ALLIANCE
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VARIABLE PRODUCTS
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SERIES FUND
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ANNUAL REPORT
DECEMBER 31, 1998
The following Annual Report for the Alliance Variable Products Series Fund, Inc.
(the "Fund") includes financial information for the nineteen Portfolios of the
Fund which were active as of December 31, 1998. Not all Portfolios of the Fund
are available through each insurance product offering investments in the Fund.
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LETTER TO SHAREHOLDERS Alliance Variable Products Series Fund
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February 24, 1999
Dear Shareholder:
We are pleased to provide you with an update of Alliance Variable Products
Series Fund, Inc. (the "Fund") for the annual reporting period ended December
31, 1998.
The following pages include a discussion regarding market activity and
investment results for each of the 19 portfolios that comprise the Fund. As you
will see, each portfolio's respective investment objective, as well as general
market review, investment results and investment outlook are printed on a
separate page within the report. Each portfolio's returns for the six- and
12-month periods ended December 31, 1998, located in the commentary section of
the report, reflect unannualized total returns, and are based on each
portfolio's net asset value (NAV). In addition, returns for the same periods are
provided for the relevant benchmarks of each portfolio, as are the returns for
other comparable indices. For additional investment results over the longer
term, please refer to page A-25. A list of all comparable indices and their
respective definitions can be found on page A-29.
We appreciate your investment in the portfolios of Alliance Variable Products
Series Fund and look forward to reporting further investment progress in the
coming period.
Sincerely,
/s/ John D. Carifa
John D. Carifa
Chairman and President
A-1
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CONSERVATIVE INVESTORS PORTFOLIO Alliance Variable Products Series Fund
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INVESTMENT OBJECTIVE
The Conservative Investors Portfolio seeks the highest total return without, in
the view of the Fund's Adviser, undue risk to principal by investing in a
diversified mix of publicly traded equity and fixed-income securities.
MARKET REVIEW
In spite of very high volatility, 1998 was an excellent year for stock markets,
and the MSCI World Equity Index provided its best return in ten years. Growth
upsets in developing economies and the financial losses emanating from Asia and
Russia left the European and U.S. economies largely unaffected despite a sharp
decline in the world trade and export volumes. The U.S., in particular, posted
very strong economic performance as interest-rate and real-income effects more
than offset the weaker trend in exports and a dramatic widening of the trade
deficit.
During the year, notwithstanding buoyant economic conditions in the U.S. and in
some European economies, government bond yields continued to fall. This decline
in yields was a consequence of weak commodity prices, deflation at the wholesale
price level and the concerted round of reductions in short-term interest rates
after the Russian default and the financial market turmoil of the summer.
Government bonds fared better than corporates as credit spreads widened.
The forces at work in bond markets and investor concerns about quality and
liquidity were also apparent in equity markets. Large-capitalization growth
stocks were by far the best performing category in almost every market, with
performance at the benchmark level dominated by an untypically small number of
stocks.
INVESTMENT RESULTS
The Conservative Investors Portfolio provided a return of 5.73% for the second
half of 1998. The result fell slightly short of its 6.37% composite benchmark
rate of return. This composite is a 70%/30% mix of the Lehman Brothers
Government/Corporate Bond Index and the S&P 500 Stock Index, respectively. Over
the 12 months ended December 31, 1998, your Portfolio gained 14.20%, while its
benchmark advanced 15.25%.
The three principal factors affecting the Portfolio's performance were: (1) the
equity portion of the Portfolio's concentration in U.S. large-capitalization
growth stocks, which performed relatively well, (2) a timely reduction of stock
market exposure in July and a decision to reinvest in October, and (3)
underperformance of the bond portion of the Portfolio as credit spreads widened.
INVESTMENT OUTLOOK
We believe that world economic growth will be much weaker in 1999. Japan, in our
view, is not recovering and European business confidence is deteriorating fast.
This leaves the increasingly unbalanced U.S. economy as almost the only engine
for growth. A negative savings ratio and a foreign borrowing requirement of $300
billion are clearly not sustainable in the long run. Sustainable world growth
depends on successful measures to stimulate consumption outside the United
States. So far, these have been slow in coming.
Stock markets will continue to experience a two-way pull. Interest rates and
inflation are likely to remain low, providing a supportive environment for the
current high valuation levels. At the same time, earnings growth will be
increasingly hard to achieve in a slowing world economy. The authorities will
continue to lower interest rates as necessary to sustain world growth,
nonetheless, the Japanese economy will probably continue to struggle, and the
pressure for further competitive currency devaluations will persist.
A-2
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GROWTH INVESTORS PORTFOLIO Alliance Variable Products Series Fund
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INVESTMENT OBJECTIVE
The Growth Investors Portfolio seeks the highest total return consistent with
what the Fund's Adviser considers to be reasonable risk by investing in a
diversified mix of publicly traded equity and fixed income securities.
MARKET REVIEW
Subdued inflation, falling interest rates and improved corporate margins have
fueled the global bull market throughout the 1990s. Although most markets
bottomed in the early '90s, the current bull phase really dates from 1995, since
which time global equities have outperformed global bonds.
Although corporate earnings have grown since 1995, stock market returns have far
outstripped the growth in corporate net worth. A lower discount rate applied to
future earnings is part of the explanation while a steady reduction in the
equity risk premium explains the rest.
Equity market sentiment went full circle in 1998. In the first half of the year,
the implosion in Asian economies, which began in 1997, was largely ignored.
Then, during the third quarter and after Russia's default on its domestic debt,
markets reversed as investors stared into a deflationary abyss. And finally,
markets recovered in the fourth quarter as the Western economies, particularly
the U.S., apparently emerged unscathed, and the Central Banks cut interest
rates.
In 1998, bond yields continued to fall. A combination of weak commodity prices,
deflation at the wholesale price level and the three reductions in short-term
interest rates contributed to this decline in yields. As credit spreads widened,
government bonds fared better than corporates.
INVESTMENT RESULTS
For the six months ended December 31, 1998, the Growth Investors Portfolio
provided a total return of 8.29%, outperforming its 8.08% composite benchmark
rate of return for the same period. This composite represents 70% of the S&P 500
Stock Index, which returned 9.36%, and 30% of the Lehman Brothers
Government/Corporate Bond Index, which returned 5.09%, for the same period. Over
the 12 months ended December 31, 1998, your Portfolio gained 23.68% while its
benchmark advanced 22.96%. The principal factors affecting the Portfolio's
outperformance were (1) the Portfolio's concentration in U.S.
large-capitalization growth stocks, and (2) a timely reduction of stock market
exposure in July and a decision to reinvest the proceeds in October.
INVESTMENT OUTLOOK
Similar to 1998, weak global growth will continue to be of primary concern over
the next 12 months. Japan, in our view, is not recovering and European business
confidence is deteriorating fast. This leaves the increasingly unbalanced U.S.
economy as almost the only engine for growth. Sustainable world growth depends
on successful measures to stimulate consumption outside the United States, and
such measures have, so far, been slow in coming.
While interest rates and inflation are likely to remain low, at the same time
earnings growth will be increasingly difficult to achieve in a slowing world
economy. The authorities will continue to lower interest rates as necessary to
sustain world growth, nonetheless, we believe that the Japanese economy will
continue to struggle and the pressure for further competitive currency
devaluations will persist.
A-3
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TOTAL RETURN PORTFOLIO Alliance Variable Products Series Fund
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The Total Return Portfolio seeks to achieve a high return through a combination
of current income and capital appreciation by investing in a diversified
portfolio of common and preferred stocks, senior corporate debt securities, and
U.S. government and agency obligations, bonds and senior debt securities.
MARKET REVIEW
Despite global turmoil, the United States continued on a path of robust growth
driven by domestic consumer demand. Growth for all of 1998 matched the previous
year's growth at 3.9%. Manufacturing, however, remained weak as world export
markets declined. Inflation and unemployment remained historically low
throughout the period. The Federal Reserve, as a hedge against a slowing global
economy, lowered interest rates from 5.50% to 4.75%.
As a result of the financial crises in Japan and several emerging market
countries including Russia and Latin America, the past 12 months have produced
extremes in the performance of various financial instruments. One such extreme
has been the performance of value stocks, in which price tends to be low
relative to earnings or book value. Growth stocks, on the other hand, show
current business expectations fostering higher prices for a given level of
earnings. Over the past year, the S&P 500 Stock Index (S&P 500) returned 28.74%,
but if separated into growth and value components, the growth segment's
appreciation of nearly 43% dwarfed the value portion's return of 15%.
The U.S. bond market posted solid returns in 1998. During the first half of the
year, interest rates remained relatively stable and investor demand for
yield-oriented securities, corporate bonds as well as mortgage-backed
securities, was high. Despite strong U.S. economic growth, inflation remained
low, further increasing demand in the bond market. During the third quarter,
global markets suffered from heightened concerns about recession as the
financial and economic turmoil in Asia spread to Russia and Latin America. The
resulting flight to quality spurred a rally in the U.S. Treasury market and
other safe haven government bond markets outside the U.S. while negatively
impacting returns in the corporate, high yield and mortgage bond sectors. In the
fourth quarter, the high yield sector rebounded along with equity markets when
the Federal Reserve cut interest rates.
INVESTMENT RESULTS
The Total Return Portfolio posted returns of 6.36% and 16.99% for the six- and
12-month periods ended December 31, 1998. The Portfolio's benchmark, a 60/40
composite of the S&P 500 and the Lehman Brothers Government/Corporate Bond
Index, returned 7.65% and 21.03% for the same time frames.
As you can see, the Portfolio underperformed its benchmark for both the six- and
12-month periods. The primary reason for this underperformance was that the
equity portion of the Portfolio did not perform as well as the S&P 500. The
performance of the S&P 500 continues to be dominated by several very large
companies with unusually high price/earnings ratios. Our stock selection
discipline is a valuation-based process that has led us to avoid these types of
securities which appear expensive and have become even more expensive over time.
We are persuaded that these excesses tend to reverse themselves over a full
market cycle.
Your Portfolio, however, outperformed its peer group average, the Lipper
Flexible Portfolio Funds Average, over the same six- and 12-month periods ended
December 31, 1998. This peer group, consisting of 702 and 654 similar funds,
returned 3.25% and 13.05% for these time frames. While these funds have similar
investment objectives to your Portfolio, they may have different investment
policies.
INVESTMENT OUTLOOK
We are hopeful that the Federal Reserve's action in lowering U.S. interest rates
last fall is the catalyst for value stocks to improve their performance in 1999,
as confidence returns to the markets and demand for investments broadens out
beyond a small group of large-capitalization stocks.
We believe the risk of global recession has diminished after the recent wave of
official interest rate cuts around the world. However, we believe global growth
should continue to slow and inflation will remain subdued as the consequences of
excess productive capacity are felt around the world. U.S. economic activity is
expected to moderate, with growth estimates centered around 2.9% for 1999. U.S.
interest rates and inflation should remain low allowing the U.S. Treasury market
to continue to provide a safe haven during times of volatility.
PORTFOLIO STRATEGY
We will maintain our focus on securities that have the most attractive
valuations, while also maintaining a well diversified portfolio with a high
degree of sector and industry diversification. In addition, at this time, we
plan to maintain the Portfolio's current position of fixed income securities to
further enhance the Portfolio's diversification and to meet the Portfolio's
investment objective.
A-4
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GROWTH AND INCOME PORTFOLIO Alliance Variable Products Series Fund
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INVESTMENT OBJECTIVE
The Growth and Income Portfolio seeks to balance the objectives of reasonable
current income and reasonable opportunities for appreciation through investments
primarily in dividend-paying common stocks of good quality.
MARKET REVIEW
Due to the financial crisis in Japan and the subsequent spread to the emerging
markets, the past 12 months have been characterized by extremes in the
performance of various financial instruments. Among the extremes has been the
performance of value stocks, of which prices tend to be low relative to earnings
or book values, versus growth stocks, for which current business expectations
foster higher prices for a given level of earnings. Over the past year, the S&P
500 Stock Index (S&P 500) returned 28.74%, but if separated into growth and
value components, the growth segment's appreciation of nearly 43% dwarfed the
value portion's return of 15%.
INVESTMENT RESULTS
Your Portfolio intentionally maintains a value bias versus the S&P 500, and
therefore, underperformed its unmanaged benchmark, the S&P 500, over the six-
and 12-month periods ended December 31, 1998. The Growth and Income Portfolio
returned 6.28% for the six-month period, and 20.89% for the 12-month period
ended December 31, 1998. The S&P 500 posted returns of 9.36% and 28.74% for the
same time frames, respectively.
Your Portfolio, however, outperformed its peer group average, the Lipper Growth
and Income Fund Average, over the same periods. This peer group, consisting of
971 and 794 similar funds, returned 3.25% and 15.72%, for the six- and 12-month
periods. While these funds have similar investment objectives to your Portfolio,
they may have different investment policies.
INVESTMENT OUTLOOK
The emerging markets crisis reached a peak in August of 1998 with the Russian
debt default. The potential for financial turmoil that followed led the Federal
Reserve to lower U.S. interest rates three times since September. We hope that
this is the catalyst for value stocks to improve their performance in 1999, as
confidence returns to the markets and demand for investments broadens out beyond
a small group of large-capitalization stocks.
PORTFOLIO STRATEGY
Your Portfolio has been consistent in its portfolio characteristics of
maintaining a defensive dividend yield and price to earnings ratio, a fully
invested posture, and a high degree of sector and industry diversification. We
continue to seek the stocks of companies with primarily secular growth potential
combined with reasonable valuation. Finally, we rely on Alliance's internal
research capabilities in selecting stocks that we expect to deliver superior
performance.
A-5
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GROWTH PORTFOLIO Alliance Variable Products Series Fund
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INVESTMENT OBJECTIVE
The Growth Portfolio seeks long-term growth of capital by investing primarily in
common stocks and other equity securities.
ECONOMIC AND MARKET REVIEW
The market moved steadily higher in the first half of 1998, but then experienced
a turbulent second half. The 1997 collapse of Asian markets and economies seemed
to have little effect on the U. S. economy or stock market until late summer of
1998. In the third quarter of 1998, worsening conditions in Asia began to put
pressure on Western markets. When Russia defaulted on its foreign debt,
sentiment turned bleakly pessimistic with talk of worldwide recession and
uncontrolled deflation. From its July peak to its October low, the U. S. market
dropped about 20%, with many stocks faring far worse.
In reality, the U. S. economy was still performing quite well with growth at a
moderate pace and little pressure from inflation or interest rates. When the
Federal Reserve cut interest rates, thus signaling its willingness to ease
further if the economy did indeed weaken, the market began to stabilize. Only
weeks later the Fed eased again, a move that caught the market by surprise and
clearly reinforced the message that government policy would be stimulative.
Other foreign central banks also eased. The stock market reacted by rebounding
strongly, a move that has continued into early 1999.
INVESTMENT RESULTS
The Growth Portfolio gained 8.35% during the six months ended December 31, 1998,
compared to a gain of 9.36% for the overall U.S. stock market, as represented by
the S&P 500 Stock Index (S&P 500). The Russell 1000 Growth Stock Index (Russell
1000), which tracks performance of large-cap U.S. stocks, gained 15.22% for the
same six-month period.
After performing well in the first half of 1998, the Growth Portfolio, with its
heavy concentration in the volatile technology and financial sectors, fell by
more than its benchmark index during the third quarter decline. With the U. S.
economy performing well, and with inflation and interest rates low, we did not
believe that there would necessarily be a recession. Furthermore, we thought
that if there were a recession, it would likely be a modest one. In September
and October it seemed to us that we were experiencing a financial panic rather
than the beginning of a bear market. We used this market weakness to expand our
positions in the technology sector, with particular emphasis on communications.
These purchases proved to be quite timely. As it became apparent that the U. S.
economy was continuing to grow, the recovery gained momentum and in a remarkably
short time, new all time highs were attained. The Portfolio performed strongly
in this recovery and, by year end, had performed in line with the S&P 500. For
the 1998 calendar year, your Portfolio, the S&P 500, and the Russell 1000 gained
28.73%, 28.74%, and 38.71%, respectively. Last year saw a continuing trend of
outperformance by very large-capitalization stocks, and the Portfolio's return
compared quite favorably with that of the average growth mutual fund, as
represented by the Lipper Growth Funds Average (Lipper Average), which advanced
22.86% for 1998. During the 12 months ended December 31, 1998, the Lipper
Average consisted of 980 mutual funds.
INVESTMENT OUTLOOK
Conditions appear favorable for continued gains entering 1999. However,
valuations have reached uncomfortably high levels and the market is taking on an
increasingly speculative tone, especially with respect to online trading of
Internet-related stocks. We remain optimistic about long-term prospects for the
U. S. economy and markets, but caution that 1999 could be another year of
considerable volatility.
AREAS OF OPPORTUNITY
We continue to believe that the communications sector offers the most attractive
opportunities for above average long-term returns. Our long standing holdings of
MCI Worldcom, Inc. and Cisco Systems, Inc. have been augmented by new positions
in Global TeleSystems Group, Inc., an operator of a Pan-European fiber optic
network along railroad rights of way, and by three contract manufacturers
serving the electronics industry, Solectron Corp., Sanmina Corp., and SCI
Systems, Inc. Financial services remains our second area of major concentration.
This is a long-term growth area of the economy and relative stock market
valuation continues to be moderate.
A-6
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INTERNATIONAL PORTFOLIO Alliance Variable Products Series Fund
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INVESTMENT OBJECTIVE
The International Portfolio seeks to obtain a total return on its assets from
long-term growth of capital and from income principally through a broad
portfolio of marketable securities of established non-United States companies
(or United States companies having their principal activities and interests
outside the United States), companies participating in foreign economies with
prospects for growth, and foreign government securities.
MARKET REVIEW
In the fourth quarter 1998, coordinated global easing ameliorated further
concerns over deflation and recession. With the 30 basis point cut in core repo
(repurchase agreement) rates to 3.00% in early December, the European Central
Banks followed the Federal Reserve's move to arrest global economic slowdown.
With lower rates in most OECD countries, the exception being Japan, we are
sanguine on the 1999 profit growth story, albeit slower growth than in 1998, and
on the equity markets for the U.S. and Western Europe.
INVESTMENT RESULTS
For the six months ended December 31, 1998, the International Portfolio posted a
- -2.47% return while its benchmark, the Morgan Stanely Capital International
(MSCI) Europe, Australasia, and Far East (EAFE) Index reported a 3.66% return.
Over the longer 12-month period, both your Portfolio and its benchmark performed
better. The International Portfolio returned 13.02% and the Index returned
20.33% for the 12-month period ended December 31, 1998.
Stocks recovered from their lows in the beginning of October with
telecommunications companies leading the way. The Portfolio's telecommunications
holdings in Nokia AB OYJ Corp. and Vodafone Group Plc contributed to performance
in the fourth quarter, as did a snapback in bank stocks. The Portfolio's annual
performance was below its benchmark index due to an exposure to export-related
stocks in Japan and to the company Telecomunicacoes Brasileiras in Brazil, which
performed relatively poorly.
INVESTMENT OUTLOOK
The U.S. economy has remained surprisingly strong, and we expect 3% Gross
Domestic Product (GDP) growth in 1999. Although this rate of growth is below the
4% seen in the last two years, the figure nonetheless is impressive. Strong
consumer demand, evident through retail, auto and home sales, continues to
propel the U.S. economic engine.
Our forecast for GDP growth in Europe is between 2% and 2.5%, slower than in
1998, but still healthy. With U.K. interest rates currently above European
rates, we may see steeper declines in this market as well as a weakness in the
pound. In the Portfolio, we have established and increased positions in stocks
which should benefit under this scenario.
With the introduction of the Euro, we have a positive long-term outlook on the
continental European markets. A trace of this optimism was felt the first few
trading days of January with most European markets closing higher. We continue
to hold rising telecom stocks, as their fundamentals remain superb. On the
margin we have added to cyclical names. We continue to believe that corporate
restructurings will take place in Europe and will benefit shareholders as
managements focus on higher returns on capital. The adoption of the Euro should
continue to accelerate this mindset in the European business community as these
major enterprises are forced to compete efficiently in an increasingly global
economy.
While Japanese stocks performed nicely in October and November, some of the
gains were lost in December, particularly with export-related stocks. With the
rapidly appreciating yen, our holdings in these stocks reversed the positive
trend we saw in these holdings in November. Over the past three months, we have
been reducing the "export" positions and have been building positions in more
domestic names. We have increased our overall exposure to Japan, although we
still remain slightly underweight relative to the MSCI EAFE Index. Policy
actions in Japan appear to be one step forward, two steps back, but we are
likely approaching some turning point in Japan. While we still look for negative
growth of -1% in Japan for 1999, this rate would be an improvement from the -3%
seen in 1998.
East Asia, ex-Japan, proved to have powerful markets during the fourth quarter.
Our underweight position in the region, helped us earlier in the year but hurt
us in the fourth quarter. We have been selective in choosing stocks in this part
of the world where we see current value.
Our only holding in Latin America is Telebras, a telecommunications company in
Brazil. The value of this collection of communication assets was demonstrated
earlier in the year with private sales to numerous telecommunications companies
around the world. The January 13th devaluation of the real, however, has caused
terrific instability in the market and we are closely watching the situation.
A-7
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INTERNATIONAL PORTFOLIO (continued) Alliance Variable Products Series Fund
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PORTFOLIO STRATEGY
In managing the Portfolio, our investment strategy will emphasize stock
selection and investment in a limited number of comparatively large,
high-quality companies. In following this strategy, we utilize the fundamental
analysis and research of Alliance's large global equity research team situated
in numerous locations around the world. The Portfolio's sector and geographic
weightings will be a by-product of our "bottom-up" stock selection approach,
rather than predetermined allocation.
A-8
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PREMIER GROWTH PORTFOLIO Alliance Variable Products Series Fund
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INVESTMENT OBJECTIVE
The Premier Growth Portfolio seeks growth of capital rather than current income.
In pursuing its investment objective, the Premier Growth Portfolio will employ
aggressive investment policies. Since investments will be made based upon their
potential for capital appreciation, current income will be incidental to the
objective of capital growth. The Portfolio is not intended for investors whose
principal objective is assured income or preservation of capital.
MARKET REVIEW
Few people would have predicted the returns for 1998 given the major price
pullback during the first week in October. At the time, we argued that we were
modestly increasing our level of aggressiveness on the theory that you can only
sell high if you have first bought low. Additionally, many companies were
continuing to report solid fundamentals, even in the face of lower stock prices.
Importantly, the Federal Reserve demonstrated a willingness to provide liquidity
in order to address systemic financial strains. Clearly, many of the problems
that troubled the market in the third quarter of 1998 have not been resolved.
There are continuing risks in Latin America and Eastern Europe and precious few
signs of significant change in Japan. However, on balance, it is our belief that
the strength of the U.S. and European economies will serve to pull the troubled
economies forward rather than vice-versa. The U.S. continues to demonstrate
tremendous strength, both in absolute and relative terms. These strengths range
from our democratic-capitalist base, our sound legal and accounting systems,
excellent corporate balance sheets, technological leadership, name brand
recognition as well as centrist monetary, fiscal and political policies.
INVESTMENT RESULTS
The Premier Growth Portfolio outperformed both of its benchmarks for the six-
and 12-month periods ended December 31, 1998. For the six months, the Portfolio
returned 15.27% versus 9.36% for the S&P 500 Stock Index (S&P 500) and 15.22%
for the Russell 1000 Growth Stock Index. For the 12-month period, the Portfolio
achieved a total return of 47.97%, versus 28.74% for the S&P 500, and 38.71% for
the Russell 1000. The Portfolio benefited from select technology names,
primarily in personal computers, wireless, data telecommunications and computer
software and storage. Strong gains were also posted by high-growth retailers. A
total of 35 stocks, representing 80% of the portfolio weighting, outperformed
the benchmarks. Airline stocks detracted from performance because, despite lower
fuel costs and record load factors, they continue to come under pressure from
fears of an economic slowdown in Asia and Latin America.
INVESTMENT OUTLOOK
Fundamentals have, on the margin, improved since the major pullback of the first
week of October; however, prices have lifted dramatically. Our expectation is
for good economic growth in 1999, particularly among large-cap growth companies
which we have labeled the "haves" (i.e., those companies which can achieve 17%
or greater annual growth going forward). Although the price of these companies
is higher, within a context of positive Gross Domestic Product (GDP) growth, low
interest rates, low inflation, and continued centrist monetary and fiscal
policy, the rollover growth of these companies offers a compelling alternative
to the 5% long bond. We also expect a respectable growth rate in Europe, which
should add a second leg to the strength of the world economy.
PORTFOLIO STRATEGY
Two-thirds of the Portfolio remains invested in the "haves," mentioned above,
with a second tier invested in 12%-15% steady growers such as drug and food
chains, select consumer staples and select retailers. In the event the economy
proves stronger than expected (a risk we view as higher than risk of
disinflation), we maintain small positions in airlines, autos and select
financials. We anticipate volatility to increase and will, as always, capitalize
on such volatility by trading around core positions.
A-9
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QUASAR PORTFOLIO Alliance Variable Products Series Fund
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INVESTMENT OBJECTIVE
The Quasar Portfolio seeks growth of capital by pursuing aggressive investment
policies. While it invests primarily in the equity securities of
small-capitalization companies, it may invest in any type of securities issues
by any company in any industry that we believe to offer possibilities for
capital appreciation. The Portfolio may also pursue investment opportunities
outside of the United States.
INVESTMENT RESULTS
1998 was a difficult year for small- and mid-cap companies. As a result, both
your Portfolio and its benchmark, the Russell 2000 Index, posted negative
returns for the sixand 12-month periods ended December 31, 1998. The Portfolio's
returns were -16.37% and -4.49%, while the Russell 2000 Index posted returns of
- -7.12% and -2.55%.
INVESTMENT REVIEW
During 1998, we believe that there were three major reasons that led to the
Portfolio's underperformance relative to its benchmark. First, growth stocks
with cyclical exposure did not do well during the third quarter, as many
investors felt that we may enter a recession sometime in 1999. If that were to
be the case, their earnings outlook would deteriorate. Specifically, the airline
sector and the rental car sector, two industries which are showing tremendous
profitability, and which are fundamentally quite strong, gave up almost two
years worth of stock performance during this one quarter alone. During this
time, investors shifted out of these types of stocks into groups of stocks that
had more positive momentum (price and volume trends).
Second, we underestimated the amount of momentum that was evident in investors'
minds when they bought stocks and when they sold stocks. In many cases, it
appeared that we bought our new ideas too early, and when we sold our older
names based on valuation, this sell decision was also made too early. In other
words, valuations took longer to be realized when the buy decision was made.
Conversely, the momentum investors carried our stocks to higher valuations after
we sold them because the valuations they were willing to pay for these stocks
were simply higher than the valuations we thought they were worth. As a result,
our sell decision was premature based upon this momentum.
Third, while we like to think of ourselves as leading edge investors looking for
that next great idea, we were unwilling to overweight heavily in the technology
sector. More specifically, we essentially avoided investing in Internet stocks
altogether. These stocks, in most cases, have yet to demonstrate the ability to
earn a single penny in earnings and in some cases, probably never will.
Regardless, these stocks have performed exceptionally well, defying all logical
valuation criteria. In our opinion, these stocks were overpriced a year ago when
1998 began, and today are even more overpriced as we enter 1999. We simply
believe that when investors start looking at fundamentals and valuations, not
hype and momentum, these stocks will come back to reality.
As a result, after a very strong first half during 1998, the Portfolio
underperformed tremendously in the third quarter. Although we made up some
further ground in the fourth quarter, we still underperformed relative to the
benchmark for the entire year by 1.94%.
PORTFOLIO STRATEGY
Our basic investment strategy remains unchanged. We continue to adjust the
Portfolio's composition to reflect our perception of those smaller, highly
competitive companies that will, in our judgment, exhibit long-term price
appreciation through superior earnings growth.
On the growth side, we still have strong weightings in the retail, health care,
and leisure sectors. On the cyclical side, we are overweighted in the
transportation and housing related sectors. We are currently underweighted in
the technology and financial services sectors. Furthermore, 1998 marks the fifth
consecutive year in which the large-cap stocks, as measured by the S&P 500 Stock
Index (S&P 500), outperformed the small-cap stocks, as measured by the Russell
2000 Index. During this five-year period, on an annualized basis, the S&P 500
was up 24.1%, considerably outperforming the Russell 2000 Index, up 11.9%. We
are extremely excited about the Quasar Portfolio as we enter the new year. We
firmly believe that when the turn for small-cap stocks does occur, we will be
extremely well positioned to fully participate.
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<PAGE>
REAL ESTATE INVESTMENT PORTFOLIO Alliance Variable Products Series Fund
================================================================================
INVESTMENT OBJECTIVE
The Real Estate Investment Portfolio seeks a total return on its assets from
long-term growth of capital and income primarily by investing in the equity
securities of companies primarily engaged in, or related to, the real estate
industry.
MARKET REVIEW
Unfortunately, the negative relative performance produced by real estate
companies in the first six months of 1998 accelerated in the year's second half.
Whereas much of the U.S. equity market rebounded strongly from a summer sell-off
in the December quarter, Real Estate Investment Trusts (REITs) did not. The
National Association of Real Estate Investment Trusts (NAREIT) Equity Index
dropped 13.13% for the six months ended December 31, 1998 and an astounding
17.50% for the full year. Large- and small-capitalization U.S. equities produced
returns of 9.36% as measured by the S&P 500 Stock Index and -7.12% as measured
by the Russell 2000 Index, in the closing six months of 1998, respectively.
These two indices produced calendar 1998 returns of 28.74% and -2.55%,
respectively. REIT returns for the year, on the other hand, more closely
mirrored those of hard asset commodities than those of public equities. The Dow
Jones-AIG Commodity Index lost over 30% of its value during 1998.
The calendar 1998 return of the NAREIT Equity Index reflected all of the
negatives and none of the positives experienced by REITs during the year. Among
the factors depressing real estate stocks at various points in 1998 were: a
global downturn in hard asset prices and inflation hedge investments, high
valuations relative to net asset value, a plethora of equity issuance by REITs,
the beginning of construction in select markets, too much debt capital coming
into real estate, tax law changes which restricted the potential growth of the
four so-called paired share REITS, fears of a recession and a demand drop-off,
and too little capital coming into the market. Among the factors ignored by
investors during the year were better than expected realized growth in the face
of declining growth for the market as a whole, accelerating dividend increases
in the face of declining alternative yields, and a very healthy underlying real
estate environment.
INVESTMENT RESULTS
As we have already discussed, the real estate market did not perform well in
1998. As a result, both your Portfolio and its benchmark, the NAREIT Equity
Index, produced negative returns for the six- and 12-month periods ended
December 31, 1998. The Real Estate Investment Portfolio lost 13.45% and 19.07%
during these time frames. While we outperformed our NAREIT benchmark in the
first and fourth quarters of the year, we lagged in between.
Our stock selection process leads us to choose companies that are likely to
experience better than average and better than expected growth because they are
exposed to the best real estate markets. These companies have tended to be
inexpensive relative to our expectations of growth, although not necessarily
cheap on an absolute basis. In general, this was not a formula for success in
1998, as virtually all real estate companies experienced valuation declines with
the most severe contractions being reserved for the higher growth entities we
favor. This broad-based phenomenon was felt most sharply in the hotel sector.
Hotels produced far greater cash flow growth in 1998 than any other real estate
sector, yet lagged all other sectors in price action with a decline of nearly
60% during the year. We entered the year with nearly a two times market
weighting in hotels based on the in place real estate fundamentals and our
expectations of growth. Although we reduced our hotel exposure during the year
(to little more than a market neutral weight by year-end), enough damage was
already done to ensure a below benchmark year. The Portfolio's relative
underperformance resulted entirely from our hotel investments.
PORTFOLIO STRATEGY
As we enter 1999, the Real Estate Investment Portfolio is more conservative than
it was a year ago. It trades in line with the average REIT at 8.5-9.0 times 1999
expected funds from operations (or FFO, the REIT equivalent of earnings per
share) and 5%-10% below estimated net asset value of the underlying real estate.
It has better than average expected growth in FFO of over 12% and a high
dividend yield of 7%. We think these characteristics stack up well against other
REIT portfolios and, indeed, against many non-REIT portfolios, as well.
Our Portfolio is conservative from a real estate perspective, as well. Our
largest exposure on an absolute and relative basis is to downtown office
properties in the northeastern United States. These are markets which offer
relatively predictable rental growth prospects today because of long lease terms
with below market in-place rents, low vacancy rates, and long lead times for
construction. We are also weighted towards grocery anchored shopping centers on
the West Coast and Class "A" apartments in California and the northeast. We view
these sectors as defensive in a slower growth economy. The Portfolio is
under-represented in Sunbelt apartments because we believe there are too many
apartments being built today in the Sunbelt for us to be comfortable with large
investments in the sector. Since we are concerned
A-11
<PAGE>
REAL ESTATE INVESTMENT PORTFOLIO
(continued) Alliance Variable Products Series Fund
================================================================================
about the discretionary nature of most mall sales at this point in the economic
cycle, we are also under-represented in regional malls in general.
INVESTMENT OUTLOOK
Our outlook for 1999, although muted by the past year, remains upbeat and
optimistic. REITs are just plain cheap by any absolute or relative measure. The
fundamentals underlying the real estate business are solidly in equilibrium
(which has been a good time to make money in past cycles). And few investors
seem to care. This combination of traits is a classic representation of an
out-of-favor sector. And historically, out-of-favor sectors have been fruitful
areas for investment. While past performance cannot guarantee a future course of
action, we believe that the risk/reward trade off in REITs today is extremely
compelling.
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<PAGE>
TECHNOLOGY PORTFOLIO Alliance Variable Products Series Fund
================================================================================
INVESTMENT OBJECTIVE
The Technology Portfolio is a diversified investment portfolio that seeks growth
of capital. The Portfolio invests principally in securities of companies which
use technology extensively in the development of new or improved products or
processes.
INVESTMENT RESULTS
1998 was a year of high volatility and uncertainty. In the last twelve months,
the market has experienced a dramatic correction only to see an even stronger
rally which has continued into 1999.
The Technology Portfolio has underperformed its benchmark, the Pacific Stock
Exchange (PSE) High Technology Index, for the six-month period ended December
31, 1998, but comfortably outperformed its benchmark during the 1998 calendar
year. For the six- and 12-month periods, your Portfolio gained 27.55% and
63.79%, respectively, while the PSE High Technology Index advanced 29.85% and
54.60%, respectively. Your Portfolio outperformed its benchmark index for the
12-month period ended December 31, due to our consistent style of focusing on
quality and long-term fundamentals. This investment style has been rewarded
during this unique time by preserving capital while still being positioned to
participate fully in the market's recent recovery.
INVESTMENT DISCUSSION
We have commented in the past about how technology product cycles keep getting
shorter, that they are measured in months now rather than years. Lately, it
seems the same thing is happening with investor perceptions about
technology--sharp emotional shifts in short periods of time. In the last two
quarters, for example, we have gone from unbridled enthusiasm to rampant
pessimism back to jubilation. If people are not worried about the Y2K issue,
problems in Asia, the government's case vs. Microsoft or the decline in PC
prices, they are enthusiastic about the strong earnings shown as we finish 1998,
recovery in Asia, or the excitement (mania?) surrounding Internet stocks.
These rapid changes in perception make portfolio management more difficult. It
is always tempting to join the crowd and rush into a stock going up every day or
panic out of one doing the reverse. The brokerage community reinforces the
importance of these short-term swings in their effort to maximize trade
commissions. We have long felt, however, that too much emphasis on short-term
issues and the high portfolio turnover, which is part of that approach, often
leads to a "churn and burn" experience--high transaction costs, more capital
gains taxes and too much emphasis on tactical rather than strategic
considerations.
It is possible that some of this trading myopia may have become a permanent part
of the investment scene, at least with respect to technology stocks. Many people
are chasing these stocks without an understanding of their underlying business
and they show a readiness to unload positions at the slightest sign of weakness.
More involvement with tech stocks amongst the retail community partly explains
this instability. The non-professional investor now has access, through the
Internet, to quotes, charts, press releases, conference calls, chat rooms and
even Wall Street analysis. Momentum is the buzzword of this new kind of
investor, electronic day trading is the style and myopic group-think is the
result.
The extraordinary run-up in Internet stocks is the best example of this
phenomenon. This worldwide network, allowing consumers and businesses to connect
to almost anyone or anything, marks a new era in technology and it has profound
implications. The secular growth opportunity for dozens of new companies in this
area is clear. Nevertheless, too much of the activity in Internet stocks is
amongst retail day traders who seem to believe that the higher a stock goes, the
more attractive it becomes.
Some of the Portfolio's strong performance this year has come from its exposure
to several names in this Internet space and we hope to capitalize further on the
secular business opportunity which lies ahead in this new "dot com" era. Shorter
term, however, we are somewhat concerned about an old fashioned issue called
valuation--some Internet stocks seem ahead of themselves and we are cautiously
waiting for better opportunities than exist today to further build our positions
in this exciting new wave of technology.
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<PAGE>
UTILITY INCOME PORTFOLIO Alliance Variable Products Series Fund
================================================================================
INVESTMENT OBJECTIVE
The Utility Income Portfolio seeks current income and capital appreciation by
investing primarily in the equity and fixed-income securities of companies in
the utilities industry. The Portfolio's investment objective and policies are
designed to take advantage of the characteristics and historical performance of
securities of utilities companies engaged in the manufacture, production,
generation, provision, transmission, sale and distribution of gas, electric
energy, and communications equipment and services, and the provision of other
utility or utility-related goods and services.
MARKET REVIEW
There has been a very large discrepancy between the performance of growth
stocks, which command premium prices for constant and visible earnings growth,
and of value stocks, whose greater degree of business-cycle exposure translates
into lower valuations, in 1998. The performance differential is now greater in
some respects than it was during the "nifty fifty" period of the early 1970s.
History, however, shows that over the long run growth stocks and value stocks
have exhibited similar performance. Additionally, value stocks tend to benefit
from Federal Reserve easing such as that begun in September of 1998. We
therefore expect value to be highlighted by the market as we enter 1999.
INVESTMENT RESULTS
For the six-month period ended December 31, 1998, the total return for your
Portfolio was 12.57%. This compares with returns of 6.27% and 17.05%, for the
Dow Jones (DJ) Utility Index and the New York Stock Exchange (NYSE) Utility
Index, respectively. For the same time period, the Lehman Brothers (LB)
Long-Term Government Bond Index returned 6.74%. Over the 12 months ended
December 31, 1998, your Portfolio gained 23.91% compared to returns of 14.37%,
33.04%, and 13.41% for the DJ Utility Index, NYSE Utility Index, and the LB
Long-Term Government Bond Index, respectively
Also, for the same six- and 12-month periods ended December 31, your Portfolio
outperformed its peer group as represented by the Lipper Utility Funds Average
(Lipper Average), which returned 9.11% and 18.30%, respectively. During the six-
and 12-month periods ended December 31, 1998, the Lipper Average consisted of
103 and 102 funds, respectively.
Utility stocks tend to perform well during times of market stress. The fourth
quarter of 1997 witnessed relatively sharp outperformance of utilities brought
on by the Asian crisis. The first two quarters of 1998 marked a reduction of
Asian tensions and a return to higher comfort levels, and therefore, utilities
did not keep up with the consequent overall rise in the broader market.
In August, a renewed bout of nervousness due to the Russian debt crisis and
domestic hedge fund problems caused the broad market to plummet, but the
perceived safe haven nature of utilities again bolstered the sector. For the
month, the S&P 500 Stock Index dropped 14.5% while your Portfolio's decline was
slightly less than 9%. Finally, the market's subsequent rebound caused the
broader market to outperform the utility sector once again.
Your Portfolio's underperformance relative to its benchmark, the NYSE Utility
Index, is largely due to the 5% weighting in that index of Lucent Technologies,
the communications technology company spun out of AT&T Corporation. Lucent
stock, which is not a holding of your Portfolio, appreciated 175% over the past
12 months.
INVESTMENT OUTLOOK
Three factors will converge in 1999 that may point to continued good performance
of the utility sector. First, the global turmoil evident in 1998 has moderated,
but has not disappeared. Any intensification of the emerging markets financial
crisis in 1999 will once again highlight the safe haven nature of utilities.
Second, in its successful attempt to calm the markets, the Fed has begun to
ease. Historically, easing has led to reduced long-term interest rates, which
are typically favorable for utility stock performance. Third, corporate earnings
growth is liable to slow in 1999 as global economic problems dampen domestic
business activity. Utility earnings growth is normally low relative to the broad
market, but 1999 may see utility earnings growing more comparably to the broad
market.
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<PAGE>
WORLDWIDE PRIVATIZATION PORTFOLIO Alliance Variable Products Series Fund
================================================================================
INVESTMENT OBJECTIVE
The Worldwide Privatization Portfolio seeks long-term capital appreciation by
investing principally in equity securities issued by enterprises that are
undergoing, or have undergone, privatization. The balance of the Portfolio's
investment portfolio will include equity securities of companies that are
believed by the Fund's Adviser to be beneficiaries of the privatization process.
REVIEW AND OUTLOOK
1998 featured dramatically diverse equity returns from the various regions of
the world. Economic uncertainty originating in Asia negatively affected all the
global emerging markets. Developed market returns were largely positive but were
subject to increased volatility.
European markets were particularly strong as investor's enthusiasm for the
prospects arising from European Monetary Union grew. Additional support for
equity markets in the region arose from the continued change in savings patterns
with a shift towards equity ownership by individuals.
Asian markets recovered from lows but remained depressed following the financial
crisis that engulfed the region. The strongest recovering markets in the region
were those in which economic reform had been embraced most aggressively. We
believe that the process of economic reform is still at an early stage and feel
that governments must continue to withdraw from the economy for revival to be
maintained. Privatization will be key to this process and we expect to see an
acceleration of privatization issues and opportunities for your Portfolio in
Asia.
