N-30D 1 edg8121.txt VARP GLOBAL BOND ALLIANCE VARIABLE PRODUCTS SERIES FUND GLOBAL BOND PORTFOLIO SEMI-ANNUAL REPORT JUNE 30, 2002 INVESTMENT PRODUCTS OFFERED o ARE NOT FDIC INSURED o MAY LOSE VALUE o ARE NOT BANK GUARANTEED GLOBAL BOND PORTFOLIO PORTFOLIO OF INVESTMENTS June 30, 2002 (unaudited) Alliance Variable Products Series Fund _______________________________________________________________________________ Principal Amount (000) U.S. $ Value ------------------------------------------------------------------------------- LONG-TERM INVESTMENTS-92.5% AUSTRALIA-2.7% BANKING-0.2% National Australia Bank, Ltd. 2.535%, 5/19/10 (a)(b) USD 113 $ 113,236 GOVERNMENT OBLIGATIONS-2.5% Commonwealth of Australia 0.00%, 7/23/02 (a) AUD 1,910 1,073,275 6.75%, 11/15/06 (a) 575 336,170 ----------- 1,409,445 ----------- 1,522,681 CANADA-0.4% GOVERNMENT OBLIGATION-0.4% Government of Canada 0.00%, 11/21/02 (a) CAD 315 205,039 DENMARK-3.4% GOVERNMENT OBLIGATION-3.4% Kingdom of Denmark 6.00%, 11/15/09 (a) DKK 13,590 1,904,075 FRANCE-5.3% GOVERNMENT OBLIGATIONS-5.3% Government of France 4.00%, 4/25/09 (a) EUR 2,950 2,783,205 5.50%, 10/25/07 (a) 130 133,554 5.50%, 4/25/29 (a) 97 98,051 ----------- 3,014,810 GERMANY-6.0% BANKING-0.3% Deutsche Ausgleichsbank 7.00%, 6/23/05 (a) USD 150 163,580 GOVERNMENT OBLIGATIONS-5.7% Federal Republic of Germany 5.00%, 2/17/06 (a) EUR 700 703,690 5.625%, 1/04/28 (a) 2,450 2,513,415 ----------- 3,217,105 ----------- 3,380,685 ITALY-5.3% GOVERNMENT OBLIGATION-5.3% Republic of Italy 5.00%, 5/01/08 (a) 3,000 2,993,450 JAPAN-15.8% GOVERNMENT OBLIGATIONS-15.8% Government of Japan 0.50%, 6/20/07 (a) JPY 848,000 7,107,169 2.60%, 3/20/07 (a) 204,000 1,879,113 ----------- 8,986,282 Shares or Principal Amount (000) U.S. $ Value ------------------------------------------------------------------------------- MEXICO-0.1% FINANCIAL-MISCELLANEOUS-0.0% United Mexican States, warrants expiring 6/03/03 USD 1 $ 3 ASSET BACKED SECURITY-0.1% Pemex Finance, Ltd. 6.125%, 11/15/03 (a) 74 75,301 ----------- 75,304 NETHERLANDS-2.6% GOVERNMENT OBLIGATION-2.6% Government of Netherlands 5.50%, 1/15/28 (a) EUR 1,481 1,487,751 SPAIN-3.4% GOVERNMENT OBLIGATION-3.4% Government of Spain 6.00%, 1/31/29 (a) 1,780 1,899,622 SWEDEN-2.9% GOVERNMENT OBLIGATION-2.9% Kingdom of Sweden 5.00%, 1/15/04 (a) SEK 15,000 1,630,863 UNITED KINGDOM-3.0% GOVERNMENT OBLIGATIONS-3.0% United Kingdom Treasury 4.25%, 6/07/32 (a) GBP 410 572,223 9.75%, 8/27/02 (a) 750 1,152,469 ----------- 1,724,692 UNITED STATES-41.6% BANKING-0.4% FMR Corp. 7.57%, 6/15/29 (a)(c) USD 120 130,788 Wells Fargo & Co. 6.50%, 9/03/02 (a) 99 99,760 ----------- 230,548 FINANCIAL-3.1% GE Financial Assurance Holdings 1.60%, 6/20/11 (a) JPY 200,000 1,627,247 Morgan Stanley Dean Witter & Co. 7.75%, 6/15/05 (a) USD 104 114,206 ----------- 1,741,453 1 Alliance Variable Products Series Fund _______________________________________________________________________________ Principal Amount (000) U.S. $ Value ------------------------------------------------------------------------------- GOVERNMENT AND AGENCY OBLIGATIONS-38.1% Federal National Mortgage Association 1.75%, 3/26/08 (a) JPY 400,000 $ 3,582,958 U.S. Treasury Bonds 6.375%, 8/15/27 (a) USD 1,070 1,166,910 U.S. Treasury Notes 3.375%, 4/30/04 (a) 8,075 8,160,191 3.50%, 11/15/06 (a) 2,180 2,141,152 3.875%, 1/15/09 (a) 1,863 1,977,276 5.00%, 8/15/11 (a) 4,550 4,613,154 ----------- 21,641,641 Total Long-Term Investments (cost $50,064,507) 52,438,896 SHORT-TERM INVESTMENT-8.4% TIME DEPOSIT-8.4% State Street Euro Dollar 1.25%, 7/01/02 (cost $4,759,000) $4,759 $4,759,000 TOTAL INVESTMENTS-100.9% (cost $54,823,507) 57,197,896 Other assets less liabilities-(0.9%) (485,463) ----------- NET ASSETS-100% $ 56,712,433 (a) Securities, or portion thereof, with an aggregate market value of $52,438,893 have been segregated to collateralize forward exchange currency contracts. (b) Floating rate security. Stated interest rate in effect at June 30, 2002. (c) Security exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions exempt from registration normally applied to certain qualified buyers. At June 30, 2002, the aggregate market value of this security amounted to $130,788 or 0.2% of net assets. See Notes to Financial Statements. 