N-30D 1 edg7540.txt VARP INTERNATIONAL 12/01 This annual report for Alliance Variable Products Series Fund, Alliance International Portfolio (the "International Portfolio") dated December 31, 2001 is being filed to correct an earlier filing and replace an annual report filed for Alliance Variable Products Series Fund, AllianceBernstein International Value Portfolio (the "International Value Portfolio") dated December 31, 2001, which was inadvertently filed on March 8, 2002 instead of the annual report for the International Portfolio. The annual report for the International Value Portfolio was filed on March 7, 2002. ALLIANCE ---------------------------------------------------- VARIABLE PRODUCTS ---------------------------------------------------- SERIES FUND ---------------------------------------------------- INTERNATIONAL PORTFOLIO ---------------------------------------------------- ANNUAL REPORT DECEMBER 31, 2001 Investment Products Offered --------------------------- > Are Not FDIC Insured > May Lose Value > Are Not Bank Guaranteed --------------------------- INTERNATIONAL PORTFOLIO Alliance Variable Products Series Fund ================================================================================ LETTER TO INVESTORS February 12, 2002 Dear Investor: We are pleased to provide you with an update of Alliance Variable Products Series Fund-Alliance International Portfolio (the "Portfolio") for the annual reporting period ended December 31, 2001. INVESTMENT OBJECTIVE The Portfolio seeks to obtain a total return on its assets from long-term growth of capital principally through a broad portfolio of marketable securities of established non-United States companies (or United States companies having their principal activities and interests outside the United States), companies participating in foreign economies with prospects for growth, and foreign government securities. As a secondary objective, the Portfolio attempts to increase its current income without assuming undue risk. INVESTMENT RESULTS Listed below are the Portfolio's average annual total returns for the one-year, five-year and since inception periods ended December 31, 2001. 1 Year -22.35% 5 Years 0.38% Since Inception (12/92) 5.04% 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 slightly underperformed its benchmark, the Morgan Stanley Capital International (MSCI) Europe, Australasia and Far East (EAFE) Index, for the year 2001 with a return of -22.35% versus the benchmark's return of -21.21%. Year 2001 was as challenging as 2000. During most of the year, the market did not favor growth stocks. We were heartened by the very good performance during the fourth quarter of 2001, however, the Portfolio gained back most of the losses relative to the MSCI EAFE Index during that quarter. Contributing to performance during the year were defensive stocks such as pharmaceuticals and consumer stocks. European bank stocks also aided positive performance results. Despite the volatility in the technology sector during 2001, a few stocks, particularly within the Asia emerging markets, boosted results. On the negative side, European media stocks detracted from performance, as did European insurance stocks. INVESTMENT OUTLOOK The combination of monetary and fiscal stimulus and inventory liquidation should enable the U.S. economy to begin a recovery in 2002, followed by Europe. Japan may lag due to the lack of necessary structural reform within the country. An improving global economy in 2002 bodes well for global markets. Valuations are far from their lows in September, but with expected economic growth, we expect cyclical earnings to "catch up" with valuation. We continue to be invested in those stocks with the most visible earnings growth over the next 12-18 months. As always, a sensible and measured evaluation of price in relation to fundamentals continues to be our guiding light as we move forward in the challenging year ahead. We appreciate your investment in Alliance International Portfolio and look forward to reporting further investment progress in the coming period. Sincerely, /s/ Sandra Yeager Sandra Yeager Vice President and Portfolio Manager 1 INTERNATIONAL PORTFOLIO Alliance Variable Products Series Fund ================================================================================ PERFORMANCE UPDATE International Portfolio MSCI EAFE Index Lipper International Funds Average [The following table was depicted as a line chart in the printed material.] Lipper International Funds Average: $ 19,466 MSCI EAFE Index: $18,066 International Portfolio: $ 15,578 International MSCI EAFE Lipper International Portfolio Index Funds Average ------------------------------------------------------------------------------ 12/31/92* $10,000 $10,000 $10,000 12/31/93 $12,160 $13,294 $13,357 12/31/94 $12,975 $14,366 $13,332 12/31/95 $14,254 $16,026 $14,807 12/31/96 $15,287 $17,045 $16,931 12/31/97 $15,796 $17,396 $18,386 12/31/98 $17,852 $20,933 $21,028 12/31/99 $25,034 $26,647 $28,974 12/31/00 $20,062 $22,928 $24,405 12/31/01 $15,578 $18,066 $19,466 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 (MSCI EAFE) measures the overall performance of stock markets in 21 countries within Europe, Australasia and the Far East. The Lipper International Funds Average (Lipper International Funds Average) reflects performance of 100 mutual funds. -------------------------------------------------------------------------------- * Since closest month-end after Portfolio's inception. Inception date for the Portfolio is 12/28/92. 