Inc.1		30,680		229,180
Fairchild Semiconductor International, Inc., Cl. A1		147,940		2,309,343

	Shares		Value
Semiconductors & Semiconductor Equipment Continued
GT Solar International, Inc.1		215,840	$	1,968,461
Himax Technologies, Inc., ADR		209,760		495,034
Integrated Device Technology, Inc.1		2,250		14,985
JA Solar Holdings Co. Ltd., ADS1		181,380		1,255,150
Kulicke & Soffa Industries, Inc.1		83,620		602,064
Lattice Semiconductor Corp.1		203,320		1,232,119
Micrel, Inc.		108,507		1,409,506
Microsemi Corp.1		900		20,610
Netlogic Microsystems, Inc.1		186,290		5,851,369
ON Semiconductor Corp.1		44,000		434,720
Photronics, Inc.1		35,760		211,342
PMC-Sierra, Inc.1		70,990		609,804
RF Micro Devices, Inc.1		269,360		1,979,796
Semtech Corp.1		275,959		6,247,712
Skyworks Solutions, Inc.1		214,610		6,144,284
Solarfun Power Holdings Co. Ltd., Sponsored ADR1		87,350		713,650
Spansion, Inc., Cl. A1		6,920		143,244
Standard Microsystems Corp.1		4,470		128,870
Teradyne, Inc.1		136,270		1,913,231
Tessera Technologies, Inc.1		45,549		1,008,910
Varian Semiconductor Equipment Associates, Inc.1		163,279		6,036,425
Veeco Instruments, Inc.1		41,210		1,770,382
				52,439,126
Software—4.6%
Actuate Corp.1		128,940		734,958
Blackboard, Inc.1		82,060		3,389,078
Changyou.com Ltd., ADR1		45,590		1,299,771
Check Point Software Technologies Ltd.1		154,074		7,127,463
Compuware Corp.1		185,758		2,167,796
Concur Technologies, Inc.1		56,300		2,923,659
FactSet Research Systems, Inc.		81,652		7,655,692
Fair Isaac Corp.		70,821		1,655,087
Giant Interactive Group, Inc., ADR		76,210		542,615
Lawson Software, Inc.1		51,760		478,780
Manhattan Associates, Inc.1		63,855		1,950,132
MicroStrategy, Inc., Cl. A1		14,216		1,215,042
Monotype Imaging Holdings, Inc.1		30,030		333,333
Net 1 UEPS Technologies, Inc.1		112,530		1,379,618
NetScout Systems, Inc.1		740		17,027
Perfect World Co. Ltd.1		41,920		991,408
Pervasive Software, Inc.1		43,660		225,286
Quest Software, Inc.1		83,310		2,311,019
Shanda Games Ltd., Sponsored ADR1		197,100		1,269,324
TIBCO Software, Inc.1		283,116		5,580,216
Websense, Inc.1		22,060		446,715
				43,694,019
Materials—5.1%
Chemicals—1.9%
Arch Chemicals, Inc.		7,210		273,475
Contango ORE, Inc.1		1,098		11,529
Cytec Industries, Inc.		128,511		6,818,794
Hawkins, Inc.		27,000		1,198,800
Innophos Holdings, Inc.		58,370		2,105,990
Innospec, Inc.1		16,760		341,904
KMG Chemicals, Inc.		19,380		321,127
Koppers Holdings, Inc.		15,056		538,704
Minerals Technologies, Inc.		27,464		1,796,420
NewMarket Corp.		9,340		1,152,276
OM Group, Inc.1		26,210		1,009,347
Solutia, Inc.1		20,930		483,064
Stepan Co.		8,980		684,905
W.R. Grace & Co.1		51,690		1,815,870
Westlake Chemical Corp.		3,140		136,496
				18,688,701
Construction Materials—0.6%
Eagle Materials, Inc.		204,250		5,770,063
Containers & Packaging—1.1%
Boise, Inc.		150,010		1,189,579
Packaging Corp. of America		287,110		7,418,922
Rock-Tenn Co., Cl. A		29,379		1,584,997
Silgan Holdings, Inc.		2,740		98,119
				10,291,617
Metals & Mining—0.8%
Compass Minerals International, Inc.		82,690		7,381,736
Gulf Resources, Inc.1		16,250		173,713
Redcorp Ventures Ltd., Legend Shares1,2		666,400		3,351
				7,558,800
Paper & Forest Products—0.7%
Buckeye Technologies, Inc.		95,950		2,015,910
Clearwater Paper Corp.1		16,330		1,278,639
Domtar Corp.		22,050		1,674,036
Glatfelter		75,380		924,913
KapStone Paper & Packing Corp.1		62,410		954,873
				6,848,371

	Shares			Value
Telecommunication Services—0.6%
Diversified Telecommunication Services—0.2%
Cincinnati Bell, Inc.1		263,752		$	738,506
IDT Corp., Cl. B		25,790			661,514
Neutral Tandem, Inc.1		10,440			150,754
Nortel Inversora SA, Sponsored ADR1		16,050			479,895
Telecom Corp. of New Zealand Ltd., Sponsored ADR		47,360			397,824
					2,428,493
Wireless Telecommunication Services—0.4%
Cellcom Israel Ltd.		42,590			1,392,267
NTELOS Holdings Corp.		27,818			529,933
USA Mobility, Inc.		91,762			1,630,611
					3,552,811
Utilities—3.2%
Electric Utilities—1.1%
Companhia Paranaense de Energia-Copel, Sponsored ADR		78,851			1,984,680
El Paso Electric Co.1		52,150			1,435,690
Empresa Distribuidora y Comercializadora Norte SA, ADR1		32,790			448,567
UIL Holdings Corp.		450			13,482
UniSource Energy Corp.		28,970			1,038,285
Westar Energy, Inc.		230,860			5,808,438
					10,729,142
Energy Traders—1.0%
AES Corp. (The)1		809,390			9,858,370
Gas Utilities—0.6%
Atmos Energy Corp.		51,290			1,600,248
Chesapeake Utilities Corp.		6,110			253,687
Nicor, Inc.		290			14,477
Southwest Gas Corp.		53,120			1,947,910
UGI Corp.		46,380			1,464,680
					5,281,002
Multi-Utilities—0.1%
Integrys Energy Group, Inc.		23,110			1,121,066
Vectren Corp.		5,410			137,306
					1,258,372
Water Utilities—0.4%
Aqua America, Inc.		159,150			3,577,664
Total Common Stocks (Cost $694,239,797)					929,312,510
Investment Companies—2.6%
Ares Capital Corp.		429,060			7,070,909
BlackRock Kelso Capital Corp.		119,670			1,323,550
Gladstone Capital Corp.		81,658			940,700
Hercules Technology Growth Capital, Inc.		18,977			196,602
JPMorgan U.S. Treasury Plus Money Market Fund, Agency Shares, 0.00%3,5		133,735			133,735
MCG Capital Corp.		98,070			683,548
Oppenheimer Institutional Money Market Fund, Cl. E, 0.21%3,4		13,940,550			13,940,550
TICC Capital Corp.		63,270			709,257
Total Investment Companies (Cost $22,847,404)					24,998,851
Total Investments, at Value (Cost $717,087,201)		99.9	%		954,311,361
Other Assets Net of Liabilities		0.1			975,118
Net Assets		100.0	%	$	955,286,479

Footnotes to Statement of Investments

1.	Non-income producing security.
2.	Represents securities sold under Rule 144A, which are exempt from registration under the Securities Act of 1933, as amended. These securities have been determined to be liquid under guidelines established by the Board of Trustees. These securities amount to $3,351 or less than 0.005% of the Fund’s net assets as of December 31, 2010.
3.	Rate shown is the 7-day yield as of December 31, 2010.
4.	Is or was an affiliate, as defined in the Investment Company Act of 1940, at or during the period ended December 31, 2010, 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, 2009		Additions		Reductions		December 31, 2010
Oppenheimer Institutional Money Market Fund, Cl. E		6,595,140		301,135,286		293,789,876		13,940,550

	Value		Income
Oppenheimer Institutional Money Market Fund, Cl. E	$	13,940,550	$	22,622

5. Interest rate is less than 0.0005%

Valuation Inputs

Various data inputs are used in determining the value of each of the Fund’s investments as of the reporting period end. These data inputs are categorized in the following hierarchy under applicable financial accounting standards:

1) Level 1—unadjusted quoted prices in active markets for identical assets or liabilities (including securities actively traded on a securities exchange)

2) Level 2—inputs other than unadjusted quoted prices that are observable for the asset or liability (such as unadjusted quoted prices for similar assets and market corroborated inputs such as interest rates, prepayment speeds, credit risks, etc.)

3) Level 3—significant unobservable inputs (including the Manager’s own judgments about assumptions that market participants would use in pricing the asset or liability).

The table below categorizes amounts that are included in the Fund’s Statement of Assets and Liabilities as of December 31, 2010 based on valuation input level:

				Level 3—
	Level 1—		Level 2—	Significant
	Unadjusted		Other Significant	Unobservable
	Quoted Prices		Observable Inputs	Inputs		Value
Assets Table
Investments, at Value:
Common Stocks
Consumer Discretionary	$	127,845,744	$—	$	—	$	127,845,744
Consumer Staples		19,688,252	—		—		19,688,252
Energy		51,640,857	—		—		51,640,857
Financials		198,612,714	—		—		198,612,714
Health Care		107,696,844	—		25		107,696,869
Industrials		150,560,561	—		—		150,560,561
Information Technology		187,424,107	—		—		187,424,107
Materials		49,154,201	—		3,351		49,157,552
Telecommunication Services		5,981,304	—		—		5,981,304
Utilities		30,704,550	—		—		30,704,550
Investment Companies		24,998,851	—		—		24,998,851
Total Assets	$	954,307,985	$—	$	3,376	$	954,311,361

Currency contracts and forwards, if any, are reported at their unrealized appreciation/depreciation at measurement date, which represents the change in the contract’s value from trade date. Futures, if any, are reported at their variation margin at measurement date, which represents the amount due to/from the Fund at that date. All additional assets and liabilities included in the above table are reported at their market value at measurement date.

See the accompanying Notes for further discussion of the methods used in determining value of the Fund’s investments, and a summary of changes to the valuation methodologies, if any, during the reporting period.

STATEMENT OF ASSETS AND LIABILITIES December 31, 2010

Assets
Investments, at value—see accompanying statement of investments:
Unaffiliated companies (cost $703,146,651)	$	940,370,811
Affiliated companies (cost $13,940,550)		13,940,550
		954,311,361
Receivables and other assets:
Investments sold		1,322,757
Dividends		1,021,613
Other		16,412
Total assets		956,672,143
Liabilities
Payables and other liabilities:
Distribution and service plan fees		514,331
Shares of beneficial interest redeemed		430,145
Shareholder communications		259,995
Transfer and shareholder servicing agent fees		80,536
Due to custodian		48,330
Trustees’ compensation		13,793
Other		38,534
Total liabilities		1,385,664
Net Assets	$	955,286,479
Composition of Net Assets
Par value of shares of beneficial interest	$	54,530
Additional paid-in capital		929,224,523
Accumulated net investment income		4,175,047
Accumulated net realized loss on investments		(215,391,781	)
Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies		237,224,160
Net Assets	$	955,286,479
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 $95,575,915 and 5,412,628 shares of beneficial interest outstanding)	$	17.66
Service Shares:
Net asset value, redemption price per share and offering price per share (based on net assets of $859,710,564 and 49,117,021 shares of beneficial interest outstanding)	$	17.50

STATEMENT OF OPERATIONS For the Year Ended December 31, 2010

Investment Income
Dividends:
Unaffiliated companies (net of foreign withholding taxes of $50,417)	$	12,241,751
Affiliated companies		22,622
Interest		415
Total investment income		12,264,788
Expenses
Management fees		5,732,969
Distribution and service plan fees—Service shares		1,818,061
Transfer and shareholder servicing agent fees:
Non-Service shares		88,009
Service shares		729,536
Shareholder communications:
Non-Service shares		31,214
Service shares		260,274
Trustees’ compensation		32,378
Custodian fees and expenses		4,471
Administration service fees		1,500
Other		79,527
Total expenses		8,777,939
Less waivers and reimbursements of expenses		(411,578	)
Net expenses		8,366,361
Net Investment Income		3,898,427
Realized and Unrealized Gain
Net realized gain on investments from unaffiliated companies		52,686,058
Net change in unrealized appreciation/depreciation on:
Investments		128,458,193
Translation of assets and liabilities denominated in foreign currencies		16,517
Net change in unrealized appreciation/depreciation		128,474,710
Net Increase in Net Assets Resulting from Operations	$	185,059,195

STATEMENTS OF CHANGES IN NET ASSETS

Year Ended December 31,	2010			2009
Operations
Net investment income	$	3,898,427		$	3,381,265
Net realized gain (loss)		52,686,058			(133,188,329	)
Net change in unrealized appreciation/depreciation		128,474,710			346,221,405
Net increase in net assets resulting from operations		185,059,195			216,414,341
Dividends and/or Distributions to Shareholders
Dividends from net investment income:
Non-Service shares		(548,102	)		(605,525	)
Service shares		(2,854,368	)		(4,276,612	)
		(3,402,470	)		(4,882,137	)
Beneficial Interest Transactions
Net increase (decrease) in net assets resulting from beneficial interest transactions:
Non-Service shares		(4,150,760	)		894,228
Service shares		33,619,248			(78,387,647	)
		29,468,488			(77,493,419	)
Net Assets
Total increase		211,125,213			134,038,785
Beginning of period		744,161,266			610,122,481
End of period (including accumulated net investment income of $4,175,047 and $3,373,950, respectively)	$	955,286,479		$	744,161,266

