-----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, Gz4G1f7d3hFFb71zGZ6qcL94kKRrLO3oE+3H3xtXyUNRgsBkbvXKMBjXMdQuRdHp ZXwgeOVuAGBUbANa+HQL1w== 0000936772-01-000129.txt : 20010307 0000936772-01-000129.hdr.sgml : 20010307 ACCESSION NUMBER: 0000936772-01-000129 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: 1556756 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 --------------------- QUASAR 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 Quasar Portfolio seeks growth of capital by pursuing aggressive investment policies. While it invests primarily in the equity securities of small-capitalization companies, it may invest in any type of securities issues, by any company, in any industry that we believe to offer possibilities for capital appreciation. The Portfolio may also pursue investment opportunities outside of the United States. MARKET REVIEW While perhaps not the global meltdown that many doomsayers had forecasted, Y2K certainly posed many challenges to small-cap growth stock investors. 2000 was a year marked by ongoing economic uncertainty, enormous volatility, massive sector rotation and, ultimately, disappointing small-cap growth stock returns. In fact, the Russell 2000 Growth Index turned in its single worst calendar year performance since its inception in 1979. INVESTMENT RESULTS The Quasar Portfolio finished out the year with strong second half relative performance. For the six-month period ended December 31, 2000, the Portfolio decreased in value by 12.5% versus a 23.5% decline in the Russell 2000 Growth Index. This brings the Portfolio's full-year return to -6.1%, which compares favorably to the Russell 2000 Growth Index's -22.4% return. As for the environment, year 2000 was filled with ups and downs. The run from January 1 to March 10 was one of the most powerful, euphoric rides ever experienced by small-cap investors. Over this timeframe, the Russell 2000 Growth Index gained more than 30%, as investors aggressively bid up new-economy stocks to unprecedented levels. The good news did not last long. Over the course of the next 25 trading sessions, the Russell 2000 Growth Index would give up all of its year-to-date gains, and then some, as it declined an astonishing 34%. Although small-cap growth stocks would stage periodic rallies of varying intensity, the Russell 2000 Growth Index ultimately went on to decline another 18% before finding a hitting bottom on December 21, 46% below the March 10 high. Consistent with the portfolio management team's historical discipline, the Portfolio's sector bets during the six- and 12-month periods were kept to a minimum. A modest overweight in health care and a modest underweight in technology did favorably impact relative performance for the six-month period. Overall, stock selection proved to be by far the single largest contributor to outperformance for both the six- and 12-month periods. In fact, for the year, all four-sectors significantly outperformed the Russell 2000 Growth Index. INVESTMENT OUTLOOK Looking forward, we believe that small-cap growth stocks are well positioned for strong relative performance. Coming off what was obviously a disappointing year, relative valuations have improved to near-historical lows. As is the case when looking at specific stocks, however, cheap is never reason enough to expect outperformance. In the case of small-cap growth stocks, we believe a more accommodating Federal Reserve will provide the catalyst for small-cap outperformance. Reviewing the past 11 declining interest rate cycles, small-cap stocks have outperformed nearly 75% of the time. While performance during a Fed easing can vary dramatically, small-caps have on average outperformed large-caps by nearly 400 basis points and 700 basis points, respectively, over the six- and 12- month periods following an initial cut. We do not expect the road to outperformance to be without speed bumps. As is typically the case around inflection points, increased investor uncertainty is likely to keep volatility high. This will clearly pose unique challenges to small-cap investors. However, cognizant of the changes underway, the Alliance Small Cap Team is very focused on making appropriate adjustments to the Portfolio with a view toward improvements in economic activity likely later in the year. - -------------------------------------------------------------------------------- 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. Quasar Portfolio o 1 Year -6.09% o Since Inception (8/96) 6.59% - -------------------------------------------------------------------------------- 