N-30D 1 edg7528.txt ALLIANCE VARP QUASAR ALLIANCE ----------------------------------------------- VARIABLE PRODUCTS ----------------------------------------------- SERIES FUND ----------------------------------------------- QUASAR PORTFOLIO ----------------------------------------------- ANNUAL REPORT DECEMBER 31, 2001 Investment Products Offered --------------------------- > Are Not FDIC Insured > May Lose Value > Are Not Bank Guaranteed --------------------------- QUASAR PORTFOLIO Alliance Variable Products Series Fund ================================================================================ LETTER TO INVESTORS February 12, 2002 Dear Investor: We are pleased to provide you with an update of Alliance Variable Products Series Fund--Alliance Quasar Portfolio (the "Portfolio") for the annual reporting period ended December 31, 2001. INVESTMENT OBJECTIVE The Portfolio seeks growth of capital by pursuing aggressive investment policies. While it currently emphasizes the equity securities of small-capitalization companies, it may invest in any type of security issued by any company in any industry with the potential for capital appreciation. The Portfolio may also pursue investment opportunities outside of the United States. Current income is incidental to the Portfolio's objective. INVESTMENT RESULTS Listed below are the Portfolio's average annual total returns for the one-year, five-year and since inception periods ended December 31, 2001. 1 Year -12.75% 5 Years 1.68% Since Inception (8/96) 2.72% 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. The year 2001 proved to be a challenging year for small-cap growth stock investors. The Russell 2000 Growth Index's 9.23% decline marked the first time that small-cap growth stocks posted back-to-back calendar year declines. Small-cap growth stocks also declined a similar amount in the second half of the year, with the benchmark down 9.26% for the six-month period ending December 31, 2001. Challenged by an out of favor style and several company-specific disappointments, the Portfolio lagged the benchmark for both the six- and 12-month periods, declining 9.82% and 12.75% over the periods, respectively. MARKET REVIEW The Russell 2000 Growth Index's second-half decline, while essentially matching its full-year return, should, in no way, be construed as an indication of a quiet and stable year. In fact, 2001 will go down as one of the more wild rides for small-cap growth investors. Sentiment throughout the year swung wildly as investors wrestled with growing economic weakness and the U.S. Federal Reserve's ability to prevent a recession, or at least mitigate the downside if one should materialize. Further complicating matters, valuations across many sectors of the small-cap growth universe left little room for uncertainty and virtually none for disappointment. INVESTMENT STRATEGY Over the course of 2001, investors preferred value stocks over growth stocks and smaller companies over larger companies. This made for a uniquely challenging environment for the Portfolio. Consistent with the portfolio management team's growth style, investments throughout the year were skewed toward companies with faster-than-average growth rates. While we strongly believe that these companies are best positioned to drive above-average returns long-term, over the past 12 months investments in these faster growing companies hurt the Portfolio's absolute and relative returns. Relative returns were also negatively impacted by the Portfolio's lack of investments in those very small companies within the benchmark. These stocks not only lacked sufficient liquidity, but were, in many cases, companies displaying very poor fundamentals. Despite these factors, many of these "microcaps" posted exceptional returns in 2001. Here again, we do not believe these stocks are likely to be strong performers over a long-term investment horizon. Stock selection throughout the year was mixed. Industrials, financial services and consumer stocks contributed favorably to the Portfolio's relative return, while health care and technology stocks were somewhat disappointing. The biggest disappointments in 2001 were largely company-specific in nature, rather than a reflection of a poorly executed theme or sector bet. Sector allocations for the year had only a nominal impact on the Portfolio's relative returns. A modest underweight in the very poorly performing technology sector provided a small boost to the Portfolio's relative return. MARKET OUTLOOK Although business conditions remain challenging, recent company inputs would suggest that one year of aggressive Fed easing has led to initial signs of stabilizing fundamentals. This, combined with significantly lower earnings expectations, should lead to fewer negative earnings revisions in 2002, and may very well drive earnings estimates higher should a strong recovery materialize in the second half of the year. We believe that 1 QUASAR PORTFOLIO Alliance Variable Products Series Fund ================================================================================ this environment will prove particularly favorable for small-cap growth stocks, which have historically been disproportionate beneficiaries of low interest rates and accelerating economic activity. In fact, small-cap stocks have outperformed large-cap stocks in nine out of the past 10 economic recoveries. The management team remains confident that it is invested in a portfolio well positioned to weather the current economic environment and will likely perform well as conditions improve. Attractive opportunities have been identified across all major sectors of the small-cap market without significant over- or underweighted positions in any particular sector. Current allocations reflect a recent increase in the Portfolio's technology exposure and a modest decrease in health care. While driven by the team's bottom-up approach, these minor adjustments reflect a somewhat more constructive outlook toward technology fundamentals and some concern on the margin that valuations for many stocks within the health care