N-30D 1 edg7532.txt VARP AB VALUE ALLIANCE ------------------------- VARIABLE PRODUCTS ------------------------- SERIES FUND ------------------------- ALLIANCEBERNSTEIN VALUE ------------------------- PORTFOLIO ------------------------- ANNUAL REPORT DECEMBER 31, 2001 Investment Products Offered --------------------------- > Are Not FDIC Insured > May Lose Value > Are Not Bank Guaranteed --------------------------- ALLIANCEBERNSTEIN VALUE 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--AllianceBernstein Value Portfolio (the "Portfolio") for the annual reporting period ended December 31, 2001. INVESTMENT OBJECTIVE The Portfolio seeks long-term growth of capital. The Portfolio invests primarily in a diversified portfolio of equity securities of companies with relatively large market capitalizations that Alliance believes are undervalued. In selecting securities for the Portfolio, Alliance's Bernstein unit ("Bernstein") uses fundamental research to identify companies whose long-term earnings power and dividend paying capability are not reflected in the current market price of their securities. The Portfolio may invest up to 15% of its total assets in foreign securities. INVESTMENT RESULTS Listed below is the Portfolio's cumulative total return for the since inception period ended December 31, 2001. Since Inception 5/01 0.70% Total returns are based on net asset value (NAV) performance 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 Portfolio had an NAV total return of 1.30% for the six-month period and 0.70% since the Portfolio's inception at the end of May, both outperforming the Russell 1000 Value Index, the Portfolio's benchmark. Not surprisingly, the source of the Portfolio's premium was stock selection. The Portfolio's better-than-average performers across a range of sectors contributed significantly to relative performance. In addition, the Portfolio's underweight positions in technology and telecommunications stocks also contributed to the outperformance. These two sectors underperformed massively for the year, despite their fourth-quarter rally. MARKET REVIEW Markets were weak for much of 2001 and value stocks outperformed. Concerns related to the pace of economic growth weighed heavily on investor confidence during the year. Then, as some investors began to anticipate that we were hitting the bottom in this cycle, the September 11 attacks forestalled hopes of near-term recovery, and stocks sold off in the weeks that followed. This development created strong opportunities in the stock market. In the fourth quarter of 2001, new hopes for economic rebound produced positive returns for the markets with technology stocks taking the lead. INVESTMENT OUTLOOK The U.S. equity risk premium--the potential premium investors get for investing in U.S. equities instead of bonds--is now near its highest level in several years and close to its historical norm. This does not necessarily mean equities will rally in the near-term, but it gives us confidence that U.S. large-cap stocks should provide solid returns over the next five years, at least compared to the current low level of interest rates. We expect returns for equities to be in the high single digits, considerably below the returns investors enjoyed in the 1980s and 1990s. The Portfolio's investment strategy is driven by individual stock selection, as we seek to form a Portfolio with attractive values while controlling risk. Cyclical stocks, including industrial resource producers, retailers, railroads and energy companies, continue to represent an important group of the Portfolio's holdings. We are emphasizing companies whose conservative investment patterns have strengthened them to weather a downturn and restore profits quickly when the environment turns. Today, financial stocks offer some of the most compelling opportunities. We have positioned the Portfolio to capture the most attractive opportunities we see. 1 ALLIANCEBERNSTEIN VALUE PORTFOLIO Alliance Variable Products Series Fund ================================================================================ The fourth-quarter rally in technology stocks, in our view, was premature because over-capacity remains a serious issue that will depress earnings for some time to come. The rebound has made the sector expensive again. Electric power generators, which massively underperformed the market during the fourth quarter of 2001, may represent attractive value opportunities. We have focused a portion of our research efforts on this potential opportunity. We appreciate your investment in AllianceBernstein Value Portfolio and look forward to