The Japanese market and economy remained in the doldrums as the government
failed to deal adequately with the country's banking crisis. Two large
privatizations at the end of the year offered some encouragement that the
Japanese administration has accepted the need to implement change. We expect to
see the Japanese government continue in its efforts to privatize and reform,
although at a slow pace.
The contagion effect from Asia negatively impacted the Latin American markets.
Additional uncertainty in the region was caused by the failure of Cardoso's
Brazilian government to implement fiscal reforms and reduce the country's huge
public sector budget deficit. Ultimately, this resulted in the removal of the
Brazilian currency peg and a sharp devaluation of the real. We strongly believe
that economic and fiscal reform must be implemented in order for both Brazil and
the Latin American economic environment to improve. We believe that some
excellent opportunities will arise for the Portfolio to invest in the countries
that restructure most aggressively.
East European markets were similarly affected by the Asian contagion and the
economic collapse in Russia. We currently find some excellent value in
privatization issues in the region.
Despite the market volatility in 1998, privatization volumes were strong with
over US$140 billion of initial public offerings and secondary offerings. Over
the next 12 months, we anticipate a significant increase in the number of
privatization issues both in the developed economies of the world and the
emerging economies that accelerate restructuring of their economic systems.
On an industry basis, privatizations continued to be dominated by telecoms and
utility transactions. However, as noted in previous years there continued to be
an expansion in both industry and geographic spread. We believe this will be a
lasting trend, and we anticipate further opportunities to broaden your
Portfolio's industry and geographic diversity.
We are confident that privatizations will continue to offer one of the most
attractive ways to gain exposure to global investment opportunities and the
themes of deregulation and restructuring.
INVESTMENT RESULTS
The Worldwide Privatization Portfolio posted a return of -2.57% for the second
half of 1998. This result underperformed the Morgan Stanley Capital
International (MSCI) Europe, Australasia, and Far East (EAFE) Index return of
3.66% for the same period. Over the 12-month period ended December 31, 1998,
your Portfolio advanced 10.83%, underperforming the MSCI EAFE Index return of
20.33% for that period.
Your Portfolio's strong relative weighting in emerging market stocks negatively
impacted overall performance and was the primary reason for your Portfolio's
relative underperformance during the 12-month period ended December 31, 1998.
However, performance of the Portfolio did benefit from relative underweighting
in Japan and overweighting in Europe. Stock selection continued to positively
impact performance across all regions.
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<PAGE>
GLOBAL BOND PORTFOLIO Alliance Variable Products Series Fund
================================================================================
INVESTMENT OBJECTIVE
The Global Bond Portfolio seeks 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.
MARKET REVIEW
Investment results for both the six- and 12-month periods ended December 31,
1998 were boosted in the second half of the year as the value of foreign
investments rose due to a weak U.S. dollar in the foreign exchange markets.
The USD fell by over 24% against the Japanese yen, peak-to-trough, as the JPY
moved from a low of 147.66 to a high of 111.58. A move of this magnitude in such
a short period has not been seen since the 1970s. The value of European bond
investments also benefited from USD weakness as the USD fell by over 13%,
peak-to-trough, against the German mark.
Such a robust environment in the foreign exchange market dwarfed the impact of
the movement in the underlying bonds however, the direction of both U.S. and
European bonds was positive for the Portfolio over the period. Yields moved to
historic lows on the back of the Russian financial crises, and the U.S. Federal
Reserve's leading of various central banks in easing monetary policy. Japanese
bonds were the laggard performers as supply concerns overwhelmed the market, and
Japanese bond yields rose during the second half of the year.
The move in U.S. and European bond yields was initially supported by the Russian
crisis as "safe-haven premium" was built into government debt. Sentiment (and
prices) was further boosted as central banks eased monetary policy. However,
during the last quarter of 1998, the markets returned to focus more internally,
and the U.S. market, in particular, found itself pricing-in too bearish an
outlook for growth. As growth confounded the pessimists, U.S. bonds retraced
approximately half their gains of the third quarter. European bonds held up
better during the latter quarter as growth and inflation data lived up to, and
in many cases exceeded, the pessimistic expectations.
INVESTMENT RESULTS
For the six-month period ended December 31, 1998, your Portfolio gained 10.79%,
bringing the 1998 calendar year advance to 14.12%. The Portfolio's benchmark,
the Salomon Smith Barney (SSB) World Government Bond Index (unhedged in U.S.
dollar terms), returned 12.17% and 15.31% over the six- and 12-month periods
ended December 31, 1998, respectively.
Your Portfolio's return did not rise as rapidly as that of the SSB World
Government Bond Index due primarily to the Portfolio's relative underexposure to
the resurgent Japanese yen in the second half of 1998. Partially offsetting
this, your Portfolio did benefit from an overweighting of interest rate risk in
anticipation of bond yield declines.
INVESTMENT OUTLOOK
Our key quantitative measures used to assess the likely direction of bond yields
continue to suggest bond yields are at low value levels, and that a move to
higher yields should be anticipated. From a relative perspective, European
exposure is favored over both the U.S. and Japan.
Our subjective assessment for U.S. bonds is fiercely divided between our focus
on the confounding strength of the U.S. economy, and the very negative external
influences that have yet to dampen domestic U.S. growth. In the current
environment, we believe domestic strength is dominating pricing and likely to
move bond yields higher before rallying back down later in the year.
Japan makes for an interesting comparison with the current dichotomy of our view
on the U.S. In Japan, the economy continues to exceed the pessimistic forecasts
with even less activity than most dared to consider. The economy remains
resolute in refusing to react to massive fiscal stimulus. Such a backdrop should
normally prove favorable for bonds however, Japan has now reached the point
where its credit quality and funding requirements become dominant in market
pricing and we therefore expect Japanese yields to move higher.
In Europe, our assessment is made with greater conviction. We perceive external
events are increasingly dampening domestic Euro-area growth that was already
struggling against internal structural problems, particularly in the Euro-area
labor market. Our subjective assessment for Europe is for bond yields to
decline.
Our foreign exchange view is for the USD and EUR to rally against the JPY later
in 1999, with the USD expected to outperform EUR.
PORTFOLIO STRATEGY
At present, your Portfolio is positioned cautiously in both the U.S. and Japan.
European interest rate risk is favored. We anticipate increasing U.S. interest
rate risk once solid confirmation of a slowdown in U.S. activity is forthcoming.
We continue to believe that the global bond product offers you an attractive
opportunity to diversify away from equity market risk, and at the same time, to
maintain the foreign value of your investments through its diversified global
currency exposure.
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<PAGE>
GLOBAL DOLLAR GOVERNMENT PORTFOLIO Alliance Variable Products Series Fund
================================================================================
INVESTMENT OBJECTIVE
The Global Dollar Government Portfolio seeks a high level of current income
through investing its assets in U.S. and non-U.S. fixed income securities
denominated only in U.S. dollars. As a secondary objective, the Portfolio seeks
capital appreciation. Substantially all of the Portfolio's assets will be
invested in high yield, high risk securities that are low-rated (i.e., below
investment grade), or of comparable quality and unrated, and that are considered
to be predominantly speculative as regards to the issuer's capacity to pay
interest and repay principal.
MARKET REVIEW
In the emerging markets, debt prices fell over the 12-month period as economic
turmoil spread from Asia to Russia and Latin America. Strong gains made in the
first quarter of 1998 were erased in the second quarter when more bad economic
news was reported from Asia. Lower than expected economic growth in emerging
Asia, a weakening yen and recession in Japan along with fiscal problems in
Russia combined to cause a sell-off throughout the emerging markets. In August,
this sell-off gained momentum when the Russian government devalued the ruble and
defaulted on its domestic debt. In September, investor concern shifted to
Brazil, which, like Russia, had a semi-fixed currency regime and deficits in
both its fiscal and current accounts. After reaching a low in September,
emerging market debt prices rebounded as the U.S. and other industrial countries
began easing monetary policy and the International Monetary Fund authorized an
emergency loan package for Brazil. However, the period ended with investors
concerned about the Brazilian government's ability to pass the necessary reforms
in time to avert a currency devaluation.
During the 12-month period, Poland posted the best performance while Russia
posted the worst performance among emerging debt markets. Poland's
investment-grade rating and modest short-term financing needs sheltered the
country from market volatility. In Latin America, Ecuador, followed by
Venezuela, was the worst performing debt market. Both countries have suffered
from low oil prices and political uncertainty. In addition, Ecuador recently
devalued its currency.
INVESTMENT RESULTS
Over the six-month period ended December 31, 1998, your Portfolio returned
- -19.08%. This compares with the -10.82% return posted by the JP Morgan Emerging
Markets Bond Index. Over the 12 months ended December 31, 1998, your Portfolio
declined 21.71% while its benchmark returned -11.04%. The underperformance of
your Portfolio can be attributed to the sluggish performance of some of its
emerging market debt holdings. In particular, the Portfolio's holdings in Russia
and Ecuador hurt performance.
INVESTMENT OUTLOOK
Our outlook for emerging market debt has improved as a concerted effort by the
Group of Seven (G7) industrial countries has been made to avert further spread
of economic and financial malaise. The U.S. Federal Reserve, along with other G7
countries, has begun easing monetary policy in an effort to lower the risk of
slower economic growth, and the Japanese yen has strengthened sharply against
the U.S. dollar, relieving pressure on exchange rates and interest rates
elsewhere in Asia. In addition, signs of economic growth are beginning to emerge
from emerging markets in Asia.
However, increased uncertainty has been generated by the change in Brazil's
exchange rate policy. Spreads on emerging market debt have widened considerably
as a result, weakening growth prospects for Latin America. Furthermore, we
remain concerned about the effects that slower global growth and low commodity
prices will have on emerging markets. In this environment, we expect emerging
market debt prices to remain volatile with periods of improved sentiment,
triggered by stimulative policies in developed countries, interspersed with
episodes of weakness, as investors lose confidence in the pace of reforms in
emerging countries and Japan.
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<PAGE>
HIGH YIELD PORTFOLIO Alliance Variable Products Series Fund
================================================================================
INVESTMENT OBJECTIVE
The High Yield Portfolio seeks the highest level of current income available
without assuming undue risk by investing principally in high yielding fixed
income securities. The Portfolio invests substantially all of its assets in
higher yielding, higher risk fixed-income securities (commonly known as "junk
bonds") that are rated below investment grade and are considered to have
predominantly speculative characteristics.
MARKET REVIEW
1998 was a challenging year for the financial markets as a whole, and for high
yield in particular. During the first half of the year, the high yield market
performed well, driven by healthy economic conditions and good market
technicals. Record new issuance was absorbed by strong inflows by investors into
high yield, causing prices to remain firm. The Portfolio significantly
outperformed the CS First Boston High Yield Index for that time period,
returning 8.13% compared to 4.30% for the Index.
The high yield market came under tremendous pressure in the second half of the
year, especially during the August to mid-October time period. Concerns about a
global economic slowdown, the possibility of a 1999 recession in the United
States, and fears of lower corporate profits, caused a flight to quality. The
situation was exacerbated by leveraged hedge funds selling high yield securities
in order to meet margin calls. The market became temporarily illiquid for credit
risk securities, and spreads in high yield widened dramatically. The average
spread over Treasuries for high yield securities peaked at approximately 7.75%
on October 15, up from 3.86% at year-end 1997. Firm action by the Federal
Reserve in reducing interest rates and U.S./ International Monetary Fund support
of Brazil materialized. This resulted in a reversal of sentiment toward the end
of the year, however, spreads in high yield only partially rebounded. By year
end, the high yield market was yielding 11.32%, or 6.50% over Treasuries.
INVESTMENT RESULTS
The Portfolio returned -3.69% for the 12-month period ended December 31, 1998,
underperforming the 0.81% return of its benchmark. Despite good performance in
the first half of the year, performance in the second half suffered as a result
of the Portfolio's greater emphasis on single B-rated securities than that of
the Index. For the first time in three years, the trend of double B-rated
securities outperforming single B-rated securities reversed itself in the summer
as a result of the global turmoil and the flight to quality. For the year,
double-B rated securities outperformed single B-rated securities by over 4.00%.
INVESTMENT OUTLOOK
Entering 1999, market sentiment for high yield appears to be positive as most
economists are expecting continued, although slower, economic growth. While we
have some concern about increasing default levels, particularly in the more
commodity-oriented segments of the market, the current trailing 12-month default
rate of 3.3% is still below the historical average of 3.4%. Although we
anticipate a recovery in the high yield market, we remain focused on several
things, including the availability of capital, the strength of the equity
markets, and Brazil's efforts to stabilize its economy. Negative news in any of
these areas could keep high yield spreads wide despite reasonable economic
growth. However, with the high yield spread over Treasuries currently at 6.50%,
compared to the historical average of 4.50%, high yield continues to look
attractive relative to other investment alternatives.
PORTFOLIO STRATEGY
Credit selection continues to play a significant role in the Portfolio's
composition. We favor companies that have capital structures which can withstand
slower economic growth and lower prices and which do not need to raise
additional capital. As of the end of the current period, the Portfolio is
underweighted in some of the more cyclical industries, such as metals, paper and
energy. We expect commodity prices in those industries to continue to remain
weak for some time. We will continue to focus our attention on the single B
sector of the market, which we still feel offers the best value from a
risk/reward relationship. The Portfolio is well diversified by both issuer and
by industry, and holds 46 issues within 20 industries.
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<PAGE>
NORTH AMERICAN GOVERNMENT
INCOME PORTFOLIO Alliance Variable Products Series Fund
================================================================================
INVESTMENT OBJECTIVE
The North American Government Income Portfolio seeks the highest level of
current income, consistent with what the Fund's Adviser considers to be prudent
investment risk, that is available from a portfolio of debt securities issued or
guaranteed by the governments of the United States, Canada and Mexico, their
political subdivisions (including Canadian Provinces but excluding the States of
the United States), agencies, instrumentalities or authorities. The Portfolio
seeks high current yields by investing in government securities denominated in
local currency and U.S. dollars. Normally, the Portfolio expects to maintain at
least 25% of its assets in securities denominated in the U.S. dollar.
MARKET REVIEW
Despite global economic turmoil, the United States continued on a path of robust
growth driven by domestic consumer demand. Growth for all of 1998 matched the
previous year's growth at 3.9%. Manufacturing, however, remained weak as world
export markets declined. Inflation and unemployment remained historically low
throughout the period. The Federal Reserve, as a hedge against a slowing global
economy, lowered interest rates from 5.50% to 4.75%.
The U.S. bond market posted solid returns in 1998. During the first half of the
year, interest rates remained relatively stable and investor demand for
yield-oriented securities, corporate bonds as well as mortgage-backed
securities, was high. Despite strong U.S. economic growth, inflation remained
low, further increasing demand in the bond market. During the third quarter,
global markets suffered from heightened concerns about recession as the
financial and economic turmoil in Asia spread to Russia and Latin America. The
resulting flight to quality spurred a rally in the U.S. Treasury market and
other safe haven government bond markets outside the U.S. while negatively
impacting returns in the corporate, high yield and mortgage bond sectors. In the
fourth quarter, the high yield sector rebounded along with equity markets when
the Federal Reserve cut interest rates.
In the emerging markets, debt prices fell over the 12-month period as economic
turmoil spread from Asia to Russia and Latin America. Strong gains made in the
first quarter of 1998 were erased in the second quarter when more bad economic
news was reported from Asia. Lower than expected economic growth in emerging
Asia, a weakening yen and recession in Japan along with fiscal problems in
Russia combined to cause a sell-off throughout the emerging markets. In August,
this sell-off gained momentum when the Russian government devalued the ruble and
defaulted on its domestic debt. In September, investor concern shifted to
Brazil, which, like Russia, had a semi-fixed currency regime and deficits in
both its fiscal and current accounts. After reaching a low in September,
emerging market debt prices rebounded as the U.S. and other industrial countries
began easing monetary policy and the IMF authorized an emergency loan package
for Brazil. However, the period ended with investors concerned about the
Brazilian government's ability to pass the necessary reforms in time to avert a
currency devaluation.
During the 12-month period, Poland posted the best performance while Russia
posted the worst performance among emerging debt markets. Poland's
investment-grade rating and modest short-term financing needs sheltered the
country from market volatility. In Latin America, Ecuador, followed by
Venezuela, was the worst performing debt market. Both countries have suffered
from low oil prices and political uncertainty. In addition, Ecuador recently
devalued its currency.
The reporting period has seen positive developments for both Mexico and
Argentina. Mexico recently approved further steps in banking reforms, enabling
them to attract additional capital amidst policies of fiscal discipline in 1998.
Falling prices of oil, of which Mexico is an exporter, are not expected to
significantly impact the country's financial outlook as oil revenues constitute
a smaller percentage of total revenues. Furthermore, the Mexican economy has
continued to show resilience against the backdrop of other Latin economies.
Consumer spending has buoyed the Mexican economy despite difficult global
conditions. Mexico's outperformance in these areas has been benefited by its
North American Free Trade Agreement (NAFTA) preferences and the long-term
convergence of its manufacturing sector with that of the United States.
Argentina, which has been aided with funds from the International Monetary Fund,
continued with its internal policies of fiscal discipline. Policy improvements
have bolstered their economy's ability to weather external storms within the
global economy and Latin America. Moreover, Argentina is less exposed to the
global slowdown as just 10% of the country's gross domestic product is dependent
on exports. In addition, Argentina's "convertibility law," which pegs the peso 1
to 1 with the U.S. dollar has achieved significant credibility amidst global
turmoil.
In the developed markets outside of the U.S., government bond returns were
augmented by investors' aversion to risk. Traditional safe haven markets
benefited from both the flight to quality and the increased probability of
mon-
A-19
<PAGE>
NORTH AMERICAN GOVERNMENT
INCOME PORTFOLIO (continued) Alliance Variable Products Series Fund
================================================================================
etary easing, while non-safe haven countries suffered from low liquidity. In
Canada, growth slowed and inflation remained low as a result of falling
commodity prices and lessening demand from Asia. A weak currency and low
liquidity dampened bond market returns in Canada on both a local and hedged
basis.
INVESTMENT STRATEGY
During the six-month period ended December 31, 1998, we maintained the
Portfolio's country weighting consistent with the investment objectives of the
Portfolio, while securing a high level of current income. The Portfolio
continued to be invested in Mexican, Argentinean and Canadian debt, as well as
U.S. Government obligations. Longer-duration securities were held in
anticipation of longer-term interest rates trending downward, thus minimizing
interest rate risk.
INVESTMENT RESULTS
We compare your Portfolio's performance to the Lehman Brothers (LB) Aggregate
Bond Index, a standard measure of the performance of the overall U.S. bond
market, and the LB Intermediate-Term Government Bond Index, which measures the
performance of U.S. bonds in the 1-10 year maturity range.
During the six-month period ended December 31, 1998, your Portfolio returned
2.12%, while the LB Aggregate Bond Index returned 4.58% and the LB
Intermediate-Term Government Bond Index returned 4.93%. Performance for the
Portfolio and its benchmarks improved over the 12-month period ending December
31, 1998 with the Portfolio posting returns of 4.07% and the LB Aggregate Bond
Index returning 8.69% and the LB Intermediate returning 8.49%.
Your Portfolio underperformed both benchmarks for the six- and 12-month periods
as a result of your Portfolio's allocation to both Argentina and Mexico.
Emerging markets countries such as these suffered from the crisis in Russia and
uncertainty in the global capital markets during the period under review.
However, the Portfolio's allocation to U.S. Treasuries helped the Portfolio's
performance as U.S. Treasuries benefited from the flight to quality. Overall
underperformance of the Portfolio is attributable to the fact that both Lehman
indices reflect U.S. based government securities only while your Portfolio is
also invested overseas. These U.S.-based government securities outperformed most
global government bond markets during the period.
INVESTMENT OUTLOOK
While the outlook for global recession has diminished, we continue to project a
slower growth trajectory to the global economy in 1999. In the U.S., economic
activity is expected to moderate with growth estimates centered around 3.0% for
1999. Further interest rate reductions to sustain growth by the Federal Reserve
are likely in 1999, but are not imminent. U.S. interest rates, as well as
inflation, will remain low and the U.S. Treasury market will continue to provide
a safe haven during times of volatility.
In Europe, growth is expected to slow to 1.9% in 1999, from 2.6% in 1998.
Inflation should remain benign. Recent interest rate reductions in Europe may be
followed by additional rate cuts in 1999 to offset the effects of the global
slowdown.
Our outlook for emerging market debt has improved as a concerted effort by the
Group of Seven (G7) industrial countries has been made to avert further spread
of economic and financial malaise. The U.S. Federal Reserve, along with other G7
countries, has begun easing monetary policy in an effort to lower the risk of
slower economic growth and the Japanese yen has strengthened sharply against the
U.S. dollar, relieving pressure on exchange rates and interest rates elsewhere
in Asia. In addition, signs of economic growth are beginning to emerge from
emerging markets in Asia.
However, increased uncertainty has been generated by the change in Brazil's
exchange rate policy. Spreads on emerging market debt have widened considerably
as a result, weakening growth prospects for Latin America. Furthermore, we
remain concerned about the effects that slower global growth and low commodity
prices will have on emerging markets. In this environment, we expect emerging
market debt prices to remain volatile with periods of improved sentiment,
triggered by stimulative policies in developed countries, interspersed with
episodes of weakness, as investors lose confidence in the pace of reforms in
emerging countries and Japan.
We remain positive in our view on Mexico and Argentina as economic policy in
each country remains quite strong and their long-term trend toward improving
credit fundamentals remains intact. Although the turmoil in Brazil may
negatively affect Mexico's asset prices, we do not expect the impact to be
either great or long term. We currently see no relative value in the Canadian
market as spreads have tightened considerably.
A-20
<PAGE>
SHORT-TERM MULTI-MARKET PORTFOLIO Alliance Variable Products Series Fund
================================================================================
INVESTMENT OBJECTIVE
The Short-Term Multi-Market Portfolio seeks the highest level of current income
consistent with what the Fund's Adviser considers to be prudent investment risk,
that is available from a portfolio of high-quality debt securities having
remaining maturities of not more than three years.
MARKET REVIEW
During 1998, developed government bond markets as a group posted a strong
return. On an individual country basis, all developed government bond markets
posted returns over 10%, with the exceptions being for Japan and Canada. During
the first half of 1998, interest rates remained relatively stable and investor
demand for yield oriented securities was high. During the third quarter of 1998,
however, global markets suffered from multiple concerns about recession and a
liquidity crisis throughout non-government bond markets. The unexpected
devaluation in Russia, the extreme weakness in the Japanese yen, and the well
publicized bailout of Long Term Capital Management's hedge fund, all added to
extreme risk aversion. The resulting flight to quality spurred a rally in the
U.S. Treasury market and other safe haven government bond markets outside the
U.S. This also negatively impacted returns in the corporate, high yield and
mortgage bond sectors. The U.S. Federal Reserve and other world central banks
reacted by reducing official interest rates. The combined effect of monetary
policy ease, with the release of stronger than expected U.S. economic growth
data, reduced market aversion and investors cautiously moved back into higher
yielding securities.
European bond markets performed well over the 12-month period, as the threat of
slowing growth and market turmoil increased demand for high quality government
bonds. Late in the year, slowing economic growth, combined with low inflation,
motivated a coordinated rate cut among the Euro-11 countries from 3.30% to
3.00%. The Euro-11 countries are those European countries scheduled to
participate in the European Monetary Union (EMU) beginning January 1, 1999. Rate
cuts by EMU outsiders also occurred which drove yields lower across European
bond markets. The U.K. posted the best return as the Bank of England continued
to ease monetary policy in the face of a slowing economy.
In Japan, concerns about the ability of the bond market to absorb a glut of
government bonds being issued, as well as further erosion of Japanese economic
fundamentals, pushed bond prices down during the period. Fourth quarter economic
growth remained weak after an already dismal third quarter growth rate of -2.6%.
During the period, the yen rose dramatically against the U.S. dollar as hedge
funds and others rushed to unwind yen-financing trades.
In the Dollar Bloc countries (Australia, New Zealand and Canada) growth slowed
and inflation remained low as a result of falling commodity prices and lessening
demand from Asia. The New Zealand bond market posted the strongest return of the
three markets, as it continued to benefit from sharp rate cuts made by the
central bank to stop the economy from slipping into recession. In Canada and
Australia, weak currencies and low liquidity helped place their bond markets
among the bottom performing markets over the period. Both countries' currencies
are suffering from a combination of negligent monetary policies and their
dependence on exports that are suffering from slowing global growth.
INVESTMENT RESULTS
The Portfolio's total return for the six-month period ended December 31, 1998
was 2.85% compared to the Merrill Lynch 1-3 Year Treasury Index return of 3.86%
for the same period. On a 12 month basis, the Portfolio posted a return of
6.32%, versus 7.00% for the benchmark. As you can see, your Portfolio
underperformed the index over both the six- and 12-month periods. As a result of
the market turmoil in the third quarter of the year, we positioned the Portfolio
more defensively by allocating a larger percentage of the Portfolio's assets to
cash. This defensive posture hurt performance as markets recovered in the fourth
quarter.
INVESTMENT OUTLOOK
We believe the risk of global recession has diminished after the recent wave of
official interest rate cuts around the world. However, we believe global growth
should continue to slow and inflation will remain subdued as the consequences of
excess productive capacity are felt around the world. U.S. economic activity is
expected to moderate from the robust rate of the fourth quarter with growth
estimates centered around 2.9% for 1999. Further interest rate reductions by the
Federal Reserve are likely, but not imminent. U.S. interest rates, as well as
inflation, will remain low and the U.S. Treasury market will continue to provide
a safe haven during times of volatility.
In Europe, we expect growth to slow to 1.9% in 1999 from 2.6% in 1998 and
inflation to remain low. Additional rate cuts by the European Central Bank are
likely. The Euro will provide interesting investment opportunities as it
stimulates the development of a European corporate bond market exhibiting
similar characteristics to the U.S. bond market. In the near term, we would
expect the Euro to weaken against the U.S. dollar, as
A-21
<PAGE>
SHORT-TERM MULTI-MARKET PORTFOLIO
(continued) Alliance Variable Products Series Fund
================================================================================
interest cuts from the European Central Bank will likely happen much sooner than
action by the Federal Reserve in the U.S.
Japanese growth is expected to decline by -0.9% in 1999 after having shrunk an
estimated -2.8% in 1998. A deflationary cycle has taken hold in Japan and is
negatively impacting the world economic outlook. We remain pessimistic on the
outlook for Japanese growth until meaningful financial and real-sector reforms
are implemented.
In the non-U.S. Dollar Bloc, we believe the Canadian central bank will follow
the U.S. Federal Reserve throughout much of 1999. While in Australia and New
Zealand, as long as inflation remains well contained and the economy grows below
its potential, low interest rates should remain in tact.
A-22
<PAGE>
U.S. GOVERNMENT/HIGH GRADE
SECURITIES PORTFOLIO Alliance Variable Products Series Fund
================================================================================
INVESTMENT OBJECTIVE
The U.S. Government/High Grade Securities Portfolio seeks a high level of
current income consistent with preservation of capital by investing principally
in a portfolio of U.S. government securities and other high-grade debt
securities.
MARKET REVIEW
Despite global turmoil, the United States continued on a path of robust growth
driven by domestic consumer demand. Growth for all of 1998 matched the previous
year's growth at 3.9%. Manufacturing, however, remained weak as world export
markets declined. Inflation and unemployment remained historically low
throughout the period. The Federal Reserve, as a hedge against a slowing global
economy, lowered interest rates from 5.50% to 4.75%.
The U.S. bond market posted solid returns in 1998. During the first half of the
year, interest rates remained relatively stable and investor demand for
yield-oriented securities, corporate bonds as well as mortgage-backed
securities, was high. Despite strong U.S. economic growth, inflation remained
low, further increasing demand in the bond market. During the third quarter,
global markets suffered from heightened concerns about recession as the
financial and economic turmoil in Asia spread to Russia and Latin America. The
resulting flight to quality spurred a rally in the U.S. Treasury market and
other safe haven government bond markets outside the U.S., and negatively
impacted returns in the corporate, high yield and mortgage bond sectors.
Non-U.S. Treasury markets recovered much of their third quarter losses in the
fourth quarter when the Federal Reserve cut interest rates and the U.S. reported
stronger than expected economic growth.
INVESTMENT RESULTS
For the six months ended December 31, 1998, the Portfolio returned 4.34% versus
5.10% for its benchmark (a composite of 67% Lehman Brothers (LB) Government Bond
Index and 33% LB Corporate Bond Index). For the 12- month period, the Portfolio
posted a return of 8.22%, while its benchmark posted a return of 9.34%. The
Portfolio underperformed its benchmark during both periods due to weakness in
our Yankee bond (U.S. dollar denominated foreign corporate debt) holdings.
Volatility during the period, caused by events overseas, prompted investors to
shun corporate securities, particularly Yankee securities.
INVESTMENT OUTLOOK
We believe the risk of global recession has diminished after the recent wave of
official interest rate cuts around the world. However, global growth will
continue to slow and inflation will remain subdued as the consequences of excess
productive capacity are felt around the world. U.S. economic activity is
expected to moderate from the robust rate of the fourth quarter with growth
estimates centered around 3.0% for 1999. Further interest rate reductions by the
Federal Reserve are likely, but not imminent. U.S. interest rates, as well as
inflation, will remain low and the U.S. Treasury market will continue to provide
a safe haven during times of volatility.
A-23
<PAGE>
MONEY MARKET PORTFOLIO Alliance Variable Products Series Fund
================================================================================
INVESTMENT OBJECTIVE
The Money Market Portfolio seeks safety of principal, maintenance of liquidity
and maximum current income by investing in a broadly diversified portfolio of
money market securities. An investment in the Portfolio is neither insured nor
guaranteed by the U.S. Government.
MARKET REVIEW
Events during the final quarter of 1998 made us aware of how sensitive financial
markets can be towards international developments. We also witnessed how swift
Fed initiative can reassure or even correct markets woes. In the wake of Russian
bond defaults and the restructuring of the major hedge fund, Long Term Capital
Management, on top of the already existing Asian crisis, credit spreads
continued to widen as we entered the fourth quarter. In addition, bond issuance
declined and liquidity (or lack of liquidity) greatly concerned the Federal
Reserve. A series of three interest rate easings by the Fed commencing in
September reduced the Fed funds target level by 75 basis points to a rate of
4.75% by mid November. The decisive response by the Fed prompted a narrowing of
credit and liquidity spreads and demonstrated to financial markets that Fed
officials would do whatever was necessary to avoid intervals of extreme
volatility.
Domestically, our economy remained strong through the end of the year, mainly
against a backdrop of continued inflation checks. Highlighting these checks, one
would have to look at a further collapse in oil prices as a main theme. Oil
prices were 30% lower in 1998 than in 1997. The savings on gasoline and heating
oil allowed consumers to spend on other products. The finished goods Producer
Price Index (PPI) declined in the fourth quarter and was down 0.7% from November
1997 to November 1998. Perhaps this is what led to an unexpected rise in retail
sales of 0.6% in November. The October and November data pointed to a strong
pace of consumer spending in the fourth quarter, which would support a strong
quarter of real gross domestic product (GDP) growth. Anticipated fourth quarter
real GDP is projected at around 3.5% on the heels of a strong third quarter
measure of real GDP of 3.9%.
PORTFOLIO MANAGEMENT
With an awareness of how September and October funding pressures were playing
havoc on money markets, the Fed was anxious to prevent any future ugliness going
into year-end. First we saw a reduction in the Fed funds target level as was
previously discussed. Additionally, the Fed pumped new money into the system
throughout December not showing any fears of adding too much in the way of
reserves, rather than not enough. These actions, combined with an influx of new
assets to the money-market mutual fund industry throughout the quarter, aided to
subside year-end funding pressures. As these developments unfolded, we elected
to make use of a short-term yield curve we felt would become flat by year-end.
Therefore a major portion of our longer term investing (60 days or longer) took
place in late November and early December. Our typical strategy of avoiding
January maturities allows the Portfolio to enjoy higher yields without the
worries of re-investment at a significantly lower rate.
OUTLOOK
The economy should retain its forward momentum in the early stages of 1999. Some
of the forces suppressing inflation through last year should remain in effect in
the beginning of the year, mainly lower energy costs and falling commodity
prices. Thus, consumer spending should maintain its resiliency. The fact that
high yield and emerging markets borrowers can raise funds again means that the
risk of a credit crunch has faded considerably. Our expectation is that the Fed
will hold off on its easing process through the first quarter of 1999. What is
less clear is to speculate on whether economic growth will slow down later in
the spring. Without any convincing indications that interest rates will move any
time soon, we shall invest the bulk of our cash no further than quarter to
quarter.
INVESTMENT RESULTS
For the six- and 12-month periods ended December 31, 1998, the Money Market
Portfolio returned 2.37%, and 4.98%, respectively. During the same six- and
12-month periods, the total returns for the Portfolio's benchmark, the Salomon
Smith Barney 3-Month Treasury Bill Index, were 2.42% and 5.05%, respectively.
A-24
<PAGE>
INVESTMENT RESULTS Alliance Variable Products Series Fund
================================================================================
INVESTMENT RESULTS AS OF DECEMBER 31, 1998
Listed below are the Portfolios' average annual total returns for the one-year,
five-year (where applicable) and since-inception periods ended December 31,
1998.
ASSET ALLOCATION PORTFOLIOS
Conservative Investors Portfolio
o One Year 14.20%
o Since Inception (10/94) 11.11%
Growth Investors Portfolio
o One Year 23.68%
o Since Inception (10/94) 15.84%
Total Return Portfolio
o One Year 16.99%
o Five Years 14.20%
o Since Inception (12/92) 13.41%
COMMON STOCK/EQUITY SECURITIES
PORTFOLIOS
Growth and Income Portfolio
o One Year 20.89%
o Five Years 21.19%
o Since Inception (1/91) 16.01%
Growth Portfolio
o One Year 28.73%
o Since Inception (9/94) 29.73%
International Portfolio
o One Year 13.02%
o Five Years 7.98%
o Since Inception (12/92) 10.12%
Premier Growth Portfolio
o One Year 47.97%
o Five Years 27.85%
o Since Inception (6/92) 25.42%
Quasar Portfolio
o One Year -4.49%
o Since Inception (8/96) 8.05%
Real Estate Investment Portfolio
o One Year -19.07%
o Since Inception (1/97) -0.06%
Technology Portfolio
o One Year 63.79%
o Since Inception (1/96) 24.68%
Utility Income Portfolio
o One Year 23.91%
o Since Inception (5/94) 16.48%
Worldwide Privatization Portfolio
o One Year 10.83%
o Since Inception (9/94) 12.10%
INCOME-ORIENTED PORTFOLIOS
Global Bond Portfolio
o One Year 14.12%
o Five Years 7.62%
o Since Inception (7/91) 8.72%
Global Dollar Government Portfolio
o One Year -21.71%
o Since Inception (5/94) 6.47%
High Yield Portfolio
o One Year -3.69%
o Since Inception (10/97) -0.43%
North American Government
Income Portfolio
o One Year 4.07%
o Since Inception (5/94) 8.45%
Short-Term Multi-Market Portfolio
o One Year 6.32%
o Five Years 3.99%
o Since Inception (11/90) 4.28%
U.S. Government/High-Grade
Securities Portfolio
o One Year 8.22%
o Five Years 6.66%
o Since Inception (9/92) 6.55%
SHORT-TERM INCOME PORTFOLIOS
Money Market Portfolio
o One Year 4.98%
o Annualized 7-Day Yield 4.48%
- --------------------------------------------------------------------------------
Total returns are based on net asset value performance and reflect investment of
dividends and/or capital gains distributions in additional shares. These figures
do not reflect insurance company separate account or annuity contract charges,
which would reduce total return to a contract owner. Past performance does not
guarantee future results. Investment return and principal value will fluctuate
so that an investor's shares, when redeemed, may be worth more or less than
their original cost.
The Money Market Portfolio yield is an annualized 7-day compound return as of
December 31, 1998.
A-25
<PAGE>
Alliance Variable Products Series Fund
================================================================================
ALLIANCE VARIABLE PRODUCTS SERIES FUND
GROWTH OF A $10,000 INVESTMENT
[The following tables were depicted as a line graphs in the printed material.]
CONSERVATIVE INVESTORS PORTFOLIO
10/31/94* TO 12/31/98
30% S&P 500/70% LB Aggregate: $18,877
Conservative Investors Portfolio: $15,530
LB Aggregate Bond Index: $14,701
GROWTH & INCOME PORTFOLIO
1/31/91* TO 12/31/98
S&P 500: $43,480
Lipper Growth & Income Funds Average: $33,810
Growth & Income Portfolio: $32,579
GROWTH INVESTORS PORTFOLIO
10/31/94* TO 12/31/98
S&P 500: $28,356
70% S&P 500/30% LB Aggregate: $24,340
Growth Investors Portfolio: $18,490
GROWTH PORTFOLIO
9/30/94* TO 12/31/98
Growth Portfolio: $30,560
S&P 500: $28,991
Russell 1000: $28,356
TOTAL RETURN PORTFOLIO
12/31/92* TO 12/31/98
60% S&P 500/40% LB Gov't/Corp
Bond Index: $25,718
Total Return Portfolio: $21,304
Lipper Flexible Portfolio
Funds Average: $20,327
INTERNATIONAL PORTFOLIO
12/31/92* TO 12/31/98
MSCI EAFE: $20,932
Lipper International Funds Average: $20,756
International Portfolio: $17,852
A-26
<PAGE>
Alliance Variable Products Series Fund
================================================================================
ALLIANCE VARIABLE PRODUCTS SERIES FUND
GROWTH OF A $10,000 INVESTMENT
[The following tables were depicted as a line graphs in the printed material.]
PREMIER GROWTH PORTFOLIO
6/30/92* TO 12/31/98
Premier Growth Portfolio: $43,785
S&P 500: $35,029
Russell 1000 Index: $34,599
GLOBAL BOND PORTFOLIO
7/31/91* TO 12/31/98
SSB World Gov't Bond Index: $19,948
Global Bond Portfolio: $18,639
UTILITY INCOME PORTFOLIO
5/31/94* TO 12/31/98
S&P 500: $29,664
NYSE Utility Index: $21,561
Utility Income Portfolio: $19,773
GLOBAL DOLLAR GOVERNMENT PORTFOLIO
5/31/94* TO 12/31/98
JP Morgan Emerging Markets Bond Index: $16,438
Global Dollar Government Portfolio: $13,360
WORLDWIDE PRIVATIZATION PORTFOLIO
9/30/94* TO 12/31/98
Worldwide Privatization Portfolio: $16,289
MSCI EAFE Index: $14,433
NORTH AMERICAN GOVERNMENT INCOME PORTFOLIO
5/31/94* TO 12/31/98
LB Aggregate Bond Index: $14,745
North American Government
Income Portfolio: $14,375
LB Intermediate Gov't Bond Index: $14,010
A-27
<PAGE>
Alliance Variable Products Series Fund
================================================================================
ALLIANCE VARIABLE PRODUCTS SERIES FUND
GROWTH OF A $10,000 INVESTMENT
[The following tables were depicted as a line graphs in the printed material.]
U.S. GOVERNMENT/HIGH-GRADE
SECURITIES PORTFOLIO
9/30/92* TO 12/31/98
67% LB Gov't Bond Index/33% LB Corp.
Bond Index: $15,653
LB Aggregate Bond Index: $15,633
U.S. Gov't/High Grade Securities
Portfolio: $14,907
SHORT-TERM MULTI-MARKET PORTFOLIO
11/30/90* TO 12/31/98
ML 1-3 Year Treasury Index: $16,938
Lipper Global Income Funds Average: $15,967
Short-Term Multi-Market Portfolio: $14,035
TECHNOLOGY PORTFOLIO
1/31/96* TO 12/31/98
PSE High-Tech Index: $21,751
Technology Portfolio: $19,137
QUASAR PORTFOLIO
8/31/96* TO 12/31/98
Russell 2000 Index: $13,035
Quasar Portfolio: $12,028
REAL ESTATE INVESTMENT PORTFOLIO
1/31/97* TO 12/31/98
S&P 500: $16,140
Real Estate Investment Portfolio: $9,957
NAREIT Index: $9,812
HIGH YIELD PORTFOLIO
10/31/97* TO 12/31/98
CS First Boston High Yield Index: $10,389
High Yield Portfolio: $9,949
Past performance is no guarantee of future results.
These charts illustrate the total value of an assumed $10,000 investment in each
Portfolio as compared to the performance of an appropriate broad-based index for
the time frames indicated for each Portfolio. Performance results for each
Portfolio represent the Portfolio's total return at net asset value. An investor
cannot invest directly in an index or average.
* Month end closest to Portfolio inception. Inception dates for the
Portfolios are: 10/28/94 Conservative Investors; 1/14/91 Growth & Income;
10/28/94 Growth Investors; 9/15/94 Growth; 12/28/92 Total Return; 12/28/92
International; 6/26/92 Premier Growth; 7/15/91 Global Bond; 5/10/94
Utility Income; 5/2/94 Global Dollar Government; 9/23/94 Worldwide
Privatization; 5/3/94 North American Government Income Trust; 9/17/92 U.S.
Government/High-Grade Securities; 11/28/90 Short-Term Multi-Market;
1/11/96 Technology; 8/5/96 Quasar; 1/9/97 Real Estate Investment; 10/27/97
High Yield.
A-28
<PAGE>
THE BENCHMARKS Alliance Variable Products Series Fund
================================================================================
The benchmarks described below represent unmanaged indices; the Lipper Averages
include funds that have generally similar investment objectives to the
respective Alliance portfolio, although some funds included in the averages may
have somewhat different investment policies.
CS First Boston High Yield Index--Credit Suisse First Boston High Yield Index is
an unmanaged, trader-priced portfolio constructed to mirror the high yield debt
market.
DJ Utility--The Dow Jones Utility Average is a price-weighted average which
consists of actively traded stocks representing a cross-section of corporations
involved in various phases of the utility industry.
