-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WOV8oM+kfBgh1O5wbpZXmZpQn1rOg41bJAq0uA9A1O8CqGGaNvc67e4TDbuyTsHW bzLJaGRa4/mGOPU+uapTWg== 0000936772-01-000112.txt : 20010307 0000936772-01-000112.hdr.sgml : 20010307 ACCESSION NUMBER: 0000936772-01-000112 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010228 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLIANCE VARIABLE PRODUCTS SERIES FUND INC CENTRAL INDEX KEY: 0000825316 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-05398 FILM NUMBER: 1556113 BUSINESS ADDRESS: STREET 1: 500 PLAZA DRIVE STREET 2: 1345 AVENUE OF THE AMERICAS 31ST FL CITY: NEW YORK STATE: NY ZIP: 10105 BUSINESS PHONE: 2013194105 MAIL ADDRESS: STREET 1: ALLIANCE CAPITAL MANGEMENT LP STREET 2: 1345 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10105 N-30D 1 0001.txt ALLIANCE ------------------------ VARIABLE PRODUCTS ------------------------ SERIES FUND ------------------------ UTILITY INCOME PORTFOLIO ------------------------ ANNUAL REPORT DECEMBER 31, 2000 Investment Products Offered --------------------------- > Are Not FDIC Insured > May Lose Value > Are Not Bank Guaranteed --------------------------- LETTER TO SHAREHOLDERS Alliance Variable Products Series Fund - -------------------------------------------------------------------------------- February 1, 2001 Dear Shareholder: We are pleased to provide you with an update of Alliance Variable Products Series Fund, Inc. (the "Fund") for the annual reporting period ended December 31, 2000. We appreciate your investment in the Portfolio(s) of Alliance Variable Products Series Fund and look forward to reporting further investment progress in the coming period. Sincerely, /s/ John D. Carifa John D. Carifa Chairman and President 1 Alliance Variable Products Series Fund - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The Utility Income Portfolio seeks current income and capital appreciation by investing primarily in the equity and fixed-income securities of companies in the utilities industry. The Portfolio seeks to take advantage of the characteristics and historical performance of securities of utilities companies engaged in the manufacture, production, generation, provision, transmission, sale and distribution of gas, electric energy, and communications equipment and services, and the provision of other utility or utility-related goods and services. MARKET REVIEW 2000 marked one of the strongest years of the electric industry in history. Based on our survey of 40 companies, prices of investor-owned electric utility stocks increased by an average of 40.2% in 2000, resulting in approximately a 43.1% S&P Utility Index total return. The Dow Jones Utility Index recorded an even larger gain, increasing 45.5% in 2000. In comparison, the Dow Jones Industrial Average declined 6.2%, recording - 4.9% total return for the year. While the S&P 500 Stock Index fell 9.1% for the year, the growth half of the market, represented by the S&P 500 Barra Growth Index, declined by 22.1%, but the value-half of the market, as represented by the S&P 500 Barra Value Index, increased by 6.1%. Within the growth category, the only significant sector that negatively impacted the market was technology, with the Credit Suisse First Boston Technology Index falling 32.8% for the year and the Pacific High Technology Index decreasing by 16.2%. Technology accounted for two-thirds of the loss in the S&P 500. The NASDAQ Composite Index declined by a sharp 39% in 2000, its worst year since the inception of the Index in 1971, compared to an 86% gain in 1999. While the sharp declines in the broader market indices were the worst since 1977 for the S&P 500, the utility industry's performance in 2000 was the best in at least the last 10 years. INVESTMENT RESULTS The Utility Income Portfolio returned 9.79% for the six-month period and 11.45% for the 12-month period, respectively and comfortably ahead of the New York Stock Exchange Utility Index, which includes telecommunications and technology stocks in addition to electric and gas utilities. The Index had a loss of 13.8% for the year and declined 8.1% over the past six months. The Portfolio's relative outperformance can be attributed to the superior stock selection in the electric industry. INVESTMENT OUTLOOK In our view, the outlook for utility companies continues to look attractive. First, signs of a slowdown in the U.S. economy could benefit this group. Also, tight supply of generating capacity in many parts of the U.S. will be the major driver to most of the generation companies, as well as the merchant energy companies. In addition, deregulation and the move towards a more competitive electric industry are leading many companies to separate faster growing generation and merchant energy businesses from slower growth regulated activities. These changes are creating vast opportunities for utilities to enhance shareholder returns, while at the same time, are producing a secure environment for stable dividends. Nonetheless, the performance of electric stocks will depend, to a certain degree, on the overall performance of the broad markets and on how the California power issues are resolved. The Portfolio continues to hold a significant cash position to take advantage of this potential shift when it occurs. In addition, the Portfolio has reduced its underweight position in telephone utilities due to the easing of competitive concerns, and we continue to augment the income characteristics of the Portfolio with convertible securities of higher growth telecommunication service providers such as cable television companies. - -------------------------------------------------------------------------------- Average annual total returns are for the Portfolio's Class A shares. 