reporting further investment progress in the coming period. Sincerely, /s/ Marilyn Fedak Marilyn Fedak Vice President and Portfolio Manager /s/ Steven Pisarkiewicz Steven Pisarkiewicz Vice President and Portfolio Manager 2 ALLIANCEBERNSTEIN VALUE PORTFOLIO Alliance Variable Products Series Fund ================================================================================ PERFORMANCE UPDATE [The following table was depicted as a mountain chart in the printed material.] AB Value Portfolio: $10,070 Russell 1000 Value Index : $9,349 AB Value Russell 1000 Portfolio Value Index ---------------------------------------------------------- 5/31/01 $10,000 $10,000 6/30/01 $ 9,940 $ 9,778 9/30/01 $ 9,300 $ 8,707 12/31/01 $10,070 $ 9,349 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 1000 Value Index (Russell 1000) contains those securities in the Russell 1000 Index with a less-than-average growth orientation. The unmanaged Russell 1000 Index is comprised of the 1000 largest capitalized companies that are traded in the United States. ---------- * Month-end closest to Portfolio inception. Inception date for the Portfolio is 5/1/01. 3 ALLIANCEBERNSTEIN VALUE PORTFOLIO TEN LARGEST HOLDINGS December 31, 2001 Alliance Variable Products Series Fund ================================================================================ -------------------------------------------------------------------------------- COMPANY U.S. $ VALUE PERCENT OF NET ASSETS -------------------------------------------------------------------------------- Exxon Mobil Corp. $ 1,151,490 4.2% -------------------------------------------------------------------------------- Citigroup, Inc. 979,312 3.6 -------------------------------------------------------------------------------- Verizon Communications 766,479 2.8 -------------------------------------------------------------------------------- SBC Communications, Inc. 618,886 2.3 -------------------------------------------------------------------------------- Bank of America Corp. 598,025 2.2 -------------------------------------------------------------------------------- ChevronTexaco Corp. 512,300 1.9 -------------------------------------------------------------------------------- BellSouth Corp. 476,875 1.7 -------------------------------------------------------------------------------- Wells Fargo & Co. 419,292 1.5 -------------------------------------------------------------------------------- Philip Morris Cos., Inc. 394,310 1.5 -------------------------------------------------------------------------------- AT&T Corp. 384,568 1.4 ----------- ---- -------------------------------------------------------------------------------- $ 6,301,537 23.1% -------------------------------------------------------------------------------- 4 ALLIANCEBERNSTEIN VALUE PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2001 Alliance Variable Products Series Fund ================================================================================ Company Shares U.S. $ Value -------------------------------------------------------------------------------- COMMON STOCKS-90.2% FINANCIAL-32.2% BANKS - NYC-4.5% Citigroup, Inc. ............................. 19,400 $ 979,312 J. P. Morgan Chase & Co. .................... 6,800 247,180 ----------- 1,226,492 ----------- FINANCE - PERSONAL LOANS-0.7% American Express Co. ........................ 2,200 78,518 Countrywide Credit Industries, Inc. ......... 3,050 124,959 ----------- 203,477 ----------- LIFE INSURANCE-0.8% MetLife, Inc. ............................... 5,000 158,400 Torchmark, Inc. ............................. 1,300 51,129 ----------- 209,529 ----------- MAJOR REGIONAL BANKS-14.4% AmSouth Bancorp. ............................ 8,500 160,650 Bank of America Corp. ....................... 9,500 598,025 Bank One Corp. .............................. 8,500 331,925 Charter One Financial, Inc. ................. 2,205 59,866 Comerica, Inc. .............................. 3,200 183,360 FleetBoston Financial Corp. ................. 8,300 302,950 Huntington Bancshares, Inc. ................. 7,500 128,925 KeyCorp. .................................... 7,350 178,899 National City Corp. ......................... 6,800 198,832 Regions Financial Corp. ..................... 5,300 158,682 SouthTrust Corp. ............................ 5,500 135,685 Suntrust Banks, Inc. ........................ 3,300 206,910 U.S. Bancorp ................................ 15,800 330,694 Union Planters Corp. ........................ 3,075 138,775 UnionBanCal Corp. ........................... 1,750 66,500 Wachovia Corp. .............................. 