N-30D 1 edg7531.txt VARP INTERNATIONAL ALLIANCE -------------------------------------------------------------- VARIABLE PRODUCTS -------------------------------------------------------------- SERIES FUND -------------------------------------------------------------- ALLIANCEBERNSTEIN -------------------------------------------------------------- INTERNATIONAL VALUE -------------------------------------------------------------- PORTFOLIO -------------------------------------------------------------- ANNUAL REPORT DECEMBER 31, 2001 Investment Products Offered --------------------------- > Are Not FDIC Insured > May Lose Value > Are Not Bank Guaranteed --------------------------- ALLIANCEBERNSTEIN INTERNATIONAL 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 International Value Portfolio (the "Portfolio") for the reporting period ended December 31, 2001. INVESTMENT OBJECTIVE The Portfolio seeks long-term growth of capital. The Portfolio will invest primarily in a diversified portfolio of foreign equity securities. The Portfolio's investment policies emphasize investment in companies that are determined by Alliance to be undervalued, using the fundamental value approach of Alliance's Bernstein unit. In selecting securities for the Portfolio, Bernstein uses its fundamental research to identify companies whose long-term earnings power is not reflected in the current market price of their securities. In order to hedge a portion of currency risk, the Portfolio may from time to time invest in currency futures contracts or currency forward contracts. INVESTMENT RESULTS Listed below is the Portfolio's cumulative total return for the since inception period ended December 31, 2001. Since Inception (5/01) -1.30% 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 Portfolio returned -0.60% for the six-month period ended December 31, 2001 and -1.30% for the since inception period, comfortably ahead of its benchmark, the Morgan Stanley Capital International (MSCI) Europe, Australasia and Far East (EAFE) Index, which returned -7.95% and -11.77%, respectively. Not surprisingly, the source of the Portfolio's premium was stock selection. The Portfolio's better-than-average performers across a range of sectors and geographies contributed positively and significantly to relative performance. In addition, the Portfolio's underweight position in technology and telecommunications stocks also helped performance. These two sectors underperformed massively for the year, despite their fourth quarter rally. Notably, we also gained a meaningful portion of our premium in particularly challenging environments--the Japanese market and economically sensitive industries. This highlights the importance of research in identifying companies that are doing the right things to improve the company's performance results, even in hostile settings. MARKET REVIEW Markets were weak for much of 2001 due to concerns related to the pace of economic growth. Then, as some began to speculate that we were hitting a bottom in this cycle, the September 11 attacks in the United States seemed to forestall hopes of near-term recovery, and stocks around the world sold off in the weeks that followed. This created strong opportunities in equity markets around the world, such that have not been seen for quite some time. New hopes for global economic rebound produced positive returns for the European, Australasian and Far Eastern markets in the fourth quarter, as they recovered somewhat from their post-September 11 lows. INVESTMENT OUTLOOK Expectations are growing for an economic recovery. Central banks around the world have been aggressive in trying to stimulate growth. The U.S. Federal Reserve set the tone, with 11 rate cuts last year (four since September 11 alone) totaling 4.75%. Central banks in Europe, the UK and Canada also moved into easing mode, and even the Bank of Japan cut its rate from 0.25% to zero early in the year. Consequently, the so-called risk-free rates on short-term government debt are at 40-year lows in the U.S., the UK and Canada. Oil prices dropped 27% during the year, which should act much like a significant tax cut for many businesses and consumers. Finally, companies that are slashing inventory levels will likely leverage the impact of renewed demand. However, our investment strategy is not driven by economic forecasts. The Portfolio is positioned to do well in a range of economic environments. Cyclical stocks continue to represent an important group of investments today, particularly companies whose conservative investment patterns have strengthened them to weather a downturn and rebound in a recovery. 