FINANCIAL HIGHLIGHTS

Non-Service Shares   Year Ended December 31,	2010			2009			2008			2007			2006
Per Share Operating Data
Net asset value, beginning of period	$	14.40		$	10.65		$	18.20		$	19.15		$	17.18
Income (loss) from investment operations:
Net investment income1		.10			.08			.12			.09			.08
Net realized and unrealized gain (loss)		3.25			3.78			(6.73	)		(.30	)		2.46
Total from investment operations		3.35			3.86			(6.61	)		(.21	)		2.54
Dividends and/or distributions to shareholders:
Dividends from net investment income		(.09	)		(.11	)		(.08	)		(.06	)		(.03	)
Distributions from net realized gain		—			—			(.86	)		(.68	)		(.54	)
Total dividends and/or distributions to shareholders		(.09	)		(.11	)		(.94	)		(.74	)		(.57	)
Net asset value, end of period	$	17.66		$	14.40		$	10.65		$	18.20		$	19.15
Total Return, at Net Asset Value2		23.41	%		37.20	%		(37.83	)%		(1.21	)%		15.00	%
Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	95,576		$	81,814		$	58,478		$	93,939		$	81,405
Average net assets (in thousands)	$	88,063		$	69,585		$	80,406		$	94,815		$	62,659
Ratios to average net assets:3
Net investment income		0.68	%		0.71	%		0.80	%		0.48	%		0.46	%
Total expenses4		0.85	%		0.91	%		0.75	%		0.73	%		0.77	%
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses		0.80	%		0.82	%		0.75	%		0.73	%		0.77	%
Portfolio turnover rate		73	%		140	%		130	%		115	%		110	%

1.	Per share amounts calculated based on the average shares outstanding during the period.
2.	Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
3.	Annualized for periods less than one full year.
4.	Total Expenses including indirect expenses from affiliated fund were as follows:

Year Ended December 31, 2010	0.85	%
Year Ended December 31, 2009	0.91	%
Year Ended December 31, 2008	0.75	%
Year Ended December 31, 2007	0.73	%
Year Ended December 31, 2006	0.77	%

Service Shares   Year Ended December 31,	2010			2009			2008			2007			2006
Per Share Operating Data
Net asset value, beginning of period	$	14.28		$	10.54		$	18.03		$	18.98		$	17.06
Income (loss) from investment operations:
Net investment income1		.07			.05			.08			.05			.04
Net realized and unrealized gain (loss)		3.21			3.76			(6.67	)		(.29	)		2.42
Total from investment operations		3.28			3.81			(6.59	)		(.24	)		2.46
Dividends and/or distributions to shareholders:
Dividends from net investment income		(.06	)		(.07	)		(.04	)		(.03	)		—2
Distributions from net realized gain		—			—			(.86	)		(.68	)		(.54	)
Total dividends and/or distributions to shareholders		(.06	)		(.07	)		(.90	)		(.71	)		(.54	)
Net asset value, end of period	$	17.50		$	14.28		$	10.54		$	18.03		$	18.98
Total Return, at Net Asset Value3		23.06	%		36.88	%		(38.00	)%		(1.39	)%		14.66	%
Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	859,710		$	662,347		$	551,644		$	821,642		$	636,430
Average net assets (in thousands)	$	730,069		$	612,651		$	769,150		$	766,102		$	479,456
Ratios to average net assets:4
Net investment income		0.45	%		0.47	%		0.52	%		0.23	%		0.23	%
Total expenses5		1.10	%		1.15	%		0.99	%		0.97	%		1.00	%
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses		1.05	%		1.07	%		0.99	%		0.97	%		1.00	%
Portfolio turnover rate		73	%		140	%		130	%		115	%		110	%

1.	Per share amounts calculated based on the average shares outstanding during the period.
2.	Less than $0.005 per share.
3.	Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
4.	Annualized for periods less than one full year.
5.	Total expenses including indirect expenses from affiliated fund were as follows:

Year Ended December 31, 2010	1.10	%
Year Ended December 31, 2009	1.15	%
Year Ended December 31, 2008	0.99	%
Year Ended December 31, 2007	0.97	%
Year Ended December 31, 2006	1.00	%

NOTES TO FINANCIAL STATEMENTS

1. Significant Accounting Policies

Oppenheimer Main Street Small Cap 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 investment objective is to seek capital appreciation. 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.

     Each investment asset or liability of the Fund is assigned a level at measurement date based on the significance and source of the inputs to its valuation. Unadjusted quoted prices in active markets for identical securities are classified as “Level 1,” inputs other than unadjusted quoted prices for an asset that are observable are classified as “Level 2” and significant unobservable inputs, including the Manager’s judgment about the assumptions that a market participant would use in pricing an asset or liability, are classified as “Level 3.” The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. A table summarizing the Fund’s investments under these levels of classification is included following the Statement of Investments.

     Securities are valued using unadjusted quoted market prices, when available, as supplied primarily by portfolio pricing services approved by the Board of Trustees or dealers.

     Securities traded on a registered U.S. securities exchange are valued based on the last sale price of the security reported on the principal exchange on which it is traded, prior to the time when the Fund’s assets are valued. Securities whose principal exchange is NASDAQ^® are valued based on the official closing prices 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 current day’s closing “bid” and “asked” prices, and if not, at the current day’s closing bid price. A foreign security traded on a foreign exchange is valued based on the last sale price on the principal exchange on which the security is traded, as identified by the portfolio pricing service used by the Manager, prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the most recent official closing price on the principal exchange on which it is traded.

     Shares of a registered investment company that are not traded on an exchange are valued at that investment company’s net asset value per share.

     U.S. domestic and international debt instruments (including corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed securities) and “money market-type” debt instruments with a remaining maturity in excess of sixty days are valued at the mean between the “bid” and “asked” prices utilizing price quotations obtained from independent pricing services or broker-dealers. Such prices are typically determined based upon information obtained from market participants including reported trade data, broker-dealer price quotations and inputs such as benchmark yields and issuer spreads from identical or similar securities.

     “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.

     In the absence of a readily available unadjusted quoted market price, including for 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 the securities’ respective exchanges, the Manager, acting through its internal valuation committee, in good faith determines the fair valuation of that asset using consistently applied procedures under the supervision of the Board of Trustees (which reviews those fair valuations by the Manager). Those procedures include certain standardized methodologies to fair value securities. Such methodologies include, but are not limited to, pricing securities initially at cost and subsequently adjusting the value based on: changes in company specific fundamentals, changes in an appropriate securities index, or changes in the value of similar securities which may be adjusted for any discounts related to resale restrictions. When possible, such methodologies use observable market inputs such as unadjusted quoted prices of similar securities, observable interest rates, currency rates and yield curves. The methodologies used for valuing securities are not necessarily an indication of the risks associated with investing in those securities.

     There have been no significant changes to the fair valuation methodologies of the Fund during the period.

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. When applicable, the Fund’s investment in IMMF is included in the Statement of Investments. Shares of IMMF are valued at their net asset value per share. 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.

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.

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

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

					Net Unrealized
					Appreciation Based
					on Cost of Securities
Undistributed	Undistributed		Accumulated		and Other Investments
Net Investment	Long-Term		Loss		for Federal Income
Income	Gain		Carryforward1,2,3		Tax Purposes
$3,393,342	$	—	$	207,226,042	$	229,859,904

1. As of December 31, 2010, the Fund had $207,226,042 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, 2010, details of the capital loss carryforwards were as follows:

Expiring
2016	$	45,463,528
2017		161,762,514
Total	$	207,226,042

2.	During the fiscal year ended December 31, 2010, the Fund utilized $46,413,192 of capital loss carryforward to offset capital gains realized in that fiscal year.
3.	During the fiscal year ended December 31, 2009, 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, 2010. Net assets of the Fund were unaffected by the reclassifications.

	Increase to
Increase to	Accumulated Net
Accumulated Net	Realized Loss
Investment Income	on Investments
$305,140	$	305,140

The tax character of distributions paid during the years ended December 31, 2010 and December 31, 2009 was as follows:

	Year Ended		Year Ended
	December 31, 2010		December 31, 2009
Distributions paid from:
Ordinary income	$	3,402,470	$	4,882,137

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, 2010 are noted in the following table. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss.

Federal tax cost of securities	$	724,451,457
Gross unrealized appreciation	$	236,867,825
Gross unrealized depreciation		(7,007,921	)
Net unrealized appreciation	$	229,859,904

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 with 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. 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, 2010						Year Ended December 31, 2009
	Shares			Amount			Shares			Amount
Non-Service Shares
Sold		2,793,780		$	42,429,352			3,169,215		$	36,433,519
Dividends and/or distributions reinvested		36,202			548,102			83,752			605,525
Redeemed		(3,098,803	)		(47,128,214	)		(3,063,138	)		(36,144,816	)
Net increase (decrease)		(268,821	)	$	(4,150,760	)		189,829		$	894,228
Service Shares
Sold		11,844,155		$	173,858,907			14,093,981		$	149,861,179
Dividends and/or distributions reinvested		189,911			2,854,368			592,905			4,262,989
Redeemed		(9,301,032	)		(143,094,027	)		(20,638,747	)		(232,511,815	)
Net increase (decrease)		2,733,034		$	33,619,248			(5,951,861	)	$	(78,387,647	)

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, 2010, were as follows:

	Purchases		Sales
Investment securities	$	610,839,072	$	589,808,446

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
Up to $200 million	0.75	%
Next $200 million	0.72
Next $200 million	0.69
Next $200 million	0.66
Over $800 million	0.60

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 fees at an annual rate of 0.10% of the daily net assets of each class of shares. For the year ended December 31, 2010, the Fund paid $798,923 to OFS for services to the Fund.

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 0.25% of the daily net assets of Service shares of the Fund. The Distributor currently uses all of those fees to compensate sponsors 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. The Manager has voluntarily agreed to limit the Fund’s total annual operating expenses so that those expenses, as percentages of daily net assets, will not exceed the annual rate of 0.80% for Non-Service shares and 1.05% for Service shares. During the year ended December 31, 2010, the Manager waived fees and/or reimbursed the Fund $44,175 and $357,636 for Non-Service and Service shares, respectively.

     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, 2010, the Manager waived fees and/or reimbursed the Fund $9,767 for IMMF management fees.

     Some of these undertakings may be modified or terminated at any time; some may not be modified or terminated until after one year from the date of the current prospectus, as indicated therein.

5. Pending Litigation

Since 2009, a number of lawsuits have been pending in federal courts against the Manager, the Distributor, and certain mutual funds (“Defendant Funds”) advised by the Manager and distributed by the Distributor (but not including the Fund). The lawsuits naming the Defendant Funds also name as defendants certain officers and current and former trustees of the respective Defendant Funds. The plaintiffs seek class action status on behalf of purchasers of shares of the respective Defendant Fund during a particular time period. The lawsuits raise claims under federal securities laws alleging that, among other things, the disclosure documents of the respective Defendant Fund contained misrepresentations and omissions, that such Defendant Fund’s investment policies were not followed, and that such Defendant Fund and the other defendants violated federal securities laws and regulations. The plaintiffs seek unspecified damages, equitable relief and an award of attorneys’ fees and litigation expenses.

     In 2009, what are claimed to be derivative lawsuits were filed in state court against the Manager and a subsidiary (but not against the Fund), on behalf of the New Mexico Education Plan Trust. These lawsuits allege breach of contract, breach of fiduciary duty, negligence and violation of state securities laws, and seek compensatory damages, equitable relief and an award of attorneys’ fees and litigation expenses.

     Other lawsuits have been filed since 2008 in various state and federal courts, against the Manager and certain of its affiliates. Those lawsuits were filed by investors who made investments through an affiliate of the Manager, and relate to the alleged investment fraud perpetrated by Bernard Madoff and his firm (“Madoff”). Those suits allege a variety of claims, including breach of fiduciary duty, fraud, negligent misrepresentation, unjust enrichment, and violation of federal and state securities laws and regulations, among others. They seek unspecified damages, equitable relief and an award of attorneys’ fees and litigation expenses. None of the suits have named the Distributor, any of the Oppenheimer mutual funds or any of their independent Trustees or Directors as defendants. None of the Oppenheimer funds invested in any funds or accounts managed by Madoff.

     The Manager believes that the lawsuits described above are without legal merit and is defending against them vigorously. The Defendant Funds’ Boards of Trustees have also engaged counsel to defend the suits brought against those Funds and the present and former Independent Trustees named in those suits. While it is premature to render any opinion as to the outcome in these lawsuits, or whether any costs that the Defendant Funds may bear in defending the suits might not be reimbursed by insurance, the Manager believes that these suits should not impair the ability of the Manager or the Distributor to perform their respective duties to the Fund, and that the outcome of all of the suits together should not have any material effect on the operations of any of the Oppenheimer funds.

6. Subsequent Event

The Regulated Investment Company Modernization Act of 2010 (the “Act”) was signed into law on December 22, 2010. The Act makes changes to a number of tax rules impacting the Fund. Under the Act, future capital losses generated by a fund may be carried over indefinitely, but these losses must be used prior to the utilization of any pre-enactment capital losses. Since pre-enactment capital losses may only be carried forward for eight years, there may be a greater likelihood that all or a portion of a fund’s pre-enactment capital losses will expire unused. In general, the provisions of the Act will be effective for the Fund’s fiscal year ending December 31, 2011. Specific information regarding the impact of the Act on the Fund will be contained within the “Federal Taxes” section of the financial statement notes for the fiscal year ending December 31, 2011.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Trustees and Shareholders of Oppenheimer Variable Account Funds:

We have audited the accompanying statement of assets and liabilities of Oppenheimer Money Fund/VA (one of the portfolios constituting the Oppenheimer Variable Account Funds), including the statement of investments, as of December 31, 2010, the related statement of operations for the year then ended, and the statements of changes in net assets and the financial highlights for each of the years in the two-year 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. The accompanying financial highlights of Oppenheimer Money Fund/VA for the years ended prior to January 1, 2009 were audited by other auditors whose report dated February 11, 2009 expressed an unqualified opinion on those financial highlights.

