-----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, BmLQGBxVY131ORlWRTDpLOs6wP+OLdfZmS16ZpbzkWL6LIpwHtqr+Um9gf94uUOR m9foMN+aA+lUmjKHqcFAaQ== 0000936772-02-000334.txt : 20020822 0000936772-02-000334.hdr.sgml : 20020822 20020821185549 ACCESSION NUMBER: 0000936772-02-000334 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020822 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: 02745227 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 edg8135.txt VARP WORLDWIDE PRIVATIZATION ALLIANCE VARIABLE PRODUCTS SERIES FUND WORLDWIDE PRIVATIZATION PORTFOLIO SEMI-ANNUAL REPORT JUNE 30, 2002 Investment Products Offered o Are Not FDIC Insured o May Lose Value o Are Not Bank Guaranteed WORLDWIDE PRIVATIZATION PORTFOLIO TEN LARGEST HOLDINGS June 30, 2002 (unaudited) Alliance Variable Products Series Fund _______________________________________________________________________________ PERCENT OF COMPANY U.S. $ VALUE NET ASSETS - ------------------------------------------------------------------------------- Japan Tobacco, Inc. $ 1,328,094 3.5% BNP Paribas, SA 1,310,771 3.5 Kookmin Bank (Common & ADR) 1,251,494 3.3 Nomura Securities Co., Ltd. 1,115,922 3.0 Pharmacia Corp. 984,935 2.6 ENI SpA 878,119 2.3 NTT Docomo, Inc. 846,619 2.2 Lattice Group Plc 832,302 2.2 SK Telecom Co., Ltd. (Common & ADR) 786,518 2.1 National Grid Group Plc 784,378 2.1 $10,119,152 26.8% SECTOR DIVERSIFICATION June 30, 2002 (unaudited) PERCENT OF SECTOR U.S. $ VALUE NET ASSETS - ------------------------------------------------------------------------------- Aerospace & Defense $ 97,755 0.3% Basic Industries 1,616,387 4.3 Consumer Services 6,391,772 17.0 Consumer Staples 1,911,878 5.1 Energy 4,685,211 12.4 Finance 7,018,473 18.6 Healthcare 2,536,966 6.7 Multi Industry 76,982 0.2 Technology 2,505,271 6.6 Transportation 3,103,168 8.2 Utilities 5,030,093 13.3 Total Investments* 34,973,956 92.7 Cash and receivables, net of liabilities 2,746,652 7.3 Net Assets $37,720,608 100.0% * Excludes short-term obligations. 1 WORLDWIDE PRIVATIZATION PORTFOLIO PORTFOLIO OF INVESTMENTS June 30, 2002 (unaudited) Alliance Variable Products Series Fund _______________________________________________________________________________ Company Shares U.S. $ Value - ------------------------------------------------------------------------------- COMMON & PREFERRED STOCKS-92.7% AUSTRALIA-2.3% CSL, Ltd. 35,000 $ 634,163 Qantas Airways, Ltd. 83,431 216,089 ------------ 850,252 AUSTRIA-0.5% Flughafen Wien AG 6,050 207,540 BELGIUM-1.0% Interbrew 13,642 390,922 BRAZIL-3.3% Brasil Telecom Participacoes, SA (ADR) 2,000 56,620 Companhia de Saneamento Basico de Sao Paulo (ADR) 2,000 17,400 Companhia Paranaense de Energia-Copel (ADR) 9,000 36,450 Companhia Vale do Rio Doce (a) (b) 2,360 0 ADR 2,000 51,900 ADR (b) 8,200 226,894 Eletropaulo Metropolitana, SA pfd. 310,000 4,816 Empresa Brasileira de Aeronautica SA (Embraer) (ADR) 4,568 97,755 Gerdau Siderurg, SA pfd. 20,228,288 209,505 Itausa-Investimentos Itau, SA pfd. 200,911 134,935 pfd. (b) 10,036 6,740 Petroleo Brasileiro, SA (ADR) 21,000 365,400 Tele Norte Leste Participacoes, SA (ADR) 5,000 49,750 ------------ 1,258,165 CHILE-0.1% Enersis, SA (ADR) (b) 6,000 34,740 CZECH REPUBLIC-0.5% Komercni Banka AS 3,650 186,567 EGYPT-1.0% Eastern Company for Tobacco & Cigarettes 21,974 192,862 Egyptian Co. for Mobile Services 32,618 192,488 ------------ 385,350 FINLAND-1.6% Fortum Oyj 35,551 204,659 Sampo Oyj 25,161 195,940 TietoEnator Oyj 7,747 190,915 ------------ 591,514 FRANCE-9.0% BNP Paribas, SA 23,745 1,310,771 Dassault Systemes, SA 8,200 373,846 Sanofi-Synthelabo, SA 12,611 765,768 Societe Television Francaise 1 12,750 340,727 STMicroelectronics NV 16,226 403,868 TotalFinaElf, SA 1,295 209,864 ------------ 3,404,844 GERMANY-5.0% Deutsche Lufthansa AG (b) 12,086 171,558 Deutsche Post AG 50,201 647,767 Fraport AG 16,689 389,893 Stinnes AG 23,400 675,850 ------------ 1,885,068 GHANA-0.4% Ashanti Goldfields Co., Ltd. (GDR) (b) 33,900 166,449 GREECE-0.8% Public Power Corp. 19,930 283,688 HONG KONG-2.4% China Petroleum & Chemical Co. Cl.H 1,645,000 293,157 