universe already reflect a fair dose of good news. Although the consumer weighting has remained largely unchanged, the Portfolio has shifted money into more economically sensitive commercial services companies at the expense of more defense consumer non-cyclicals. We appreciate your investment in Alliance Quasar Portfolio and look forward to reporting further investment progress in the coming period. Sincerely, /s/ Bruce Aronow Bruce Aronow Vice President and Portfolio Manager 2 QUASAR PORTFOLIO Alliance Variable Products Series Fund ================================================================================ PERFORMANCE UPDATE Russell 2000 Growth Index: $12,144 Quasar Portfolio: $11,562 [The following was represented by a mountain graph in the printed material.] Quasar Portfolio Russell 2000 Growth Index ------------------------------------------------------------------------------- 8/31/96* $10,000 $10,000 12/31/96 $10,640 $10,543 12/31/97 $12,619 $11,908 12/31/98 $12,052 $12,053 12/31/99 $14,111 $17,248 12/31/00 $13,252 $13,379 12/31/01 $11,562 $12,144 Past performance is no guarantee of future results. This chart illustrates the total value of an assumed $10,000 investment in the Portfolio as compared to the performance of an appropriate broad-based index for the time frames indicated for the Portfolio. Performance results for the 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. The unmanaged Russell 2000 Growth Index (Russell 2000) measures the performance of those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values. The Index is a capitalization-weighted index that includes 2,000 of the smallest stocks representing approximately 10% of the U.S equity market. -------------------------------------------------------------------------------- * Since closest month-end after Portfolio's inception. Inception date for the Portfolio is 8/5/96. 3 QUASAR PORTFOLIO TEN LARGEST HOLDINGS December 31, 2001 Alliance Variable Products Series Fund ================================================================================ -------------------------------------------------------------------------------- COMPANY U.S. $ VALUE PERCENT OF NET ASSETS -------------------------------------------------------------------------------- Iron Mountain, Inc. $ 2,711,220 1.4% -------------------------------------------------------------------------------- ICN Pharmaceuticals, Inc. 2,619,700 1.4 -------------------------------------------------------------------------------- Aeroflex, Inc. 2,506,332 1.3 -------------------------------------------------------------------------------- Priority Healthcare Corp. Cl.B 2,505,528 1.3 -------------------------------------------------------------------------------- Amphenol Corp. Cl.A 2,407,305 1.3 -------------------------------------------------------------------------------- SICOR, Inc. 2,352,000 1.2 -------------------------------------------------------------------------------- Southwest Bancorporation of Texas, Inc. 2,345,925 1.2 -------------------------------------------------------------------------------- L-3 Communications Holding, Inc. 2,322,000 1.2 -------------------------------------------------------------------------------- Pactiv Corp. 2,302,175 1.2 -------------------------------------------------------------------------------- AirGate PCS, Inc. 2,282,055 1.2 ------------ ----- $ 24,354,240 12.7% -------------------------------------------------------------------------------- 4 QUASAR PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2001 Alliance Variable Products Series Fund ================================================================================ Company Shares U.S. $ Value ------------------------------------------------------------- COMMON STOCKS-97.4% HEALTH CARE-24.2% BIOTECHNOLOGY-6.3% Charles River Laboratories International, Inc. (a)..... 49,000 $ 1,640,520 CV Therapeutics, Inc. (a)...... 32,900 1,711,458 InterMune, Inc. (a)............ 37,700 1,857,102 OSI Pharmaceuticals, Inc. (a).. 38,800 1,774,712 The Medicines Co. (a).......... 119,600 1,386,164 Transkaryotic Therapies, Inc. (a).................... 36,600 1,566,480 Trimeris, Inc. (a)............. 24,800 1,115,256 United Therapeutics Corp. (a).. 95,300 992,073 -------------- 12,043,765 -------------- DRUGS-3.4% American Pharmaceutical Partners, Inc. (a).......... 15,000 312,000 ICN Pharmaceuticals, Inc. ..... 78,200 2,619,700 Medicis Pharmaceutical Corp. Cl.A (a).............. 18,400 1,188,456 SICOR, Inc. (a)................ 150,000 2,352,000 -------------- 6,472,156 -------------- MEDICAL PRODUCTS-9.1% Aksys, Ltd. (a)................ 102,500 476,625 Align Technology, Inc. (a)..... 195,000 877,500 Bruker AXS, Inc. (a)........... 87,400 571,596 CryoLife, Inc. (a)............. 66,000 1,980,000 Cytyc Corp. (a)................ 73,000 1,905,300 DUSA Pharmaceuticals, Inc. (a).................... 46,700 375,935 Fisher Scientific International, Inc. (a)..... 73,700 2,152,040 Given Imaging, Ltd. (Israel) (a)................ 25,600 457,216 INAMED Corp. (a)............... 65,700 1,975,599 Integra LifeSciences Holdings Corp. (a).......... 57,000 1,501,380 Novavax, Inc. (a).............. 110,300 1,555,230 OraSure Technologies, Inc. (a).................... 68,100 827,415 Taro Pharmaceutical Industries, Ltd. (a)........ 45,000 1,797,750 Therasense, Inc. (a)........... 34,600 858,080 -------------- 17,311,666 -------------- MEDICAL SERVICES-4.5% AMN Healthcare Services, Inc. (a).................... 34,700 950,780 BioMarin Pharmaceutical, Inc. (a).................... 37,400 502,656 Cross Country, Inc. (a)........ 9,700 257,050 LifePoint Hospitals, Inc. (a).. 30,500 1,038,220 MedCath Corp. (a).............. 23,600 396,008 Option Care, Inc. (a).......... 82,500 1,612,875 Priority Healthcare Corp. Cl.B (a).................... 71,200 2,505,528 Universal Health Services, Inc. Cl.B (a)............... 31,500 1,347,570 -------------- 8,610,687 -------------- MISCELLANEOUS-0.9% Stericycle, Inc. (a)........... 29,300 1,783,784 -------------- 46,222,058 -------------- TECHNOLOGY-23.5% COMMUNICATION EQUIPMENT-0.3% Sirenza Microdevices, Inc. (a).................... 