-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NWMoe7av9d/xikVnU10t+8WWH4otRdQi/k/HO5LsfbFxcTSZVX59yY/aYbq1zJpD 7Py96PI0uY2jrfCCLcTUNA== 0000936772-02-000321.txt : 20020819 0000936772-02-000321.hdr.sgml : 20020819 20020816175704 ACCESSION NUMBER: 0000936772-02-000321 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020819 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLIANCE VARIABLE PRODUCTS SERIES FUND INC CENTRAL INDEX KEY: 0000825316 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-05398 FILM NUMBER: 02741828 BUSINESS ADDRESS: STREET 1: 500 PLAZA DRIVE STREET 2: 1345 AVENUE OF THE AMERICAS 31ST FL CITY: NEW YORK STATE: NY ZIP: 10105 BUSINESS PHONE: 2013194105 MAIL ADDRESS: STREET 1: ALLIANCE CAPITAL MANGEMENT LP STREET 2: 1345 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10105 N-30D 1 edg8109.txt VARP GROWTH AND INCOME ALLIANCE ------------------------------------------------- VARIABLE PRODUCTS ------------------------------------------------- SERIES FUND ------------------------------------------------- GROWTH AND INCOME PORTFOLIO ------------------------------------------------- SEMI-ANNUAL REPORT JUNE 30, 2002 Investment Products Offered --------------------------- > Are Not FDIC Insured > May Lose Value > Are Not Bank Guaranteed --------------------------- GROWTH AND INCOME PORTFOLIO TEN LARGEST HOLDINGS June 30, 2002 (unaudited) Alliance Variable Products Series Fund ================================================================================ - ------------------------------------------------------------------------------- PERCENT OF COMPANY U.S. $ VALUE NET ASSETS - ------------------------------------------------------------------------------- Citigroup, Inc. $ 74,690,625 4.4% - ------------------------------------------------------------------------------- J.P. Morgan Chase & Co. 72,928,000 4.3 - ------------------------------------------------------------------------------- Household International, Inc. 63,367,500 3.8 - ------------------------------------------------------------------------------- Bank of America Corp. 59,806,000 3.6 - ------------------------------------------------------------------------------- Union Pacific Corp. 59,761,632 3.6 - ------------------------------------------------------------------------------- BP Plc (ADR) 53,014,500 3.1 - ------------------------------------------------------------------------------- Pfizer, Inc. 52,500,000 3.1 - ------------------------------------------------------------------------------- Wyeth 51,200,000 3.0 - ------------------------------------------------------------------------------- AT&T Corp. 50,825,000 3.0 - ------------------------------------------------------------------------------- Avon Products, Inc. 48,322,000 2.9 ------------ ---- - ------------------------------------------------------------------------------- $586,415,257 34.8% - ------------------------------------------------------------------------------- 1 GROWTH AND INCOME PORTFOLIO PORTFOLIO OF INVESTMENTS June 30, 2002 (unaudited) Alliance Variable Products Series Fund ================================================================================ Company Shares U.S. $ Value - -------------------------------------------------------------------------------- COMMON STOCKS-97.3% FINANCE-29.3% BANKING - MONEY CENTER-4.3% J.P. Morgan Chase & Co. ................... 2,150,000 $ 72,928,000 ------------ BANKING - REGIONAL-6.1% Bank of America Corp. ..................... 850,000 59,806,000 Bank One Corp. ............................ 800,000 30,784,000 KeyCorp ................................... 450,000 12,285,000 ------------ 102,875,000 ------------ BROKERAGE & MONEY MANAGEMENT-2.0% Merrill Lynch & Co., Inc. ................. 825,000 33,412,500 ------------ INSURANCE-2.6% ACE, Ltd. (Bermuda) ....................... 450,000 14,220,000 American International Group, Inc. ............................ 450,000 30,703,500 ------------ 44,923,500 ------------ MORTGAGE BANKING-5.2% Fanni Mae ................................. 600,000 44,250,000 PMI Group, Inc. ........................... 449,000 17,151,800 Washington Mutual, Inc. ................... 700,000 25,977,000 ------------ 87,378,800 ------------ MISCELLANEOUS-9.1% Citigroup, Inc. ........................... 1,927,500 74,690,625 Household International, Inc. ............. 1,275,000 63,367,500 MBNA Corp. ................................ 