China Unicom, Ltd. (b) 168,000 129,235 CNOOC, Ltd. 191,000 255,899 Shanghai Industrial Holdings, Ltd. 114,000 220,699 ------------ 898,990 HUNGARY-0.7% OTP Bank Rt. 35,533 279,078 ITALY-4.7% Acegas SpA 31,700 192,177 Enel SpA 34,022 194,516 ENI SpA 55,330 878,119 Telecom Italia SpA 93,814 496,602 ------------ 1,761,414 JAPAN-13.8% East Japan Railway Co. 147 687,999 Japan Airlines Co., Ltd. 140,000 394,777 Japan Tobacco, Inc. 198 1,328,094 Nippon Telegraph & Telephone, Corp. 152 625,170 Nomura Securities Co., Ltd. 76,000 1,115,922 NTT Docomo, Inc. 344 846,619 West Japan Railway Co. 51 205,932 ------------ 5,204,513 MALAYSIA-0.2% Maxis Communications Berhad (b) 52,000 67,032 2 WORLDWIDE PRIVATIZATION PORTFOLIO PORTFOLIO OF INVESTMENTS (continued) Alliance Variable Products Series Fund _______________________________________________________________________________ Company Shares U.S. $ Value - ------------------------------------------------------------------------------- MEXICO-5.3% America Movil, SA de CV Series L (ADR) 13,800 $ 184,920 Grupo Aeroportuario del Sureste, SA de CV Series B (ADR) 6,000 77,400 Grupo Financiero Bancomer, SA de CV (b) 229,600 187,189 Grupo Financiero Banorte, SA de CV Cl.B (b) 299,000 688,132 Telefonos de Mexico, SA Cl.L (ADR) 14,000 449,120 Tubos de Acero de Mexico, SA (ADR) 43,000 395,600 ------------ 1,982,361 NETHERLANDS-1.7% ING Groep NV 24,900 638,175 NORWAY-0.6% Telenor AS 65,600 231,956 PEOPLES REPUBLIC OF CHINA-0.9% Beijing Capital International Airport Co., Ltd. 1,488,000 358,658 PERU-0.2% Explosivos, SA Cl.C (a) 180,099 76,982 POLAND-0.6% Polski Koncern Naftowy, SA (GDR) 26,900 235,375 RUSSIA-1.8% AO VimpelCom (ADR) 6,200 157,852 Mobile Telesystems (ADR) 5,000 151,450 YUKOS (ADR) 2,600 359,338 ------------ 668,640 SINGAPORE-0.9% DBS Group Holdings, Ltd. 50,172 352,234 SOUTH AFRICA-0.9% Iscor, Ltd. (b) 78,500 166,538 M-Cell, Ltd. (b) 152,400 171,946 ------------ 338,484 SOUTH KOREA-6.5% Kookmin Bank 14,000 679,634 ADR 11,635 571,860 POSCO 3,600 399,501 SK Telecom Co., Ltd. 1,010 226,264 ADR 22,600 560,254 ------------ 2,437,513 SPAIN-1.9% Iberia Lineas Aereas de Espana, SA 128,452 224,120 Indra Sistemas, SA 56,400 486,468 ------------ 710,588 SWEDEN-1.4% Eniro AB 68,000 520,391 SWITZERLAND-0.5% Unique Zurich Airport (b) 2,420 187,402 TAIWAN-3.0% Taipei Bank 840,000 671,296 Taiwan Semiconductor Co. (b) 218,020 443,740 ------------ 1,115,036 THAILAND-1.5% PTT Public Company, Ltd. 284,300 246,266 Ratchaburi Electricity Generating Holding Public Co., Ltd. 772,300 325,198 ------------ 571,464 TURKEY-0.6% Dogan Yayin Holding AS (b) 122,365,985 224,241 UNITED KINGDOM-13.0% BP Plc (ADR) 72,928 612,655 British Sky Broadcast Group Plc (b) 37,458 359,224 BT Group Plc 150,338 577,617 Capita Group Plc 64,834 308,409 Centrica Plc 111,000 343,550 Lattice Group Plc 319,238 832,302 Mersey Docks & Harbor Co. 25,520 230,925 National Grid Group Plc 110,400 784,378 PowerGen Plc 21,411 251,851 Vodafone Group Plc 449,146 616,312 ------------ 4,917,223 UNITED STATES-4.1% Affiliated Computer Services, Inc. Cl.A (b) 8,400 398,832 deCODE GENETICS, Inc. (b) 32,500 152,100 Pharmacia Corp. 26,300 984,935 ------------ 1,535,867 3 WORLDWIDE PRIVATIZATION PORTFOLIO PORTFOLIO OF INVESTMENTS (continued) Alliance Variable Products Series Fund _______________________________________________________________________________ Company Shares U.S. $ Value - ------------------------------------------------------------------------------- VENEZUELA-0.0% Compania Anonima Nacional Telefonos de Venezuela Cl.D (ADR) 1,071 $ $15,240 ------------ TOTAL INVESTMENTS-92.7% (cost $34,403,855) $34,973,956 Other assets less liabilities-7.3% 2,746,652 NET ASSETS-100% $37,720,608 (a) Illiquid security valued at fair value (see Note A). (b) Non-income producing security. Glossary of Terms: ADR - American Depositary Receipt GDR - Global Depositary Receipt See Notes to Financial Statements. 