10,450 327,712 Wells Fargo & Co. ........................... 9,650 419,292 ----------- 3,927,682 ----------- MISCELLANEOUS FINANCIAL-3.5% Goldman Sachs Group, Inc. ................... 1,975 183,181 Lehman Brothers Holdings, Inc. .............. 3,200 213,760 Merrill Lynch & Co., Inc. ................... 2,375 123,785 MGIC Investment Corp. ....................... 2,700 166,644 Morgan Stanley, Dean Witter & Co. ........... 4,800 268,512 ----------- 955,882 ----------- MULTI-LINE INSURANCE-1.9% Aetna, Inc. ................................. 900 29,691 American International Group, Inc. .......... 1,825 144,905 CIGNA Corp. ................................. 1,450 134,343 Health Net, Inc. (a) ........................ 6,400 139,392 Humana, Inc. (a) ............................ 5,800 68,382 ----------- 516,713 ----------- PROPERTY - CASUALTY INSURANCE-3.0% Allstate Corp. .............................. 7,250 244,325 Aon Corp. ................................... 4,800 170,496 Chubb Corp. ................................. 2,400 165,600 Old Republic International Corp. ............ 3,500 98,035 St. Paul Cos., Inc. ......................... 2,100 92,337 XL Capital, Ltd. Cl.A ....................... 400 36,544 ----------- 807,337 ----------- SAVINGS AND LOAN-3.4% Federal Home Loan Mortgage Corp. ............ 1,600 104,640 Federal National Mortgage Assn. ............. 4,800 381,600 Golden West Financial Corp. ................. 2,950 173,607 Washington Mutual, Inc. ..................... 8,200 268,140 ----------- 927,987 ----------- 8,775,099 ----------- UTILITIES-13.0% ELECTRIC COMPANIES-3.1% Ameren Corp. ................................ 3,800 160,740 American Electric Power Co., Inc. ........... 4,175 181,738 Cinergy Corp. ............................... 4,650 155,449 Consolidated Edison, Inc. ................... 3,950 159,422 FirstEnergy Corp. ........................... 1,800 62,964 Western Resources, Inc. ..................... 3,800 65,360 Xcel Energy, Inc. ........................... 2,150 59,641 ----------- 845,314 ----------- TELEPHONE-9.9% AT&T Corp. .................................. 21,200 384,568 AT&T Wireless Services, Inc. (a) ............ 3 43 BellSouth Corp. ............................. 12,500 476,875 SBC Communications, Inc. .................... 15,800 618,886 Sprint Corp. ................................ 6,700 134,536 Verizon Communications ...................... 16,150 766,479 WorldCom, Inc.- WorldCom Group .............. 22,100 311,168 ----------- 2,692,555 ----------- 3,537,869 ----------- ENERGY-9.3% OILS-INTEGRATED DOMESTIC-2.7% Amerada Hess Corp. .......................... 850 53,125 Ashland, Inc. ............................... 2,700 124,416 Occidental Petroleum Corp. .................. 6,800 180,404 Phillips Petroleum Co. ...................... 2,800 168,728 Sunoco, Inc. ................................ 2,050 76,547 Ultramar Diamond Shamrock Corp. ............. 1,300 64,324 Valero Energy Corp. ......................... 1,600 60,992 ----------- 728,536 ----------- 5 ALLIANCEBERNSTEIN VALUE PORTFOLIO PORTFOLIO OF INVESTMENTS (continued) Alliance Variable Products Series Fund ================================================================================ Company Shares U.S. $ Value -------------------------------------------------------------------------------- OILS-INTEGRATED INTERNATIONAL-6.6% ChevronTexaco Corp. ......................... 5,717 $ 512,300 Conoco, Inc. ................................ 5,000 141,500 Exxon Mobil Corp. ........................... 29,300 1,151,490 ----------- 1,805,290 ----------- 2,533,826 ----------- CONSUMER CYCLICALS-8.6% AUTO PARTS-AFTER MARKET-0.8% Genuine Parts Co. ........................... 4,400 161,480 Snap On, Inc. ............................... 1,925 64,796 ----------- 226,276 ----------- AUTOS & AUTO PARTS-1.2% Autoliv, Inc. (Sweden) ...................... 4,900 99,519 Dana Corp. .................................. 400 5,552 Ford Motor Co. .............................. 3,000 47,160 General Motors Corp. ........................ 700 34,020 Lear Corp. (a) .............................. 3,800 144,932 ----------- 331,183 ----------- HOME FURNISHINGS-0.6% Leggett & Platt, Inc. ....................... 6,600 151,800 ----------- HOTEL-MOTEL-0.2% Hilton Hotels Corp. ......................... 4,000 43,680 ----------- HOUSEHOLD-APPLIANCES/DURABLES-1.5% Black & Decker Corp. ........................ 3,800 143,374 Maytag Corp. ................................ 3,900 121,017 Whirlpool Corp. ............................. 2,100 153,993 ----------- 418,384 ----------- MISCELLANEOUS CONSUMER CYCLICALS-1.1% Fortune Brands, Inc. ........................ 