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 Quasar Portfolio o Russell 2000 Growth Index [The following table was depicted as a mountain graph in the printed material.] Russell 2000 Growth Index: $13,380 Quasar Portfolio: $13,252 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 respective 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 QUASAR PORTFOLIO TEN LARGEST HOLDINGS December 31, 2000 Alliance Variable Products Series Fund ================================================================================ - -------------------------------------------------------------------------------- COMPANY U.S. $ VALUE PERCENT OF NET ASSETS - -------------------------------------------------------------------------------- King Pharmaceuticals, Inc. $ 7,108,944 3.1% - -------------------------------------------------------------------------------- Informatica Corp. 4,735,631 2.0 - -------------------------------------------------------------------------------- Priority Healthcare Corp. Cl.B 4,473,050 1.9 - -------------------------------------------------------------------------------- Universal Health Services, Inc. Cl.B 3,866,550 1.7 - -------------------------------------------------------------------------------- Laboratory Corp. of America Holdings 3,608,000 1.5 - -------------------------------------------------------------------------------- NetIQ Corp. 3,521,212 1.5 - -------------------------------------------------------------------------------- West TeleServices Corp. 3,425,625 1.5 - -------------------------------------------------------------------------------- Iron Mountain, Inc. 3,419,212 1.5 - -------------------------------------------------------------------------------- SBA Communications Corp. Cl.A 3,272,682 1.4 - -------------------------------------------------------------------------------- Spinnaker Exploration Co. 3,259,750 1.4 - -------------------------------------------------------------------------------- $40,690,656 17.5% - -------------------------------------------------------------------------------- 6 QUASAR PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2000 Alliance Variable Products Series Fund ================================================================================ Company Shares U.S. $ Value - -------------------------------------------------------------------------------- COMMON STOCKS-98.7% HEALTH CARE-28.6% BIOTECHNOLOGY-7.4% Aksys, Ltd. (a) ............................ 63,000 $ 1,039,500 Cephalon, Inc. (a) ......................... 47,500 3,007,344 CuraGen Corp. (a) .......................... 8,200 223,963 Enzon, Inc. (a) ............................ 32,500 2,017,031 Genomic Solutions, Inc. (a) ................ 95,800 730,475 ImmunoGen, Inc. (a) ........................ 38,400 823,200 Intermune Pharmaceuticals, Inc. (a) ................................ 41,100 1,834,087 SICOR, Inc. (a) ............................ 9,100 131,381 Tanox, Inc. (a) ............................ 38,000 1,489,125 The Medicines Co. (a) ...................... 17,200 352,600 Titan Pharmaceuticals, Inc. (a) ............ 77,400 2,737,638 Trimeris, Inc. (a) ......................... 38,600 2,118,175 United Therapeutics Corp. (a) .............. 55,000 811,250 ----------- 17,315,769 ----------- DRUGS-11.4% Alpharma, Inc. Cl.A ........................ 61,700 2,707,088 Array BioPharma, Inc. (a) .................. 57,900 517,481 Aurora Biosciences Corp. (a) ............... 16,800 528,150 CIMA Labs, Inc. (a) ........................ 42,300 2,752,144 Cubist Pharmaceuticals, Inc. (a) ................................ 18,700 542,300 DUSA Pharmaceuticals, Inc. (a) ................................ 68,900 1,158,381 King Pharmaceuticals, Inc. (a) ............. 137,537 7,108,944 Matrix Pharmaceutical, Inc. (a) ................................ 136,200 2,332,425 MediChem Life Sciences, Inc. (a) ................................ 89,800 415,325 Medicis Pharmaceutical Corp. ............... Cl.A (a) ................................ 53,900 3,186,837 Noven Pharmaceuticals, Inc. (a) ................................ 68,000 2,541,500 OSI Pharmaceuticals, Inc. (a) .............. 35,100 2,812,388 ----------- 26,602,963 ----------- MEDICAL PRODUCTS-2.1% Apogent Technologies, Inc. (a) ................................ 117,800 2,414,900 Biosite Diagnostics, Inc. (a) .............. 59,900 2,422,206 ----------- 4,837,106 ----------- MEDICAL SERVICES-7.7% Caremark Rx, Inc. (a) ...................... 218,000 2,956,625 Laboratory Corp. of America Holdings ................................ 20,500 3,608,000 LifePoint Hospitals, Inc. (a) .............. 