2 INVESTMENT RESULTS Alliance Variable Products Series Fund - -------------------------------------------------------------------------------- INVESTMENT RESULTS AS OF DECEMBER 31, 2000 Listed below are the Portfolios' average annual total returns for Class A shares for the one-year, five-year (where applicable) and since inception periods ended December 31, 2000. Utility Income Portfolio o 1 Year 11.45% o 5 Years 17.46% o Since Inception (5/94) 16.14% - -------------------------------------------------------------------------------- Total returns are based on net asset value (NAV) performance for Class A shares and reflect reinvestment of dividends and/or capital gains distributions in additional shares. These figures do not reflect insurance company separate account or annuity contract charges, which would reduce total return to a contract owner. Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. 3 PERFORMANCE UPDATE Alliance Variable Products Series Fund - -------------------------------------------------------------------------------- o Alliance Utility Income Portfolio o NYSE Utility Index [The following table was depicted as a mountain graph in the printed material.] Utility Portfolio: $27,048 NYSE Utility Index: $21,296 Past performance is no guarantee of future results. These charts illustrate the total value of an assumed $10,000 investment in each Portfolio as compared to the performance of an appropriate broad-based index for the time frames indicated for each Portfolio. Performance results for each Portfolio represent the Portfolio's total return at net asset value (NAV). An investor cannot invest directly in an index or average, and its results are not indicative of the performance for any Alliance mutual fund. - -------------------------------------------------------------------------------- * Month-end closest to Portfolio inception. Inception dates for the Portfolios are: 1/14/91 Growth & Income; 9/15/94 Growth; 12/28/92 Total Return; 12/28/92 International; 6/26/92 Premier Growth; 7/15/91 Global Bond; 5/10/94 Utility Income; 5/2/94 Global Dollar Government; 9/23/94 Worldwide Privatization; 5/3/94 North American Government Income; 9/17/92 U.S. Government/High-Grade Securities; 1/11/96 Technology; 8/5/96 Quasar; 1/9/97 Real Estate Investment; 10/27/97 High Yield. 4 THE BENCHMARKS Alliance Variable Products Series Fund - -------------------------------------------------------------------------------- The benchmarks described below represent unmanaged indices; the Lipper Averages include funds that have generally similar investment objectives to the respec- tive Alliance portfolio, although some funds included in the averages may have somewhat different investment policies. CS First Boston High Yield -- Credit Suisse First Boston High Yield Index is an unmanaged, trader-priced portfolio constructed to mirror the high yield debt market. DJ Utility -- The Dow Jones Utility Index is a price-weighted average that consists of actively traded stocks representing a cross-section of corporations involved in various phases of the utility industry. JPM EMBI-Plus -- The JP Morgan Emerging Markets Bond Index-Plus tracks returns for external-currency-denominated debt instruments of the emerging markets including Brady bonds, loans, Eurobonds, and U.S. dollar-denominated local market instruments. Countries covered are Argentina, Brazil, Bulgaria, Ecuador, Mexico, Morocco, Nigeria, Panama, Peru, the Phillipines, Poland, Russia and Venezuela. LB Aggregate Bond -- The Lehman Brothers Aggregate Bond Index is composed of the Mortgage-Backed and Asset-Backed Securities Indices, and the Government/Credit Bond Index. LB Credit Bond -- The Lehman Brothers Corporate Bond Index includes all publicly issued, fixed-rate, non-convertible investment grade corporate debt; the index is composed of both U.S. and Brady Bonds. Until June 30, 2000, this index was known as the Lehman Brothers Corporate Index. LB Gov't/Credit Bond -- The Lehman Brothers Government/Credit Bond Index represents a combination of the two indices. LB Gov't Bond -- The Lehman Brothers Government Bond Index is composed of the Treasury Bond and Agency Bond Indices, the 1-3 year Government Index and the 20+ year Treasury Index. LB Intermediate Gov't Bond -- The Lehman Brothers Intermediate Government Bond Index is composed of U.S. Government agency and Treasury securities with maturities of one to 10 years. LB Long-Term Gov't Bond -- The Lehman Brothers Long-Term Government Bond Index is composed of U.S. Government agency and Treasury securities with maturities of 10 years or more. Lipper Growth and Income Funds Average -- The Lipper Growth and Income Funds Average reflects performance of 100 mutual funds. Lipper International Funds Average -- The Lipper International Funds Average reflects performance of 100 mutual funds. MSCI EAFE -- The Morgan Stanley Capital International EAFE Index measures the overall performance of stock markets in 21 countries within Europe, Australia and the Far East. MSCI World ex-USA -- The Morgan Stanley Capital International World ex-USA Index is an unmanaged, market capitalization-weighted index that measures the performance of stock markets in 21 countries outside the United States. NAREIT -- The NAREIT Index represents returns for the National Association of Real Estate Investment Trust Equity Index. NYSE Utility --- The New York Stock Exchange Utility Index is composed of all utility issues traded on the Exchange. PSE High Technology - The Pacific Stock Exchange High Technology Index is comprised of technology stocks traded on the Pacific Stock Exchange. Russell 1000 -- The Russell 1000 Growth Stock Index represents performance of 1000 of the largest U.S. companies by market capitalization. Russell 2000 -- The Russell 2000 Value Index consists of 2000 small- and mid-cap companies. The average market capitalization is approximately $500 million. SSB 3-Month Treasury Bill -- The Salomon Smith Barney 3-Month Treasury Bill Index represents the average of T-bill rates for each of the prior three months, adjusted to a bond equivalent basis. SSB World Gov't Bond -- The Salomon Smith Barney World Government Bond Index represents performance of government bond markets in 14 countries. S&P 500 -- The Standard and Poor's 500 Stock Index includes 500 stocks and is a common measure of the performance of the overall U.S. stock market. 5 UTILITY INCOME PORTFOLIO TEN LARGEST HOLDINGS December 31, 2000 Alliance Variable Products Series Fund - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- COMPANY U.S. $ VALUE PERCENT OF NET ASSETS - -------------------------------------------------------------------------------- Dynegy, Inc. Cl.A .................. $ 3,139,500 5.0% Calpine Corp. ...................... 