3,400 134,606 Newell Rubbermaid, Inc. ..................... 5,800 159,906 ----------- 294,512 ----------- RETAILERS-2.0% Federated Department Stores, Inc. (a) ....... 4,200 171,780 May Department Stores Co. ................... 2,800 103,544 Sears, Roebuck & Co. ........................ 4,225 201,279 TJX Cos, Inc. ............................... 1,900 75,734 ----------- 552,337 ----------- TEXTILES/SHOES-APPAREL MFG.-1.0% Jones Apparel Group, Inc. (a) ............... 4,000 132,680 Liz Claiborne, Inc. ......................... 2,500 124,375 V. F. Corp. ................................. 650 25,356 ----------- 282,411 ----------- TIRES & RUBBER GOODS-0.2% Goodyear Tire & Rubber Co. .................. 2,200 52,382 ----------- 2,352,965 ----------- COMMODITIES-6.8% CHEMICALS-4.0% Cabot Corp. ................................. 2,200 78,540 E.I. du Pont de Nemours & Co. ............... 8,075 343,268 Eastman Chemical Co. ........................ 1,600 62,432 FMC Corp. ................................... 1,600 95,200 Hercules, Inc. .............................. 3,300 33,000 Praxair, Inc. ............................... 1,950 107,737 The Dow Chemical Co. ........................ 7,900 266,862 The Lubrizol Corp. .......................... 2,650 92,989 ----------- 1,080,028 ----------- PAPER-2.8% Boise Cascade Corp. ......................... 3,400 115,634 Georgia-Pacific Group ....................... 5,850 161,518 International Paper Co. ..................... 5,400 217,890 Mead Corp. .................................. 800 24,712 Smurfit-Stone Container Corp. (a) ........... 7,450 118,976 Temple-Inland, Inc. ......................... 450 25,529 Westvaco Corp. .............................. 3,750 106,688 Willamette Industries, Inc. ................. 100 5,212 ----------- 776,159 ----------- 1,856,187 ----------- CONSUMER STAPLES-6.7% BEVERAGES-SOFT, LITE & HARD-0.4% Coca-Cola Enterprises, Inc. ................. 5,100 96,594 Pepsi Bottling Group, Inc. .................. 900 21,150 ----------- 117,744 ----------- FOODS-2.2% ConAgra Foods, Inc. ......................... 6,700 159,259 H.J. Heinz Co. .............................. 3,875 159,340 Kellogg Co. ................................. 175 5,267 Sara Lee Corp. .............................. 5,100 113,373 Tyson Foods, Inc. Cl.A ...................... 12,976 149,873 ----------- 587,112 ----------- MISCELLANEOUS STAPLES-0.2% Energizer Holdings, Inc. (a) ................ 2,300 43,815 ----------- RESTAURANTS-0.8% McDonald's Corp. ............................ 600 15,882 Tricon Global Restaurants, Inc. (a) ......... 2,000 98,400 Wendy's International, Inc. ................. 3,750 109,388 ----------- 223,670 ----------- RETAIL STORES- FOOD-0.0% SUPERVALU, Inc. ............................. 500 11,060 ----------- 6 Alliance Variable Products Series Fund ================================================================================ Company Shares U.S. $ Value -------------------------------------------------------------------------------- SOAPS-1.0% Procter & Gamble Co. ........................ 3,500 $ 276,955 ----------- SUGAR REFINERS-0.6% Archer-Daniels- Midland Co. ................. 11,105 159,357 ----------- TOBACCO-1.5% Philip Morris Cos., Inc. .................... 8,600 394,310 ----------- 1,814,023 ----------- TECHNOLOGY-4.1% COMMUNICATION-EQUIP. MFRS.-0.4% Nortel Networks Corp. ....................... 1,000 7,500 Tellabs, Inc. (a) ........................... 6,200 92,752 ----------- 100,252 ----------- COMPUTERS-2.0% Hewlett-Packard Co. ......................... 13,500 277,290 International Business Machines Corp. ....... 1,540 186,278 Quantum Corp. (a) ........................... 7,750 76,338 ----------- 539,906 ----------- COMPUTER SERVICES/SOFTWARE-0.3% Electronic Data Systems Corp. ............... 1,300 89,115 ----------- MISCELLANEOUS INDUSTRIAL TECHNOLOGY-1.3% Arrow Electronics, Inc. (a) ................. 1,200 35,880 Avnet, Inc. ................................. 2,000 50,940 Ingram Micro, Inc. Cl.A, (a) ................ 3,000 51,960 Solectron Corp. (a) ......................... 8,310 93,737 Tech Data Corp. (a) ......................... 2,650 114,692 ----------- 347,209 ----------- SEMICONDUCTORS-0.1% Motorola, Inc. .............................. 2,400 36,048 ----------- 1,112,530 ----------- CAPITAL EQUIPMENT-3.7% AEROSPACE - DEFENSE-0.5% B.F. Goodrich Corp. ......................... 4,800 127,776 ----------- AUTO TRUCKS-PARTS-1.2% Cummins Engine Co., Inc. .................... 1,925 74,190 Eaton Corp. ................................. 1,850 137,658 PACCAR, Inc. ................................ 