1 ALLIANCEBERNSTEIN INTERNATIONAL VALUE PORTFOLIO Alliance Variable Products Series Fund ================================================================================ In the financial services sector, we emphasize companies whose financial strength and good risk assessment should allow them to hold up better than most companies in a weak market, and who are most likely to restore profit growth quickly when the environment turns. Furthermore, international stock markets continue to look attractive relative to the U.S., based on stock pricing, lower excess production capacity and the accelerating pace of corporate restructuring abroad. We have, thus, positioned the Portfolio to capture the most attractive opportunities we see. We appreciate your investment in AllianceBernstein International Value Portfolio and look forward to reporting further investment progress in the coming period. Sincerely, /s/ Andrew Adelson Andrew Adelson Vice President and Portfolio Manager /s/ Kevin Simms Kevin Simms Vice President and Portfolio Manager 2 ALLIANCEBERNSTEIN INTERNATIONAL VALUE PORTFOLIO Alliance Variable Products Series Fund ================================================================================ PERFORMANCE UPDATE [The following table was depicted as a mountain chart in the printed material.] AB International Value Portfolio: $9,870 MSCI EAFE Index: $8,832 AB International Value Portfolio MSCI EAFE Index ------------------------------------------------------------------------------- 5/31/01 $10,000 $10,000 6/30/01 $ 9,930 $ 9,595 9/30/01 $ 8,880 $ 8,256 12/31/01 $ 9,870 $ 8,832 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 Morgan Stanley Capital International (MSCI) Europe, Australasia and Far East (EAFE) Index measures the overall performance of stock markets in 21 countries within Europe, Australasia and the Far East. -------------------------------------------------------------------------------- * Since closest month-end after Portfolio's inception. Inception date for the Portfolio is 5/10/01. 3 ALLIANCEBERNSTEIN INTERNATIONAL VALUE PORTFOLIO TEN LARGEST HOLDINGS December 31, 2001 Alliance Variable Products Series Fund ================================================================================ -------------------------------------------------------------------------------- COMPANY U.S. $ VALUE PERCENT OF NET ASSETS -------------------------------------------------------------------------------- Honda Motor Co., Ltd. $ 223,555 3.9% -------------------------------------------------------------------------------- DSM NV 215,380 3.8 -------------------------------------------------------------------------------- PSA Peugoet Citroen 214,649 3.7 -------------------------------------------------------------------------------- Royal & Sun Alliance Insurance Group Plc 208,608 3.6 -------------------------------------------------------------------------------- Compal Electronics, Inc. (GDR) 182,535 3.2 -------------------------------------------------------------------------------- Stora Enso Oyj 180,485 3.1 -------------------------------------------------------------------------------- Eni S.p.A. 175,466 3.1 -------------------------------------------------------------------------------- Canon, Inc. 172,124 3.0 -------------------------------------------------------------------------------- Safeway Plc 165,151 2.9 -------------------------------------------------------------------------------- Lloyds TSB Group Plc 159,426 2.8 --------- ----- -------------------------------------------------------------------------------- $ 1,897,379 33.1% -------------------------------------------------------------------------------- SECTOR DIVERSIFICATION December 31, 2001 ================================================================================ -------------------------------------------------------------------------------- SECTOR U.S. $ VALUE PERCENT OF NET ASSETS -------------------------------------------------------------------------------- Capital Equipment $ 515,420 9.0% -------------------------------------------------------------------------------- Construction 505,520 8.8 -------------------------------------------------------------------------------- Consumer Cyclical 459,419 8.0 -------------------------------------------------------------------------------- Consumer Staples 116,864 2.0 -------------------------------------------------------------------------------- Energy 382,762 6.6 -------------------------------------------------------------------------------- Finance 1,794,217 31.3 -------------------------------------------------------------------------------- Industrial 182,535 3.2 -------------------------------------------------------------------------------- Industrial Commodities 395,865 6.9 -------------------------------------------------------------------------------- Resources 93,275 1.6 -------------------------------------------------------------------------------- Services 96,339 1.7 -------------------------------------------------------------------------------- Technology 172,124 3.0 -------------------------------------------------------------------------------- Utilities 184,047 3.2 ----------- ------ -------------------------------------------------------------------------------- Total Investments* 4,898,387 85.3 -------------------------------------------------------------------------------- Cash and receivables, net of liabilities 843,386 14.7 ----------- ------ -------------------------------------------------------------------------------- Net Assets $ 5,741,773 100.0% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- * Excludes short-term obligations. 4 ALLIANCEBERNSTEIN INTERNATIONAL VALUE PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2001 Alliance Variable Products Series Fund ================================================================================ Company Shares U.S. $ Value -------------------------------------------------------------------------------- COMMON STOCKS-85.3% AUSTRALIA-1.9% Australia and New Zealand Banking Group, Ltd. ..................... 