N-30D 1 edg6667.txt VARP - WORLD WIDE PRIVATIZATION SAR ALLIANCE ------------------------------ VARIABLE PRODUCTS ------------------------------ SERIES FUND ------------------------------ WORLDWIDE PRIVATIZATION ------------------------------ PORTFOLIO ------------------------------ SEMI-ANNUAL REPORT JUNE 30, 2001 Investment Products Offered --------------------------- > Are Not FDIC Insured > May Lose Value > Are Not Bank Guaranteed --------------------------- WORLDWIDE PRIVATIZATION PORTFOLIO TEN LARGEST HOLDINGS June 30, 2001 (unaudited) Alliance Variable Products Series Fund ================================================================================ -------------------------------------------------------------------------------- COMPANY U.S. $ VALUE PERCENT OF NET ASSETS -------------------------------------------------------------------------------- Sanofi-Synthelabo, SA $ 1,912,524 4.0% -------------------------------------------------------------------------------- NTT Docomo, Inc. 1,496,432 3.2 -------------------------------------------------------------------------------- Japan Tobacco, Inc. 1,386,096 2.9 -------------------------------------------------------------------------------- Grupo Financiero Banorte, SA de CV Cl.B 1,363,887 2.9 -------------------------------------------------------------------------------- BNP Paribas, SA 1,306,767 2.8 -------------------------------------------------------------------------------- ING Groep NV 1,286,677 2.7 -------------------------------------------------------------------------------- Nomura Securities Co., Ltd. 1,245,690 2.6 -------------------------------------------------------------------------------- Akzo Nobel NV 1,173,718 2.5 -------------------------------------------------------------------------------- BP Plc (ADR) 1,121,955 2.4 -------------------------------------------------------------------------------- Daiwa Securities Group, Inc. 1,004,571 2.1 -------------------------------------------------------------------------------- $ 13,298,317 28.1% -------------------------------------------------------------------------------- SECTOR DIVERSIFICATION June 30, 2001 (unaudited) ================================================================================ -------------------------------------------------------------------------------- SECTOR U.S. $ VALUE PERCENT OF NET ASSETS -------------------------------------------------------------------------------- Basic Industries $ 4,485,801 9.4% -------------------------------------------------------------------------------- Capital Goods 180,313 0.4 -------------------------------------------------------------------------------- Consumer Services 10,170,703 21.5 -------------------------------------------------------------------------------- Consumer Staples 574,285 1.2 -------------------------------------------------------------------------------- Energy 5,334,174 11.3 -------------------------------------------------------------------------------- Finance 9,045,164 19.1 -------------------------------------------------------------------------------- Healthcare 3,782,775 8.0 -------------------------------------------------------------------------------- Multi Industry 540,144 1.1 -------------------------------------------------------------------------------- Technology 2,061,322 4.4 -------------------------------------------------------------------------------- Transportation 2,633,488 5.6 -------------------------------------------------------------------------------- Utilities 6,284,719 13.3 -------------------------------------------------------------------------------- Total Investments* 45,092,888 95.3 -------------------------------------------------------------------------------- Cash and receivables, net of liabilities 2,229,393 4.7 -------------------------------------------------------------------------------- Net Assets $ 47,322,281 100.0% -------------------------------------------------------------------------------- * Excludes short-term obligations. 1 WORLDWIDE PRIVATIZATION PORTFOLIO PORTFOLIO OF INVESTMENTS June 30, 2001 (unaudited) Alliance Variable Products Series Fund ================================================================================ Company Shares U.S. $ Value -------------------------------------------------------------------------------- COMMON & PREFERRED STOCKS - 95.3% ARGENTINA - 0.6% Nortel Inversora, SA pfd. (ADR) ..................................... 26,300 $ 273,520 ------------- AUSTRALIA - 1.8% CSL, Ltd. .................................... 35,000 851,529 ------------- AUSTRIA - 0.5% Flughafen Wien AG ............................ 8,000 259,320 ------------- BELGIUM - 1.0% Interbrew .................................... 17,825 477,343 ------------- BRAZIL - 3.9% Banco Itau, SA pfd. .......................... 1,000,000 87,617 Celular CRT Participacoes, SA......................................... 3 1 Companhia Paranaense de Energia-Copel (ADR) ....................... 3,000 22,530 Companhia Siderurgica Nacional................................... 