1,800 118,116 ----------- 329,964 ----------- DEFENSE-0.7% Lockheed Martin Corp. ....................... 800 37,336 Raytheon Co. ................................ 4,750 154,233 ----------- 191,569 ----------- ELECTRICAL EQUIPMENT-0.8% Cooper Industries, Inc. ..................... 4,200 146,664 Hubbell, Inc. Cl.B .......................... 2,300 67,574 Thomas & Betts Corp. ........................ 500 10,575 ----------- 224,813 ----------- MACHINERY-0.0% Briggs & Stratton Corp. ..................... 150 6,405 ----------- MISCELLANEOUS CAPITAL GOODS-0.5% Minnesota Mining and Manufacturing Co. ...... 30 3,546 Parker-Hannifin Corp. ....................... 2,900 133,139 ----------- 136,685 ----------- 1,017,212 ----------- CONSUMER GROWTH-2.4% DRUGS-0.8% American Home Products Corp. ................ 125 7,670 Bristol-Myers Squibb Co. .................... 250 12,750 Merck & Co., Inc. ........................... 1,800 105,840 Pfizer, Inc. ................................ 175 6,974 Pharmacia Corp. ............................. 1,800 76,770 ----------- 210,004 ----------- ENTERTAINMENT-0.4% Viacom, Inc. (a) ............................ 650 28,698 Walt Disney Co. ............................. 4,100 84,952 ----------- 113,650 ----------- HOSPITAL SUPPLIES-0.4% Abbott Laboratories ......................... 675 37,631 Johnson & Johnson ........................... 980 57,918 ----------- 95,549 ----------- PUBLISHING-0.4% R.R. Donnelley & Sons Co. ................... 4,250 126,182 ----------- RADIO-TV BROADCASTING-0.4% Liberty Media Corp. Cl.A, (a) ............... 8,375 117,250 ----------- 662,635 ----------- NON-FINANCIAL-1.9% BUILDING MATERIAL-HEAT/PLUMBING/AIR-0.5% Masco Corp. ................................. 4,975 121,888 ----------- FOREST PRODUCTS-0.1% Louisiana-Pacific Corp. ..................... 4,800 40,512 ----------- HOME BUILDING-1.3% Centex Corp. ................................ 2,250 128,452 KB HOME ..................................... 2,500 100,250 Pulte Homes, Inc. ........................... 2,800 125,076 ----------- 353,778 ----------- 7 ALLIANCEBERNSTEIN VALUE PORTFOLIO PORTFOLIO OF INVESTMENTS (continued) Alliance Variable Products Series Fund ================================================================================ Company Shares U.S. $ Value -------------------------------------------------------------------------------- MISCELLANEOUS BUILDING-0.0% Acuity Brands, Inc. (a) ..................... 1,100 $ 13,310 ----------- 529,488 ----------- SERVICES-1.5% RAILROADS-1.5% Burlington Northern Santa Fe Corp. .......... 6,000 171,180 Norfolk Southern Corp. ...................... 4,450 81,568 Union Pacific Corp. ......................... 2,900 165,300 ----------- 418,048 ----------- Total Common Stocks (cost $23,870,068) ....................... 24,609,882 ----------- Principal Amount Company (000) U.S. $ Value -------------------------------------------------------------------------------- SHORT-TERM INVESTMENT-9.6% TIME DEPOSIT-9.6% State Street Euro Dollar 1.25%, 1/02/02 (cost $2,607,000) ........................ $ 2,607 $ 2,607,000 ----------- TOTAL INVESTMENTS-99.8% (cost $26,477,068) ....................... 27,216,882 Other assets less liabilities-.2% ..................... 69,239 ----------- NET ASSETS-100% ............................. $27,286,121 =========== -------------------------------------------------------------------------------- (a) Non-income producing security. See Notes to Financial Statements. 8 ALLIANCEBERNSTEIN VALUE PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES December 31, 2001 Alliance Variable Products Series Fund ================================================================================ ASSETS Investments in securities, at value (cost $26,477,068) ..... $ 27,216,882 Cash ....................................................... 583 Receivable for capital stock sold .......................... 388,728 Dividends and interest receivable .......................... 40,420 Receivable due from Adviser ................................ 25,541 ------------ Total assets ............................................... 27,672,154 ------------ LIABILITIES Payable for investment securities purchased ................ 357,670 Distribution fee payable ................................... 4,992 Payable for capital stock redeemed ......................... 1,914 ------------ Accrued expenses and other liabilities ..................... 21,457 ------------ Total liabilities .......................................... 