4 WORLDWIDE PRIVATIZATION PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES June 30, 2002 (unaudited) Alliance Variable Products Series Fund _______________________________________________________________________________ ASSETS Investments in securities, at value (cost $34,403,855) $34,973,956(a) Cash 319,212 Foreign cash, at value (cost $2,472,428) 2,553,933 Collateral held for securities loaned 99,000 Dividends and interest receivable 77,448 Total assets 38,023,549 LIABILITIES Payable for investment securities purchased 156,026 Payable for collateral received on securities loaned 99,000 Advisory fee payable 31,525 Accrued expenses 16,390 Total liabilities 302,941 NET ASSETS $37,720,608 COMPOSITION OF NET ASSETS Capital stock, at par $ 3,051 Additional paid-in capital 45,801,855 Undistributed net investment income 217,368 Accumulated net realized loss on investment and foreign currency transactions (8,956,427) Net unrealized appreciation of investments and foreign currency denominated assets and liabilities 654,761 $37,720,608 Class A Shares Net assets $34,832,839 Shares of capital stock outstanding 2,816,986 Net asset value per share $ 12.37 Class B Shares Net assets $ 2,887,769 Shares of capital stock outstanding 233,924 Net asset value per share $ 12.34 (a) Includes securities on loan with a value of $96,240 (see Note F). See Notes to Financial Statements. 5 WORLDWIDE PRIVATIZATION 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 $49,760) $ 465,365 Interest 14,738 Total investment income 480,103 EXPENSES Advisory fee 191,694 Distribution fee-Class B 2,094 Custodian 92,310 Administrative 34,500 Audit and legal 17,557 Printing 5,068 Directors' fees 1,086 Transfer agency 472 Miscellaneous 3,510 Total expenses 348,291 Less: expenses waived and reimbursed (see Note B) (120,389) Net expenses 227,902 Net investment income 252,201 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS Net realized loss on investment transactions (4,589,862) Net realized loss on foreign currency transactions (50,506) Net change in unrealized appreciation/ depreciation of: Investments 5,490,729 Foreign currency denominated assets and liabilities 84,839 Net gain on investment and foreign currency transactions 935,200 NET INCREASE IN NET ASSETS FROM OPERATIONS $1,187,401 See Notes to Financial Statements. 6 WORLDWIDE PRIVATIZATION 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 $ 252,201 $ 684,568 Net realized loss on investment and foreign currency transactions (4,640,368) (4,305,732) Net change in unrealized appreciation/ depreciation of investments and foreign currency denominated assets and liabilities 5,575,568 (5,713,342) Net increase (decrease) in net assets from operations 1,187,401 (9,334,506) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income Class A (588,448) (98,462) Class B (45,450) (1,045) Net realized gain on investments Class A -0- (2,642,078) Class B -0- (32,360) CAPITAL STOCK TRANSACTIONS Net decrease (1,336,070) (5,807,379) Total decrease (782,567) (17,915,830) NET ASSETS Beginning of period 38,503,175 56,419,005 End of period (including undistributed net investment income of $217,368 and $599,065, respectively) $37,720,608 $38,503,175 See Notes to Financial Statements. 7 WORLDWIDE PRIVATIZATION PORTFOLIO NOTES TO FINANCIAL STATEMENTS June 30, 2002 (unaudited) Alliance Variable Products Series Fund _______________________________________________________________________________ NOTE A: Significant Accounting Policies The Worldwide Privatization Portfolio (the "Portfolio") is a series of Alliance Variable Products Series Fund, Inc. (the "Fund"). The Portfolio's investment objective is to seek long-term capital appreciation. The Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. TheFund offers nineteen separately managed pools ofassets which have differing investment objectives andpolicies. 