     We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2010, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Oppenheimer Money Fund/VA as of December 31, 2010, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for each of the years in the two-year period then ended, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG llp

Denver, Colorado
February 16, 2011

STATEMENT OF INVESTMENTS December 31, 2010

	Maturity		Final Legal		Principal
	Date*		Maturity Date**		Amount		Value
Certificates of Deposit—22.4%
Yankee Certificates of Deposit—22.4%
Bank of Montreal, Chicago:
0.25%		1/27/11		1/27/11	$	2,000,000	$	2,000,000
0.25%		1/28/11		1/28/11		3,000,000		3,000,000
Barclays Bank plc, New York, 0.44%1		1/19/11		7/19/11		4,000,000		4,000,000
BNP Paribas, New York, 0.50%		6/30/11		6/30/11		1,000,000		1,000,000
Rabobank Nederland NV, New York:
0.288%1		1/31/11		7/29/11		2,000,000		2,000,000
0.332%1		1/12/11		5/12/11		3,000,000		3,000,000
0.361%1		1/25/11		6/27/11		2,000,000		2,000,000
Royal Bank of Canada, New York:
0.37%1		1/3/11		11/10/11		3,500,000		3,500,000
0.39%1		1/3/11		8/16/11		3,000,000		3,000,000
Societe Generale, New York, 0.34%		2/2/11		2/2/11		3,000,000		3,000,013
Svenska Handelsbanken, New York:
0.27%		2/4/11		2/4/11		2,000,000		2,000,000
0.29%		2/22/11		2/22/11		2,000,000		2,000,000
0.29%		3/3/11		3/3/11		3,000,000		3,000,051
Total Certificates of Deposit (Cost $33,500,064)								33,500,064
Direct Bank Obligations—17.8%
Barclays US Funding LLC, 0.30%		3/1/11		3/1/11		3,000,000		2,998,525
Commonwealth Bank of Australia, 0.27%2		2/9/11		2/9/11		5,400,000		5,398,450
Credit Agricole North America, Inc., 0.30%		1/20/11		1/20/11		5,600,000		5,599,124
Credit Suisse, New York Branch, 0.23%		1/5/11		1/5/11		2,000,000		1,999,949
ING (US) Funding LLC, 0.28%		2/2/11		2/2/11		3,500,000		3,499,129
Nordea North America, Inc., 0.29%		3/15/11		3/15/11		2,700,000		2,698,412
Societe Generale North America, Inc.:
0.30%		1/20/11		1/20/11		2,400,000		2,399,620
0.30%		1/28/11		1/28/11		2,000,000		1,999,550
Total Direct Bank Obligations (Cost $26,592,759)								26,592,759
Short-Term Notes—46.5%
Capital Markets—3.9%
BNP Paribas Finance, Inc.:
0.39%		3/23/11		3/23/11		2,550,000		2,547,762
0.46%		6/17/11		6/17/11		3,300,000		3,292,958
								5,840,720
Leasing & Factoring—4.9%
Toyota Motor Credit Corp.:
0.33%		4/5/11		4/5/11		5,000,000		4,995,692
0.35%		4/12/11		4/12/11		2,250,000		2,247,791
								7,243,483
Municipal—12.2%
Carroll Cnty., KY Solid Waste Disposal Revenue Bonds, North America Stainless Project, Series 2006, 0.39%1		1/7/11		1/7/11		4,300,000		4,300,000
Chicago, IL Industrial Development Revenue Bonds, Freedman Seating Co. Project, Series 1998, 0.50%1		1/7/11		1/7/11		1,275,000		1,275,000
Health Care Revenue Bonds, SFO Associates Project, Series 1994, 0.34%1		1/7/11		1/7/11		1,900,000		1,900,000
IL Finance Authority, Freedman Seating Co. Project, Series 2005, 0.50%1		1/7/11		1/7/11		1,440,000		1,440,000

	Maturity		Final Legal		Principal
	Date*		Maturity Date**		Amount		Value
Municipal Continued
IN Health Facilities Financing Authority Hospital Revenue Bonds, Deaconess Hospital Obligation Project, Series 2004B, 0.31%1		1/7/11		1/7/11	$	4,130,000	$	4,130,000
Miami-Dade Cnty., FL Industrial Development Authority Bonds, Airbus Service Co., Inc. Project, Series 98, 0.38%1		1/7/11		1/7/11		1,000,000		1,000,000
San Antonio, TX Industrial Development Authority Revenue Bonds, Tindall Corp. Project, 0.34%1		1/7/11		1/7/11		3,300,000		3,300,000
Valdosta-Lowndes Cnty., GA Industrial Authority, Steeda Autosports, Inc. Project, Series 2008, 0.50%1		1/7/11		1/7/11		945,000		945,000
								18,290,000
Oil, Gas & Consumable Fuels—2.7%
Total Capital Canada, 0.47%2		1/19/11		1/19/11		4,000,000		3,999,040
Personal Products—3.0%
Reckitt Benckiser Treasury Services plc:
0.27%2		1/6/11		1/6/11		2,500,000		2,499,906
0.28%2		1/7/11		1/7/11		2,000,000		1,999,907
								4,499,813
Receivables Finance—8.0%
Falcon Asset Securitization Co. LLC:
0.27%2		1/24/11		1/24/11		1,700,000		1,699,707
0.27%2		2/1/11		2/1/11		3,000,000		2,999,303
Gemini Securitization Corp., 0.27%2		1/7/11		1/7/11		1,500,000		1,499,933
Mont Blanc Capital Corp., 0.28%2		1/19/11		1/19/11		2,000,000		1,999,720
Old Line Funding Corp., 0.27%2		2/3/11		2/3/11		1,256,000		1,255,689
Thunder Bay Funding LLC, 0.27%2		2/22/11		2/22/11		2,500,000		2,499,025
								11,953,377
Special Purpose Financial—11.8%
Crown Point Capital Co.:
0.35%		1/4/11		1/4/11		5,000,000		4,999,854
0.35%		1/10/11		1/10/11		1,000,000		999,913
FCAR Owner Trust I:
0.30%		1/13/11		1/13/11		2,400,000		2,399,760
0.31%		2/1/11		2/1/11		2,000,000		1,999,466
Lexington Parker Capital Co. LLC:
0.35%2		1/5/11		1/5/11		5,000,000		4,999,806
0.35%2		1/12/11		1/12/11		2,300,000		2,299,754
								17,698,553
Total Short-Term Notes (Cost $69,524,986)								69,524,986
U.S. Government Agencies—3.3%
Federal Home Loan Bank:
0.40%		11/28/11		11/28/11		2,000,000		2,000,000
0.45%		12/16/11		12/16/11		2,000,000		2,000,000
0.50%		12/28/11		12/28/11		1,000,000		1,000,000
Total U.S. Government Agencies (Cost $5,000,000)								5,000,000
U.S. Government Obligations—5.9%
U.S. Treasury Nts.:
0.875%		2/28/11		2/28/11		1,800,000		1,801,455
0.875%		3/31/11		3/31/11		1,000,000		1,001,065
0.875%		4/30/11		4/30/11		1,000,000		1,001,110
1.125%		12/15/11		12/15/11		3,000,000		3,022,204
4.875%		7/31/11		7/31/11		1,000,000		1,025,930

	Maturity		Final Legal		Principal
	Date*		Maturity Date**		Amount			Value
U.S. Government Obligations Continued
U.S. Treasury Nts.: Continued
5.125%		6/30/11		6/30/11	$	1,000,000		$	1,023,181
Total U.S. Government Obligations (Cost $8,874,945)									8,874,945
Repurchase Agreements—4.2%
Repurchase agreement (Principal Amount/Value $6,300,000, with a maturity value of $6,300,105) with JPMorgan Chase Bank, 0.20%, dated 12/31/10, to be repurchased at $6,300,105 on 1/3/11, collateralized by Government National Mortgage Assn., Principal-Only Stripped Mtg.-Backed Security, 0%, 4/20/40, with a value of $6,429,158 (Cost $6,300,000)		1/3/11		1/3/11		6,300,000			6,300,000
Total Investments, at Value (Cost $149,792,754)						100.1	%		149,792,754
Liabilities in Excess of Other Assets						(0.1	)		(95,599	)
Net Assets						100.0	%	$	149,697,155

Footnotes to Statement of Investments
Short-term notes and direct bank obligations are generally traded on a discount basis; the interest rate shown is the discount rate received by the Fund at the time of purchase. Other securities normally bear interest at the rates shown.
*	The Maturity Date represents the date used to calculate the Fund’s weighted average maturity as determined under Rule 2a-7.
**	If different from the Maturity Date, the Final Legal Maturity date includes any maturity date extensions, which may be affected at the option of the issuer, or unconditional payments of principal by the issuer which may be affected at the option of the Fund, and represents the date used to calculate the Fund’s weighted average life.
1.	Represents the current interest rate for a variable or increasing rate security.
2.	Security issued in an exempt transaction without registration under the Securities Act of 1933. Such securities amount to $33,150,240 or 22.14% of the Fund’s net assets, and have been determined to be liquid pursuant to guidelines adopted by the Board of Trustees.

Valuation Inputs

Various data inputs are used in determining the value of each of the Fund’s investments as of the reporting period end. These data inputs are categorized in the following hierarchy under applicable financial accounting standards:

1) Level 1—unadjusted quoted prices in active markets for identical assets or liabilities (including securities actively traded on a securities exchange)

2) Level 2—inputs other than unadjusted quoted prices that are observable for the asset or liability (such as unadjusted quoted prices for similar assets and market corroborated inputs such as interest rates, prepayment speeds, credit risks, etc.)

3) Level 3—significant unobservable inputs (including the Manager’s own judgments about assumptions that market participants would use in pricing the asset or liability).

The table below categorizes amounts that are included in the Fund’s Statement of Assets and Liabilities as of December 31, 2010 based on valuation input level:

					Level 3—
	Level 1—		Level 2—		Significant
	Unadjusted		Other Significant		Unobservable
	Quoted Prices		Unobservable Inputs		Inputs		Value
Assets Table
Investments, at Value:
Certificates of Deposit	$	—	$	33,500,064	$	—	$	33,500,064
Direct Bank Obligations		—		26,592,759		—		26,592,759
Short-Term Notes		—		69,524,986		—		69,524,986
U.S. Government Agencies		—		5,000,000		—		5,000,000
U.S. Government Obligations		—		8,874,945		—		8,874,945
Repurchase Agreements		—		6,300,000		—		6,300,000
Total Assets	$	—	$	149,792,754	$	—	$	149,792,754

Currency contracts and forwards, if any, are reported at their unrealized appreciation/depreciation at measurement date, which represents the change in the contract’s value from trade date. Futures, if any, are reported at their variation margin at measurement date, which represents the amount due to/from the Fund at that date. All additional assets and liabilities included in the above table are reported at their market value at measurement date.

See the accompanying Notes for further discussion of the methods used in determining value of the Fund’s investments, and a summary of changes to the valuation methodologies, if any, during the reporting period.

STATEMENT OF ASSETS AND LIABILITIES December 31, 2010

Assets
Investments, at value (cost $149,792,754)—see accompanying statement of investments	$	149,792,754
Cash		117,456
Receivables and other assets:
Interest		53,199
Shares of beneficial interest sold		2,369
Other		9,424
Total assets		149,975,202
Liabilities
Payables and other liabilities:
Shares of beneficial interest redeemed		216,038
Legal, auditing and other professional fees		20,458
Shareholder communications		17,865
Transfer and shareholder servicing agent fees		12,878
Trustees’ compensation		6,928
Dividends		524
Other		3,356
Total liabilities		278,047
Net Assets	$	149,697,155
Composition of Net Assets
Par value of shares of beneficial interest	$	149,697
Additional paid-in capital		149,547,458
Net Assets—applicable to 149,697,155 shares of beneficial interest outstanding	$	149,697,155
Net Asset Value, Redemption Price Per Share and Offering Price Per Share	$	1.00

STATEMENT OF OPERATIONS For the Year Ended December 31, 2010

Investment Income
Interest	$	585,547
Expenses
Management fees		739,544
Transfer and shareholder servicing agent fees		164,341
Legal, auditing and other professional fees		36,254
Shareholder communications		33,196
Trustees’ compensation		17,308
Custodian fees and expenses		1,852
Administration service fees		1,500
Other		15,759
Total expenses		1,009,754
Less waivers and reimbursements of expenses		(435,558	)
Net expenses		574,196
Net Investment Income		11,351
Net Realized Gain on Investments		68
Net Increase in Net Assets Resulting from Operations	$	11,419

STATEMENTS OF CHANGES IN NET ASSETS

Year Ended December 31,	2010			2009
Operations
Net investment income	$	11,351		$	765,680
Net realized gain		68			10,354
Net increase in net assets resulting from operations		11,419			776,034
Dividends and/or Distributions to Shareholders
Dividends from net investment income		(46,794	)		(765,999	)
Beneficial Interest Transactions
Net decrease in net assets resulting from beneficial interest transactions		(31,222,151	)		(62,411,738	)
Net Assets
Total decrease		(31,257,526	)		(62,401,703	)
Beginning of period		180,954,681			243,356,384
End of period	$	149,697,155		$	180,954,681

FINANCIAL HIGHLIGHTS

Year Ended December 31,	2010			2009			2008			2007			2006
Per Share Operating Data
Net asset value, beginning of period	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Income from investment operations-net investment income and net realized gain1		—	2		—	2		.03			.05			.05
Dividends and/or distributions to shareholders:
Dividends from net investment income		—	2		—	2		(.03	)		(.05	)		(.05	)
Distributions from net realized gain		—			—			—			—	2		—	2
Total dividends and/or distributions to shareholders		—	2		—	2		(.03	)		(.05	)		(.05	)
Net asset value, end of period	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Return3		0.03	%		0.32	%		2.78	%		4.98	%		4.71	%
Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	149,697		$	180,955		$	243,356		$	189,749		$	171,521
Average net assets (in thousands)	$	164,258		$	218,079		$	212,564		$	181,271		$	171,118
Ratios to average net assets:4
Net investment income		0.01	%		0.35	%		2.72	%		4.86	%		4.61	%
Total expenses		0.61	%		0.57	%		0.50	%		0.50	%		0.49	%
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses		0.35	%		0.48	%		0.50	%		0.50	%		0.49	%

1.	Per share amounts calculated based on the average shares outstanding during the period.
2.	Less than $0.005 per share.
3.	Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
4.	Annualized for periods less than one full year.

NOTES TO FINANCIAL STATEMENTS

1. Significant Accounting Policies

Oppenheimer Money 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 investment objective is to seek maximum current income from investments in “money market” securities consistent with low capital risk and the maintenance of liquidity. The Fund’s investment adviser is OppenheimerFunds, Inc. (the “Manager”).