2 INTERNATIONAL PORTFOLIO TEN LARGEST HOLDINGS December 31, 2001 Alliance Variable Products Series Fund ================================================================================ ================================================================================ COMPANY U.S. $VALUE PERCENT OF NET ASSETS ================================================================================ Takeda Chemical Industries, Ltd. $ 2,919,510 4.5% -------------------------------------------------------------------------------- Vodafone Group Plc 2,812,045 4.4 -------------------------------------------------------------------------------- British Sky Broadcasting Group Plc 2,594,744 4.0 -------------------------------------------------------------------------------- Royal Bank of Scotland Group Plc 2,447,767 3.8 -------------------------------------------------------------------------------- Banco Bilbao Vizcaya Argentaria, SA 2,384,294 3.7 -------------------------------------------------------------------------------- Sanofi-Synthelabo, SA 2,382,551 3.7 -------------------------------------------------------------------------------- Shin-Etsu Chemical Co., Ltd. 2,228,990 3.5 -------------------------------------------------------------------------------- Canon, Inc. 2,210,076 3.4 -------------------------------------------------------------------------------- L'Oreal, SA 2,196,401 3.4 -------------------------------------------------------------------------------- CRH Plc 2,078,890 3.2 ----------- ---- -------------------------------------------------------------------------------- $24,255,268 37.6% -------------------------------------------------------------------------------- Sector Diversification December 31, 2001 ================================================================================ ================================================================================ SECTOR U.S. $ Value PERCENT OF NET ASSETS ================================================================================ Basic Industries $ 2,228,990 3.5% -------------------------------------------------------------------------------- Capital Goods 3,400,454 5.3 -------------------------------------------------------------------------------- Consumer Manufacturing 3,639,048 5.7 -------------------------------------------------------------------------------- Consumer Services 9,608,304 14.9 -------------------------------------------------------------------------------- Consumer Staples 5,876,013 9.1 -------------------------------------------------------------------------------- Energy 3,492,887 5.4 -------------------------------------------------------------------------------- Finance 14,954,038 23.2 -------------------------------------------------------------------------------- Healthcare 7,774,192 12.1 -------------------------------------------------------------------------------- Multi Industry 665,275 1.0 -------------------------------------------------------------------------------- Technology 11,930,521 18.5 -------------------------------------------------------------------------------- Utilities 351,510 0.5 ----------- ----- -------------------------------------------------------------------------------- Total Investments* 63,921,232 99.2 -------------------------------------------------------------------------------- Cash and receivables, net of liabilities 527,519 0.8 ----------- ----- -------------------------------------------------------------------------------- Net Assets $64,448,751 100.0% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- * Excludes short-term obligations. 3 INTERNATIONAL PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2001 Alliance Variable Products Series Fund ================================================================================ Company Shares U.S. $ Value -------------------------------------------------------------------------------- COMMON STOCKS & OTHER INVESTMENTS-99.2% BELGIUM-0.3% Interbrew ........................................ 6,700 $ 183,393 ----------- FINLAND-2.8% Nokia AB Corp. ................................... 68,928 1,776,877 ----------- FRANCE-18.5% Alcatel, SA Cl.A ................................. 13,830 236,367 BNP Paribas, SA .................................. 22,840 2,043,268 Carrefour, SA .................................... 34,300 1,783,077 L'Oreal, SA ...................................... 30,500 2,196,401 LVMH Moet Hennessy Louis Vuitton ................. 10,400 423,071 Sanofi-Synthelabo, SA ............................ 31,940 2,382,551 Schneider Electric SA ............................ 16,000 769,090 STMicroelectronics NV ............................ 31,285 1,003,933 TotalFinaElf, SA Cl.B ............................ 7,564 1,079,988 ----------- 11,917,746 ----------- GERMANY-2.9% Bayerische Motoren Werke (BMW) AG ................ 21,400 745,777 SAP AG ........................................... 8,500 1,106,946 ----------- 1,852,723 ----------- HONG KONG-3.2% Cheung Kong Holdings, Ltd. ....................... 66,000 685,582 Citic Pacific, Ltd. .............................. 299,000 665,275 Johnson Electric Holdings, Ltd. .................. 130,000 136,706 Li & Fung, Ltd. .................................. 529,000 593,601 ----------- 2,081,164 ----------- IRELAND-3.2% Bank of Ireland .................................. 