450,000 14,881,500 ------------ 152,939,625 ------------ 494,457,425 ------------ HEALTH CARE-16.0% DRUGS-8.3% Pfizer, Inc. .............................. 1,500,000 52,500,000 Schering-Plough Corp. ..................... 1,500,000 36,900,000 Wyeth ..................................... 1,000,000 51,200,000 ------------ 140,600,000 ------------ MEDICAL PRODUCTS-0.7% Abbott Laboratories ....................... 317,500 11,953,875 ------------ MEDICAL SERVICES-7.0% Cardinal Health, Inc. ..................... 425,000 26,099,250 HCA, Inc. ................................. 550,000 26,125,000 Tenet Healthcare Corp. (a) ............... 650,000 46,507,500 WellPoint Health Networks, Inc. (a) ............................... 250,000 19,452,500 ------------ 118,184,250 ------------ 270,738,125 ------------ TECHNOLOGY-10.5% COMMUNICATION EQUIPMENT-2.4% Juniper Networks, Inc. (a) ................ 4,000,000 22,600,000 Lucent Technologies, Inc. (a) ............. 5,000,000 8,300,000 QUALCOMM, Inc. (a) ........................ 379,700 10,437,953 ------------ 41,337,953 ------------ COMPUTER SERVICES-1.9% First Data Corp. .......................... 850,000 31,620,000 ------------ CONTRACT MANUFACTURING-2.0% Flextronics International, Ltd. (Singapore) (a) ................... 532,940 3,799,862 Sanmina Corp. (a) ......................... 2,000,000 12,620,000 Solectron Corp. (a) ....................... 2,750,000 16,912,500 ------------ 33,332,362 ------------ SEMI-CONDUCTOR COMPONENTS-3.3% Altera Corp. (a) .......................... 2,200,000 29,920,000 Micron Technology, Inc. (a) ............... 1,250,000 25,275,000 ------------ 55,195,000 ------------ SOFTWARE-0.9% Amdocs, Ltd. (Guernsey)(a) ................ 742,600 5,606,630 Veritas Software Corp. (a) ................ 500,000 9,895,000 ------------ 15,501,630 ------------ 176,986,945 ------------ ENERGY-10.1% DOMESTIC INTEGRATED-1.7% Occidental Petroleum Corp. ................ 460,000 13,795,400 Phillips Petroleum Co. .................... 260,000 15,308,800 ------------ 29,104,200 ------------ DOMESTIC PRODUCERS-2.1% Apache Corp. .............................. 137,758 7,918,330 Kerr-McGee Corp. .......................... 525,000 28,113,750 ------------ 36,032,080 ------------ INTERNATIONAL-4.0% BP Plc (ADR) (United Kingdom) ....................... 1,050,000 53,014,500 Exxon Mobil Corp. ......................... 337,000 13,790,040 ------------ 66,804,540 ------------ OIL SERVICE-1.3% GlobalSantafe Corp. ....................... 250,000 6,837,500 Transocean Sedco Forex, Inc. .............. 450,000 14,017,500 ------------ 20,855,000 ------------ MISCELLANEOUS-1.0% Dynegy, Inc. .............................. 2,394,000 17,236,800 ------------ 170,032,620 ------------ CONSUMER STAPLES-10.0% BEVERAGES-2.7% Anheuser-Busch Cos., Inc. ................. 925,000 46,250,000 ------------ COSMETICS-2.9% Avon Products, Inc. ....................... 925,000 48,322,000 ------------ RETAIL - FOOD & DRUG-1.6% Kroger Co. (a) ............................ 1,350,000 26,865,000 ------------ 2 Alliance Variable Products Series Fund ================================================================================ Company Shares U.S. $ Value - -------------------------------------------------------------------------------- TOBACCO-2.8% Philip Morris Cos., Inc. ................. 1,100,000 $ 48,048,000 -------------- 169,485,000 -------------- UTILITIES-7.7% ELECTRIC & GAS UTILITY-2.1% Ameren Corp. ............................. 300,000 12,903,000 Constellation Energy Group ............... 500,000 14,670,000 Reliant Energy, Inc. ..................... 472,760 7,989,644 -------------- 35,562,644 -------------- TELEPHONE UTILITIES-5.6% AT&T Corp. ............................... 4,750,000 50,825,000 BellSouth Corp. .......................... 400,000 12,600,000 SBC Communications, Inc. ................. 800,000 24,400,000 Sprint Corp. (a) ......................... 591,000 6,270,510 -------------- 94,095,510 -------------- 129,658,154 -------------- TRANSPORTATION-4.3% RAILROADS-4.3% Burlington Northern Santa Fe Corp .................................. 400,000 12,000,000 Union Pacific Corp. ...................... 944,400 59,761,632 -------------- 71,761,632 -------------- CAPITAL GOODS-3.3% MISCELLANEOUS-3.3% General Electric Co. ..................... 1,000,000 29,050,000 United Technologies Corp. ................ 385,000 26,141,500 -------------- 55,191,500 -------------- CONSUMER SERVICES-2.7% BROADCASTING & CABLE-0.9% Comcast Corp. Cl.A (a) ................... 