3,127,338 5.0 Duke Power Energy Corp. ............ 2,762,100 4.4 SBC Communications, Inc. ........... 2,563,936 4.1 FPL Group, Inc. .................... 2,525,600 4.1 Allegheny Energy, Inc. ............. 2,255,175 3.6 Nisource, Inc. ..................... 2,189,400 3.5 AES Corp. .......................... 1,904,900 3.1 Verizon Communications, Inc. ....... 1,895,226 3.1 BellSouth Corp. .................... 1,756,219 2.8 $24,119,394 38.7% - -------------------------------------------------------------------------------- 6 UTILITY INCOME PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2000 Alliance Variable Products Series Fund - -------------------------------------------------------------------------------- Company Shares U.S. $ Value - -------------------------------------------------------------------------------- COMMON & PREFERRED STOCKS - 94.8% UNITED STATES INVESTMENTS - 84.5% UTILITIES - 65.8% ELECTRIC & GAS UTILITIES - 41.8% AGL Resources, Inc. ...................... 6,100 $ 134,581 Allegheny Energy, Inc. ................... 46,800 2,255,175 American Electric Power Co., Inc. .................................... 30,000 1,395,000 Cleco Corp. .............................. 2,000 109,500 CMS Energy Corp. ......................... 18,400 583,050 Constellation Energy Group ............... 6,000 270,375 Dominion Resources, Inc. ................. 17,000 1,139,000 DPL, Inc. ................................ 21,000 696,937 DTE Energy Co. ........................... 16,000 623,000 Duke Power Energy Corp. .................. 32,400 2,762,100 Equitable Resources, Inc. ................ 5,600 373,800 Exelon Corp. ............................. 17,062 1,197,923 FPL Group, Inc. .......................... 35,200 2,525,600 KeySpan Corp. ............................ 15,100 639,863 MCN Energy Group, Inc. ................... 4,600 127,363 Montana Power Co. ........................ 31,200 647,400 New Jersey Resources Corp. ............... 13,200 570,900 Nisource, Inc. ........................... 71,200 2,189,400 Nisource, Inc. pfd ....................... 8,000 433,500 Northwest Natural Gas Co. ................ 5,250 139,125 NSTAR .................................... 28,000 1,200,500 People's Energy Corp. .................... 3,600 161,100 Pinnacle West Capital Corp. .............. 19,000 904,875 Potomac Electric Power Co. ............... 50,000 1,235,500 Public Service Enterprise Group, Inc. ............................. 13,700 666,162 Questar Corp. ............................ 7,000 210,438 Reliant Energy, Inc. ..................... 23,000 996,187 UtiliCorp United, Inc. ................... 42,000 1,302,000 Wisconsin Energy Corp. ................... 26,000 586,625 ----------- 26,076,979 ----------- TELEPHONE UTILITIES - 15.4% AT&T Corp. ............................... 68,661 1,188,694 BellSouth Corp. .......................... 42,900 1,756,219 Qwest Communications International, Inc. (a) .................. 29,571 1,212,411 SBC Communications, Inc. ................. 53,695 2,563,936 Telephone & Data Systems, Inc. .................................... 6,000 540,000 Verizon Communications, Inc. .................................... 37,810 1,895,226 WorldCom, Inc. ........................... 31,100 437,344 ----------- 9,593,830 ----------- MISCELLANEOUS - 8.6% AES Corp. (a) ............................ 34,400 1,904,900 Calpine Corp. (a) ........................ 69,400 3,127,338 Southern Energy, Inc. (a) ................ 11,700 331,256 ----------- 5,363,494 ----------- 41,034,303 ----------- ENERGY - 11.0% DOMESTIC PRODUCERS - 0.3% WGL Holdings, Inc. ....................... 5,600 170,450 ----------- PIPELINES - 4.1% El Paso Energy Corp. ..................... 21,000 1,504,125 Piedmont Natural Gas Co., Inc. .................................... 5,100 194,756 The Williams Cos., Inc. .................. 22,031 879,863 ----------- 2,578,744 ----------- MISCELLANEOUS - 6.6% Dynegy, Inc. Cl.A ........................ 56,000 3,139,500 Enron Corp. .............................. 11,600 964,250 ----------- 4,103,750 ----------- 6,852,944 ----------- CONSUMER SERVICES - 6.0% BROADCASTING & CABLE - 6.0% Cablevision Systems Corp. ................ Cl.A (a) ................................. 14,828 1,259,453 Comcast Corp. Cl.A (a) ................... 18,000 751,500 MediaOne Group, Inc. (b) ................. 21,400 1,738,750 ----------- 3,749,703 ----------- TECHNOLOGY - 1.4% COMMUNICATION EQUIPMENT - 1.4% ADC Telecommunications, Inc. (a) ................................ 14,620 264,987 Lucent Technologies, Inc. ................ 33,500 452,250 NTL, Inc. (a) ............................ 6,518 156,025 ----------- 873,262 ----------- MULTI INDUSTRY COMPANY - 0.3% Southwest Gas Corp. ...................... 7,000 153,125 ----------- Total United States Investments (cost $38,543,126) ...................... 52,663,337 ----------- FOREIGN INVESTMENTS - 10.3% BRAZIL - 0.8% Companhia Energetica de Minas Gerais (ADR) ...................... 1,958 28,316 Companhia Paranaense de Energia-Copel pfd. (ADR) ................ 4,700 39,656 Embratel Participacoes, S.A .............. (ADR) ................................... 13,700 214,919 Telesp Celular Participacoes, SA (ADR) ................................ 7,400 199,800 ----------- 482,691 ----------- 7 UTILITY INCOME PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2000 (continued) Alliance Variable Products Series Fund - -------------------------------------------------------------------------------- Company Shares U.S. $ Value - -------------------------------------------------------------------------------- CANADA - 0.8% BCE, Inc. ................................ 16,700 $ 483,256 ---------- FINLAND - 2.8% Nokia Corp. (ADR) ........................ 40,000 1,740,000 ---------- FRANCE - 0.1% Equant NV (a) ............................ 3,300 86,006 ---------- HONG KONG - 0.9% China Mobile (Hong Kong), Ltd. (ADR) (a) .......................... 21,600 585,900 ---------- MEXICO - 1.8% Telefonos de Mexico, SA Series L (ADR) .......................... 