1 9 CRH Plc .......................................... 118,250 2,078,890 ----------- 2,078,899 ----------- ITALY-4.8% Alleanza Assicurazioni ........................... 168,600 1,853,480 ENI SpA .......................................... 97,200 1,218,238 ----------- 3,071,718 ----------- JAPAN-24.2% Acom Co., Ltd. ................................... 4,200 306,160 Bank of Fukuoka, Ltd. ............................ 133,000 450,744 Banyu Pharmaceutical Co., Ltd. ................... 31,000 461,415 Canon, Inc. ...................................... 64,200 2,210,076 Fast Retailing Co., Ltd. ......................... 1,000 89,001 Honda Motor Co., Ltd. ............................ 20,400 814,381 Hoya Corp. ....................................... 20,000 1,195,329 Kao Corp. ........................................ 30,000 623,998 Keyence Corp. .................................... 2,000 332,646 Nomura Securities Co., Ltd. ...................... 41,000 525,761 NTT Docomo, Inc. ................................. 102 1,198,993 Ricoh Co., Ltd. .................................. 14,000 260,744 Shin-Etsu Chemical Co., Ltd. ..................... 62,000 2,228,990 SMC Corp. ........................................ 9,800 997,878 Sumitomo Trust & Banking Co., Ltd. ............... 235,000 954,278 Takeda Chemical Industries, Ltd. ................. 64,500 2,919,510 ----------- 15,569,904 ----------- NETHERLANDS-1.1% ASM Lithography Holding NV (a) ................... 42,500 738,469 ----------- SINGAPORE-0.7% Flextronics International, Ltd. (a) .............. 17,800 427,022 ----------- SOUTH KOREA-3.6% Samsung Electronics Co., Ltd. .................... 7,020 1,496,813 SK Telecom Co., Ltd. (ADR) ....................... 39,250 848,585 ----------- 2,345,398 ----------- SPAIN-4.7% Banco Bilbao Vizcaya Argentaria, SA .............. 192,700 2,384,294 Industria de Diseno Textil, SA (a) ............... 15,800 301,118 Telefonica de Espana, SA (ADR) ................... 859 34,429 Telefonica, SA (a) ............................... 23,700 317,081 ----------- 3,036,922 ----------- 4 Alliance Variable Products Series Fund ================================================================================ Company Shares U.S. $ Value ------------------------------------------------------------------------------- SWEDEN-2.3% Atlas Copco AB Series A .......................... 66,720 $ 1,496,780 ----------- SWITZERLAND-3.4% Compagnie Financiere Richemont AG Cl.A (a) ....... 6,000 111,533 Credit Suisse Group (a) .......................... 26,048 1,111,231 Swiss Reinsurance (a) ............................ 9,457 951,626 ----------- 2,174,390 ----------- TAIWAN-1.8% Taiwan Semiconductor Manufacturing Co., Ltd. ..... 139,776 349,940 warrants, expiring 1/10/03 (a) ................ 318,900 795,359 ----------- 1,145,299 ----------- UNITED KINGDOM-21.7% AstraZeneca Group Plc ............................ 44,400 1,999,718 AstraZeneca Plc .................................. 239 10,998 BP Plc ........................................... 153,886 1,194,661 British Sky Broadcasting Group Plc (a) ........... 236,085 2,594,744 Pearson Plc ...................................... 55,613 639,525 Reuters Group Plc ................................ 42,400 419,159 Royal Bank of Scotland Group Plc ................. 100,700 2,447,767 Standard Chartered Plc ........................... 103,793 1,237,332 Tesco Plc ........................................ 184,000 666,073 Vodafone Group Plc ............................... 1,076,091 2,812,045 ----------- 14,022,022 ----------- Shares or Principal Amount Company (000) U.S. $ Value ------------------------------------------------------------------------------- UNITED STATES-0.0% Providian Financial Corp. ........................ 706 $ 2,506 ----------- Total Common Stocks & Other Investments (cost $65,926,476) ............................ 63,921,232 ----------- SHORT-TERM INVESTMENT-3.9% TIME DEPOSIT-3.9% State Street Euro Dollar 1.25%, 1/02/02 (cost $2,529,000) ............................. $ 2,529 2,529,000 ----------- TOTAL INVESTMENTS-103.1% (cost $68,455,476) ............................ 66,450,232 Other assets less liabilities-(3.1%) ............. (2,001,481) ----------- NET ASSETS-100% .................................. $64,448,751 =========== ------------------------------------------------------------------------------- (a) Non-income producing security. Glossary: ADR - American Depositary Receipt. See Notes to Financial Statements. 5 INTERNATIONAL PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES December 31, 2001 Alliance Variable Products Series Fund ================================================================================ ASSETS Investments in securities, at value (cost $68,455,476) ...................... $ 66,450,232(a) Cash ........................................................................ 938 Collateral held for securities loaned ....................................... 324,000 Dividends and interest receivable ........................................... 79,342 Receivable for capital stock sold ........................................... 60,654 ------------ Total assets ................................................................ 66,915,166 ------------ LIABILITIES Payable for capital stock redeemed .......................................... 2,017,664 Payable for collateral received on securities loaned ........................ 324,000 Advisory fee payable ........................................................ 