625,000 14,900,000 -------------- Shares or Principal Amount Company (000) U.S. $ Value - -------------------------------------------------------------------------------- CELLULAR COMMUNICATIONS-0.1% Sprint Corp. (PCS Group) (a) ............. 557,600 $ 2,492,472 -------------- ENTERTAINMENT & LEISURE-0.8% Carnival Corp. ........................... 500,000 13,845,000 -------------- RETAIL - GENERAL MERCHANDISE-0.9% Sears, Roebuck & Co. ..................... 265,000 14,389,500 -------------- 45,626,972 -------------- MULTI-INDUSTRY COMPANIES-2.0% Tyco International, Ltd. ................. 2,500,000 33,775,000 -------------- BASIC INDUSTRY-1.4% CHEMICALS-1.4% E.I. du Pont de Nemours & Co. ......................... 350,000 15,540,000 Lyondell Chemical Co. .................... 500,000 7,550,000 -------------- 23,090,000 -------------- Total Common Stocks (cost $1,843,270,781) ................. 1,640,803,373 -------------- SHORT-TERM INVESTMENT-2.5% TIME DEPOSIT-2.5% State Street Euro Dollar 1.25%, 7/01/02 (cost $42,531,000) .................... $ 42,531 42,531,000 -------------- TOTAL INVESTMENTS-99.8% (cost $1,885,801,781) ................. 1,683,334,373 Other assets less liabilities-0.2% ................. 3,398,544 -------------- NET ASSETS-100% .......................... $1,686,732,917 -------------- - -------------------------------------------------------------------------------- (a) Non-income producing security. Glossary: ADR - American Depositary Receipt See Notes to Financial Statements. 3 GROWTH AND INCOME PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES June 30, 2002 (unaudited) Alliance Variable Products Series Fund ================================================================================ ASSETS Investments in securities, at value (cost $1,885,801,781) ............................... $ 1,683,334,373(a) Cash .................................................. 538 Collateral held for securities loaned ................. 63,666,300 Receivable for investment securities sold ............. 19,106,739 Dividends and interest receivable ..................... 2,471,880 --------------- Total assets .......................................... 1,768,579,830 --------------- LIABILITIES Payable for collateral received on securities loaned .. 63,666,300 Payable for investment securities purchased ........... 16,859,780 Advisory fee payable .................................. 895,074 Accrued expenses ...................................... 425,759 --------------- Total liabilities ..................................... 81,846,913 --------------- NET ASSETS ............................................... $ 1,686,732,917 =============== COMPOSITION OF NET ASSETS Capital stock, at par ................................. $ 91,591 Additional paid-in capital ............................ 1,934,387,336 Undistributed net investment income ................... 8,269,634 Accumulated net realized loss on investments .......... (53,548,236) Net unrealized depreciation of investments ............ (202,467,408) --------------- $ 1,686,732,917 =============== Class A Shares Net assets ............................................ $ 565,121,863 =============== Shares of capital stock outstanding ................... 30,557,248 =============== Net asset value per share ............................. $ 18.49 =============== Class B Shares Net assets ............................................ $ 1,121,611,054 =============== Shares of capital stock outstanding ................... 61,033,941 =============== Net asset value per share ............................. $ 18.38 =============== - -------------------------------------------------------------------------------- (a) Includes securities on loan with a value of $61,699,556 (see Note F). See Notes to Financial Statements. 4 GROWTH AND INCOME PORTFOLIO STATEMENT OF OPERATIONS Six Months Ended June 30, 2002 (unaudited) Alliance Variable Products Series Fund ================================================================================ INVESTMENT INCOME Dividends (net of foreign taxes withheld of $70,050) ..... $ 14,779,016 Interest ................................................. 703,948 ------------- Total investment income .................................. 15,482,964 ------------- EXPENSES Advisory fee ............................................. 5,352,029 Distribution fees--Class B ............................... 