53,000 2,656,625 Priority Healthcare Corp. .................. Cl.B (a) ................................ 109,600 4,473,050 Sybron Dental Specialties, Inc. (a) ................................ 19,066 321,739 Universal Health Services, Inc. ............ Cl.B (a) ................................ 34,600 3,866,550 ----------- 17,882,589 ----------- 66,638,427 ----------- TECHNOLOGY-25.9% COMMUNICATIONS EQUIPMENT-2.3% Digital Lightwave, Inc. (a) ................ 39,300 1,245,319 Exfo Electro-Optical Engineering, Inc. ....................... (Canada) (a) ............................ 45,300 1,183,462 Powerwave Technologies, Inc. (a) ................................ 27,900 1,632,150 Stanford Microdevices, Inc. (a) ................................ 37,500 1,350,000 ----------- 5,410,931 ----------- COMPUTER SOFTWARE-12.0% Actuate Software Corp. (a) ................ 112,200 2,145,825 Advent Software, Inc. (a) .................. 37,800 1,514,363 BindView Development Corp. (a) ............................... 165,200 1,553,913 Business Objects, SA (ADR) (France) (a) ............................ 28,200 1,596,825 Documentum, Inc. (a) ....................... 31,400 1,560,187 Great Plains Software, Inc. (a) ............ 23,100 1,087,144 Informatica Corp. (a) ...................... 119,700 4,735,631 Interwoven, Inc. (a) ....................... 25,800 1,701,187 Macrovision Corp. (a) ...................... 22,400 1,657,950 MatrixOne, Inc. (a) ........................ 66,500 1,209,469 Micromuse, Inc. (a) ........................ 33,200 2,003,931 NetIQ Corp. (a) ............................ 40,300 3,521,212 Niku Corp. (a) ............................. 68,600 501,638 SMTC Corp. (Canada) (a) .................... 80,600 1,098,175 Watchguard Technologies, Inc. (a) ................................ 67,100 2,122,037 ----------- 28,009,487 ----------- CONTRACT MANUFACTURING-2.3% DDi Corp. (a) .............................. 102,900 2,804,025 Plexus Corp. (a) ........................... 41,500 1,261,211 Semtech Corp. (a) .......................... 53,400 1,178,137 ----------- 5,243,373 ----------- INTERNET-0.3% Selectica, Inc. (a) ........................ 24,000 580,500 Virage, Inc. (a) ........................... 37,900 203,713 ----------- 784,213 ----------- NETWORKING SOFTWARE-1.0% Ixia (a) ................................... 11,200 256,200 Stratos Lightwave, Inc. (a) ................ 60,000 1,023,750 Ulticom, Inc. (a) .......................... 33,400 1,137,688 ----------- 2,417,638 ----------- 7 QUASAR PORTFOLIO PORTFOLIO OF INVESTMENTS (continued) Alliance Variable Products Series Fund ================================================================================ Company Shares U.S. $ Value - -------------------------------------------------------------------------------- SEMI-CONDUCTOR CAPITAL EQUIPMENT-2.1% Internet Security Systems, Inc. (a) ................................ 39,900 $ 3,129,656 MKS Instruments, Inc. (a) .................. 31,900 494,450 Varian Semiconductor Equipment Associates, Inc. (a) ................................ 49,100 1,166,125 ----------- 4,790,231 ----------- SEMI-CONDUCTOR COMPONENTS-2.4% ASAT Holdings, Ltd. (ADR) (Hong Kong) (a) ......................... 152,000 760,000 Elantec Semiconductor, Inc. (a) ................................ 40,400 1,121,100 International Rectifier Corp. (a) ............................... 35,900 1,077,000 Intersil Holding Corp. (a) ................. 76,000 1,743,250 IXYS Corp. (a) ............................. 57,900 846,788 ----------- 5,548,138 ----------- MISCELLANEOUS-3.5% Aeroflex, Inc. (a) ......................... 103,200 2,975,062 Amphenol Corp. Cl.A (a) .................... 33,900 1,328,456 Exar Corp. (a) ............................. 94,100 2,915,630 TTM Technologies, Inc. (a) ................. 61,600 873,950 ----------- 8,093,098 ----------- 60,297,109 ----------- CONSUMER SERVICES-20.0% ADVERTISING-0.8% Administaff, Inc. (a) ...................... 68,300 1,857,760 ----------- BROADCASTING & CABLE-2.2% ADVO, Inc. (a) ............................. 29,600 1,313,500 Entravision Communications Corp. Cl.A (a) .......................... 162,600 2,987,775 ValueVision International, Inc. ............ Cl.A (a) ................................ 69,600 878,700 ----------- 5,179,975 ----------- CELLULAR COMMUNICATIONS-1.7% o2Wireless Solutions, Inc. (a) ............. 78,100 727,306 SBA Communcations Corp. .................... Cl.A (a) ................................ 79,700 3,272,682 ----------- 3,999,988 ----------- ENTERTAINMENT & LEISURE-1.1% Penton Media, Inc. ......................... 