11,000,000 205,114 Companhia Vale do Rio Doce (a) .................................. 2,360 0 Gerdau Siderurg, SA pfd. ..................... 20,228,288 156,965 Itausa-Investimentos Itau, SA pfd .................................... 350,911 313,544 Metalurgica Gerdau, SA pfd ................... 28,720,086 379,945 Tele Celular Sul Participacoes, SA (ADR) .................................. 11,900 240,380 Tele Norte Leste Participacoes, SA (ADR) .................................. 13,000 198,380 Telesp Celular Participacoes, SA (ADR) .................................. 17,000 257,550 ------------- 1,862,026 ------------- CZECH REPUBLIC - 0.2% Ceske Radiokomunikace AS ..................... 7,361 92,128 ------------- DENMARK - 1.0% Kobenhavns Lufthavne AS ...................... 5,810 452,976 ------------- EGYPT - 0.4% Eastern Company for Tobacco & Cigarettes .............................. 8,040 96,942 Orascom Telecommunications (GDR) (a) ................................. 33,225 96,353 ------------- 193,295 ------------- FINLAND - 0.2% TietoEnator Oyj .............................. 4,700 104,753 ------------- FRANCE - 9.5% BNP Paribas, SA .............................. 15,000 1,306,767 Eramet SLN ................................... 4,445 135,609 Orange, SA (a) ............................... 51,600 419,793 Pechiney, SA ................................. 1,406 71,491 Sanofi-Synthelabo, SA ........................ 29,120 1,912,524 TotalFinaElf, SA ............................. 3,763 527,453 Wanadoo (a) .................................. 22,800 113,999 ------------- 4,487,636 ------------- GERMANY - 4.8% Deutsche Lufthansa AG ........................ 20,200 318,575 Deutsche Post AG ............................. 47,667 763,473 Fraport AG (a) ............................... 12,386 343,236 Stinnes AG ................................... 40,100 841,072 ------------- 2,266,356 ------------- HONG KONG - 5.1% China Merchants Holdings International Co., Ltd. ................... 659,500 503,093 China Mobile (Hong Kong), Ltd. (a) .................................. 99,000 521,667 China Petroleum & Chemical Co. Cl.H .................................. 2,548,000 509,613 China Unicom, Ltd. (a) ....................... 168,000 291,854 Citic Pacific, Ltd. .......................... 128,000 396,318 Legend Holdings, Ltd. ........................ 358,000 199,659 ------------- 2,422,204 ------------- HUNGARY - 0.6% OTP Bank Rt. ................................. 5,300 275,864 ------------- ITALY - 6.5% Acegas SpA (a) ............................... 31,700 208,734 AEM SpA ...................................... 162,100 324,197 Enel SpA ..................................... 141,700 433,502 ENI SpA ...................................... 72,400 883,517 San Paolo - IMI SpA .......................... 67,100 860,919 Tiscali SpA (a) .............................. 41,364 350,189 ------------- 3,061,058 ------------- JAPAN - 12.3% Daiwa Securities Group, Inc. ................. 96,000 1,004,571 Japan Tobacco, Inc. .......................... 201 1,386,096 Nippon Telegraph & Telephone, Corp. .......................... 136 708,844 Nomura Securities Co., Ltd. .................. 65,000 1,245,690 NTT Docomo, Inc. ............................. 86 1,496,432 ------------- 5,841,633 ------------- LITHUANIA - 0.3% Lietuvos Telekomas (GDR) ..................... 39,875 163,487 ------------- MEXICO - 6.5% America Movil, SA de CV Series L (ADR) ............................ 17,000 354,620 Grupo Aeroportuario del Sureste, SA de CV Series B (ADR) (a) ................................. 4,000 74,800 Grupo Financiero Bancomer, SA de CV (a) .............................. 370,000 367,344 Grupo Financiero Banorte, SA de CV Cl.B (a) ......................... 650,000 1,363,887 Grupo Iusacell, SA de CV (ADR) (a) ................................. 37,000 255,670 Telefonos de Mexico, SA Cl.L (ADR) ..................................... 2,000 70,180 Tubos de Acero de Mexico, SA (ADR) ..................................... 46,000 581,900 ------------- 3,068,401 ------------- 2 Alliance Variable Products Series Fund ================================================================================ Company Shares U.S. $ Value -------------------------------------------------------------------------------- NETHERLANDS - 6.8% Akzo Nobel NV ................................ 27,700 $ 1,173,718 DSM NV ....................................... 16,600 578,181 ING Groep NV (a) ............................. 19,667 1,286,677 United Pan Europe Communications NV (a) ..................... 78,000 198,303 ------------ 3,236,879 ------------ NORWAY - 2.0% Statoil ASA (a) .............................. 52,500 388,276 Telenor AS ................................... 129,600 534,808 ------------ 923,084 ------------ PEOPLES REPUBLIC OF CHINA - 0.8% Beijing Capital International Airport Co., Ltd. ......................... 1,244,000 390,754 ------------ PERU - 0.3% Explosivos, SA Cl.C (b) ...................... 152,870 143,826 ------------ POLAND - 1.1% Orbis, SA (a) ................................ 45,000 186,517 Polski Koncern Naftowy, SA (GDR) ..................................... 