1,328,425 Custodian ................................................ 190,955 Audit and legal .......................................... 50,861 Administrative ........................................... 37,829 Printing ................................................. 30,283 Directors' fees .......................................... 543 Transfer agency .......................................... 362 Miscellaneous ............................................ 15,872 ------------- Total expenses ........................................... 7,007,159 ------------- Net investment income .................................... 8,475,805 ------------- REALIZED AND UNREALIZED LOSS ON INVESTMENTS Net realized loss on investment transactions ............. (18,156,301) Net change in unrealized appreciation/depreciation of investments ......................................... (241,599,529) ------------- Net loss on investments .................................. (259,755,830) ------------- NET DECREASE IN NET ASSETS FROM OPERATIONS .................. $(251,280,025) ============= - -------------------------------------------------------------------------------- See Notes to Financial Statements. 5 GROWTH AND INCOME PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS Alliance Variable Products Series Fund ================================================================================
Six Months Ended Year Ended June 30, 2002 December 31, (unaudited) 2001 ================ =============== INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income ........................................... $ 8,475,805 $ 9,491,801 Net realized gain (loss) on investment transactions ............. (18,156,301) 24,298,080 Net change in unrealized appreciation/depreciation of investments (241,599,529) (40,616,232) --------------- --------------- Net decrease in net assets from operations ...................... (251,280,025) (6,826,351) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income Class A ....................................................... (3,650,677) (3,814,813) Class B ....................................................... (5,894,119) (2,140,696) Net realized gain on investments Class A ....................................................... (18,762,068) (28,040,271) Class B ....................................................... (36,231,457) (16,582,157) CAPITAL STOCK TRANSACTIONS Net increase .................................................... 439,435,394 872,234,137 --------------- --------------- Total increase .................................................. 123,617,048 814,829,849 NET ASSETS Beginning of period ............................................. 1,563,115,869 748,286,020 --------------- --------------- End of period (including undistributed net investment income of $8,269,634 and $9,338,625, respectively) ...................... $ 1,686,732,917 $ 1,563,115,869 =============== ===============
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 6 GROWTH AND INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS June 30, 2002 (unaudited) Alliance Variable Products Series Fund ================================================================================ NOTE A: Significant Accounting Policies The Growth and Income Portfolio (the "Portfolio") is a series of Alliance Variable Products Series Fund, Inc. (the "Fund"). The Portfolio's investment objective is to seek reasonable current income and reasonable opportunity for appreciation through investments primarily in dividend-paying, common stocks of good quality. 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 amortizes premiums and accretes discounts as adjustments to interest income. Investment gains and losses are determined on the identified cost basis. 5. Income and Expenses Expenses attributable to a single portfolio are charged to that portfolio. Expenses of the Fund are charged to each 7 GROWTH AND INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) Alliance Variable Products Series Fund ================================================================================ portfolio in proportion to net assets. All income earned and expenses incurred by a portfolio with multi-class shares outstanding are borne on a pro-rata basis by each outstanding class of shares, based on the proportionate interest in the portfolio represented by the net assets of such class, except that the portfolio's Class B shares bear the distribution fees. 6. Dividends and Distributions The Portfolio declares and distributes dividends and distributions from net investment income and net realized gains, respectively, if any, at least annually. Income dividends and capital gains distributions to shareholders are recorded on the ex-dividend date. Income dividends and capital gains distributions are determined in accordance with federal tax regulations and may differ from those determined in accordance with accounting principles generally accepted in the United States. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. - -------------------------------------------------------------------------------- NOTE B: Advisory Fee and Other Transactions with Affiliates Under the terms of an investment advisory agreement, the Portfolio pays Alliance Capital Management L.P. (the "Adviser"), an investment advisory fee at an annualized rate of .625% of the Portfolio's average daily net assets. Pursuant to the advisory agreement, the Portfolio paid $37,829 to the Adviser representing the cost of certain legal and accounting services provided to the Portfolio by the Adviser for the six months ended June 30, 2002. Prior to May 1, 2002, the Adviser agreed to waive its fee and to reimburse additional operating expenses ("Expense Limitation Undertaking") 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. The Adviser terminated the Expense Limitation Undertaking effective May 1, 2002. Any expense waivers or reimbursements are accrued daily and paid monthly. For the six months ended June 30, 2002, there were no such waivers or reimbursements. Brokerage commissions paid on investment transactions for the six months ended June 30, 2002 amounted to $2,576,839, of which $130,449 was paid to Sanford C. Bernstein & Co. LLC, an affiliate of the Adviser. The Portfolio compensates Alliance Global Investor Services, Inc., a wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for providing personnel and facilities to perform transfer agency services for the Portfolio. Such compensation amounted to $543 for the six months ended June 30, 2002. - -------------------------------------------------------------------------------- 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. 8 Alliance Variable Products Series Fund ================================================================================ NOTE D: Investment Transactions Purchases and sales of investment securities (excluding short-term investments) for the six months ended June 30, 2002, were as follows: Purchases: Stocks and debt obligations ................................. $ 930,634,757 U.S. government and agencies ................................ -0- Sales: Stocks and debt obligations ................................. $ 491,848,942 U.S. government and agencies ................................ -0- At June 30, 2002, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes. Accordingly, gross unrealized appreciation and unrealized depreciation are as follows: Gross unrealized appreciation ............................... $ 86,835,035 Gross unrealized depreciation ............................... (289,302,443) ------------- Net unrealized depreciation ................................. $(202,467,408) ============= 1. Forward Exchange Currency Contracts The Portfolio may enter into forward exchange currency contracts to hedge exposure to changes in foreign currency exchange rates on foreign portfolio holdings, to hedge certain firm purchase and sales commitments denominated in foreign currencies and for investment purposes. A forward exchange currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. The Portfolio may enter into contracts to deliver or receive foreign currency it will receive from or require for its normal investment activities. It may also use contracts in a manner intended to protect foreign currency denominated securities from declines in value due to unfavorable exchange rate movements. The gain or loss arising from the difference between the original contracts and the closing of such contracts is included in realized gains or losses from foreign currency transactions. Fluctuations in the value of forward exchange currency contracts are recorded for financial reporting purposes as unrealized gains or losses by the Portfolio. The Portfolio's custodian will place and maintain cash not available for investment or other liquid assets in a separate