83,100 506,079 -------------- COMPUTER HARDWARE/STORAGE-0.5% Lantronix, Inc. (a)............ 152,000 960,640 -------------- COMPUTER PERIPHERALS-1.3% Advanced Energy Industries, Inc. (a).................... 40,400 1,076,256 Pericom Semiconductor Corp. (a)................... 91,700 1,329,650 -------------- 2,405,906 -------------- COMPUTER SERVICES-0.9% Orbotech, Ltd. (Israel), (a)... 1 31 PEC Solutions, Inc. (a)........ 45,300 1,703,733 -------------- 1,703,764 -------------- CONTRACT MANUFACTURING-1.9% DDi Corp. (a).................. 137,600 1,353,984 Plexus Corp. (a)............... 44,500 1,181,920 Semtech Corp. (a).............. 32,700 1,167,063 -------------- 3,702,967 -------------- INTERNET MEDIA-0.6% EarthLink, Inc. (a)............ 93,700 1,140,329 -------------- NETWORKING SOFTWARE-0.4% Stratos Lightwave, Inc. (a).... 108,300 666,045 -------------- SEMI-CONDUCTOR CAPITAL EQUIPMENT-1.4% MKS Instruments, Inc. (a)...... 51,200 1,383,936 Varian Semiconductor Equipment Associates, Inc. (a).................... 39,800 1,376,682 -------------- 2,760,618 -------------- 5 QUASAR PORTFOLIO PORTFOLIO OF INVESTMENTS (continued) Alliance Variable Products Series Fund ================================================================================ Company Shares U.S. $ Value ------------------------------------------------------------- SEMI-CONDUCTOR COMPONENTS-5.5% Alpha Industries, Inc. (a)..... 60,600 $ 1,321,080 ANADIGICS, Inc. (a)............ 88,500 1,349,625 Brooks Automation, Inc. (a).... 41,200 1,675,604 Elantec Semiconductor, Inc. (a).................... 36,600 1,405,440 GlobespanVirata, Inc. (a)...... 103,564 1,341,154 Integrated Circuit Systems, Inc. (a).................... 70,200 1,585,818 IXYS Corp. (a)................. 54,500 440,905 Micrel, Inc. (a)............... 56,000 1,468,880 -------------- 10,588,506 -------------- SOFTWARE-5.5% Actuate Corp. (a).............. 161,400 850,578 Advent Software, Inc. (a)...... 18,700 934,065 Informatica Corp. (a).......... 131,300 1,905,163 MatrixOne, Inc. (a)............ 81,100 1,053,489 NetIQ Corp. (a)................ 59,800 2,108,548 Retek, Inc. (a)................ 57,400 1,714,538 Tier Technologies, Inc. Cl.B (a).................... 45,100 972,356 Vignette Corp. (a)............. 174,800 938,676 -------------- 10,477,413 -------------- MISCELLANEOUS-5.2% Aeroflex, Inc. (a)............. 132,400 2,506,332 Amphenol Corp. Cl.A (a)........ 50,100 2,407,305 Exar Corp. (a)................. 96,100 2,003,685 Plantronics, Inc. (a).......... 36,800 943,552 Power-One, Inc. (a)............ 90,500 942,105 Precise Software Solutions, Ltd. (Israel) (a)........... 56,700 1,171,422 -------------- 9,974,401 -------------- 44,886,668 -------------- CONSUMER SERVICES-21.6% ADVERTISING-0.6% Getty Images, Inc. (a)......... 52,400 1,204,152 -------------- BROADCASTING & CABLE-2.3% Insight Communications Co., Inc. Cl.A (a).......... 79,600 1,923,136 ValueVision International, Inc. Cl.A (a)............... 71,400 1,398,726 XM Satellite Radio Holdings, Inc. Cl.A(a)................ 54,900 1,007,964 -------------- 4,329,826 -------------- ENTERTAINMENT & LEISURE-3.2% Action Performance Cos., Inc. (a).................... 54,800 1,677,428 Activision, Inc. (a)........... 36,400 946,764 Take-Two Interactive Software, Inc. (a).......... 136,100 2,200,737 THQ, Inc. (a).................. 25,500 1,235,985 -------------- 6,060,914 -------------- RETAIL - GENERAL MERCHANDISE-4.7% Electronics Boutique Holdings Corp. (a).......... 40,000 1,597,600 Freds, Inc. Cl.A............... 43,700 1,789,952 Galyan's Trading, Inc. (a)..... 117,500 1,673,200 Global Sports, Inc. (a)........ 45,600 909,720 Hot Topic, Inc. (a)............ 54,400 1,707,616 Ultimate Electronics, Inc. (a). 43,200 1,296,000 -------------- 8,974,088 -------------- MISCELLANEOUS-10.8% Career Education Corp. (a)..... 51,600 1,768,848 Copart, Inc. (a)............... 48,500 1,763,945 Edison Schools, Inc. Cl.A (a).. 102,100 2,006,265 Insight Enterprises, Inc. (a).. 85,600 2,105,760 Iron Mountain, Inc. (a)........ 61,900 2,711,220 MSC Industrial Direct Co., Inc. Cl.A (a).......... 112,800 2,227,800 Resources Connection, Inc. (a).................... 68,400 1,800,972 ScanSource, Inc. (a)........... 36,500 1,737,400 Smartforce Public Limited Co. (ADR) (Ireland) (a)..... 33,600 831,600 Strayer Education, Inc. ....... 37,800 1,841,616 West Corp. (a)................. 75,000 1,870,500 -------------- 20,665,926 -------------- 41,234,906 -------------- FINANCE-8.8% BANKING - MONEY CENTER-1.1% UCBH Holdings, Inc. ........... 74,200 2,110,248 -------------- BANKING - REGIONAL-0.5% Westamerica Bancorp. .......... 23,500 929,895 -------------- BROKERAGE & MONEY MANAGEMENT-1.8% Affiliated Managers Group, Inc. (a)............. 15,800 1,113,584 Southwest Bancorporation of Texas, Inc. (a).......... 77,500 2,345,925 -------------- 3,459,509 -------------- 6 Alliance Variable Products Series Fund ================================================================================ Company Shares U.S. $ Value ------------------------------------------------------------- INSURANCE-3.5% Arthur J. Gallagher & Co. ..... 36,200 $ 1,248,538 PMA Capital Corp. Cl.A......... 76,500 1,476,450 Reinsurance Group of America, Inc. .............. 41,700 1,387,776 RenaissanceRe Holdings, Ltd. (Bermuda).............. 9,700 925,380 StanCorp Financial Group, Inc. ................ 32,500 1,535,625 -------------- 6,573,769 -------------- MISCELLANEOUS-1.9% Investors Financial Services Corp. ............. 30,600 2,026,026 The InterCept Group, Inc. (a).. 40,400 1,652,360 -------------- 3,678,386 -------------- 16,751,807 -------------- CAPITAL GOODS-6.0% ELECTRICAL EQUIPMENT-4.2% Cabot Microelectronics Corp. (a)................... 19,900 1,577,075 EDO Corp. ..................... 40,700 1,076,515 Engineered Support Systems, Inc. ....................... 56,800 1,943,128 L-3 Communications Holding, Inc. (a)........... 25,800 2,322,000 United Defense Industries, Inc. ....................... 