JPM EMBI--The J.P. Morgan Emerging Market Bond Index is composed of
dollar-denominated restructured sovereign bonds; a large percentage of the index
is made up of Brady Bonds.
LB Aggregate--The Lehman Brothers Aggregate Bond Index is composed of the
Mortgage-Backed and Asset-Backed Securities Indices, and the
Government/Corporate Bond Index.
LB Corp. Bond--The Lehman Brothers Corporate Bond Index includes all publicly
issued, fixed-rate, non-convertible investment grade corporate debt; the index
is composed of both U.S. and Brady Bonds.
LB Gov't/Corp. Bond--The Lehman Brothers Government/Corporate Bond Index
represents a combination of the two indices.
LB Gov't Bond--The Lehman Brothers Government Bond Index is composed of the
Treasury Bond and Agency Bond Indices, the 1-3 year Government Index and the 20+
year Treasury Index.
LB Intermediate-Term Gov't Bond--The Lehman Brothers Intermediate-Term
Government Bond Index is composed of U.S. Government agency and Treasury
securities with maturities of one to 10 years.
LB Long-Term Gov't Bond--The Lehman Brothers Long-Term Government Bond Index is
composed of U.S. Government agency and Treasury securities with maturities of 10
years or more.
Lipper Growth and Income Funds Average--The Lipper Growth and Income Funds
Average reflects performance of 100 mutual funds.
Lipper Flexible Portfolio Funds Average--The Lipper Flexible Portfolio Funds
Average reflects performance of 208 mutual funds.
Lipper International Funds Average--The Lipper International Funds Average
reflects performance of 100 mutual funds.
Lipper Global Income Funds Average--The Lipper Global Income Funds Average
reflects performance of 21 mutual funds.
ML 1-3 Year Treasury--The Merrill Lynch 1-3 Year Treasury Index is composed of
U.S. Treasury securities with maturities of between one and three years.
MSCI EAFE--The Morgan Stanley Capital International EAFE Index measures the
overall performance of stock markets in 21 countries within Europe, Australia
and the Far East.
NAREIT Index--The NAREIT Index represents returns for the National Association
of Real Estate Investment Trust Equity Index.
NYSE Utility--The New York Stock Exchange Utility Index is composed of all
utility issues traded on the Exchange.
PSE High Technology--The Pacific Stock Exchange High Technology Index is
comprised of technology stocks traded on the Pacific Stock Exchange.
Russell 1000--The Russell 1000 Growth Stock Index represents performance of 1000
of the largest U.S. companies by market capitalization.
Russell 2000--The Russell 2000 Index consists of 2000 small- and mid-cap
companies. The average market capitalization is approximately $500 million.
SSB 3-Month Treasury Bill Index--The Salomon Smith Barney 3-Month Treasury Bill
Index represents the average of T-bill rates for each of the prior three months,
adjusted to a bond equivalent basis.
SSB World Gov't Bond--The Salomon Smith Barney World Government Bond Index
represents performance of government bond markets in 14 countries.
S&P 500--The Standard and Poor's 500 Stock Index includes 500 stocks and is a
common measure of the performance of the overall U.S. stock market.
A-29
<PAGE>
TEN LARGEST HOLDINGS
DECEMBER 31, 1998 Alliance Variable Products Series Fund
================================================================================
Conservative Investors Portfolio
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
COMPANY U.S. $ VALUE PERCENT OF NET ASSETS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Notes $ 17,307,350 46.3%
- -----------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds 2,710,819 7.3
- -----------------------------------------------------------------------------------------------------------
Bristol-Myers Squibb Co. 669,062 1.8
- -----------------------------------------------------------------------------------------------------------
Nokia AB OYJ Corp. Series A 607,962 1.6
- -----------------------------------------------------------------------------------------------------------
BankAmerica Corp. 480,940 1.3
- -----------------------------------------------------------------------------------------------------------
Schering-Plough Corp. 442,000 1.2
- -----------------------------------------------------------------------------------------------------------
Microsoft Corp. 415,594 1.1
- -----------------------------------------------------------------------------------------------------------
Dayton Hudson Corp. 379,750 1.0
- -----------------------------------------------------------------------------------------------------------
MCI WorldCom, Inc. 358,906 1.0
- -----------------------------------------------------------------------------------------------------------
Chase Manhattan Corp. 340,313 0.9
- -----------------------------------------------------------------------------------------------------------
$ 23,712,696 63.5%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Growth Investors Portfolio
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
COMPANY U.S. $ VALUE PERCENT OF NET ASSETS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Notes $ 2,917,614 13.9%
- -----------------------------------------------------------------------------------------------------------
Microsoft Corp. 692,656 3.3
- -----------------------------------------------------------------------------------------------------------
Bristol-Myers Squibb Co. 669,062 3.2
- -----------------------------------------------------------------------------------------------------------
Nokia AB OYJ Corp. Series A 607,962 2.9
- -----------------------------------------------------------------------------------------------------------
Chase Manhattan Corp. 544,500 2.6
- -----------------------------------------------------------------------------------------------------------
Dayton Hudson Corp. 542,500 2.6
- -----------------------------------------------------------------------------------------------------------
Tyco International, Ltd. 528,063 2.5
- -----------------------------------------------------------------------------------------------------------
Home Depot, Inc. 489,500 2.3
- -----------------------------------------------------------------------------------------------------------
Tele-Communications, Inc. - Liberty Media Group Cl.A 460,938 2.2
- -----------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds 454,977 2.1
- -----------------------------------------------------------------------------------------------------------
$ 7,907,772 37.6%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Total Return Portfolio
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
COMPANY U.S. $ VALUE PERCENT OF NET ASSETS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Notes $ 15,233,351 25.6%
- -----------------------------------------------------------------------------------------------------------
Bristol-Myers Squibb Co. 1,859,994 3.1
- -----------------------------------------------------------------------------------------------------------
Household International, Inc. 1,640,475 2.8
- -----------------------------------------------------------------------------------------------------------
BankAmerica Corp. 1,262,625 2.1
- -----------------------------------------------------------------------------------------------------------
Citigroup, Inc. 1,227,600 2.1
- -----------------------------------------------------------------------------------------------------------
Philip Morris Cos., Inc. 1,209,100 2.0
- -----------------------------------------------------------------------------------------------------------
AT&T Corp. 1,181,425 2.0
- -----------------------------------------------------------------------------------------------------------
Electronic Data Systems Corp. 1,180,875 2.0
- -----------------------------------------------------------------------------------------------------------
Chase Manhattan Corp. 1,177,481 2.0
- -----------------------------------------------------------------------------------------------------------
Solectron Corp. 1,133,837 1.9
- -----------------------------------------------------------------------------------------------------------
$ 27,106,763 45.6%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
A-30
<PAGE>
Alliance Variable Products Series Fund
================================================================================
Growth and Income Portfolio
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
COMPANY U.S. $ VALUE PERCENT OF NET ASSETS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Bristol-Myers Squibb Co. $ 18,185,119 4.8%
- -----------------------------------------------------------------------------------------------------------
Household International, Inc. 15,830,188 4.1
- -----------------------------------------------------------------------------------------------------------
BankAmerica Corp. 12,079,113 3.2
- -----------------------------------------------------------------------------------------------------------
Citigroup, Inc. 11,587,950 3.0
- -----------------------------------------------------------------------------------------------------------
Philip Morris Cos., Inc. 11,556,000 3.0
- -----------------------------------------------------------------------------------------------------------
AT&T Corp. 11,550,423 3.0
- -----------------------------------------------------------------------------------------------------------
Electronic Data Systems Corp. 11,306,250 3.0
- -----------------------------------------------------------------------------------------------------------
Chase Manhattan Corp. 11,305,181 3.0
- -----------------------------------------------------------------------------------------------------------
Solectron Corp. 10,799,337 2.8
- -----------------------------------------------------------------------------------------------------------
USX-Marathon Group 10,197,312 2.7
- -----------------------------------------------------------------------------------------------------------
$ 124,396,873 32.6%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Growth Portfolio
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
COMPANY U.S. $ VALUE PERCENT OF NET ASSETS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
MCI WorldCom, Inc. $ 21,805,996 6.6%
- -----------------------------------------------------------------------------------------------------------
Cisco Systems, Inc. 11,911,853 3.6
- -----------------------------------------------------------------------------------------------------------
Sanmina Corp. 11,171,362 3.4
- -----------------------------------------------------------------------------------------------------------
TCI Ventures Group Series A 10,685,528 3.2
- -----------------------------------------------------------------------------------------------------------
Ceridian Corp. 10,367,156 3.2
- -----------------------------------------------------------------------------------------------------------
Mannesmann AG 10,317,278 3.1
- -----------------------------------------------------------------------------------------------------------
American International Group, Inc. 10,149,200 3.1
- -----------------------------------------------------------------------------------------------------------
Sterling Software, Inc. 9,747,913 3.0
- -----------------------------------------------------------------------------------------------------------
Citigroup, Inc. 9,429,701 2.9
- -----------------------------------------------------------------------------------------------------------
Network Associates, Inc. 9,274,856 2.8
- -----------------------------------------------------------------------------------------------------------
$ 114,860,843 34.9%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
International Portfolio
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
COMPANY U.S. $ VALUE PERCENT OF NET ASSETS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Nokia AB OYJ Corp. Series A $ 4,304,374 6.6%
- -----------------------------------------------------------------------------------------------------------
Zurich Allied AG 2,517,143 3.9
- -----------------------------------------------------------------------------------------------------------
Nestle, SA 2,394,264 3.7
- -----------------------------------------------------------------------------------------------------------
Akzo Nobel NV 2,047,959 3.1
- -----------------------------------------------------------------------------------------------------------
Diageo Plc 1,996,179 3.1
- -----------------------------------------------------------------------------------------------------------
Tabacalera, SA Series A 1,889,249 2.9
- -----------------------------------------------------------------------------------------------------------
Telefonica de Espana (common and rights) 1,811,427 2.8
- -----------------------------------------------------------------------------------------------------------
ING Groep NV 1,584,606 2.4
- -----------------------------------------------------------------------------------------------------------
SEITA 1,565,015 2.4
- -----------------------------------------------------------------------------------------------------------
Telecom Italia SpA 1,424,113 2.2
- -----------------------------------------------------------------------------------------------------------
$ 21,534,329 33.1%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
A-31
<PAGE>
TEN LARGEST HOLDINGS (continued) Alliance Variable Products Series Fund
================================================================================
Premier Growth Portfolio
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
COMPANY U.S. $ VALUE PERCENT OF NET ASSETS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Nokia Corp. (ADR) $ 65,710,700 5.3%
- -----------------------------------------------------------------------------------------------------------
Dell Computer Corp. 62,968,125 5.0
- -----------------------------------------------------------------------------------------------------------
Cisco Systems, Inc. 61,081,903 4.9
- -----------------------------------------------------------------------------------------------------------
Home Depot, Inc. 58,574,671 4.7
- -----------------------------------------------------------------------------------------------------------
AirTouch Communications, Inc. 52,607,975 4.2
- -----------------------------------------------------------------------------------------------------------
Pfizer, Inc. 41,946,300 3.4
- -----------------------------------------------------------------------------------------------------------
Wal-Mart Stores, Inc. 40,783,900 3.3
- -----------------------------------------------------------------------------------------------------------
Tyco International, Ltd. 39,363,287 3.1
- -----------------------------------------------------------------------------------------------------------
EMC Corp. 37,051,500 3.0
- -----------------------------------------------------------------------------------------------------------
MCI WorldCom, Inc. 32,862,820 2.6
- -----------------------------------------------------------------------------------------------------------
$ 492,951,181 39.5%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Quasar Portfolio
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
COMPANY U.S. $ VALUE PERCENT OF NET ASSETS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Mohawk Industries, Inc. $ 2,820,291 3.1%
- -----------------------------------------------------------------------------------------------------------
Alaska Air Group, Inc. 2,632,875 2.9
- -----------------------------------------------------------------------------------------------------------
Premier Parks, Inc. 2,628,725 2.9
- -----------------------------------------------------------------------------------------------------------
Bethlehem Steel Corp. 2,344,162 2.6
- -----------------------------------------------------------------------------------------------------------
Chelsea GCA Realty, Inc. 2,312,062 2.5
- -----------------------------------------------------------------------------------------------------------
Tiffany & Co. 2,183,937 2.4
- -----------------------------------------------------------------------------------------------------------
Legg Mason, Inc. 2,143,094 2.4
- -----------------------------------------------------------------------------------------------------------
Budget Group, Inc. Cl.A 1,965,325 2.2
- -----------------------------------------------------------------------------------------------------------
America West Airlines, Inc. Cl.B 1,771,400 1.9
- -----------------------------------------------------------------------------------------------------------
Consolidated Freightways Corp. 1,696,200 1.9
- -----------------------------------------------------------------------------------------------------------
$ 22,498,071 24.8
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Real Estate Investment Portfolio
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
COMPANY U.S. $ VALUE PERCENT OF NET ASSETS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Equity Office Properties Trust $ 842,400 4.9%
- -----------------------------------------------------------------------------------------------------------
Pan Pacific Retail Properties, Inc. 675,881 3.9
- -----------------------------------------------------------------------------------------------------------
SL Green Realty Corp. 674,700 3.9
- -----------------------------------------------------------------------------------------------------------
Avalon Bay Communities, Inc. 648,489 3.8
- -----------------------------------------------------------------------------------------------------------
Cornerstone Properties, Inc. 642,187 3.8
- -----------------------------------------------------------------------------------------------------------
Arden Realty Group, Inc. 607,512 3.6
- -----------------------------------------------------------------------------------------------------------
Public Storage, Inc. 603,494 3.5
- -----------------------------------------------------------------------------------------------------------
Glenborough Realty Trust, Inc. 594,950 3.5
- -----------------------------------------------------------------------------------------------------------
Vornado Realty Trust 577,125 3.4
- -----------------------------------------------------------------------------------------------------------
Crescent Real Estate Equities Co. 558,900 3.3
- -----------------------------------------------------------------------------------------------------------
$ 6,425,638 37.6%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
A-32
<PAGE>
Alliance Variable Products Series Fund
================================================================================
Technology Portfolio
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
COMPANY U.S. $ VALUE PERCENT OF NET ASSETS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
America Online, Inc. $ 9,792,000 7.5%
- -----------------------------------------------------------------------------------------------------------
Cisco Systems, Inc. 8,216,672 6.3
- -----------------------------------------------------------------------------------------------------------
Dell Computer Corp. 6,355,388 4.9
- -----------------------------------------------------------------------------------------------------------
Compaq Computer Corp. 5,938,350 4.5
- -----------------------------------------------------------------------------------------------------------
Solectron Corp. 5,790,006 4.4
- -----------------------------------------------------------------------------------------------------------
Sanmina Corp. 5,043,019 3.9
- -----------------------------------------------------------------------------------------------------------
HBO & Co. 4,796,031 3.7
- -----------------------------------------------------------------------------------------------------------
Network Associates, Inc. 4,790,019 3.7
- -----------------------------------------------------------------------------------------------------------
Intuit, Inc. 4,473,250 3.4
- -----------------------------------------------------------------------------------------------------------
Nokia Corp. (ADR) 4,094,875 3.1
- -----------------------------------------------------------------------------------------------------------
$ 59,289,610 45.4%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Utility Income Portfolio
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
COMPANY U.S. $ VALUE PERCENT OF NET ASSETS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
AT&T Corp. $ 1,910,146 5.6%
- -----------------------------------------------------------------------------------------------------------
BellSouth Corp. 1,905,225 5.5
- -----------------------------------------------------------------------------------------------------------
Ameritech Corp. 1,723,800 5.0
- -----------------------------------------------------------------------------------------------------------
MCI WorldCom, Inc. 1,722,750 5.0
- -----------------------------------------------------------------------------------------------------------
Consolidated Edison, Inc. 1,612,687 4.7
- -----------------------------------------------------------------------------------------------------------
Cablevision Systems Corp. Series I 1,507,500 4.4
- -----------------------------------------------------------------------------------------------------------
NIPSCO Industries, Inc. 1,467,087 4.3
- -----------------------------------------------------------------------------------------------------------
MediaOne Group, Inc. 1,423,100 4.1
- -----------------------------------------------------------------------------------------------------------
GTE Corp. 1,332,500 3.9
- -----------------------------------------------------------------------------------------------------------
GPU, Inc. 1,325,625 3.8
- -----------------------------------------------------------------------------------------------------------
$ 15,930,420 46.3%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Worldwide Privatization Portfolio
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
COMPANY U.S. $ VALUE PERCENT OF NET ASSETS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Akzo Nobel NV $ 1,365,306 3.0%
- -----------------------------------------------------------------------------------------------------------
Sanofi, SA 1,359,184 2.9
- -----------------------------------------------------------------------------------------------------------
Japan Tobacco, Inc. 1,339,407 2.9
- -----------------------------------------------------------------------------------------------------------
ING Groep NV 1,176,814 2.5
- -----------------------------------------------------------------------------------------------------------
Volkswagen AG 954,446 2.1
- -----------------------------------------------------------------------------------------------------------
Bank Austria AG 890,397 1.9
- -----------------------------------------------------------------------------------------------------------
Aldeasa, SA 885,371 1.9
- -----------------------------------------------------------------------------------------------------------
SEITA 862,636 1.9
- -----------------------------------------------------------------------------------------------------------
Viag AG 854,128 1.9
- -----------------------------------------------------------------------------------------------------------
SGS-Thomson Microelectronics NV 840,494 1.8
- -----------------------------------------------------------------------------------------------------------
$ 10,528,183 22.8%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
A-33
<PAGE>
INDUSTRY DIVERSIFICATION
December 31, 1998 Alliance Variable Products Series Fund
================================================================================
International Portfolio
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
U.S. $ VALUE PERCENT OF NET ASSETS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Basic Industries $ 2,047,959 3.1%
- -----------------------------------------------------------------------------------------------------------
Capital Goods 845,747 1.3
- -----------------------------------------------------------------------------------------------------------
Consumer Manufacturing 5,114,032 7.9
- -----------------------------------------------------------------------------------------------------------
Consumer Services 6,767,771 10.4
- -----------------------------------------------------------------------------------------------------------
Consumer Staples 12,549,613 19.3
- -----------------------------------------------------------------------------------------------------------
Energy 1,378,791 2.1
- -----------------------------------------------------------------------------------------------------------
Finance 12,721,625 19.6
- -----------------------------------------------------------------------------------------------------------
Healthcare 4,921,889 7.6
- -----------------------------------------------------------------------------------------------------------
Multi Industry 1,889,147 2.9
- -----------------------------------------------------------------------------------------------------------
Technology 6,693,971 10.3
- -----------------------------------------------------------------------------------------------------------
Utilities 5,558,491 8.5
- -----------------------------------------------------------------------------------------------------------
Total Investments* 60,489,036 93.0
- -----------------------------------------------------------------------------------------------------------
Cash and receivables, net of liabilities 4,562,757 7.0
- -----------------------------------------------------------------------------------------------------------
Net Assets $ 65,051,793 100.0%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Worldwide Privatization Portfolio
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
U.S. $ VALUE PERCENT OF NET ASSETS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Basic Industries $ 3,245,085 7.0%
- -----------------------------------------------------------------------------------------------------------
Capital Goods 66,830 0.1
- -----------------------------------------------------------------------------------------------------------
Consumer Manufacturing 1,403,661 3.0
- -----------------------------------------------------------------------------------------------------------
Consumer Services 2,481,656 5.4
- -----------------------------------------------------------------------------------------------------------
Consumer Staples 4,207,083 9.1
- -----------------------------------------------------------------------------------------------------------
Energy 3,069,538 6.6
- -----------------------------------------------------------------------------------------------------------
Finance 9,635,418 20.8
- -----------------------------------------------------------------------------------------------------------
Healthcare 2,104,180 4.6
- -----------------------------------------------------------------------------------------------------------
Multi Industry 329,910 0.7
- -----------------------------------------------------------------------------------------------------------
Technology 3,085,721 6.7
- -----------------------------------------------------------------------------------------------------------
Telephone 7,236,292 15.6
- -----------------------------------------------------------------------------------------------------------
Transportation 1,878,388 4.1
- -----------------------------------------------------------------------------------------------------------
Utilities 4,892,036 10.6
- -----------------------------------------------------------------------------------------------------------
Total Investments* 43,635,798 94.3
- -----------------------------------------------------------------------------------------------------------
Cash and receivables, net of liabilities 2,632,051 5.7
- -----------------------------------------------------------------------------------------------------------
Net Assets $ 46,267,849 100.0%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
A-34
<PAGE>
CONSERVATIVE INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1998 Alliance Variable Products Series Fund
================================================================================
Company Shares U.S. $ Value
- -----------------------------------------------------------------------
COMMON & PREFERRED STOCKS-27.8%
UNITED STATES INVESTMENTS-21.1%
HEALTH CARE-4.3%
DRUGS-3.7%
Algos Pharmaceutical Corp. (a)...... 900 $ 23,625
Bristol-Myers Squibb Co. ........... 5,000 669,062
Centocor, Inc. (a).................. 1,500 67,594
Pfizer, Inc. ....................... 1,500 188,156
Schering-Plough Corp. .............. 8,000 442,000
--------------
1,390,437
--------------
MEDICAL PRODUCTS-0.6%
Medtronic, Inc. .................... 3,000 222,750
--------------
1,613,187
--------------
FINANCE-4.3%
BANKING - MONEY CENTER-2.2%
BankAmerica Corp. .................. 7,999 480,940
Chase Manhattan Corp. .............. 5,000 340,313
--------------
821,253
--------------
BROKERAGE & MONEY MANAGEMENT-0.6%
Morgan Stanley Dean Witter
and Co. ......................... 3,000 213,000
--------------
FINANCE-0.7%
MBNA Corp. ......................... 10,000 249,375
--------------
INSURANCE-0.8%
American International
Group, Inc. ..................... 3,250 314,031
--------------
1,597,659
--------------
CONSUMER SERVICES-3.8%
BROADCASTING & CABLE-1.3%
Scripps E.W. Co. Cl.A............... 4,000 199,000
Tele-Communications, Inc. -
Liberty Media Group
Cl.A (a) ........................ 6,000 276,562
--------------
475,562
--------------
RETAIL - GENERAL MERCHANDISE-2.5%
Dayton Hudson Corp. ................ 7,000 379,750
Home Depot, Inc. ................... 5,000 305,937
Wal-Mart Stores, Inc. .............. 3,000 244,313
--------------
930,000
--------------
1,405,562
--------------
TECHNOLOGY-3.2%
COMPUTER HARDWARE-0.8%
Dell Computer Corp. (a)............. 4,000 292,875
--------------
COMPUTER SERVICES-0.5%
Computer Sciences Corp. ............ 3,000 193,312
--------------
COMPUTER SOFTWARE-1.1%
Microsoft Corp. (a)................. 3,000 415,594
--------------
NETWORKING SOFTWARE-0.5%
Cisco Systems, Inc. (a)............. 2,000 185,688
--------------
SEMI-CONDUCTOR COMPONENTS-0.3%
Altera Corp. (a).................... 2,000 121,625
--------------
1,209,094
--------------
CONSUMER STAPLES-2.1%
COSMETICS-0.4%
Gillette Co. ....................... 3,000 144,938
--------------
RETAIL - FOOD & DRUG-0.8%
Kroger Co. (a)...................... 5,000 302,500
--------------
TOBACCO-0.9%
Philip Morris Cos., Inc. ........... 6,000 321,000
--------------
768,438
--------------
MULTI-INDUSTRY COMPANIES-1.0%
Tyco International, Ltd. ........... 4,000 301,750
U.S. Industries, Inc. .............. 5,000 93,125
--------------
394,875
--------------
UTILITY-1.0%
TELEPHONE UTILITY-1.0%
MCI WorldCom, Inc. (a).............. 5,000 358,906
--------------
ENGINEERING-0.8%
Harley-Davidson, Inc. .............. 6,000 284,250
--------------
ENERGY-0.6%
OIL SERVICE-0.6%
Halliburton Co. .................... 4,000 118,500
Noble Drilling Corp. (a)............ 8,000 103,500
--------------
222,000
--------------
Total United States Investments
(cost $5,766,786)................ 7,853,971
--------------
FOREIGN INVESTMENTS-6.7%
CANADA-0.2%
Newcourt Credit Group, Inc. ........ 1,500 52,406
--------------
FINLAND-1.6%
Nokia AB OYJ Corp.
Series A......................... 5,000 607,962
--------------
FRANCE-1.2%
Carrefour, SA ...................... 150 113,191
Sanofi, SA ......................... 1,000 164,550
SEITA .............................. 1,400 87,641
Total, SA Cl.B...................... 900 91,111
--------------
456,493
--------------
B-1
<PAGE>
CONSERVATIVE INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS
(continued) Alliance Variable Products Series Fund
================================================================================
Company Shares U.S. $ Value
- -----------------------------------------------------------------------
GERMANY-0.2%
ProSieben Media AG pfd. ............ 1,500 $ 69,303
--------------
JAPAN-0.3%
Canon, Inc. ........................ 1,000 21,362
Honda Motor Co. .................... 3,000 98,452
--------------
119,814
--------------
NETHERLANDS-0.3%
Akzo Nobel NV ...................... 2,500 113,776
--------------
SPAIN-0.8%
Telefonica de Espana ............... 2,500 110,998
Banco Bilbao Vizcaya, SA ........... 4,000 62,623
Tabacalera, SA ..................... 5,000 125,950
Telefonica, SA (a).................. 2,500 2,216
--------------
301,787
--------------
SWEDEN-0.3%
Astra AB Series A................... 6,000 122,218
--------------
SWITZERLAND-1.2%
Nestle, SA ......................... 70 152,362
Novartis AG ........................ 60 117,930
Zurich Allied AG ................... 250 185,084
--------------
455,376
--------------
UNITED KINGDOM-0.6%
Royal Bank of Scotland
Group Plc ....................... 4,000 65,393
United News & Media Plc ............ 5,000 43,446
Vodafone Group Plc ................. 6,000 97,491
--------------
206,330
--------------
Total Foreign Investments
(cost $2,024,809)................ 2,505,465
--------------
Total Common & Preferred Stocks
(cost $7,791,595)................ 10,359,436
--------------
Principal
Amount
(000) U.S. $ Value
- -----------------------------------------------------------------------
DEBT OBLIGATIONS-53.6%
U.S. GOVERNMENT &
AGENCY OBLIGATIONS-53.6%
U.S. Treasury Bonds
5.25%, 11/15/28 ................. $ 565 $ 578,419
6.125%, 11/15/27 ................ 1,905 2,132,400
U.S. Treasury Notes
4.25%, 11/15/03 ................. 410 404,748
5.625%, 5/15/08 ................. 2,480 2,646,234
5.75%, 8/15/03 .................. 1,520 1,587,214
6.00%, 8/15/00 .................. 3,015 3,077,169
6.25%, 4/30/01 .................. 1,240 1,283,598
6.50%, 8/31/01 .................. 2,975 3,111,196
6.50%, 5/31/02 .................. 4,430 4,677,106
6.875%, 5/15/06 ................. 460 520,085
--------------
Total Debt Obligations
(cost $19,846,449)............... 20,018,169
--------------
SHORT-TERM INVESTMENT-18.1%
TIME DEPOSIT-18.1%
State Street Cayman Islands
4.50%, 1/04/99
(amortized cost $6,773,000)...... 6,773,000
--------------
TOTAL INVESTMENTS -99.5%
(cost $34,411,044)............... 37,150,605
Other assets less liabilities-0.5%.. 190,067
--------------
NET ASSETS-100%..................... $ 37,340,672
==============
- --------------------------------------------------------------------------------
(a) Non-income producing security.
See Glossary of Terms on page B-36.
See Notes to Financial Statements.
B-2
<PAGE>
GROWTH INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1998 Alliance Variable Products Series Fund
================================================================================
Company Shares U.S. $ Value
- -----------------------------------------------------------------------
COMMON STOCKS & OTHER
INVESTMENTS-60.3%
UNITED STATES INVESTMENTS-47.5%
CONSUMER SERVICES-11.0%
BROADCASTING & CABLE-3.4%
Scripps (E.W.) Co. Cl.A............. 5,000 $ 248,750
Tele-Communications, Inc.-
Liberty Media Group
Cl.A (a) ........................ 10,000 460,938
--------------
709,688
--------------
ENTERTAINMENT & LEISURE-1.6%
Harley-Davidson, Inc. .............. 7,000 331,625
--------------
RETAIL - GENERAL MERCHANDISE-6.0%
Dayton Hudson Corp. ................ 10,000 542,500
Home Depot, Inc. ................... 8,000 489,500
Wal-Mart Stores, Inc. .............. 3,000 244,312
--------------
1,276,312
--------------
2,317,625
--------------
FINANCE-9.2%
BANKING - MONEY CENTERS-4.6%
BankAmerica Corp. .................. 7,000 420,875
Chase Manhattan Corp. .............. 8,000 544,500
--------------
965,375
--------------
BROKERAGE & MONEY MANAGEMENT-1.7%
Morgan Stanley, Dean Witter
and Co. ......................... 5,000 355,000
--------------
INSURANCE-1.8%
American International
Group, Inc. ..................... 4,000 386,500
--------------
MISCELLANEOUS-1.1%
MBNA Corp. ......................... 9,000 224,437
--------------
1,931,312
--------------
TECHNOLOGY-8.5%
COMPUTER HARDWARE-1.7%
Dell Computer Corp. (a)............. 5,000 366,094
--------------
COMPUTER SERVICES-0.9%
Computer Sciences Corp. ............ 3,000 193,312
--------------
COMPUTER SOFTWARE-3.3%
Microsoft Corp. (a)................. 5,000 692,656
--------------
NETWORKING SOFTWARE-1.8%
Cisco Systems, Inc. (a)............. 4,000 371,375
--------------
SEMI-CONDUCTOR COMPONENTS-0.8%
Altera Corp. (a).................... 2,800 170,275
--------------
1,793,712
--------------
HEALTH CARE-7.7%
DRUGS-6.7%
Algos Pharmaceutical Corp. (a)...... 1,000 26,250
Bristol-Myers Squibb Co. ........... 5,000 669,062
Centocor, Inc. (a).................. 2,000 90,125
Pfizer, Inc. ....................... 1,400 175,613
Schering-Plough Corp. .............. 8,000 442,000
--------------
1,403,050
--------------
MEDICAL PRODUCTS-1.0%
Medtronic, Inc. .................... 3,000 222,750
--------------
1,625,800
--------------
CONSUMER STAPLES-4.7%
COSMETICS-0.9%
Gillette Co. ....................... 4,000 193,250
--------------
RETAIL - FOOD & DRUG-1.7%
Kroger Co. (a)...................... 6,000 363,000
--------------
TOBACCO-2.1%
Philip Morris Cos., Inc. ........... 8,000 428,000
--------------
984,250
--------------
MULTI-INDUSTRY COMPANIES-3.0%
Tyco International, Ltd. ........... 7,000 528,063
U.S. Industries, Inc. .............. 5,000 93,125
--------------
621,188
--------------
UTILITY-2.1%
TELEPHONE UTILITY-2.1%
MCI WorldCom, Inc. (a).............. 6,000 430,688
--------------
ENERGY-1.3%
OIL SERVICE-1.3%
Halliburton Co. .................... 5,000 148,125
Noble Drilling Corp. (a)............ 10,000 129,375
--------------
277,500
--------------
Total United States Investments
(cost $7,397,264)................ 9,982,075
--------------
FOREIGN INVESTMENTS-12.8%
CANADA-0.3%
Newcourt Credit Group, Inc. ........ 2,000 69,875
--------------
FINLAND-2.9% Nokia AB OYJ Corp.
Series A ........................ 5,000 607,962
--------------
FRANCE-2.7%
Carrefour, SA ...................... 200 150,921
Sanofi, SA ......................... 1,000 164,550
SEITA .............................. 2,000 125,201
Total, SA Cl.B...................... 1,200 121,481
--------------
562,153
--------------
B-3
<PAGE>
GROWTH INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS
(continued) Alliance Variable Products Series Fund
================================================================================
Company Shares U.S. $ Value
- -----------------------------------------------------------------------
GERMANY-0.4%
ProSieben Media AG pfd.............. 2,000 $ 92,404
--------------
JAPAN-0.3%
Honda Motor Co. .................... 2,000 65,635
--------------
NETHERLANDS-0.6%
Akzo Nobel NV ...................... 3,000 136,531
--------------
SPAIN-1.5%
Banco Bilbao Vizcaya, SA ........... 5,000 78,279
Tabacalera, SA Class A.............. 5,000 125,950
Telefonica de Espana, SA ........... 2,500 110,998
rights, expiring 1/30/99 (a)..... 2,500 2,216
--------------
317,443
--------------
SWEDEN-0.7%
Astra AB Series A................... 7,000 142,588
--------------
SWITZERLAND-2.2%
Nestle, SA ......................... 70 152,362
Novartis AG ........................ 80 157,240
Zurich Allied AG ................... 200 148,067
--------------
457,669
--------------
UNITED KINGDOM-1.2%
Royal Bank of Scotland
Group Plc ....................... 5,000 81,741
United News & Media Plc ............ 6,000 52,135
Vodafone Group Plc ................. 7,000 113,740
--------------
247,616
--------------
Total Foreign Investments
(cost $2,192,404)................ 2,699,876
--------------
Total Common Stocks & Other
Investments
(cost $9,589,668)................ 12,681,951
--------------
Principal
Amount
(000) U.S. $ Value
- -----------------------------------------------------------------------
DEBT OBLIGATIONS-16.0%
U.S. GOVERNMENT &
AGENCY OBLIGATIONS-16.0%
U.S. Treasury Bonds
5.25%, 11/15/28 ................. $ 100 $ 102,375
6.125%, 11/15/27 ................ 315 352,602
U.S. Treasury Notes
4.25%, 11/15/03 ................. 100 98,719
5.625%, 5/15/08 ................. 515 549,520
5.75%, 8/15/03 .................. 260 271,497
6.00%, 8/15/00 .................. 260 265,361
6.375%, 5/15/99 ................. 190 191,188
6.50%, 8/31/01 .................. 460 481,059
6.50%, 5/31/02 .................. 940 992,433
6.875%, 5/15/06 ................. 60 67,837
--------------
Total Debt Obligations
(cost $3,344,937)................ 3,372,591
--------------
SHORT-TERM INVESTMENT-23.9%
TIME DEPOSIT-23.9%
State Street Cayman Islands
4.50%, 1/04/99
(amortized cost $5,020,000)...... 5,020,000
--------------
TOTAL INVESTMENTS -100.2%
(cost $17,954,605)............... 21,074,542
Other assets less liabilities-(0.2%) (46,070)
--------------
NET ASSETS-100%..................... $ 21,028,472
==============
- --------------------------------------------------------------------------------
(a) Non-income producing security.
See Glossary of Terms on page B-36.
See Notes to Financial Statements.
B-4
<PAGE>
TOTAL RETURN PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1998 Alliance Variable Products Series Fund
================================================================================
Company Shares U.S. $ Value
- -----------------------------------------------------------------------
COMMON STOCKS-63.6%
FINANCE-11.9%
BANKING - MONEY CENTERS-4.7%
Bank One Corp. ..................... 6,500 $ 331,906
BankAmerica Corp. .................. 21,000 1,262,625
Chase Manhattan Corp. .............. 17,300 1,177,481
--------------
2,772,012
--------------
INSURANCE-0.5%
PennCorp Financial Group, Inc. ..... 5,500 5,500
Travelers Property Casualty
Corp. Cl.A ...................... 10,400 322,400
--------------
327,900
--------------
MISCELLANEOUS-6.7%
Associates First Capital
Corp. Cl.A ...................... 11,400 483,075
Citigroup, Inc. .................... 24,800 1,227,600
Household International, Inc. ...... 41,400 1,640,475
MBNA Corp. ......................... 14,250 355,360
PMI Group, Inc. .................... 5,600 276,500
--------------
3,983,010
--------------
7,082,922
--------------
TECHNOLOGY-10.5%
COMMUNICATIONS EQUIPMENT-0.3%
Tellabs, Inc. (a) .................. 2,100 143,981
--------------
COMPUTER HARDWARE-1.1%
Compaq Computer Corp. .............. 16,000 671,000
--------------
COMPUTER SERVICES-3.7%
Electronic Data Systems
Corp. ........................... 23,500 1,180,875
First Data Corp. ................... 31,600 1,001,325
--------------
2,182,200
--------------
COMPUTER SOFTWARE-1.3%
Computer Associates
International, Inc. ............. 3,500 149,188
Oracle Corp. (a) ................... 14,400 621,450
--------------
770,638
--------------
NETWORKING SOFTWARE-0.5%
Ascend Communications,
Inc. (a) ........................ 2,500 164,453
FORE Systems, Inc. (a) ............. 8,600 157,219
--------------
321,672
--------------
SEMI-CONDUCTOR COMPONENTS-1.7%
Altera Corp. (a) ................... 11,200 681,100
Atmel Corp. (a) .................... 22,300 340,772
--------------
1,021,872
--------------
MISCELLANEOUS-1.9%
Solectron Corp. (a) ................ 12,200 1,133,837
--------------
6,245,200
--------------
HEALTH CARE-7.6%
BIOTECHNOLOGY-0.6%
Genzyme Corp. ...................... 6,400 318,200
--------------
DRUGS-3.1%
Bristol-Myers Squibb Co. ........... 13,900 1,859,994
--------------
MEDICAL PRODUCTS-0.2%
Baxter International, Inc. ......... 2,100 135,056
--------------
MEDICAL SERVICES-3.7%
Columbia HCA/Healthcare
Corp. ........................... 23,400 579,150
PacifiCare Health Systems, Inc.
Cl.B(a) ......................... 6,000 476,812
Tenet Healthcare Corp. (a) ......... 26,600 698,250
United Healthcare Corp. ............ 9,800 422,013
--------------
2,176,225
--------------
4,489,475
--------------
CONSUMER SERVICES-7.2%
AIRLINES-0.6%
Northwest Airlines Corp.
Cl.A (a) ........................ 6,600 168,300
UAL Corp. (a) ...................... 3,500 208,906
--------------
377,206
--------------
APPAREL-0.4%
Nautica Enterprises, Inc. (a) ...... 8,300 123,722
Tommy Hilfiger Corp. (a) ........... 2,000 120,000
--------------
243,722
--------------
BROADCASTING & CABLE-1.5%
A.H. Belo Corp. Series A ........... 20,900 416,694
AirTouch Communications,
Inc. (a) ........................ 4,700 338,987
Scripps E.W. Co. ................... 2,700 134,325
--------------
890,006
--------------
ENTERTAINMENT & LEISURE-1.7%
Carnival Corp. Cl.A ................ 4,000 192,000
Harley-Davidson, Inc. .............. 9,400 445,325
Mirage Resorts, Inc. (a) ........... 11,600 173,275
Royal Caribbean Cruises, Ltd. ...... 6,000 222,000
--------------
1,032,600
--------------
PRINTING & PUBLISHING-0.6%
Donnelley (R.R.) & Sons Co. ........ 7,400 324,213
--------------
B-5
<PAGE>
TOTAL RETURN PORTFOLIO
PORTFOLIO OF INVESTMENTS
(continued) Alliance Variable Products Series Fund
================================================================================
Company Shares U.S. $ Value
- -----------------------------------------------------------------------
RETAIL - GENERAL MERCHANDISE-2.4%
Dayton Hudson Corp. ................ 17,100 $ 927,675
Federated Department Stores,
Inc. (a) ........................ 8,700 378,994
Saks, Inc. (a) ..................... 3,000 94,687
--------------
1,401,356
--------------
4,269,103
--------------
CONSUMER STAPLES-7.1%
BEVERAGES-0.1%
Coca-Cola Enterprises, Inc. ........ 2,900 103,675
--------------
COSMETICS-1.4%
Avon Products, Inc. ................ 12,800 566,400
Gillette Co. ....................... 5,200 251,225
--------------
817,625
--------------
FOOD-1.7%
Campbell Soup Co. .................. 5,700 313,500
General Mills, Inc. ................ 4,200 326,550
Tyson Foods, Inc. Cl.A ............. 17,500 371,875
--------------
1,011,925
--------------
HOUSEHOLD PRODUCTS-0.9%
Colgate-Palmolive Co. .............. 4,300 399,362
Procter & Gamble Co. ............... 1,500 136,969
--------------
536,331
--------------
TOBACCO-3.0%
Philip Morris Cos., Inc. ........... 22,600 1,209,100
RJR Nabisco Holdings Corp. ......... 19,100 567,031
--------------
1,776,131
--------------
4,245,687
--------------
UTILITIES-6.8%
ELECTRIC & GAS UTILITIES-3.1%
Allegheny Energy, Inc. ............. 5,400 186,300
CMS Energy Corp. ................... 9,200 445,625
Consolidated Edison, Inc. .......... 2,700 142,763
Duke Power Energy Corp. ............ 2,100 134,531
Edison International ............... 13,300 370,737
FPL Group, Inc. .................... 5,000 308,125
GPU, Inc. .......................... 2,500 110,469
Pinnacle West Capital Corp. ........ 3,800 161,025
--------------
1,859,575
--------------
TELEPHONE UTILITIES-3.7%
AT&T Corp. ......................... 15,700 1,181,425
MCI WorldCom, Inc. (a) ............. 13,826 992,448
--------------
2,173,873
--------------
4,033,448
--------------
ENERGY-5.6%
DOMESTIC INTEGRATED-1.7%
USX-Marathon Group ................. 33,800 1,018,225
--------------
DOMESTIC PRODUCERS-0.8%
Apache Corp. ....................... 12,900 326,531
Murphy Oil Corp. ................... 2,650 109,313
Union Pacific Resources
Group, Inc. ..................... 7,200 65,250
--------------
501,094
--------------
OIL SERVICES-2.6%
BJ Services Co. (a) ................ 10,000 156,250
Halliburton Co. .................... 17,000 503,625
Noble Drilling Corp. (a) ........... 49,800 644,288
Transocean Offshore, Inc. .......... 8,500 227,906
--------------
1,532,069
--------------
MISCELLANEOUS-0.5%
AES Corp. (a) ...................... 6,300 298,462
--------------
3,349,850
--------------
CAPITAL GOODS-3.3%
ELECTRICAL EQUIPMENT-0.4%
General Electric Co. ............... 2,000 204,125
--------------
MACHINERY-0.3%
Case Corp. ......................... 9,000 196,313
--------------
MISCELLANEOUS-2.6%
Allied-Signal, Inc. ................ 15,300 677,981
United Technologies Corp. .......... 8,200 891,750
--------------
1,569,731
--------------
1,970,169
--------------
MULTI-INDUSTRY COMPANIES-2.6%
Honeywell, Inc. .................... 2,900 218,406
Tyco International, Ltd. ........... 13,200 995,775
U.S. Industries, Inc. .............. 18,600 346,425
--------------
1,560,606
--------------
BASIC INDUSTRIES-0.9%
CHEMICAL-0.8%
Praxair, Inc. ...................... 13,000 458,250
--------------
CONTAINER-0.1%
Sealed Air Corp. (a) ............... 1,000 51,063
--------------
509,313
--------------
TRANSPORTATION-0.1%
RAILROAD-0.1%
Canadian Pacific, Ltd. (b) ......... 3,200 60,400
--------------
Total Common Stocks
(cost $33,381,462)............... 37,816,173
--------------
B-6
<PAGE>
Alliance Variable Products Series Fund
================================================================================
Principal
Amount
(000) U.S. $ Value
- -----------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS-25.6%
U.S. Treasury Notes
5.50%, 2/15/08................... $ 1,500 $ 1,589,535
6.50%, 10/15/06.................. 8,900 9,872,058
7.25%, 8/15/04................... 3,355 3,771,758
--------------
Total U.S. Government Obligations
(cost $14,125,896)............... 15,233,351
--------------
SHORT-TERM INVESTMENT-11.0%
TIME DEPOSIT-11.0%
State Street Cayman Islands
4.50%, 1/04/99
(amortized cost $6,555,000)...... 6,555 6,555,000
--------------
TOTAL INVESTMENTS-100.2%
(cost $54,062,358)............... 59,604,524
Other assets less liabilities-(0.2%) (140,774)
--------------
NET ASSETS-100%..................... $ 59,463,750
==============
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) Country of origin--Canada.