2 GLOBAL BOND PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES June 30, 2002 (unaudited) Alliance Variable Products Series Fund _______________________________________________________________________________ ASSETS Investments in securities, at value (cost $54,823,507) $57,197,896 Cash 34 Foreign cash, at value (cost $177,842) 187,031 Interest receivable 593,485 Total assets 57,978,446 LIABILITIES Unrealized depreciation of forward exchange currency contracts 831,962 Payable for investment securities purchased 341,505 Advisory fee payable 29,373 Accrued expenses 63,173 Total liabilities 1,266,013 NET ASSETS $56,712,433 COMPOSITION OF NET ASSETS Capital stock, at par $4,813 Additional paid-in capital 55,697,511 Undistributed net investment income 686,589 Accumulated net realized loss on investments (1,256,384) Net unrealized depreciation of investment and foreign currency denominated assets and liabilities 1,579,904 $56,712,433 Class A Shares Net assets $49,392,456 Shares of capital stock outstanding 4,188,689 Net asset value per share $11.79 Class B Shares Net assets $ 7,319,977 Shares of capital stock outstanding 624,347 Net asset value per share $ 11.72 See Notes to Financial Statements. 3 GLOBAL BOND PORTFOLIO STATEMENT OF OPERATIONS Six Months Ended June 30, 2002 (unaudited) Alliance Variable Products Series Fund _______________________________________________________________________________ INVESTMENT INCOME Interest $944,090 EXPENSES Advisory fee 175,313 Distribution fee--Class B 8,586 Custodian 40,919 Audit and legal 14,656 Administrative 26,250 Printing 13,938 Directors' fees 1,196 Transfer agency 474 Miscellaneous 3,456 Total expenses 284,788 Net investment income 659,302 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS Net realized gain on investment transactions 472,651 Net realized gain on foreign currency transactions 1,443,226 Net change in unrealized appreciation/depreciation of: Investments 3,003,227 Foreign currency denominated assets and liabilities (827,775) Net gain on investment and foreign currency transactions 4,091,329 NET INCREASE IN NET ASSETS FROM OPERATIONS $4,750,631 See Notes to Financial Statements. 4 GLOBAL BOND 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 $ 659,302 $ 1,723,823 Net realized gain on investment and foreign currency transactions 1,915,877 195,715 Net change in unrealized appreciation/depreciation of investments and foreign currency denominated assets and liabilities 2,175,452 (2,284,588) Net increase (decrease) in net assets from operations 4,750,631 (365,050) DIVIDENDS TO SHAREHOLDERS FROM Net investment income Class A (547,877) -0- Class B (66,713) -0- CAPITAL STOCK TRANSACTIONS Net decrease (2,795,102) (733,082) Total increase (decrease) 1,340,939 (1,098,132) NET ASSETS Beginning of period 55,371,494 56,469,626 End of period (including undistributed net investment income of $686,589 and $641,877, respectively) $ 56,712,433 $ 55,371,494 See Notes to Financial Statements. 5 GLOBAL BOND PORTFOLIO NOTES TO FINANCIAL STATEMENTS June 30, 2002 (unaudited) Alliance Variable Products Series Fund _______________________________________________________________________________ NOTE A: Significant Accounting Policies The Global Bond Portfolio (the "Portfolio") is a series of Alliance Variable Products Series Fund, Inc. (the "Fund"). The Portfolio's investment objective is to seek a high level of return from a combination of current income and capital appreciation by investing in a globally diversified portfolio of high-quality debt securities denominated in the U.S. dollar and a range of foreign currencies. 