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

Securities Valuation. Securities are valued at cost adjusted by the amortization of discount or premium to maturity (amortized cost), which approximates market value. If amortized cost is determined not to approximate market value, the fair value of the portfolio securities will be determined under procedures approved by the Fund’s Board of Trustees.

     Each investment asset or liability of the Fund is assigned a level at measurement date based on the significance and source of the inputs to its valuation. Unadjusted quoted prices in active markets for identical securities are classified as “Level 1,” inputs other than unadjusted quoted prices for an asset that are observable are classified as “Level 2” and significant unobservable inputs, including the Manager’s judgment about the assumptions that a market participant would use in pricing an asset or liability, are classified as “Level 3.” The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. A table summarizing the Fund’s investments under these levels of classification is included following the Statement of Investments.

     In the absence of a readily available unadjusted quoted market price, including for 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 the securities’ respective exchanges, the Manager, acting through its internal valuation committee, in good faith determines the fair valuation of that asset using consistently applied procedures under the supervision of the Board of Trustees (which reviews those fair valuations by the Manager). Those procedures include certain standardized methodologies to fair value securities. Such methodologies include, but are not limited to, pricing securities initially at cost and subsequently adjusting the value based on: changes in company specific fundamentals, changes in an appropriate securities index, or changes in the value of similar securities which may be adjusted for any discounts related to resale restrictions. When possible, such methodologies use observable market inputs such as unadjusted quoted prices of similar securities, observable interest rates, currency rates and yield curves. The methodologies used for valuing securities are not necessarily an indication of the risks associated with investing in those securities.

     There have been no significant changes to the fair valuation methodologies of the Fund during the period.

Repurchase Agreements. The Fund requires its custodian bank to take possession, to have legally segregated in the Federal Reserve Book Entry System or to have segregated within the custodian’s vault, all securities held as collateral for repurchase agreements. The market value of the collateral is required to 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.

Federal Taxes. The Fund intends to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its investment company taxable income to shareholders. Therefore, no federal income or excise tax provision is required. The Fund files income tax returns in U.S. federal and applicable state jurisdictions. The statute of limitations on the Fund’s tax return filings generally remain open for the three preceding fiscal reporting period ends.

The tax components of capital shown in the following table 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 for federal income tax purposes.

Undistributed Net		Undistributed		Accumulated Loss
Investment Income		Long-Term Gains		Carryforward1,2
$	10,084	$	—	$	—

1.	During the fiscal year ended December 31, 2010, the Fund did not utilize any capital loss carryforwards.
2.	During the fiscal year ended December 31, 2009, the Fund did not utilize any capital loss carryforwards.

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

Accordingly, the following amounts have been reclassified for December 31, 2010. Net assets of the Fund were unaffected by the reclassifications.

			Reduction to
	Reduction to		Accumulated Net
Reduction to	Accumulated		Realized Gain
Paid-in Capital	Net Investment Loss		on Investments
$26,088	$	35,443	$	9,355

The tax character of distributions paid during the years ended December 31, 2010 and December 31, 2009 was as follows:

	Year Ended		Year Ended
	December 31, 2010		December 31, 2009
Distributions paid from:
Ordinary income	$	46,794	$	765,999

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 with 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 distributions, if any, are declared daily and paid monthly. Capital gain distributions, if any, are declared and paid annually but may be paid at other times to maintain the net asset value per share at $1.00.

Investment Income. Interest income is recognized on an accrual basis. Discount and premium, which are included in interest income on the Statement of Operations, are amortized or accreted daily.

Custodian Fees. “Custodian fees and expenses” in the Statement of Operations may include interest expense incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on such cash overdrafts, to the extent they are not offset by positive cash balances maintained by the Fund, at a rate equal to the Federal Funds Rate plus 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. Transactions in shares of beneficial interest were as follows:

	Year Ended December 31, 2010						Year Ended December 31, 2009
	Shares			Amount			Shares			Amount
Sold		64,871,083		$	64,871,083			66,197,591		$	66,197,591
Dividends and/or distributions reinvested		46,794			46,794			765,999			765,999
Redeemed		(96,140,028	)		(96,140,028	)		(129,375,328	)		(129,375,328	)
Net decrease		(31,222,151	)	$	(31,222,151	)		(62,411,738	)	$	(62,411,738	)

3. 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
Up to $500 million	0.450	%
Next $500 million	0.425
Next $500 million	0.400
Over $1.5 billion	0.375

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 fees at an annual rate of 0.10% of its daily net assets. For the year ended December 31, 2010, the Fund paid $167,034 to OFS for services to the Fund.

Waivers and Reimbursements of Expenses. The Manager has voluntarily undertaken to waive fees and/or reimburse expenses to the extent necessary to assist the Fund in attempting to maintain a positive yield. There is no guarantee that the Fund will maintain a positive yield. During the year ended December 31, 2010, the Manager waived fees and/or reimbursed the Fund $435,558.

     The Manager has voluntarily agreed to limit the Fund’s total annual operating expenses so that those expenses, as a percentage of daily net assets, will not exceed the annual rate of 0.50%.

     Some of these undertakings may be modified or terminated at any time; some may not be modified or terminated until after one year from the date of the current prospectus, as indicated therein.

4. Pending Litigation

Since 2009, a number of lawsuits have been pending in federal courts against the Manager, the Distributor, and certain mutual funds (“Defendant Funds”) advised by the Manager and distributed by the Distributor (but not including the Fund). The lawsuits naming the Defendant Funds also name as defendants certain officers and current and former trustees of the respective Defendant Funds. The plaintiffs seek class action status on behalf of purchasers of shares of the respective Defendant Fund during a particular time period. The lawsuits raise claims under federal securities laws alleging that, among other things, the disclosure documents of the respective Defendant Fund contained misrepresentations and omissions, that such Defendant Fund’s investment policies were not followed, and that such Defendant Fund and the other defendants violated federal securities laws and regulations. The plaintiffs seek unspecified damages, equitable relief and an award of attorneys’ fees and litigation expenses.

     In 2009, what are claimed to be derivative lawsuits were filed in state court against the Manager and a subsidiary (but not against the Fund), on behalf of the New Mexico Education Plan Trust. These lawsuits allege breach of contract, breach of fiduciary duty, negligence and violation of state securities laws, and seek compensatory damages, equitable relief and an award of attorneys’ fees and litigation expenses.

     Other lawsuits have been filed since 2008 in various state and federal courts, against the Manager and certain of its affiliates. Those lawsuits were filed by investors who made investments through an affiliate of the Manager, and relate to the alleged investment fraud perpetrated by Bernard Madoff and his firm (“Madoff ”). Those suits allege a variety of claims, including breach of fiduciary duty, fraud, negligent misrepresentation, unjust enrichment, and violation of federal and state securities laws and regulations, among others. They seek unspecified damages, equitable relief and an award of attorneys’ fees and litigation expenses. None of the suits have named the Distributor, any of the Oppenheimer mutual funds or any of their independent Trustees or Directors as defendants. None of the Oppenheimer funds invested in any funds or accounts managed by Madoff.

     The Manager believes that the lawsuits described above are without legal merit and is defending against them vigorously. The Defendant Funds’ Boards of Trustees have also engaged counsel to defend the suits brought against those Funds and the present and former Independent Trustees named in those suits. While it is premature to render any opinion as to the outcome in these lawsuits, or whether any costs that the Defendant Funds may bear in defending the suits might not be reimbursed by insurance, the Manager believes that these suits should not impair the ability of the Manager or the Distributor to perform their respective duties to the Fund, and that the outcome of all of the suits together should not have any material effect on the operations of any of the Oppenheimer funds.

5. Subsequent Event

The Regulated Investment Company Modernization Act of 2010 (the “Act”) was signed into law on December 22, 2010. The Act makes changes to a number of tax rules impacting the Fund. Under the Act, future capital losses generated by a fund may be carried over indefinitely, but these losses must be used prior to the utilization of any pre-enactment capital losses. Since pre-enactment capital losses may only be carried forward for eight years, there may be a greater likelihood that all or a portion of a fund’s pre-enactment capital losses will expire unused. In general, the provisions of the Act will be effective for the Fund’s fiscal year ending December 31, 2011. Specific information regarding the impact of the Act on the Fund will be contained within the “Federal Taxes” section of the financial statement notes for the fiscal year ending December 31, 2011.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Trustees and Shareholders of Oppenheimer Variable Account Funds:

We have audited the accompanying statement of assets and liabilities of Oppenheimer Small- & Mid-Cap Growth Fund/VA formerly known as Oppenheimer MidCap Fund/VA, (one of the portfolios constituting the Oppenheimer Variable Account Funds), including the statement of investments, as of December 31, 2010, the related statement of operations for the year then ended, and the statements of changes in net assets and the financial highlights for each of the years in the two-year 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. The accompanying financial highlights of Oppenheimer Small- & Mid-Cap Growth Fund/VA for the years ended prior to January 1, 2009 were audited by other auditors whose report dated February 11, 2009 expressed an unqualified opinion on those financial highlights.

     We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2010, by correspondence with the custodian and transfer agent. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Oppenheimer Small- & Mid-Cap Growth Fund/VA as of December 31, 2010, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for each of the years in the two-year period then ended, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG llp

Denver, Colorado
February 16, 2011

STATEMENT T OF INVESTMENTS December 31, 2010

	Shares		Value
Common Stocks—100.8%
Consumer Discretionary—22.2%
Auto Components—1.7%
BorgWarner, Inc.1		102,250	$	7,398,810
TRW Automotive Holdings Corp.1		62,000		3,267,400
				10,666,210
Diversified Consumer Services—0.7%
Sotheby’s		104,470		4,701,150
Hotels, Restaurants & Leisure—4.6%
Cheesecake Factory, Inc. (The)1		174,630		5,354,156
Chipotle Mexican Grill, Inc., Cl. A1		41,971		8,925,553
Panera Bread Co., Cl. A1		85,790		8,682,806
Starwood Hotels & Resorts Worldwide, Inc.		107,310		6,522,302
				29,484,817
Internet & Catalog Retail—2.0%
E-Commerce China Dangdang, Inc.,
Sponsored ADR1		53,150		1,438,771
NetFlix.com, Inc.1		16,800		2,951,760
Priceline.com, Inc.1		20,640		8,246,712
				12,637,243
Leisure Equipment & Products—0.9%
Hasbro, Inc.		128,660		6,070,179
Media—2.6%
Discovery Communications, Inc.1		187,590		7,822,503
Scripps Networks Interactive, Cl. A		116,780		6,043,365
Valassis Communications, Inc.1		99,480		3,218,178
				17,084,046
Multiline Retail—2.6%
Dollar Tree, Inc.1		181,305		10,167,584
Nordstrom, Inc.		161,040		6,824,875
				16,992,459
Specialty Retail—4.8%
Dick’s Sporting Goods, Inc.1		89,680		3,363,000
Guess?, Inc.		64,130		3,034,632
O’Reilly Automotive, Inc.1		112,260		6,782,749
Tiffany & Co.		116,440		7,250,719
Tractor Supply Co.		146,910		7,123,666
Ulta Salon, Cosmetics & Fragrance, Inc.1		95,800		3,257,200
				30,811,966
Textiles, Apparel & Luxury Goods—2.3%
Fossil, Inc.1		67,390		4,749,647
Phillips/Van Heusen Corp.		97,770		6,160,488
Under Armour, Inc., Cl. A1		71,840		3,939,706
				14,849,841
Consumer Staples—4.9%
Beverages—1.1%
Hansen Natural Corp.1		138,900		7,261,692
Food & Staples Retailing—1.5%
Fresh Market, Inc. (The)1		47,370		1,951,644
Whole Foods Market, Inc.1		151,450		7,661,856
				9,613,500
Food Products—0.5%
TreeHouse Foods, Inc.1		65,610		3,352,015
Personal Products—1.8%
Estee Lauder Cos., Inc. (The), Cl. A		88,680		7,156,476
Nu Skin Asia Pacific, Inc., Cl. A		137,690		4,166,499
				11,322,975
Energy—5.9%
Energy Equipment & Services—2.9%
Complete Production Services, Inc.1		113,150		3,343,583
Core Laboratories NV		66,600		5,930,730
Dril-Quip, Inc.1		52,930		4,113,720
Superior Energy Services, Inc.1		161,930		5,665,931
				19,053,964
Oil, Gas & Consumable Fuels—3.0%
Concho Resources, Inc.1		140,560		12,322,895
Whiting Petroleum Corp.1		59,410		6,962,258
				19,285,153
Financials—5.7%
Capital Markets—1.4%
Affiliated Managers Group, Inc.1		53,390		5,297,356
Stifel Financial Corp.1		62,200		3,858,888
				9,156,244
Commercial Banks—2.2%
East West Bancorp, Inc.		257,580		5,035,689
First Republic Bank1		80,240		2,336,589
Signature Bank1		141,500		7,075,000
				14,447,278
Diversified Financial Services—1.1%
MSCI, Inc., Cl. A1		175,280		6,828,909
Real Estate Management & Development—1.0%
Jones Lang LaSalle, Inc.		74,290		6,234,417