24,800 1,119,100 ---------- SOUTH KOREA - 0.7% Korea Electric Power Corp. ............... 4,020 74,998 SK Telecom Co., Ltd. (ADR) ............... 15,701 369,955 ---------- 444,953 ---------- SPAIN - 0.1% Telefonica de Espana, SA (ADR) ................................... 1,496 74,800 ---------- Shares or Principal Amount Company (000) U.S. $ Value - -------------------------------------------------------------------------------- UNITED KINGDOM - 2.3% Lattice Group Plc (a) .................... 89,500 $ 202,082 National Grid Group Plc (ADR) ................................... 27,000 1,225,125 ---------- 1,427,207 ---------- Total Foreign Investments (cost $4,709,496) ....................... 6,443,913 ---------- Total Common & Preferred Stocks (cost $43,252,622) ...................... 59,107,250 ---------- SHORT-TERM INVESTMENT - 5.6% TIME DEPOSIT - 5.6% State Street Euro Dollar 6.00%, 1/02/01 (amortized cost $3,475,000) $ 3,475 3,475,000 ---------- TOTAL INVESTMENTS - 100.4% (cost $46,727,622) ...................... 62,582,250 Other assets less liabilities - (0.4%) .................... (220,709) ---------- NET ASSETS - 100% ........................ $62,361,541 ========== - -------------------------------------------------------------------------------- (a) Non-income producing security. (b) Premium Income Exchangeable note which is convertible to Vodafone AirTouch Plc until 8/15/01 at a rate of 2.0253 shares of Vodafone AirTouch Plc for every share of the exchangeable note. Glossary: ADR - American Depositary Receipt See Notes to Financial Statements. 8 UTILITY INCOME PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES December 31, 2000 Alliance Variable Products Series Fund - -------------------------------------------------------------------------------- ASSETS Investments in securities, at value (cost $46,727,622) ....... $62,582,250 Cash ......................................................... 100 Dividends and interest receivable ............................ 57,272 ----------- Total assets ................................................. 62,639,622 ----------- LIABILITIES Payable for capital stock redeemed ........................... 196,718 Advisory fee payable ......................................... 38,200 Accrued expenses ............................................. 43,163 ----------- Total liabilities ............................................ 278,081 ----------- NET ASSETS ..................................................... $62,361,541 =========== COMPOSITION OF NET ASSETS Capital stock, at par ........................................ $ 2,753 Additional paid-in capital ................................... 43,681,199 Undistributed net investment income .......................... 2,415,849 Accumulated net realized gain on investments ................. 407,073 Net unrealized appreciation of investments and foreign currency denominated assets and liabilities ......... 15,854,667 ----------- $62,361,541 =========== Class A Shares Net assets .................................................. $62,361,541 =========== Shares of capital stock outstanding ......................... 2,753,135 =========== Net asset value per share ................................... $ 22.65 =========== - -------------------------------------------------------------------------------- See Notes to Financial Statements. 9 UTILITY INCOME PORTFOLIO STATEMENT OF OPERATIONS Year Ended December 31, 2000 Alliance Variable Products Series Fund - -------------------------------------------------------------------------------- INVESTMENT INCOME Dividends (net of foreign taxes withheld of $7,810) .......... $ 2,726,730 Interest ..................................................... 229,368 ----------- Total investment income ...................................... 2,956,098 ----------- EXPENSES Advisory fee ................................................. 394,043 Administrative ............................................... 66,000 Custodian .................................................... 59,851 Audit and legal .............................................. 12,467 Printing ..................................................... 7,249 Directors' fees .............................................. 1,326 Transfer agency .............................................. 944 Miscellaneous ................................................ 3,784 ----------- Total expenses ............................................... 545,664 Less: expenses waived and reimbursed ......................... (22,116) ----------- Net expenses ................................................. 523,548 ----------- Net investment income ........................................ 2,432,550 ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS Net realized gain on investment transactions ................. 415,044 Net realized loss on foreign currency transactions ........... (7,824) Net change in unrealized appreciation/depreciation of: Investments ................................................ 3,053,392 Foreign currency denominated assets and liabilities ........ (122) ----------- Net gain on investments and foreign currency transactions .... 3,460,490 ----------- NET INCREASE IN NET ASSETS FROM OPERATIONS ..................... $ 5,893,040 =========== - -------------------------------------------------------------------------------- See Notes to Financial Statements 10 UTILITY INCOME PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS Alliance Variable Products Series Fund - --------------------------------------------------------------------------------