39,000 351,780 ------------ 538,297 ------------ PORTUGAL - 0.7% Electricidade de Portugal, SA ................ 138,000 329,794 ------------ RUSSIA - 0.9% Mobile Telesystems (ADR) (a) ....................................... 15,900 435,660 ------------ SINGAPORE - 1.9% DBS Group Holdings, Ltd. ..................... 36,172 266,029 SIA Engineering Co., Ltd. .................... 233,000 180,313 Singapore Airport Terminal Services, Ltd. ............................ 146,000 123,403 Singapore Press Holdings, Ltd. ............... 31,500 345,774 ------------ 915,519 ------------ SOUTH AFRICA - 1.2% Iscor, Ltd. (a) .............................. 152,100 547,843 ------------ SOUTH KOREA - 3.4% H&CB (ADR) ................................... 33,126 367,036 Kookmin Bank ................................. 22,300 299,219 Pohang Iron & Steel Co., Ltd. ................ (ADR) ..................................... 1,900 151,942 SK Telecom Co., Ltd. ......................... 2,690 396,105 (ADR) ........................................ 22,600 381,940 ------------ 1,596,242 ------------ SPAIN - 5.5% Aldeasa, SA .................................. 18,139 376,150 Indra Sistemas, SA ........................... 56,400 497,080 Shares or Principal Amount Company (000) U.S. $ Value -------------------------------------------------------------------------------- Repsol, SA ................................... 43,650 $ 721,328 Telefonica, SA ............................... 74,492 919,147 Terra Networks, SA ........................... 11,400 83,567 ------------ 2,597,272 ------------ SWEDEN - 1.4% Eniro AB ..................................... 68,000 672,308 ------------ SWITZERLAND - 0.6% Unique Zurich Airport ........................ 2,420 279,852 ------------ TAIWAN - 0.4% Taiwan Semiconductor Co. ..................... 95,200 176,962 ------------ THAILAND - 0.6% Ratchaburi Electricity Generating Holding Public Co., Ltd. (a) ............................. 772,300 298,680 ------------ TURKEY - 0.3% Dogan Yayin Holding AS........................ 46,900,000 144,593 ------------ UNITED KINGDOM - 9.9% BP Plc (ADR) ................................. 136,300 1,121,955 Centrica Plc ................................. 111,000 355,240 Energis Plc (a) .............................. 93,900 249,602 Lattice Group Plc ............................ 278,000 621,518 Mersey Docks & Harbor Co. .................... 40,600 331,055 National Grid Group Plc ...................... 133,100 982,210 PowerGen Plc ................................. 20,893 211,556 Vodafone Group Plc ........................... 359,094 796,496 ------------ 4,669,632 ------------ UNITED STATES - 2.2% deCODE GENETICS, Inc. (a) .................... 13,700 168,647 Pharmacia Corp. .............................. 18,500 850,075 ------------ 1,018,722 ------------ VENEZUELA - 0.1% Compania Anonima Nacional Telefonos de Venezuela Cl.D (ADR) ................................ 1,000 23,440 ------------ Total Common & Preferred Stocks (cost $49,854,465) ................. 45,092,888 ------------ SHORT-TERM INVESTMENT - 4.5% UNITED STATES - 4.5% State Street Euro Dollar 3.25%, 7/02/01 (amortized cost $2,148,000) ............................... $ 2,148 2,148,000 ------------ TOTAL INVESTMENTS - 99.8% (cost $52,002,465) ........................... 47,240,888 Other assets less liabilities - 0.2% ........................ 81,393 ------------ NET ASSETS - 100% ............................ $ 47,322,281 ============ -------------------------------------------------------------------------------- (a) Non-income producing security. (b) Illiquid security valued at fair market value (see Note A). Glossary of Terms: ADR - American Depositary Receipt. GDR - Global Depositary Receipt. See Notes to Financial Statements. 3 WORLDWIDE PRIVATIZATION PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES June 30, 2001 (unaudited) Alliance Variable Products Series Fund ================================================================================ ASSETS Investments in securities, at value (cost $52,002,465) ....................... $ 47,240,888 Cash ......................................................................... 209 Foreign cash, at value (cost $36,557) ........................................ 36,442 Collateral held for securities loaned ........................................ 564,825 Dividends and interest receivable ............................................ 151,486 ------------ Total assets ................................................................. 47,993,850 ------------ LIABILITIES Payable for collateral received on securities loaned ......................... 564,825 Payable for investment securities purchased .................................. 23,037 Advisory fee payable ......................................................... 20,729 Accrued expenses ............................................................. 62,978 ------------ Total liabilities ............................................................ 671,569 ------------ NET ASSETS ...................................................................... $ 47,322,281 ============ COMPOSITION OF NET ASSETS Capital stock, at par ........................................................ $ 3,584 Additional paid-in capital ................................................... 52,278,828 Undistributed net investment income .......................................... 667,161 Accumulated net realized loss on investments and foreign currency transactions (864,049) Net unrealized depreciation of investments and foreign currency denominated assets and liabilities ..................................................... (4,763,243) ------------ $ 47,322,281 ============ Class A Shares Net assets ................................................................... $ 46,293,744 ============ Shares of capital stock outstanding .......................................... 3,505,949 ============ Net asset value per share .................................................... $ 13.20 ============ Class B Shares Net assets ................................................................... $ 1,028,537 ============ Shares of capital stock outstanding .......................................... 77,924 ============ Net asset value per share .................................................... $ 13.20 ============
-------------------------------------------------------------------------------- See Notes to Financial Statements. 4 WORLDWIDE PRIVATIZATION PORTFOLIO STATEMENT OF OPERATIONS Six Months Ended June 30, 2001 (unaudited) Alliance Variable Products Series Fund ================================================================================ INVESTMENT INCOME Dividends (net of foreign taxes withheld of $104,870) ...... $ 855,634 Interest ................................................... 61,282 ----------- Total investment income .................................... 916,916 ----------- EXPENSES Advisory fee ............................................... 255,905 Distribution fee - Class B ................................. 628 Custodian .................................................. 84,510 Administrative ............................................. 32,781 Audit and legal ............................................ 12,341 Printing ................................................... 9,541 Directors' fees ............................................ 730 Transfer agency ............................................ 561 Miscellaneous .............................................. 2,483 ----------- Total expenses ............................................. 399,480 Less: expenses waived and reimbursed ....................... (155,742) ----------- Net expenses ............................................... 243,738 ----------- Net investment income ...................................... 673,178 ----------- REALIZED AND UNREALIZED LOSS ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS Net realized loss on investment transactions ............... (755,623) Net realized loss on foreign currency transactions ......... (18,613) Net change in unrealized appreciation/depreciation of: Investments .............................................. (5,553,415) Foreign currency denominated assets and liabilities ...... (2,363) ----------- Net loss on investments and foreign currency transactions .. (6,330,014) ----------- NET DECREASE IN NET ASSETS FROM OPERATIONS .................... $(5,656,836) =========== -------------------------------------------------------------------------------- See Notes to Financial Statements. 5 WORLDWIDE PRIVATIZATION PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS Alliance Variable Products Series Fund ================================================================================
Six Months Ended Year Ended June 30, 2001 December 31, (unaudited) 2000 ================= ============ INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income ..............................................$ 673,178 $ 185,347 Net realized gain (loss) on investments and foreign currency transactions (774,236) 3,127,303 Net change in unrealized appreciation/depreciation of investments and foreign currency denominated assets and liabilities ................... (5,555,778) (20,455,149) ------------ ------------ Net decrease in net assets from operations ..........................(5,656,836) (17,142,499) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class A ............................................................. (98,463) (393,186) Class B ...............................................................(1,045) -0- Net realized gain on investments Class A ...........................................................(2,642,077) (4,030,981) Class B ............................................................ (32,360) -0- CAPITAL STOCK TRANSACTIONS Net increase (decrease) ...............................................(665,943) 13,926,944 ------------ ------------ Total decrease ......................................................(9,096,724) (7,639,722) NET ASSETS Beginning of period .................................................56,419,005 64,058,727 ------------ ------------ End of period (including undistributed net investment income of $667,161 and $93,491, respectively) ..............................$ 47,322,281 $ 56,419,005 ============ ============