386,033 ------------ NET ASSETS .................................................... $ 27,286,121 ------------ COMPOSITION OF NET ASSETS Capital stock, at par ...................................... $ 2,711 Additional paid-in capital ................................. 26,544,922 Undistributed net investment income ........................ 88,633 Accumulated net realized loss on investments ............... (89,959) Net unrealized appreciation of investments ................. 739,814 ------------ $ 27,286,121 ============ Class B Shares Net assets ................................................. $ 27,286,121 ============ Shares of capital stock outstanding ........................ 2,710,802 ============ Net asset value per share .................................. $ 10.07 ============ -------------------------------------------------------------------------------- See Notes to Financial Statements. 9 ALLIANCEBERNSTEIN VALUE PORTFOLIO STATEMENT OF OPERATIONS May 1, 2001(a) to December 31, 2001 Alliance Variable Products Series Fund ================================================================================ INVESTMENT INCOME Dividends ....................................................... $ 153,949 Interest ........................................................ 17,138 --------- Total investment income ......................................... 171,087 --------- EXPENSES Advisory fee .................................................... 51,252 Distribution fee--Class B ....................................... 17,084 Custodian ....................................................... 41,301 Administrative .................................................. 34,500 Audit and legal ................................................. 16,091 Printing ........................................................ 5,784 Directors' fees ................................................. 1,205 Transfer agency ................................................. 630 Miscellaneous ................................................... 1,959 --------- Total expenses .................................................. 169,806 Less: expenses waived and reimbursed (see Note B) ............... (87,352) --------- Net expenses .................................................... 82,454 --------- Net investment income ........................................... 88,633 --------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized loss on investment transactions .................... (89,959) Net change in unrealized appreciation/depreciation of investments 739,814 --------- Net gain on investments ......................................... 649,855 --------- NET INCREASE IN NET ASSETS FROM OPERATIONS ......................... $ 738,488 ========= -------------------------------------------------------------------------------- (a) Commencement of operations. See Notes to Financial Statements. 10 ALLIANCEBERNSTEIN VALUE PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS Alliance Variable Products Series Fund ================================================================================
May 1, 2001(a) to December 31, 2001 =============== INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income .................................................. $ 88,633 Net realized loss on investment transactions ........................... (89,959) Net change in unrealized appreciation/depreciation of investments ...... 739,814 ------------ Net increase in net assets from operations ............................. 738,488 CAPITAL STOCK TRANSACTIONS Net increase ........................................................... 26,547,633 ------------ Total increase ......................................................... 27,286,121 NET ASSETS Beginning of period .................................................... -0- ------------ End of period (including undistributed net investment income of $88,633) $ 27,286,121 ============
-------------------------------------------------------------------------------- (a) Commencement of operations. See Notes to Financial Statements. 11 ALLIANCEBERNSTEIN VALUE PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2001 Alliance Variable Products Series Fund ================================================================================ NOTE A: Significant Accounting Policies The AllianceBernstein Value 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 growth of capital. The Portfolio commenced operations on May 1, 2001. 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. As of December 31, 2001, the Portfolio had only Class B shares outstanding. 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. 