Year Ended Year Ended December 31, December 31, 2000 1999 ------------ ------------ INCREASE IN NET ASSETS FROM OPERATIONS Net investment income ............................................... $ 2,432,550 $ 818,161 Net realized gain on investments and foreign currency transactions .. 407,220 2,301,229 Net change in unrealized appreciation/depreciation of investments and foreign currency denominated assets and liabilities ............... 3,053,270 3,974,739 ------------ ------------ Net increase in net assets from operations .......................... 5,893,040 7,094,129 DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class A ............................................................ (819,857) (573,650) Net realized gain on investments Class A ............................................................ (2,301,907) (1,041,778) CAPITAL STOCK TRANSACTIONS Net increase ........................................................ 13,432,017 6,243,310 ------------ ------------ Total increase ...................................................... 16,203,293 11,722,011 NET ASSETS Beginning of period ................................................. 46,158,248 34,436,237 ------------ ------------ End of period (including undistributed net investment income of $2,415,849 and $810,980, respectively) ............................. $ 62,361,541 $ 46,158,248 ============ ============
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 11 UTILITY INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2000 Alliance Variable Products Series Fund - -------------------------------------------------------------------------------- NOTE A: Significant Accounting Policies The Utility Income Portfolio (the "Portfolio") is a series of Alliance Variable Products Series Fund, Inc. (the "Fund"). The Portfolio's investment objective is to seek current income and capital appreciation by investing primarily in equity and fixed-income securities of companies in the utilities industry. The Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers nineteen separately managed pools of assets which have differing investment objectives and policies. The Fund currently issues shares of the Conservative Investors Portfolio, Growth Investors Portfolio, Total Return Portfolio, Growth and Income Portfolio, Growth Portfolio, International Portfolio, Premier Growth Portfolio, Quasar Portfolio, Real Estate Investment Portfolio, Technology Portfolio, Utility Income Portfolio, Worldwide Privatization Portfolio, Global Bond Portfolio, Global Dollar Government Portfolio, High-Yield Portfolio, North American Government Income Portfolio, Short-Term Multi-Market Portfolio, U.S. Government/High Grade Securities Portfolio and Money Market Portfolio (the "Portfolios"). On January 5, 1999, the creation of a second class of shares, Class B shares, was approved by the Board of Directors. The Fund offers Class A and Class B shares. Both classes of shares have identical voting, dividend, liquidating and other rights, except that Class B shares bear a distribution expense and have exclusive voting rights with respect to the Class B distribution plan. As of December 31, 2000, the following Portfolios had Class B shares issued and outstanding: Growth and Income Portfolio, Growth Portfolio, Premier Growth Portfolio, Quasar Portfolio, Technology Portfolio, Worldwide Privatization Portfolio, Global Bond Portfolio, U.S. Government/High Grade Securities Portfolio and Money Market Portfolio. The Fund offers and sells its shares only to separate accounts of certain life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Sales are made without a sales charge at each Portfolio's net asset value per share. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States, which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Fund. 1. Security Valuation Portfolio securities traded on a national securities exchange or on a foreign securities exchange (other than foreign securities exchanges whose operations are similar to those of the United States over-the-counter market) or on The Nasdaq Stock Market, Inc., are generally valued at the last reported sales price or if no sale occurred, at the mean of the closing bid and asked price on that day. Readily marketable securities traded in the over-the-counter market, securities listed on a foreign securities exchange whose operations are similar to the U.S. over-the-counter market, and securities listed on a national securities exchange whose primary market is believed to be over-the-counter (but excluding securities traded on The Nasdaq Stock Market, Inc.), are valued at the mean of the current bid and asked price. U.S. government and fixed income securities which mature in 60 days or less are valued at amortized cost, unless this method does not represent fair value. Securities for which current market quotations are not readily available are valued at their fair value as determined in good faith by, or in accordance with procedures adopted by, the Board of Directors. Fixed income securities may be valued on the basis of prices obtained from a pricing service when such prices are believed to reflect the fair market value of such securities. Securities in which the Money Market Portfolio invests are valued at amortized cost which approximates fair value, under which method a portfolio instrument is valued at cost and any premium or discount is amortized on a straight-line basis to maturity. 2. Currency Translation Assets and liabilities denominated in foreign currencies and commitments under forward exchange currency contracts are translated into U.S. dollars at the mean of the quoted bid and asked price of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated at rates of exchange prevailing when accrued. Net realized gains and losses on foreign currency transactions represent foreign exchange gains and losses from sales and maturities of securities and forward exchange currency contracts, holdings of foreign currencies, exchange gains and losses realized between the trade and settlement dates on investment transactions, and the difference between the amounts of interest, dividends and foreign witholding tax reclaims recorded on the Portfolio's books and the U.S. dollar equivalent amounts 12 Alliance Variable Products Series Fund - -------------------------------------------------------------------------------- actually received or paid. Net currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation (depreciation) of investments and foreign currency denominated assets and liabilities. 3. Taxes It is the Fund's policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. 