94,200 2,531,625 ----------- PRINTING & PUBLISHING-0.8% Barnes & Noble, Inc. (a) ................... 71,900 1,905,350 ----------- RESTAURANTS & LODGING-0.3% Ruby Tuesday, Inc. ......................... 50,900 776,225 ----------- RETAIL - GENERAL MERCHANDISE-3.2% American Eagle Outfitters, Inc. (a) ................................ 36,700 1,550,575 Freds, Inc. Cl.A ........................... 64,600 1,360,637 Group 1 Automotive, Inc. (a) ............... 100,200 939,375 MSC Industrial Direct Co., Inc. ............ Cl.A (a) ................................ 134,500 2,429,406 Ultimate Electronics, Inc. (a) ............. 48,500 1,063,969 ----------- 7,343,962 ----------- MISCELLANEOUS-9.9% Career Education Corp. (a) ................. 59,000 2,308,375 CDW Computer Centers, Inc. (a) ................................ 9,600 267,600 ChoicePoint, Inc. (a) ...................... 41,732 2,736,054 Concord Camera Corp. (a) ................... 70,600 1,164,900 Copart, Inc. (a) ........................... 45,900 986,850 Dycom Industries, Inc. (a) ................. 43,700 1,570,469 FirstService Corp. ......................... (Canada) (a) ............................ 88,500 1,288,781 Iron Mountain, Inc. (a) .................... 92,100 3,419,212 Optimal Robotics Corp. ..................... (Canada) (a) ............................ 55,400 1,859,363 PC Connection, Inc. (a) .................... 36,800 381,800 Rent-Way, Inc. (a) ......................... 82,700 366,981 Resources Connection, Inc. (a) ................................ 31,200 592,800 ScanSource, Inc. (a) ....................... 34,100 1,329,900 Watson Wyatt & Co. Holdings Cl.A (a) ................................ 54,300 1,276,050 West TeleServices Corp. (a) ................ 121,800 3,425,625 ----------- 22,974,760 ----------- 46,569,645 ----------- ENERGY-6.8% DOMESTIC PRODUCERS-0.7% Barrett Resources Corp. (a) ................ 27,900 1,585,069 ----------- OIL SERVICE-2.1% Spinnaker Exploration Co. (a) .............. 76,700 3,259,750 W-H Energy Services, Inc. (a) .............. 87,100 1,714,781 ----------- 4,974,531 ----------- PIPELINES-1.5% Cal Dive International, Inc. (a) ........... 64,200 1,709,325 Patterson Energy, Inc. (a) ................. 46,500 1,732,125 ----------- 3,441,450 ----------- MISCELLANEOUS-2.5% Evergreen Resources, Inc. (a) .............. 25,900 1,000,388 Newfield Exploration Co. (a) ............... 62,300 2,955,356 Stone Energy Corp. (a) ..................... 28,200 1,820,310 ----------- 5,776,054 ----------- 15,777,104 ----------- 8 Alliance Variable Products Series Fund ================================================================================ Company Shares U.S. $ Value - ------------------------------------------------------------------------------- FINANCE-6.4% BANKING - REGIONAL-1.5% Greater Bay Bancorp ........................ 59,100 $ 2,423,100 Silicon Valley Bancshares (a) .............. 28,000 967,750 ----------- 3,390,850 ----------- BROKERAGE & MONEY MANAGEMENT-0.7% W.P. Stewart & Co., Ltd. (a) ............... 65,400 1,700,400 ----------- INSURANCE-2.7% Arthur J. Gallagher & Co. .................. 20,100 1,278,862 Reinsurance Group of America, Inc. .................................... 70,500 2,502,750 StanCorp Financial Group, Inc. .................................... 50,200 2,397,050 ----------- 6,178,662 ----------- MISCELLANEOUS-1.5% Investment Technology Group, Inc. (a) ................................ 41,300 1,724,275 Radian Group, Inc. ......................... 23,900 1,793,994 ----------- 3,518,269 ----------- 14,788,181 ----------- CAPITAL GOODS-4.3% ELECTRICAL EQUIPMENT-1.5% Active Power, Inc. (a) ..................... 52,200 1,145,138 C&D Technologies, Inc. ..................... 54,600 2,358,037 ----------- 3,503,175 ----------- POLLUTION CONTROL-0.4% Tetra Tech, Inc. (a) ....................... 34,000 1,083,750 ----------- MISCELLANEOUS-2.4% Carlisle Cos., Inc. ........................ 30,400 1,305,300 L-3 Communications Holding, Inc. (a) ................................ 41,200 3,172,400 Toll Brothers, Inc. (a) .................... 25,400 1,038,225 ----------- 5,515,925 ----------- 10,102,850 ----------- BASIC INDUSTRY-2.4% CHEMICALS-1.3% OM Group, Inc. ............................. 57,900 3,162,787 ----------- PAPER & FOREST PRODUCTS-1.1% Pactiv Corp. (a) ........................... 200,900 2,486,138 ----------- 5,648,925 ----------- Shares or Principal Amount Company (000) U.S. $ Value - ------------------------------------------------------------------------------- TRANSPORTATION-2.2% SHIPPING-1.2% Expeditores International of Washington, Inc. ..................... 