	Shares		Value
Health Care—14.6%
Biotechnology—2.5%
Alexion Pharmaceuticals, Inc.1		143,200	$	11,534,760
United Therapeutics Corp.1		71,170		4,499,367
				16,034,127
Health Care Equipment & Supplies—2.5%
Edwards Lifesciences Corp.1		117,380		9,488,999
ResMed, Inc.1		192,840		6,679,978
				16,168,977
Health Care Providers & Services—4.0%
AmerisourceBergen Corp.		153,700		5,244,244
Catalyst Health Solutions, Inc.1		95,690		4,448,628
Emergency Medical Services LP, Cl. A1		60,030		3,878,538
Health Management Associates, Inc., Cl. A1		454,040		4,331,542
HMS Holdings Corp.1		119,560		7,743,901
				25,646,853
Health Care Technology—1.8%
Cerner Corp.1		52,110		4,936,901
SXC Health Solutions Corp.1		158,100		6,776,166
				11,713,067
Life Sciences Tools & Services—1.3%
Illumina, Inc.1		54,190		3,432,395
Waters Corp.1		65,330		5,076,794
				8,509,189
Pharmaceuticals—2.5%
Nektar Therapeutics1		203,640		2,616,774
Perrigo Co.		90,580		5,736,431
Salix Pharmaceuticals Ltd.1		35,300		1,657,688
Valeant Pharmaceuticals International, Inc.		216,310		6,119,410
				16,130,303
Industrials—15.1%
Aerospace & Defense—2.7%
BE Aerospace, Inc.1		192,730		7,136,792
DigitalGlobe, Inc.1		77,970		2,472,429
TransDigm Group, Inc.1		104,850		7,550,249
				17,159,470
Commercial Services & Supplies—0.8%
Stericycle, Inc.1		67,440		5,457,245
Electrical Equipment—4.1%
AMETEK, Inc.		183,945		7,219,841
Polypore International, Inc.1		100,780		4,104,769
Rockwell Automation, Inc.		119,950		8,601,615
Roper Industries, Inc.		82,480		6,303,946
				26,230,171
Machinery—4.5%
CNH Global NV1		101,790		4,859,455
Gardner Denver, Inc.		100,661		6,927,490
Joy Global, Inc.		38,090		3,304,308
Parker-Hannifin Corp.		101,440		8,754,272
WABCO Holdings, Inc.1		84,310		5,137,008
				28,982,533
Road & Rail—1.3%
Kansas City Southern, Inc.1		175,870		8,417,138
Trading Companies & Distributors—1.7%
MSC Industrial Direct Co., Inc., Cl. A		119,530		7,732,396
WESCO International, Inc.1		62,640		3,307,392
				11,039,788
Information Technology—24.6%
Communications Equipment—2.8%
F5 Networks, Inc.1		80,370		10,460,959
Riverbed Technology, Inc.1		208,660		7,338,572
				17,799,531
Computers & Peripherals—0.9%
NetApp, Inc.1		102,100		5,611,416
Electronic Equipment & Instruments—1.0%
Dolby Laboratories, Inc., Cl. A1		47,280		3,153,576
Trimble Navigation Ltd.1		80,830		3,227,542
				6,381,118
Internet Software & Services—3.2%
Akamai Technologies, Inc.1		156,740		7,374,617
Rackspace Hosting, Inc.1		221,020		6,942,238
SINA Corp.1		92,240		6,347,957
				20,664,812
IT Services—2.2%
Cognizant Technology Solutions Corp.1		91,060		6,673,787
Syntel, Inc.		62,600		2,991,654
Teradata Corp.1		113,310		4,663,840
				14,329,281
Semiconductors & Semiconductor Equipment—6.3%
Atheros Communications, Inc.1		136,530		4,904,158
Atmel Corp.1		439,590		5,415,749
Broadcom Corp., Cl. A		104,070		4,532,249
Cavium Networks, Inc.1		155,850		5,872,428

	Shares			Value
Semiconductors & Semiconductor Equipment Continued
Netlogic Microsystems, Inc.1		242,790		$	7,626,034
Silicon Laboratories, Inc.1		71,180			3,275,704
Skyworks Solutions, Inc.1		315,140			9,022,458
					40,648,780
Software—8.2%
Citrix Systems, Inc.1		115,400			7,894,514
Concur Technologies, Inc.1		118,380			6,147,473
Fortinet, Inc.1		138,780			4,489,533
Informatica Corp.1		148,320			6,530,530
Red Hat, Inc.1		178,930			8,168,155
Rovi Corp.1		117,470			7,284,315
Salesforce.com, Inc.1		58,560			7,729,920
TIBCO Software, Inc.1		232,570			4,583,955
					52,828,395
Materials—5.7%
Chemicals—3.7%
Albemarle Corp.		164,950			9,200,911
Lubrizol Corp. (The)		44,730			4,780,742
Rockwood Holdings, Inc.1		60,370			2,361,674
Solutia, Inc.1		336,690			7,770,805
					24,114,132
Containers & Packaging—0.8%
Rock-Tenn Co., Cl. A		97,250			5,246,638
Metals & Mining—1.2%
Silver Wheaton Corp.1		190,650			7,442,976
Telecommunication Services—2.1%
Wireless Telecommunication Services—2.1%
NII Holdings, Inc.1		192,490			8,596,603
SBA Communications Corp.1		122,980			5,034,796
					13,631,399
Total Common Stocks (Cost $463,471,713)					650,041,397
Investment Companies—0.4%
JPMorgan U.S. Treasury Plus Money Market Fund, Agency Shares, 0.00%2,3		49,708			49,708
Oppenheimer Institutional Money Market Fund, Cl. E, 0.21%3,4		2,477,343			2,477,343
Total Investment Companies (Cost $2,527,051)					2,527,051
Total Investments, at Value (Cost $465,998,764)		101.2	%		652,568,448
Liabilities in Excess of Other Assets		(1.2	)		(8,027,040	)
Net Assets		100.0	%	$	644,541,408

Footnotes to Statement of Investments

1.	Non-income producing security.
2.	Interest rate is less than 0.0005%.
3.	Rate shown is the 7-day yield as of December 31, 2010.
4.	Is or was an affiliate, as defined in the Investment Company Act of 1940, at or during the period ended December 31, 2010, 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, 2009		Additions		Reductions		December 31, 2010
Oppenheimer Institutional Money Market Fund, Cl. E		10,877,341		247,300,053		255,700,051		2,477,343

	Value		Income
Oppenheimer Institutional Money Market Fund, Cl. E	$	2,477,343	$	28,145

Valuation Inputs

Various data inputs are used in determining the value of each of the Fund’s investments as of the reporting period end. These data inputs are categorized in the following hierarchy under applicable financial accounting standards:

1) Level 1—unadjusted quoted prices in active markets for identical assets or liabilities (including securities actively traded on a securities exchange)

2) Level 2—inputs other than unadjusted quoted prices that are observable for the asset or liability (such as unadjusted quoted prices for similar assets and market corroborated inputs such as interest rates, prepayment speeds, credit risks, etc.)

3) Level 3—significant unobservable inputs (including the Manager’s own judgments about assumptions that market participants would use in pricing the asset or liability).

The table below categorizes amounts that are included in the Fund’s Statement of Assets and Liabilities as of December 31, 2010 based on valuation input level:

					Level 3–
	Level 1–		Level 2–		Significant
	Unadjusted		Other Significant		Unobservable
	Quoted Prices		Observable Inputs		Inputs		Value
Assets Table
Investments, at Value:
Common Stocks
Consumer Discretionary	$	143,297,911	$	—	$	—	$	143,297,911
Consumer Staples		31,550,182		—		—		31,550,182
Energy		38,339,117		—		—		38,339,117
Financials		36,666,848		—		—		36,666,848
Health Care		94,202,516		—		—		94,202,516
Industrials		97,286,345		—		—		97,286,345
Information Technology		158,263,333		—		—		158,263,333
Materials		36,803,746		—		—		36,803,746
Telecommunication Services		13,631,399		—		—		13,631,399
Investment Companies		2,527,051		—		—		2,527,051
Total Assets	$	652,568,448	$	—	$	—	$	652,568,448

Currency contracts and forwards, if any, are reported at their unrealized appreciation/depreciation at measurement date, which represents the change in the contract’s value from trade date. Futures, if any, are reported at their variation margin at measurement date, which represents the amount due to/from the Fund at that date. All additional assets and liabilities included in the above table are reported at their market value at measurement date.

See the accompanying Notes for further discussion of the methods used in determining value of the Fund’s investments, and a summary of changes to the valuation methodologies, if any, during the reporting period.

STATEMENT OF ASSETS AND LIABILITIES December 31, 2010

Assets
Investments, at value—see accompanying statement of investments:
Unaffiliated companies (cost $463,521,421)	$	650,091,105
Affiliated companies (cost $2,477,343)		2,477,343
		652,568,448
Receivables and other assets:
Investments sold		1,198,279
Shares of beneficial interest sold		132,479
Dividends		83,825
Other		22,974
Total assets		654,006,005
Liabilities
Payables and other liabilities:
Shares of beneficial interest redeemed		9,246,382
Shareholder communications		97,054
Transfer and shareholder servicing agent fees		55,532
Trustees’ compensation		20,834
Distribution and service plan fees		18,742
Other		26,053
Total liabilities		9,464,597
Net Assets	$	644,541,408
Composition of Net Assets
Par value of shares of beneficial interest	$	13,863
Additional paid-in capital		760,866,762
Accumulated net investment loss		(20,834	)
Accumulated net realized loss on investments		(302,888,067	)
Net unrealized appreciation on investments		186,569,684
Net Assets	$	644,541,408
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 $611,872,248 and 13,144,426 shares of beneficial interest outstanding)	$	46.55
Service Shares:
Net asset value, redemption price per share and offering price per share (based on net assets of $32,669,160 and 718,702 shares of beneficial interest outstanding)	$	45.46

STATEMENT OF OPERATIONS For the Year Ended December 31, 2010

Investment Income
Dividends:
Unaffiliated companies (net of foreign withholding taxes of $37,216)	$	2,675,622
Affiliated companies		28,145
Interest		281
Total investment income		2,704,048
Expenses
Management fees		4,152,994
Distribution and service plan fees—Service shares		68,751
Transfer and shareholder servicing agent fees:
Non-Service shares		548,533
Service shares		27,541
Shareholder communications:
Non-Service shares		90,387
Service shares		4,600
Trustees’ compensation		25,838
Custodian fees and expenses		3,435
Administration service fees		1,500
Other		63,015
Total expenses		4,986,594
Less waivers and reimbursements of expenses		(551,229	)
Net expenses		4,435,365
Net Investment Loss		(1,731,317	)
Realized and Unrealized Gain
Net realized gain on investments from unaffiliated companies		74,149,150
Net change in unrealized appreciation/depreciation on investments		71,236,219
Net Increase in Net Assets Resulting from Operations	$	143,654,052

STATEMENTS OF CHANGES IN NET ASSETS

Year Ended December 31,	2010			2009
Operations
Net investment loss	$	(1,731,317	)	$	(925,079	)
Net realized gain (loss)		74,149,150			(78,545,847	)
Net change in unrealized appreciation/depreciation		71,236,219			224,373,833
Net increase in net assets resulting from operations		143,654,052			144,902,907
Beneficial Interest Transactions
Net decrease in net assets resulting from beneficial interest transactions:
Non-Service shares		(72,544,702	)		(52,496,797	)
Service shares		(348,697	)		(2,261,210	)
		(72,893,399	)		(54,758,007	)
Net Assets
Total increase		70,760,653			90,144,900
Beginning of period		573,780,755			483,635,855
End of period (including accumulated net investment income (loss) of $(20,834) and $37,265, respectively)	$	644,541,408		$	573,780,755

FINANCIAL HIGHLIGHTS

Non-Service Shares   Year Ended December 31,	2010			2009			2008			2007			2006
Per Share Operating Data
Net asset value, beginning of period	$	36.52		$	27.54		$	54.07		$	50.85		$	49.39
Income (loss) from investment operations:
Net investment loss1		(.11	)		(.05	)		(.13	)		(.02	)		(.02	)
Net realized and unrealized gain (loss)		10.14			9.03			(26.40	)		3.24			1.48
Total from investment operations		10.03			8.98			(26.53	)		3.22			1.46
Net asset value, end of period	$	46.55		$	36.52		$	27.54		$	54.07		$	50.85
Total Return, at Net Asset Value2		27.46	%		32.61	%		(49.07	)%		6.33	%		2.96	%
Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	611,872		$	547,683		$	461,684		$	1,002,442		$	1,054,809
Average net assets (in thousands)	$	548,739		$	478,968		$	754,170		$	1,045,592		$	1,135,831
Ratios to average net assets:3
Net investment loss		(0.29	)%		(0.17	)%		(0.30	)%		(0.04	)%		(0.04	)%
Total expenses4		0.85	%		0.86	%		0.71	%		0.69	%		0.69	%
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses		0.76	%		0.71	%		0.68	%		0.69	%		0.69	%
Portfolio turnover rate		95	%		102	%		78	%		112	%		56	%

1.	Per share amounts calculated based on the average shares outstanding during the period.
2.	Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
3.	Annualized for periods less than one full year.
4.	Total expenses including indirect expenses from affiliated fund were as follows:

Year Ended December 31, 2010	0.85	%
Year Ended December 31, 2009	0.86	%
Year Ended December 31, 2008	0.71	%
Year Ended December 31, 2007	0.69	%
Year Ended December 31, 2006	0.69	%

Service Shares   Year Ended December 31,	2010			2009			2008			2007			2006
Per Share Operating Data
Net asset value, beginning of period	$	35.75		$	27.03		$	53.22		$	50.19		$	48.87
Income (loss) from investment operations:
Net investment loss1		(.20	)		(.13	)		(.24	)		(.17	)		(.16	)
Net realized and unrealized gain (loss)		9.91			8.85			(25.95	)		3.20			1.48
Total from investment operations		9.71			8.72			(26.19	)		3.03			1.32
Net asset value, end of period	$	45.46		$	35.75		$	27.03		$	53.22		$	50.19
Total Return, at Net Asset Value2		27.16	%		32.26	%		(49.21	)%		6.04	%		2.70	%
Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	32,669		$	26,098		$	21,952		$	47,270		$	47,131
Average net assets (in thousands)	$	27,552		$	22,605		$	35,815		$	49,421		$	44,273
Ratios to average net assets:3
Net investment loss		(0.53	)%		(0.44	)%		(0.57	)%		(0.31	)%		(0.33	)%
Total expenses4		1.10	%		1.12	%		0.98	%		0.96	%		0.97	%
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses		1.01	%		0.97	%		0.95	%		0.96	%		0.97	%
Portfolio turnover rate		95	%		102	%		78	%		112	%		56	%

1.	Per share amounts calculated based on the average shares outstanding during the period.
2.	Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
3.	Annualized for periods less than one full year.
4.	Total expenses including indirect expenses from affiliated fund were as follows:

Year Ended December 31, 2010	1.10	%
Year Ended December 31, 2009	1.12	%
Year Ended December 31, 2008	0.98	%
Year Ended December 31, 2007	0.96	%
Year Ended December 31, 2006	0.97	%

NOTES TO FINANCIAL STATEMENTS

1. Significant Accounting Policies

Oppenheimer Small- & Mid-Cap Growth Fund/VA (the “Fund”), formerly known as Oppenheimer MidCap Fund/VA, 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 investment objective is to seek capital appreciation by investing in “growth type” companies. 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.