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. 6 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. Repurchase Agreements It is the Portfolio's policy that its custodian or designated subcustodian take control of securities as collateral under repurchase agreements and to determine on a daily basis that the value of such securities are sufficient to cover the value of the repurchase agreements. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of collateral by the Portfolio may be delayed or limited. 7. 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 .65% of the Portfolio's average daily net assets. Under a sub-advisory agreement, the Adviser retained AIGAM International Limited (AIGAM), an affiliate of American International Group, Inc., as a sub-adviser to the Portfolio. Effective February 1, 2001, the Adviser and AIGAM agreed to terminate this sub-advisory agreement. The Adviser now provides the services formerly provided by AIGAM. Pursuant to the advisory agreement, the Portfolio paid $26,250 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. The Portfolio compensates Alliance Global Investor Services, Inc. (AGIS), 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 $474 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 com- 7 GLOBAL BOND PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) Alliance Variable Products Series Fund _______________________________________________________________________________ pensation 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. 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 $34,591,091 U.S. government and agency obligations 22,220,319 Sales: Stocks and debt obligations $38,108,337 U.S. government and agency obligations 12,266,147 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 $2,463,628 Gross unrealized depreciation (89,239) Net unrealized appreciation $2,374,389 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. 8 Alliance Variable Products Series Fund _______________________________________________________________________________ At June 30, 2002, the Portfolio had outstanding forward exchange currency contracts as follows: U.S. $ Contract Value on U.S. $ Unrealized Amount Origination Current Appreciation (000) Date Value (Depreciation) ------------------------------------------------------------------------------- Forward Exchange Currency Buy Contracts British Pound, settling 8/06/02 886 1,306,281 1,347,857 41,576 Canadian Dollar, settling 7/11/02 2,061 1,345,620 1,356,957 11,337 Euro, settling 7/15/02 5,029 4,752,990 4,953,610 200,620 Euro, settling 8/26/02 16,380 15,978,536 16,103,330 124,794 Japanese Yen, settling 7/24/02 225,110 1,825,708 1,880,584 54,876 Forward Exchange Currency Sale Contracts British Pound, settling 8/06/02 355 524,216 540,683 (16,467) Danish Krone, settling 8/22/02 10,000 1,330,672 1,323,438 7,234 Euro, settling 7/15/02 12,051 10,616,178 11,870,549 (1,254,371) Swedish Krona, settling 8/22/02 3,330 358,450 360,011 (1,561) $ (831,962) 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 writing an option, the Portfolio bears the market risk of an unfavorable change in the price of the security or currency underlying the written option. Exercise of an option written by the Portfolio could result in the Portfolio selling or buying a security or currency at a price different from the current market value. The Portfolio had no transactions in options written for the six months ended June 30, 2002. 