account of the Portfolio having an approximate value equal to the aggregate amount of the Portfolio's commitments under forward exchange currency contracts entered into with respect to position hedges. Risks may arise from the potential inability of a counterparty to meet the terms of a contract and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. The face or contract amount, in U.S. dollars, reflects the total exposure the Portfolio has in that particular currency contract. At June 30, 2002, 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- 9 GROWTH AND INCOME 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 six months ended June 30, 2002. - -------------------------------------------------------------------------------- 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 ......................... $13,089,780 $ 9,364,223 Net long-term capital gains ............. 37,488,157 29,857,029 ----------- ------------ Total taxable distributions ................ 50,577,937 39,221,252 =========== ============ Total distributions paid ................... $50,577,937 $ 39,221,252 =========== ============ As of December 31, 2001, the components of accumulated earnings/(deficit) on a tax basis were as follows: Undistributed ordinary income .............. $ 9,338,625 Undistributed long-term capital gains ...... 54,966,570 ------------ Accumulated earnings ....................... 64,305,195 Accumulated capital and other losses ....... (27,280,471)(a) Unrealized appreciation/(depreciation) ..... 31,047,612 (b) ------------ Total accumulated earnings/(deficit) ....... $ 68,072,336 ============ (a) 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 January 31, 2001, the Portfolio deferred to January 1, 2002, post October capital losses of $27,280,471. (b) The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales. - -------------------------------------------------------------------------------- NOTE F: Securities Lending The Portfolio has entered into a securities lending agreement with UBS/Paine Webber, Inc. (the "Lending Agent"). Under the terms of the agreement, the Lending Agent, on behalf of the Portfolio, administers the lending of portfolio securities to certain broker-dealers. In return, the Portfolio receives fee income from the lending transactions. All loans are continuously secured by collateral exceeding the value of the securities loaned. All collateral consists of either cash or U.S. Government securities. The Lending Agent invests the cash collateral in an eligible money market vehicle in accordance with the investment restrictions of the Portfolio. UBS/Paine Webber will indemnify the Portfolio for any loss resulting from a borrower's failure to return a loaned security when due. As of June 30, 2002, the Portfolio had loaned securities with a value of $61,699,556 and received cash collateral of $63,666,300. For the six months ended June 30, 2002, the Portfolio received fee income of $35,393 which is included in the interest income in the accompanying statement of operations. 10 Alliance Variable Products Series Fund ================================================================================ NOTE G: Capital Stock There are 1,000,000,000 shares of $.001 par value capital stock authorized, divided into two classes, designated Class A and Class B shares. Each class consists of 500,000,000 authorized shares. Transactions in capital stock were as follows:
---------------------------------- ----------------------------------- SHARES AMOUNT ---------------------------------- ----------------------------------- Six Months Ended Year Ended Six Months Ended Year Ended June 30, 2002 December 31, June 30, 2002 December 31, (unaudited) 2001 (unaudited) 2001 ================ ============== -=============== ============== Class A Shares sold....................... 3,258,032 11,560,257 $ 70,205,926 $ 263,768,912 Shares issued in connection with acquisition of Brinson Series Trust Growth & Income Portfolio...................... -0- 689,257 -0- 14,906,477 Shares issued in reinvestment of dividends and distributions.... 1,176,522 1,347,508 22,412,745 31,855,085 Shares redeemed................... (4,276,262) (8,962,586) (91,085,596) (199,854,703) -------------- -------------- -------------- -------------- Net increase...................... 158,292 4,634,436 $ 1,533,075 $ 110,675,771 ============== ============== ============== ============== Class B Shares sold....................... 20,035,884 34,800,614 $ 428,516,785 $ 782,912,514 Shares issued in connection with acquisition of Brinson Series Trust Growth & Income Portfolio...................... -0- 366,713 -0- 7,888,640 Shares issued in reinvestment of dividends and distributions.... 2,225,334 796,040 42,125,576 18,722,853 Shares redeemed................... (1,598,440) (2,172,479) (32,740,042) (47,965,641) -------------- -------------- -------------- -------------- Net increase...................... 20,662,778 33,790,888 $ 437,902,319 $ 761,558,366 ============== ============== ============== ==============