29,847 Accrued expenses ............................................................ 94,904 ------------ Total liabilities ........................................................... 2,466,415 ------------ NET ASSETS ...................................................................... $ 64,448,751 ============ COMPOSITION OF NET ASSETS Capital stock, at par ....................................................... $ 5,511 Additional paid-in capital .................................................. 81,139,807 Undistributed net investment income ......................................... 23,490 Accumulated net realized loss on investment and foreign currency transactions (14,712,340) Net unrealized depreciation of investments and foreign currency denominated assets and liabilities .................................................... (2,007,717) ------------ $ 64,448,751 ============ Class A Shares Net assets .................................................................. $ 64,035,892 ============ Shares of capital stock outstanding ......................................... 5,475,832 ============ Net asset value per share ................................................... $ 11.69 ============ Class B Shares Net assets .................................................................. $ 412,859 ============ Shares of capital stock outstanding ......................................... 35,344 ============ Net asset value per share ................................................... $ 11.68 ============
-------------------------------------------------------------------------------- (a) Includes securities on loan with a value of $305,015 (see Note F). See Notes to Financial Statements 6 INTERNATIONAL PORTFOLIO STATEMENT OF OPERATIONS Year Ended December 31, 2001 Alliance Variable Products Series Fund ================================================================================ INVESTMENT INCOME Dividends (net of foreign taxes withheld of $102,917) ....................... $ 762,321 Interest .................................................................... 30,895 ------------ Total investment income ..................................................... 793,216 ------------ EXPENSES Advisory fee ................................................................ 674,078 Distribution fee - Class B .................................................. 185 Custodian ................................................................... 155,072 Administrative .............................................................. 69,000 Audit and legal ............................................................. 38,156 Printing .................................................................... 24,487 Directors' fees ............................................................. 1,952 Transfer agency ............................................................. 949 Miscellaneous ............................................................... 6,711 ------------ Total expenses .............................................................. 970,590 Less: expenses waived and reimbursed (see Note B) ........................... (330,031) ------------ Net expenses ................................................................ 640,559 ------------ Net investment income ....................................................... 152,657 ------------ REALIZED AND UNREALIZED LOSS ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS Net realized loss on investment transactions ................................ (13,270,914) Net realized loss on foreign currency transactions .......................... (72,196) Net change in unrealized appreciation/depreciation of: Investments .............................................................. (3,300,479) Foreign currency denominated assets and liabilities ...................... (202) ------------ Net loss on investment and foreign currency transactions .................... (16,643,791) ------------ NET DECREASE IN NET ASSETS FROM OPERATIONS ...................................... $(16,491,134) ============
-------------------------------------------------------------------------------- See Notes to Financial Statements. 7 INTERNATIONAL PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS Alliance Variable Products Series Fund ================================================================================
Year Ended Year Ended December 31, December 31, 2001 2000 ============= ============= INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income ...................................................... $ 152,657 $ 56,790 Net realized gain (loss) on investment and foreign currency transactions ... (13,343,110) 3,862,846 Net change in unrealized appreciation/depreciation of investments and foreign currency denominated assets and liabilities ........................ (3,300,681) (20,979,631) ------------- ------------- Net decrease in net assets from operations ................................. (16,491,134) (17,059,995) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class A ................................................................. -0- (105,625) Net realized gain on investments Class A ................................................................. (3,843,812) (7,359,954) Distributions in excess of net realized gain on investments Class A ................................................................. (84,320) -0- CAPITAL STOCK TRANSACTIONS Net increase ............................................................... 5,878,008 22,145,328 ------------- ------------- Total decrease ............................................................. (14,541,258) (2,380,246) NET ASSETS Beginning of period ........................................................ 78,990,009 81,370,255 ------------- ------------- End of period (including undistributed net investment income of $23,490 at December 31, 2001) ............................................ $ 64,448,751 $ 78,990,009 ============= =============