See Glossary of Terms on page B-36.
See Notes to Financial Statements.
B-7
<PAGE>
GROWTH AND INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1998 Alliance Variable Products Series Fund
================================================================================
Company Shares U.S. $ Value
- -----------------------------------------------------------------------
COMMON STOCKS-95.4%
FINANCE-17.9%
BANKING - MONEY CENTERS-7.0%
Bank One Corp. ..................... 62,100 $ 3,170,981
BankAmerica Corp. .................. 200,900 12,079,113
Chase Manhattan Corp. .............. 166,100 11,305,181
--------------
26,555,275
--------------
INSURANCE-1.6%
PennCorp Financial Group, Inc. ..... 52,700 52,700
PMI Group, Inc. .................... 58,900 2,908,187
Travelers Property Casualty
Corp. Cl.A ...................... 99,300 3,078,300
--------------
6,039,187
--------------
REAL ESTATE-0.2%
ProLogis Trust ..................... 37,090 769,618
--------------
MISCELLANEOUS-9.1%
Associates First Capital Corp.
Cl.A ............................ 108,800 4,610,400
Citigroup, Inc. .................... 234,100 11,587,950
Household International, Inc. ...... 399,500 15,830,188
MBNA Corp. ......................... 113,850 2,839,134
--------------
34,867,672
--------------
68,231,752
--------------
TECHNOLOGY-15.7%
COMMUNICATION EQUIPMENT-0.4%
Tellabs, Inc. (a) .................. 21,000 1,439,813
--------------
COMPUTER HARDWARE-1.7%
Compaq Computer Corp. .............. 152,700 6,403,856
--------------
COMPUTER SERVICES-5.5%
Electronic Data Systems Corp. ...... 225,000 11,306,250
First Data Corp. ................... 301,700 9,560,119
--------------
20,866,369
--------------
COMPUTER SOFTWARE-1.9%
Computer Associates
International, Inc. ............. 33,400 1,423,675
Oracle Corp. (a) ................... 137,400 5,929,669
--------------
7,353,344
--------------
NETWORKING SOFTWARE-0.8%
Ascend Communications, Inc. (a) .... 24,100 1,585,328
FORE Systems, Inc. (a) ............. 84,300 1,541,109
--------------
3,126,437
--------------
SEMI-CONDUCTOR COMPONENTS-2.6%
Altera Corp. (a) ................... 112,000 6,811,000
Atmel Corp. (a) .................... 213,200 3,257,963
--------------
10,068,963
--------------
MISCELLANEOUS-2.8%
Solectron Corp. (a) ................ 116,200 10,799,337
--------------
60,058,119
--------------
HEALTH CARE-11.4%
BIOTECHNOLOGY-0.8%
Genzyme Corp. (a) .................. 61,200 3,042,787
--------------
DRUGS-4.8%
Bristol-Myers Squibb Co. ........... 135,900 18,185,119
--------------
MEDICAL PRODUCTS-0.3%
Baxter International, Inc. ......... 20,600 1,324,838
--------------
MEDICAL SERVICES-5.5%
Columbia HCA/Healthcare Corp. ...... 223,900 5,541,525
PacifiCare Health Systems, Inc.
Cl.B(a) ......................... 57,400 4,561,506
Tenet Healthcare Corp. (a) ......... 257,500 6,759,375
United Healthcare Corp. ............ 93,700 4,034,956
--------------
20,897,362
--------------
43,450,106
--------------
CONSUMER STAPLES-10.6%
BEVERAGES-0.3%
Coca-Cola Enterprises, Inc. ........ 28,000 1,001,000
--------------
COSMETICS-2.0%
Avon Products, Inc. ................ 122,500 5,420,625
Gillette Co. ....................... 48,700 2,352,819
--------------
7,773,444
--------------
FOOD-2.5%
Campbell Soup Co. .................. 55,800 3,069,000
General Mills, Inc. ................ 39,500 3,071,125
Tyson Foods, Inc. Cl.A ............. 167,200 3,553,000
--------------
9,693,125
--------------
HOUSEHOLD PRODUCTS-1.4%
Colgate-Palmolive Co. .............. 41,000 3,807,875
Procter & Gamble Co. ............... 14,500 1,324,031
--------------
5,131,906
--------------
TOBACCO-4.4%
Philip Morris Cos., Inc. ........... 216,000 11,556,000
RJR Nabisco Holdings Corp. ......... 181,800 5,397,187
--------------
16,953,187
--------------
40,552,662
--------------
CONSUMER SERVICES-10.5%
AIRLINES-1.0%
Northwest Airlines Corp. Cl.A (a) .. 63,300 1,614,150
UAL Corp. (a) ...................... 34,000 2,029,375
--------------
3,643,525
--------------
APPAREL-0.3%
Nautica Enterprises, Inc. (a) ...... 79,700 1,188,028
--------------
B-8
<PAGE>
Alliance Variable Products Series Fund
================================================================================
Company Shares U.S. $ Value
- -----------------------------------------------------------------------
BROADCASTING & CABLE-2.3%
A.H. Belo Corp. Series A ........... 199,000 $ 3,967,562
AirTouch Communications, Inc. ...... 47,300 3,411,513
Scripps E.W. Co. ................... 26,000 1,293,500
--------------
8,672,575
--------------
ENTERTAINMENT & LEISURE-2.6%
Carnival Corp. ..................... 38,700 1,857,600
Harley-Davidson, Inc. .............. 91,100 4,315,863
Mirage Resorts, Inc. (a) ........... 111,100 1,659,556
Royal Caribbean Cruises, Ltd. ...... 57,500 2,127,500
--------------
9,960,519
--------------
PRINTING & PUBLISHING-0.8%
Donnelley (R.R.) & Sons Co. ........ 71,000 3,110,687
--------------
RETAIL - GENERAL MERCHANDISE-3.5%
Dayton Hudson Corp. ................ 163,100 8,848,175
Federated Department Stores,
Inc. (a) ........................ 82,800 3,606,975
Saks, Inc. (a) ..................... 29,900 943,719
--------------
13,398,869
--------------
39,974,203
--------------
UTILITIES-10.2%
ELECTRIC & GAS UTILITIES-4.7%
Allegheny Energy, Inc. ............. 51,900 1,790,550
CMS Energy Corp. ................... 88,400 4,281,875
Consolidated Edison, Inc. .......... 25,600 1,353,600
Duke Power Energy Corp. ............ 20,600 1,319,688
Edison International ............... 127,200 3,545,700
FPL Group, Inc. .................... 47,900 2,951,837
GPU, Inc. .......................... 23,700 1,047,244
Pinnacle West Capital Corp. ........ 38,600 1,635,675
--------------
17,926,169
--------------
TELEPHONE UTILITIES-5.5%
AT&T Corp. ......................... 153,494 11,550,423
MCI WorldCom, Inc. (a) ............. 132,568 9,515,897
--------------
21,066,320
--------------
38,992,489
--------------
ENERGY-8.6%
DOMESTIC INTEGRATED-2.7%
USX-Marathon Group ................. 338,500 10,197,312
--------------
DOMESTIC PRODUCERS-1.3%
Apache Corp. ....................... 123,100 3,115,969
Murphy Oil Corp. ................... 25,550 1,053,937
Union Pacific Resources
Group, Inc. ..................... 70,600 639,813
--------------
4,809,719
--------------
OIL SERVICES-3.9%
BJ Services Co. (a) ................ 96,600 1,509,375
Halliburton Co. .................... 167,500 4,962,187
Noble Drilling Corp. (a) ........... 480,900 6,221,644
Transocean Offshore, Inc. .......... 82,200 2,203,988
--------------
14,897,194
--------------
MISCELLANEOUS-0.7%
AES Corp. (a) ...................... 60,300 2,856,713
--------------
32,760,938
--------------
CAPITAL GOODS-4.9%
ELECTRICAL EQUIPMENT-0.5%
General Electric Co. ............... 19,200 1,959,600
--------------
MACHINERY-0.5%
Case Corp. ......................... 86,300 1,882,419
--------------
MISCELLANEOUS-3.9%
Allied-Signal, Inc. ................ 146,000 6,469,625
United Technologies Corp. .......... 77,800 8,460,750
--------------
14,930,375
--------------
18,772,394
--------------
MULTI-INDUSTRY COMPANIES-3.8%
Honeywell, Inc. .................... 28,050 2,112,516
Tyco International, Ltd. ........... 121,200 9,143,025
U.S. Industries, Inc. .............. 179,100 3,335,737
--------------
14,591,278
--------------
BASIC INDUSTRIES-1.3%
CHEMICAL-1.2%
Praxair, Inc. ...................... 123,000 4,335,750
--------------
CONTAINER-0.1%
Sealed Air Corp. (a) ............... 9,600 490,200
--------------
4,825,950
--------------
CONSUMER MANUFACTURING-0.3%
TEXTILE PRODUCTS-0.3%
Tommy Hilfiger Corp. (a) ........... 18,700 1,122,000
--------------
TRANSPORTATION-0.2%
RAILROAD-0.2%
Canadian Pacific, Ltd. (b) ......... 42,900 809,738
--------------
Total Common Stocks
(cost $322,755,982).............. 364,141,629
--------------
B-9
<PAGE>
GROWTH AND INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
(continued) Alliance Variable Products Series Fund
================================================================================
Principal
Amount
(000) U.S. $ Value
- -----------------------------------------------------------------------
SHORT-TERM INVESTMENTS-5.3%
COMMERCIAL PAPER-5.3%
American Express Co.
4.90%, 1/06/99................... $ 3,000 $ 2,997,958
Ford Motor Credit Corp.
4.91%, 1/07/99................... 7,700 7,693,699
5.71%, 1/05/99................... 1,400 1,399,112
Prudential Funding Corp.
4.75%, 1/04/99................... 8,000 7,996,833
--------------
Total Short-Term Investments
(amortized cost $20,087,602)..... 20,087,602
--------------
U.S. $ Value
- -----------------------------------------------------------------------
TOTAL INVESTMENTS-100.7%
(cost $342,843,584).............. $ 384,229,231
Other assets less liabilities-(0.7%) (2,614,890)
--------------
NET ASSETS-100%..................... $ 381,614,341
==============
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) Country of origin--Canada.
See Glossary of Terms on page B-36.
See Notes to Financial Statements.
B-10
<PAGE>
GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1998 Alliance Variable Products Series Fund
================================================================================
Company Shares U.S. $ Value
- -----------------------------------------------------------------------
COMMON & PREFERRED STOCKS-94.0%
TECHNOLOGY-33.4%
COMMUNICATION SERVICES-1.7%
Nextel Communications, Inc.
Cl.A (a) ........................ 234,000 $ 5,535,563
--------------
COMMUNICATIONS EQUIPMENT-5.0%
Global Telesystems Group,
Inc. (a) ........................ 64,900 3,614,119
Loral Space & Communications (a) ... 219,800 3,915,187
Sterling Commerce, Inc. (a) ........ 196,789 8,855,505
--------------
16,384,811
--------------
COMPUTER HARDWARE-2.5%
International Business Machines
Corp. ........................... 45,000 8,313,750
--------------
COMPUTER SERVICES-3.3%
Ceridian Corp. (a) ................. 148,500 10,367,156
First Data Corp. ................... 11,000 348,563
--------------
10,715,719
--------------
COMPUTER SOFTWARE-7.1%
HBO & Co. .......................... 147,000 4,221,656
Network Associates, Inc. (a) ....... 139,800 9,274,856
Sterling Software, Inc. (a) ........ 360,200 9,747,913
--------------
23,244,425
--------------
ELECTRONICS-2.2%
Philips Electronics NV ............. 23,000 1,556,812
SCI Systems, Inc. (a) .............. 98,500 5,688,375
--------------
7,245,187
--------------
NETWORKING SOFTWARE-3.6%
Cisco Systems, Inc. (a) ............ 128,300 11,911,853
--------------
SEMI-CONDUCTOR COMPONENTS-1.2%
Texas Instruments, Inc. ............ 47,000 4,021,438
--------------
TELECOMMUNICATIONS-1.5%
Colt Telecom Group Plc (ADR) (a) ... 42,600 2,558,662
Esprit Telecom Group Plc
(ADR) (a) ....................... 2,600 122,687
Globalstar Telecommunications,
Ltd. (a) ........................ 5,200 105,138
Intermedia Communications,
Inc. pfd. ....................... 18,000 450,000
Millicom International Cellular,
SA (a) .......................... 49,500 1,686,094
--------------
4,922,581
--------------
MISCELLANEOUS-5.3%
Ingram Micro, Inc. Cl.A (a) ........ 30,900 1,077,638
Sanmina Corp. (a) .................. 179,100 11,171,362
Solectron Corp. (a) ................ 57,300 5,325,319
--------------
17,574,319
--------------
109,869,646
--------------
FINANCE-24.7%
BANKING - MONEY CENTERS-2.9%
American Express Co. ............... 18,100 1,850,725
Automatic Common Exchange
SecurityTrust II ................ 25,000 381,250
Chase Manhattan Corp. .............. 106,440 7,244,572
--------------
9,476,547
--------------
BANKING - REGIONAL-4.4%
BankAmerica Corp. .................. 98,600 5,928,325
First Union Corp. .................. 45,000 2,736,562
Newcourt Credit Group, Inc. ........ 162,100 5,663,369
--------------
14,328,256
--------------
INSURANCE-3.9%
American Bankers Insurance
Group, Inc. ..................... 47,000 2,273,625
American International
Group, Inc. ..................... 105,037 10,149,200
UNUM Corp. ......................... 7,000 408,625
--------------
12,831,450
--------------
INVESTMENT COMPANY-3.2%
TCI Ventures Group Series A (a) .... 451,700 10,685,528
--------------
REAL ESTATE-2.5%
Entertainment Properties Trust ..... 56,000 952,000
Humphrey Hospitality Trust, Inc. ... 99,100 947,644
JP Realty, Inc. .................... 78,000 1,530,750
Koger Equity, Inc. ................. 100,000 1,718,750
Macerich Co. ....................... 42,500 1,089,062
Spieker Properties, Inc. ........... 56,000 1,939,000
--------------
8,177,206
--------------
B-11
<PAGE>
GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
(continued) Alliance Variable Products Series Fund
================================================================================
Company Shares U.S. $ Value
- -----------------------------------------------------------------------
MISCELLANEOUS-7.8%
Associates First Capital Corp.
Cl.A ............................ 81,000 $ 3,432,375
Citigroup, Inc. .................... 190,499 9,429,701
Household International, Inc. ...... 40,000 1,585,000
MBNA Corp. ......................... 345,375 8,612,789
PMI Group, Inc. .................... 30,300 1,496,063
Providian Financial Corp. .......... 13,500 1,012,500
--------------
25,568,428
--------------
81,067,415
--------------
CONSUMER SERVICES-11.4%
AIRLINES-1.6%
Continental Airlines, Inc.
Cl.B (a) ........................ 57,000 1,909,500
Delta Air Lines, Inc. .............. 64,000 3,328,000
--------------
5,237,500
--------------
BROADCASTING & CABLE-2.8%
Tele-Communications, Inc. -
LibertyMedia Group Cl.A (a) ..... 111,055 5,118,941
Viacom, Inc. Cl.B (a) .............. 55,900 4,136,600
--------------
9,255,541
--------------
BUSINESS SERVICES-1.9%
Cendant Corp. (a) .................. 325,050 6,196,266
--------------
PRINTING & PUBLISHING-0.7%
Readers Digest Association, Inc. ... 90,000 2,340,000
--------------
RETAIL - GENERAL MERCHANDISE-4.4%
Home Depot, Inc. ................... 98,300 6,014,731
Office Depot, Inc. (a) ............. 53,000 1,957,688
Tandy Corp. ........................ 59,700 2,458,894
The Limited, Inc. .................. 136,300 3,969,737
--------------
14,401,050
--------------
37,430,357
--------------
UTILITIES-7.0%
TELEPHONE UTILITIES-7.0%
MCI WorldCom, Inc. (a) ............. 303,784 21,805,996
Pacific Gateway Exchange, Inc. ..... 22,200 1,067,681
--------------
22,873,677
--------------
HEALTH CARE-5.0%
BIOTECHNOLOGY-0.1%
Gensia Sicor, Inc.
3.75%, cv. pfd. (a) (b) ......... 8,000 201,392
--------------
DRUGS-4.2%
Bristol-Myers Squibb Co. ........... 49,000 6,556,812
Merck & Co., Inc. .................. 30,900 4,563,544
Schering-Plough Corp. .............. 50,000 2,762,500
--------------
13,882,856
--------------
MEDICAL PRODUCTS-0.4%
Medtronic, Inc. .................... 15,200 1,128,600
--------------
MEDICAL SERVICES-0.3%
Columbia HCA/Healthcare Corp. ...... 43,000 1,064,250
--------------
16,277,098
--------------
CAPITAL GOODS-3.1%
MACHINERY-3.1%
Mannesmann AG (c) .................. 90,025 10,317,278
--------------
BUSINESS SERVICES-3.0%
BROADCASTING & CABLE-2.4%
CBS Corp. .......................... 165,700 5,426,675
MediaOne Group, Inc. ............... 49,000 2,303,000
--------------
7,729,675
--------------
PRINTING & PUBLISHING-0.6%
News Corp., Ltd. (ADR) (d) ......... 80,800 2,136,150
--------------
9,865,825
--------------
ENERGY-2.6%
OIL SERVICES-2.6%
Atlantic Richfield Co. ............. 116,200 7,582,050
Gulf Canada Resources, Ltd. (e) .... 294,300 864,506
--------------
8,446,556
--------------
CONSUMER STAPLES-1.4%
TOBACCO-1.4%
Loews Corp. ........................ 46,800 4,598,100
--------------
MULTI-INDUSTRY COMPANY-1.4%
Tyco International, Ltd. ........... 62,572 4,720,275
--------------
CONSUMER MANUFACTURING-0.6%
AUTO & RELATED-0.6%
Republic Industires, Inc. .......... 144,000 2,124,000
--------------
BASIC INDUSTRY-0.4%
CHEMICALS-0.4%
Engelhard Corp. .................... 67,000 1,306,500
--------------
Total Common & Preferred Stocks
(cost $214,878,224).............. 308,896,727
--------------
B-12
<PAGE>
Alliance Variable Products Series Fund
================================================================================
Principal
Amount
Company (000) U.S. $ Value
- -----------------------------------------------------------------------
LONG-TERM DEBT SECURITIES-1.1%
COMMUNICATIONS EQUIPMENT-1.1%
Global Telesystems Group, Inc.
5.75%, 7/01/10
(cost $2,311,313)................ $ 3,275 $ 3,651,625
--------------
SHORT-TERM INVESTMENTS-7.0%
U.S. GOVERNMENT & AGENCIES-7.0%
Federal Home Loan Mortgage Corp.
5.025%, 2/22/99.................. 3,000 2,978,225
5.10%, 1/14/99................... 2,700 2,695,027
Federal National Mortgage Assn.
5.12%, 1/27/99................... 3,000 2,988,907
Student Loan Marketing Assn.
4.28%, 1/04/99................... 14,300 14,294,900
--------------
Total Short-Term Investments
(amortized cost $22,957,059)..... 22,957,059
--------------
TOTAL INVESTMENTS-102.1%
(cost $240,146,596).............. 335,505,411
Other assets less liabilities-(2.1%) (6,823,966)
--------------
NET ASSETS-100%..................... $ 328,681,445
==============
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) 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 December 31, 1998, the
aggregate market value of this security amounted to $201,392 or 0.06% of
net assets.
(c) German holding.
(d) Country of origin--Australia.
(e) Country of origin--Canada.
See Glossary of Terms on page B-36.
See Notes to Financial Statements.
B-13
<PAGE>
INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1998 Alliance Variable Products Series Fund
================================================================================
Company Shares U.S. $ Value
- -----------------------------------------------------------------------
COMMON STOCKS &
OTHER INVESTMENTS-93.0%
AUSTRALIA-0.6%
Coca Cola Amatil ................... 112,000 $ 417,280
--------------
BRAZIL-1.1%
Telecomunicacoes Brasileiras,
SA (ADR) ........................ 10,000 726,875
CANADA-3.0%
Newcourt Credit Group, Inc. ........ 27,000 945,044
Northern Telecom, Ltd. ............. 20,000 1,002,290
--------------
1,947,334
--------------
FINLAND-7.8%
Nokia AB OYJ Corp. Series A ........ 35,400 4,304,374
Orion-Yhtymae OY Cl.B .............. 33,000 792,155
--------------
5,096,529
--------------
FRANCE-8.7%
Lafarge SA ......................... 10,000 949,741
Sanofi SA .......................... 8,600 1,415,132
Schneider SA ....................... 14,700 891,307
SEITA .............................. 25,000 1,565,015
Total, SA Cl.B ..................... 8,200 830,120
--------------
5,651,315
--------------
GERMANY-5.1%
Hornbach Holding AG pfd. ........... 3,800 225,729
Merck KGAA ......................... 15,000 675,027
ProSieben Media AG pfd. ............ 19,300 891,696
Volkswagen AG ...................... 12,000 957,638
Wella AG pfd. ...................... 700 583,823
--------------
3,333,913
--------------
HONG KONG-0.1%
Dickson Concepts International,
Ltd. ............................ 80,000 61,955
--------------
ITALY-4.6%
ENI SpA ............................ 84,000 548,671
Telecom Italia SpA ................. 167,000 1,424,113
Union Credito Italiano SpA ......... 175,000 1,036,696
--------------
3,009,480
--------------
JAPAN-19.3%
Bank of Tokyo-Mitsubishi ........... 49,000 507,121
Bridgestone Corp. .................. 40,000 907,563
Canon, Inc. ........................ 35,000 747,678
Credit Saison Co. .................. 35,500 874,547
Daito Trust Construction Co.,
Ltd. ............................ 40,000 346,395
Daiwa Securities Co., Ltd. ......... 170,000 580,451
Familymart Co. ..................... 16,100 803,220
Fuji Photo Film Co. ................ 20,000 743,034
Honda Motor Co. .................... 26,000 853,251
Japan Tobacco, Inc. ................ 70 699,690
Kao Corp. .......................... 23,000 518,797
Nintendo Corp. Ltd. ................ 3,000 290,579
NTT Mobile Communications .......... 20 822,645
Orix Corp. ......................... 5,000 373,286
Shiseido Co., Ltd. ................. 28,000 359,628
Sony Corp. ......................... 11,300 822,636
Takeda Chemical Industries ......... 7,000 269,350
TDK Corp. .......................... 7,000 639,629
Tokai Bank ......................... 56,000 264,520
Yamanouchi Pharmaceutical
Co., Ltd. ....................... 36,000 1,159,133
--------------
12,583,153
--------------
NETHERLANDS-8.6%
Ahold Koninklijke NV ............... 35,800 1,322,468
Akzo Nobel NV ...................... 45,000 2,047,959
ING Groep NV ....................... 26,000 1,584,606
KLM Royal Dutch Air NV ............. 20,000 604,673
--------------
5,559,706
--------------
SPAIN-6.8%
Banco Bilbao Vizcaya, SA ........... 45,000 704,510
Tabacalera, SA Series A ............ 75,000 1,889,249
Telefonica de Espana ............... 40,000 1,775,964
rights, expiring 1/30/99 (a) .... 40,000 35,463
--------------
4,405,186
--------------
SWEDEN-3.5%
Astra AB Series A .................. 30,000 611,092
Autoliv, Inc. ...................... 17,400 623,203
Forenings Sparbanken AB
Series A ........................ 39,000 1,008,025
--------------
2,242,320
--------------
SWITZERLAND-7.6%
Nestle, SA ......................... 1,100 2,394,264
Zurich Allied AG (a) ............... 3,400 2,517,143
--------------
4,911,407
--------------
UNITED KINGDOM-16.2%
Bank of Scotland ................... 110,767 1,325,008
British Airways Plc ................ 50,000 343,911
Compass Group Plc .................. 50,000 570,693
Diageo Plc ......................... 180,000 1,996,179
Dixons Group Plc ................... 61,000 857,385
B-14
<PAGE>
Alliance Variable Products Series Fund
================================================================================
Company Shares U.S. $ Value
- -----------------------------------------------------------------------
Granada Group Plc .................. 32,000 $ 560,891
Ladbroke Group Plc ................. 120,000 482,472
Misys Plc .......................... 68,000 499,352
Reuters Group Plc .................. 42,000 443,097
Royal Bank of Scotland Group Plc ... 40,000 653,929
Standard Chartered Bank ............ 29,900 346,739
Tomkins Plc ........................ 210,000 997,840
United News Media Plc .............. 79,600 691,656
Vodafone Group Plc ................. 47,600 773,431
--------------
10,542,583
--------------
Total Common Stocks & Other
Investments
(cost $53,864,692)............... 60,489,036
--------------
Principal
Amount
(000) U.S. $ Value
- -----------------------------------------------------------------------
SHORT-TERM INVESTMENT-5.4%
TIME DEPOSIT-5.4%
State Street Cayman Islands
4.50%, 1/04/99
(amortized cost $3,519,000)...... $ 3,519 $ 3,519,000
--------------
TOTAL INVESTMENTS-98.4%
(cost $57,383,692)............... 64,008,036
Other assets less liabilities-1.6%.. 1,043,757
--------------
NET ASSETS-100%..................... $ 65,051,793
==============
- --------------------------------------------------------------------------------
(a) Non-income producing security.
See Glossary of Terms on page B-36.
See Notes to Financial Statements.
B-15
<PAGE>
PREMIER GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1998 Alliance Variable Products Series Fund
================================================================================
Company Shares U.S. $ Value
- -----------------------------------------------------------------------
COMMON STOCKS-96.0%
TECHNOLOGY-31.0%
COMMUNICATIONS EQUIPMENT-10.1%
EMC Corp. (a) ...................... 435,900 $ 37,051,500
Lucent Technologies, Inc. .......... 207,342 22,807,620
Nokia Corp. (ADR) (b) .............. 545,600 65,710,700
--------------
125,569,820
--------------
COMPUTER HARDWARE-7.8%
Compaq Computer Corp. .............. 431,700 18,104,418
Dell Computer Corp. (a) ............ 860,000 62,968,125
International Business
Machines Corp. .................. 23,500 4,341,625
Sun Microsystems, Inc. (a) ......... 147,900 12,654,694
--------------
98,068,862
--------------
COMPUTER SOFTWARE-3.7%
HBO & Co. .......................... 773,000 22,199,594
Microsoft Corp. (a) ................ 173,700 24,062,878
--------------
46,262,472
--------------
NETWORKING SOFTWARE-6.3%
America Online, Inc. ............... 108,500 17,360,000
Cisco Systems, Inc. (a) ............ 657,900 61,081,903
--------------
78,441,903
--------------
SEMI-CONDUCTOR COMPONENTS-2.5%
Intel Corp. ........................ 260,600 30,889,244
--------------
MISCELLANEOUS-0.6%
AMP, Inc. .......................... 152,000 7,913,500
--------------
387,145,801
--------------
CONSUMER SERVICES-24.6%
AIRLINES-3.4%
Continental Airlines, Inc. (a) ..... 128,000 4,288,000
Delta Air Lines, Inc. .............. 207,400 10,784,800
KLM Royal Dutch Air ................ 125,776 3,773,280
Northwest Airlines Corp.
Cl.A (a) ........................ 345,660 8,814,330
UAL Corp. (a) ...................... 254,500 15,190,469
--------------
42,850,879
--------------
BROADCASTING & CABLE-5.8%
AirTouch Communications,
Inc. (a) ........................ 729,400 52,607,975
Tele-Communications, Inc. -
LibertyMedia Group Cl.A (a) ..... 427,405 19,700,699
--------------
72,308,674
--------------
ENTERTAINMENT & LEISURE-1.4%
Walt Disney Co. .................... 592,800 17,784,000
--------------
PRINTING & PUBLISHING-0.5%
Gannett Co., Inc. .................. 99,000 6,385,500
--------------
RETAIL - GENERAL MERCHANDISE-13.5%
Dayton Hudson Corp. ................ 526,300 28,551,775
Gap, Inc. .......................... 312,200 17,561,250
Home Depot, Inc. ................... 957,298 58,574,671
Kohl's Corp. (a) ................... 268,600 16,502,112
Lowes Cos., Inc. ................... 110,600 5,661,338
Wal-Mart Stores, Inc. .............. 500,800 40,783,900
--------------
167,635,046
--------------
306,964,099
--------------
FINANCE-14.4%
BANKING - MONEY CENTERS-2.6%
BankAmerica Corp. .................. 289,567 17,410,216
Fifth Third Bancorp ................ 84,200 6,007,144
U.S. Bancorp ....................... 245,200 8,704,600
--------------
32,121,960
--------------
BROKERAGE & MONEY MANAGEMENT-1.9%
Merrill Lynch & Co., Inc. .......... 135,400 9,037,950
Morgan Stanley, Dean Witter
and Co. ......................... 207,355 14,722,205
--------------
23,760,155
--------------
INSURANCE-1.5%
American International Group,
Inc. ............................ 122,775 11,863,134
Progressive Corp. .................. 41,300 6,995,188
--------------
18,858,322
--------------
MORTGAGE BANKING-4.1%
Federal Home Loan Mortgage Corp. ... 397,300 25,601,019
Federal National Mortgage Assn. .... 219,500 16,243,000
Washington Mutual, Inc. ............ 241,640 9,227,627
--------------
51,071,646
--------------
MISCELLANEOUS-4.3%
Associates First Capital Corp.
Cl.A ............................ 268,056 11,358,873
Citigroup, Inc. .................... 226,050 11,189,475
MBNA Corp. ......................... 1,247,050 31,098,309
--------------
53,646,657
--------------
179,458,740
--------------
HEALTH CARE-11.9%
DRUGS-10.1%
Bristol-Myers Squibb Co. ........... 223,500 29,907,093
Merck & Co., Inc. .................. 121,700 17,973,569
Pfizer, Inc. ....................... 334,400 41,946,300
Schering-Plough Corp. .............. 403,800 22,309,950
Warner-Lambert Co. ................. 189,300 14,232,994
--------------
126,369,906
--------------
B-16
<PAGE>
Alliance Variable Products Series Fund
================================================================================
Company Shares U.S. $ Value
- -----------------------------------------------------------------------
MEDICAL PRODUCTS-0.5%
Medtronic, Inc. .................... 73,800 $ 5,479,650
--------------
MEDICAL SERVICES-1.3%
IMS Health, Inc. ................... 216,200 16,309,588
--------------
148,159,144
--------------
CONSUMER STAPLES-5.1%
COSMETICS-0.4%
Gillette Co. ....................... 104,500 5,048,656
--------------
FOOD-0.4%
Coca-Cola Co. ...................... 69,600 4,654,500
--------------
HOUSEHOLD PRODUCTS-1.0%
Colgate-Palmolive Co. .............. 136,500 12,677,438
--------------
RETAIL - FOOD & DRUG-1.4%
Kroger Co. (a) ..................... 199,600 12,075,800
Rite Aid Corp. ..................... 99,000 4,906,688
--------------
16,982,488
--------------
TOBACCO-1.9%
Philip Morris Cos., Inc. ........... 454,273 24,303,605
--------------
63,666,687
--------------
MULTI-INDUSTRY COMPANY-3.2%
Tyco International, Ltd. ........... 521,800 39,363,287
--------------
CAPITAL GOODS-2.6%
AUTO & RELATED-0.6%
Ford Motor Co. ..................... 127,000 7,453,313
--------------
ELECTRICAL EQUIPMENT-0.9%
General Electric Co. ............... 106,400 10,859,450
--------------
MISCELLANEOUS-1.1%
United Technologies Corp. .......... 134,000 14,572,500
--------------
32,885,263
--------------
UTILITY-2.6%
TELEPHONE UTILITY-2.6%
MCI WorldCom, Inc. (a) ............. 457,819 32,862,820
--------------
ENERGY-0.6%
OIL SERVICE-0.6%
Schlumberger, Ltd. ................. 158,326 7,302,787
--------------
Total Common Stocks
(cost $816,101,223).............. 1,197,808,628
--------------
Shares, or
Principal
Amount
(000) U.S. $ Value
- -----------------------------------------------------------------------
SHORT-TERM INVESTMENTS-4.6%
COMMERCIAL PAPER-4.4%
General Electric Capital Corp.
5.40%, 1/04/99................... $ 55,198 55,173,161
--------------
TIME DEPOSIT-0.2%
State Street Cayman Islands
4.50%, 1/04/99................... 1,684 1,684,000
--------------
Total Short-Term Investments
(amortized cost $56,857,161)..... 56,857,161
--------------
TOTAL INVESTMENTS-100.6%
(cost $872,958,384).............. 1,254,665,789
Other assets less liabilities-(0.6%) (7,411,519)
--------------
NET ASSETS-100%..................... $1,247,254,270
==============
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) Country of origin--Finland.
See Glossary of Terms on page B-36.
See Notes to Financial Statements.
B-17
<PAGE>
QUASAR PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1998 Alliance Variable Products Series Fund
================================================================================
Company Shares U.S. $ Value
- -----------------------------------------------------------------------
COMMON STOCKS-77.3%
CONSUMER PRODUCTS & SERVICES-36.6%
AIRLINES-5.4%
Alaska Air Group, Inc. (a) ......... 59,500 $ 2,632,875
America West Airlines, Inc.
Cl.B (a) ........................ 104,200 1,771,400
Mesa Air Group, Inc. (a) ........... 61,500 480,469
--------------
4,884,744
--------------
APPAREL-1.7%
Tommy Hilfiger Corp. (a) ........... 25,800 1,548,000
--------------
BROADCASTING & CABLE-1.7%
Sinclair Broadcast Group, Inc.
Cl.A (a) ........................ 44,500 880,266
Young Broadcasting Corp.
Cl.A (a) ........................ 16,900 706,103
--------------
1,586,369
--------------
BUSINESS SERVICES-2.6%
Carey International, Inc. (a) ...... 45,800 807,225
FirstService Corp. (a) ............. 32,200 384,388
TeleSpectrum Worldwide, Inc. (a) ... 122,500 1,202,031
--------------
2,393,644
--------------
ENTERTAINMENT & LEISURE-5.9%
Bally Total Fitness Holding
Corp.(a) ........................ 51,000 1,268,625
N2K, Inc. (a) ...................... 16,100 209,803
Premier Parks, Inc. (a) ............ 86,900 2,628,725
Sunterra Corp. (a) ................. 81,100 1,216,500
--------------
5,323,653
--------------
FOOD SERVICES & LODGING-0.3%
Merkert American Corp. (a) ......... 15,700 238,444
--------------
FUNERAL SERVICES-0.8%
Carriage Services, Inc. Cl.A (a) ... 26,600 756,437
--------------
RESTAURANTS & LODGING-1.4%
Florida Panthers Holdings, Inc.
Cl.A (a) ........................ 42,700 397,644
MeriStar Hospitality Corp. ......... 45,900 852,018
--------------
1,249,662
--------------
RETAILING-15.0%
Budget Group, Inc. Cl.A (a) ........ 123,800 1,965,325
Callaway Golf Co. .................. 19,900 203,975
Circuit City Stores, Inc.-
Car Max Group (a) ............... 128,000 696,000
Furniture Brands International,
Inc. (a) ........................ 37,700 1,027,325
Industrie Natuzzi SpA (ADR) (b) .... 58,700 1,460,163
Mens Wearhouse, Inc. (a) ........... 28,350 893,025
Movado Group, Inc. ................. 29,600 778,850
Sports Authority, Inc. (a) ......... 98,400 516,600
Stage Stores, Inc. (a) ............. 74,700 700,313
Tiffany & Co. ...................... 42,100 2,183,937
Transport World Entertainment
Corp. (a) ....................... 25,050 476,733
United Rentals, Inc. (a) ........... 43,800 1,450,875
Venator Group, Inc. (a) ............ 114,300 735,806
Whole Foods Market, Inc. (a) ....... 11,800 572,300
--------------
13,661,227
--------------
MISCELLANEOUS-1.8%
Central Garden & Pet Co. (a) ....... 42,100 610,450
Century Business Services,
Inc. (a) ........................ 72,300 1,041,572
--------------
1,652,022
--------------
33,294,202
--------------
TECHNOLOGY-10.7%
COMMUNICATIONS EQUIPMENT-1.3%
Comverse Technology, Inc. (a) ...... 16,200 1,149,694
--------------
COMPUTER HARDWARE-1.4%
Apex PC Solutions, Inc. (a) ........ 44,100 1,267,875
--------------
COMPUTER SOFTWARE & SERVICES-5.4%
Checkfree Corp. (a) ................ 41,600 969,800
DBT Online, Inc. (a) ............... 46,500 1,159,594
Engineering Animation, Inc. (a) .... 10,600 571,406
Harbinger Corp. (a) ................ 66,000 530,062
IMRglobal Corp. (a) ................ 15,600 459,712
Preview Travel, Inc. (a) ........... 16,900 312,122
Saville Systems Plc (ADR) (a) (c) 12,100 229,522
Transaction Systems Architects,
Inc. (a) ........................ 14,000 704,375
--------------
4,936,593
--------------
SEMI-CONDUCTOR EQUIPMENT-0.9%
Uniphase Corp. (a) ................. 4,000 277,750
Vitesse Semiconductor Corp. (a) .... 12,800 583,200
--------------
860,950
--------------
TELECOMMUNICATIONS-1.5%
GST Telecommunications, Inc. (a) ... 42,000 276,938
Millicom International Cellular,
SA (a) (d) ...................... 31,000 1,055,937
--------------
1,332,875
--------------
MISCELLANEOUS-0.2%
Excalibur Technologies
Corp. (a) ....................... 27,400 170,394
--------------
9,718,381
--------------
B-18
<PAGE>
Alliance Variable Products Series Fund
================================================================================
Company Shares U.S. $ Value
- -----------------------------------------------------------------------
BASIC INDUSTRIES-9.6%
BUILDING & RELATED-0.4%
Associate Materials, Inc. (a) ...... 32,300 $ 391,638
--------------
METAL HARDWARE-2.6%
Bethlehem Steel Corp. (a) .......... 279,900 2,344,162
--------------
TEXTILE PRODUCTS-3.1%
Mohawk Industries, Inc. (a) ........ 67,050 2,820,291
--------------
TRANSPORTATION & SHIPPING-3.5%
Consolidated Freightways
Corp. (a) ....................... 105,600 1,696,200
OMI Corp. (a) ...................... 218,700 710,775
Teekay Shipping Corp. .............. 41,800 786,362
--------------
3,193,337
--------------
8,749,428
--------------
FINANCIAL SERVICES-8.5%
BROKERAGE & MONEY MANAGEMENT-2.4%
Legg Mason, Inc. ................... 67,900 2,143,094
--------------
INSURANCE-0.6%
Reinsurance Group of America,
Inc. ............................ 8,600 522,450
--------------
REAL ESTATE-5.5%
Chelsea GCA Realty, Inc. ........... 64,900 2,312,062
Glenborough Realty Trust, Inc. ..... 40,900 833,338
Golf Trust of America, Inc. ........ 15,500 430,125
Taubman Centers, Inc. .............. 106,200 1,460,250
--------------
5,035,775
--------------
7,701,319
--------------
HEALTH CARE-5.3%
BIOTECHNOLOGY-2.3%
GelTex Pharmaceuticals, Inc. (a) ... 60,510 1,369,039
MedImmune, Inc. (a) ................ 6,600 657,937
--------------
2,026,976
--------------
DRUGS, HOSPITAL SUPPLIES & MEDICAL
SERVICES-3.0%
Aradigm Corp. (a) .................. 43,500 541,031
St. Jude Medical, Inc. (a) ......... 13,700 379,319
Synetic, Inc. (a) .................. 16,900 741,488
Veterinary Centers of America,
Inc. (a) ........................ 34,400 686,925
Novoste Corp. (a) .................. 14,200 395,825
--------------
2,744,588
--------------
4,771,564
--------------
CONSUMER MANUFACTURING-4.4%
AUTO & RELATED-4.4%
Dollar Thrifty Automotive
Group, Inc. (a) ................. 93,800 1,207,675
Group 1 Automotive, Inc. (a) ....... 61,400 1,596,400
Monaco Coach Corp. (a) ............. 46,500 1,232,250
--------------
4,036,325
--------------
ENERGY-2.2%
OIL & GAS SERVICES-2.2%
Parker Drilling Co. (a) ............ 97,600 311,100
Southern Union Co. ................. 68,926 1,680,071
--------------
1,991,171
--------------
Total Common Stocks
(cost $71,965,715)............... 70,262,390
--------------
Shares or
Principal
Amount
(000) U.S. $ Value
- -----------------------------------------------------------------------
SHORT-TERM INVESTMENTS-25.4%
U.S. GOVERNMENT & AGENCIES-25.4%
Federal Home Loan Mortgage Corp.