51,800 $ 2,781,013 ------------- TRUCKING-0.4% Swift Transportation Co., Inc. (a) ............................. 42,100 834,106 ------------- MISCELLANEOUS-0.6% Tower Automotive, Inc. (a) .............. 167,800 1,510,200 ------------- 5,125,319 ------------- UTILITIES-1.2% TELEPHONE UTILITY-0.2% Millicom International Cellular, SA (Luxembourg) (a) .................. 22,000 506,000 ------------- MISCELLANEOUS-1.0% FLAG Telecom Holdings, Ltd. ............. (Bermuda) (a) ........................ 97,600 610,000 GT Group Telecom, Inc. .................. Cl.B (a) ............................. 94,800 711,000 Rural Celluar Corp. Cl.A (a) ............ 28,700 850,238 ------------- 2,171,238 ------------- 2,677,238 ------------- CONSUMER STAPLES-0.9% FOOD-0.6% Performance Food Group Co. (a) .............................. 28,200 1,445,691 ------------- RETAIL - FOOD & DRUG-0.3% Duane Reade, Inc. (a) ................... 20,100 614,306 ------------- 2,059,997 ------------- Total Common Stocks (cost $231,638,903) .................. 229,684,795 ------------- SHORT-TERM INVESTMENT-17.6% TIME DEPOSIT-17.6% State Street Euro Dollar 6.00%, 1/02/01 (amortized cost $41,004,000) ......................... $ 41,004 41,004,000 ------------- TOTAL INVESTMENTS-116.3% (cost $272,642,903) .................. 270,688,795 Other assets less liabilities-(16.3%) ............. (38,014,692) ------------- NET ASSETS-100% ......................... $ 232,674,103 ============= - -------------------------------------------------------------------------------- (a) Non-income producing security. Glossary: ADR - American Depositary Receipt See Notes to Financial Statements. 9 QUASAR PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES December 31, 2000 Alliance Variable Products Series Fund ================================================================================ ASSETS Investments in securities, at value (cost $272,642,903) ... $ 270,688,795 Cash ...................................................... 116 Receivable for investment securities sold ................. 2,410,657 Receivable for capital stock sold ......................... 168,003 Dividends and interest receivable ......................... 32,632 Deferred organization expenses ............................ 3,301 ------------- Total assets .............................................. 273,303,504 ------------- LIABILITIES Payable for investment securities purchased ............... 23,155,599 Payable for capital stock redeemed ........................ 17,291,751 Advisory fee payable ...................................... 122,704 Accrued expenses .......................................... 59,347 ------------- Total liabilities ......................................... 40,629,401 ------------- NET ASSETS ................................................... $ 232,674,103 ============= COMPOSITION OF NET ASSETS Capital stock, at par ..................................... $ 19,653 Additional paid-in capital ................................ 229,426,962 Accumulated net realized gain on investments .............. 5,181,596 Net unrealized depreciation of investments ................ (1,954,108) ------------- $ 232,674,103 ============= Class A Shares Net assets ................................................ $ 232,239,093 ============= Shares of capital stock outstanding ....................... 19,616,548 ============= Net asset value per share ................................. $ 11.84 ============= Class B Shares Net assets ................................................ $ 435,010 ============= Shares of capital stock outstanding ....................... 36,793 ============= Net asset value per share ................................. $ 11.82 ============= - -------------------------------------------------------------------------------- See Notes to Financial Statements. 10 QUASAR PORTFOLIO STATEMENT OF OPERATIONS Year Ended December 31, 2000 Alliance Variable Products Series Fund ================================================================================ INVESTMENT INCOME Interest ........................................................ $ 734,371 Dividends (net of foreign taxes withheld of $7,501) ............. 197,580 ------------ Total investment income ......................................... 931,951 ------------ EXPENSES Advisory fee .................................................... 1,912,785 Distribution fee - Class B ...................................... 186 Custodian ....................................................... 142,420 Administrative .................................................. 