-------------------------------------------------------------------------------- See Notes to Financial Statements. 8 INTERNATIONAL PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2001 Alliance Variable Products Series Fund ================================================================================ NOTE A: Significant Accounting Policies The International Portfolio (the "Portfolio") is a series of Alliance Variable Products Series Fund, Inc. (the "Fund"). The Portfolio's investment objective is to seek to obtain a total return on its assets from long-term growth of capital principally through a broad portfolio of marketable securities of established non-U.S. companies (i.e., companies in corporated outside the U.S.), companies participating in foreign economies with prospects for growth, and foreign government securities. 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 sim ilar 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 ex change gains and losses from sales and maturities of securities and forward exchange currency contracts, holdings of foreign currencies, exchange gains and losses realized between the trade and settlement dates on investment transactions, and the difference between the amounts of interest, dividends and foreign 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 INTERNATIONAL PORTFOLIO NOTES TO FINANCIAL STATEMENTS (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, merger transactions and tax character of distributions, resulted in a net decrease in undistributed net investment income, a net increase in accumulated net realized loss on investments and foreign currency transactions and a corresponding increase in additional paid-in capital. This reclassification had no effect on net assets. -------------------------------------------------------------------------------- NOTE B: Advisory Fee and Other Transactions with Affiliates Under the terms of an investment advisory agreement, the Portfolio pays Alliance Capital Management L.P. (the "Adviser"), an investment advisory fee at an annualized rate of 1% of the Portfolio's average daily net assets. Pursuant to the advisory agreement, the Portfolio paid $69,000 to the Adviser representing the cost of certain legal and accounting services provided to the Portfolio by the Adviser for the year ended December 31, 2001. During the year ended December 31, 2001, the Adviser agreed to waive its fee and to reimburse the additional operating expenses to the extent necessary to limit total operating expenses on an annual basis to .95% and 1.20% of the average daily net assets for Class A and Class B shares, respectively. Expense waivers/reimbursements, if any, are accrued daily and paid monthly. For the year ended December 31, 2001, such waivers/reimbursements amounted to $330,031. Brokerage commissions paid on investment transactions for the year ended December 31, 2001 amounted to $145,026, none of which was paid to Sanford C. Bernstein & Co. LLC, an affiliate of the Adviser. The Portfolio compensates Alliance Global Investor Services, Inc. (formerly Alliance Fund Services, Inc.), a wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for providing personnel and facilities to perform transfer agency services for the Portfolio. Such compensation amounted to $949 for the year ended December 31, 2001. -------------------------------------------------------------------------------- NOTE.C: Distribution Plan The Portfolio has adopted a Plan for Class B shares pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "Plan"). Under the Plan, the Portfolio pays distribution and servicing fees to the Distributor at an annual rate of up to .50% of 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 year ended December 31, 2001, were as follows: Purchases: Stocks and debt obligations ............................ $ 37,811,272 U.S. government and agencies ........................... -0- Sales: Stocks and debt obligations ............................ $ 37,152,767 U.S. government and agencies ........................... -0- At December 31, 2001, the cost of investments for federal income tax purposes was $69,281,268. Accordingly, gross unrealized appreciation and unrealized depreciation (excluding foreign currency transactions) are as follows: Gross unrealized appreciation .......................... $ 3,399,339 Gross unrealized depreciation .......................... (6,230,375) ------------ Net unrealized depreciation ............................ $ (2,831,036) ============ 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 un anticipated movements in the value of a foreign currency relative to the U.S. dollar. The face or contract amount, in U.S. dollars, reflects the total exposure the Portfolio has in that particular currency contract. At December 31, 2001, the Portfolio had no outstanding forward exchange currency contracts. 