     Each investment asset or liability of the Fund is assigned a level at measurement date based on the significance and source of the inputs to its valuation. Unadjusted quoted prices in active markets for identical securities are classified as “Level 1,” inputs other than unadjusted quoted prices for an asset that are observable are classified as “Level 2” and significant unobservable inputs, including the Manager’s judgment about the assumptions that a market participant would use in pricing an asset or liability, are classified as “Level 3.” The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. A table summarizing the Fund’s investments under these levels of classification is included following the Statement of Investments.

     Securities are valued using unadjusted quoted market prices, when available, as supplied primarily by portfolio pricing services approved by the Board of Trustees or dealers.

     Securities traded on a registered U.S. securities exchange are valued based on the last sale price of the security reported on the principal exchange on which it is traded, prior to the time when the Fund’s assets are valued. Securities whose principal exchange is NASDAQ^® are valued based on the official closing prices 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 current day’s closing “bid” and “asked” prices, and if not, at the current day’s closing bid price. A foreign security traded on a foreign exchange is valued based on the last sale price on the principal exchange on which the security is traded, as identified by the portfolio pricing service used by the Manager, prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the most recent official closing price on the principal exchange on which it is traded.

     Shares of a registered investment company that are not traded on an exchange are valued at that investment company’s net asset value per share.

     U.S. domestic and international debt instruments (including corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed securities) and “money market-type” debt instruments with a remaining maturity in excess of sixty days are valued at the mean between the “bid” and “asked” prices utilizing price quotations obtained from independent pricing services or broker-dealers. Such prices are typically determined based upon information obtained from market participants including reported trade data, broker-dealer price quotations and inputs such as benchmark yields and issuer spreads from identical or similar securities.

     “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.

     In the absence of a readily available unadjusted quoted market price, including for 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 the securities’ respective exchanges, the Manager, acting through its internal valuation committee, in good faith determines the fair valuation of that asset using consistently applied procedures under the supervision of the Board of Trustees (which reviews those fair valuations by the Manager). Those procedures include certain standardized methodologies to fair value securities. Such methodologies include, but are not limited to, pricing securities initially at cost and subsequently adjusting the value based on: changes in company specific fundamentals, changes in an appropriate securities index, or changes in the value of similar securities which may be adjusted for any discounts related to resale restrictions. When possible, such methodologies use observable market inputs such as unadjusted quoted prices of similar securities, observable interest rates, currency rates and yield curves. The methodologies used for valuing securities are not necessarily an indication of the risks associated with investing in those securities.

     There have been no significant changes to the fair valuation methodologies of the Fund during the period.

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. When applicable, the Fund’s investment in IMMF is included in the Statement of Investments. Shares of IMMF are valued at their net asset value per share. 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.

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.

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

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

					Net Unrealized Appreciation
					Based on Cost
Undistributed	Undistributed		Accumulated		of Securities and Other
Net Investment	Long-Term		Loss		Investments for Federal
Income	Gain		Carryforward1,2,3,4		Income Tax Purposes
$—	$	—	$	301,034,992	$	184,716,600

1. As of December 31, 2010, the Fund had $301,034,992 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, 2010, details of the capital loss carryforward were as follows:

Expiring
2017	$	301,034,992

2.	During the fiscal year ended December 31, 2010, the Fund utilized $72,390,451 of capital loss carryforward to offset capital gains realized in that fiscal year.
3.	During the fiscal year ended December 31, 2009, the Fund did not utilize any capital loss carryforward.
4.	During the fiscal year ended December 31, 2010, $157,834,371 of unused capital loss carryforward expired.

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, 2010. Net assets of the Fund were unaffected by the reclassifications.

			Reduction
	Reduction		to Accumulated
Reduction	to Accumulated Net		Net Realized
to Paid-in Capital	Investment Loss		Loss on Investments
$159,508,986	$	1,673,218	$	157,835,768

No distributions were paid during the years ended December 31, 2010 and December 31, 2009.

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, 2010 are noted in the following table. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss.

Federal tax cost of securities	$	467,851,848
Gross unrealized appreciation	$	185,300,459
Gross unrealized depreciation		(583,859	)
Net unrealized appreciation	$	184,716,600

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 with 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. 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, 2010						Year Ended December 31, 2009
	Shares			Amount			Shares			Amount
Non-Service Shares
Sold		660,517		$	26,701,795			730,850		$	22,021,499
Redeemed		(2,513,826	)		(99,246,497	)		(2,496,465	)		(74,518,296	)
Net decrease		(1,853,309	)	$	(72,544,702	)		(1,765,615	)	$	(52,496,797	)
Service Shares
Sold		170,363		$	6,822,078			97,563		$	2,820,902
Redeemed		(181,692	)		(7,170,775	)		(179,541	)		(5,082,112	)
Net decrease		(11,329	)	$	(348,697	)		(81,978	)	$	(2,261,210	)

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, 2010, were as follows:

	Purchases		Sales
Investment securities	$	536,304,551		$	597,025,225

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
Up to $200 million	0.75	%
Next $200 million	0.72
Next $200 million	0.69
Next $200 million	0.66
Next $700 million	0.60
Over $1.5 billion	0.58

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 fees at an annual rate of 0.10% of the daily net assets of each class of shares. For the year ended December 31, 2010, the Fund paid $568,665 to OFS for services to the Fund.

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 0.25% of the daily net assets of Service shares of the Fund. The Distributor currently uses all of those fees to compensate sponsors 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. From April 1, 2009 through March 31, 2010, the Manager voluntarily waived its advisory fee by 0.09% of the Fund’s average annual net assets. Effective April 1, 2010 through August 31, 2010, the Manager voluntarily agreed to waive its advisory fee by 0.05% of the Fund’s average daily net assets. During the year ended December 31, 2010, the Manager waived $243,506 in advisory fees as a result of these voluntary arrangements. These voluntary undertakings were applied after all other waivers and/or reimbursements.

     The Manager has voluntarily agreed to limit the Fund’s total annual operating expenses so that those expenses, as percentages of daily net assets, will not exceed the annual rate of 0.80% for Non-Service shares and 1.05% for Service shares. During the year ended December 31, 2010, the Manager waived fees and/or reimbursed the Fund $282,216 and $14,086 for Non-Service and Service shares, respectively.

     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, 2010, the Manager waived fees and/or reimbursed the Fund $11,421 for IMMF management fees.

     Some of these undertakings may be modified or terminated at any time; some may not be modified or terminated until after one year from the date of the current prospectus, as indicated therein.

5. Pending Litigation

Since 2009, a number of lawsuits have been pending in federal courts against the Manager, the Distributor, and certain mutual funds (“Defendant Funds”) advised by the Manager and distributed by the Distributor (but not including the Fund). The lawsuits naming the Defendant Funds also name as defendants certain officers and current and former trustees of the respective Defendant Funds. The plaintiffs seek class action status on behalf of purchasers of shares of the respective Defendant Fund during a particular time period. The lawsuits raise claims under federal securities laws alleging that, among other things, the disclosure documents of the respective Defendant Fund contained misrepresentations and omissions, that such Defendant Fund’s investment policies were not followed, and that such Defendant Fund and the other defendants violated federal securities laws and regulations. The plaintiffs seek unspecified damages, equitable relief and an award of attorneys’ fees and litigation expenses.

     In 2009, what are claimed to be derivative lawsuits were filed in state court against the Manager and a subsidiary (but not against the Fund), on behalf of the New Mexico Education Plan Trust. These lawsuits allege breach of contract, breach of fiduciary duty, negligence and violation of state securities laws, and seek compensatory damages, equitable relief and an award of attorneys’ fees and litigation expenses.

     Other lawsuits have been filed since 2008 in various state and federal courts, against the Manager and certain of its affiliates. Those lawsuits were filed by investors who made investments through an affiliate of the Manager, and relate to the alleged investment fraud perpetrated by Bernard Madoff and his firm (“Madoff ”). Those suits allege a variety of claims, including breach of fiduciary duty, fraud, negligent misrepresentation, unjust enrichment, and violation of federal and state securities laws and regulations, among others. They seek unspecified damages, equitable relief and an award of attorneys’ fees and litigation expenses. None of the suits have named the Distributor, any of the Oppenheimer mutual funds or any of their independent Trustees or Directors as defendants. None of the Oppenheimer funds invested in any funds or accounts managed by Madoff.

     The Manager believes that the lawsuits described above are without legal merit and is defending against them vigorously. The Defendant Funds’ Boards of Trustees have also engaged counsel to defend the suits brought against those Funds and the present and former Independent Trustees named in those suits. While it is premature to render any opinion as to the outcome in these lawsuits, or whether any costs that the Defendant Funds may bear in defending the suits might not be reimbursed by insurance, the Manager believes that these suits should not impair the ability of the Manager or the Distributor to perform their respective duties to the Fund, and that the outcome of all of the suits together should not have any material effect on the operations of any of the Oppenheimer funds.

6. Subsequent Event

The Regulated Investment Company Modernization Act of 2010 (the “Act”) was signed into law on December 22, 2010. The Act makes changes to a number of tax rules impacting the Fund. Under the Act, future capital losses generated by a fund may be carried over indefinitely, but these losses must be used prior to the utilization of any pre-enactment capital losses. Since pre-enactment capital losses may only be carried forward for eight years, there may be a greater likelihood that all or a portion of a fund’s pre-enactment capital losses will expire unused. In general, the provisions of the Act will be effective for the Fund’s fiscal year ending December 31, 2011. Specific information regarding the impact of the Act on the Fund will be contained within the “Federal Taxes” section of the financial statement notes for the fiscal year ending December 31, 2011.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Trustees and Shareholders of Oppenheimer Variable Account Funds:

We have audited the accompanying statement of assets and liabilities of Oppenheimer Value Fund/VA, (one of the portfolios constituting the Oppenheimer Variable Account Funds), including the statement of investments, as of December 31, 2010, and the related statement of operations for the year then ended, and the statements of changes in net assets and the financial highlights for each of the years in the two-year 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. The accompanying financial highlights of Oppenheimer Value Fund/VA for the years ended prior to January 1, 2009 were audited by other auditors whose report dated February 11, 2009 expressed an unqualified opinion on those financial highlights.

     We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2010, by correspondence with the custodian, transfer agent and brokers, or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Oppenheimer Value Fund/VA as of December 31, 2010, and the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for each of the years in the two-year period then ended, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG llp

Denver, Colorado
February 16, 2011

STATEMENT OF INVESTMENTS December 31, 2010

	Shares		Value
Common Stocks—96.3%
Consumer Discretionary—10.7%
Auto Components—1.8%
Lear Corp.1		1,350	$	133,259
Household Durables—1.8%
Mohawk Industries, Inc.1		2,360		133,954
Media—5.6%
Comcast Corp., Cl. A		6,010		132,040
Time Warner Cable, Inc.		1,610		106,308
Viacom, Inc., Cl. B		4,470		177,057
				415,405
Multiline Retail—1.5%
Target Corp.		1,870		112,443
Consumer Staples—5.9%
Beverages—2.8%
Coca-Cola Co. (The)		3,110		204,545
Food & Staples Retailing—1.5%
Walgreen Co.		2,934		114,309
Household Products—1.6%
Church & Dwight Co., Inc.		1,730		119,405
Energy—11.7%
Energy Equipment & Services—3.2%
Halliburton Co.		5,840		238,447
Oil, Gas & Consumable Fuels—8.5%
Chevron Corp.		3,500		319,375
CONSOL Energy, Inc.		1,640		79,934
Exxon Mobil Corp.		2,014		147,264
Royal Dutch Shell plc, ADR		1,200		80,136
				626,709
Financials—22.9%
Capital Markets—4.0%
E*TRADE Financial Corp.1		2,301		36,816
Goldman Sachs Group, Inc. (The)		460		77,354
State Street Corp.		3,860		178,872
				293,042
Commercial Banks—8.6%
CIT Group, Inc.1		3,110		146,481
Comerica, Inc.		2,440		103,066
PNC Financial Services Group, Inc.		1,760		106,867
U.S. Bancorp		4,430		119,477
Wells Fargo & Co.		5,100		158,049
				633,940
Diversified Financial Services—3.9%
JPMorgan Chase & Co.		6,890		292,274
Insurance—6.4%
ACE Ltd.		2,380		148,155
CNO Financial Group, Inc.1		6,660		45,155
MetLife, Inc.		4,940		219,534
Prudential Financial, Inc.		1,060		62,233
				475,077
Health Care—13.6%
Biotechnology—3.6%
Amgen, Inc.1		2,530		138,897
Gilead Sciences, Inc.1		3,440		124,666
				263,563
Health Care Providers & Services—3.6%
Humana, Inc.1		2,440		133,566
WellPoint, Inc.1		2,360		134,190
				267,756
Pharmaceuticals—6.4%
Merck & Co., Inc.		5,800		209,032
Pfizer, Inc.		15,169		265,609
				474,641
Industrials—10.6%
Aerospace & Defense—1.1%
AerCap Holdings NV1		5,890		83,167
Airlines—1.3%
United Continental Holdings, Inc.1		3,960		94,327
Electrical Equipment—0.8%
Babcock & Wilcox Co.1		2,240		57,322
Industrial Conglomerates—1.4%
Tyco International Ltd.		2,440		101,114
Machinery—4.0%
Ingersoll-Rand plc		3,730		175,646
Navistar International Corp.1		2,063		119,468
				295,114
Road & Rail—2.0%
Norfolk Southern Corp.		2,420		152,020
Information Technology—6.2%
Communications Equipment—3.1%
Harris Corp.		3,250		147,221
QUALCOMM, Inc.		1,650		81,659
				228,880
Office Electronics—1.1%
Xerox Corp.		6,890		79,373
Software—2.0%
Microsoft Corp.		5,430		151,606