-------------------------------------------------------------------------------- See Notes to Financial Statements. 6 WORLDWIDE PRIVATIZATION PORTFOLIO NOTES TO FINANCIAL STATEMENTS June 30, 2001 (unaudited) Alliance Variable Products Series Fund ================================================================================ NOTE A: Significant Accounting Policies The Worldwide Privatization Portfolio (the "Portfolio") is a series of Alliance Variable Products Series Fund, Inc. (the "Fund"). The Portfolio's investment objective is to seek long-term capital appreciation. 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 Portfolio 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. The Portfolio 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 the 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 Portfolio. 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. 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 actually received or paid. Net unrealized 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 or depreciation of investments and foreign currency denominated assets and liabilities. 3. Taxes It is the Portfolio'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 Portfolio accretes discounts as adjustments to interest income. Investment gains and losses are determined on the identified cost basis. 5. Income and Expenses Expenses attributable to a single portfolio are charged to that portfolio. Expenses of the Fund are charged to each portfolio in proportion to net assets. All income earned and expenses incurred by a portfolio with multi-class shares outstanding are borne on a pro-rata basis by each 7 WORLDWIDE PRIVATIZATION PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) Alliance Variable Products Series Fund ================================================================================ outstanding class of shares, based on the proportionate interest in the portfolio represented by the net assets of such class, except that the portfolio's Class B shares bear the distribution fees. 6. Dividends and Distributions The Portfolio declares and distributes dividends and distributions from net investment income and net realized gains, respectively, if any, at least annually. 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. -------------------------------------------------------------------------------- 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 six months ended June 30, 2001, 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 six months ended June 30, 2001, such waivers/reimbursements amounted to $155,742. Brokerage commissions paid on investment transactions for the six months ended June 30, 2001, amounted to $42,222, none of which was paid to Sanford C. Bernstein & Co. LLC, an affiliate of the Adviser. The Portfolio compensates Alliance Global Investor 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 Portfolio. Such compensation amounted to $474 for the six months ended June 30, 2001. -------------------------------------------------------------------------------- NOTE C: Distribution Plan The Portfolio has adopted a Plan for class B shares pursuant to Rule 12B-1 under the Investment Company Act of 1940 (the "Plan"). Under the Plan, the Portfolio pays distribution and servicing fees to the Distributor at an annual rate of up to .50% of the 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 the Portfolio's average daily net assets attributable to Class B shares. The Plan provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. The Portfolio is not obligated under the Plan to pay any distribution services fee in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Plan is to compensate the Distributor for its distribution services with respect to the sale of the 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 Plan is characterized by the staff of the Commission as being of the "compensation" variety. In the event that the Plan is terminated or not continued, no distribution services fees (other than current amounts accrued but not yet paid) would be owed by the Portfolio to the Distributor. The Plan also provides that the Adviser may use its own resources to finance the distribution of the Portfolio's shares. 8 Alliance Variable Products Series Fund ================================================================================ NOTE D: Investment Transactions Purchases and sales of investment securities (excluding short-term investments) for the six months ended June 30, 2001, were as follows: Purchases: Stocks and debt obligations ............................. $8,303,333 U.S. government and agencies ............................ -0- Sales: Stocks and debt obligations ............................. $9,663,473 U.S. government and agencies ............................ -0- At June 30, 2001, 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 ......................... $ 5,959,949 Gross unrealized depreciation ......................... (10,721,526) ------------ Net unrealized depreciation ........................... $ (4,761,577) ============ 1. Forward Exchange Currency Contracts The 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 Portfolio 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. The 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 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 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 the Portfolio has in that particular currency contract. At June 30, 2001, the Portfolio had no outstanding forward exchange currency contracts. 2. Option Transactions For hedging and investment purposes, the 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 9 WORLDWIDE PRIVATIZATION PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) Alliance Variable Products Series Fund ================================================================================ 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 six months ended June 30, 2001. -------------------------------------------------------------------------------- NOTE E: Securities Lending The Portfolio has entered into a securities lending agreement with UBS/Paine Webber, Inc. (the "Lending Agent"). Under the terms of the agreement, the Lending Agent, on behalf of the Portfolio, administers the lending of portfolio securities to certain broker-dealers. In return, the Portfolio receives fee income from the lending transactions. All loans are continuously secured by collateral exceeding the value of the securities loaned. All collateral consists of either cash or U.S. Government securities. The Lending Agent invests the cash collateral in an eligible money market vehicle in accordance with the investment restrictions of the Portfolio. UBS/Paine Webber will indemnify the Portfolio for any loss resulting from a borrower's failure to return a loaned security when due. As of June 30, 2001, the Portfolio had loaned securities with a value of $530,074 and received cash collateral of $564,825. For the six months ended June 30, 2001, the Portfolio received fee income of $903 which is included in interest income in the accompanying Statement of Operations. -------------------------------------------------------------------------------- NOTE F: Capital Stock There are 1,000,000,000 shares of $.001 par value capital stock authorized, divided into two classes, designated Class A and Class B shares. Each class consists of 500,000,000 authorized shares. Transactions in capital stock were as follows:
------------------------------------ ------------------------------------- SHARES AMOUNT ------------------------------------ ------------------------------------- Six Months Ended Year Ended Six Months Ended Year Ended June 30, 2001 December 31, June 30, 2001 December 31, (unaudited) 2000 (unaudited) 2000 ================ ================ ================ ================ Class A Shares sold ................199,752 997,476 $ 2,904,524 $ 19,865,475 Shares issued in reinvestment of dividends and distributions . 203,455 232,606 2,740,540 4,424,167 Shares redeemed ...........(489,556) (584,135) (7,151,648) (10,623,454) -------- -------- ----------- ------------ Net increase (decrease) ....(86,349) 645,947 $(1,506,584) $ 13,666,188 ======== ======== =========== ============ Six Months Ended July 5, 2000* to Six Months Ended July 5, 2000* to June 30, 2001 December 31, June 30, 2001 December 31, (unaudited) 2000 (unaudited) 2000 ================ ================ ================ ================ Class B Shares sold ........... 527,836 17,087 $ 7,526,921 $ 290,463 Shares issued in reinvestment of dividends and distributions . 2,482 -0- 33,405 -0- Shares redeemed ............(467,629) (1,852) (6,719,685) (29,707) -------- -------- ----------- ------------ Net increase .................62,689 15,235 $ 840,641 $ 260,756 ======== ======== =========== ============
-------------------------------------------------------------------------------- NOTE G: 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. -------------------------------------------------------------------------------- * Commencement of distribution. 10 Alliance Variable Products Series Fund ================================================================================ NOTE H: 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 six months ended June 30, 2001. 11 WORLDWIDE PRIVATIZATION PORTFOLIO FINANCIAL HIGHLIGHTS Alliance Variable Products Series Fund ================================================================================ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