9 GLOBAL BOND PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) Alliance Variable Products Series Fund _______________________________________________________________________________ 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 $-0- $2,103,096 Total taxable distributions -0- 2,103,096 Tax return of capital -0- 23,050 Total distributions paid $-0- $2,126,146 As of December 31, 2001, the components of accumulated earnings/(deficit) on a tax basis were as follows: Undistributed ordinary income $ 808,106 Accumulated earnings 808,106 Accumulated capital and other losses (2,664,930)(a) Unrealized appreciation/(depreciation) (1,269,108)(b) Total accumulated earnings/(deficit) $(3,125,932) (a) On December 31, 2001, the Portfolio had a net capital loss carryforward of $2,664,930 of which $198,285 will expire in the year 2006, $488,861 will expire in the year 2007 and $1,977,784 will expire in the year 2008. 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 BrinsonSeries Trust Strategic Income Portfolio and Brinson Series Trust Global Income Portfolio, may apply. (b) The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the tax deferral of losses on wash sales, the difference between book and tax amortization methods for premium and market discount and the realization for tax purposes of unrealized gains on certain derivative instruments. 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 no securities on loan. 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. 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 Dec. 31, June 30, 2002 Dec. 31, (unaudited) 2001 (unaudited) 2001 ------------ ------------ -------------- -------------- Shares sold 324,129 408,519 $3,591,673 $4,419,740 Shares issued in connection with acquisition of Brinson Series Trust Global Income Portfolio -0- 427,796 -0- 4,776,770 Shares issued in connection with acquisition of Brinson Series Trust Strategic Income Portfolio -0- 63,759 -0- 711,928 Shares issued in reinvestment of dividends 48,485 -0- 547,877 -0- Shares redeemed (595,921) (1,080,790) (6,569,012) (11,735,211) Net decrease (223,307) (180,716) $(2,429,462) $(1,826,773) Class B Shares sold 28,475 70,472 $318,138 $777,950 Shares issued in connection with acquisition of Brinson Series Trust Strategic Income Portfolio -0- 166,844 -0- 1,852,870 Shares issued in reinvestment of dividends 5,941 -0- 66,713 -0- Shares redeemed (68,503) (141,731) (750,491) (1,537,129) Net increase (decrease) (34,087) 95,585 $(365,640) $1,093,691 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. 11 GLOBAL BOND PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) Alliance Variable Products Series Fund _______________________________________________________________________________ NOTE J: Acquisition of Brinson Series Trust Global Income and Strategic Income Portfolios On October 26, 2001, the Portfolio acquired all of the assets and liabilities of the Brinson Series Trust Global Income and Strategic Income Portfolios, respectively, pursuant to separate plans of reorganization approved by the shareholders of the Brinson Series Trust Global Income and Strategic Income Portfolios on March 1, 2001. On October 26, 2001, the acquisition was accomplished by a tax-free exchange of 658,399 shares of the Portfolio for 442,079 shares of Brinson Series Trust Global Income Portfolio and 244,874 of Brinson Series Trust Strategic Income Portfolio. The aggregate net assets of the Portfolio, Brinson Series Trust Global Income Portfolio, and Strategic Income Portfolio immediately before the acquisition were $49,913,559, $4,776,770 (including $95,575 net unrealized depreciation of investments) and $2,564,798 (including $123,029 net unrealized appreciation of investments), respectively. Immediately after the acquisition the combined net assets of the Portfolio amounted to $57,255,127. 