51,300 1,079,865 -------------- 7,998,583 -------------- POLLUTION CONTROL-0.7% Tetra Tech, Inc. (a)........... 65,325 1,300,621 -------------- MISCELLANEOUS-1.1% Dal-Tile International, Inc. (a).................... 74,300 1,727,475 Griffon Corp. ................. 27,500 412,500 -------------- 2,139,975 -------------- 11,439,179 -------------- ENERGY-5.4% DOMESTIC PRODUCERS-1.0% Newfield Exploration Co. (a)... 54,900 1,949,499 -------------- OIL SERVICE-2.3% Patterson-UTI Energy, Inc. (a).................... 25,900 603,729 Spinnaker Exploration Co. (a)..................... 47,200 1,942,752 W-H Energy Services, Inc. (a).................... 97,000 1,847,850 -------------- 4,394,331 -------------- PIPELINES-1.7% Cal Dive International, Inc. (a).................... 74,000 1,826,320 Hydril Co. (a)................. 84,600 1,491,498 -------------- 3,317,818 -------------- MISCELLANEOUS-0.4% Stone Energy Corp. (a)......... 17,400 687,300 -------------- 10,348,948 -------------- BASIC INDUSTRY-3.3% CHEMICALS-1.6% Georgia Gulf Corp. ............ 95,600 1,768,600 OM Group, Inc. ................ 21,000 1,389,990 -------------- 3,158,590 -------------- MINING & METALS-0.5% Champion Enterprises, Inc. (a).................... 75,200 925,712 -------------- PAPER & FOREST PRODUCTS-1.2% Pactiv Corp. (a)............... 129,700 2,302,175 -------------- 6,386,477 -------------- TRANSPORTATION-1.8% AIR FREIGHT-0.7% Expeditors International of Washington, Inc. ........... 23,600 1,344,020 -------------- TRUCKING-0.6% Swift Transportation Co., Inc. (a)............... 51,800 1,114,218 -------------- MISCELLANEOUS-0.5% Tower Automotive, Inc. (a)..... 112,000 1,011,360 -------------- 3,469,598 -------------- UTILITIES-1.5% MISCELLANEOUS-1.5% AirGate PCS, Inc. (a).......... 50,100 2,282,055 Rural Cellular Corp. Cl.A (a).. 28,800 640,800 -------------- 2,922,855 -------------- CONSUMER STAPLES-1.3% FOOD-1.0% Performance Food Group Co. (a)............... 54,100 1,902,697 -------------- RETAIL - FOOD & DRUG-0.3% Duane Reade, Inc. (a).......... 20,500 622,175 -------------- 2,524,872 -------------- Total Common Stocks (cost $175,634,210)......... 186,187,368 -------------- QUASAR PORTFOLIO PORTFOLIO OF INVESTMENTS (continued) Alliance Variable Products Series Fund ================================================================================ Principal Amount Company (000) U.S. $ Value ------------------------------------------------------------- SHORT-TERM INVESTMENT-4.1% TIME DEPOSIT-4.1% State Street Euro Dollar 1.25%, 1/02/02 (cost $7,798,000)........... $7,798 $ 7,798,000 -------------- TOTAL INVESTMENTS-101.5% (cost $183,432,210)......... 193,985,368 Other assets less liabilities-(1.5%).......... (2,926,913) -------------- NET ASSETS-100%................ $ 191,058,455 ============== -------------------------------------------------------------------------------- (a) Non-income producing security. Glossary: ADR - American Depositary Receipts. See Notes to Financial Statements. 8 QUASAR PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES December 31, 2001 Alliance Variable Products Series Fund ================================================================================ ASSETS Investments in securities, at value (cost $183,432,210).. $ 193,985,368(a) Cash..................................................... 656,719 Collateral held for securities loaned.................... 17,464,000 Receivable for investment securities sold................ 1,968,827 Dividends and interest receivable........................ 18,607 Receivable for capital stock sold........................ 11,226 -------------- Total assets............................................. $ 214,104,747 -------------- LIABILITIES Payable for collateral received on securities loaned..... 17,464,000 Payable for investment securities purchased.............. 2,711,095 Payable for capital stock redeemed....................... 2,656,782 Advisory fee payable..................................... 98,241 Accrued expenses......................................... 116,174 -------------- Total liabilities........................................ 23,046,292 -------------- NET ASSETS.................................................. $ 191,058,455 -------------- COMPOSITION OF NET ASSETS Capital stock, at par.................................... $ 19,086 Additional paid-in capital............................... 224,921,803 Accumulated net realized loss on investments............. (44,435,592) Net unrealized appreciation of investments............... 10,553,158 -------------- $ 191,058,455 ============== Class A Shares Net assets............................................... $ 184,223,049 ============== Shares of capital stock outstanding...................... 18,400,820 ============== Net asset value per share................................ $ 10.01 ============== Class B Shares Net assets............................................... $ 6,835,406 ============== Shares of capital stock outstanding...................... 685,224 ============== Net asset value per share................................ $ 9.98 ============== -------------------------------------------------------------------------------- (a) Includes securities on loan with a value of $16,200,820 (see Note F). See Notes to Financial Statements. 9 QUASAR PORTFOLIO STATEMENT OF OPERATIONS Year Ended December 31, 2001 Alliance Variable Products Series Fund ================================================================================ INVESTMENT INCOME Interest............................................................ $ 269,621 Dividends........................................................... 240,161 -------------- Total investment income............................................. 509,782 -------------- EXPENSES Advisory fee........................................................ 2,044,867 Distribution fee--Class B............................................ 8,497 Custodian........................................................... 129,142 Administrative...................................................... 69,000 Audit and legal..................................................... 