66,000 Audit and legal ................................................. 33,687 Printing ........................................................ 14,547 Amortization of organization expenses ........................... 5,124 Transfer agency ................................................. 2,940 Directors' fees ................................................. 1,378 Miscellaneous ................................................... 6,140 ------------ Total expenses .................................................. 2,185,207 Less: expenses waived and reimbursed ............................ (367,875) ------------ Net expenses .................................................... 1,817,332 ------------ Net investment loss ............................................. (885,381) ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain on investment transactions .................... 7,938,018 Net change in unrealized appreciation/depreciation of investments (16,400,536) ------------ Net loss on investments ......................................... (8,462,518) ------------ NET DECREASE IN NET ASSETS FROM OPERATIONS ......................... $ (9,347,899) ============
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 11 QUASAR PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS Alliance Variable Products Series Fund ================================================================================
Year Ended Year Ended December 31, December 31, 2000 1999 ============= ============= INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income (loss) ..................................... $ (885,381) $ 861,387 Net realized gain on investments ................................. 7,938,018 6,765,798 Net change in unrealized appreciation /depreciation of investments (16,400,536) 16,149,753 ------------- ------------- Net increase (decrease) in net assets from operations ............ (9,347,899) 23,776,938 DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class A ........................................................ (657,364) (312,237) Net realized gain on investments Class A ........................................................ (4,601,546) -0- CAPITAL STOCK TRANSACTIONS Net increase ..................................................... 77,669,578 55,276,395 ------------- ------------- Total increase ................................................... 63,062,769 78,741,096 NET ASSETS Beginning of period .............................................. 169,611,334 90,870,238 ------------- ------------- End of period (including undistributed net investment income of $801,669 at December 31, 1999) ................................. $ 232,674,103 $ 169,611,334 ============= =============
- ------------------------------------------------------------------------------- See Notes to Financial Statements. 12 QUASAR PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2000 Alliance Variable Products Series Fund ================================================================================ NOTE A: Significant Accounting Policies The Quasar Portfolio (the "Portfolio") is a series of Alliance Variable Products Series Fund, Inc. (the "Fund"). The Portfolio's investment objective is to seek growth of capital by pursuing aggressive investment policies. Current income is incidental to the Portfolio's objective. The Fund was in cor porated 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 Port folio (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, Tech nology Port folio, Worldwide Privatization Portfolio, Global Bond Port folio, U.S. Government/High Grade Securi ties 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 ex penses are translated at rates of exchange prevailing when accrued. Net realized gains and losses on foreign currency transactions represent foreign ex change 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 13 QUASAR PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) 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 in vestments and foreign currency denominated assets and liabilities. 3. Organization Expenses Organization expenses of $26,098 have been deferred and are being amortized on a straight line basis through August 2001. 4. 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. 5. 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. 6. 