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 12 Alliance Variable Products Series Fund ================================================================================ 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. 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. During the current fiscal year, there were no permanent differences. -------------------------------------------------------------------------------- NOTE B: Advisory Fee and Other Transactions with Affiliates Under the terms of an investment advisory agreement, the Portfolio pays Alliance Capital Management L.P. (the "Adviser"), an investment advisory fee at an annualized rate of .75% of the Portfolio's average daily net assets. Pursuant to the advisory agreement, the Portfolio paid $34,500 to the Adviser representing the cost of certain legal and accounting services provided to the Portfolio by the Adviser for the period ended December 31, 2001. During the period 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 1.20% of the average daily net assets for Class B shares. Expense waivers/reimbursements, if any, are accrued daily and paid monthly. For the period ended December 31, 2001, such waivers/reimbursements amounted to $87,352. Brokerage commissions paid on investment transactions for the period ended December 31, 2001, amounted to $34,797, of which $15,649 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 $630 for the period 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 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 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 ALLIANCEBERNSTEIN VALUE 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 period ended December 31, 2001, were as follows: Purchases: Stocks and debt obligations ............................ $ 24,387,436 U.S. government and agencies ........................... -0- Sales: Stocks and debt obligations ............................ $ 427,078 U.S. government and agencies ........................... -0- At December 31, 2001, the cost of investments for federal income tax purposes was $26,477,068. Accordingly, gross unrealized appreciation and unrealized depreciation are as follows: Gross unrealized appreciation .......................... $ 1,155,907 Gross unrealized depreciation .......................... (416,093) ------------ Net unrealized appreciation ............................ $ 739,814 ============ 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 14 Alliance Variable Products Series Fund ================================================================================ treated as a realized gain, or if the premium received is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium received is added to the proceeds from the sale of the underlying security or currency in determining whether the Portfolio has realized a gain or loss. In writing an option, the Portfolio bears the market risk of an unfavorable change in the price of the security or currency underlying the written option. Exercise of an option written by the Portfolio could result in the Portfolio selling or buying a security or currency at a price different from the current market value. The Portfolio had no transactions in options written for the period ended December 31, 2001. -------------------------------------------------------------------------------- NOTE E: Distributions to Shareholders As of December 31, 2001, the components of accumulated earnings/(deficit) on a tax basis were as follows: Undistributed ordinary income ............................ $ 88,633 --------- Accumulated earnings ..................................... 88,633 Accumulated capital and other losses ..................... (89,959)(a) Unrealized appreciation/(depreciation) ................... 739,814 --------- Total accumulated earnings/(deficit) ..................... $ 738,488 ========= (a) On December 31, 2001, the Portfolio had a capital loss carryforward of $89,959 which will expire on December 31, 2009. To the extent future capital gains are offset by capital loss carryforwards, such gains will not be distributed. -------------------------------------------------------------------------------- NOTE F: Capital Stock There are 500,000,000 Class B shares of $.001 par value capital stock authorized. Transactions in capital stock were as follows: ----------------- ----------------- SHARES AMOUNT ----------------- ----------------- May 1, 2001(a) to May 1, 2001(a) to December 31, December 31, 2001 2001 ================= ================= Class B Shares sold ........................ 2,757,370 $ 26,981,265 Shares redeemed .................... (46,568) (433,632) ---------- ------------ Net increase ....................... 