12,100 $ 110,298 ---------- BRAZIL-1.4% Petroleo Brasileiro, SA (ADR) .............. 3,700 81,911 ---------- CANADA-7.3% Bank of Montreal ........................... 1,000 22,546 Bank of Nova Scotia ........................ 4,300 132,216 Canadian National Railway Co. .............. 2,000 96,339 Magna International, Inc. Cl.A ............. 700 44,445 Talisman Energy, Inc. ...................... 3,300 125,385 ---------- 420,931 ---------- FINLAND-3.2% Stora Enso Oyj ............................. 14,100 180,485 ---------- FRANCE-12.8% Assurances Generales de France (AGF) ............................ 2,800 134,342 BNP Paribas, SA ............................ 1,600 143,136 Compagnie De Saint-Gobain .................. 900 135,792 PSA Peugoet Citroen (a) .................... 5,050 214,649 Societe Generale ........................... 1,920 107,416 ---------- 735,335 ---------- GERMANY-2.5% AMB Generali Holding AG .................... 900 94,446 Hannover Rueckversicherungs- AG....................................... 850 50,989 ---------- 145,435 ---------- HONG KONG-2.3% The Wharf (Holdings), Ltd. ................. 53,000 129,480 ---------- IRELAND-1.9% Bank of Ireland ............................ 11,600 109,763 ---------- ITALY-4.8% Eni S.p.A .................................. 14,000 175,466 San Paolo-IMI S.p.A ........................ 9,105 97,663 ---------- 273,129 ---------- JAPAN-10.6% Canon, Inc. ................................ 5,000 172,124 Fuji Heavy Industries, Ltd. ................ 18,000 77,216 Honda Motor Co., Ltd. ...................... 5,600 223,555 Takefuji Corp. ............................. 1,900 137,486 ---------- 610,381 ---------- MEXICO-1.3% Cemex, SA de CV (ADR) ...................... 2,900 72,543 ---------- Shares or Principal Amount Company (000) U.S. $ Value -------------------------------------------------------------------------------- NETHERLANDS-4.9% DSM NV ..................................... 5,900 $ 215,380 ING Groep NV ............................... 2,600 66,284 ---------- 281,664 ---------- SOUTH AFRICA-1.6% Sappi, Ltd. (ADR) .......................... 9,100 93,275 ---------- SOUTH KOREA-1.5% Hyundai Motor Co., Ltd. .................... (GDR) (a) ............................... 8,500 87,038 ---------- SPAIN-3.3% Grupo Dragados, SA ......................... 4,100 54,854 Iberdrola, SA .............................. 10,500 136,647 ---------- 191,501 ---------- SWEDEN-3.1% Electrolux AB Cl.A ......................... 4,600 68,870 Nordea AB .................................. 20,300 107,783 ---------- 176,653 ---------- TAIWAN-3.2% Compal Electronics, Inc. ................... (GDR) ................................... 28,900 182,535 ---------- UNITED KINGDOM-17.7% British American Tobacco Plc ............... 13,800 116,864 Lattice Group Plc .......................... 20,900 47,400 Lloyds TSB Group Plc ....................... 14,700 159,426 Royal & Sun Alliance Insurance Group Plc ..................... 36,350 208,608 Royal Bank of Scotland Group ................................... 4,600 111,815 Safeway Plc ................................ 35,500 165,151 Six Continents ............................. 9,500 93,915 Wolseley Plc ............................... 13,500 112,851 ---------- 1,016,030 ---------- Total Common Stocks (cost $4,710,549) ....................... 4,898,387 ---------- SHORT-TERM INVESTMENT-10.6% TIME DEPOSIT-10.6% State Street Euro Dollar 1.25%, 1/02/02 (cost $608,000) ......................... $608 608,000 ---------- TOTAL INVESTMENTS-95.9% (cost $5,318,549) ....................... 5,506,387 Other assets less liabilities-4.1% ........................ 235,386 ---------- NET ASSETS-100% ............................ $5,741,773 ========== -------------------------------------------------------------------------------- (a) Non-income producing security. Glossary of Terms: ADR - American Depositary Receipt. GDR - Global Depositary Receipt. See Notes to Financial Statements. 5 ALLIANCEBERNSTEIN INTERNATIONAL VALUE PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES December 31, 2001 Alliance Variable Products Series Fund ================================================================================ ASSETS Investments in securities, at value (cost $5,318,549) ...... $ 5,506,387 Cash ....................................................... 157 Foreign cash, at value (cost $187,349) ..................... 187,625 Receivable for capital stock sold .......................... 161,150 Receivable due from Adviser ................................ 33,377 Dividends and interest receivable .......................... 6,110 ----------- Total assets ............................................... 5,894,806 ----------- LIABILITIES Payable for investment securities purchased ................ 133,312 Payable for capital stock redeemed ......................... 97 Accrued expenses ........................................... 19,624 ----------- Total liabilities .......................................... 153,033 ----------- NET ASSETS .................................................... $ 5,741,773 =========== COMPOSITION OF NET ASSETS Capital stock, at par ...................................... $ 581 Additional paid-in capital ................................. 