5.025%, 2/22/99.................. $ 3,000 2,978,225
5.10%, 1/14/99................... 2,700 2,695,027
Federal National Mortgage Assn.
5.12%, 1/27/99................... 3,000 2,988,907
Student Loan Marketing Assn.
4.28%, 1/04/99................... 14,400 14,394,864
--------------
Total Short-Term Investments
(amortized cost $23,057,023)..... 23,057,023
--------------
TOTAL INVESTMENTS-102.7%
(cost $95,022,738)............... 93,319,413
Other assets less liabilities-(2.7%) (2,449,175)
--------------
NET ASSETS-100%..................... $ 90,870,238
==============
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) Country of origin--Italy.
(c) Country of origin--Ireland.
(d) Country of origin--Luxembourg.
See Glossary of Terms on page B-36.
See Notes to Financial Statements.
B-19
<PAGE>
REAL ESTATE INVESTMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1998 Alliance Variable Products Series Fund
================================================================================
Company Shares U.S. $ Value
- -----------------------------------------------------------------------
COMMON STOCKS-94.6%
REAL ESTATE INVESTMENT TRUSTS-94.6%
APARTMENTS-8.0%
Avalon Bay Communities, Inc. ....... 18,934 $ 648,489
Essex Property Trust, Inc. ......... 14,300 425,425
Irvine Apartment Communities,
Inc. ............................ 9,100 290,063
--------------
1,363,977
--------------
DIVERSIFIED-13.8%
Correctional Properties Trust ...... 20,600 372,087
Entertainment Properties Trust ..... 27,100 460,700
Glenborough Realty Trust, Inc. ..... 29,200 594,950
Golf Trust of America, Inc. ........ 12,900 357,975
Vornado Realty Trust ............... 17,100 577,125
--------------
2,362,837
--------------
HOTELS & RESTAURANTS-8.8%
Innkeepers USA Trust ............... 29,700 350,831
MeriStar Hospitality Corp. ......... 27,378 508,204
Patriot American Hospitality,
Inc. ............................ 40,500 243,000
Starwood Hotels & Resorts .......... 17,200 390,225
--------------
1,492,260
--------------
OFFICE-23.8%
Arden Realty Group, Inc. ........... 26,200 607,512
Boston Properties, Inc. ............ 13,400 408,700
Cornerstone Properties, Inc. ....... 41,100 642,187
Crescent Real Estate Equities Co. .. 24,300 558,900
Equity Office Properties Trust ..... 35,100 842,400
Mack-Cali Realty Corp. ............. 10,900 336,538
SL Green Realty Corp. .............. 31,200 674,700
--------------
4,070,937
--------------
OFFICE - INDUSTRIAL MIX-14.1%
Brandywine Realty Trust ............ 25,800 461,175
Duke Realty Investments, Inc. ...... 14,500 337,125
Great Lakes REIT, Inc. ............. 13,200 207,075
Highwoods Properties, Inc. ......... 16,400 422,300
Reckson Associates Realty Corp. .... 22,100 490,344
Spieker Properties, Inc. ........... 14,200 491,675
--------------
2,409,694
--------------
REGIONAL MALLS-5.6%
Macerich Co. ....................... 19,600 502,250
Mills Corp. ........................ 22,700 451,163
--------------
953,413
--------------
SHOPPING CENTERS-11.1%
Burnham Pacific Properites, Inc. ... 28,000 337,750
New Plan Excel Realty Trust, Inc. .. 14,620 324,381
Pacific Retail Trust Co. (a) (b).... 19,000 202,920
Pan Pacific Retail Properties,
Inc. ............................ 33,900 675,881
Prime Retail, Inc. ................. 36,000 353,250
--------------
1,894,182
--------------
STORAGE-3.5%
Public Storage, Inc. ............... 22,300 603,494
WAREHOUSE & INDUSTRIAL-5.9%
Cabot Industrial Trust ............. 22,600 461,888
ProLogis Trust ..................... 26,400 547,800
--------------
1,009,688
--------------
Total Common Stocks
(cost $19,178,222)............... 16,160,482
--------------
Shares, or
Principal
Amount
(000) U.S. $ Value
- -----------------------------------------------------------------------
SHORT-TERM INVESTMENT-3.9%
TIME DEPOSIT-3.9%
State Street Cayman Islands
4.50%, 1/04/99
(amortized cost $658,000)........ $ 658 658,000
--------------
TOTAL INVESTMENTS-98.5%
(cost $19,836,222)............... 16,818,482
Other assets less liabilities-1.5%.. 261,077
--------------
NET ASSETS-100%..................... $ 17,079,559
==============
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) Illiquid security valued at fair market value (see Note A).
See Glossary of Terms on page B-36.
See Notes to Financial Statements.
B-20
<PAGE>
TECHNOLOGY PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1998 Alliance Variable Products Series Fund
================================================================================
Company Shares U.S. $ Value
- -----------------------------------------------------------------------
COMMON STOCKS-91.0%
TECHNOLOGY-88.6%
COMMUNICATIONS EQUIPMENT-6.0%
Motorola, Inc. ..................... 34,000 $ 2,076,125
Nokia Corp. (ADR) (a) .............. 34,000 4,094,875
Uniphase Corp. (b) ................. 23,600 1,638,725
--------------
7,809,725
--------------
COMPUTER HARDWARE-10.1%
Apex PC Solutions, Inc. (b) ........ 30,300 871,125
Compaq Computer Corp. .............. 141,600 5,938,350
Dell Computer Corp. (b) ............ 86,800 6,355,388
--------------
13,164,863
--------------
COMPUTER PERIPHERALS-2.6%
Lexmark International Group,
Inc. (b) ........................ 33,700 3,386,850
--------------
COMPUTER SERVICES-12.1%
Ceridian Corp. (b) ................. 29,000 2,024,563
Computer Sciences Corp. ............ 48,200 3,105,887
Convergys Corp. (b) ................ 13,300 297,588
DST Systems, Inc. (b) .............. 43,125 2,460,820
Fiserv, Inc. (b) ................... 46,000 2,364,687
Galileo International, Inc. ........ 49,000 2,131,500
Gartner Group, Inc. Cl.A (b) ....... 41,000 871,250
SunGard Data Systems, Inc. (b) ..... 65,200 2,587,625
--------------
15,843,920
--------------
COMPUTER SOFTWARE-14.7%
Actuate Software Corp. (b) ......... 1,200 23,775
BEA Systems, Inc. (b) .............. 20,000 245,625
HBO & Co. .......................... 167,000 4,796,031
I2 Technologies, Inc. (b) .......... 8,000 242,750
Interplay Entertainment Corp. (b) .. 33,000 58,266
Intuit, Inc. (b) ................... 61,700 4,473,250
J.D. Edwards & Co. (b) ............. 14,300 406,209
Microsoft Corp. (b) ................ 23,700 3,283,191
Network Associates, Inc. (b) ....... 72,200 4,790,019
New Era of Networks, Inc. (b) ...... 13,300 583,537
Rational Software Corp. (b) ........ 11,500 304,750
--------------
19,207,403
--------------
NETWORKING SOFTWARE-15.3%
3Com Corp. (b) ..................... 45,000 $ 2,017,969
America Online, Inc. ............... 61,200 9,792,000
Cisco Systems, Inc. (b) ............ 88,500 8,216,672
--------------
20,026,641
--------------
SEMI-CONDUCTOR CAPITAL EQUIPMENT-4.2%
Amkor Technology, Inc. (b) ......... 69,100 749,303
Applied Materials, Inc. (b) ........ 36,300 1,550,691
KLA-Tencor Corp. (b) ............... 36,900 1,601,690
Teradyne, Inc. (b) ................. 36,600 1,550,925
--------------
5,452,609
--------------
SEMI-CONDUCTOR COMPONENTS-12.6%
Altera Corp. (b) ................... 64,300 3,910,244
Intel Corp. ........................ 32,400 3,840,412
Micron Technology, Inc. (b) ........ 26,800 1,355,075
PMC-Sierra, Inc. (b) ............... 31,100 1,960,272
Texas Instruments, Inc. ............ 34,300 2,934,794
Xilinx, Inc. (b) ................... 36,400 2,369,413
--------------
16,370,210
--------------
MISCELLANEOUS-11.0%
Ingram Micro, Inc. Cl.A (b) ........ 61,600 2,148,300
Sanmina Corp. (b) .................. 80,850 5,043,019
Solectron Corp. (b) ................ 62,300 5,790,006
Tech Data Corp. (b) ................ 35,500 1,426,656
--------------
14,407,981
--------------
115,670,202
--------------
UTILITY-1.7%
TELEPHONE UTILITY-1.7%
MCI WorldCom, Inc. (b) ............. 31,400 2,253,931
--------------
CONSUMER SERVICES-0.7%
ADVERTISING-0.5%
DoubleClick, Inc. (b) .............. 15,400 684,337
--------------
MISCELLANEOUS-0.2%
Equifax, Inc. ...................... 8,000 273,500
--------------
957,837
--------------
Total Common Stocks
(cost $68,206,319)............... 118,881,970
--------------
B-21
<PAGE>
TECHNOLOGY PORTFOLIO
PORTFOLIO OF INVESTMENTS
(continued) Alliance Variable Products Series Fund
================================================================================
Principal
Amount
(000) U.S. $ Value
- -----------------------------------------------------------------------
SHORT-TERM INVESTMENTS-9.1%
COMMERCIAL PAPER-9.1%
American Express Credit Corp.
5.00%, 1/05/99 .................. $ 2,300 $ 2,298,722
5.70%, 1/04/99 .................. 1,600 1,599,240
Ford Motor Credit Corp.
5.41%, 1/06/99 .................. 4,500 4,496,619
General Electric Capital Corp.
5.68%, 1/12/99 .................. 3,500 3,493,926
--------------
Total Short-Term Investments
(amortized cost $11,888,507)..... 11,888,507
--------------
U.S. $ Value
- -----------------------------------------------------------------------
TOTAL INVESTMENTS-100.1%
(cost $80,094,826)............... $ 130,770,477
Other assets less liabilities-(0.1%) (168,815)
--------------
NET ASSETS-100%..................... $ 130,601,662
==============
- --------------------------------------------------------------------------------
(a) Country of origin--Finland.
(b) Non-income producing security.
See Glossary of Terms on page B-36.
See Notes to Financial Statements.
B-22
<PAGE>
UTILITY INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1998 Alliance Variable Products Series Fund
================================================================================
Company Shares U.S. $ Value
- -----------------------------------------------------------------------
COMMON & PREFERRED STOCKS-90.0%
UNITED STATES INVESTMENTS-82.9%
UTILITIES-60.1%
ELECTRIC & GAS UTILITIES-28.3%
AGL Resources, Inc. ................ 6,100 $ 140,681
American Electric Power, Inc. ...... 16,900 795,356
CINergy Corp. ...................... 22,100 759,688
CMS Energy Corp. ................... 18,400 891,250
Consolidated Edison, Inc. .......... 30,500 1,612,687
DPL, Inc. .......................... 21,000 454,125
FPL Group, Inc. .................... 10,200 628,575
GPU, Inc. .......................... 30,000 1,325,625
Illinova Corp. ..................... 28,000 700,000
KeySpan Energy Corp. (a) ........... 4,600 142,600
MCN Corp. .......................... 4,600 87,688
New Jersey Resources Corp. ......... 4,400 173,800
NIPSCO Industries, Inc. ............ 48,200 1,467,087
Northwest Natural Gas Co. .......... 5,250 135,844
People's Energy Corp. .............. 3,600 143,550
Questar Corp. ...................... 7,000 135,625
Sempra Energy ...................... 6,165 156,437
--------------
9,750,618
--------------
TELEPHONE UTILITIES-31.8%
Ameritech Corp. .................... 27,200 1,723,800
AT&T Corp. ......................... 25,384 1,910,146
Bell Atlantic Corp. ................ 12,800 678,400
BellSouth Corp. .................... 38,200 1,905,225
Frontier Corp. ..................... 21,000 714,000
GTE Corp. .......................... 20,500 1,332,500
MCI WorldCom, Inc. (a) ............. 24,000 1,722,750
Telephone and Data Systems, Inc. ... 6,000 269,625
US West Communications Group ....... 10,800 697,950
--------------
10,954,396
--------------
20,705,014
--------------
CONSUMER SERVICES-14.4%
BROADCASTING & CABLE-10.0%
Comcast Corp. Cl.A ................. 18,000 1,056,937
MediaOne Group, Inc. ............... 21,400 1,423,100
Omnipoint Corp.
7.00% cv. pfd. (a) (b) .......... 11,000 258,500
TCI Communications, Inc.
Series A
$2.125 cv. pfd. ................. 6,200 700,600
--------------
3,439,137
--------------
ENTERTAINMENT & LEISURE-4.4%
Cablevision Systems Corp.
Series I
8.50% cv. pfd. .................. 20,000 1,507,500
--------------
4,946,637
--------------
ENERGY-6.3%
DOMESTIC PRODUCERS-2.4%
The Williams Cos., Inc.
3.50% pfd. ...................... 4,700 687,962
Washington Gas Light Co. ........... 5,600 151,900
--------------
839,862
--------------
PIPELINES-1.5%
Enron Corp. ........................ 5,800 330,962
Piedmont Natural Gas Co., Inc. ..... 5,100 184,238
--------------
515,200
--------------
MISCELLANEOUS-2.4%
AES Corp. (a) ...................... 17,200 814,850
--------------
2,169,912
--------------
TECHNOLOGY-1.1%
COMMUNICATION EQUIPMENT-1.1%
NTL, Inc. (a) ...................... 4,172 235,327
PairGain Technologies, Inc. (a) .... 17,000 131,219
--------------
366,546
--------------
MULTI-INDUSTRY COMPANIES-1.0%
Southwest Gas Corp. ................ 7,000 188,125
Wicor, Inc. ........................ 7,000 152,688
--------------
340,813
--------------
Total United States Investments
(cost $20,018,500)............... 28,528,922
--------------
FOREIGN INVESTMENTS-7.1%
ARGENTINA-1.8%
Telecom Argentina, SA .............. 11,500 316,250
Telefonica De Argentina ............ 11,500 321,281
--------------
637,531
--------------
BRAZIL-0.3%
Companhia Energetica de
Minas Gerais (ADR) .............. 1,958 37,274
Companhia Paranaense de
Energia-Copel pfd. (ADR) ........ 4,700 33,487
Companhia Riograndense de
Telecom pfd. .................... 129,000 46,442
--------------
117,203
--------------
FINLAND-1.7%
Nokia Corp. (ADR) .................. 5,000 602,188
--------------
B-23
<PAGE>
UTILITY INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
(continued) Alliance Variable Products Series Fund
================================================================================
Company Shares U.S. $ Value
- -----------------------------------------------------------------------
MEXICO-1.8%
Telefonos de Mexico, SA
Series L (ADR) .................. 12,400 $ 603,725
--------------
PERU-0.2%
Telefonica del Peru, SA Cl.B ....... 62,000 77,966
--------------
PHILIPPINES-0.5%
Philippine Long Distance
Telephone Co. Series III
3.50% cv. pfd. (ADR) ............ 6,000 155,625
--------------
SOUTH KOREA-0.8%
Korea Electric Power Corp. ......... 4,020 99,581
SK Telecom Co., Ltd. (ADR) ......... 15,701 159,957
--------------
259,538
--------------
Total Foreign Investments
(cost $2,137,527)................ 2,453,776
--------------
Total Common & Preferred
Stocks
(cost $22,156,027)............... 30,982,698
--------------
Principal
Amount
(000) U.S. $ Value
- -----------------------------------------------------------------------
SHORT-TERM INVESTMENTS-11.3%
COMMERCIAL PAPER-11.3%
American Express Co.
3.00%, 1/05/99 .................. $ 2,000 $ 1,999,333
Ford Motor Credit Corp.
4.70%, 1/06/99 .................. 1,900 1,898,760
--------------
Total Short-Term Investments
(amortized cost $3,898,093)...... 3,898,093
--------------
TOTAL INVESTMENTS-101.3%
(cost $26,054,120)............... 34,880,791
Other assets less liabilities-(1.3%) (444,554)
--------------
NET ASSETS-100%..................... $ 34,436,237
==============
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) 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 December 31, 1998, the
aggregate market value of this security amounted to $258,500 or 0.8% of
net assets.
See Glossary of Terms on page B-36.
See Notes to Financial Statements.
B-24
<PAGE>
WORLDWIDE PRIVATIZATION PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1998 Alliance Variable Products Series Fund
================================================================================
Company Shares U.S. $ Value
- -----------------------------------------------------------------------
COMMON STOCKS & OTHER
INVESTMENTS-94.3%
ARGENTINA-0.6%
Nortel Inversora, SA
Series B pfd. (ADR) ............. 17,300 $ 278,962
--------------
AUSTRALIA-1.5%
Amrad Corporation, Ltd. (a) ........ 157,100 130,925
CSL, Ltd. .......................... 63,400 543,634
--------------
674,559
--------------
AUSTRIA-3.8%
Austria Tabakwerke AG .............. 10,483 803,805
Bank Austria AG .................... 17,510 890,397
Premier Telesports Ltd. (a) (c)..... 6,600 59,811
--------------
1,754,013
--------------
BOTSWANA-0.3%
Sechaba Breweries, Ltd. ............ 138,400 160,016
--------------
BRAZIL-4.8%
Bardella Industrias Mecanicas,
SA pfd. ......................... 1,650 65,546
Celese Centrais Eletrais de
Santa Catarina, SA
Cl.B pfd. ....................... 455,001 203,344
GDR (b).......................... 750 33,521
Companhia Paranaense de
Energia-Copel (ADR) ............. 40,000 285,000
Companhia Paulista de Forca e
Luz, pfd ........................ 1,591 95
Companhia Riograndense de
Telecom Cl.A pfd. ............... 454,282 163,546
Companhia Vale do
Rio Doce PNB (receipts) ......... 2,360 0
Embratel Participacoes, SA
(ADR) (a) ....................... 8,000 111,500
Espirito Santo Centrais
Electricas, SA................... 324 21,449
Gerdau, SA pfd. .................... 24,114,144 179,614
Globo Cabo SA ADR (a) .............. 22,600 52,262
Iven, SA pfd. (a) (c) .............. 681,300 135,324
Metalurgica Gerdau, SA (c) ......... 419,660 5,644
pfd. ........................... 14,360,043 237,690
Telecomunicacoes Brasileiras,
SA (ADR) ........................ 6,000 436,125
Telecomunicacoes do
Parana, SA pfd. ................. 129,000 22,953
Telesp Participacoes,
SA (ADR) ........................ 12,000 265,500
--------------
2,219,113
--------------
CZECH REPUBLIC-1.2%
Ceske Radiokomunikace AS (a) ....... 13,461 434,266
Komercni Banka AS (GDR) (a)......... 11,700 47,385
Tabak AS ........................... 330 92,246
--------------
573,897
--------------
DENMARK-0.6%
Kobenhavns Lufthane AS ............. 2,300 285,499
EGYPT-0.9%
Egypt Mobile Phone (a) ............. 19,400 57,005
non-tradable receipts (a) ....... 32,333 196,748
Egyptian Financial & Industrial .... 1,900 31,425
Housing Development Bank ........... 3,500 78,006
Madinet NASR City for
Housing & Development ........... 2,370 71,545
--------------
434,729
--------------
FINLAND-2.3%
Fortum OYJ Corp. (a) ............... 89,839 546,187
Merita OYJ, Plc Series A ........... 84,200 531,720
--------------
1,077,907
--------------
FRANCE-10.5%
CNP Assurances (a) ................. 19,650 596,775
Sanofi, SA ......................... 8,260 1,359,184
SEITA .............................. 13,780 862,636
SGS-Thomson
Microelectronics NV (a) ......... 10,680 840,494
Societe Generale ................... 2,601 421,017
Societe National Elf
Aquitaine ....................... 6,720 776,448
--------------
4,856,554
--------------
GERMANY-3.9%
Viag AG ............................ 1,457 854,128
Volkswagen AG ...................... 11,960 954,446
--------------
1,808,574
--------------
GREECE-1.0%
Commercial Bank of Greece .......... 2,400 236,158
Heracles General Cement, SA......... 7,900 214,521
--------------
450,679
--------------
HONG KONG-0.7%
Ng Fung Hong Ltd.................... 342,000 306,792
--------------
HUNGARY-1.2%
MO1 Magyar Olaj-es Gazipari ........ 14,100 386,521
OTP Bank (GDR) ..................... 3,930 193,159
--------------
579,680
--------------
INDIA-0.4%
Mahanagar Telephone Nigam,
Ltd. (GDR) ...................... 5,600 67,200
Videsh Sanchar Nigam, Ltd.
(GDR) (b)........................ 11,900 142,800
--------------
210,000
--------------
INDONESIA-0.4%
PT Tambang Timah (GDR) ............. 25,500 167,025
--------------
ISRAEL-0.5%
Bank Hapoalim, Ltd. ................ 135,000 244,187
--------------
B-25
<PAGE>
WORLDWIDE PRIVATIZATION PORTFOLIO
PORTFOLIO OF INVESTMENTS
(continued) Alliance Variable Products Series Fund
================================================================================
Company Shares U.S. $ Value
- -----------------------------------------------------------------------
ITALY-5.0%
Banca Nazionale del Lavoro (a) ..... 217,000 $ 648,985
ENI SpA ............................ 79,000 516,012
Instituto Nazionale delle
Assicurazioni ................... 137,500 362,991
Istituto Bancario San Paolo di
Torini .......................... 104 1,837
Telecom Italia Mobile di Risp
SpA ............................. 90,000 423,478
Telecom Italia SpA ................. 45,000 283,045
Unione Immobiliare SpA (a) ......... 137,500 71,683
--------------
2,308,031
--------------
JAPAN-10.5%
Daiwa Securities Co., Ltd. ......... 193,000 658,983
East Japan Railway Co. ............. 82 457,691
Japan Tobacco, Inc. ................ 134 1,339,407
Nippon Telegraph &
Telephone, Corp. ................ 106 817,621
Nomura Securities Co., Ltd. ........ 62,000 540,203
NTT Mobile Communications
Network, Inc. (a) ............... 19 781,513
West Japan Railway ................. 58 256,524
--------------
4,851,942
--------------
JORDAN-0.1%
Arab Potash Co. .................... 10,900 42,865
--------------
LUXEMBOURG-0.4%
Societe Europeenne des
Satellites (a) .................. 1,300 199,306
--------------
MALAYSIA-0.3%
Telekom Malaysia Berhad (c)......... 78,600 144,751
--------------
MALTA-0.2%
Maltacom Plc (GDR) (a) ............. 7,000 91,000
--------------
MEXICO-3.7%
Grupo Financiero Banamex
Cl.B (a) ........................ 95,700 125,578
Grupo Financiero Bancrecer,
SA de CV Cl.B (a) (c) ........... 75,000 2,271
Grupo Financiero Banorte,
SA de CV Cl.B (a) ............... 567,200 486,646
Grupo Financiero GBM
Atlantico Cl.L (ADR) (a) (c)..... 8,400 8,400
Grupo Profesional Planeacion y
Proyectos, SA Cl.B (a) (c) ...... 4,800 1,284
Telefonos de Mexico, SA
Cl.L (ADR) ...................... 17,200 837,425
Tubos de Acero de Mexico,
SA (ADR) ........................ 36,000 231,750
--------------
1,693,354
--------------
NETHERLANDS-8.4%
Akzo Nobel NV ...................... 30,000 1,365,306
Equant NV ADR(a) ................... 12,000 813,750
ING Groep NV ....................... 19,309 1,176,814
KLM Royal Dutch Airlines NV ....... 16,875 510,193
--------------
3,866,063
--------------
NEW ZEALAND-0.7%
Auckland International
Airport, Ltd. (a) ............... 236,000 329,089
--------------
NORWAY-0.6%
Christiana Bank OG
Kreditkasse ..................... 47,500 165,032
Den Norske Bank .................... 39,500 136,718
--------------
301,750
--------------
PAKISTAN-0.1%
Hub Power Co., Ltd.
(GDR) (a) ....................... 5,000 28,750
--------------
PEOPLES REPUBLIC OF CHINA-0.9%
Beijing Datang Power
Generation Co., Ltd. Cl. H....... 500,000 150,047
Yanzhou Coal Mining
Co., Ltd. Cl. H ................. 542,000 90,944
Zhejiang Southeast Electric
Power Co., Ltd. (GDR) (b)........ 19,600 197,960
--------------
438,951
--------------
PERU-0.7%
Cementos Norte Pacasmayo,
SA Cl.C ......................... 139,796 141,700
Explosivios, SA Cl. C (c) .......... 104,636 89,489
Ferreyros, SA ...................... 102,022 92,101
--------------
323,290
--------------
PHILIPPINES-1.4%
First Philippines Holdings Corp.
Series B ........................ 214,540 115,819
International Container
Terminal Services, Inc. (a) ..... 448,500 37,471
Manila Electric Co. Series B ....... 99,300 319,087
Philippine Long Distance
Telephone Co. ................... 7,440 191,260
--------------
663,637
--------------
POLAND-0.6%
Kredyt Bank PBI, SA
(GDR) (a) (b) ................... 8,000 129,800
Orbis, SA (a) ...................... 17,886 140,642
--------------
270,442
--------------
PORTUGAL-0.8%
Electricidade de Portugal, SA ...... 17,000 374,457
--------------
RUSSIA-0.7%
Gazprom (ADR) (b)................... 8,000 67,200
JSC Rosneftegazstroy (ADR) (a) ..... 6,842 12,111
Lukoil Holdings (ADR) .............. 6,770 109,674
B-26
<PAGE>
Alliance Variable Products Series Fund
================================================================================
Company Shares U.S. $ Value
- -----------------------------------------------------------------------
Primamedic, Ltd. (a) (c)............ 129,000 $ 70,437
Sberbank of Russia ................. 2,245 28,062
Sun Brewing, Ltd.
(GDR) (a) (b).................... 10,400 25,409
(GDR) (a) ....................... 1,900 4,655
--------------
317,548
--------------
SINGAPORE-0.9%
Development Bank of Singapore ...... 44,000 397,093
--------------
SOUTH AFRICA-0.6%
Iscor, Ltd. ........................ 1,440,071 256,706
--------------
SOUTH KOREA-4.4%
Korea Electric Power Corp. ......... 11,000 272,485
Pohang Iron & Steel Co., Ltd. ...... 8,180 525,593
(ADR) ........................... 17,800 300,375
SK Telecom Co., Ltd. ............... 656 487,728
(ADR) ........................... 42,127 429,169
--------------
2,015,350
--------------
SPAIN-5.4%
Aldeasa, SA ........................ 22,550 885,371
Argentaria, SA ..................... 24,000 620,602
Repsol, SA ......................... 7,050 375,517
Tabacalera, SA Cl.A ................ 24,300 612,117
--------------
2,493,607
--------------
SWEDEN-1.0%
Diligentia AB ...................... 11,300 79,276
ForeningsSparbanken AB, Cl.A ....... 15,800 408,379
--------------
487,655
--------------
SWITZERLAND-1.8%
Sairgroup .......................... 1,000 248,235
Swisscom AG (a) .................... 1,400 586,008
--------------
834,243
--------------
THAILAND-0.4%
PTT Exploration & Production
Public Co., Ltd. (a)............. 24,500 172,545
--------------
TURKEY-1.0%
Eregli Demir Ve Celik
Fabrikalari TAS (a) ............. 564,000 23,242
Petkim Petrokimya
Holding AS ...................... 150,500 67,984
Tupras Turkiye Petrol
Rafinerileri AS ................. 3,932,500 174,523
Turkiye Is Bankasi Series C ........ 3,930,000 102,156
Usas Ucak Servisi AS ............... 67,800 96,716
--------------
464,621
--------------
UNITED KINGDOM-9.0%
Anglian Water Plc .................. 22,059 306,294
Birkby Plc ......................... 74,200 228,061
British Energy Plc ................. 65,000 745,140
Energis Plc (a)..................... 25,600 569,929
Mersey Docks & Harbour Co. ......... 40,600 323,775
National Grid Group Plc ............ 61,200 488,054
National Power Plc ................. 83,876 723,237
PowerGen Plc ....................... 19,724 258,880
Stagecoach Holdings Plc ............ 127,700 511,309
--------------
4,154,679
--------------
VENEZUELA-0.1%
Mercantil Servicios Financieros
(ADR) ........................... 5,000 31,887
--------------
Total Common Stocks &
Other Investments
(cost $41,676,293)............... 43,635,798
--------------
shares or
Principal
Amount
(000) U.S. $ Value
- -----------------------------------------------------------------------
SHORT-TERM INVESTMENT-5.0%
TIME DEPOSIT-5.0%
State Street Cayman Islands
4.50%, 1/04/99
(amortized cost $2,315,000)...... $ 2,315 2,315,000
--------------
TOTAL INVESTMENTS-99.3%
(cost $43,991,293)............... 45,950,798
Other assets less liabilities-0.7%.. 317,051
--------------
NET ASSETS-100%..................... $ 46,267,849
==============
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration normally applied to certain qualified buyers. At December 31,
1998, the aggregate market value of these securities amounted to $596,690
or 1.3% of net assets.
(c) Illiquid security valued at fair market value (see Note A).
See Glossary of Terms on page B-36.
See Notes to Financial Statements.
B-27
<PAGE>
GLOBAL BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1998 Alliance Variable Products Series Fund
================================================================================
Principal
Amount
(000) U.S. $ Value
- -----------------------------------------------------------------------
AUSTRIA-3.3%
GOVERNMENT OBLIGATION-3.3%
Republic of Austria
4.50%, 9/28/05 (a) .......... JPY 110,000 $ 1,141,353
--------------
FRANCE-9.8%
GOVERNMENT OBLIGATIONS-9.8%
Government of France
5.25%, 4/25/08............... FRF 4,500 887,364
Government of France
Treasury Bill
4.00%, 7/12/00............... XEU 2,100 2,493,488
--------------
3,380,852
--------------
GERMANY-11.4%
GOVERNMENT OBLIGATION-11.4%
Government of Germany
6.00%, 2/16/06............... DEM 5,800 3,955,178
--------------
ITALY-4.2%
GOVERNMENT OBLIGATION-4.2%
Republic of Italy
6.25%, 5/15/02............... ITL 2,200,000 1,448,172
--------------
JAPAN-7.0%
DEBT OBLIGATIONS-7.0%
Asian Development Bank
5.00%, 2/05/03............... JPY 80,000 808,846
European Investment Bank
3.00%, 9/20/06 (a)........... 130,000 1,231,004
Export Import Bank
2.875%, 7/28/05.............. 40,000 374,347
--------------
2,414,197
--------------
NETHERLANDS-7.4%
GOVERNMENT OBLIGATION-7.4%
Dutch Government
5.25%, 7/15/08............... NLG 4,400 2,578,592
--------------
SPAIN-7.1%
GOVERNMENT OBLIGATION-7.1%
Government of Spain
5.25%, 1/31/03............... ESP 325,000 2,454,880
--------------
SWEDEN-4.5%
DEBT OBLIGATION-4.5%
Kingdom of Sweden
8.00%, 8/15/07............... SEK 10,000 1,573,085
--------------
UNITED KINGDOM-3.7%
DEBT OBLIGATION-0.5%
International Bank for
Reconstruction & Development
7.125%, 7/30/07.............. GBP 100 188,902
--------------
GOVERNMENT OBLIGATIONS-3.2%
U.K. Treasury Gilts
8.50%, 7/16/07 (a)........... 520 1,108,423
--------------
1,297,325
--------------
UNITED STATES-33.4%
GOVERNMENT/AGENCY
OBLIGATIONS-33.4%
Federal National
Mortgage Association
2.125%, 10/09/07............. JPY 170,000 1,519,549
U.S. Treasury Notes
6.125%, 8/15/07.............. US$ 3,000 3,276,570
6.875%, 5/15/06.............. 3,600 4,070,232
7.25%, 8/15/04............... 2,400 2,698,128
--------------
11,564,479
--------------
TOTAL INVESTMENTS-91.8%
(cost $29,414,126)........... 31,808,113
Other assets less liabilities-8.2% 2,843,821
--------------
NET ASSETS-100%................. $ 34,651,934
==============
- --------------------------------------------------------------------------------
(a) Securities, or portion thereof, with an aggregate market value of
$3,480,780 have been segregated to collateralize forward exchange currency
contracts.
See Glossary of Terms on page B-36.
See Notes to Financial Statements.
B-28
<PAGE>
GLOBAL DOLLAR GOVERNMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1998 Alliance Variable Products Series Fund
================================================================================
Principal
Amount
(000) U.S. $ Value
- -----------------------------------------------------------------------
SOVEREIGN DEBT OBLIGATIONS-76.9%
NON-COLLATERALIZED BRADY BONDS-28.1%
BRAZIL-10.9%
Republic of Brazil C-Bonds
8.00%, 4/15/14 (a) .............. $ 1,460 $ 868,848
Republic of Brazil FRN
6.1875%, 4/15/12 ................ 520 260,000
--------------
1,128,848
--------------
BULGARIA-4.4%
Republic of Bulgaria FLIRB
2.50%, 7/28/12 (b)............... 800 455,040
--------------
ECUADOR-0.2%
Republic of Ecuador PDI
3.25%, 2/28/15 .................. 57 22,775
--------------
PANAMA-3.7%
Republic of Panama PDI FRN
6.6875%, 7/17/16 (c)............. 527 390,224
--------------
PERU-4.4%
Republic of Peru FLIRB
3.25%, 3/07/17 (b)(d) ........... 250 141,250
Republic of Peru PDI
4.00%, 3/07/17 .................. 500 313,750
--------------
455,000
--------------
POLAND-4.5%
Republic of Poland
5.00%, 10/27/14 ................. 500 465,650
--------------
Total Non-Collateralized
Brady Bonds
(cost $3,401,709)................ 2,917,537
--------------
OTHER SOVEREIGN DEBT-35.7%
ARGENTINA-15.8%
Province of Tucuman
9.45%, 8/01/04 (d) .............. 657 542,141
Republic of Argentina
9.75%, 9/19/27 .................. 500 445,650
Republic of Argentina
11.00%, 12/04/05 ................ 400 399,000
Republic of Argentina,
warrants, expiring
12/03/99, (e) ................... 400 1,740
Republic of Argentina Global
Bond
11.375%, 1/30/17 ................ 250 248,625
--------------
1,637,156
--------------
BRAZIL-2.6%
Republic of Brazil
9.375%, 4/07/08 ................. 400 274,000
--------------
COLOMBIA-5.8%
Republic of Colombia
7.27%, 6/16/03 .................. 600 513,000
Republic of Colombia
8.625%, 4/01/08 ................. 100 85,000
--------------
598,000
--------------
JAMAICA-1.6%
Government of Jamaica
10.875%, 6/10/05 (d)............. 200 164,000
--------------
MEXICO-3.1%
United Mexican States
11.50%, 5/15/26 ................. 300 321,000
--------------
RUSSIA-1.9%
Russian IAN FRN
5.9688%, 12/15/15 ............... 1,292 135,625
Russian Principal Loans FRN
5.9688%, 12/15/20 (f) ........... 1,350 62,437
--------------
198,062
--------------
SOUTH KOREA-4.9%
Republic of Korea
8.875%, 4/15/08 ................. 500 513,750
--------------
Total Other Sovereign Debt
(cost $4,949,130)................ 3,705,968
--------------
Shares or
Principal
Amount
(000) U.S. $ Value
- -----------------------------------------------------------------------
COLLATERALIZED BRADY BONDS-13.1%
ARGENTINA-3.2%
Republic of Argentina
Euro Par Bonds FRN
5.75%, 3/31/23 .................. 460 329,498
--------------
BULGARIA-2.0%
Republic of Bulgaria
6.6875%, 7/28/24 ................ 300 210,000
--------------
ECUADOR-4.6%
Republic of Ecuador
Discount Bonds FRN
6.625%, 2/28/25 ................. 930 474,300
--------------
VENEZUELA-3.3%
Republic of Venezuela
6.75%, 3/31/20 .................. 500 347,500
--------------
Total Collateralized Brady Bonds
(cost $1,304,435)................ 1,361,298
--------------
Total Sovereign Debt Obligations
(cost $9,655,274)................ 7,984,803
--------------
CORPORATE DEBT OBLIGATIONS-19.2%
BANKING-4.7%
Banco Nacional De Desenvolvimiento
Economico FRN
15.22%, 6/16/08 (d).............. 600 486,000
--------------
B-29
<PAGE>
GLOBAL DOLLAR GOVERNMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS
(continued) Alliance Variable Products Series Fund
================================================================================
Principal
Amount
(000) U.S. $ Value
- -----------------------------------------------------------------------
INDUSTRIAL-3.9%
Petroleos Mexicanos
9.25%, 3/30/18 .................. $ 500 $ 405,000
--------------
TELEPHONE-0.5%
Interamericas Communications
14.00%, 10/27/07 (d)(g).......... 100 52,500
--------------
TRANSPORTATION-1.3%
Navigator Gas Transport Plc
10.50%, 6/30/07 (d).............. 150 132,750
--------------
YANKEE BONDS-8.8%
Cantv Finance Ltd.
9.25%, 2/01/04 .................. 500 345,625
Consorcio Ecuatoriano
14.00%, 5/01/02 ................. 400 206,000
Innova S de R.L.
12.875%, 4/01/07 ................ 500 348,750
Transportacion Maritima
Mexicana SA
9.25%, 5/15/03 .................. 12 10,200
--------------
910,575
--------------
Total Corporate Debt
Obligations
(cost $2,589,758)................ 1,986,825
--------------
TOTAL INVESTMENTS-96.1%
(cost $12,245,032)............... 9,971,628
Other assets less liabilities-3.9%.. 408,280
--------------
NET ASSETS-100%..................... $ 10,379,908
==============
- --------------------------------------------------------------------------------
(a) Coupon consists of 5% cash payment and 3% paid in kind.
(b) Coupon will increase periodically based upon a predetermined schedule.
Stated interest rate in effect at December 31, 1998.
(c) Coupon consists of 4% cash payment and 2.6875% paid in kind.
(d) Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration normally applied to certain qualified buyers. At December 31,
1998 the aggregate market value of these securities amounted to $1,518,641
or 14.6% of net assets.
(e) Non-income producing security.
(f) Coupon consists of 2.9844% cash payment and 2.9844% paid in kind of
Russian IANs.
(g) Security trades with warrants expiring in October 2007.
See Glossary of Terms on page B-36.
See Notes to Financial Statements.
B-30
<PAGE>
HIGH-YIELD PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1998 Alliance Variable Products Series Fund
================================================================================
Shares or
Principal
Amount
(000) U.S. $ Value
- -----------------------------------------------------------------------
CORPORATE DEBT OBLIGATIONS-84.3%
AEROSPACE & DEFENSE-3.0%
Transdigm, Inc.
10.375%, 12/01/08 (a)............ $ 500 $ 505,000
--------------
AIRLINES-1.5%
Canadian Airlines Corp.
10.00%, 5/01/05.................. 300 262,500
--------------
AUTOMOTIVE-1.8%
Advanced Accessory Systems LLC
9.75%, 10/01/07 ................. 300 300,000
--------------
BROADCASTING/MEDIA-3.5%
Goss Graphic Systems, Inc.
12.00%, 10/15/06................. 500 277,500
Jones International Networks, Ltd.
11.75%, 7/01/05 (a).............. 400 322,000
--------------
599,500
--------------
BUILDINGS/REAL ESTATE-2.0%
Reliant Building Products, Inc.
10.875%, 5/01/04................. 400 346,000
--------------
CABLE-1.0%
Radio Unica Corp.
11.75%, 8/01/06 (a).............. 300 163,500
--------------
CHEMICALS-8.0%
Aqua Chemical, Inc.
11.25%, 7/01/08 (a).............. 300 289,500
Brunner Mond Group Plc
11.00%, 7/15/08 (a).............. 400 370,000
Climachem, Inc.
Series B
10.75%, 12/01/07................. 300 303,000
Phillipp Brothers Chemicals, Inc.
9.875%, 6/01/08 (a).............. 400 394,000
--------------
1,356,500
--------------
COMMUNICATIONS-17.8%
American Mobile Satellite Corp.,
warrants, expiring 4/01/08 (b) .. 300 1,164
Dobson Wireline Co.
12.25%, 6/15/08 ................. 300 279,000
Esat Telecom Group Plc
11.875%, 12/01/08 (a)............ 500 502,500
ICO Global Communications
Holding, LTD
15.00%, 8/01/05 (c).............. 400 300,000
Iridium Capital Corp. LLC
14.00%, 7/15/05 ................. 550 525,250
Long Distance International, Inc.