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 transactionsare 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 portfolio in proportion to net assets. All income earned and expenses incurred by a portfolio with multi-class 8 Alliance Variable Products Series Fund _______________________________________________________________________________ shares outstanding are borne on a pro-rata basis by each outstanding class of shares, based on the proportionate interest in the portfolio represented by the net assets of such class, except that the portfolio's Class B shares bear the distribution fees. 6. Dividends and Distributions The Portfolio declares and distributes dividends and distributions from net investment income and net realized gains, respectively, if any, at least annually. Income dividends and capital gains distributions to shareholders are recorded on the ex-dividend date. Income dividends and capital gains distributions are determined in accordance with federal tax regulations and may differ from those determined in accordance with accounting principles generally accepted in the United States. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. NOTE B: Advisory Fee and Other Transactions with Affiliates Under the terms of an investment advisory agreement, the Portfolio pays Alliance Capital Management L.P. (the "Adviser"), an investment advisory fee at an annualized rate of 1% of the Portfolio's average daily net assets. Pursuant to the advisory agreement, the Portfolio paid $34,500 to the Adviser representing the cost of certain legal and accounting services provided to the Portfolio by the Adviser for the six months ended June 30, 2002. Prior to May 1, 2002, the Adviser agreed to waive its fee and to reimburse the 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, the Adviser waived fees in the amount of $34,500 and reimbursed additional expenses in the amount of $85,889. Brokerage commissions paid on investment transactions for the six months ended June 30, 2002, amounted to $66,832, none of which 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 $472 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. 9 WORLDWIDE PRIVATIZATION PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) Alliance Variable Products Series Fund _______________________________________________________________________________ NOTE D: Investment Transactions Purchases and sales of investment securities (excluding short-term investments) for the six months ended June 30, 2002, were as follows: Purchases: Stocks and debt obligations $11,057,979 U.S. government and agencies -0- Sales: Stocks and debt obligations $13,374,735 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 (excluding foreign currency transactions) are as follows: Gross unrealized appreciation $ 5,264,916 Gross unrealized depreciation (4,694,815) Net unrealized appreciation $ 570,101 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 orsell 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 orrequire for its normal investment activities. It may alsouse contractsin a manner intended to protect foreigncurrency 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- 10 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 asfollows: 2001 2000 ----------- ----------- Distributions paid from: Ordinary income $ 179,389 $3,089,318 Net long-term capital gains 2,594,556 1,334,849 Total taxable distributions 2,773,945 4,424,167 Total distributions paid $2,773,945 $4,424,167 As of December 31, 2001, the components of accumulated earnings/(deficit) on a tax basis were as follows: Undistributed ordinary income $ 627,088 Accumulated earnings 627,088 Accumulated capital and other losses 4,278,650)(a) Unrealized appreciation/(depreciation) (4,986,239)(b) Total accumulated earnings/(deficit) $(8,637,801) (a) On December 31, 2001, the Portfolio had a net capital loss carryforward of $2,142,659 which will expire on December 31, 2009. To the extent future capital gains are offset by capital loss carryforward, such gains will not be distributed. Net capital losses incurred after October 31, and within the taxable year are deemed to arise on the first business day of the Portfolio's next taxable year. For the year ended December 31, 2001, the Portfolio deferred to January 1, 2002, post October capital and foreign currency losses of $2,107,967 and $28,024, respectively. (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 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 $96,240 and received cash collateral of $99,000. For the six months ended June 30, 2002, the Portfolio received fee income of $5,548 which is included in interest income in the accompanying statement of operations. 