- -------------------------------------------------------------------------------- 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 six months ended June 30, 2002. - -------------------------------------------------------------------------------- NOTE J: Acquisition of Brinson Series Trust Growth & Income Portfolio On October 26, 2001, the Portfolio acquired all of the assets and liabilities of the Brinson Series Trust Growth & Income Portfolio pursuant to a plan of reorganization approved by the shareholders of Brinson Series Trust Growth & Income Portfolio on March 1, 2001. The acquisition was accomplished by a tax-free exchange of 1,055,970 shares of the Portfolio for 2,191,984 shares of Brinson Series Trust Growth & Income Portfolio on October 26, 2001. The aggregate net assets of the Portfolio and Brinson Series Trust Growth & Income Portfolio immediately before the acquisition were $1,310,505,175 and $22,795,117 (including $863,296 of net unrealized depreciation of investments), respectively. Immediately after the acquisition the combined net assets of the Portfolio amounted to $1,333,300,292. 11 GROWTH AND INCOME PORTFOLIO FINANCIAL HIGHLIGHTS Alliance Variable Products Series Fund ================================================================================ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
------------------------------------------------------------------------------------ CLASS A ------------------------------------------------------------------------------------ Six Months Ended Year Ended December 31, June 30, 2002 =================================================================== (unaudited) 2001 2000 1999 1998 1997 =========== =========== =========== =========== =========== =========== Net asset value, beginning of period .... $ 22.16 $ 23.15 $ 21.79 $ 21.84 $ 19.93 $ 16.40 ----------- ----------- ----------- ----------- ----------- ----------- Income From Investment Operations Net investment income (a) ............... .12 .21 .22 .16 .22 .21 (b) Net realized and unrealized gain (loss) on investment transactions ........... (3.04) (.05) 2.75 2.25 3.81 4.39 ----------- ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in net asset value from operations ................ (2.92) .16 2.97 2.41 4.03 4.60 ----------- ----------- ----------- ----------- ----------- ----------- Less: Dividends and Distributions Dividends from net investment income .... (.12) (.14) (.14) (.18) (.16) (.13) Distributions from net realized gain on investments .......................... (.63) (1.01) (1.47) (2.28) (1.96) (.94) ----------- ----------- ----------- ----------- ----------- ----------- Total dividends and distributions ....... (.75) (1.15) (1.61) (2.46) (2.12) (1.07) ----------- ----------- ----------- ----------- ----------- ----------- Net asset value, end of period .......... $ 18.49 $ 22.16 $ 23.15 $ 21.79 $ 21.84 $ 19.93 =========== =========== =========== =========== =========== =========== Total Return Total investment return based on net asset value (c) ...................... (13.28)% 0.36% 13.89% 11.37% 20.89% 28.80% Ratios/Supplemental Data Net assets, end of period (000's omitted) $ 565,122 $ 673,722 $ 596,547 $ 522,163 $ 381,614 $ 250,202 Ratio to average net assets of: Expenses, net of waivers and reimbursements ..................... .66%(d) .67% .69% .71% .73% .72% Expenses, before waivers and reimbursements ..................... .66%(d) .67% .69% .71% .73% .72% Net investment income ................ 1.14%(d) .95% 1.01% .75% 1.07% 1.16%(b) Portfolio turnover rate ................. 30% 80% 74% 46% 79% 86%
- -------------------------------------------------------------------------------- See footnote summary on page 13. 12 GROWTH AND INCOME PORTFOLIO FINANCIAL HIGHLIGHTS (continued) Alliance Variable Products Series Fund ================================================================================ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