2,710,802 $ 26,547,633 ========== ============ -------------------------------------------------------------------------------- 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. -------------------------------------------------------------------------------- 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 period ended December 31, 2001. ---------- (a) Commencement of operations. 15 ALLIANCEBERNSTEIN VALUE PORTFOLIO FINANCIAL HIGHLIGHTS Alliance Variable Products Series Fund ================================================================================ Selected Data For A Share Of Capital Stock Outstanding Throughout The Period ------------ CLASS B ------------ May 1, 2001(a) to December 31, 2001 ============ Net asset value, beginning of period ......................... $ 10.00 ---------- Income From Investment Operations Net investment income (b)(c) ................................. .08 Net realized and unrealized loss on investment transactions .. (.01) ---------- Net increase in net asset value from operations .............. .07 ---------- Net asset value, end of period ............................... $ 10.07 ========== Total Return Total investment return based on net asset value (d) ......... .70% Ratios/Supplemental Data Net assets, end of period (000's omitted) .................... $ 27,286 Ratio to average net assets of: Expenses, net of waivers and reimbursements ............... 1.20%(e) Expenses, before waivers and reimbursements ............... 2.47%(e) Net investment income (c) ................................. 1.29%(e) Portfolio turnover rate ...................................... 4% ---------- (a) Commencement of operations. (b) Based on average shares outstanding. (c) Net of expenses reimbursed or waived by the Adviser. (d) Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Total investment return calculated for a period of less than one year is not annualized. (e) Annualized. 16 REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS Alliance Variable Products Series Fund ================================================================================ To the Shareholders and Board of Directors AllianceBernstein Value Portfolio Alliance Variable Products Series Fund, Inc. We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the AllianceBernstein Value Portfolio (the "Portfolio"), (one of the portfolios constituting the Alliance Variable Products Series Fund, Inc.) as of December 31, 2001, and the related statements of operations, changes in net assets and the financial highlights for the period from May 1, 2001 (commencement of operations) to December 31, 2001. 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 audit. We conducted our audit 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 audit provides 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 AllianceBernstein Value Portfolio of the Alliance Variable Products Series Fund, Inc. at December 31, 2001, and the results of its operations, the changes in its net assets and the financial highlights for the period from May 1, 2001 (commencement of operations) to December 31, 2001, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP New York, New York February 12, 2002 17 ALLIANCEBERNSTEIN VALUE 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. 18 ALLIANCEBERNSTEIN VALUE 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. 19 ALLIANCEBERNSTEIN VALUE 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. 20 ALLIANCEBERNSTEIN VALUE PORTFOLIO Alliance Variable Products Series Fund ================================================================================ Officer Information Certain information concerning the Fund's officers is set forth below.
NAME, PRINCIPAL ADDRESS,* POSITION(S) OCCUPATION DURING AND AGE HELD WITH FUND 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. Marilyn G. Fedak, 55 Vice President Chief Investment Officer - U.S. Value Equities and Executive Vice President of ACMC since October 2000. Prior thereto, she was Chief Investment Officer and Chairman of the U.S. Equity Investment Policy Group at Bernstein since prior to 1997. Steven Pisarkiewicz, 52 Vice President Senior Vice President and Chairman of the Structured Equities Investment Policy Group of ACMC's Bernstein Investment Research and Management ("Bernstein Unit") unit since October 2000. Prior thereto, he was a Managing Director at Bernstein since prior to 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 Chief Financial Officer Senior Vice President of AGIS, with which he has been 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. 21