2. Option Transactions For hedging and investment purposes, the Portfolio may purchase and write call options and purchase put options on U.S. securities that are traded on U.S. securities exchanges and over-the-counter markets. The risk associated with purchasing an option is that the Portfolio pays a premium whether or not the option is exercised. Additionally, the Portfolio bears the risk of loss of premium and change in market value should the counterparty not perform under the contract. Put and call options purchased are accounted for in the same manner as portfolio securities. The cost of securities acquired through the exercise of call options is increased by premiums paid. The proceeds from securities sold through the exercise of put options are decreased by the premiums paid. When the Portfolio writes an option, the premium received by the Portfolio is recorded as a liability and is subsequently adjusted to the current market value of the option written. Premiums received from which written options expire unexercised are recorded by the Portfolio on the expiration date as realized gains from written options. The difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium received is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium received is added to the proceeds from the sale of the underlying security or currency in determining whether the Portfolio has realized a gain or loss. In writ- 11 INTERNATIONAL PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) Alliance Variable Products Series Fund ================================================================================ ing an option, the Portfolio bears the market risk of an unfavorable change in the price of the security or currency underlying the written option. Exercise of an option written by the Portfolio could result in the Portfolio selling or buying a security or currency at a price different from the current market value. The Portfolio had no transactions in options written for the year ended December 31, 2001. -------------------------------------------------------------------------------- NOTE E: Distributions to Shareholders The tax character of distributions paid during the fiscal year ended December 31, 2001 and December 31, 2000 were as follows: 2001 2000 ========== ========== Distributions paid from : Ordinary income .......................... $ 467,035 $1,635,076 Net long-term capital gains .............. 3,461,097 5,830,503 ---------- ---------- Total taxable distributions .................. 3,928,132 7,465,579 ---------- ---------- Total distributions paid ..................... $3,928,132 $7,465,579 ========== ========== As of December 31, 2001, the components of accumulated earnings/(deficit) on a tax basis were as follows: Undistributed ordinary income .......................... $ 23,490 ------------ Accumulated earnings ................................... 23,490 Accumulated capital and other losses ................... (13,886,548)(a) Unrealized appreciation/(depreciation) ................. (2,833,509)(b) ------------ Total accumulated earnings/(deficit) ................... $(16,696,567) ============ (a) On December 31, 2001, the Portfolio had a net capital loss carryforward of $9,355,628 of which $1,383,309 will expire on December 31, 2008 and $7,972,319 will expire on December 31, 2009. To the extent future capital gains are offset by capital loss carryforwards, such gains will not be distributed. Based on certain provisions in the Internal Revenue Code, various limitations regarding the future utilization of these carryforwards, brought forward as a result of the Portfolio's merger with Brinson Series Trust Global Equity Portfolio, may apply. Net capital losses incurred after October 31, and within the taxable year are deemed to arise on the first business day of the Portfolio's next taxable year. For the year ended December 31, 2001, the Portfolio deferred to January 1, 2002, post October capital losses of $4,530,920. (b) The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales. -------------------------------------------------------------------------------- NOTE: F Securities Lending The Portfolio has entered into a securities lending agreement with UBS/PaineWebber, Inc. (the "Lending Agent"). Under the terms of the agreement, the Lending Agent, on behalf of the Portfolio, administers the lending of port folio securities to certain broker-dealers. In return, the Portfolio receives fee income from the lending transactions. All loans are continuously secured by collateral exceeding the value of the securities loaned. All collateral consists of either cash or U.S. Government securities. The Lending Agent invests the cash collateral in an eligible money market vehicle in accordance with the investment restrictions of the Portfolio. UBS/Paine Webber will indemnify the Portfolio for any loss resulting from a borrower's failure to return a loaned security when due. As of December 31, 2001, the Portfolio had loaned securities with a value of $305,015 and received cash collateral of $324,000. For the year ended December 31, 2001, the Portfolio received fee income of $2,447 which is included in interest income in the accompanying statement of operations. 12 Alliance Variable Products Series Fund ================================================================================ NOTE G: Capital Stock There are 1,000,000,000 shares of $.001 par value capital stock authorized, divided into two classes, designated Class A and Class B. Each class consists of 500,000,000 authorized shares. Transactions in capital stock were as follows:
============================== ============================== Shares Amount ============================== ============================== Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, 2001 2000 2001 2000 ============= ============= ============= ============= Class A Shares sold .............................. 13,199,338 14,724,676 $ 180,820,739 $ 283,890,498 Shares issued in connection with acquisition of Brinson Series Trust Global Equity Portfolio .............. 439,426 -0- 4,971,061 -0- Shares issued in reinvestment of dividends and distributions .......... 312,999 381,286 3,928,132 7,465,579 Shares redeemed .......................... (13,410,593) (13,907,844) (184,239,914) (269,210,749) ------------- ------------- ------------- ------------- Net increase ............................. 541,170 1,198,118 $ 5,480,018 $ 22,145,328 ============= ============= ============= ============= October 26, 2001* October 26, 2001* to December 31, to December 31, 2001 2001 ================= ================ Class B Shares sold .............................. 764 $ 8,803 Shares issued in connection with acquisition of Brinson Series Trust Global Equity Portfolio .............. 39,110 442,130 Shares redeemed .......................... (4,530) (52,943) ------------- ------------- Net increase ............................. 35,344 $ 397,990 ============= =============
-------------------------------------------------------------------------------- NOTE H: Concentration of Risk Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign exchange rates and the possibility of future political and economic developments which could adversely affect the value of such securities. Moreover, securities of many foreign companies or foreign governments and their markets may be less liquid and their prices more volatile than those of comparable United States companies or of the United States government. -------------------------------------------------------------------------------- NOTE I: Bank Borrowing A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $750 million revolving credit facility (the "Facility") intended to provide short-term financing if necessary, subject to certain restrictions in connection with abnormal redemption activity. Commitment fees related to the Facility are paid by the participating funds and are included in the miscellaneous expenses in the statement of operations. The Portfolio did not utilize the Facility during the year ended December 31, 2001. -------------------------------------------------------------------------------- * Commencement of distribution. 13 INTERNATIONAL PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) Alliance Variable Products Series Fund ================================================================================ NOTE J: Acquisition of Brinson Series Trust Global Equity Portfolio On October 26, 2001, the Portfolio acquired all of the assets and liabilities of the Brinson Series Trust Global Equity Portfolio pursuant to a plan of reorganization approved by the shareholders of Brinson Series Trust Global Equity Portfolio on March 1, 2001. The acquisition was accomplished by a tax-free exchange of 478,536 shares of the Portfolio for 641,573 shares of Brinson Series Trust Global Equity Portfolio on October 26, 2001. The aggregate net assets of the Portfolio and Brinson Series Trust Global Equity Portfolio immediately before the acquisition were $59,923,521 and $5,413,191 (including $268,510 of net unrealized depreciation of investments), respectively. Immediately after the acquisition, the combined net assets of the Portfolio amounted to $65,336,712. 14 INTERNATIONAL PORTFOLIO FINANCIAL HIGHLIGHTS Alliance Variable Products Series Fund ================================================================================ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
------------------------------------------------------------ CLASS A ------------------------------------------------------------ Year Ended December 31, ============================================================ 2001 2000 1999 1998 1997 ======== ======== ======== ======== ======== Net asset value, beginning of period .................... $ 16.01 $ 21.78 $ 16.17 $ 15.02 $ 14.89 -------- -------- -------- -------- -------- Income From Investment Operations Net investment income (a)(b) ............................ .03 .01 .12 .17 .13 Net realized and unrealized gain (loss) on investment and foreign currency transactions ................... (3.55) (4.01) 6.13 1.80 .39 -------- -------- -------- -------- -------- Net increase (decrease) in net asset value from operations ..................................... (3.52) (4.00) 6.25 1.97 .52 -------- -------- -------- -------- -------- Less: Dividends and Distributions Dividends from net investment income .................... -0- (.03) (.15) (.33) (.15) Distributions from net realized gain on investments ..... (.78) (1.74) (.49) (.49) (.24) Distributions in excess of net realized gain on investments ...................................... (.02) -0- -0- -0- -0- -------- -------- -------- -------- -------- Total dividends and distributions ....................... (.80) (1.77) (.64) (.82) (.39) -------- -------- -------- -------- -------- Net asset value, end of period .......................... $ 11.69 $ 16.01 $ 21.78 $ 16.17 $ 15.02 ======== ======== ======== ======== ======== Total Return Total investment return based on net asset value (c) .... (22.35)% (19.86)% 40.23% 13.02% 3.33% Ratios/Supplemental Data Net assets, end of period (000's omitted) ............... $ 64,036 $ 78,990 $ 81,370 $ 65,052 $ 60,710 Ratio to average net assets of: Expenses, net of waivers and reimbursements ......... .95% .95% .95% .95% .95% Expenses, before waivers and reimbursements ......... 1.44% 1.34% 1.36% 1.37% 1.42% Net investment income (a) ........................... .23% .07% .69% 1.08% .87% Portfolio turnover rate ................................. 56% 57% 111% 117% 134%