59,943 Printing............................................................ 54,681 Transfer agency..................................................... 953 Amortization of organization expenses............................... 3,301 Directors' fees..................................................... 1,455 Miscellaneous....................................................... 9,465 -------------- Total expenses...................................................... 2,381,304 Less: expenses waived and reimbursed (see Note B)................... (430,185) -------------- Net expenses........................................................ 1,951,119 -------------- Net investment loss................................................. (1,441,337) -------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized loss on investment transactions........................ (42,290,348) Net change in unrealized appreciation/depreciation of investments... 12,523,989 -------------- Net loss on investments............................................. (29,766,359) -------------- NET DECREASE IN NET ASSETS FROM OPERATIONS............................. $ (31,207,696) ==============
-------------------------------------------------------------------------------- See Notes to Financial Statements. 10 QUASAR PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS Alliance Variable Products Series Fund ================================================================================
Year Ended Year Ended December 31, December 31, 2001 2000 ============== ============== INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment loss.................................................. $ (1,441,337) $ (885,381) Net realized gain (loss) on investment transactions.................. (42,290,348) 7,938,018 Net change in unrealized appreciation/depreciation of investments.... 12,523,989 (16,400,536) -------------- -------------- Net decrease in net assets from operations........................... (31,207,696) (9,347,899) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class A............................................................ -0- (657,364) Net realized gain on investments Class A............................................................ (5,051,253) (4,601,546) Class B............................................................ (130,343) -0- Dividends in excess of net realized gain on investments Class A............................................................ (1,694,250) -0- Class B............................................................ (43,719) -0- Return of capital Class A............................................................ (118,929) -0- Class B............................................................ (3,069) -0- CAPITAL STOCK TRANSACTIONS Net increase (decrease).............................................. (3,366,389) 77,669,578 -------------- -------------- Total increase (decrease)............................................ (41,615,648) 63,062,769 NET ASSETS Beginning of period.................................................. 232,674,103 169,611,334 -------------- -------------- End of period........................................................ $ 191,058,455 $ 232,674,103 ============== ==============
-------------------------------------------------------------------------------- See Notes to Financial Statements. 11 QUASAR PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2001 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 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 withholding 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. 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 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. 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 Portfolio accretes discounts as adjustments to interest income. Investment gains and losses are determined on the identified cost basis. 6. Income and Expenses Expenses attributable to a single portfolio are charged to that portfolio. Expenses of the Fund are charged to each 12 Alliance Variable Products Series Fund ================================================================================ 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 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. 7. 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. During the current fiscal year, permanent differences, primarily due to net operating losses and merger transactions, resulted in a net decrease in undistributed net investment loss, an increase in accumulated net realized loss on investments and a corresponding decrease in additional paid-in capital. 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. Pursuant to the advisory agreement, the Portfolio paid $69,000 to the Adviser representing the cost of certain legal and accounting services provided to the Portfolio by the Adviser for the year ended December 31, 2001. During the year ended December 31, 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 year ended December 31, 2001, such waivers/reimbursements amounted to $430,185. Brokerage commissions paid on investment transactions for the year ended December 31, 2001 amounted to $363,862, none of which was paid to Sanford C. Bernstein & Co. LLC, an affiliate of the Adviser. The Portfolio compensates Alliance Global Investor Services, Inc. (formerly 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 Portfolio. Such compensation amounted to $953 for the year ended December 31, 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 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 and servicing fees 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 and servicing 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. 13 QUASAR PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) Alliance Variable Products Series Fund ================================================================================ NOTE D: Investment Transactions Purchases and sales of investment securities (excluding short-term investments) for the year ended December 31, 2001, were as follows: Purchases: Stocks and debt obligations................................. $ 227,647,145 U.S. government and agencies................................ -0- Sales: Stocks and debt obligations................................. $ 242,237,214 U.S. government and agencies................................ -0- At December 31, 2001, the cost of investments for federal income tax purposes was $190,556,455. Accordingly, gross unrealized appreciation and unrealized depreciation are as follows: Gross unrealized appreciation............................... $ 28,430,035 Gross unrealized depreciation............................... (25,001,122) -------------- Net unrealized appreciation................................. $ 3,428,913 ============== 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 $2,038,953 during the fiscal year. 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 December 31, 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 14 Alliance Variable Products Series Fund ================================================================================ 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, 2001. -------------------------------------------------------------------------------- NOTE E: Distributions to Shareholders The tax character of distributions paid during the fiscal year ended December 31, 2001 and December 31, 2000 were as follows: 2001 2000 =============== =============== Distributions paid from: Ordinary income................... $ 6,919,565 $ 5,258,910 --------------- --------------- Total taxable distributions.......... 6,919,565 5,258,910 Tax return of capital............. 121,998 -0- --------------- --------------- Total distributions paid............. $ 7,041,563 $ 5,258,910 =============== =============== As of December 31, 2001, the components of accumulated earnings/(deficit) on a tax basis were as follows: Accumulated capital and other losses ................. $ (37,311,348)(a) Unrealized appreciation/(depreciation)................ $ 3,428,913 (b) --------------- Total accumulated earnings/(deficit).................. $ (33,882,435) =============== -------------------------------------------------------------------------------- (a) On December 31, 2001, the Portfolio had a net capital loss carryforward of $35,272,395 of which $360,350 will expire in the year 2008 and $34,912,045 will expire in the year 2009. To the extent future capital gains are offset by capital loss carryforwards, such gains will not be distributed. Based on certain provisions in the Internal Revenue Code, various limitations regarding the future utilization of these carryforwards, brought forward as a result of the Portfolio's merger with Brinson Series Trust Small Cap Growth Portfolio, may apply. Net capital losses incurred after October 31, and within the taxable year are deemed to arise on the first business day of the Portfolio's next taxable year. For the year ended December 31, 2001, the Portfolio deferred to January 1, 2002, post October capital losses of $2,038,953. (b) The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales. -------------------------------------------------------------------------------- NOTE F: 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 or any loss resulting from a borrower's failure to return a loaned security when due. As of December 31, 2001, the Portfolio had loaned securities with a value of $16,565,465 and received cash collateral of $17,464,000. For the year ended December 31, 2001, the Portfolio received fee income of $44,217 which is included in interest income in the accompanying statement of operations. 15 QUASAR PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) Alliance Variable Products Series Fund ================================================================================ NOTE G: 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 --------------------------------- --------------------------------- Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, 2001 2000 2001 2000 ============== ============== ============== ============== Class A Shares sold....................... 18,590,860 54,680,516 $ 203,234,285 $ 696,227,537 Shares issued in connection with acquisition of Brinson Series Trust Small Cap Growth......... 55,903 -0- 501,822 -0- Shares issued in reinvestment of dividends and distributions.... 627,462 417,374 6,864,432 5,258,910 Shares redeemed................... (20,489,953) (48,523,546) (220,821,507) (624,279,001) -------------- -------------- -------------- -------------- Net increase (decrease)........... (1,215,728) 6,574,344 $ (10,220,968) $ 77,207,446 ============== ============== ============== ============== Year Ended August 11, 2000* Year Ended August 11, 2000* December 31, to December 31, December 31, to December 31, 2001 2000 2001 2000 ============== ============== ============== ============== Class B Shares sold....................... 765,042 37,317 $ 8,052,083 $ 468,643 Shares issued in connection with acquisition of Brinson Series Trust Small Cap Growth......... 48,534 -0- 434,277 -0- Shares issued in reinvestment of distributions..................... 16,236 -0- 177,131 -0- Shares redeemed................... (181,381) (524) (1,808,912) (6,511) -------------- -------------- -------------- -------------- Net increase...................... 648,431 36,793 $ 6,854,579 $ 462,132 ============== ============== ============== ==============