---------------------------------------------------------------------------- CLASS A ---------------------------------------------------------------------------- Six Months Ended Year Ended December 31, June 30, 2001 ========================================================== (unaudited) 2000 1999 1998 1997 1996 ============= ====== ====== ====== ====== ====== Net asset value, beginning of period .. $15.64 $21.74 $14.81 $14.20 $13.13 $11.17 ------ ------ ------ ------ ------ ------ Income From Investment Operations Net investment income (a)(b) ......... .19 .05 .15 .26 .25 .28 Net realized and unrealized gain (loss) on investments and foreign currency transactions .......... (1.79) (4.81) 8.00 1.29 1.17 1.78 ------ ------ ------ ------ ------ ------ Net increase (decrease) in net asset value from operations ....... (1.60) (4.76) 8.15 1.55 1.42 2.06 ------ ------ ------ ------ ------ ------ Less: Dividends and Distributions Dividends from net investment income ..... (.03) (.12) (.31) (.20) (.16) (.10) Distributions from net realized gains ........ (.81) (1.22) (.91) (.74) (.19) -0- ------ ------ ------ ------ ------ ------ Total dividends and distributions ........ (.84) (1.34) (1.22) (.94) (.35) (.10) ------ ------ ------ ------ ------ ------ Net asset value, end of period ........ $13.20 $15.64 $21.74 $14.81 $14.20 $13.13 ====== ====== ====== ====== ====== ====== Total Return Total investment return based on net asset value (c) ...... (10.37)% (23.00)% 58.83% 10.83% 10.75% 18.51% Ratios/Supplemental Data Net assets, end of period (000's omitted) ............. $46,294 $56,181 $64,059 $46,268 $41,818 $18,807 Ratio to average net assets of: Expenses, net of waivers and reimbursements ...... .95%(d) .95% .95% .95% .95% .95% Expenses, before waivers and reimbursements ...... 1.56%(d) 1.43% 1.46% 1.70% 1.55% 1.85% Net investment income (a) .. 2.63%(d) .29% .93% 1.74% 1.76% 2.26% Portfolio turnover rate ................. 17% 65% 54% 92% 58% 47%
-------------------------------------------------------------------------------- See footnote summary on page 13. 12 Alliance Variable Products Series Fund ================================================================================ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
-------------------------------- CLASS B -------------------------------- Six Months July 5, 2000(e) Ended to June 30, 2001 December 31, (unaudited) 2000 ============= =============== Net asset value, beginning of period .............................. $15.62 $19.09 ------ ------ Income From Investment Operations Net investment income (loss) (a)(b) ............................... .17 (.04) Net realized and unrealized loss on investments and foreign currency transactions (1.75) (3.43) ------ ------ Net decrease in net asset value from operations ................... (1.58) (3.47) ------ ------ Less: Dividends and Distributions Dividends from net investment income .............................. (.03) -0- Distributions from net realized gains ............................. (.81) -0- ------ ------ Total dividends and distributions ................................. (.84) -0- ------ ------ Net asset value, end of period .................................... $13.20 $15.62 ====== ====== Total Return Total investment return based on net asset value (c) .............. (10.28)% (18.43)% Ratios/Supplemental Data Net assets, end of period (000's omitted) ......................... $1,029 $238 Ratio to average net assets of: Expenses, net of waivers and reimbursements (d) ................ 1.20% 1.20% Expenses, before waivers and reimbursements (d) ................ 1.98% 1.80% Net investment income (loss) (a)(d) ............................ 2.76% (.26)% Portfolio turnover rate ........................................... 17% 65%
-------------------------------------------------------------------------------- (a) Net of expenses reimbursed or waived by the Adviser. (b) Based on average shares outstanding. (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. (d) Annualized. (e) Commencement of distribution. 13 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 Kathleen A. Corbet, Senior Vice President Alfred L. Harrison, Senior Vice President Andrew S. Adelson, Vice President Peter Anastos, Vice President Andrew Aran, Vice President Bruce K. Aronow, Vice President Edward Baker, Vice President Thomas J. Bardong, Vice President Matthew Bloom, Vice President Mark H. Breedon, Vice President Russell Brody, Vice President Kenneth T. Carty, Vice President Frank Caruso, Vice President John F. Chiodi, Vice President Paul J. DeNoon, Vice President Joseph C. Dona, Vice President Gregory Dube, Vice President Marilyn G. Fedak, Vice President F. Jeanne Goetz, Vice President Jane Mack Gould, Vice President David A. Kruth, Vice President Alan E. Levi, Vice President Michael Levy, Vice President Gerald T. Malone, Vice President Andrew Moloff, Vice President Michael Mon, Vice President Raymond J. Papera, Vice President Douglas J. Peebles, Vice President Daniel G. Pine, Vice President Steven Pisarkiewicz, Vice President John Ricciardi, Vice President Paul C. Rissman, Vice President Gregory R. Sawers, Vice President Kevin F. Simms, Vice President Kenneth D. Smalley, Vice President Michael A. Snyder, Vice President Annie Tsao, 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 Global Investor Services, Inc. P.O. Box 1520 Secaucus, NJ 07096-1520 Toll-free 1-(800) 221-5672 -------------------------------------------------------------------------------- (1) Member of the Audit Committee. 14 (This page left intentionally blank.) (This page left intentionally blank.) (This page left intentionally blank.)