	Shares			Value
Materials—4.7%
Chemicals—3.7%
Celanese Corp., Series A		3,770		$	155,211
Potash Corp. of Saskatchewan, Inc.		740			114,574
					269,785
Metals & Mining—1.0%
Allegheny Technologies, Inc.		1,370			75,597
Telecommunication Services—4.0%
Diversified Telecommunication Services—3.0%
AT&T, Inc.		7,592			223,053
Wireless Telecommunication Services—1.0%
Vodafone Group plc, Sponsored ADR		2,630			69,511
Utilities—6.0%
Electric Utilities—5.6%
American Electric Power Co., Inc.		1,950			70,161
Edison International, Inc.		4,330			167,138
Entergy Corp.		2,500			177,075
					414,374
Multi-Utilities—0.4%
NiSource, Inc.		1,750			30,835
Total Common Stocks (Cost $5,840,217)					7,124,847
Investment Companies—3.8%
JPMorgan U.S. Treasury Plus Money Market Fund, Agency Shares, 0.00%2,3		51,310			51,310
Oppenheimer Institutional Money Market Fund, Cl. E, 0.21%2,4		230,823			230,823
Total Investment Companies (Cost $282,133)					282,133
Total Investments, at Value (Cost $6,122,350)		100.1	%		7,406,980
Liabilities in Excess of Other Assets		(0.1	)		(3,789	)
Net Assets		100.0	%	$	7,403,191

Footnotes to Statement of Investments

1.	Non-income producing security.
2.	Rate shown is the 7-day yield as of December 31, 2010.
3.	Interest rate is less than 0.0005%.
4.	Is or was an affiliate, as defined in the Investment Company Act of 1940, at or during the period ended December 31, 2010, 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, 2009		Additions		Reductions		December 31, 2010
Oppenheimer Institutional Money Market Fund, Cl. E		340,073		4,624,129		4,733,379		230,823

	Value		Income
Oppenheimer Institutional Money Market Fund, Cl. E	$	230,823	$	560

Valuation Inputs

Various data inputs are used in determining the value of each of the Fund’s investments as of the reporting period end. These data inputs are categorized in the following hierarchy under applicable financial accounting standards:

1)   Level 1—unadjusted quoted prices in active markets for identical assets or liabilities (including securities actively traded on a securities exchange)

2)   Level 2—inputs other than unadjusted quoted prices that are observable for the asset or liability (such as unadjusted quoted prices for similar assets and market corroborated inputs such as interest rates, prepayment speeds, credit risks, etc.)

3)   Level 3—significant unobservable inputs (including the Manager’s own judgments about assumptions that market participants would use in pricing the asset or liability).

The table below categorizes amounts that are included in the Fund’s Statement of Assets and Liabilities as of December 31, 2010 based on valuation input level:

					Level 3 –
	Level 1 –		Level 2 –		Significant
	Unadjusted		Other Significant		Unobservable
	Quoted Prices		Observable Inputs		Inputs		Value
Assets Table
Investments, at Value:
Common Stocks
Consumer Discretionary	$	795,061	$	—	$	—	$	795,061
Consumer Staples		438,259		—		—		438,259
Energy		865,156		—		—		865,156
Financials		1,694,333		—		—		1,694,333
Health Care		1,005,960		—		—		1,005,960
Industrials		783,064		—		—		783,064
Information Technology		459,859		—		—		459,859
Materials		345,382		—		—		345,382
Telecommunication Services		292,564		—		—		292,564
Utilities		445,209		—		—		445,209
Investment Companies		282,133		—		—		282,133
Total Assets	$	7,406,980	$	—	$	—	$	7,406,980

Currency contracts and forwards, if any, are reported at their unrealized appreciation/depreciation at measurement date, which represents the change in the contract’s value from trade date. Futures, if any, are reported at their variation margin at measurement date, which represents the amount due to/from the Fund at that date. All additional assets and liabilities included in the above table are reported at their market value at measurement date.

See the accompanying Notes for further discussion of the methods used in determining value of the Fund’s investments, and a summary of changes to the valuation methodologies, if any, during the reporting period.

STATEMENT OF ASSETS AND LIABILITIES December 31, 2010

Assets
Investments, at value—see accompanying statement of investments:
Unaffiliated companies (cost $5,891,527)	$	7,176,157
Affiliated companies (cost $230,823)		230,823
		7,406,980
Receivables and other assets:
Shares of beneficial interest sold		40,353
Dividends		6,292
Other		6,236
Total assets		7,459,861
Liabilities
Payables and other liabilities:
Legal, auditing and other professional fees		20,589
Shareholder communications		14,788
Investments purchased		8,334
Trustees’ compensation		4,406
Distribution and service plan fees		4,309
Shares of beneficial interest redeemed		1,260
Transfer and shareholder servicing agent fees		609
Other		2,375
Total liabilities		56,670
Net Assets	$	7,403,191
Composition of Net Assets
Par value of shares of beneficial interest	$	726
Additional paid-in capital		8,010,434
Accumulated net investment income		60,637
Accumulated net realized loss on investments		(1,953,236	)
Net unrealized appreciation on investments		1,284,630
Net Assets	$	7,403,191
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 $92,048 and 10,836 shares of beneficial interest outstanding)	$	8.49
Service Shares:
Net asset value, redemption price per share and offering price per share (based on net assets of $7,311,143 and 714,794 shares of beneficial interest outstanding)	$	10.23

STATEMENT OF OPERATIONS For the Year Ended December 31, 2010

Investment Income
Dividends:
Unaffiliated companies (net of foreign withholding taxes of $801)	$	124,863
Affiliated companies		560
Interest		3
Total investment income		125,426
Expenses
Management fees		52,993
Distribution and service plan fees—Service shares		17,522
Transfer and shareholder servicing agent fees:
Non-Service shares		57
Service shares		7,009
Shareholder communications:
Non-Service shares		270
Service shares		24,190
Legal, auditing and other professional fees		28,401
Trustees’ compensation		7,802
Administration service fees		1,500
Custodian fees and expenses		100
Other		6,818
Total expenses		146,662
Less waivers and reimbursements of expenses		(81,418	)
Net expenses		65,244
Net Investment Income		60,182
Realized and Unrealized Gain
Net realized gain on investments from unaffiliated companies		524,533
Net change in unrealized appreciation/depreciation on investments		356,769
Net Increase in Net Assets Resulting from Operations	$	941,484

STATEMENTS OF CHANGES IN NET ASSETS

Year Ended December 31,	2010			2009
Operations
Net investment income	$	60,182		$	60,719
Net realized gain (loss)		524,533			(236,784	)
Net change in unrealized appreciation/depreciation		356,769			1,768,926
Net increase in net assets resulting from operations		941,484			1,592,861
Dividends and/or Distributions to Shareholders
Dividends from net investment income:
Non-Service shares		(479	)		(103	)
Service shares		(64,271	)		(9,896	)
		(64,750	)		(9,999	)
Beneficial Interest Transactions
Net increase (decrease) in net assets resulting from beneficial interest transactions:
Non-Service shares		42,114			23,026
Service shares		(1,058,473	)		1,240,784
		(1,016,359	)		1,263,810
Net Assets
Total increase (decrease)		(139,625	)		2,846,672
Beginning of period		7,542,816			4,696,144
End of period (including accumulated net investment income of $60,637 and $53,310, respectively)	$	7,403,191		$	7,542,816

FINANCIAL HIGHLIGHTS

Non-Service Shares     Year Ended December 31,	2010			2009			2008			2007			2006
Per Share Operating Data
Net asset value, beginning of period	$	7.22		$	4.99		$	11.73		$	11.58		$	11.16
Income (loss) from investment operations:
Net investment income (loss)1		.11			.11			.12			.10			(.03	)
Net realized and unrealized gain (loss)		1.24			2.14			(4.44	)		.59			1.61
Total from investment operations		1.35			2.25			(4.32	)		.69			1.58
Dividends and/or distributions to shareholders:
Dividends from net investment income		(.08	)		(.02	)		(2.42	)		(.10	)		(.01	)
Distributions from net realized gain		—			—			—			(.44	)		(1.15	)
Total dividends and/or distributions to shareholders		(.08	)		(.02	)		(2.42	)		(.54	)		(1.16	)
Net asset value, end of period	$	8.49		$	7.22		$	4.99		$	11.73		$	11.58
Total Return, at Net Asset Value2		18.85	%		45.08	%		(36.43	)%		5.89	%		14.03	%
Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	92		$	38		$	6		$	1,728		$	2,657
Average net assets (in thousands)	$	57		$	20		$	857		$	2,753		$	2,695
Ratios to average net assets:3
Net investment income (loss)		1.46	%		1.75	%		1.07	%		0.80	%		(0.29	)%
Total expenses4		2.05	%		2.30	%		1.48	%		1.49	%		2.14	%
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses		0.57	%		0.85	%		1.25	%		1.25	%		2.14	%
Portfolio turnover rate		109	%		122	%		175	%		142	%		124	%

1.	Per share amounts calculated based on the average shares outstanding during the period.
2.	Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
3.	Annualized for periods less than one full year.
4.	Total expenses including indirect expenses from affiliated fund were as follows:

Year Ended December 31, 2010	2.05	%
Year Ended December 31, 2009	2.31	%
Year Ended December 31, 2008	1.48	%
Year Ended December 31, 2007	1.49	%
Year Ended December 31, 2006	2.14	%

Service Shares     Year Ended December 31,	2010			2009			2008			2007			20061
Per Share Operating Data
Net asset value, beginning of period	$	8.99		$	6.79		$	11.75		$	11.57		$	11.89
Income (loss) from investment operations:
Net investment income (loss)2		.08			.09			.08			.06			(.05	)
Net realized and unrealized gain (loss)		1.24			2.12			(4.97	)		.60			.88
Total from investment operations		1.32			2.21			(4.89	)		.66			.83
Dividends and/or distributions to shareholders:
Dividends from net investment income		(.08	)		(.01	)		(.07	)		(.04	)		—
Distributions from net realized gain		—			—			—			(.44	)		(1.15	)
Total dividends and/or distributions to shareholders		(.08	)		(.01	)		(.07	)		(.48	)		(1.15	)
Net asset value, end of period	$	10.23		$	8.99		$	6.79		$	11.75		$	11.57
Total Return, at Net Asset Value3		14.81	%		32.57	%		(41.62	)%		5.70	%		6.81	%
Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	7,311		$	7,505		$	4,690		$	6,481		$	455
Average net assets (in thousands)	$	7,008		$	5,501		$	5,561		$	3,527		$	268
Ratios to average net assets:4
Net investment income (loss)		0.85	%		1.10	%		0.84	%		0.49	%		(1.30	)%
Total expenses5		2.08	%		2.17	%		2.13	%		1.63	%		2.89	%
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses		0.93	%		1.15	%		1.50	%		1.50	%		2.88	%
Portfolio turnover rate		109	%		122	%		175	%		142	%		124	%

1.	For the period from September 18, 2006 (inception of offering) to December 31, 2006.
2.	Per share amounts calculated based on the average shares outstanding during the period.
3.	Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Total return information does not reflect expenses that apply at the separate account level or to related insurance products. Inclusion of these charges would reduce the total return figures for all periods shown. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
4.	Annualized for periods less than one full year.
5.	Total expenses including indirect expenses from affiliated fund were as follows:

Year Ended December 31, 2010	2.08	%
Year Ended December 31, 2009	2.18	%
Year Ended December 31, 2008	2.13	%
Year Ended December 31, 2007	1.63	%
Period Ended December 31, 2006	2.89	%

NOTES TO FINANCIAL STATEMENTS

1. Significant Accounting Policies

Oppenheimer Value 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 investment objective is to seek long-term growth of capital by investing primarily in common stocks with low price earnings ratios and better-than-anticipated earnings. Realization of current income is a secondary consideration. 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.

     Each investment asset or liability of the Fund is assigned a level at measurement date based on the significance and source of the inputs to its valuation. Unadjusted quoted prices in active markets for identical securities are classified as “Level 1,” inputs other than unadjusted quoted prices for an asset that are observable are classified as “Level 2” and significant unobservable inputs, including the Manager’s judgment about the assumptions that a market participant would use in pricing an asset or liability, are classified as “Level 3.” The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. A table summarizing the Fund’s investments under these levels of classification is included following the Statement of Investments.

     Securities are valued using unadjusted quoted market prices, when available, as supplied primarily by portfolio pricing services approved by the Board of Trustees or dealers.

     Securities traded on a registered U.S. securities exchange are valued based on the last sale price of the security reported on the principal exchange on which it is traded, prior to the time when the Fund’s assets are valued. Securities whose principal exchange is NASDAQ^® are valued based on the official closing prices 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 current day’s closing “bid” and “asked” prices, and if not, at the current day’s closing bid price. A foreign security traded on a foreign exchange is valued based on the last sale price on the principal exchange on which the security is traded, as identified by the portfolio pricing service used by the Manager, prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the most recent official closing price on the principal exchange on which it is traded.

     Shares of a registered investment company that are not traded on an exchange are valued at that investment company’s net asset value per share.

     U.S. domestic and international debt instruments (including corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed securities) and “money market-type” debt instruments with a remaining maturity in excess of sixty days are valued at the mean between the “bid” and “asked” prices utilizing price quotations obtained from independent pricing services or broker-dealers. Such prices are typically determined based upon information obtained from market participants including reported trade data, broker-dealer price quotations and inputs such as benchmark yields and issuer spreads from identical or similar securities.

     “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.

     In the absence of a readily available unadjusted quoted market price, including for 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 the securities’ respective exchanges, the Manager, acting through its internal valuation committee, in good faith determines the fair valuation of that asset using consistently applied procedures under the supervision of the Board of Trustees (which reviews those fair valuations by the Manager). Those procedures include certain standardized methodologies to fair value securities. Such methodologies include, but are not limited to, pricing securities initially at cost and subsequently adjusting the value based on: changes in company specific fundamentals, changes in an appropriate securities index, or changes in the value of similar securities which may be adjusted for any discounts related to resale restrictions. When possible, such methodologies use observable market inputs such as unadjusted quoted prices of similar securities, observable interest rates, currency rates and yield curves. The methodologies used for valuing securities are not necessarily an indication of the risks associated with investing in those securities.