5,558,602 Undistributed net investment income ........................ 19,968 Accumulated net realized loss on investments, futures contracts and foreign currency transactions ...... (35,768) Net unrealized appreciation of investments, futures contracts and foreign currency denominated assets and liabilities .......................................... 198,390 ----------- $ 5,741,773 =========== Class A Shares Net assets ................................................. $ 3,913,303 =========== Shares of capital stock outstanding ........................ 396,326 =========== Net asset value per share .................................. $ 9.87 =========== Class B Shares Net assets ................................................. $ 1,828,470 =========== Shares of capital stock outstanding ........................ 185,275 =========== Net asset value per share .................................. $ 9.87 =========== -------------------------------------------------------------------------------- See Notes to Financial Statements. 6 ALLIANCEBERNSTEIN INTERNATIONAL VALUE PORTFOLIO STATEMENT OF OPERATIONS May 10, 2001(a) to December 31, 2001 Alliance Variable Products Series Fund ================================================================================ INVESTMENT INCOME Dividends (net of foreign taxes withheld of $1,731) .......... $ 15,280 Interest ..................................................... 3,154 --------- Total investment income ...................................... 18,434 --------- EXPENSES Advisory fee ................................................. 11,645 Distribution fee--Class B .................................... 547 Administrative ............................................... 34,500 Custodian .................................................... 29,761 Audit and legal .............................................. 15,902 Printing ..................................................... 5,721 Directors' fees .............................................. 1,157 Transfer agency .............................................. 626 Miscellaneous ................................................ 1,969 --------- Total expenses ............................................... 101,828 Less: expenses waived and reimbursed (see Note B) ............ (89,478) --------- Net expenses ................................................. 12,350 --------- Net investment income ........................................ 6,084 --------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS Net realized loss on investment transactions ................. (35,768) Net realized gain on foreign currency transactions ........... 13,884 Net change in unrealized appreciation/depreciation of: Investments ................................................ 187,838 Futures .................................................... 9,599 Foreign currency denominated assets and liabilities ........ 953 --------- Net gain on investment and foreign currency transactions ..... 176,506 --------- NET INCREASE IN NET ASSETS FROM OPERATIONS ...................... $ 182,590 ========= -------------------------------------------------------------------------------- (a) Commencement of operations. See Notes to Financial Statements. 7 ALLIANCEBERNSTEIN INTERNATIONAL VALUE PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS Alliance Variable Products Series Fund ================================================================================ May 10, 2001(a) to December 31, 2001 ================ INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income ...................................... $ 6,084 Net realized loss on investments, futures contracts and foreign currency transactions ........................ (21,884) Net change in unrealized appreciation/depreciation of investments, futures contracts and foreign currency denominated assets and liabilities .............. 198,390 ----------- Net increase in net assets from operations ................. 182,590 CAPITAL STOCK TRANSACTIONS Net increase ............................................... 5,559,183 ----------- Total increase ............................................. 5,741,773 NET ASSETS Beginning of period ........................................ -0- ----------- End of period (including undistributed net investment income of $19,968) ....................................... $ 5,741,773 =========== -------------------------------------------------------------------------------- (a) Commencement of operations. See Notes to Financial Statements. 8 ALLIANCEBERNSTEIN INTERNATIONAL VALUE PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2001 Alliance Variable Products Series Fund ================================================================================ NOTE A: Significant Accounting Policies The AllianceBernstein International 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 10, 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. 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. 