4. Investment Income and Investment Transactions Dividend income is recorded on the ex-dividend date. Interest income is accrued daily. Investment transactions are accounted for on the date securities are purchased or sold. The Fund accretes discounts as adjustments to interest income and in the case of the Money Market Portfolio, amortizes premium as well. Investment gains and losses are determined on the identified cost basis. 5. Dividends and Distributions Each Portfolio declares and distributes dividends and distributions from net investment income and net realized gains, respectively, if any, at least annually, except for dividends on the Money Market Portfolio, which are declared daily and paid monthly. Income dividends and capital gains distributions to shareholders are recorded on the ex-dividend date. Income dividends and capital gains distributions are determined in accordance with federal tax regulations and may differ from those determined in accordance with accounting principles generally accepted in the United States. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. During the current fiscal year, permanent differences, primarily due to tax treatment of foreign currency transactions, resulted in a net decrease in undistributed net investment income and a corresponding increase in accumulated net realized gain on investments. This reclassification had no effect on net assets. - -------------------------------------------------------------------------------- NOTE B: Advisory Fee and Other Transactions with Affiliates Under the terms of an investment advisory agreement, the Portfolio pays Alliance Capital Management L.P. (the "Adviser"), an investment advisory fee at an annualized rate of .75% of the Portfolio's average daily net assets. Pursuant to the advisory agreement, the Portfolio paid $43,884 to the Adviser representing the cost of certain legal and accounting services provided to the Portfolio by the Adviser for the year ended December 31, 2000. Prior to May 1, 2000, the Adviser agreed to waive its fee and to reimburse the additional operating expenses to the extent necessary to limit total operating expenses on an annual basis to .95% of the average daily net assets for Class A shares. Effective May 1, 2000, the Adviser determined not to extend the expense limitation undertaking of the Portfolio. Expense waivers/reimbursements, if any, are accrued daily and paid monthly. For the year ended December 31, 2000, such waivers/reimbursements amounted to $22,116. Brokerage commissions paid on investment transactions for the year ended December 31, 2000, amounted to $35,041. For the period from January 1, 2000 to October 31, 2000, $942 was paid to Donaldson, Lufkin & Jenrette Securities Corp. ("DLJ") directly and none was paid to brokers utilizing the services of the Pershing Division of DLJ, affiliates of the Adviser (whose affiliation ended on November 2, 2000). Effective October 2, 2000, Sanford C. Bernstein & Co. LLC ("SCB") became an affiliate of the Adviser. For the period from October 2, 2000 to December 31, 2000, no brokerage commission was paid to SCB directly. The Fund compensates Alliance Fund Services, Inc., a wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for providing personnel and facilities to perform transfer agency services for the Fund. For the year ended December 31, 2000, the Fund paid a total of $18,000 which was allocated evenly among the Portfolios. - -------------------------------------------------------------------------------- NOTE C: Distribution Plan The Portfolios have each adopted a Plan for Class B shares of the Fund pursuant to Rule 12b-1 under the Investment Company Act of 1940 (each a "Plan" and collectively the "Plans"). Under the Plans, the Portfolios pay distribution and servicing fees to the Distributor at 13 UTILITY INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) Alliance Variable Products Series Fund - -------------------------------------------------------------------------------- an annual rate of up to .50% of each portfolio's average daily net assets attributable to the Class B shares. The fees are accrued daily and paid monthly. The Board of Directors currently limit payments under the Plan to .25% of each Portfolio's average daily net assets attributable to Class B shares. The Plans provide that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. The Portfolios are not obligated under the Plans to pay any distribution services fee in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Plans is to compensate the Distributor for its distribution services with respect to the sale of each Portfolio's shares. Since the Distributor's compensation is not directly tied to its expenses, the amount of compensation received by it under the Plan during any year may be more or less than its actual expenses. For this reason, the Plans are characterized by the staff of the Commission as being of the "compensation" variety. In the event that a Plan is terminated or not continued, no distribution services fees (other than current amounts accrued but not yet paid) would be owed by the Portfolios to the Distributor with respect to the relevant Plan. The Plan also provides that the Adviser may use its own resources to finance the distribution of each Portfolio's shares. - -------------------------------------------------------------------------------- NOTE D: Investment Transactions Purchases and sales of investment securities (excluding short-term investments) for the year ended December 31, 2000, were as follows: Purchases: Stocks and debt obligations .......... $21,768,538 U.S. government and agencies.......... -0- Sales: Stocks and debt obligations .......... $8,792,804 U.S. government and agencies ....... -0- At December 31, 2000, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes. Accordingly, gross unrealized appreciation and unrealized depreciation (excluding foreign currency transactions) are as follows: Gross unrealized appreciation ....... $ 18,910,690 Gross unrealized depreciation ....... (3,056,062) ---------- Net unrealized appreciation ......... $ 15,854,628 ============ Foreign currency losses incurred after October 31 ("post-October" losses) within the taxable year are deemed to arise on the first business day of the Portfolio's