------------------------------------------------------------------- CLASS B ------------------------------------------------------------------- Six Months June 1, 1999(e) Ended Year Ended December 31, to June 30, 2002 ============================= December 31, (unaudited) 2001 2000 1999 ============= ============= ============= =============== Net asset value, beginning of period .... $ 22.03 $ 23.06 $ 21.76 $ 21.37 ------------- ------------- ------------- ------------- Income From Investment Operations Net investment income (a) ............... .09 .16 .18 .07 Net realized and unrealized gain (loss) on investment transactions ........... (3.01) (.05) 2.73 .32 ------------- ------------- ------------- ------------- Net increase (decrease) in net asset value from operations ................ (2.92) .11 2.91 .39 ------------- ------------- ------------- ------------- Less: Dividends and Distributions Dividends from net investment income .... (.10) (.13) (.14) -0- Distributions from net realized gain on investments ....................... (.63) (1.01) (1.47) -0- ------------- ------------- ------------- ------------- Total dividends and distributions ....... (.73) (1.14) (1.61) -0- ------------- ------------- ------------- ------------- Net asset value, end of period .......... $ 18.38 $ 22.03 $ 23.06 $ 21.76 ============= ============= ============= ============= Total Return Total investment return based on net asset value (c) ...................... (13.36)% 0.15% 13.59% 1.83% Ratios/Supplemental Data Net assets, end of period (000's omitted) $ 1,121,611 $ 889,394 $ 151,739 $ 7,993 Ratio to average net assets of: Expenses ............................. .91%(d) .92% .95% .97%(d) Net investment income ................ .90%(d) .75% .85% .55%(d) Portfolio turnover rate ................. 30% 80% 74% 46%
- -------------------------------------------------------------------------------- (a) Based on average shares outstanding. (b) Net of expenses reimbursed or waived by the Adviser. (c) Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Total investment return calculated for a period of less than one year is not annualized. (d) Annualized. (e) Commencement of distribution. 13 GROWTH AND INCOME 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) OFFICERS Kathleen A. Corbet, Senior Vice President Alfred L. Harrison, Senior Vice President Andrew S. Adelson, Vice President Andrew Aran, Vice President Bruce K. Aronow, Vice President Edward Baker, Vice President Thomas J. Bardong, Vice President Matthew Bloom, Vice President Mark H. Breedon, Vice President Russell Brody, Vice President Kenneth T. Carty, Vice President Frank Caruso, Vice President John F. Chiodi, Vice President Paul J. DeNoon, Vice President Joseph C. Dona, Vice President Gregory Dube, Vice President Marilyn G. Fedak, Vice President Jane Mack Gould, Vice President David A. Kruth, Vice President Alan E. Levi, Vice President Michael Levy, Vice President Gerald T. Malone, Vice President Andrew Moloff, Vice President Michael Mon, Vice President Daniel Nordby, Vice President Raymond J. Papera, Vice President Douglas J. Peebles, Vice President Jeffrey S. Phlegar, Vice President Daniel G. Pine, Vice President Steven Pisarkiewicz, Vice President Michael J. Reilly, Vice President John Ricciardi, Vice President Paul C. Rissman, Vice President Kevin F. Simms, Vice President Michael A. Snyder, Vice President Annie Tsao, Vice President Jean Van De Walle, Vice President Richard A. Winge, Vice President Sandra Yeager, Vice President Edmund P. Bergan, Jr., Secretary Mark D. Gersten, Treasurer & Chief Financial Officer Thomas Manley, Controller CUSTODIAN State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110 DISTRIBUTOR Alliance Fund Distributors, Inc. 1345 Avenue of the Americas New York, NY 10105 INDEPENDENT AUDITORS Ernst & Young LLP 5 Times Square New York, NY 10036 LEGAL COUNSEL Seward & Kissel One Battery Park Plaza New York, NY 10004 TRANSFER AGENT Alliance Global Investor Services, Inc. P.O. Box 1520 Secaucus, NJ 07096-1520 Toll-free 1-(800) 221-5672 - -------------------------------------------------------------------------------- (1) Member of the Audit Committee. 14 (This page left intentionally blank.) (This page left intentionally blank.) (This page left intentionally blank.) -----END PRIVACY-ENHANCED MESSAGE-----