9 ALLIANCEBERNSTEIN INTERNATIONAL VALUE PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2001 (continued) Alliance Variable Products Series Fund ================================================================================ 5. Income and Expenses Expenses attributable to a single portfolio are charged to that portfolio. Expenses of the Fund are charged to each portfolio in proportion to net assets. All income earned and expenses incurred by a portfolio with multi-class shares outstanding are borne on a pro-rata basis by each 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, permanent differences, primarily due to foreign currency transactions, resulted in a net increase in undistributed net investment income and a corresponding increase in accumulated net investment loss. 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 $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 .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 period ended December 31, 2001, such waivers/reimbursements amounted to $89,478. Brokerage commissions paid on investment transactions for the period ended December 31, 2001, amounted to $8,341, of which $842 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 $626 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. 10 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 ............................ $ 5,159,505 U.S. government and agencies ........................... -0- Sales: Stocks and debt obligations ............................ $ 419,905 U.S. government and agencies ........................... -0- At December 31, 2001, the cost of investments for federal income tax purposes was $5,350,200. Accordingly, gross unrealized appreciation and unrealized depreciation are as follows: Gross unrealized appreciation .......................... $ 262,273 Gross unrealized depreciation .......................... (106,086) ----------- Net unrealized appreciation ............................ $ 156,187 =========== 1. Financial Futures Contracts The Portfolio may buy or sell financial futures contracts for the purpose of hedging its portfolio against adverse affects of anticipated movements in the market. The Portfolio bears the market risk that arises from changes in the value of these financial instruments. At the time the Portfolio enters into a futures contract, the Portfolio deposits and maintains as collateral an initial margin as required by the exchange on which the transaction is effected. Pursuant to the contract, the Portfolio agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as variation margin and are recorded by the Portfolio as unrealized gains or losses. When the contract is closed, the Portfolio records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed. At December 31, 2001, the Portfolio had outstanding futures contracts as follows:
Value at Number of Expiration Original December 31, Unrealized Type Contracts Position Month Value 2001 Appreciation ============= ========= ======== ========== ======== ============ ============ EURO STOXX 50 9 Long Mar 2002 $294,823 $304,422 $9,599
A portion of the foreign cash included in the statement of assets and liabilities has been segregated as collateral for the futures transactions outstanding at December 31, 2001. 2. 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. 11 ALLIANCEBERNSTEIN INTERNATIONAL VALUE PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2001 (continued) Alliance Variable Products Series Fund ================================================================================ 3. Option Transactions For hedging and investment purposes, the Portfolio may purchase and write call options and purchase put options on U.S. securities that are traded on U.S. securities exchanges and over-the-counter markets. The risk associated with purchasing an option is that the Portfolio pays a premium whether or not the option is exercised. Additionally, the Portfolio bears the risk of loss of premium and change in market value should the counterparty not perform under the contract. Put and call options purchased are accounted for in the same manner as portfolio securities. The cost of securities acquired through the exercise of call options is increased by premiums paid. The proceeds from securities sold through the exercise of put options are decreased by the premiums paid. When the Portfolio writes an option, the premium received by the Portfolio is recorded as a liability and is subsequently adjusted to the current market value of the option written. Premiums received from which written options expire unexercised are recorded by the Portfolio on the expiration date as realized gains from written options. The difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium received is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium received is added to the proceeds from the sale of the underlying security or currency in determining whether the Portfolio has realized a gain or loss. In writing an option, the Portfolio bears the market risk of an 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 ............................ $ 22,685 --------- Accumulated earnings ..................................... 22,685 Accumulated capital and other losses ..................... (6,834)(a) Unrealized appreciation/(depreciation) ................... 166,739(b) --------- Total accumulated earnings/(deficit) ..................... $ 182,590 ========= -------------------------------------------------------------------------------- (a) On December 31, 2001, the Portfolio had a net capital loss carryforward of $4,117 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. 