next taxable year. The Portfolio incurred and will elect to defer net foreign currency losses of $7,097 during the fiscal year. 1. Forward Exchange Currency Contracts All Portfolios (except for the Global Dollar Government Portfolio, U.S. Government/High Grade Securities Portfolio and Money Market Portfolio) may enter into forward exchange currency contracts to hedge exposure to changes in foreign currency exchange rates on foreign portfolio holdings, to hedge certain firm purchase and sales commitments denominated in foreign currencies and for investment purposes. A forward exchange currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. The Portfolios may enter into contracts to deliver or receive foreign currency it will receive from or require for its normal investment activities. It may also use contracts in a manner intended to protect foreign currency denominated securities from declines in value due to unfavorable exchange rate movements. The gain or loss arising from the difference between the original contracts and the closing of such contracts is included in realized gains or losses from foreign currency transactions. Fluctuations in the value of forward exchange currency contracts are recorded for financial reporting purposes as unrealized gains or losses by the Portfolio. Each Portfolio's custodian will place and maintain cash not available for investment or other liquid assets in a separate account of the Portfolio having an approximate value equal to the aggregate amount of the respective portfolio's commitments under forward exchange currency contracts entered into with respect to position hedges. 14 Alliance Variable Products Series Fund - -------------------------------------------------------------------------------- Risks may arise from the potential inability of a counterparty to meet the terms of a contract and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. The face or contract amount, in U.S. dollars, reflects the total exposure each Portfolio has in that particular currency contract. At December 31, 2000, the Portfolio had no outstanding forward exchange currency contracts. 2. Option Transactions For hedging and investment purposes, all Portfolios (except for the Money Market Portfolio) may purchase and write call options and purchase put options on U.S. securities that are traded on U.S. securities exchanges and over-the-counter markets. The risk associated with purchasing an option is that the Portfolio pays a premium whether or not the option is exercised. Additionally, the Portfolio bears the risk of loss of premium and change in market value should the counterparty not perform under the contract. Put and call options purchased are accounted for in the same manner as portfolio securities. The cost of securities acquired through the exercise of call options is increased by premiums paid. The proceeds from securities sold through the exercise of put options are decreased by the premiums paid. When the Portfolio writes an option, the premium received by the Portfolio is recorded as a liability and is subsequently adjusted to the current market value of the option written. Premiums received from which written options expire unexercised are recorded by the Portfolio on the expiration date as realized gains from written options. The difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium received is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium received is added to the proceeds from the sale of the underlying security or currency in determining whether the Portfolio has realized a gain or loss. In writing an option, the Portfolio bears the market risk of an unfavorable change in the price of the security or currency underlying the written option. Exercise of an option written by the Portfolio could result in the Portfolio selling or buying a security or currency at a price different from the current market value. The Portfolio had no transactions in options written for the year ended December 31, 2000. - -------------------------------------------------------------------------------- NOTE E: Capital Stock There are 20,000,000,000 shares of capital stock, $.001 par value per share of the Fund authorized divided into two classes, designated Class A and Class B. Each class consists of 10,000,000,000 authorized shares. The Portfolio had no Class B shares outstanding during the year ended December 31, 2000. Transactions in capital stock were as follows:
---------------------------- --------------------------- SHARES AMOUNT ---------------------------- --------------------------- Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, 2000 1999 2000 1999 ------------ ------------ ------------ ------------ Class A Shares sold .................... 809,242 648,227 $ 17,683,636 $ 13,051,564 Shares issued in reinvestment of dividends and distributions ... 148,091 80,330 3,121,764 1,615,428 Shares redeemed ................ (335,561) (419,601) (7,373,383) (8,423,682) ------------ ------------ ------------ ------------ Net increase ................... 621,772 308,956 $ 13,432,017 $ 6,243,310 ============ ============ ============ ============
- -------------------------------------------------------------------------------- NOTE F: Concentration of Risk Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign exchange rates and the possibility of future political and economic developments which could adversely affect the value of such securities. Moreover, securities of many foreign companies or foreign governments and their markets may be less liquid and their prices more volatile than those of comparable United States companies or of the United States government. 15 UTILITY INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) Alliance Variable Products Series Fund - -------------------------------------------------------------------------------- NOTE G: Bank Borrowing A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $750 million revolving credit facility (the "Facility") intended to provide short-term financing if necessary, subject to certain restrictions in connection with abnormal redemption activity. Commitment fees related to the Facility are paid by the participating funds and are included in the miscellaneous expenses in the statement of operations. The Portfolio did not utilize the Facility during the year ended December 31, 2000. 16 UTILITY INCOME PORTFOLIO FINANCIAL HIGHLIGHTS Alliance Variable Products Series Fund - -------------------------------------------------------------------------------- Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