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 net operating losses, resulted in a net decrease in accumulated net investment loss and a corresponding decrease 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 1% of the Portfolio's average daily net assets. During the year ended December 31, 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% and 1.20% of the average daily net assets for Class A and Class B shares, respectively. Expense waivers/reimbursements, if any, are accrued daily and paid monthly. For the year ended December 31, 2000, such waivers/reimbursements amounted to $367,875. Brokerage commissions paid on investment transactions for the year ended December 31, 2000, amounted to $662,339. For the period from January 1, 2000 to October 31, 2000, $4,060 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 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 14 Alliance Variable Products Series Fund ================================================================================ .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 ................................ $ 410,964,753 U.S. government and agencies ............................... -0- Sales: Stocks and debt obligations ................................ $ 328,607,542 U.S. government and agencies ............................... -0- At December 31, 2000, the cost of investments for federal income tax purposes was $273,609,347. Accordingly, gross unrealized appreciation and unrealized depreciation are as follows: Gross unrealized appreciation............................... $ 29,283,500 Gross unrealized depreciation............................... (32,204,052) ------------- Net unrealized depreciation................................. $ (2,920,552) ============= Capital 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 capital losses of $771,525 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 ex change 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 for eign 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. Risks may arise from the potential inability of a counterparty to meet the terms of a contract and from 15 QUASAR PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) Alliance Variable Products Series Fund ================================================================================ 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 ex change 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. 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 .................... 54,680,516 18,952,076 $ 696,227,537 $ 218,586,174 Shares issued in reinvestment of dividends and distributions . 417,374 27,705 5,258,910 312,238 Shares redeemed ................ (48,523,546) (14,096,710) (624,279,001) (163,622,017) ------------- ------------- ------------- ------------- Net increase ................... 6,574,344 4,883,071 $ 77,207,446 $ 55,276,395 ============= ============= ============= ============= August 11, 2000* to August 11, 2000* to December 31, December 31, 2000 2000 =================== =================== Class B Shares sold....................... 37,317 $ 468,643 Shares redeemed................... (524) (6,511) ------------- ------------ Net increase...................... 36,793 $ 462,132 ============= ============
- -------------------------------------------------------------------------------- * Commencement of distribution. 16 Alliance Variable Products Series Fund ================================================================================ 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. - -------------------------------------------------------------------------------- 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. 17 QUASAR PORTFOLIO FINANCIAL HIGHLIGHTS Alliance Variable Products Series Fund ================================================================================ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
------------------------------------------------------------------------ CLASS A ------------------------------------------------------------------------ August 5, Year Ended December 31, 1996(a) to ========================================================== December 31, 2000 1999 1998 1997 1996 =========== =========== =========== =========== ========== Net asset value, beginning of period ................ $ 13.00 $ 11.14 $ 12.61 $ 10.64 $ 10.00 ----------- ----------- ----------- ----------- ---------- Income From Investment Operations Net investment income (loss) (b)(c) ................. (.06) .08 .07 .02 .04 Net realized and unrealized gain (loss) on investment transactions ...................................... (.71) 1.82 (.49) 1.96 .60 ----------- ----------- ----------- ----------- ---------- Net increase (decrease) in net asset value from operations ........................................ (.77) 1.90 (.42) 1.98 .64 ----------- ----------- ----------- ----------- ---------- Less: Dividends and Distributions Dividends from net investment income ................ (.05) (.04) (.01) (.01) -0- Distributions from net realized gains ............... (.34) -0- (1.04) -0- -0- ----------- ----------- ----------- ----------- ---------- Total dividends and distributions ................... (.39) (.04) (1.05) (.01) -0- ----------- ----------- ----------- ----------- ---------- Net asset value, end of period ...................... $ 11.84 $ 13.00 $ 11.14 $ 12.61 $ 10.64 =========== =========== =========== =========== ========== Total Return Total investment return based on net asset value (d) (6.09)% 17.08% (4.49)% 18.60% 6.40% Ratios/Supplemental Data Net assets, end of period (000's omitted) ........... $ 232,239 $ 169,611 $ 90,870 $ 59,277 $ 8,842 Ratios to average net assets of: Expenses, net of waivers and reimbursements ....... .95% .95% .95% .95% .95%(e) Expenses, before waivers and reimbursements ....... 1.14% 1.19% 1.30% 1.37% 4.44%(e) Net investment income (loss) (c) .................. (.46)% .72% .55% .17% .93%(e) Portfolio turnover rate ............................. 178% 110% 107% 210% 40%
- -------------------------------------------------------------------------------- See footnote summary on page 19. 18 Alliance Variable Products Series Fund ================================================================================ Selected Data For A Share Of Capital Stock Outstanding Throughout The Period ------------ CLASS B ------------ August 11, 2000(f) to December 31, 2000 ------------ Net asset value, beginning of period.......................... $13.00 ------ Income From Investment Operations Net investment loss (b)(c).................................... (.03) Net realized and unrealized loss on investment transactions... (1.15) ------ Net decrease in net asset value from operations............... (1.18) ------ Less: Dividends Dividends from net investment income.......................... -0- ------ Net asset value, end of period................................ $11.82 ====== Total Return Total investment return based on net asset value (d).......... (8.16)% Ratios/Supplemental Data Net assets, end of period (000's omitted)..................... $435 Ratios to average net assets of: Expenses, net of waivers and reimbursements (e)............ 1.20% Expenses, before waivers and reimbursements (e)............ 1.41% Net investment loss (c) (e)................................ (.69)% Portfolio turnover rate....................................... 178% - -------------------------------------------------------------------------------- (a) Commencement of operations. (b) Based on average shares outstanding. (c) Net of expenses reimbursed or waived by the Adviser. (d) 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. (e) Annualized. (f) Commencement of distribution. 19 REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS Alliance Variable Products Series Fund ================================================================================ To the Shareholders and Board of Directors Quasar Portfolio Alliance Variable Products Series Fund, Inc. We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the Quasar 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 reason able 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 Quasar 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 20 RESULTS OF SHAREHOLDER MEETING (unaudited) Alliance Variable Products Series Fund ================================================================================ A special meeting of stockholders of the Quasar Portfolio ("the Portfolio") was held on December 12, 2000. The description of the proposal and the number of shares voted at the meeting are as follows:
Voted Abstain/ Voted Voted Authority For Against Withheld - ----------------------------------------------------------------------------------------------------------------- 1. Approval to amend the Portfolio's fundamental policy to permit the Portfolio to engage in securities lending to the extent permitted by the Investment Company Act of 1940.................................... 16,639,514 609,952 960,024 2. Approval to amend the Portfolio's fundamental policy to permit the Portfolio to purchase and sell financial forward and futures contracts and options thereon.................................... 16,376,807 863,131 969,552
21 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. 22 (This page left intentionally blank.) (This page left intentionally blank.) (This page left intentionally blank.) -----END PRIVACY-ENHANCED MESSAGE-----