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 period ended December 31, 2001, the Portfolio deferred to January 1, 2002, post October currency losses of $2,717. (b) The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales. 12 Alliance Variable Products Series Fund ================================================================================ NOTE F: Capital Stock There are 1,000,000,000 shares of $.001 par value capital stock authorized, divided into two classes, designated Class A and Class B shares. Each class consists of 500,000,000 authorized shares. Transactions in capital stock were as follows: ================== ================== SHARES AMOUNT ================== ================== May 10, 2001(a) to May 10, 2001(a) to December 31, December 31, 2001 2001 ================== ================== Class A Shares sold ......................... 534,207 $ 5,054,653 Shares redeemed ..................... (137,881) (1,246,108) ------------------ ------------------ Net increase ........................ 396,326 $ 3,808,545 ================== ================== August 15, 2001(b) August 15, 2001(b) to December 31, to December 31, 2001 2001 ================== ================== Class B Shares sold ......................... 188,151 $ 1,778,002 Shares redeemed ..................... (2,876) (27,364) ------------------ ------------------ Net increase ........................ 185,275 $ 1,750,638 ================== ================== -------------------------------------------------------------------------------- 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. (b) Commencement of distribution. 13 ALLIANCEBERNSTEIN INTERNATIONAL VALUE PORTFOLIO FINANCIAL HIGHLIGHTS Alliance Variable Products Series Fund ================================================================================ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
============ ============ CLASS A CLASS B ============ ============ May 10, August 15, 2001(a) to 2001(b) to December 31, December 31, 2001 2001 ============ ============ Net asset value, beginning of period ...................... $10.00 $10.25 ------ ------ Income From Investment Operations Net investment income (c)(d) .............................. .04 .01 Net realized and unrealized loss on investment transactions (.17) (.39) ------ ------ Net decrease in net asset value from operations ........... (.13) (.38) ------ ------ Net asset value, end of period ............................ $ 9.87 $ 9.87 ====== ====== Total Return Total investment return based on net asset value (e) ...... (1.30)% (3.71)% Ratios/Supplemental Data Net assets, end of period (000's omitted) ................. $3,913 $1,828 Ratio to average net assets of: Expenses, net of waivers and reimbursements (f) ........ .95% 1.20% Expenses, before waivers and reimbursements (f) ........ 8.41% 9.31% Net investment income (d)(f) ........................... .59% .17% Portfolio turnover rate ................................... 22% 22%
-------------------------------------------------------------------------------- (a) Commencement of operations. (b) Commencement of distribution. (c) Based on average shares outstanding. (d) Net of expenses reimbursed or waived by the Adviser. (e) 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. (f) Annualized. 14 REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS Alliance Variable Products Series Fund ================================================================================ To the Shareholders and Board of Directors AllianceBernstein International 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 International 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 10, 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 International Value Portfolio of the Alliance Variable Products Series Fund, Inc. at December 31, 2001, and results of its operations, the changes in its net assets and the financial highlights for the period from May 10, 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 15 ALLIANCEBERNSTEIN INTERNATIONAL 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. 16 ALLIANCEBERNSTEIN INTERNATIONAL 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. 17 ALLIANCEBERNSTEIN INTERNATIONAL 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. 18 ALLIANCEBERNSTEIN INTERNATIONAL VALUE PORTFOLIO Alliance Variable Products Series Fund ================================================================================ Officer Information Certain information concerning the Fund's officers is set forth below. NAME, ADDRESS* POSITION(S) PRINCIPAL OCCUPATION AND AGE HELD 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. Andrew S. Adelson, 46 Vice President Chief Investment Officer of International Value Equities and Executive Vice President of ACMC since October 2000. Prior thereto, he was Chief Investment Officer of International Investment Management Services at Sanford C. Bernstein & Co., Inc. ("Bernstein") since prior to 1997. Kevin F. Simms, 35 Vice President Senior Vice President and Director of Research for International Value and Global Value Equities at ACMC since October 2000. Prior thereto, he was a research analyst 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 Senior Vice President of Financial Officer 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. 19 (This page left intentionally blank.) (This page left intentionally blank.)