     There have been no significant changes to the fair valuation methodologies of the Fund during the period.

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. When applicable, the Fund’s investment in IMMF is included in the Statement of Investments. Shares of IMMF are valued at their net asset value per share. 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.

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.

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

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

					Net Unrealized
					Appreciation
					Based on Cost of
					Securities and
Undistributed	Undistributed		Accumulated		Other Investments
Net Investment	Long-Term		Loss		for Federal Income
Income	Gain		Carryforward1,2,3		Tax Purposes
$67,313	$	—	$	1,856,867	$	1,185,989

1. As of December 31, 2010, the Fund had $1,856,867 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, 2010, details of the capital loss carryforwards were as follows:

Expiring
2016	$	856,985
2017		999,882
Total	$	1,856,867

2.	During the fiscal year ended December 31, 2010, the Fund utilized $446,612 of capital loss carryforward to offset capital gains realized in that fiscal year.
3.	During the fiscal year ended December 31, 2009, 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, 2010. Net assets of the Fund were unaffected by the reclassifications.

	Increase to
Increase to	Accumulated Net
Accumulated	Net Realized
Net Investment	Loss on
Income	Investments
$11,895	$	11,895

The tax character of distributions paid during the years ended December 31, 2010 and December 31, 2009 was as follows:

	Year Ended		Year Ended
	December 31, 2010		December 31, 2009
Distributions paid from:
Ordinary income	$	64,750	$	9,999

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, 2010 are noted in the following table. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss.

Federal tax cost of securities	$	6,220,991
Gross unrealized appreciation	$	1,217,740
Gross unrealized depreciation		(31,751	)
Net unrealized appreciation	$	1,185,989

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 with 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. 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, 2010						Year Ended December 31, 2009
	Shares			Amount			Shares			Amount
Non-Service Shares
Sold		6,745		$	50,146			4,808		$	27,757
Dividends and/or distributions reinvested		65			479			14			103
Redeemed		(1,196	)		(8,511	)		(846	)		(4,834	)
Net increase		5,614		$	42,114			3,976		$	23,026
Service Shares
Sold		108,649		$	1,008,324			326,123		$	2,582,040
Dividends and/or distributions reinvested		7,063			64,271			1,092			9,896
Redeemed		(235,966	)		(2,131,068	)		(182,945	)		(1,351,152	)
Net increase (decrease)		(120,254	)	$	(1,058,473	)		144,270		$	1,240,784

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, 2010, were as follows:

	Purchases		Sales
Investment securities	$	7,375,086	$	8,387,433

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
Up to $200 million	0.75	%
Next $200 million	0.72
Next $200 million	0.69
Next $200 million	0.66
Over $800 million	0.60

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 fees at an annual rate of 0.10% of the daily net assets of each class of shares. For the year ended December 31, 2010, the Fund paid $7,095 to OFS for services to the Fund.

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 0.25% of the daily net assets of Service shares of the Fund. The Distributor currently uses all of those fees to compensate sponsors 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. The Manager has voluntarily agreed to limit the Fund’s total annual operating expenses so that those expenses, as percentages of daily net assets, will not exceed the annual rate of 0.80% for Non-Service shares and 1.05% for Service shares. During the year ended December 31, 2010, the Manager waived fees and/or reimbursed the Fund $844 and $80,322 for Non-Service and Service shares, respectively.

     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, 2010, the Manager waived fees and/or reimbursed the Fund $252 for IMMF management fees.

     Some of these undertakings may be modified or terminated at any time; some may not be modified or terminated until after one year from the date of the current prospectus, as indicated therein.

5. Risk Exposures and the Use of Derivative Instruments

The Fund’s investment objectives not only permit the Fund to purchase investment securities, they also allow the Fund to enter into various types of derivatives contracts, including, but not limited to, futures contracts, forward foreign currency exchange contracts, credit default swaps, interest rate swaps, total return swaps, and purchased and written options. In doing so, the Fund will employ strategies in differing combinations to permit it to increase, decrease, or change the level or types of exposure to market risk factors. Central to those strategies are features inherent to derivatives that make them more attractive for this purpose than equity and debt securities: they require little or no initial cash investment, they can focus exposure on only certain selected risk factors, and they may not require the ultimate receipt or delivery of the underlying security (or securities) to the contract. This may allow the Fund to pursue its objectives more quickly and efficiently than if it were to make direct purchases or sales of securities capable of effecting a similar response to market factors.

Market Risk Factors. In accordance with its investment objectives, the Fund may use derivatives to increase or decrease its exposure to one or more of the following market risk factors:

Commodity Risk. Commodity risk relates to the change in value of commodities or commodity indexes as they relate to increases or decreases in the commodities market. Commodities are physical assets that have tangible properties. Examples of these types of assets are crude oil, heating oil, metals, livestock, and agricultural products.

Credit Risk. Credit risk relates to the ability of the issuer to meet interest and principal payments, or both, as they come due. In general, lower-grade, higher-yield bonds are subject to credit risk to a greater extent than lower-yield, higher-quality bonds.

Equity Risk. Equity risk relates to the change in value of equity securities as they relate to increases or decreases in the general market.

Foreign Exchange Rate Risk. Foreign exchange rate risk relates to the change in the U.S. dollar value of a security held that is denominated in a foreign currency. The U.S. dollar value of a foreign currency denominated security will decrease as the dollar appreciates against the currency, while the U.S. dollar value will increase as the dollar depreciates against the currency.

Interest Rate Risk. Interest rate risk refers to the fluctuations in value of fixed-income securities resulting from the inverse relationship between price and yield. For example, an increase in general interest rates will tend to reduce the market value of already issued fixed-income investments, and a decline in general interest rates will tend to increase their value. In addition, debt securities with longer maturities, which tend to have higher yields, are subject to potentially greater fluctuations in value from changes in interest rates than obligations with shorter maturities. 

Volatility Risk. Volatility risk refers to the magnitude of the movement, but not the direction of the movement, in a financial instrument’s price over a defined time period. Large increases or decreases in a financial instrument’s price over a relative time period typically indicate greater volatility risk, while small increases or decreases in its price typically indicate lower volatility risk.

The Fund’s actual exposures to these market risk factors during the period are discussed in further detail, by derivative type, below.

Risks of Investing in Derivatives. The Fund’s use of derivatives can result in losses due to unanticipated changes in the market risk factors and the overall market. In instances where the Fund is using derivatives to decrease, or hedge, exposures to market risk factors for securities held by the Fund, there are also risks that those derivatives may not perform as expected resulting in losses for the combined or hedged positions.

     Derivatives may have little or no initial cash investment relative to their market value exposure and therefore can produce significant gains or losses in excess of their cost. This use of embedded leverage allows the Fund to increase its market value exposure relative to its net assets and can substantially increase the volatility of the Fund’s performance.

     Additional associated risks from investing in derivatives also exist and potentially could have significant effects on the valuation of the derivative and the Fund. Typically, the associated risks are not the risks that the Fund is attempting to increase or decrease exposure to, per its investment objectives, but are the additional risks from investing in derivatives. Examples of these associated risks are liquidity risk, which is the risk that the Fund will not be able to sell the derivative in the open market in a timely manner, and counterparty credit risk, which is the risk that the counterparty will not fulfill its obligation to the Fund. Associated risks can be different for each type of derivative and are discussed by each derivative type in the notes that follow.

Counterparty Credit Risk. Certain derivative positions are subject to counterparty credit risk, which is the risk that the counterparty will not fulfill its obligation to the Fund. The Fund’s derivative counterparties are financial institutions who are subject to market conditions that may weaken their financial position. The Fund intends to enter into financial transactions with counterparties that the Manager believes to be creditworthy at the time of the transaction.

Credit Related Contingent Features. The Fund’s agreements with derivative counterparties have several credit related contingent features that if triggered would allow its derivatives counterparties to close out and demand payment or additional collateral to cover their exposure from the Fund. Credit related contingent features are established between the Fund and its derivatives counterparties to reduce the risk that the Fund will not fulfill its payment obligations to its counterparties. These triggering features include, but are not limited to, a percentage decrease in the Fund’s net assets and or a percentage decrease in the Fund’s Net Asset Value or NAV. The contingent features are established within the Fund’s International Swap and Derivatives Association, Inc. master agreements which govern certain positions in swaps, over-the-counter options and swaptions, and forward currency exchange contracts for each individual counterparty.

The effect of derivative instruments on the Statement of Operations is as follows:

Amount of Realized Gain or (Loss) Recognized on Derivatives

Derivatives Not Accounted	Investments from
for as Hedging Instruments	unaffiliated companies*
Equity contracts	$	(1,267	)

* Includes purchased option contracts, purchased swaption contracts and written option contracts exercised, if any.

Option Activity

The Fund may buy and sell put and call options, or write put and call options. When an option is written, the Fund receives a premium and becomes obligated to sell or purchase the underlying security at a fixed price, upon exercise of the option.

     Options are valued daily based upon the last sale price on the principal exchange on which the option is traded. The difference between the premium received or paid, and market value of the option, is recorded as unrealized appreciation or depreciation. The net change in unrealized appreciation or depreciation is reported in the Statement of Operations. When an option is exercised, the cost of the security purchased or the proceeds of the security sale are adjusted by the amount of premium received or paid. Upon the expiration or closing of the option transaction, a gain or loss is reported in the Statement of Operations.

     The Fund has purchased put options on individual equity securities and, or, equity indexes to decrease exposure to equity risk. A purchased put option becomes more valuable as the price of the underlying financial instrument depreciates relative to the strike price.

     During the year ended December 31, 2010, the Fund had an average market value of $101 on purchased put options.

     Options written, if any, are reported in a schedule following the Statement of Investments and as a liability in the Statement of Assets and Liabilities. Securities held in collateralized accounts to cover potential obligations with respect to outstanding written options are noted in the Statement of Investments.

     The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk that there may be an illiquid market where the Fund is unable to close the contract.

Additional associated risks to the Fund include counterparty credit risk for over-the-counter options and liquidity risk. As of December 31, 2010, the Fund did not hold any outstanding written options.

6. Pending Litigation

Since 2009, a number of lawsuits have been pending in federal courts against the Manager, the Distributor, and certain mutual funds (“Defendant Funds”) advised by the Manager and distributed by the Distributor (but not including the Fund). The lawsuits naming the Defendant Funds also name as defendants certain officers and current and former trustees of the respective Defendant Funds. The plaintiffs seek class action status on behalf of purchasers of shares of the respective Defendant Fund during a particular time period. The lawsuits raise claims under federal securities laws alleging that, among other things, the disclosure documents of the respective Defendant Fund contained misrepresentations and omissions, that such Defendant Fund’s investment policies were not followed, and that such Defendant Fund and the other defendants violated federal securities laws and regulations. The plaintiffs seek unspecified damages, equitable relief and an award of attorneys’ fees and litigation expenses.

     In 2009, what are claimed to be derivative lawsuits were filed in state court against the Manager and a subsidiary (but not against the Fund), on behalf of the New Mexico Education Plan Trust. These lawsuits allege breach of contract, breach of fiduciary duty, negligence and violation of state securities laws, and seek compensatory damages, equitable relief and an award of attorneys’ fees and litigation expenses.

     Other lawsuits have been filed since 2008 in various state and federal courts, against the Manager and certain of its affiliates. Those lawsuits were filed by investors who made investments through an affiliate of the Manager, and relate to the alleged investment fraud perpetrated by Bernard Madoff and his firm (“Madoff “). Those suits allege a variety of claims, including breach of fiduciary duty, fraud, negligent misrepresentation, unjust enrichment, and violation of federal and state securities laws and regulations, among others. They seek unspecified damages, equitable relief and an award of attorneys’ fees and litigation expenses. None of the suits have named the Distributor, any of the Oppenheimer mutual funds or any of their independent Trustees or Directors as defendants. None of the Oppenheimer funds invested in any funds or accounts managed by Madoff.

     The Manager believes that the lawsuits described above are without legal merit and is defending against them vigorously. The Defendant Funds’ Boards of Trustees have also engaged counsel to defend the suits brought against those Funds and the present and former Independent Trustees named in those suits. While it is premature to render any opinion as to the outcome in these lawsuits, or whether any costs that the Defendant Funds may bear in defending the suits might not be reimbursed by insurance, the Manager believes that these suits should not impair the ability of the Manager or the Distributor to perform their respective duties to the Fund, and that the outcome of all of the suits together should not have any material effect on the operations of any of the Oppenheimer funds.

7. Subsequent Event

The Regulated Investment Company Modernization Act of 2010 (the “Act”) was signed into law on December 22, 2010. The Act makes changes to a number of tax rules impacting the Fund. Under the Act, future capital losses generated by a fund may be carried over indefinitely, but these losses must be used prior to the utilization of any pre-enactment capital losses. Since pre-enactment capital losses may only be carried forward for eight years, there may be a greater likelihood that all or a portion of a fund’s pre-enactment capital losses will expire unused. In general, the provisions of the Act will be effective for the Fund’s fiscal year ending December 31, 2011. Specific information regarding the impact of the Act on the Fund will be contained within the “Federal Taxes” section of the financial statement notes for the fiscal year ending December 31, 2011.

Oppenheimer Variable Account Funds

Website
www.oppenheimerfunds.com

Investment Adviser
OppenheimerFunds, Inc.
Two World Financial Center
225 Liberty Street, 11th Floor
New York, New York 10281-1008

Distributor
OppenheimerFunds Distributor, Inc.
Two World Financial Center
225 Liberty Street, 11th Floor
New York, New York 10281-1008

Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1.800.CALL OPP (225.5677)

Custodian Bank
JPMorgan Chase Bank
4 Chase Metro Tech Center
Brooklyn, New York 11245

Independent Registered Public Accounting Firm
KPMG LLP
707 Seventeenth Street
Denver, Colorado 80202

Counsel to the Funds & Independent Directors
K&L Gates LLP
70 West Madison Street, Suite 3100
Chicago, Illinois 60602

PX0610.001.0411