12.25%, 4/15/08 (a).............. 500 417,500
Long Distance International, Inc.
warrants, expiring 4/13/08 (b) .. 500 1,250
RSL Communications Plc
10.50%, 11/15/08 (a) ............ 500 488,750
Versatel Telecom BV
13.25%, 5/15/08 (a) ............. 500 495,000
--------------
3,010,414
--------------
ENERGY-3.7%
Northern Offshore ASA
10.00%, 5/15/05 (a).............. 300 157,500
Queens Sand Resources, Inc.
12.50%, 7/01/08 ................. 400 290,000
Transamerican Energy Corp.
Series B
11.50%, 6/15/02.................. 560 182,000
--------------
629,500
--------------
ENTERTAINMENT-6.8%
Harrahs Operating, Inc.
7.875%, 12/15/05................. 500 506,208
HMV Media Group Plc
10.25%, 5/15/08 (a).............. 300 289,500
TVN Entertainment Corp.
14.00%, 8/01/08 (d).............. 400 352,000
--------------
1,147,708
--------------
FINANCIAL-2.6%
Metris Companies, Inc.
10.00%, 11/01/04................. 450 447,750
--------------
FOOD/BEVERAGES-1.5%
Favorite Brands International, Inc.
10.75%, 5/15/06 (a).............. 300 247,500
--------------
HOUSEHOLD FURNISHINGS-5.1%
Home Interiors & Gifts, Inc.
10.125%, 6/01/08 (a)............. 500 497,500
Imperial Home Decor Group, Inc.
11.00%, 3/15/08 ................. 400 358,000
--------------
855,500
--------------
INDUSTRIAL-14.5%
AMSC Acquisition, Inc.
Series B
12.25%, 4/01/08.................. 300 187,500
Amtrol, Inc.
10.625%, 12/31/06................ 300 294,000
Anchor Lamina, Inc.
9.875%, 2/01/08.................. 75 67,875
Dialog Corporation Plc
11.00%, 11/15/07................. 500 500,000
Elgar Holdings, Inc.
9.875%, 2/01/08 ................. 50 44,750
Generac Portable Products LLC
11.25%, 7/01/06 (a).............. 300 300,000
B-31
<PAGE>
HIGH-YIELD PORTFOLIO
PORTFOLIO OF INVESTMENTS
(continued) Alliance Variable Products Series Fund
================================================================================
Shares or
Principal
Amount
(000) U.S. $ Value
- -----------------------------------------------------------------------
Geologistics Corp.
9.75%, 10/15/07.................. $ 500 $ 402,500
P&L Coal Holdings Corp.
9.625%, 5/15/08 (a).............. 300 304,500
Stellex Industries, Inc.
Series B
9.50%, 11/01/07.................. 400 347,000
--------------
2,448,125
--------------
MEDIA-3.0%
Regional Independent Media Group
10.50%, 7/01/08 (a).............. 500 507,500
--------------
PAPER / PACKAGING-2.4%
Riverwood International Corp.
10.625%, 8/01/07................. 400 398,000
--------------
SERVICES-1.2%
ATC Group Services, Inc.
12.00%, 1/15/08.................. 40 7,200
United States Office Products, Co.
9.75%, 6/15/08 (a) .............. 300 189,000
--------------
196,200
--------------
TECHNOLOGY-3.1%
Concentric Network Corp.
12.75%, 12/15/07................. 25 25,625
Concentric Network Corp.
warrants, expiring 12/15/07 (b).. 25 3,723
Telex Communications, Inc.
10.50%, 5/01/07.................. 25 22,125
Viasystems, Inc.
9.75%, 6/01/07................... 500 470,000
--------------
521,473
--------------
TRANSPORTATION-1.8%
American Commercial Lines LLC
10.25%, 6/30/08 (a).............. 300 306,000
--------------
Total Corporate Debt Obligations
(cost $15,794,430)............... 14,248,670
--------------
PREFERRED STOCK-0.0%
COMMUNICATIONS-0.0%
Nextel Communications, Inc.
Preferred Exch Series E,
11.125%, 2/15/10 (e)
(cost $1,373).................... 2 1,800
--------------
SHORT-TERM INVESTMENT-13.3%
TIME DEPOSIT-13.3%
State Street Cayman Islands
4.50%, 1/04/99
(amortized cost $2,247,000)...... $ 2,247 2,247,000
--------------
TOTAL INVESTMENTS-97.6%
(cost $18,042,803)............... 16,497,470
Other assets less liabilities-2.4%.. 412,765
--------------
NET ASSETS-100%..................... $ 16,910,235
==============
- --------------------------------------------------------------------------------
(a) Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration normally applied to certain qualified buyers. At December 31,
1998, the aggregate market value of these securities amounted to
$6,746,750 or 39.9% of net assets.
(b) Non-income producing security.
(c) Security trades with warrants expiring August 1, 2005.
(d) Security trades with warrants expiring August 1, 2008.
(e) PIK (paid-in-kind) preferred quarterly stock payments.
See Glossary of Terms on page B-36.
See Notes to Financial Statements.
B-32
<PAGE>
NORTH AMERICAN GOVERNMENT INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1998 Alliance Variable Products Series Fund
================================================================================
Principal
Amount
(000) U.S. $ Value
- -----------------------------------------------------------------------
ARGENTINA-19.9%
GOVERNMENT OBLIGATIONS-19.9%
Republic of Argentina
Supplier-Bocon Pro I FRN
3.0106%, 4/01/07.................ARS 9,502 $ 6,165,017
Pensioner-Bocon Pre III FRN
3.0106%, 9/01/02................. 58 46,827
Pensioner-Bocon Pre I FRN ..........
3.0106%, 4/01/01................. 195 178,898
--------------
Total Argentinian Securities
(cost $6,573,174)................ 6,390,742
--------------
CANADA-6.8%
GOVERNMENT/AGENCY OBLIGATIONS-6.8%
Government of Canada
6.50%, 6/01/04...................CA$ 850 600,422
Province of British Columbia
8.00%, 9/08/23................... 400 339,941
Province of Manitoba
7.75%, 12/22/25.................. 450 379,784
Province of Ontario
8.25%, 12/01/05.................. 275 212,659
Province of Quebec
7.75%, 3/30/06................... 325 243,458
Province of Saskatchewan
9.60%, 2/04/22................... 400 394,374
--------------
Total Canadian Securities
(cost $1,966,462)................ 2,170,638
--------------
MEXICO-24.0%
GOVERNMENT/AGENCY OBLIGATIONS-24.0%
Mexican Treasury Bills (a)
20.18%, 5/06/99..................MXP 7,341 667,394
20.72%, 3/11/99.................. 6,567 624,415
27.66%, 6/03/99.................. 65,798 5,852,907
30.75%, 8/05/99.................. 6,620 561,587
--------------
Total Mexican Securities
(cost $8,373,692)................ 7,706,303
--------------
UNITED STATES-48.4%
FEDERAL AGENCY/ OBLIGATIONS-1.4%
Federal Home Loan Bank
7.26%, 9/06/01...................US$ 200 210,906
Federal Home Loan Mortgage Corp.
6.13%, 8/19/99................... 150 151,008
Government National
Mortgage Association
9.00%, 9/15/24................... 75 80,582
--------------
442,496
--------------
U.S. TREASURY SECURITIES-45.5%
U.S. Treasury Notes
5.625%, 5/15/08.................. 6,800 7,255,804
6.25%, 10/31/01.................. 1,300 1,354,431
6.50%, 4/30/99................... 85 85,505
7.00%, 7/15/06................... 2,400 2,732,616
7.125%, 9/30/99.................. 320 325,699
7.25%, 8/15/04................... 2,500 2,810,550
--------------
14,564,605
--------------
TIME DEPOSIT-1.5%
State Street Cayman Islands
4.50%, 1/04/99................... 490 490,000
--------------
Total United States Securities
(cost $14,867,804)............... 15,497,101
--------------
TOTAL INVESTMENTS-99.1%
(cost $31,781,132)............... 31,764,784
Other assets less liabilities-0.9%.. 293,778
--------------
NET ASSETS-100%..................... $ 32,058,562
==============
- --------------------------------------------------------------------------------
(a) Interest rate represents annualized yield to maturity at purchase date.
See Glossary of Terms on page B-36.
See Notes to Financial Statements.
B-33
<PAGE>
SHORT-TERM MULTI-MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1998 Alliance Variable Products Series Fund
================================================================================
Principal
Amount
(000) U.S. $ Value
- -----------------------------------------------------------------------
DENMARK-5.3%
GOVERNMENT OBLIGATION-5.3%
Kingdom of Denmark
9.00%, 11/15/00
(cost $320,411)..................DKK 2,000 $ 342,881
--------------
FRANCE-4.4%
GOVERNMENT OBLIGATION-4.4%
Government of France
7.75%, 4/12/00
(cost $268,244)..................FRF 1,500 283,581
--------------
GERMANY-22.1%
DEBT OBLIGATIONS-12.4%
Bayerische Landesbank
5.25%, 1/29/99 (a)...............US$ 300 299,700
Bremer Landesbank
Kreditanstalt Oldenburg
6.375%, 12/29/99 (a)............. 500 505,500
--------------
805,200
--------------
GOVERNMENT OBLIGATION-9.7%
Government of Germany
5.75%, 8/22/00 (a) ..............DEM 1,000 624,325
--------------
Total German Securities
(cost $1,390,154)................ 1,429,525
--------------
ITALY-9.6%
GOVERNMENT OBLIGATION-9.6%
Republic of Italy
6.00%, 2/15/00
(cost $585,937) (a)..............ITL 1,000,000 622,940
--------------
NEW ZEALAND-6.4%
DEBT OBLIGATION-3.3%
International Bank for
Reconstruction & Development
7.00%, 9/18/00 (a)...............NZ$ 400 214,587
--------------
GOVERNMENT OBLIGATION-3.1%
Government of New Zealand
6.50%, 2/15/00 (a)............... 380 202,957
Total New Zealand Securities
(cost $513,960).................. 417,544
--------------
NORWAY-4.1%
GOVERNMENT OBLIGATION-4.1%
Kingdom of Norway
9.00%, 1/31/99 (a)
(cost $325,389)..................NOK 2,000 263,236
--------------
SWEDEN-6.2%
GOVERNMENT OBLIGATION-6.2%
Kingdom of Sweden
10.25%, 5/05/00 (a)
(cost $436,278)..................SEK 3,000 400,625
--------------
UNITED STATES-39.8%
DEBT OBLIGATIONS-18.1%
Bank Nederlandse Gemeenten NV
5.875%, 4/19/99 (a)..............US$ 300 300,300
Federal National Mortgage
Association
7.00%, 9/26/00 (a)...............NZ$ 500 268,891
Rabobank Nederland
6.25%, 12/31/99 (a)..............US$ 300 303,000
Suedwest Deutsche Landesbank
5.75%, 12/20/99 (a).............. 300 301,200
--------------
1,173,391
--------------
TIME DEPOSIT-21.7%
State Street Cayman Islands
4.50%, 1/04/99................... 1,402 1,402,000
--------------
Total United States Securities
(cost $2,563,456)................ 2,575,391
--------------
TOTAL INVESTMENTS-97.9%
(cost $6,403,829)................ 6,335,723
Other assets less liabilities-2.1% 133,101
--------------
NET ASSETS-100%..................... $ 6,468,824
==============
- --------------------------------------------------------------------------------
(a) Securities, or portion thereof, with an aggregate market value of
$4,307,261 have been segregated to collateralize forward exchange currency
contracts.
See Glossary of Terms on page B-36.
See Notes to Financial Statements.
B-34
<PAGE>
U.S. GOVERNMENT/HIGH GRADE SECURITIES PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1998 Alliance Variable Products Series Fund
================================================================================
Principal
Amount
(000) U.S. $ Value
- -----------------------------------------------------------------------
U.S. GOVERNMENT/AGENCY
OBLIGATIONS-78.4%
FEDERAL AGENCIES-40.5%
Federal Home Loan Bank
5.67%, 1/14/00................... $ 5,000 $ 5,037,500
7.50%, 4/01/28................... 678 696,724
Federal National Mortgage
Association
5.25%, 1/15/03................... 1,500 1,510,305
6.00%, 9/01/13................... 1,579 1,583,239
6.50%, 5/01/13................... 751 761,273
6.50%, 10/01/28.................. 843 848,917
6.50%, 12/01/28.................. 804 809,274
7.00%, 2/01/12................... 2,211 2,257,983
7.00%, 4/01/26................... 356 362,979
7.00%, 5/01/28................... 450 458,899
8.00%, 12/01/99.................. 1,100 1,139,182
Government National Mortgage
Association
6.50%, 3/15/28................... 566 572,117
6.50%, 7/15/28................... 1,162 1,174,017
7.00%, 7/15/23................... 61 62,372
7.00%, 7/15/27................... 883 903,741
7.00%, 2/15/28................... 749 765,925
7.00%, 3/15/28................... 1,000 1,023,298
7.00%, 12/15/28.................. 2,613 2,673,413
Student Loan Marketing
Association
6.05%, 9/14/00................... 1,000 1,017,030
--------------
23,658,188
--------------
U.S. TREASURY SECURITIES-37.9%
U.S. Treasury Bonds
5.25%, 11/15/28.................. 2,300 2,354,625
6.125%, 11/15/27................. 2,050 2,294,709
U.S. Treasury Notes
4.25%, 11/15/03.................. 1,250 1,233,988
5.625%, 5/15/08.................. 2,950 3,147,739
5.75%, 8/15/03................... 2,700 2,819,394
6.50%, 8/31/01................... 4,125 4,313,842
6.50%, 5/31/02................... 3,125 3,299,312
6.875%, 5/15/06.................. 2,350 2,656,957
--------------
22,120,566
--------------
Total U.S. Government/Agency
Obligations
(cost $45,659,978)............... 45,778,754
--------------
Shares or
Principal
Amount
(000) U.S. $ Value
- -----------------------------------------------------------------------
CORPORATE DEBT OBLIGATIONS-19.5%
FINANCE-10.9%
Associates Corp. North America
5.75%, 11/01/03.................. $ 1,350 $ 1,362,109
Chase Credit Card Master Trust
6.00%, 8/15/05................... 1,250 1,279,219
Chase Manhattan Corp.
6.75%, 8/15/08................... 500 535,431
Citicorp
6.375%, 11/15/08................. 1,400 1,455,016
Goldman Sachs Group LP
7.25%, 10/01/05 (a).............. 500 527,923
Household Finance Corp.
5.875%, 11/01/02................. 1,150 1,158,535
Wachovia Corp.
6.375%, 4/15/03.................. 75 77,511
--------------
6,395,744
--------------
INDUSTRIAL-7.7%
Comcast Cable Corp.
8.375%, 5/01/07.................. 1,000 1,159,203
Motorola, Inc.
6.50%, 11/15/28.................. 1,300 1,324,176
Time Warner, Inc.
6.625%, 5/15/29.................. 500 509,881
9.125%, 1/15/13.................. 1,170 1,484,661
--------------
4,477,921
--------------
YANKEE BOND-0.9%
St. George Bank, Ltd.
7.15%, 10/15/05 (a).............. 500 519,585
--------------
Total Corporate Debt Obligations
(cost $11,147,337)............... 11,393,250
--------------
SHORT-TERM INVESTMENT-3.0%
TIME DEPOSIT-3.0%
State Street Cayman Islands
4.50%, 1/04/99
(cost $1,783,000)................ 1,783 1,783,000
--------------
TOTAL INVESTMENTS-100.9%
(cost $58,590,315)............... 58,955,004
Other assets less liabilities-(0.9%) (537,302)
--------------
NET ASSETS-100%..................... $ 58,417,702
==============
- --------------------------------------------------------------------------------
(a) Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration normally applied to certain qualified buyers. At December 31,
1998, the aggregate market value of these securities amounted to
$1,047,508 or 1.8% of net assets.
See Glossary of Terms on page B-36.
See Notes to Financial Statements.
B-35
<PAGE>
MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1998 Alliance Variable Products Series Fund
================================================================================
Principal
Amount
(000) U.S. $ Value
- -----------------------------------------------------------------------
COMMERCIAL PAPER-85.9%
Associates Corp. of North America
5.25%, 1/04/99................... $ 5,000 $ 4,997,812
Bell Atlantic Financial Services
5.23%, 1/04/99................... 5,000 4,997,821
Cargill Global Funding
5.30%, 1/04/99................... 5,000 4,997,792
Coca Cola Co.
5.15%, 1/29/99................... 4,000 3,983,978
Dow Chemical Co.
5.20%, 1/04/99................... 5,000 4,997,833
Duke Energy Corp.
5.25%, 1/04/99................... 5,000 4,997,812
Equilon Enterprise
5.12%, 3/05/99................... 4,000 3,964,160
Ford Motor Credit Corp.
5.22%, 2/16/99................... 5,000 4,966,650
General Motors Acceptance
Corp.
5.24%, 2/16/99................... 5,000 4,966,522
Georgia Power Co.
5.25%, 1/29/99................... 4,000 3,983,667
Koch Industries
5.20%, 1/04/99 (a)............... 5,000 4,997,833
Marsh & McClennan, Inc.
5.25%, 1/04/99................... 5,000 4,997,812
Morgan Stanley Group, Inc.
5.28%, 2/26/99................... 4,000 3,967,147
Pepsico, Inc.
5.25%, 1/26/99................... 5,000 4,981,875
Procter & Gamble Co.
5.20%, 1/27/99................... 5,000 4,981,222
Prudential Funding Corp.
5.24%, 2/16/99................... 5,000 4,966,522
Sara Lee Corp.
5.10%, 1/04/99................... 5,000 4,997,875
SBC Communications, Inc.
5.10%, 1/04/99................... 5,000 4,997,875
Southern Co.
5.35%, 1/29/99................... 4,000 3,983,356
Texaco, Inc.
5.10%, 2/08/99................... 4,000 3,978,467
Wells Fargo Co.
5.05%, 3/26/99................... 4,000 3,952,867
Xerox Credit Corp.
5.10%, 1/04/99................... 5,000 4,997,875
--------------
Total Commercial Paper
(amortized cost $102,654,773).... 102,654,773
--------------
U.S. GOVERNMENT OBLIGATION-10.9%
Student Loan Marketing Assn.
4.28%, 1/04/99
(amortized cost $12,995,364)..... 13,000 12,995,364
--------------
PROMISSORY NOTE-3.3%
Goldman Sachs Group LP FRN
5.23%, 5/24/99
(amortized cost $4,000,000)(a) .. 4,000 4,000,000
--------------
TOTAL INVESTMENTS-100.1%
(cost $119,650,137).............. 119,650,137
Other assets less liabilities-(0.1%) (76,433)
--------------
NET ASSETS-100%..................... $ 119,573,704
==============
- --------------------------------------------------------------------------------
(a) Security issued in reliance on Section (4) 2 or Rule 144A of the
Securities Act of 1933. This security may be resold in transactions exempt
from registration normally to qualified institutional buyers. At December
31, 1998, the aggregate market value of this security amounted to
$8,997,833 or 7.5% of net assets.
Glossary of Terms:
ADR - American Depositary Receipt
ADS - American Depositary Share
FLIRB - Front Loaded Interest Reduction Bond
FRN - Floating Rate Note
GDR - Global Depositary Receipt
GDS - Global Depositary Share
IAN - Interest Arrears Note
PDI - Past Due Interest
See Notes to Financial Statements.
B-36
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1998 Alliance Variable Products Series Fund
================================================================================
<TABLE>
<CAPTION>
Conservative Growth Total Growth and
Investors Investors Return Income
Portfolio Portfolio Portfolio Portfolio
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Investments in securities, at value
(cost $34,411,044, $17,954,605,
$54,062,358 and $342,843,584,
respectively) ......................... $ 37,150,605 $ 21,074,542 $ 59,604,524 $384,229,231
Cash, at value (cost $21, $167,
$358 and $0, respectively) ............ 21 167 358 -0-
Interest receivable ..................... 249,962 37,305 247,820 -0-
Dividends receivable .................... 9,881 11,800 43,700 416,067
Deferred organization expenses .......... 1,638 1,638 -0- -0-
Receivable for capital stock sold ....... -0- -0- 4,036 1,098,711
------------ ------------ ------------ ------------
Total assets ............................ 37,412,107 21,125,452 59,900,438 385,744,009
------------ ------------ ------------ ------------
LIABILITIES
Due to custodian ........................ -0- -0- -0- 343,303
Advisory fee payable .................... 23,472 12,807 27,389 191,393
Payable for capital stock redeemed ...... 19,160 59,687 65,833 630,047
Payable for investment securities
purchased ............................. -0- -0- 281,113 2,850,388
Accrued expenses ........................ 28,803 24,486 62,353 114,537
------------ ------------ ------------ ------------
Total liabilities ....................... 71,435 96,980 436,688 4,129,668
------------ ------------ ------------ ------------
NET ASSETS ................................. $ 37,340,672 $ 21,028,472 $ 59,463,750 $381,614,341
============ ============ ============ ============
COMPOSITION OF NET ASSETS
Capital stock, at par ................... $ 2,662 $ 1,288 $ 3,293 $ 17,470
Additional paid-in capital .............. 31,597,245 16,110,659 48,044,439 294,479,547
Undistributed net investment income ..... 1,293,963 310,178 1,221,413 3,281,944
Accumulated net realized gain
on investments and foreign
currency transactions ................. 1,706,973 1,486,119 4,652,436 42,449,681
Net unrealized appreciation of
investments and foreign
currency denominated assets
and liabilities ....................... 2,739,829 3,120,228 5,542,169 41,385,699
------------ ------------ ------------ ------------
$ 37,340,672 $ 21,028,472 $ 59,463,750 $381,614,341
============ ============ ============ ============
Shares of capital stock outstanding ..... 2,661,889 1,288,092 3,292,932 17,470,155
============ ============ ============ ============
Net asset value per share ............... $ 14.03 $ 16.33 $ 18.06 $ 21.84
============ ============ ============ ============
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-37
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
(continued) Alliance Variable Products Series Fund
================================================================================
<TABLE>
<CAPTION>
Premier
Growth International Growth Quasar
Portfolio Portfolio Portfolio Portfolio
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS
Investments in securities, at value
(cost $240,146,596, $57,383,692,
$872,958,384 and $95,022,738,
respectively) ......................... $ 335,505,411 $ 64,008,036 $1,254,665,789 $ 93,319,413
Cash, at value (cost $287,271
$2,090,175, $69,026 and $0,
respectively) ......................... 287,271 2,103,440 69,026 -0-
Receivable for investment
securities sold ....................... 1,416,365 170,597 1,060,277 455,566
Dividends receivable .................... 158,060 129,953 546,490 84,784
Interest receivable ..................... 90,495 440 211 -0-
Receivable for capital stock sold ....... 9,860 36,139 2,024,484 185,526
Deferred organization expenses .......... 1,402 -0- -0- 13,551
-------------- -------------- -------------- --------------
Total assets ............................ 337,468,864 66,448,605 1,258,366,277 94,058,840
-------------- -------------- -------------- --------------
LIABILITIES
Due to custodian ........................ -0- -0- -0- 194,080
Payable for investment securities
purchased ............................. 7,828,133 735,843 8,975,125 1,799,074
Payable for capital stock redeemed ...... 622,040 580,039 783,767 1,112,322
Advisory fee payable .................... 197,348 27,170 970,949 37,532
Accrued expenses ........................ 139,898 53,760 382,166 45,594
-------------- -------------- -------------- --------------
Total liabilities ....................... 8,787,419 1,396,812 11,112,007 3,188,602
-------------- -------------- -------------- --------------
NET ASSETS ................................. $ 328,681,445 $ 65,051,793 $1,247,254,270 $ 90,870,238
============== ============== ============== ==============
COMPOSITION OF NET ASSETS
Capital stock, at par ................... $ 12,062 $ 4,024 $ 40,190 $ 8,159
Additional paid-in capital .............. 204,055,242 57,243,336 842,579,548 96,541,541
Undistributed net investment income ..... 1,157,118 367,008 -0- 261,320
Accumulated net realized gain
(loss) on investments and
foreign currency transactions ......... 28,097,704 800,835 22,927,127 (4,237,457)
Net unrealized appreciation
(depreciation) of investments
and foreign currency
denominated assets and liabilities .... 95,359,319 6,636,590 381,707,405 (1,703,325)
-------------- -------------- -------------- --------------
$ 328,681,445 $ 65,051,793 $1,247,254,270 $ 90,870,238
============== ============== ============== ==============
Shares of capital stock outstanding ..... 12,062,060 4,023,773 40,189,981 8,159,133
============== ============== ============== ==============
Net asset value per share ............... $ 27.25 $ 16.17 $ 31.03 $ 11.14
============== ============== ============== ==============
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-38
<PAGE>
Alliance Variable Products Series Fund
================================================================================
<TABLE>
<CAPTION>
Real Estate Utility Worldwide
Investment Technology Income Privatization
Portfolio Portfolio Portfolio Portfolio
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Investments in securities, at value
(cost $19,836,222, $80,094,826,
$26,054,120 and $43,991,293,
respectively) ......................... $ 16,818,482 $ 130,770,477 $ 34,880,791 $ 45,950,798
Cash, at value (cost $45, $72,894
$0 and $18,463, respectively) ......... 45 72,894 -0- 18,488
Dividends receivable .................... 185,267 6,172 51,921 136,915
Receivable for capital stock sold ....... 73,409 27,953 7,816 3,867
Receivable for investment
securities sold ....................... 49,963 37,183 -0- 258,270
Deferred organization expenses .......... 12,094 8,883 1,078 1,446
Interest receivable ..................... 82 -0- -0- 290
Receivable from Adviser ................. -0- -0- -0- 11,094
------------- ------------- ------------- -------------
Total assets ............................ 17,139,342 130,923,562 34,941,606 46,381,168
------------- ------------- ------------- -------------
LIABILITIES
Due to custodian ........................ -0- -0- 380,339 -0-
Payable for investment securities
purchased ............................. 14,950 -0- -0- -0-
Advisory fee payable .................... 6,421 70,763 3,306 -0-
Payable for capital stock redeemed ...... 12 216,562 97,496 25,292
Accrued expenses ........................ 38,400 34,575 24,228 88,027
------------- ------------- ------------- -------------
Total liabilities ....................... 59,783 321,900 505,369 113,319
------------- ------------- ------------- -------------
NET ASSETS ................................. $ 17,079,559 $ 130,601,662 $ 34,436,237 $ 46,267,849
============= ============= ============= =============
COMPOSITION OF NET ASSETS
Capital stock, at par ................... $ 1,747 $ 6,813 $ 1,822 $ 3,124
Additional paid-in capital .............. 19,595,175 79,784,461 24,006,815 41,547,872
Undistributed net investment income ..... 834,185 283 567,409 817,021
Accumulated net realized gain
(loss) on investments and
foreign currency transactions ......... (333,808) 134,454 1,033,533 1,937,337
Net unrealized appreciation
(depreciation) of investments
and foreign currency
denominated assets and
liabilities ........................... (3,017,740) 50,675,651 8,826,658 1,962,495
------------- ------------- ------------- -------------
$ 17,079,559 $ 130,601,662 $ 34,436,237 $ 46,267,849
============= ============= ============= =============
Shares of capital stock outstanding ..... 1,747,219 6,812,686 1,822,407 3,123,512
============= ============= ============= =============
Net asset value per share ............... $ 9.78 $ 19.17 $ 18.90 $ 14.81
============= ============= ============= =============
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-39
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
(continued) Alliance Variable Products Series Fund
================================================================================
<TABLE>
<CAPTION>
Global Dollar North American
Global Bond Government High-Yield Government Income
Portfolio Portfolio Portfolio Portfolio
------------ ------------- ------------ -----------------
<S> <C> <C> <C> <C>
ASSETS
Investments in securities, at value
(cost $29,414,126, $12,245,032,
$18,042,803 and $31,781,132,
respectively) ......................... $ 31,808,113 $ 9,971,628 $ 16,497,470 $ 31,764,784
Cash, at value (cost $1,807,026,
$100,724, $849 and $491,
respectively) ......................... 1,824,415 100,724 849 491
Interest receivable ..................... 808,888 250,372 389,949 270,045
Receivable for capital stock sold ....... 245,333 57,059 38,408 -0-
Unrealized appreciation of
forward exchange currency
contract .............................. 5,011 -0- -0- -0-
Deferred organization expenses .......... -0- 12,143 -0- 1,429
Receivable from Adviser ................. -0- 4,604 2,137 -0-
Receivable for investment
securities sold ....................... -0- -0- -0- 81,972
------------ ------------ ------------ ------------
Total assets ............................ 34,691,760 10,396,530 16,928,813 32,118,721
------------ ------------ ------------ ------------
LIABILITIES
Advisory fee payable .................... 16,091 -0- -0- 17,665
Payable for capital stock redeemed ...... 3,042 49 1,858 8,088
Accrued expenses ........................ 20,693 16,573 16,720 34,406
------------ ------------ ------------ ------------
Total liabilities ....................... 39,826 16,622 18,578 60,159
------------ ------------ ------------ ------------
NET ASSETS ................................. $ 34,651,934 $ 10,379,908 $ 16,910,235 $ 32,058,562
============ ============ ============ ============
COMPOSITION OF NET ASSETS
Capital stock, at par ................... $ 2,790 $ 1,020 $ 1,701 $ 2,555
Additional paid-in capital .............. 31,217,556 13,811,696 18,234,474 30,028,458
Undistributed net investment income ..... 867,842 1,297,076 1,080,197 1,754,004
Accumulated net realized gain
(loss) on investments and
foreign currency transactions ......... 127,585 (2,456,480) (860,804) 289,641
Net unrealized appreciation
(depreciation) of investments
and foreign currency
denominated assets and liabilities .... 2,436,161 (2,273,404) (1,545,333) (16,096)
------------ ------------ ------------ ------------
$ 34,651,934 $ 10,379,908 $ 16,910,235 $ 32,058,562
============ ============ ============ ============
Shares of capital stock
outstanding ........................... 2,789,991 1,020,040 1,701,275 2,555,474
============ ============ ============ ============
Net asset value per share ............... $ 12.42 $ 10.18 $ 9.94 $ 12.55
============ ============ ============ ============
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-40
<PAGE>
Alliance Variable Products Series Fund
================================================================================
<TABLE>
<CAPTION>
Short Term U.S. Government/
Multi Market High Grade Securities Money Market
Portfolio Portfolio Portfolio
------------- --------------------- -------------
<S> <C> <C> <C>
ASSETS
Investments in securities, at value
(cost $6,403,829, $58,590,315 and
$119,650,137, respectively) ..................... $ 6,335,723 $ 58,955,004 $ 119,650,137
Cash, at value (cost $376, $277 and $174,118,
respectively) ................................... 376 277 174,118
Interest receivable ............................... 151,898 670,383 22,082
Unrealized appreciation of forward exchange
currency contracts .............................. 3,237 -0- -0-
Receivable from Adviser ........................... 1,866 -0- -0-
Receivable for capital stock sold ................. -0- 40,264 316,637
------------- ------------- -------------
Total assets ...................................... 6,493,100 59,665,928 120,162,974
------------- ------------- -------------
LIABILITIES
Payable for capital stock redeemed ................ 6,120 57,929 62,088
Payable for investment securities purchased ....... -0- 1,142,728 -0-
Advisory fee payable .............................. -0- 29,395 48,547
Dividend payable .................................. -0- -0- 437,430
Accrued expenses .................................. 18,156 18,174 41,205
------------- ------------- -------------
Total liabilities ................................. 24,276 1,248,226 589,270
------------- ------------- -------------
NET ASSETS ........................................... $ 6,468,824 $ 58,417,702 $ 119,573,704
============= ============= =============
COMPOSITION OF NET ASSETS
Capital stock, at par ............................. $ 640 $ 4,762 $ 119,574
Additional paid-in capital ........................ 7,473,453 54,327,340 119,454,020
Undistributed net investment income ............... 195,069 2,341,951 573
Accumulated net realized gain (loss) on investments
and foreign currency transactions ............... (1,135,696) 1,378,960 (463)
Net unrealized appreciation (depreciation) of
investments and foreign currency denominated
assets and liabilities .......................... (64,642) 364,689 -0-
------------- ------------- -------------
$ 6,468,824 $ 58,417,702 $ 119,573,704
============= ============= =============
Shares of capital stock
outstanding ..................................... 640,255 4,761,599 119,573,924
============= ============= =============
Net asset value per share ......................... $ 10.10 $ 12.27 $ 1.00
============= ============= =============
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-41
<PAGE>
STATEMENTS OF OPERATIONS
Year Ended December 31, 1998 Alliance Variable Products Series Fund
================================================================================
<TABLE>
<CAPTION>
Conservative Growth Total Growth and
Investors Investors Return Income
Portfolio Portfolio Portfolio Portfolio
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest ................................ $ 1,505,639 $ 359,022 $ 1,165,457 $ 749,624
Dividends (net of foreign taxes
withheld of $9,307, $10,400,
$168 and $2,437, respectively) ........ 102,787 129,698 511,786 4,842,941
------------- ------------- ------------- -------------
Total investment income ................. 1,608,426 488,720 1,677,243 5,592,565
------------- ------------- ------------- -------------
EXPENSES
Advisory fee ............................ 262,690 138,363 319,045 1,937,421
Custodian ............................... 76,945 98,491 75,290 109,753
Administrative .......................... 60,000 60,000 60,000 60,000
Printing ................................ 8,067 5,672 13,548 94,183
Audit and legal ......................... 3,960 3,089 11,017 58,222
Amortization of organization expenses ... 2,000 2,000 -0- -0-
Directors' fees ......................... 1,631 1,356 1,857 1,864
Transfer agency ......................... 979 553 1,006 967
Miscellaneous ........................... 2,061 202 2,208 10,844
------------- ------------- ------------- -------------
Total expenses .......................... 418,333 309,726 483,971 2,273,254
Less: expenses waived and reimbursed .... (103,350) (136,406) (34,652) -0-
------------- ------------- ------------- -------------
Net expenses ............................ 314,983 173,320 449,319 2,273,254
------------- ------------- ------------- -------------
Net investment income ................... 1,293,443 315,400 1,227,924 3,319,311
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain on investment
transactions .......................... 1,766,181 1,540,880 4,687,427 42,675,468
Net realized loss on foreign
currency transactions ................. (21,778) (19,402) (16) (218)
Net change in unrealized
appreciation of investments ........... 1,546,276 2,043,786 2,033,087 13,019,376
Net change in unrealized
appreciation (depreciation) of
foreign currency denominated
assets and liabilities ................ 798 397 3 41
------------- ------------- ------------- -------------
Net gain on investments and
foreign currency transactions ......... 3,291,477 3,565,661 6,720,501 55,694,667
------------- ------------- ------------- -------------
NET INCREASE IN NET
ASSETS FROM OPERATIONS ..................... $ 4,584,920 $ 3,881,061 $ 7,948,425 $ 59,013,978
============= ============= ============= =============
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-42
<PAGE>
Alliance Variable Products Series Fund
================================================================================
<TABLE>
<CAPTION>
Premier
Growth International Growth Quasar
Portfolio Portfolio Portfolio Portfolio
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends (net of foreign taxes
withheld of $30,110, $106,600,
$86,773 and $5,428, respectively) ..... $ 2,894,344 $ 1,184,485 $ 6,037,149 $ 477,000
Interest ................................ 663,585 128,213 1,971,398 649,227
------------- ------------- ------------- -------------
Total investment income ................. 3,557,929 1,312,698 8,008,547 1,126,227
------------- ------------- ------------- -------------
EXPENSES
Advisory fee ............................ 2,045,409 648,033 7,864,803 749,490
Custodian ............................... 101,649 136,766 162,586 104,166
Printing ................................ 95,948 27,329 263,397 18,063
Audit and legal ......................... 67,390 10,621 226,972 29,270
Administrative .......................... 60,000 60,000 60,000 60,000
Amortization of organization
expenses .............................. 2,000 -0- -0- 5,216
Directors' fees ......................... 1,531 1,565 1,220 1,649
Transfer agency ......................... 993 891 866 955
Miscellaneous ........................... 9,135 2,568 26,592 3,367
------------- ------------- ------------- -------------
Total expenses .......................... 2,384,055 887,773 8,606,436 972,176
Less: expenses waived and reimbursed .... -0- (272,142) (270,762) (260,160)
------------- ------------- ------------- -------------
Net expenses ............................ 2,384,055 615,631 8,335,674 712,016
------------- ------------- ------------- -------------
Net investment income (loss) ............ 1,173,874 697,067 (327,127) 414,211
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain (loss) on
investment transactions ............... 28,107,274 1,484,081 31,022,713 (3,461,226)
Net realized gain (loss) on foreign
currency transactions ................. (33,233) 727,885 -0- -0-
Net change in unrealized
appreciation (depreciation) of
investments ........................... 41,502,094 5,779,791 291,597,182 (1,930,679)
Net change in unrealized
appreciation (depreciation) of
foreign currency denominated
assets and liabilities ................ 504 (684,282) -0- -0-
------------- ------------- ------------- -------------
Net gain (loss) on investments .......... 69,576,639 7,307,475 322,619,895 (5,391,905)
------------- ------------- ------------- -------------
NET INCREASE (DECREASE)
IN NET ASSETS FROM OPERATIONS .............. $ 70,750,513 $ 8,004,542 $ 322,292,768 $ (4,977,694)
============= ============= ============= =============
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-43
<PAGE>
STATEMENTS OF OPERATIONS
Year Ended December 31, 1998 Alliance Variable Products Series Fund
================================================================================
<TABLE>
<CAPTION>
Real Estate Utility Worldwide
Investment Technology Income Privatization
Portfolio Portfolio Portfolio Portfolio
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends (net of foreign taxes
withheld of $0, $7,016, $3,694
and $130,041 respectively) ............ $ 914,963 $ 96,952 $ 685,812 $ 1,106,980
Interest ................................ 29,548 479,941 135,880 126,567
------------- ------------- ------------- -------------
Total investment income ................. 944,511 576,893 821,692 1,233,547
------------- ------------- ------------- -------------
EXPENSES
Advisory fee ............................ 143,425 891,127 195,827 459,020
Custodian ............................... 63,390 71,206 70,876 227,915
Administrative .......................... 60,000 60,000 60,000 60,000
Printing ................................ 4,508 25,057 11,574 18,619
Amortization of organization
expenses .............................. 3,997 4,296 3,059 2,000
Audit and legal ......................... 3,127 15,521 7,943 10,796
Directors' fees ......................... 1,555 2,446 1,225 1,591
Transfer agency ......................... 957 980 934 1,054
Miscellaneous ........................... 1,748 3,059 1,725 871
------------- ------------- ------------- -------------
Total expenses .......................... 282,707 1,073,692 353,163 781,866
Less: expenses waived and
reimbursed ............................ (131,314) (227,121) (105,144) (345,796)
------------- ------------- ------------- -------------
Net expenses ............................ 151,393 846,571 248,019 436,070
------------- ------------- ------------- -------------
Net investment income (loss) ............ 793,118 (269,678) 573,673 797,477
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain (loss) on
investment transactions ............... (314,101) 2,981,897 1,038,844 2,123,345
Net realized gain on foreign
currency transactions ................. -0- -0- 106 111,722
Net change in unrealized
appreciation (depreciation) of
investments ........................... (4,050,201) 45,284,402 4,488,587 1,060,393
Net change in unrealized
appreciation (depreciation) of
foreign currency denominated
assets and liabilities ................ -0- -0- (12) 7,727
------------- ------------- ------------- -------------
Net gain (loss) on investments
and foreign currency transactions ..... (4,364,302) 48,266,299 5,527,525 3,303,187
------------- ------------- ------------- -------------
NET INCREASE (DECREASE)
IN NET ASSETS FROM OPERATIONS .............. $ (3,571,184) $ 47,996,621 $ 6,101,198 $ 4,100,664
============= ============= ============= =============
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-44
<PAGE>
Alliance Variable Products Series Fund
================================================================================
<TABLE>
<CAPTION>
Global Dollar North American
Global Bond Government High-Yield Government Income
Portfolio Portfolio Portfolio Portfolio
------------- ------------- ------------- -----------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest ................................ $ 1,355,006 $ 1,441,589 $ 1,189,097 $ 3,276,744
------------- ------------- ------------- -------------
EXPENSES
Advisory fee ............................ 168,110 103,573 83,181 212,411
Custodian ............................... 64,384 58,048 48,999 83,623
Administrative .......................... 60,000 60,000 60,000 60,000
Audit and legal ......................... 7,171 3,499 3,947 8,168
Printing ................................ 6,300 10,086 524 8,928
Directors' fees ......................... 1,599 1,653 1,318 1,661
Transfer agency ......................... 975 974 869 977
Amortization of organization
expenses .............................. -0- 3,343 -0- 4,315
Miscellaneous ........................... 1,237 336 813 893
------------- ------------- ------------- -------------
Total expenses .......................... 309,776 241,512 199,651 380,976
Less: expenses waived and reimbursed .... (63,587) (110,320) (94,288) (99,140)
------------- ------------- ------------- -------------
Net expenses ............................ 246,189 131,192 105,363 281,836
------------- ------------- ------------- -------------
Net investment income ................... 1,108,817 1,310,397 1,083,734 2,994,908
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain (loss) on
investment transactions ............... 162,255 (2,456,480) (860,804) 303,782
Net realized loss on foreign
currency transactions ................. (127,198) -0- -0- (1,199,153)
Net change in unrealized
appreciation (depreciation) of
investments ........................... 2,506,383 (2,200,919) (1,556,891) (925,643)
Net change in unrealized
appreciation (depreciation) of
foreign currency denominated
assets and liabilities ................ (79,034) -0- -0- (3,460)
------------- ------------- ------------- -------------
Net gain (loss) on investments
and foreign currency transactions ..... 2,462,406 (4,657,399) (2,417,695) (1,824,474)
------------- ------------- ------------- -------------
NET INCREASE (DECREASE)
IN NET ASSETS FROM OPERATIONS .............. $ 3,571,223 $ (3,347,002) $ (1,333,961) $ 1,170,434
============= ============= ============= =============
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-45
<PAGE>
STATEMENTS OF OPERATIONS
Year Ended December 31, 1998 Alliance Variable Products Series Fund
================================================================================
<TABLE>
<CAPTION>
Short Term U.S. Government/
Multi Market High Grade Securities Money Market
Portfolio Portfolio Portfolio
------------- --------------------- -------------
<S> <C> <C> <C>
INVESTMENT INCOME
Interest ................................................ $ 439,642 $ 2,688,083 $ 5,209,956
------------- ------------- -------------
EXPENSES
Advisory fee ............................................ 35,014 267,850 471,768
Custodian ............................................... 69,108 57,296 80,211
Administrative .......................................... 60,000 60,000 60,000
Audit and legal ......................................... 2,106 9,047 6,437
Printing ................................................ 1,924 9,410 15,797
Directors' fees ......................................... 1,672 1,936 2,015
Transfer agency ......................................... 978 974 1,252
Miscellaneous ........................................... 477 1,230 4,341
------------- ------------- -------------
Total expenses .......................................... 171,279 407,743 641,821
Less: expenses waived and reimbursed .................... (111,291) (60,000) -0-
------------- ------------- -------------
Net expenses ............................................ 59,988 347,743 641,821
------------- ------------- -------------
Net investment income ................................... 379,654 2,340,340 4,568,135
------------- ------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS
Net realized gain (loss) on investment transactions ..... (4,148) 1,403,874 178
Net realized (loss) on foreign currency transactions .... (44,832) 147 -0-
Net change in unrealized appreciation (depreciation)
of investments ........................................ 212,809 (296,956) -0-
Net change in unrealized depreciation of foreign
currency denominated assets and liabilities ........... (153,486) -0- -0-
------------- ------------- -------------
Net gain on investments and foreign currency
transactions .......................................... 10,343 1,107,065 178
------------- ------------- -------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ................. $ 389,997 $ 3,447,405 $ 4,568,313
============= ============= =============
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-46
<PAGE>
STATEMENTS OF CHANGES
IN NET ASSETS Alliance Variable Products Series Fund
================================================================================
<TABLE>
<CAPTION>
Conservative Investors Portfolio Growth Investors Portfolio
-------------------------------- ----------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
--------------- --------------- ------------ ------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income ................... $ 1,293,443 $ 983,136 $ 315,400 $ 226,698
Net realized gain on investments
and foreign currency transactions ..... 1,744,403 1,295,033 1,521,478 1,347,406
Net change in unrealized
appreciation of investments
and foreign currency
denominated assets and
liabilities ........................... 1,547,074 469,660 2,044,183 334,892
------------ ------------ ------------ ------------
Net increase in net assets from
operations ............................ 4,584,920 2,747,829 3,881,061 1,908,996
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income ................... (983,527) (608,412) (214,940) (180,480)
Net realized gain on investments ........ (1,277,811) -0- (1,371,580) (200,739)
CAPITAL STOCK TRANSACTIONS
Net increase ............................ 4,820,709 6,327,771 2,134,021 4,362,797
------------ ------------ ------------ ------------
Total increase .......................... 7,144,291 8,467,188 4,428,562 5,890,574
NET ASSETS
Beginning of year ....................... 30,196,381 21,729,193 16,599,910 10,709,336
------------ ------------ ------------ ------------
End of year (including
undistributed net investment
income of $1,293,963,
$973,022, $310,178 and
$202,165, respectively) ............... $ 37,340,672 $ 30,196,381 $ 21,028,472 $ 16,599,910
============ ============ ============ ============
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-47
<PAGE>
STATEMENTS OF CHANGES
IN NET ASSETS Alliance Variable Products Series Fund
================================================================================
<TABLE>
<CAPTION>
Total Return Portfolio Growth and Income Portfolio
------------------------------- -------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income ................... $ 1,227,924 $ 822,012 $ 3,319,311 $ 2,195,334
Net realized gain on investments
and foreign currency transactions ..... 4,687,411 3,789,362 42,675,250 27,935,671
Net change in unrealized
appreciation of investments
and foreign currency
denominated assets and
liabilities ........................... 2,033,090 1,754,576 13,019,417 15,634,977
------------- ------------- ------------- -------------
Net increase in net assets from
operations ............................ 7,948,425 6,365,950 59,013,978 45,765,982
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income ................... (828,887) (480,826) (2,226,956) (1,272,246)
Net realized gain on investments ........ (3,824,313) (1,019,434) (28,160,219) (9,150,387)
CAPITAL STOCK TRANSACTIONS
Net increase ............................ 13,248,556 12,178,929 102,785,943 88,128,841
------------- ------------- ------------- -------------
Total increase .......................... 16,543,781 17,044,619 131,412,746 123,472,190
NET ASSETS
Beginning of year ....................... 42,919,969 25,875,350 250,201,595 126,729,405
------------- ------------- ------------- -------------
End of year (including
undistributed net investment
income of $1,221,413, $822,392,
$3,281,944 and $2,192,351,
respectively) ......................... $ 59,463,750 $ 42,919,969 $ 381,614,341 $ 250,201,595
============= ============= ============= =============
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-48
<PAGE>
Alliance Variable Products Series Fund
================================================================================
<TABLE>
<CAPTION>
Growth Portfolio International Portfolio
--------------------------------- ---------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income ................... $ 1,173,874 $ 687,639 $ 697,067 $ 478,040
Net realized gain on investments
and foreign currency transactions ..... 28,074,041 15,669,717 2,211,966 1,303,323
Net change in unrealized
appreciation (depreciation) of
investments and foreign
currency denominated assets
and liabilities ....................... 41,502,598 33,639,619 5,095,509 116,846
-------------- -------------- -------------- --------------
Net increase in net assets
from operations ....................... 70,750,513 49,996,975 8,004,542 1,898,209
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income ................... (667,879) (265,892) (1,367,666) (523,610)
Net realized gain on investments ........ (15,606,121) (6,564,799) (2,040,979) (836,368)
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) ................. 38,329,947 54,020,810 (254,502) 15,848,071
-------------- -------------- -------------- --------------
Total increase .......................... 92,806,460 97,187,094 4,341,395 16,386,302
NET ASSETS
Beginning of year ....................... 235,874,985 138,687,891 60,710,398 44,324,096
-------------- -------------- -------------- --------------
End of year (including
undistributed net investment
income of $1,157,118, $684,284,
$367,008 and $242,000,
respectively) ......................... $ 328,681,445 $ 235,874,985 $ 65,051,793 $ 60,710,398
============== ============== ============== ==============
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-49
<PAGE>
STATEMENTS OF CHANGES
IN NET ASSETS (continued) Alliance Variable Products Series Fund
================================================================================
<TABLE>
<CAPTION>
Premier Growth Portfolio Quasar Portfolio
--------------------------------- ---------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income (loss) ............ $ (327,127) $ 595,531 $ 414,211 $ 59,268
Net realized gain (loss) on
investments and foreign
currency transactions ................. 31,022,713 (6,667,622) (3,461,226) 5,195,196
Net change in unrealized
appreciation (depreciation) of
investments and foreign
currency denominated assets
and liabilities ....................... 291,597,182 72,666,731 (1,930,679) 79,213
-------------- -------------- -------------- --------------
Net increase (decrease) in net
assets from operations ................ 322,292,768 66,594,640 (4,977,694) 5,333,677
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income ................... (748,382) (324,686) (58,060) (22,104)
Net realized gain on investments ........ -0- -0- (6,038,262) -0-
CAPITAL STOCK TRANSACTIONS
Net increase ............................ 453,383,779 309,621,843 42,667,086 45,123,778
-------------- -------------- -------------- --------------
Total increase .......................... 774,928,165 375,891,797 31,593,070 50,435,351
NET ASSETS
Beginning of year ....................... 472,326,105 96,434,308 59,277,168 8,841,817
-------------- -------------- -------------- --------------
End of year (including
undistributed net investment
income of $0, $594,942,
$261,320 and $45,520,
respectively) ......................... $1,247,254,270 $ 472,326,105 $ 90,870,238 $ 59,277,168
============== ============== ============== ==============
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-50
<PAGE>
Alliance Variable Products Series Fund
================================================================================
<TABLE>
<CAPTION>
Real Estate Investment Portfolio Technology Portfolio
-------------------------------- -----------------------------
Year Ended Period Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1998 1997(a) 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income (loss) ............ $ 793,118 $ 287,942 $ (269,678) $ 84,919
Net realized gain (loss) on
investments and foreign
currency transactions ................. (314,101) 79,169 2,981,897 (2,186,460)
Net change in unrealized
appreciation (depreciation) of
investments and foreign
currency denominated assets
and liabilities ....................... (4,050,201) 1,032,461 45,284,402 3,331,455
------------ ------------ ------------ ------------
Net increase (decrease) in net
assets from operations ................ (3,571,184) 1,399,572 47,996,621 1,229,914
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income ................... (240,978) -0- (121,060) (141,660)
Net realized gain on investments ........ (104,773) -0- -0- -0-
CAPITAL STOCK TRANSACTIONS
Net increase ............................ 7,302,437 12,294,485 13,486,268 40,068,148
------------ ------------ ------------ ------------
Total increase .......................... 3,385,502 13,694,057 61,361,829 41,156,402
NET ASSETS
Beginning of period ..................... 13,694,057 -0- 69,239,833 28,083,431
------------ ------------ ------------ ------------
End of year (including
undistributed net investment
income of $834,185,
$287,942, $283 and $86,270,
respectively) ......................... $ 17,079,559 $ 13,694,057 $130,601,662 $ 69,239,833
============ ============ ============ ============
</TABLE>
- --------------------------------------------------------------------------------
(a) Commencement of operations, January 9, 1997.