12 GLOBAL BOND 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(a) 2000 1999 1998 1997 --------------------------------------------------------------------------------------- Net asset value, beginning of period $10.93 $10.96 $11.25 $12.42 $11.10 $11.74 Income From Investment Operations Net investment income (b) .14 .35 .45(c) .48(c) .49(c) .54(c) Net realized and unrealized gain (loss) on investments and foreign currency transactions .85 (.38) (.32) (1.24) 1.06 (.48) Net increase (decrease) in net asset value from operations .99 (.03) .13 (.76) 1.55 .06 Less: Dividends and Distributions Dividends from net investment income (.13) -0- (.42) (.37) (.17) (.57) Distributions from net realized gain on investments -0- -0- -0- (.04) (.06) (.13) Total dividends and distributions (.13) -0- (.42) (.41) (.23) (.70) Net asset value, end of period $11.79 $10.93 $10.96 $11.25 $12.42 $11.10 Total Return Total investment return based on net asset value (d) 9.14% (.27)% 1.17% (6.11)% 14.12% .67% Ratios/Supplemental Data Net assets, end of period (000's omitted) $49,392 $48,221 $50,325 $50,569 $34,652 $22,194 Ratio to average net assets of: Expenses, net of waivers and reimbursements 1.02%(e) 1.07% 1.02% .90% .93% .94% Expenses, before waivers and reimbursements 1.02%(e) 1.07% 1.06% 1.04% 1.17% 1.03% Net investment income 2.48%(e) 3.28% 4.13%(c) 4.16%(c) 4.23%(c) 4.81%(c) Portfolio turnover rate 106% 101% 372% 183% 42% 257%
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 Six Months Year Ended July 16, Ended December 31, 1999(f) to June 30, 2002 ---------------------- December 31, (unaudited) 2001(a) 2000 1999 ------------------------------------------------------------ Net asset value, beginning of period $10.86 $10.92 $11.23 $10.98 Income From Investment Operations Net investment income (b) .12 .32 .41(c) .21(c) Net realized and unrealized gain (loss) on investment and foreign currency transactions .85 (.38) (.31) .04 Net increase (decrease) in net asset value from operations .97 (.06) .10 .25 Less: Dividends Dividends from net investment income (.11) -0- (.41) -0- Net asset value, end of period $11.72 $10.86 $10.92 $11.23 Total Return Total investment return based on net asset value (d) 8.97% (.55)% .98% 2.18% Ratios/Supplemental Data Net assets, end of period (000's omitted) $7,320 $7,150 $6,145 $1,770 Ratio to average net assets of: Expenses, net of waivers and reimbursements 1.27%(e) 1.32% 1.31% 1.20%(e) Expenses, before waivers and reimbursements 1.27%(e) 1.32% 1.35% 1.34%(e) Net investment income 2.22%(e) 3.00% 3.82%(c) 3.96%(c)(e) Portfolio turnover rate 106% 101% 372% 183%
(a) As required, effective January 1, 2001, the Portfolio has adopted the provisions of the AICPA Audit and Accounting Guide, Audits of Investment Companies, and began amortizing premium on debt securities for financial statement reporting purposes only. For the year ended December 31, 2001, the effect of this change to Class A and Class B shares was to decrease net investment income per share by $.04 and $.04, increase net realized and unrealized gain (loss) on investments per share by $.04 and $.04, and decrease the ratio of net investment income to average net assets from 3.67% to 3.28% and 3.39% to 3.00%, respectively. Per share, ratios and supplemental data for periods prior to January 1, 2001 have not been restated to reflect this change in presentation. (b) Based on average shares outstanding. (c) Net of expenses reimbursed or waived by the Adviser. (d) Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Total investment return calculated for a period of less than one year is not annualized. (e) Annualized. (f) Commencement of distribution. 14 GLOBAL BOND 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