11 WORLDWIDE PRIVATIZATION PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) Alliance Variable Products Series Fund _______________________________________________________________________________ NOTE G: Capital Stock There are 1,000,000,000 shares of $.001 par value capitalstock authorized, divided into two classes, designated ClassA and ClassB 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 478,802 720,843 $ 5,949,124 $ 9,069,883 Shares issued in reinvestment of dividends and distributions 46,702 203,455 588,448 2,740,540 Shares redeemed (778,789) (1,446,325) (9,705,700) (18,468,744) Net decrease (253,285) (522,027) $(3,168,128) $ (6,658,321) Class B Shares sold 235,075 2,000,183 $ 2,941,599 $ 24,741,691 Shares issued in reinvestment of dividends and distributions 3,613 2,482 45,450 33,405 Shares redeemed (94,530) (1,928,134) (1,154,991) (23,924,154) Net increase 144,158 74,531 $ 1,832,058 $ 850,942 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. 12 WORLDWIDE PRIVATIZATION 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 $12.18 $15.64 $21.74 $14.81 $14.20 $13.13 Income From Investment Operations Net investment income (a)(b) .08 .20 .05 .15 .26 .25 Net realized and unrealized gain (loss) on investment and foreign currency transactions .32 (2.82) (4.81) 8.00 1.29 1.17 Net increase (decrease) in net asset value from operations .40 (2.62) (4.76) 8.15 1.55 1.42 Less: Dividends and Distributions Dividends from net investment income (.21) (.03) (.12) (.31) (.20) (.16) Distributions from net realized gain on investments -0- (.81) (1.22) (.91) (.74) (.19) Total dividends and distributions (.21) (.84) (1.34) (1.22) (.94) (.35) Net asset value, end of period $12.37 $12.18 $15.64 $21.74 $14.81 $14.20 Total Return Total investment return based on net asset value (c) 3.24% (17.29)% (23.00)% 58.83% 10.83% 10.75% Ratios/Supplemental Data Net assets, end of period (000's omitted) $34,833 $37,411 $56,181 $64,059 $46,268 $41,818 Ratio to average net assets of: Expenses, net of waivers and reimbursements 1.17%(d) .95% .95% .95% .95% .95% Expenses, before waivers and reimbursements 1.81%(d) 1.65% 1.43% 1.46% 1.70% 1.55% Net investment income (a) 1.32%(d) 1.50% .29% .93% 1.74% 1.76% Portfolio turnover rate 31% 35% 65% 54% 92% 58%
See footnote summary on page 14. 13 Alliance Variable Products Series Fund _______________________________________________________________________________ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period CLASS B ------------------------------------ July 5, Six Months 2000(e) Ended Year Ended to June 30, 2002 Dec. 31, Dec. 31, (unaudited) 2001 2000 ----------- ----------- ---------- Net asset value, beginning of period $12.17 $15.62 $19.09 Income From Investment Operations Net investment income (loss) (a)(b) .07 .10 (.04) Net realized and unrealized gain (loss) on investment and foreign currency transactions .30 (2.71) (3.43) Net increase (decrease) in net asset value from operations .37 (2.61) (3.47) Less: Dividends and Distributions Dividends from net investment income (.20) (.03) -0- Distributions from net realized gain on investments -0- (.81) -0- Total dividends and distributions (.20) (.84) -0- Net asset value, end of period $12.34 $12.17 $15.62 Total Return Total investment return based on net asset value (c) 3.00% (17.28)% (18.43)% Ratios/Supplemental Data Net assets, end of period (000's omitted) $2,888 $1,092 $238 Ratio to average net assets of: Expenses, net of waivers and reimbursements 1.53%(d) 1.19% 1.20%(d) Expenses, before waivers and reimbursements 2.08%(d) 1.93% 1.80%(d) Net investment income (loss) (a) 1.18%(d) .80% (.26)%(d) Portfolio turnover rate 31% 35% 65% (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) Annualized. (e) Commencement of distribution. 14 WORLDWIDE PRIVATIZATION 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. 15 -----END PRIVACY-ENHANCED MESSAGE-----