See Notes to Financial Statements.
B-51
<PAGE>
STATEMENTS OF CHANGES
IN NET ASSETS (continued) Alliance Variable Products Series Fund
================================================================================
<TABLE>
<CAPTION>
Utility Income Portfolio Worldwide Privatization Portfolio
-------------------------------- ---------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income ................... $ 573,673 $ 462,850 $ 797,477 $ 569,265
Net realized gain on investments
and foreign currency transactions ..... 1,038,950 258,014 2,235,067 2,030,990
Net change in unrealized
appreciation (depreciation) of
investments and foreign
currency denominated assets
and liabilities ....................... 4,488,575 3,238,860 1,068,120 (439,024)
------------ ------------ ------------ ------------
Net increase in net assets from
operations ............................ 6,101,198 3,959,724 4,100,664 2,161,231
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income ................... (467,584) (289,532) (602,038) (348,486)
Net realized gain on investments ........ (217,903) -0- (2,230,552) (421,270)
CAPITAL STOCK TRANSACTIONS
Net increase ............................ 8,673,520 1,820,021 3,181,810 21,619,677
------------ ------------ ------------ ------------
Total increase .......................... 14,089,231 5,490,213 4,449,884 23,011,152
NET ASSETS
Beginning of year ....................... 20,347,006 14,856,793 41,817,965 18,806,813
------------ ------------ ------------ ------------
End of year (including
undistributed net investment
income of $567,409, $461,439,
$817,021 and $502,310,
respectively) ......................... $ 34,436,237 $ 20,347,006 $ 46,267,849 $ 41,817,965
============ ============ ============ ============
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-52
<PAGE>
Alliance Variable Products Series Fund
================================================================================
<TABLE>
<CAPTION>
Global Bond Portfolio Global Dollar Government Portfolio
-------------------------------- ----------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income ................... $ 1,108,817 $ 934,603 $ 1,310,397 $ 1,020,022
Net realized gain (loss) on
investments and foreign
currency transactions ................. 35,057 (551,283) (2,456,480) 739,413
Net change in unrealized
appreciation (depreciation) of
investments and foreign
currency denominated assets
and liabilities ....................... 2,427,349 (187,415) (2,200,919) (463,672)
------------ ------------ ------------ ------------
Net increase (decrease) in net
assets from operations ................ 3,571,223 195,905 (3,347,002) 1,295,763
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income ................... (359,373) (945,935) (1,020,590) (489,948)
Net realized gain on investments ........ (126,325) (219,946) (745,193) (742,125)
CAPITAL STOCK TRANSACTIONS
Net increase ............................ 9,372,064 5,047,231 114,249 6,467,348
------------ ------------ ------------ ------------
Total increase (decrease) ............... 12,457,589 4,077,255 (4,998,536) 6,531,038
NET ASSETS
Beginning of year ....................... 22,194,345 18,117,090 15,378,444 8,847,406
------------ ------------ ------------ ------------
End of year (including
undistributed net investment
income of $867,842, $229,154,
$1,297,076 and $1,013,027,
respectively) ......................... $ 34,651,934 $ 22,194,345 $ 10,379,908 $ 15,378,444
============ ============ ============ ============
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-53
<PAGE>
STATEMENTS OF CHANGES
IN NET ASSETS (continued) Alliance Variable Products Series Fund
================================================================================
<TABLE>
<CAPTION>
North American
High-Yield Portfolio Government Income Portfolio
-------------------------------- --------------------------------
Year Ended Period Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1998 1997(a) 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income ................... $ 1,083,734 $ 7,694 $ 2,994,908 $ 2,088,881
Net realized gain (loss) on
investments and foreign
currency transactions ................. (860,804) 244 (895,371) 292,939
Net change in unrealized
appreciation (depreciation) of
investments and foreign
currency denominated assets
and liabilities ....................... (1,556,891) 11,558 (929,103) (243,915)
------------ ------------ ------------ ------------
Net increase (decrease) in net
assets from operations ................ (1,333,961) 19,496 1,170,434 2,137,905
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income ................... (11,475) -0- (2,126,978) (1,103,754)
Net realized gain on investments ........ -0- -0- (285,327) -0-
CAPITAL STOCK TRANSACTIONS
Net increase ............................ 17,114,316 1,121,859 2,793,932 12,776,700
------------ ------------ ------------ ------------
Total increase .......................... 15,768,880 1,141,355 1,552,061 13,810,851
NET ASSETS
Beginning of period ..................... 1,141,355 -0- 30,506,501 16,695,650
------------ ------------ ------------ ------------
End of year (including
undistributed net investment
income of $1,080,197, $7,694,
$1,754,004 and $2,082,356,
respectively) ......................... $ 16,910,235 $ 1,141,355 $ 32,058,562 $ 30,506,501
============ ============ ============ ============
</TABLE>
- --------------------------------------------------------------------------------
(a) Commencement of operations, October 27, 1997.
See Notes to Financial Statements.
B-54
<PAGE>
Alliance Variable Products Series Fund
================================================================================
<TABLE>
<CAPTION>
U.S. Government/
Short Term Multi Market Portfolio High Grade Securities Portfolio
--------------------------------- --------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income ................... $ 379,654 $ 395,342 $ 2,340,340 $ 1,860,009
Net realized gain (loss) on
investments and foreign
currency transactions ................. (48,980) 111,719 1,404,021 242,976
Net change in unrealized
appreciation (depreciation) of
investments and foreign
currency denominated assets
and liabilities ....................... 59,323 (181,535) (296,956) 558,819
------------ ------------ ------------ ------------
Net increase in net assets from
operations ............................ 389,997 325,526 3,447,405 2,661,804
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income ................... (630,815) (412,899) (1,873,534) (1,409,036)
Net realized gain on investments ........ -0- -0- (214,996) (54,796)
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) ................. 220,210 (535,499) 20,861,049 5,849,902
------------ ------------ ------------ ------------
Total increase (decrease) ............... (20,608) (622,872) 22,219,924 7,047,874
NET ASSETS
Beginning of year ....................... 6,489,432 7,112,304 36,197,778 29,149,904
------------ ------------ ------------ ------------
End of year (including
undistributed net investment
income of $195,069, $473,715,
$2,341,951 and $1,860,125,
respectively) ......................... $ 6,468,824 $ 6,489,432 $ 58,417,702 $ 36,197,778
============ ============ ============ ============
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-55
<PAGE>
STATEMENTS OF CHANGES
IN NET ASSETS (continued) Alliance Variable Products Series Fund
================================================================================
<TABLE>
<CAPTION>
Money Market Portfolio
--------------------------------
Year Ended Year Ended
December 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income .............................. $ 4,568,135 $ 3,452,183
Net realized gain (loss) on investments ............ 178 (298)
------------ ------------
Net increase in net assets from operations ......... 4,568,313 3,451,885
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income .............................. (4,568,135) (3,452,183)
CAPITAL STOCK TRANSACTIONS
Net increase ....................................... 51,989,705 2,814,828
------------ ------------
Total increase ..................................... 51,989,883 2,814,530
NET ASSETS
Beginning of year .................................. 67,583,821 64,769,291
------------ ------------
End of year (including
undistributed net investment
income of $573 and $1,046, respectively) ......... $119,573,704 $ 67,583,821
============ ============
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-56
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 Alliance Variable Products Series Fund
================================================================================
NOTE A: Significant Accounting Policies
Alliance Variable Products Series Fund, Inc. (the "Fund"), was incorporated in
the State of Maryland on November 17, 1987, as an open-end series investment
company. The Fund had no operations prior to November 28, 1990. The Fund offers
nineteen separately managed pools of assets which have differing investment
objectives and policies. The Fund currently issues shares of the Conservative
Investors Portfolio, Growth Investors Portfolio, Total Return Portfolio, Growth
and Income Portfolio, Growth Portfolio, International Portfolio, Premier Growth
Portfolio, Quasar Portfolio, Real Estate Investment Portfolio, Technology
Portfolio, Utility Income Portfolio, Worldwide Privatization Portfolio, Global
Bond Portfolio, Global Dollar Government Portfolio, High-Yield Portfolio, North
American Government Income Portfolio, Short-Term Multi-Market Portfolio, U.S.
Government/High Grade Securities Portfolio and Money Market Portfolio (the
"Portfolios"). The investment objectives of each Portfolio are as follows:
Conservative Investors Portfolio--seeks the highest total return without, in the
view of the Fund's Adviser, undue risk to principal by investing in a
diversified mix of publicly traded equity and fixed-income securities.
Growth Investors Portfolio--seeks the highest total return consistent with what
the Fund's Adviser considers to be reasonable risk by investing in a diversified
mix of publicly traded equity and fixed-income securities.
Total Return Portfolio--seeks to achieve a high return through a combination of
current income and capital appreciation by investing in a diversified portfolio
of common and preferred stocks, senior corporate debt securities, and U.S.
government and agency obligations, bonds and senior debt securities.
Growth and Income Portfolio--seeks to balance the objectives of reasonable
current income and reasonable opportunities for appreciation through investments
primarily in dividend-paying common stocks of good quality.
Growth Portfolio--seeks long-term growth of capital by investing primarily in
common stocks and other equity securities.
International Portfolio--seeks to obtain a total return on its assets from
long-term growth of capital and from income principally through a broad
portfolio of marketable securities of established non-United States companies
(or United States companies having their principal activities and interests
outside the United States), companies participating in foreign economies with
prospects for growth, and foreign government securities.
Premier Growth Portfolio--seeks growth of capital rather than current income. In
pursuing its investment objective, the Premier Growth Portfolio will employ
aggressive investment policies. Since investments will be made based upon their
potential for capital appreciation, current income will be incidental to the
objective of capital growth. The Portfolio is not intended for investors whose
principal objective is assured income or preservation of capital.
Quasar Portfolio--seeks growth of capital by pursuing aggressive investment
policies. The Portfolio invests principally in a diversified portfolio of equity
securities of any company and industry and in any type of security which is
believed to offer possibilities for capital appreciation.
Real Estate Investment Portfolio--seeks total return on its assets from
long-term growth of capital and from income principally through investing in a
portfolio of equity securities of issuers that are primarily engaged in or
related to the real estate industry.
Technology Portfolio--seeks growth of capital through investment in companies
expected to benefit from advances in technology. The Portfolio invests
principally in a diversified portfolio of securities of companies which use
technology extensively in the development of new or improved products or
processes.
Utility Income Portfolio--seeks current income and capital appreciation by
investing primarily in the equity and fixed-income securities of companies in
the utilities industry. The Portfolio's investment objective and policies are
designed to take advantage of the characteristics and historical performance of
securities of utilities companies. The utilities industry consists of companies
engaged in the manufacturing, production, generation, provision, transmission,
sale and distribution of gas, electric energy, and communication equipment and
services, and in the provision of other utility-related goods and services.
Worldwide Privatization Portfolio--seeks long-term capital appreciation by
investing principally in equity securities issued by enterprises that are
undergoing, or have undergone, privatization. The balance of the Portfolio's
investment portfolio will include equity securities of companies that are
believed by the Fund's Adviser to be beneficiaries of the privatization process.
B-57
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(continued) Alliance Variable Products Series Fund
================================================================================
Global Bond Portfolio--seeks 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.
Global Dollar Government Portfolio--seeks a high level of current income through
investing substantially all of its assets in U.S. and non-U.S. fixed income
securities denominated only in U.S. Dollars. As a secondary objective, the
Portfolio seeks capital appreciation substantially all of the Portfolios' assets
will be invested in high yield, high risk securities that are low-rated (i.e.
below investment grade), or of comparable quality and unrated, and that are
considered to be predominantly speculative as regards the issuer capacity to pay
interest and repay principal.
High-Yield Portfolio--seeks the highest level of current income available
without assuming undue risk by investing principally in high-yielding fixed
income securities. As a secondary objective this Portfolio seeks capital
appreciation where consistent with its primary objective. Many of the
high-yielding securities in which the High-Yield Portfolio invests are rated in
the lower rating categories (i.e. below investment grade) by the nationally
recognized rating service. These securities, which are often referred to as
"junk bonds", are subject to greater risk of loss of principle and interest than
higher rated securities and are considered to be predominantly speculative with
respect to the issuer's capacity to pay interest and repay principal.
North American Government Income Portfolio--seeks the highest level of current
income, consistent with what the Fund's Adviser considers to be prudent
investment risk, that is available from a portfolio of debt securities issued or
guaranteed by the governments of the United States, Canada and Mexico, their
political subdivisions (including Canadian Provinces but excluding the states of
the United States), agencies, instrumentalities or authorities. The Portfolio
seeks high current yields by investing in government securities denominated in
local currency and U.S. Dollars. Normally, the Portfolio expects to maintain at
least 25% of its assets in securities denominated in the U.S. Dollar.
Short-Term Multi-Market Portfolio--seeks the highest level of current income,
consistent with what the Fund's Adviser considers to be prudent investment risk,
that is available from a portfolio of high-quality debt securities having
remaining maturities of not more than three years.
U.S. Government/High Grade Securities Portfolio--seeks a high level of current
income consistent with preservation of capital by investing principally in a
portfolio of U.S. government securities and other high grade debt securities.
Money Market Portfolio--seeks safety of principal, maintenance of liquidity and
maximum current income by investing in a broadly diversified portfolio of money
market securities.
The Fund 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 each
Portfolio's net asset value per share.
The financial statements have been prepared in conformity with generally
accepted accounting principles 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
Fund.
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) 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, 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.
B-58
<PAGE>
Alliance Variable Products Series Fund
================================================================================
Securities in which the Money Market Portfolio invests are valued at amortized
cost, under which method a portfolio instrument is valued at cost and any
premium or discount is amortized on a straight-line basis to maturity.
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.
The Portfolios isolate that portion of the results of operations resulting from
changes in foreign exchange rates on investments from the fluctuations arising
from changes in market prices of securities held.
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 witholding tax reclaims recorded on the Portfolio's books and the U.S.
dollar equivalent amounts actually received or paid. Net currency gains and
losses from valuing foreign currency denominated assets and liabilities at year
end exchange rates are reflected as a component of net unrealized appreciation
(depreciation) of investments and foreign currency denominated assets and
liabilities.
3. Organization Expenses
Organization expenses of each Portfolio have been deferred and are being
amortized on a straight-line basis as follows: Conservative Investors Portfolio
$10,000 through October 1999; Growth Investors Portfolio $10,000 through October
1999; Growth Portfolio $10,000 through September 1999; Quasar Portfolio $26,098
through August 2001; Real Estate Investment Portfolio $20,000 through January
2002; Technology Portfolio $21,500 through January 2001; Utility Income
Portfolio $15,299 through April 1999; Worldwide Privatization Portfolio $10,000
through September 1999; Global Dollar Government Portfolio $16,723 through April
1999; North American Government Income Portfolio $21,570 through April 1999.
4. Taxes
It is the Fund'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.
5. 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 trade date securities
are purchased or sold. The Fund accretes discounts as adjustments to interest
income and in the case of the Money Market Portfolio, amortizes premium as well.
Investment gains and losses are determined on the identified cost basis.
6. Dividends and Distributions
Each Portfolio declares and distributes dividends and distributions from net
investment income and net realized gains, respectively, if any, at least
annually, except for dividends on the Money Market Portfolio, which are declared
daily and paid monthly. 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 generally accepted accounting principles. To the extent these differences
are permanent, such amounts are reclassified within the capital accounts based
on their federal tax basis treatment; temporary differences do not require such
reclassification. During the current fiscal year, permanent differences,
primarily due to book/tax differences, resulted in reclassification of amounts
within the composition of net assets. These reclassifications had no effect on
net assets.
- --------------------------------------------------------------------------------
NOTE B: Advisory Fee and Other Transactions with Affiliates
Under the terms of an investment advisory agreement, each Portfolio pays
Alliance Capital Management L.P. (the "Adviser"), an investment advisory fee,
based on average net assets at the following annual rates: Conservative
Investors Portfolio, .75 of 1%; Growth Investors Portfolio, .75 of 1%; Total
Return Portfolio, .625 of 1%; Growth and Income Portfolio, .625% of 1%; Growth
Portfolio, .75 of 1%; International Portfolio, 1%; Premier Growth Portfolio, 1%;
Quasar Portfolio, 1%; Real Estate Investment Portfolio, .90 of 1%; Technology
Portfolio, 1%; Utility Income Portfolio, .75 of 1%; Worldwide Privatization
Portfolio, 1%; Global Bond Portfolio, .65 of
B-59
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(continued) Alliance Variable Products Series Fund
================================================================================
1%; Global Dollar Government Portfolio, .75 of 1%; High-Yield Portfolio, .75 of
1%; North American Government Income Portfolio, .65 of 1%; Short-Term
Multi-Market Portfolio, .55 of 1%; U.S. Government/High Grade Securities
Portfolio, .60 of 1%; and Money Market Portfolio, .50 of 1%. The fee is accrued
daily and paid monthly. For the Global Bond Portfolio, the Adviser has retained,
under a sub-advisory agreement, a sub-adviser, AIGAM International Limited, an
affiliate of American International Group, Inc.
Pursuant to the advisory agreement, the Total Return, Growth & Income, Growth,
Premier Growth and Money Market Portfolios paid $30,000, $60,000, $60,000,
$30,000 and $60,000, respectively, to the Adviser representing the cost of
certain legal and accounting services provided to the Funds by the Adviser for
the year ended December 31, 1998.
The Fund compensates Alliance Fund Services, Inc., a wholly-owned subsidiary of
the Adviser, under a Transfer Agency Agreement for providing personnel and
facilities to perform transfer agency services for the Fund. For the year ended
December 31, 1998, the Fund paid a total of $18,000 which was allocated evenly
among the Portfolios.
During the year ended December 31, 1998, the Adviser voluntarily agreed to waive
its fee and to reimburse the additional operating expenses of each Portfolio,
except for the Premier Growth Portfolio, so that expenses did not exceed .95% of
average net assets. Expense waivers/reimbursements, if any, are accrued daily
and paid monthly. For the year ended December 31, 1998, such
waivers/reimbursements amounted to $103,350, $136,406, $34,652, $272,142,
$270,762, $260,160, $131,314, $227,121, $105,144, $345,796, $63,587, $110,320,
$94,288, $99,140 and $60,000, for the Conservative Investors Portfolio, the
Growth Investors Portfolio, the Total Return Portfolio, the International
Portfolio, the Premier Growth Portfolio, the Quasar Portfolio, the Real Estate
Investment Portfolio, the Technology Portfolio, the Utility Income Portfolio,
the Worldwide Privatization Portfolio, the Global Bond Portfolio, the Global
Dollar Government Portfolio, the High-Yield Portfolio, the North American
Government Income Portfolio, the Short-Term Multi Market Portfolio and the U.S.
Government/High Grade Securities Portfolio, respectively.
Brokerage commissions paid for the year ended December 31, 1998, on investment
transactions amounted to $28,738, $33,108, $58,946, $569,205, $390,366,
$331,720, $669,538, $216,969, $37,237, $77,542, $17,833, and $203,374 for the
Conservative Investors Portfolio, the Growth Investors Portfolio, the Total
Return Portfolio, the Growth and Income Portfolio, the Growth Portfolio, the
International Portfolio, the Premier Growth Portfolio, the Quasar Portfolio, the
Real Estate Investment Portfolio, the Technology Portfolio, the Utility Income
Portfolio and the Worldwide Privatization Portfolio, respectively, of which $250
was paid by the Growth Portfolio, $11,950 was paid by the Premier Growth
Portfolio and $600 was paid by the Quasar Portfolio to Donaldson, Lufkin &
Jenrette Securities Corp., an affiliate of the Adviser.
- --------------------------------------------------------------------------------
NOTE C: Investment Transactions
Purchases and sales of investment securities (excluding short-term investments)
for the year ended December 31, 1998, were as follows:
<TABLE>
<CAPTION>
Purchases Sales
----------------------------------- -----------------------------------
Stocks and U.S. Government Stocks and U.S. Government
Portfolio Debt Obligations and Agencies Debt Obligations and Agencies
- --------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Conservative Investors............ $ 12,192,712 $ 26,740,731 $ 15,561,630 $ 18,973,717
Growth Investors.................. 10,712,503 4,821,900 13,848,748 3,982,150
Total Return...................... 30,624,119 1,900,063 24,492,116 2,317,000
Growth and Income................. 296,166,194 3,739,620 228,883,505 4,208,106
Growth............................ 178,533,222 -0- 164,205,100 -0-
International..................... 71,393,565 -0- 74,314,389 -0-
Quasar............................ 89,521,556 -0- 66,925,948 -0-
Real Estate Investment............ 11,475,983 -0- 4,092,788 -0-
Technology........................ 62,382,969 -0- 50,581,538 -0-
Utility Income.................... 11,438,998 -0- 4,831,994 -0-
Worldwide Privatization........... 42,265,353 -0- 39,153,300 -0-
</TABLE>
B-60
<PAGE>
Alliance Variable Products Series Fund
================================================================================
<TABLE>
<CAPTION>
Purchases Sales
----------------------------------- -----------------------------------
Stocks and U.S. Government Stocks and U.S. Government
Portfolio Debt Obligations and Agencies Debt Obligations and Agencies
- --------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Global Bond....................... 11,942,596 $ 6,480,003 $ 8,875,144 $ 1,595,875
Global Dollar Government.......... 21,747,379 -0- 21,935,721 -0-
High-Yield........................ 44,882,929 -0- 29,128,390 -0-
North American Government
Income......................... 3,274,766 7,177,719 984,141 305,000
Short-Term Multi-Market........... 970,840 -0- 1,827,698 -0-
U.S. Government/High Grade
Securities..................... 17,644,289 107,277,923 15,038,963 82,066,932
</TABLE>
At December 31, 1998, the cost of investments for federal income tax purposes
and the tax basis gross unrealized appreciation, depreciation and net unrealized
appreciation (depreciation) were as follows:
<TABLE>
<CAPTION>
Net
Gross Unrealized Unrealized
----------------------------------- Appreciation
Portfolio Cost Appreciation Depreciation (Depreciation)
- --------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Conservative Investors............ $ 34,432,869 $ 2,867,851 $ (150,115) $ 2,717,736
Growth Investors.................. 17,956,269 3,341,776 (223,503) 3,118,273
Total Return...................... 54,083,403 8,038,139 (2,517,018) 5,521,121
Growth and Income................. 342,994,218 65,094,291 (23,859,278) 41,235,013
Growth............................ 240,221,168 106,507,369 (11,223,126) 95,284,243
International..................... 57,463,923 9,026,679 (2,482,566) 6,544,113
Premier Growth.................... 873,002,745 404,274,377 (22,611,333) 381,663,044
Quasar............................ 95,895,530 8,272,368 (10,848,485) (2,576,117)
Real Estate Investment............ 19,880,847 56,707 (3,119,072) (3,062,365)
Technology........................ 80,256,841 51,435,076 (921,440) 50,513,636
Utility Income.................... 26,054,120 9,638,469 (811,798) 8,826,671
Worldwide Privatization........... 44,241,425 7,369,395 (5,660,022) 1,709,373
Global Bond....................... 29,420,407 2,409,902 (22,196) 2,387,706
Global Dollar Government.......... 12,371,634 455,639 (2,855,645) (2,400,006)
High-Yield........................ 18,042,803 179,195 (1,724,528) (1,545,333)
North American Government
Income......................... 31,781,132 872,403 (888,751) (16,348)
Short-Term Multi-Market........... 6,403,829 126,245 (194,351) (68,106)
U.S. Government/High Grade
Securities..................... 58,608,354 501,333 (154,683) 346,650
</TABLE>
At December 31, 1998, for federal income tax purposes, Quasar, Real Estate,
Global Dollar Government, High Yield, Short-Term Multi-Market Trust and Money
Market Portfolios had net capital loss carryforwards of $1,214,862 which expires
in the year 2006, $191,303 which expires in the year 2006, $2,000,064 which
expires in the year 2006, $63,971 which expires in the year 2006, $1,135,696 (of
which $5,518 expires in the year 2000, $150,822 expires in the year 2002,
$941,593 expires in the year 2003, $32,651 expires in the year 2005 and $5,112
expires in the year 2006), $463 (of which $165 expires in the year 2004 and $298
expires in the year 2005). During the year ended December 31, 1998, Premier
Growth and Technology Portfolios utilized all of the capital loss carryforward
which amounted to $1,518,008 and $2,125,395.
B-61
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(continued) Alliance Variable Products Series Fund
================================================================================
1. Forward Exchange Currency Contracts
The Global Bond and Short-Term Multi-Market Portfolios 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 Portfolios 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.
Each Portfolio's custodian will place and maintain cash not available for
investment or other liquid assets in a separate account of the Portfolio having
a value equal to the aggregate amount of the respective portfolios 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 each Portfolio has in that particular
currency contract.
At December 31, 1998, the outstanding forward exchange currency contracts were
as follows:
GLOBAL BOND PORTFOLIO:
<TABLE>
<CAPTION>
U.S. $
Contract Value on U.S. $
Amount Origination Current Unrealized
(000) Date Value Appreciation
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Foreign Currency Sale Contract
Swedish Krona, settling 1/27/99........ 13,000 $1,606,922 $1,601,911 $ 5,011
========
</TABLE>
SHORT-TERM MULTI-MARKET PORTFOLIO:
<TABLE>
<CAPTION>
U.S. $
Contract Value on U.S. $ Unrealized
Amount Origination Current Appreciation
(000) Date Value (Depreciation)
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Foreign Currency Sale Contracts
Danish Kroner, settling 1/29/99........ 2,000 $ 309,487 $ 314,498 $ (5,011)
Deutsche Mark, settling 1/15/99........ 1,179 710,391 708,089 2,302
French Franc, settling 1/15/99......... 1,769 317,702 316,566 1,136
Italian Lira, settling 1/15/99......... 500,000 303,582 302,615 967
Japanese Yen, settling 3/15/99......... 23,667 206,880 211,431 (4,551)
New Zealand Dollar, settling 3/15/99 .. 1,303 681,053 686,304 (5,251)
Norwegian Kroner, settling 2/8/99...... 2,672 357,833 350,441 7,392
Swedish Krona, settling 1/19/99........ 3,438 429,751 423,498 6,253
--------
$ 3,237
========
</TABLE>
2. Option Transactions
For hedging and investment purposes, the Portfolios purchase and write (sell)
put and call 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
B-62
<PAGE>
Alliance Variable Products Series Fund
================================================================================
subsequently adjusted to the current market value of the option written.
Premiums received from written options which expire unexercised are recorded by
the Portfolio on the expiration date as realized gains from option written. 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. If a put option is exercised, the premium received
reduces the cost basis of the security or currency purchased by the Portfolio.
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.
For the year ended December 31, 1998, the Portfolio did not engage in any option
transactions.
- --------------------------------------------------------------------------------
NOTE D: Capital Stock
There are 10,000,000,000 shares of capital stock, $.001 par value per share of
the Fund authorized. Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
Conservative Investors Portfolio
----------------------------------- -----------------------------------
SHARES AMOUNT
----------------------------------- -----------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Shares sold....................... 675,652 780,780 $ 9,097,687 $ 9,838,439
Shares issued in reinvestment of
dividends and distributions.... 171,184 48,986 2,261,337 608,412
Shares redeemed................... (489,669) (325,161) (6,538,315) (4,119,080)
-------------- -------------- -------------- --------------
Net increase...................... 357,167 504,605 $ 4,820,709 $ 6,327,771
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
Growth Investors Portfolio
----------------------------------- -----------------------------------
SHARES AMOUNT
----------------------------------- -----------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Shares sold....................... 263,760 436,739 $ 4,023,709 $ 6,003,204
Shares issued in reinvestment of
dividends and distributions.... 105,839 28,259 1,586,520 381,219
Shares redeemed................... (235,959) (150,934) (3,476,208) (2,021,626)
-------------- -------------- -------------- --------------
Net increase...................... 133,640 314,064 $ 2,134,021 $ 4,362,797
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
Total Return Portfolio
----------------------------------- -----------------------------------
SHARES AMOUNT
----------------------------------- -----------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Shares sold....................... 1,066,045 880,572 $ 18,467,616 $ 14,008,071
Shares issued in reinvestment of
dividends and distributions.... 274,525 97,356 4,653,200 1,500,260
Shares redeemed................... (583,936) (210,529) (9,872,260) (3,329,402)
-------------- -------------- -------------- --------------
Net increase...................... 756,634 767,399 $ 13,248,556 $ 12,178,929
============== ============== ============== ==============
</TABLE>
B-63
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(continued) Alliance Variable Products Series Fund
================================================================================
<TABLE>
<CAPTION>
Growth and Income Portfolio
----------------------------------- -----------------------------------
SHARES AMOUNT
----------------------------------- -----------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Shares sold....................... 5,339,328 4,651,201 $ 109,529,029 $ 85,220,780
Shares issued in reinvestment of
dividends and distributions.... 1,482,301 585,541 30,387,175 10,422,633
Shares redeemed................... (1,904,291) (411,208) (37,130,261) (7,514,572)
-------------- -------------- -------------- --------------
Net increase...................... 4,917,338 4,825,534 $ 102,785,943 $ 88,128,841
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
Growth Portfolio
----------------------------------- -----------------------------------
SHARES AMOUNT
----------------------------------- -----------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Shares sold....................... 2,150,440 3,011,243 $ 51,763,496 $ 58,667,838
Shares issued in reinvestment of
dividends and distributions.... 657,801 359,699 16,274,000 6,830,691
Shares redeemed................... (1,267,396) (589,726) (29,707,549) (11,477,719)
-------------- -------------- -------------- --------------
Net increase...................... 1,540,845 2,781,216 $ 38,329,947 $ 54,020,810
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
International Portfolio
----------------------------------- -----------------------------------
SHARES AMOUNT
----------------------------------- -----------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Shares sold....................... 8,028,440 5,433,762 $ 130,223,344 $ 83,558,930
Shares issued in reinvestment of
dividends and distributions.... 209,505 85,533 3,408,645 1,359,978
Shares redeemed................... (8,256,225) (4,454,018) (133,886,491) (69,070,837)
-------------- -------------- -------------- --------------
Net increase (decrease)........... (18,280) 1,065,277 $ (254,502) $ 15,848,071
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
Premier Growth Portfolio
----------------------------------- -----------------------------------
SHARES AMOUNT
----------------------------------- -----------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Shares sold....................... 21,307,889 18,381,290 $ 546,039,957 $ 348,392,336
Shares issued in reinvestment of
dividends and distributions.... 27,956 17,344 748,382 324,686
Shares redeemed................... (3,650,182) (2,038,212) (93,404,560) (39,095,179)
-------------- -------------- -------------- --------------
Net increase...................... 17,685,663 16,360,422 $ 453,383,779 $ 309,621,843
============== ============== ============== ==============
</TABLE>
B-64
<PAGE>
Alliance Variable Products Series Fund
================================================================================
<TABLE>
<CAPTION>
Quasar Portfolio
----------------------------------- -----------------------------------
SHARES AMOUNT
----------------------------------- -----------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Shares sold....................... 4,852,440 4,114,230 $ 56,389,957 $ 48,077,255
Shares issued in reinvestment of
dividends and distributions.... 471,122 1,959 6,096,321 22,104
Shares redeemed................... (1,865,305) (246,062) (19,819,192) (2,975,581)
-------------- -------------- -------------- --------------
Net increase...................... 3,458,257 3,870,127 $ 42,667,086 $ 45,123,778
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
Real Estate Investment Portfolio
----------------------------------- -----------------------------------
SHARES AMOUNT
----------------------------------- -----------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Shares sold....................... 1,017,147 1,182,129 $ 11,445,744 $ 13,064,224
Shares issued in reinvestment of
dividends and distributions.... 31,720 -0- 345,751 -0-
Shares redeemed................... (411,779) (71,998) (4,489,058) (769,739)
-------------- -------------- -------------- --------------
Net increase...................... 637,088 1,110,131 $ 7,302,437 $ 12,294,485
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
Technology Portfolio
----------------------------------- -----------------------------------
SHARES AMOUNT
----------------------------------- -----------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Shares sold....................... 2,683,902 3,792,319 $ 39,262,852 $ 45,101,686
Shares issued in reinvestment of
dividends...................... 8,130 12,276 121,060 141,660
Shares redeemed................... (1,789,557) (437,863) (25,897,644) (5,175,198)
-------------- -------------- -------------- --------------
Net increase...................... 902,475 3,366,732 $ 13,486,268 $ 40,068,148
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
Utility Income Portfolio
----------------------------------- -----------------------------------
SHARES AMOUNT
----------------------------------- -----------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Shares sold....................... 827,755 353,259 $ 13,812,249 $ 4,795,124
Shares issued in reinvestment of
dividends and distributions.... 41,319 22,136 685,488 289,532
Shares redeemed................... (345,013) (247,410) (5,824,217) (3,264,635)
-------------- -------------- -------------- --------------
Net increase...................... 524,061 127,985 $ 8,673,520 $ 1,820,021
============== ============== ============== ==============
</TABLE>
- --------------------------------------------------------------------------------
(a) Commencement of operations, January 9, 1997.