-------------------------------------------------------------------------------- NOTE H: 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 I: 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, 2001. -------------------------------------------------------------------------------- * Commencement of distribution. 16 Alliance Variable Products Series Fund ================================================================================ NOTE J: Acquisition of Brinson Series Trust Small Cap Growth On October 26, 2001, the Portfolio acquired all of the assets of the Brinson Series Trust Small Cap Growth pursuant to a plan of reorganization approved by the shareholders of Brinson Series Trust Small Cap Growth on March 1, 2001. The acquisition was accomplished by a tax-free exchange of 104,437 shares of the Portfolio for 78,609 shares of Brinson Series Trust Small Cap Growth on October 26, 2001. The aggregate net assets of the Portfolio and Brinson Series Trust Small Cap Growth immediately before the acquisition were $185,248,421 and $936,099 (including $16,723 of net unrealized depreciation on investments), respectively, immediately after the acquisition the combined net assets of the Portfolio amounted to $186,184,520. 17 QUASAR PORTFOLIO FINANCIAL HIGHLIGHTS Alliance Variable Products Series Fund ================================================================================ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
-------------------------------------------------------------------------- CLASS A -------------------------------------------------------------------------- Year Ended December 31, ========================================================================== 2001 2000 1999 1998 1997 =========== =========== =========== =========== =========== Net asset value, beginning of period ................ $ 11.84 $ 13.00 $ 11.14 $ 12.61 $ 10.64 ----------- ----------- ----------- ----------- ----------- Income From Investment Operations Net investment income (loss) (a)(b) ................. (.07) (.06) .08 .07 .02 Net realized and unrealized gain (loss) on investment transactions ..................................... (1.41) (.71) 1.82 (.49) 1.96 ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in net asset value from operations ....................................... (1.48) (.77) 1.90 (.42) 1.98 ----------- ----------- ----------- ----------- ----------- Less: Dividends and Distributions Dividends from net investment income ................ -0- (.05) (.04) (.01) (.01) Distributions from net realized gain on investments . (.26) (.34) -0- (1.04) -0- Dividends in excess of net realized gain on investments ................................... (.09) -0- -0- -0- -0- ----------- ----------- ----------- ----------- ----------- Total dividends and distributions ................... (.35) (.39) (.04) (1.05) (.01) ----------- ----------- ----------- ----------- ----------- Net asset value, end of period ...................... $ 10.01 $ 11.84 $ 13.00 $ 11.14 $ 12.61 =========== =========== =========== =========== =========== Total Return Total investment return based on net asset value (c) (12.75)% (6.09)% 17.08% (4.49)% 18.60% Ratios/Supplemental Data Net assets, end of period (000's omitted) ........... $ 184,223 $ 232,239 $ 169,611 $ 90,870 $ 59,277 Ratio to average net assets of: Expenses, net of waivers and reimbursements ...... .95% .95% .95% .95% .95% Expenses, before waivers and reimbursements ...... 1.16% 1.14% 1.19% 1.30% 1.37% Net investment income (loss) (b) ................. (.70)% (.46)% .72% .55% .17% Portfolio turnover rate ............................. 113% 178% 110% 107% 210%
-------------------------------------------------------------------------------- See footnote summary on page 19. 18 Alliance Variable Products Series Fund ================================================================================ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
----------------------- CLASS B ----------------------- August 11, Year Ended 2000(e) to December 31, December 31, 2001 2000 ============ ============ Net asset value, beginning of period ...................... $ 11.82 $ 13.00 --------- --------- Income From Investment Operations Net investment loss (a)(b) ................................ (.09) (.03) Net realized and unrealized loss on investment transactions (1.40) (1.15) --------- --------- Net decrease in net asset value from operations ........... (1.49) (1.18) --------- --------- Less: Distributions Dividends from net investment income ...................... -0- -0- Distributions from net realized gain on investments ....... (.26) -0- Dividends in excess of net realized gain on investments ... (.09) -0- --------- --------- Total distributions ....................................... (.35) -0- --------- --------- Net asset value, end of period ............................ $ 9.98 $ 11.82 ========= ========= Total Return Total investment return based on net asset value (c) ...... (12.86)% (8.16)% Ratios/Supplemental Data Net assets, end of period (000's omitted) ................. $ 6,835 $ 435 Ratios to average net assets of: Expenses, net of waivers and reimbursements ............ 1.20% 1.20%(d) Expenses, before waivers and reimbursements ............ 1.43% 1.41%(d) Net investment loss (b) ................................ (.98)% (.69)%(d) Portfolio turnover rate ................................... 113% 178%
-------------------------------------------------------------------------------- (a) Based on average shares outstanding. (b) Net of expenses reimbursed or waived by the Adviser. (c) Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Total investment return calculated for a period of less than one year is not annualized. (d) Annualized. (e) 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"), (one of the portfolios constituting the Alliance Variable Products Series Fund, Inc.) as of December 31, 2001, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period 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 audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2001, by correspondence with the custodian and others. 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 of the Alliance Variable Products Series Fund, Inc. at December 31, 2001 and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP New York, New York February 12, 2002 20 QUASAR PORTFOLIO 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) 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. 21 QUASAR PORTFOLIO Alliance Variable Products Series Fund ================================================================================ MANAGEMENT OF THE FUND Board of Directors Information The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund's Directors is set forth below.