-------------------------------------------------------------------------------- See footnote summary on page 16. 15 INTERNATIONAL PORTFOLIO FINANCIAL HIGHLIGHTS (continued) Alliance Variable Products Series Fund ================================================================================ Selected Data For A Share Of Capital Stock Outstanding Throughout The Period ------------------- CLASS B ------------------- October 26, 2001(d) to December 31, 2001 =================== Net asset value, beginning of period ............... $ 11.31 ------- Income From Investment Operations Net investment loss (a)(b) ......................... (.02) Net realized and unrealized gain on investment and foreign currency transactions .............. .39 ------- Net increase in net asset value from operations .... .37 ------- Net asset value, end of period ..................... $ 11.68 ======= Total Return Total investment return based on net asset value (c) 3.27% Ratios/Supplemental Data Net assets, end of period (000's omitted) .......... $ 413 Ratio to average net assets of: Expenses, net of waivers and reimbursements .... 1.20%(e) Expenses, before waivers and reimbursements .... 2.26%(e) Net investment loss (a) ........................ (.88)%(e) Portfolio turnover rate ............................ 56% -------------------------------------------------------------------------------- (a) Net of expenses reimbursed or waived by the Adviser. (b) Based on average shares outstanding. (c) Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Total investment return calculated for a period of less than one year is not annualized. (d) Commencement of distribution. (e) Annualized. 16 REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS Alliance Variable Products Series Fund ================================================================================ To the Shareholders and Board of Directors International Portfolio Alliance Variable Products Series Fund, Inc. We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the International Portfolio, (the "Portfolio"), (one of the portfolios constituting the Alliance Variable Products Series Fund, Inc.) as of December 31, 2001, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2001, by correspondence with the custodian and others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the International Portfolio of the Alliance Variable Products Series Fund, Inc. at December 31, 2001, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. /s/ ERNST & YOUNG LLP New York, New York February 12, 2002 FEDERAL INCOME TAX INFORMATION (unaudited) ================================================================================ The Portfolio hereby designated $3,461,097 as long-term capital gain distributions during the taxable year ended December 31, 2001. 17 INTERNATIONAL 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 INTERNATIONAL 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 INTERNATIONAL 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 INTERNATIONAL PORTFOLIO Alliance Variable Products Series Fund ================================================================================ Officer Information Certain information concerning the Fund's officers is set forth below.
NAME, ADDRESS* POSITION(S) HELD PRINCIPAL OCCUPATION AND AGE WITH FUND DURING PAST 5 YEARS** -------------------------------------------------------------------------------------------------------------------------- John D. Carifa, 56 Chairman & President See biography above. Kathleen A. Corbet, 42 Senior Vice President Executive Vice President of ACMC, with which she has been associated since prior to 1997. Alfred L. Harrison, 64 Senior Vice President Vice Chairman of ACMC, with which he has been associated since prior to 1997. Wayne D. Lyski, 60 Senior Vice President Executive Vice President of ACMC, with which he has been associated with since prior to 1997. Sandra Yeager, 37 Vice President Senior Vice President of ACMC, with which she has been associated 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 Senior Vice President of AGIS, with which he has been Chief Financial Officer associated since prior to 1997. Thomas R. Manley, 50 Controller Vice President of ACMC, with which he has been associated since prior to 1997.
-------------------------------------------------------------------------------- * The address for each of the Fund's officers is 1345 Avenue of the Americas, New York, NY 10105. ** ACMC, AFD, ACL, and AGIS are affiliates of the Fund. The Fund's Statement of Additional Information (SAI) has additional information about the Fund's Directors and Officers and is available without charge upon request. Contact your financial representative or Alliance Capital at 800-227-4618 for a free prospectus or SAI. 21