---------------------------------------------------------------------------- CLASS A ---------------------------------------------------------------------------- Year Ended December 31, ---------------------------------------------------------------------------- 2000 1999 1998 1997 1996 -------- -------- ------- ------- ------- Net asset value, beginning of period ............... $ 21.66 $ 18.90 $ 15.67 $ 12.69 $ 12.01 ------------- ------------- ------------- ------------- ------------- Income From Investment Operations Net investment income (a)(b) ....................... 1.01 .41 .37 .38 .31 Net realized and unrealized gain on investments and foreign currency transactions ..... 1.36 3.19 3.31 2.84 .62 ------------- ------------- ------------- ------------- ------------- Net increase in net asset value from operations .... 2.37 3.60 3.68 3.22 .93 ------------- ------------- ------------- ------------- ------------- Less: Dividends and Distributions Dividends from net investment income ............... (.36) (.30) (.31) (.24) (.09) ------------- ------------- ------------- ------------- ------------- Distributions from net realized gains .............. (1.02) (.54) (.14) -0- (.16) ------------- ------------- ------------- ------------- ------------- Total dividends and distributions .................. (1.38) (.84) (.45) (.24) (.25) ------------- ------------- ------------- ------------- ------------- Net asset value, end of period ..................... $ 22.65 $ 21.66 $ 18.90 $ 15.67 $ 12.69 ============= ============= ============= ============= ============= Total Return Total investment return based on net asset value (c) 11.45% 19.40% 23.91% 25.71% 7.88% Ratios/Supplemental Data Net assets, end of period (000's omitted) .......... $ 62,362 $ 46,158 $ 34,436 $ 20,347 $ 14,857 Ratios to average net assets of: Expenses, net of waivers and reimbursements ....... 1.00% .95% .95% .95% .95% Expenses, before waivers and reimbursements ....... 1.04% 1.14% 1.35% 1.08% 1.51% Net investment income (b) ......................... 4.63% 2.07% 2.20% 2.83% 2.61% Portfolio turnover rate ............................ 18% 16% 20% 30% 75%
- -------------------------------------------------------------------------------- (a) Based on average shares outstanding. (b) Net of expenses reimbursed or waived by the Adviser. (c) Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Total investment return calculated for a period of less than one year is not annualized. 17 REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS Alliance Variable Products Series Fund - -------------------------------------------------------------------------------- To the Shareholders and Board of Directors Utility Income Portfolio Alliance Variable Products Series Fund, Inc. We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the Utility Income Portfolio, (the "Portfolio") a series of Alliance Variable Products Series Fund, Inc., as of December 31, 2000, and the related statement of operations for the year then ended, the statement of changes in net assets for the two years then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the 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, 2000, by correspondence with the custodian and brokers. 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 the Utility Income Portfolio, a series of Alliance Variable Products Series Fund, Inc. at December 31, 2000, the results of its operations for the year then ended, the changes in its net assets for the two years then ended, and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP New York, New York February 1, 2001 FEDERAL INCOME TAX INFORMATION (unaudited) - -------------------------------------------------------------------------------- The Portfolio hereby designates $2,301,907 as long-term capital gain distributions during the taxable year ended December 31, 2000. 18 Alliance Variable Products Series Fund - -------------------------------------------------------------------------------- BOARD OF DIRECTORS John D. Carifa, Chairman and President Ruth Block (1) David H. Dievler (1) John H. Dobkin (1) William H. Foulk, Jr. (1) Clifford L. Michel (1) Donald J. Robinson (1) OFFICERS Matthew Bloom, Senior Vice President Kathleen A. Corbet, Senior Vice President Greg Dube, Senior Vice President Alfred L. Harrison, Senior Vice President Wayne D. Lyski, Senior Vice President Raymond J. Papera, Senior Vice President Peter Anastos, Vice President Andrew Aran, Vice President Bruce K. Aronow, Vice President Edward Baker, Vice President Mark H. Breedon, Vice President Russell Brody, Vice President Frank Caruso, Vice President F. Jeanne Goetz, Vice President Jane Mack Gould, Vice President Alan E. Levi, Vice President Gerald T. Malone, Vice President Michael Mon, Vice President Douglas J. Peebles, Vice President Daniel G. Pine, Vice President John Ricciardi, Vice President Paul C. Rissman, Vice President Kenneth D. Smalley, Vice President Jean Van De Walle, Vice President Sandra Yeager, Vice President Edmund P. Bergan, Jr., Secretary Mark D. Gersten, Treasurer & Chief Financial Officer Thomas Manley, Controller CUSTODIAN State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110 DISTRIBUTOR Alliance Fund Distributors, Inc. 1345 Avenue of the Americas New York, NY 10105 INDEPENDENT AUDITORS Ernst & Young LLP 787 Seventh Avenue New York, NY 10019 LEGAL COUNSEL Seward & Kissel One Battery Park Plaza New York, NY 10004 TRANSFER AGENT Alliance Fund Services, Inc. P.O. Box 1520 Secaucus, NJ 07096-1520 Toll-free 1-(800) 221-5672 - -------------------------------------------------------------------------------- (1) Member of the Audit Committee. 19 (This page left intentionally blank) (This page left intentionally blank) -----END PRIVACY-ENHANCED MESSAGE-----