PORTFOLIOS IN FUND OTHER NAME, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIPS AGE OF DIRECTOR OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR --------------------------------------------------------------------------------------------------------------------------- INTERESTED DIRECTOR John D. Carifa,** 56, President, Chief Operating Officer and 113 None 1345 Avenue of the Americas, a Director of ACMC, with which he has New York, NY 10105 (12) been associated since prior to 1997. DISINTERESTED DIRECTORS Ruth Block,#+ 71, Formerly an Executive Vice President and 88 Ecolab Incorp.; P.O. Box 4623, the Chief Insurance Officer of the Equitable BP Amoco Corp. Stamford, CT 06903 (10) Life Assurance Society of the United States; Chairman and Chief Executive Officer of Evlico; a Director of Avon, Tandem Financial Group and Donaldson, Lufkin & Jenrette Securities Corporation. She is currently a Director of Ecolab Incorporated (specialty chemicals) and BP Amoco Corporation (oil and gas). David H. Dievler,#+ 72, Independent consultant. Until December 1994, 94 None P.O. Box 167, Senior Vice President of ACMC responsible Spring Lake, New Jersey for mutual fund administration. Prior to joining 07762 (12) ACMC in 1984, Chief Financial Officer of Eberstadt Asset Management since 1968. Prior to that, Senior Manager at Price Waterhouse & Co. Member of American Institute of Certified Public Accountants since 1953. John H. Dobkin,#+ 59, Consultant. Currently, President of the Board 91 None P.O. Box 12, of Save Venice, Inc. (preservation organization). Annandale, New York Formerly a Senior Advisor from June 1999- 12504 (10) June 2000 and President from December 1989- May 1999 of Historic Hudson Valley (historic preservation). Previously, Director of the National Academy of Design. During 1988-92, Director and Chairman of the Audit Committee of ACMC.
-------------------------------------------------------------------------------- * There is no stated term of office for the Fund's Directors. ** Mr. Carifa is an "interested director", as defined in the 1940 Act, due to his position as President and Chief Operating Officer of ACMC, the Fund's investment adviser. # Member of the Audit Committee. + Member of the Nominating Committee. 22 QUASAR PORTFOLIO Alliance Variable Products Series Fund ================================================================================
PORTFOLIOS IN FUND OTHER NAME, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIPS AGE OF DIRECTOR OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR --------------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS (continued) William H. Foulk, Jr.,#+ 69, Investment Adviser and an independent 110 None Room 100, consultant. Formerly Senior Manager of 2 Greenwich Plaza, Barrett Associates, Inc., a registered Greenwich, Connecticut investment adviser, with which he had been 06830 (12) associated since prior to 1997. Formerly Deputy Comptroller of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Clifford L. Michel,#+ 62, Senior Counsel of the law firm of Cahill 91 Placer Dome, Inc. St. Bernard's Road, Gordon & Reindel, with which he has been Gladstone, New Jersey associated since prior to 1997. President 07934 (10) and Chief Executive Officer of Wenonah Development Company (investments) and a Director of Placer Dome, Inc. (mining) Donald J. Robinson,#+ 67, Senior Counsel of the law firm of Orrick, 103 None 98 Hell's Peak Road, Herrington & Sutcliffe LLP since January 1997. Weston, Vermont 05161 (6) Formerly a senior partner and a member of the Executive Committee of that firm. Member of the Municipal Securities Rulemaking Board and a Trustee of the Museum of the City of New York.
-------------------------------------------------------------------------------- * There is no stated term of office for the Fund's Directors. # Member of the Audit Committee. + Member of the Nominating Committee. 23 QUASAR PORTFOLIO Alliance Variable Products Series Fund ================================================================================ Officer Information Certain information concerning the Fund's officers is set forth below.
NAME, ADDRESS* POSITION(S) HELD PRINCIPAL OCCUPATION AND AGE WITH FUND DURING PAST 5 YEARS** --------------------------------------------------------------------------------------------------------------- John D. Carifa, 56 Chairman & President See biography above. Kathleen A. Corbet, 42 Senior Vice President Executive Vice President of ACMC, with which she has been associated since prior to 1997. Alfred L. Harrison, 64 Senior Vice President Vice Chairman of ACMC, with which he has been associated since prior to 1997. Wayne D. Lyski, 60 Senior Vice President Executive Vice President of ACMC, with which he has been associated with since prior to 1997. Bruce K. Aronow, 35 Vice President Vice President of ACMC, with which he has been associated since 1999. Prior thereto, he was a Vice President at INVESCO since 1998 and a Vice President at LGT Capital Management since 1997. Edmund P. Bergan, Jr., 51 Secretary Senior Vice President and the General Counsel of Alliance Fund Distributors, Inc. (AFD) and Alliance Global Investor Services Inc. ("AGIS"), with which he has been associated since prior to 1997. Mark D. Gersten, 51 Treasurer and Senior Vice President of AGIS, with which he has been Chief Financial Officer associated since prior to 1997. Thomas R. Manley, 50 Controller Vice President of ACMC, with which he has been associated since prior to 1997.
-------------------------------------------------------------------------------- * The address for each of the Fund's officers is 1345 Avenue of the Americas, New York, NY 10105. ** ACMC, AFD, ACL, and AGIS are affiliates of the Fund. The Fund's Statement of Additional Information (SAI) has additional information about the Fund's Directors and Officers and is available without charge upon request. Contact your financial representative or Alliance Capital at 800-227-4618 for a free prospectus or SAI. 24 (This page left intentionally blank.)