B-65
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(continued) Alliance Variable Products Series Fund
================================================================================
<TABLE>
<CAPTION>
Worldwide Privatization Portfolio
----------------------------------- -----------------------------------
SHARES AMOUNT
----------------------------------- -----------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Shares sold....................... 574,559 1,621,182 $ 8,801,773 $ 23,165,163
Shares issued in reinvestment of
dividends and distributions.... 188,588 53,013 2,832,590 769,756
Shares redeemed................... (584,343) (162,366) (8,452,553) (2,315,242)
-------------- -------------- -------------- --------------
Net increase...................... 178,804 1,511,829 $ 3,181,810 $ 21,619,677
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
Global Bond Portfolio
----------------------------------- -----------------------------------
SHARES AMOUNT
----------------------------------- -----------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Shares sold....................... 1,110,903 615,554 $ 13,087,136 $ 6,854,237
Shares issued in reinvestment of
dividends and distributions.... 43,327 107,060 485,698 1,165,881
Shares redeemed................... (363,470) (266,344) (4,200,770) (2,972,887)
-------------- -------------- -------------- --------------
Net increase...................... 790,760 456,270 $ 9,372,064 $ 5,047,231
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
Global Dollar Government Portfolio
----------------------------------- -----------------------------------
SHARES AMOUNT
----------------------------------- -----------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Shares sold....................... 266,108 567,148 $ 3,464,930 $ 8,477,375
Shares issued in reinvestment of
dividends and distributions.... 136,883 90,285 1,765,784 1,232,073
Shares redeemed................... (433,004) (225,116) (5,116,465) (3,242,100)
-------------- -------------- -------------- --------------
Net increase (decrease)........... (30,013) 432,317 $ 114,249 $ 6,467,348
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
High-Yield Portfolio
----------------------------------- -----------------------------------
SHARES AMOUNT
----------------------------------- -----------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Shares sold....................... 2,333,171 110,513 $ 24,996,204 $ 1,122,331
Shares issued in reinvestment of
dividends...................... 1,032 -0- 11,475 -0-
Shares redeemed................... (743,394) (47) (7,893,363) (472)
-------------- -------------- -------------- --------------
Net increase...................... 1,590,809 110,466 $ 17,114,316 $ 1,121,859
============== ============== ============== ==============
</TABLE>
- --------------------------------------------------------------------------------
(b) Commencement of operations, October 27, 1997.
B-66
<PAGE>
Alliance Variable Products Series Fund
================================================================================
<TABLE>
<CAPTION>
North American Government Income Portfolio
----------------------------------- -----------------------------------
SHARES AMOUNT
----------------------------------- -----------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Shares sold....................... 807,658 1,306,695 $ 10,378,068 $ 16,666,170
Shares issued in reinvestment of
dividends and distributions.... 195,804 88,019 2,412,304 1,103,754
Shares redeemed................... (800,671) (391,062) (9,996,440) (4,993,224)
-------------- -------------- -------------- --------------
Net increase...................... 202,791 1,003,652 $ 2,793,932 $ 12,776,700
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
Short-Term Multi-Market Portfolio
----------------------------------- -----------------------------------
SHARES AMOUNT
----------------------------------- -----------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Shares sold....................... 320,284 366,280 $ 3,296,379 $ 3,882,391
Shares issued in reinvestment of
dividends...................... 64,303 40,165 630,815 412,899
Shares redeemed................... (357,998) (455,606) (3,706,984) (4,830,789)
-------------- -------------- -------------- --------------
Net increase (decrease)........... 26,589 (49,161) $ 220,210 $ (535,499)
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
U.S. Government/High Grade Securities Portfolio
----------------------------------- -----------------------------------
SHARES AMOUNT
----------------------------------- -----------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Shares sold....................... 2,327,632 870,507 $ 28,190,782 $ 10,135,743
Shares issued in reinvestment of
dividends and distributions.... 178,050 129,085 2,088,529 1,463,832
Shares redeemed................... (777,937) (497,164) (9,418,262) (5,749,673)
-------------- -------------- -------------- --------------
Net increase...................... 1,727,745 502,428 $ 20,861,049 $ 5,849,902
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
Money Market Portfolio
----------------------------------- -----------------------------------
SHARES AMOUNT
----------------------------------- -----------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Shares sold....................... 426,000,949 260,121,111 $ 426,000,949 $ 260,121,111
Shares issued in reinvestment of
dividends...................... 4,568,135 3,452,183 4,568,135 3,452,183
Shares redeemed................... (378,579,379) (260,758,466) (378,579,379) (260,758,466)
-------------- -------------- -------------- --------------
Net increase...................... 51,989,705 2,814,828 $ 51,989,705 $ 2,814,828
============== ============== ============== ==============
</TABLE>
B-67
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(continued) Alliance Variable Products Series Fund
================================================================================
NOTE E: 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 F: Bank Borrowing
A number of open-end mutual funds managed by the Adviser, including the Fund,
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 Fund did not
utilize the Facility during the year ended December 31, 1998.
B-68
<PAGE>
FINANCIAL HIGHLIGHTS Alliance Variable Products Series Fund
================================================================================
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
-----------------------------------------------------------
CONSERVATIVE INVESTORS PORTFOLIO
-----------------------------------------------------------
October 28,
1994(a)
Year Ended December 31, to
------------------------------------------- December 31,
1998 1997 1996 1995 1994
------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............................. $ 13.10 $ 12.07 $ 11.76 $ 10.07 $ 10.00
------- ------- ------- ------- -------
Income From Investment Operations
Net investment income (b)(c) ..................................... .50 .48 .45 .51 .06
Net realized and unrealized gain (loss) on investments
and foreign currency transactions ............................ 1.31 .86 (.01) 1.20 .01
------- ------- ------- ------- -------
Net increase in net asset value from operations .................. 1.81 1.34 .44 1.71 .07
------- ------- ------- ------- -------
Less: Dividends and Distributions
Dividends from net investment income ............................. (.38) (.31) (.09) (.02) -0-
Distributions from net realized gains ............................ (.50) -0- (.04) -0- -0-
------- ------- ------- ------- -------
Total dividends and distributions ................................ (.88) (.31) (.13) (.02) -0-
------- ------- ------- ------- -------
Net asset value, end of period ................................... $ 14.03 $ 13.10 $ 12.07 $ 11.76 $ 10.07
======= ======= ======= ======= =======
Total Return
Total investment return based on net asset value (d) ............. 14.20% 11.22% 3.79% 16.99% .70%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) ........................ $37,341 $30,196 $21,729 $ 7,420 $ 701
Ratios to average net assets of:
Expenses, net of waivers and reimbursements ................... .90% .95% .95% .95% .95%(e)
Expenses, before waivers and reimbursements ................... 1.19% 1.33% 1.40% 4.25% 20.35%(e)
Net investment income (b) ..................................... 3.69% 3.85% 3.93% 4.65% 3.55%(e)
Portfolio turnover rate .......................................... 123% 209% 211% 61% 2%
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------
GROWTH INVESTORS PORTFOLIO
-----------------------------------------------------------
October 28,
1994(a)
Year Ended December 31, to
------------------------------------------ December 31,
1998 1997 1996 1995 1994
------- ------- ------- ------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............................. $ 14.38 $ 12.74 $ 11.87 $ 9.86 $10.00
------- ------- ------- ------ ------
Income From Investment Operations
Net investment income (b)(c) ..................................... .26 .23 .24 .35 .04
Net realized and unrealized gain (loss) on investments
and foreign currency transactions ............................. 3.03 1.83 .72 1.67 (.18)
------- ------- ------- ------ ------
Net increase (decrease) in net asset value from operations ....... 3.29 2.06 .96 2.02 (.14)
------- ------- ------- ------ ------
Less: Dividends and Distributions
Dividends from net investment income ............................. (.18) (.20) (.07) (.01) -0-
Distributions from net realized gains ............................ (1.16) (.22) (.02) -0- -0-
------- ------- ------- ------ ------
Total dividends and distributions ................................ (1.34) (.42) (.09) (.01) -0-
------- ------- ------- ------ ------
Net asset value, end of period ................................... $ 16.33 $ 14.38 $ 12.74 $11.87 $ 9.86
======= ======= ======= ====== ======
Total Return
Total investment return based on net asset value (d) ............. 23.68% 16.34% 8.18% 20.48% (1.40)%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) ........................ $21,028 $16,600 $10,709 $4,978 $ 321
Ratios to average net assets of:
Expenses, net of waivers and reimbursements ................... .94% .95% .95% .95% .95%(e)
Expenses, before waivers and reimbursements ................... 1.68% 1.70% 1.85% 6.17% 41.62%(e)
Net investment income (b) ..................................... 1.71% 1.72% 2.01% 3.21% 2.29%(e)
Portfolio turnover rate .......................................... 100% 164% 160% 50% 3%
</TABLE>
- --------------------------------------------------------------------------------
See footnote summary on page B-78.
B-69
<PAGE>
FINANCIAL HIGHLIGHTS (continued) Alliance Variable Products Series Fund
================================================================================
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Year
<TABLE>
<CAPTION>
--------------------------------------------------------
TOTAL RETURN PORTFOLIO
--------------------------------------------------------
Year Ended December 31,
--------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ................................... $ 16.92 $ 14.63 $ 12.80 $ 10.41 $ 10.97
-------- -------- -------- -------- --------
Income From Investment Operations
Net investment income (b)(c) ......................................... .41 .39 .27 .36 .15
Net realized and unrealized gain (loss) on investment transactions ... 2.36 2.62 1.66 2.10 (.56)
-------- -------- -------- -------- --------
Net increase (decrease) in net asset value from operations ........... 2.77 3.01 1.93 2.46 (.41)
-------- -------- -------- -------- --------
Less: Dividends and Distributions
Dividends from net investment income ................................. (.29) (.23) (.07) (.07) (.09)
Distributions from net realized gains ................................ (1.34) (.49) (.03) -0- (.06)
-------- -------- -------- -------- --------
Total dividends and distributions .................................... (1.63) (.72) (.10) (.07) (.15)
-------- -------- -------- -------- --------
Net asset value, end of year ......................................... $ 18.06 $ 16.92 $ 14.63 $ 12.80 $ 10.41
======== ======== ======== ======== ========
Total Return
Total investment return based on net asset value (d) ................. 16.99% 21.11% 15.17% 23.67% (3.77)%
Ratios/Supplemental Data
Net assets, end of year (000's omitted) .............................. $ 59,464 $ 42,920 $ 25,875 $ 8,242 $ 750
Ratios to average net assets of:
Expenses, net of waivers and reimbursements ....................... .88% .88% .95% .95% .95%
Expenses, before waivers and reimbursements ....................... .95% .88% 1.12% 4.49% 19.49%
Net investment income (b) ......................................... 2.41% 2.46% 2.76% 3.16% 2.29%
Portfolio turnover rate .............................................. 57% 65% 57% 30% 83%
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------
GROWTH AND INCOME PORTFOLIO
--------------------------------------------------------
Year Ended December 31,
--------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ................................... $ 19.93 $ 16.40 $ 15.79 $ 11.85 $ 12.18
-------- -------- -------- -------- --------
Income From Investment Operations
Net investment income (b)(c) ......................................... .22 .21 .24 .27 .10
Net realized and unrealized gain (loss) on investment transactions ... 3.81 4.39 3.18 3.94 (.16)
-------- -------- -------- -------- --------
Net increase (decrease) in net asset value from operations ........... 4.03 4.60 3.42 4.21 (.06)
-------- -------- -------- -------- --------
Less: Dividends and Distributions
Dividends from net investment income ................................. (.16) (.13) (.25) (.13) (.10)
Distributions from net realized gains ................................ (1.96) (.94) (2.56) (.14) (.17)
-------- -------- -------- -------- --------
Total dividends and distributions .................................... (2.12) (1.07) (2.81) (.27) (.27)
-------- -------- -------- -------- --------
Net asset value, end of year ......................................... $ 21.84 $ 19.93 $ 16.40 $ 15.79 $ 11.85
======== ======== ======== ======== ========
Total Return
Total investment return based on net asset value (d) ................. 20.89% 28.80% 24.09% 35.76% (.35)%
Ratios/Supplemental Data
Net assets, end of year (000's omitted) .............................. $381,614 $250,202 $126,729 $ 41,993 $ 41,702
Ratios to average net assets of:
Expenses, net of waivers and reimbursements ....................... .73% .72% .82% .79% .90%
Expenses, before waivers and reimbursements ....................... .73% .72% .82% .79% .91%
Net investment income (b) ......................................... 1.07% 1.16% 1.58% 1.95% 1.71%
Portfolio turnover rate .............................................. 79% 86% 87% 150% 95%
</TABLE>
- --------------------------------------------------------------------------------
See footnote summary on page B-78.
B-70
<PAGE>
Alliance Variable Products Series Fund
================================================================================
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
-------------------------------------------------------------
GROWTH PORTFOLIO
-------------------------------------------------------------
September 15,
1994(a)
Year Ended December 31, to
---------------------------------------------- December 31,
1998 1997 1996 1995 1994
-------- -------- -------- ------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........................... $ 22.42 $ 17.92 $ 14.23 $ 10.53 $ 10.00
-------- -------- -------- ------- -------
Income From Investment Operations
Net investment income (b)(c) ................................... .10 .07 .06 .17 .03
Net realized and unrealized gain on investment transactions .... 6.19 5.18 3.95 3.54 .50
-------- -------- -------- ------- -------
Net increase in net asset value from operations ................ 6.29 5.25 4.01 3.71 .53
-------- -------- -------- ------- -------
Less: Dividends and Distributions
Dividends from net investment income ........................... (.06) (.03) (.04) (.01) -0-
Distributions from net realized gains .......................... (1.40) (.72) (.28) -0- -0-
-------- -------- -------- ------- -------
Total dividends and distributions .............................. (1.46) (.75) (.32) (.01) -0-
-------- -------- -------- ------- -------
Net asset value, end of period ................................. $ 27.25 $ 22.42 $ 17.92 $ 14.23 $ 10.53
======== ======== ======== ======= =======
Total Return
Total investment return based on net asset value (d) ........... 28.73% 30.02% 28.49% 35.23% 5.30%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) ...................... $328,681 $235,875 $138,688 $45,220 $ 5,492
Ratios to average net assets of:
Expenses, net of waivers and reimbursements ................. .87% .84% .93% .95% .95%(e)
Expenses, before waivers and reimbursements ................. .87% .84% .93% 1.27% 4.19%(e)
Net investment income (b) ................................... .43% .37% .35% 1.31% 1.17%(e)
Portfolio turnover rate ........................................ 62% 62% 98% 86% 25%
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------
International Portfolio
------------------------------------------------------------
Year Ended December 31,
------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ............................. $ 15.02 $ 14.89 $ 14.07 $ 12.88 $ 12.16
-------- -------- -------- -------- --------
Income From Investment Operations
Net investment income (b)(c) ................................... .17 .13 .19 .18 .10
Net realized and unrealized gain on investments and foreign
currency transactions ....................................... 1.80 .39 .83 1.08 .72
-------- -------- -------- -------- --------
Net increase in net asset value from operations ................ 1.97 .52 1.02 1.26 .82
-------- -------- -------- -------- --------
Less: Dividends and Distributions
Dividends from net investment income ........................... (.33) (.15) (.08) (.03) (.02)
Distributions from net realized gains .......................... (.49) (.24) (.12) (.04) (.08)
-------- -------- -------- -------- --------
Total dividends and distributions .............................. (.82) (.39) (.20) (.07) (.10)
-------- -------- -------- -------- --------
Net asset value, end of year ................................... $ 16.17 $ 15.02 $ 14.89 $ 14.07 $ 12.88
======== ======== ======== ======== ========
Total Return
Total investment return based on net asset value (d) ........... 13.02% 3.33% 7.25% 9.86% 6.70%
Ratios/Supplemental Data
Net assets, end of year (000's omitted) ........................ $ 65,052 $ 60,710 $ 44,324 $ 16,542 $ 7,276
Ratios to average net assets of:
Expenses, net of waivers and reimbursements ................. .95% .95% .95% .95% .95%
Expenses, before waivers and reimbursements ................. 1.37% 1.42% 1.91% 2.99% 7.26%
Net investment income (b) ................................... 1.08% .87% 1.29% 1.41% .90%
Portfolio turnover rate ........................................ 117% 134% 60% 87% 95%
</TABLE>
- --------------------------------------------------------------------------------
See footnote summary on page B-78.
B-71
<PAGE>
FINANCIAL HIGHLIGHTS (continued) Alliance Variable Products Series Fund
================================================================================
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
-------------------------------------------------------
PREMIER GROWTH PORTFOLIO
-------------------------------------------------------
Year Ended December 31,
-------------------------------------------------------
1998 1997 1996 1995 1994
---------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ................................... $ 20.99 $ 15.70 $ 17.80 $ 12.37 $ 12.79
---------- -------- ------- ------- -------
Income From Investment Operations
Net investment income (loss) (b)(c) .................................. (.01) .04 .08 .09 .03
Net realized and unrealized gain (loss) on investment transactions ... 10.08 5.27 3.29 5.44 (.41)
---------- -------- ------- ------- -------
Net increase (decrease) in net asset value from operations ........... 10.07 5.31 3.37 5.53 (.38)
---------- -------- ------- ------- -------
Less: Dividends and Distributions
Dividends from net investment income ................................. (.03) (.02) (.10) (.03) (.01)
Distributions from net realized gains ................................ -0- -0- (5.37) (.07) (.03)
---------- -------- ------- ------- -------
Total dividends and distributions .................................... (.03) (.02) (5.47) (.10) (.04)
---------- -------- ------- ------- -------
Net asset value, end of year ......................................... $ 31.03 $ 20.99 $ 15.70 $ 17.80 $ 12.37
========== ======== ======= ======= =======
Total Return
Total investment return based on net asset value (d) ................. 47.97% 33.86% 22.70% 44.85% (2.96)%
Ratios/Supplemental Data
Net assets, end of year (000's omitted) .............................. $1,247,254 $472,326 $96,434 $29,278 $37,669
Ratios to average net assets of:
Expenses, net of waivers and reimbursements ....................... 1.06% .95% .95% .95% .95%
Expenses, before waivers and reimbursements ....................... 1.09% 1.10% 1.23% 1.19% 1.40%
Net investment income (loss) (b) .................................. (.04)% .21% .52% .55% .42%
Portfolio turnover rate .............................................. 31% 27% 32% 97% 38%
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------
QUASAR PORTFOLIO
-------------------------------------
August 5,
Year Ended December 31, 1996(a) to
---------------------- December 31,
1998 1997 1996
-------- -------- ------------
<S> <C> <C> <C>
Net asset value, beginning of period ........................................ $ 12.61 $ 10.64 $ 10.00
-------- -------- --------
Income From Investment Operations
Net investment income (b)(c) ................................................ .07 .02 .04
Net realized and unrealized gain (loss) on investment transactions .......... (.49) 1.96 .60
-------- -------- --------
Net increase (decrease) in net asset value from operations .................. (.42) 1.98 .64
-------- -------- --------
Less: Dividends and Distributions
Dividends from net investment income ........................................ (.01) (.01) -0-
Distributions from net realized gains ....................................... (1.04) -0- -0-
-------- -------- --------
Total dividends and distributions ........................................... (1.05) (.01) -0-
-------- -------- --------
Net asset value, end of period .............................................. $ 11.14 $ 12.61 $ 10.64
======== ======== ========
Total Return
Total investment return based on net asset value (d) ........................ (4.49)% 18.60% 6.40%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) ................................... $ 90,870 $ 59,277 $ 8,842
Ratios to average net assets of:
Expenses, net of waivers and reimbursements .............................. .95% .95% .95%(e)
Expenses, before waivers and reimbursements .............................. 1.30% 1.37% 4.44%(e)
Net investment income (b) ................................................ .55% .17% .93%(e)
Portfolio turnover rate ..................................................... 107% 210% 40%
</TABLE>
- --------------------------------------------------------------------------------
See footnote summary on page B-78.
B-72
<PAGE>
Alliance Variable Products Series Fund
================================================================================
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
----------------------------
REAL ESTATE
INVESTMENT
PORTFOLIO
----------------------------
January 9,
Year Ended 1997(a) to
December 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Net asset value, beginning of period ....................................... $ 12.34 $ 10.00
---------- ----------
Income From Investment Operations
Net investment income (b)(c) ............................................... .54 .56
Net realized and unrealized gain (loss) on investment transactions ......... (2.87) 1.78
---------- ----------
Net increase (decrease) in net asset value from operations ................. (2.33) 2.34
---------- ----------
Less: Dividends and Distributions
Dividends from net investment income ....................................... (.16) -0-
Distributions from net realized gains ...................................... (.07) -0-
---------- ----------
Total dividends and distributions .......................................... (.23) -0-
---------- ----------
Net asset value, end of period ............................................. $ 9.78 $ 12.34
========== ==========
Total Return
Total investment return based on net asset value (d) ....................... (19.07)% 23.40%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) .................................. $ 17,080 $ 13,694
Ratios to average net assets of:
Expenses, net of waivers and reimbursements ............................. .95% .95%(e)
Expenses, before waivers and reimbursements ............................. 1.77% 2.31%(e)
Net investment income (b) ............................................... 4.98% 5.47%(e)
Portfolio turnover rate .................................................... 27% 26%
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------
TECHNOLOGY PORTFOLIO
-------------------------------------------
January 11,
1996(a)
Year Ended December 31, to
-------------------------- December 31,
1998 1997 1996
---------- ---------- ------------
<S> <C> <C> <C>
Net asset value, beginning of period ............................. $ 11.72 $ 11.04 $ 10.00
---------- ---------- ----------
Income From Investment Operations
Net investment income (loss) (b)(c) .............................. (.04) .02 .11
Net realized and unrealized gain on investment transactions ...... 7.51 .69 .93
---------- ---------- ----------
Net increase in net asset value from operations .................. 7.47 .71 1.04
---------- ---------- ----------
Less: Dividends
Dividends from net investment income ............................. (.02) (.03) -0-
---------- ---------- ----------
Net asset value, end of period ................................... $ 19.17 $ 11.72 $ 11.04
========== ========== ==========
Total Return
Total investment return based on net asset value (d) ............. 63.79% 6.47% 10.40%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) ........................ $ 130,602 $ 69,240 $ 28,083
Ratios to average net assets of:
Expenses, net of waivers and reimbursements ................... .95% .95% .95%(e)
Expenses, before waivers and reimbursements ................... 1.20% 1.19% 1.62%(e)
Net investment income (loss) (b) .............................. (.30)% .16% 1.17%(e)
Portfolio turnover rate .......................................... 63% 46% 22%
</TABLE>
- --------------------------------------------------------------------------------
See footnote summary on page B-78.
B-73
<PAGE>
FINANCIAL HIGHLIGHTS (continued) Alliance Variable Products Series Fund
================================================================================
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
-----------------------------------------------------------
UTILITY INCOME PORTFOLIO
-----------------------------------------------------------
May 10, 1994(a)
Year Ended December 31, to
------------------------------------------- December 31,
1998 1997 1996 1995 1994
------- ------- ------- ------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............................. $ 15.67 $ 12.69 $ 12.01 $ 9.96 $ 10.00
------- ------- ------- ------- -------
Income From Investment Operations
Net investment income (b)(c) ..................................... .37 .38 .31 .30 .28
Net realized and unrealized gain (loss) on investments
and foreign currency transactions ............................. 3.31 2.84 .62 1.83 (.32)
------- ------- ------- ------- -------
Net increase (decrease) in net asset value from operations ....... 3.68 3.22 .93 2.13 (.04)
------- ------- ------- ------- -------
Less: Dividends and Distributions
Dividends from net investment income ............................. (.31) (.24) (.09) (.08) -0-
Distributions from net realized gains ............................ (.14) -0- (.16) -0- -0-
------- ------- ------- ------- -------
Total dividends and distributions ................................ (.45) (.24) (.25) (.08) -0-
------- ------- ------- ------- -------
Net asset value, end of period ................................... $ 18.90 $ 15.67 $ 12.69 $ 12.01 $ 9.96
======= ======= ======= ======= =======
Total Return
Total investment return based on net asset value (d) ............. 23.91% 25.71% 7.88% 21.45% (.40)%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) ........................ $34,436 $20,347 $14,857 $ 6,251 $ 1,254
Ratios to average net assets of:
Expenses, net of waivers and reimbursements ................... .95% .95% .95% .95% .95%(e)
Expenses, before waivers and reimbursements ................... 1.35% 1.08% 1.51% 3.79% 15.98%(e)
Net investment income (b) ..................................... 2.20% 2.83% 2.61% 2.73% 4.62%(e)
Portfolio turnover rate .......................................... 20% 30% 75% 138% 31%
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------
WORLDWIDE PRIVATIZATION PORTFOLIO
----------------------------------------------------------
September 23,
1994(a)
Year Ended December 31, to
------------------------------------------- December 31,
1998 1997 1996 1995 1994
------- ------- ------- ------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $ 14.20 $ 13.13 $ 11.17 $ 10.10 $ 10.00
------- ------- ------- ------- -------
Income From Investment Operations
Net investment income (b)(c) .............................. .26 .25 .28 .32 .10
Net realized and unrealized gain on investments
and foreign currency transactions ...................... 1.29 1.17 1.78 .78 -0-
------- ------- ------- ------- -------
Net increase in net asset value from operations ........... 1.55 1.42 2.06 1.10 .10
------- ------- ------- ------- -------
Less: Dividends and Distributions
Dividends from net investment income ...................... (.20) (.16) (.10) (.03) -0-
Distributions from net realized gains ..................... (.74) (.19) -0- -0- -0-
------- ------- ------- ------- -------
Total dividends and distributions ......................... (.94) (.35) (.10) (.03) -0-
------- ------- ------- ------- -------
Net asset value, end of period ............................ $ 14.81 $ 14.20 $ 13.13 $ 11.17 $ 10.10
======= ======= ======= ======= =======
Total Return
Total investment return based on net asset value (d) ...... 10.83% 10.75% 18.51% 10.87% 1.00%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) ................. $46,268 $41,818 $18,807 $ 5,947 $ 1,127
Ratios to average net assets of:
Expenses, net of waivers and reimbursements ............ .95% .95% .95% .95% .95%(e)
Expenses, before waivers and reimbursements ............ 1.70% 1.55% 1.85% 4.17% 18.47%(e)
Net investment income (b) .............................. 1.74% 1.76% 2.26% 2.96% 4.27%(e)
Portfolio turnover rate ................................... 92% 58% 47% 23% 0%
</TABLE>
- --------------------------------------------------------------------------------
See footnote summary on page B-78.
B-74
<PAGE>
Alliance Variable Products Series Fund
================================================================================
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
------------------------------------------------------------
GLOBAL BOND PORTFOLIO
------------------------------------------------------------
Year Ended December 31,
------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ............................... $ 11.10 $ 11.74 $ 12.15 $ 9.82 $ 11.33
-------- -------- -------- -------- --------
Income From Investment Operations
Net investment income (b)(c) ..................................... .49 .54 .67 .69 .57
Net realized and unrealized gain (loss) on investments
and foreign currency transactions ............................ 1.06 (.48) .01 1.73 (1.16)
-------- -------- -------- -------- --------
Net increase (decrease) in net asset value from operations ....... 1.55 .06 .68 2.42 (.59)
-------- -------- -------- -------- --------
Less: Dividends and Distributions
Dividends from net investment income ............................. (.17) (.57) (.84) (.09) (.62)
Distributions from net realized gains ............................ (.06) (.13) (.25) -0- (.30)
-------- -------- -------- -------- --------
Total dividends and distributions ................................ (.23) (.70) (1.09) (.09) (.92)
-------- -------- -------- -------- --------
Net asset value, end of year ..................................... $ 12.42 $ 11.10 $ 11.74 $ 12.15 $ 9.82
======== ======== ======== ======== ========
Total Return
Total investment return based on net asset value (d) ............. 14.12% .67% 6.21% 24.73% (5.16)%
Ratios/Supplemental Data
Net assets, end of year (000's omitted) .......................... $ 34,652 $ 22,194 $ 18,117 $ 11,553 $ 7,298
Ratios to average net assets of:
Expenses, net of waivers and reimbursements ................... .93% .94% .94% .95% .95%
Expenses, before waivers and reimbursements ................... 1.17% 1.03% 1.15% 1.77% 2.05%
Net investment income (b) ..................................... 4.23% 4.81% 5.76% 6.22% 6.01%
Portfolio turnover rate .......................................... 42% 257% 191% 262% 102%
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------
GLOBAL DOLLAR GOVERNMENT PORTFOLIO
-----------------------------------------------------------
May 2, 1994(a)
Year Ended December 31, to
------------------------------------------- December 31,
1998 1997 1996 1995 1994
------- ------- ------- ------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............................. $ 14.65 $ 14.32 $ 11.95 $ 9.84 $ 10.00
------- ------- ------- ------- -------
Income From Investment Operations
Net investment income (b)(c) ..................................... 1.20 1.17 1.10 .92 .36
Net realized and unrealized gain (loss) on investments
and foreign currency transactions ............................ (4.03) .70 1.78 1.32 (.52)
------- ------- ------- ------- -------
Net increase (decrease) in net asset value from operations ....... (2.83) 1.87 2.88 2.24 (.16)
------- ------- ------- ------- -------
Less: Dividends and Distributions
Dividends from net investment income ............................. (.95) (.61) (.48) (.13) -0-
Distributions from net realized gains ............................ (.69) (.93) (.03) -0- -0-
------- ------- ------- ------- -------
Total dividends and distributions ................................ (1.64) (1.54) (.51) (.13) -0-
------- ------- ------- ------- -------
Net asset value, end of period ................................... $ 10.18 $ 14.65 $ 14.32 $ 11.95 $ 9.84
======= ======= ======= ======= =======
Total Return
Total investment return based on net asset value (d) ............. (21.71)% 13.23% 24.90% 22.98% (1.60)%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) ........................ $10,380 $15,378 $ 8,847 $ 3,778 $ 1,146
Ratios to average net assets of:
Expenses, net of waivers and reimbursements ................... .95% .95% .95% .95% .95%(e)
Expenses, before waivers and reimbursements ................... 1.75% 1.29% 1.97% 4.82% 15.00%(e)
Net investment income (b) ..................................... 9.49% 7.87% 8.53% 8.65% 6.02%(e)
Portfolio turnover rate .......................................... 166% 214% 155% 13% 9%
</TABLE>
- --------------------------------------------------------------------------------
See footnote summary on page B-78.
B-75
<PAGE>
FINANCIAL HIGHLIGHTS (continued) Alliance Variable Products Series Fund
================================================================================
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
------------------------------
HIGH-YIELD
PORTFOLIO
------------------------------
October 27,
Year Ended 1997(a) to
December 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Net asset value, beginning of period ........................................ $ 10.33 $ 10.00
-------- --------
Income From Investment Operations
Net investment income (b)(c) ................................................ 1.03 .13
Net realized and unrealized gain (loss) on investment transactions .......... (1.41) .20
-------- --------
Net increase (decrease) in net asset value from operations .................. (.38) .33
-------- --------
Less: Dividends
Dividends from net investment income ........................................ (.01) -0-
-------- --------
Net asset value, end of period .............................................. $ 9.94 $ 10.33
======== ========
Total Return
Total investment return based on net asset value (d) ........................ (3.69)% 3.30%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) ................................... $ 16,910 $ 1,141
Ratios to average net assets of:
Expenses, net of waivers and reimbursements .............................. .95% .95%(e)
Expenses, before waivers and reimbursements .............................. 1.80% 8.26%(e)
Net investment income (b) ................................................ 9.77% 7.28%(e)
Portfolio turnover rate ..................................................... 295% 8%
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------
NORTH AMERICAN GOVERNMENT INCOME PORTFOLIO
-----------------------------------------------------------
May 3, 1994(a)
Year Ended December 31, to
------------------------------------------- December 31,
1998 1997 1996 1995 1994
------- ------- ------- ------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............................. $ 12.97 $ 12.38 $ 10.48 $ 8.79 $ 10.00
------- ------- ------- ------- -------
Income From Investment Operations
Net investment income (b)(c) ..................................... 1.16 1.07 1.26 1.13 .50
Net realized and unrealized gain (loss) on investments
and foreign currency transactions ............................ (.65) .10 .69 .83 (1.71)
------- ------- ------- ------- -------
Net increase (decrease) in net asset value from operations ....... .51 1.17 1.95 1.96 (1.21)
------- ------- ------- ------- -------
Less: Dividends and Distributions
Dividends from net investment income ............................. (.82) (.58) (.05) (.27) -0-
Distributions from net realized gains ............................ (.11) -0- -0- -0- -0-
------- ------- ------- ------- -------
Total dividends and distributions ................................ (.93) (.58) (.05) (.27) -0-
------- ------- ------- ------- -------
Net asset value, end of period ................................... $ 12.55 $ 12.97 $ 12.38 $ 10.48 $ 8.79
======= ======= ======= ======= =======
Total Return
Total investment return based on net asset value (d) ............. 4.07% 9.62% 18.70% 22.71% (12.10)%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) ........................ $32,059 $30,507 $16,696 $ 7,278 $ 3,848
Ratios to average net assets of:
Expenses, net of waivers and reimbursements ................... .86% .95% .95% .95% .95%(e)
Expenses, before waivers and reimbursements ................... 1.17% 1.04% 1.41% 2.57% 4.43%(e)
Net investment income (b) ..................................... 9.16% 8.34% 11.04% 12.24% 8.49%(e)
Portfolio turnover rate .......................................... 8% 20% 4% 35% 15%
</TABLE>
- --------------------------------------------------------------------------------
See footnote summary on page B-78.
B-76
<PAGE>
Alliance Variable Products Series Fund
================================================================================
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Year
<TABLE>
<CAPTION>
------------------------------------------------------------
SHORT-TERM MULTI-MARKET PORTFOLIO
------------------------------------------------------------
Year Ended December 31,
------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ............................... $ 10.57 $ 10.73 $ 10.58 $ 9.91 $ 11.07
-------- -------- -------- -------- --------
Income From Investment Operations
Net investment income (b)(c) ..................................... .61 .59 .64 .82 .47
Net realized and unrealized gain (loss) on investments
and foreign currency transactions ............................ .03 (.11) .33 (.15) (1.16)
-------- -------- -------- -------- --------
Net increase (decrease) in net asset value from operations ....... .64 .48 .97 .67 (.69)
-------- -------- -------- -------- --------
Less: Dividends and Distributions
Dividends from net investment income ............................. (1.11) (.64) (.82) -0- (.46)
Return of capital ................................................ -0- -0- -0- -0- (.01)
-------- -------- -------- -------- --------
Total dividends and distributions ................................ (1.11) (.64) (.82) -0- (.47)
-------- -------- -------- -------- --------
Net asset value, end of year ..................................... $ 10.10 $ 10.57 $ 10.73 $ 10.58 $ 9.91
======== ======== ======== ======== ========
Total Return
Total investment return based on net asset value (d) ............. 6.32% 4.59% 9.57% 6.76% (6.51)%
Ratios/Supplemental Data
Net assets, end of year (000's omitted) .......................... $ 6,469 $ 6,489 $ 7,112 $ 3,152 $ 20,921
Ratios to average net assets of:
Expenses, net of waivers and reimbursements ................... .94% .94% .95% .95% .94%
Expenses, before waivers and reimbursements ................... 2.69% 1.42% 2.09% 1.30% .99%
Net investment income (b) ..................................... 5.94% 5.50% 6.03% 8.22% 6.52%
Portfolio turnover rate .......................................... 18% 222% 159% 379% 134%
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------
U.S. GOVERNMENT/HIGH GRADE SECURITIES PORTFOLIO
-------------------------------------------------------
Year Ended December 31,
-------------------------------------------------------
1998 1997 1996 1995 1994
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ................................... $ 11.93 $ 11.52 $ 11.66 $ 9.94 $ 10.72
------- ------- ------- ------- -------
Income From Investment Operations
Net investment income (b)(c) ......................................... .63 .68 .66 .65 .28
Net realized and unrealized gain (loss) on investment transactions ... .32 .29 (.39) 1.25 (.71)
------- ------- ------- ------- -------
Net increase (decrease) in net asset value from operations ........... .95 .97 .27 1.90 (.43)
------- ------- ------- ------- -------
Less: Dividends and Distributions
Dividends from net investment income ................................. (.55) (.54) (.28) (.18) (.21)
Distributions from net realized gains ................................ (.06) (.02) (.13) -0- (.14)
------- ------- ------- ------- -------
Total dividends and distributions .................................... (.61) (.56) (.41) (.18) (.35)
------- ------- ------- ------- -------
Net asset value, end of year ......................................... $ 12.27 $ 11.93 $ 11.52 $ 11.66 $ 9.94
======= ======= ======= ======= =======
Total Return
Total investment return based on net asset value (d) ................. 8.22% 8.68% 2.55% 19.26% (4.03)%
Ratios/Supplemental Data
Net assets, end of year (000's omitted) .............................. $58,418 $36,198 $29,150 $16,947 $ 5,101
Ratios to average net assets of:
Expenses, net of waivers and reimbursements ....................... .78% .84% .92% .95% .95%
Expenses, before waivers and reimbursements ....................... .91% .84% .98% 1.58% 3.73%
Net investment income (b) ......................................... 5.24% 5.89% 5.87% 5.96% 5.64%
Portfolio turnover rate .............................................. 235% 114% 137% 68% 32%
</TABLE>
- --------------------------------------------------------------------------------
See footnote summary on page B-78.
B-77
<PAGE>
FINANCIAL HIGHLIGHTS (continued) Alliance Variable Products Series Fund
================================================================================
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Year
<TABLE>
<CAPTION>
-----------------------------------------------------------------
MONEY MARKET PORTFOLIO
-----------------------------------------------------------------
Year Ended December 31,
-----------------------------------------------------------------
1998 1997 1996 1995 1994
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year .................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- ------- ------- ------- -------
Income From Investment Operations
Net investment income ................................. .05 .05(b) .05(b) .05(b) .03(b)
-------- ------- ------- ------- -------
Less: Dividends
Dividends from net investment income .................. (.05) (.05) (.05) (.05) (.03)
-------- ------- ------- ------- -------
Net asset value, end of year .......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======= ======= ======= =======
Total Return
Total investment return based on net asset value (d) .. 4.98% 5.11% 4.71% 4.97% 3.27%
Ratios/Supplemental Data
Net assets, end of year (000's omitted) ............... $119,574 $67,584 $64,769 $28,092 $ 6,899
Ratios to average net assets of:
Expenses, net of waivers and reimbursements ........ .68% .64% .69% .95% .95%
Expenses, before waivers and reimbursements ........ .68% .64% .69% 1.07% 4.46%
Net investment income .............................. 4.84% 5.00%(b) 4.64%(b) 4.85%(b) 3.98%(b)
</TABLE>
- --------------------------------------------------------------------------------
Footnote Summary:
(a) Commencement of operations.
(b) Net of expenses reimbursed or waived by the Adviser.
(c) Based on average shares outstanding.
(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.
B-78
<PAGE>
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS Alliance Variable Products Series Fund
================================================================================
To the Shareholders and Board of Directors
Alliance Variable Products Series Fund, Inc.
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of Alliance Variable Products Series Fund, Inc.
(the "Fund"), (comprising, respectively, Conservative Investors, Growth
Investors, Total Return, Growth and Income, Growth, International, Premier
Growth, Quasar, Real Estate Investment, Technology, Utility Income, Worldwide
Privatization, Global Bond, Global Dollar Government, High Yield, North American
Government Income, Short-Term Multi-Market, U.S. Government/High Grade
Securities and Money Market Portfolios), as of December 31, 1998, and the
related statements of operations for the year then ended, and the statements of
changes in net assets and the financial highlights for each of the periods
indicated therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1998, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective Portfolios constituting Alliance Variable Products Series
Fund, Inc. at December 31, 1998, the results of their operations for the year
then ended, and the changes in their net assets and the financial highlights for
each of the indicated periods, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
New York, New York
February 2, 1999
FEDERAL INCOME TAX INFORMATION (unaudited)
================================================================================
The following Portfolios of the Fund hereby designate the respective amounts as
long-term capital gain distributions during the taxable year ended December 31,
1998:
Long-Term
Capital Gain
Distributions
-------------
Conservative Investors $ 480,147
Growth Investors 522,507
Total Return 1,503,429
Growth and Income 9,626,197
Growth 8,237,182
International 715,395
Real Estate 5,987
Utility Income 217,903
Worldwide Privatization 1,432,851
Global Bond 28,314
Global Dollar Government 329,397
North American Government 142,663
U.S. Government/High Grade
Securities 10,238
B-79
<PAGE>
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)
Dr. James M. Hester (1)
Clifford L. Michel (1)
Donald J. Robinson (1)
OFFICERS
Kathleen A. Corbet, Senior Vice President
Alfred L. Harrison, Senior Vice President
Nelson Jantzen, Senior Vice President
Wayne D. Lyski, Senior Vice President
Raymond J. Papera, Senior Vice President
Alden M. Stewart, Senior Vice President
Peter Anastos, Vice President
Edward Baker, Vice President
Thomas J. Bardong, Vice President
Steven Beinhacker, Vice President
Mark H. Breedon, Vice President
Russell Brody, Vice President
Nicholas D.P. Carn, Vice President
Paul J. DeNoon, Vice President
David Edgerly, Vice President
Vicki L. Fuller, Vice President
Randall E. Haase, Vice President
Gerald T. Malone, Vice President
Daniel V. Panker, Vice President
Douglas J. Peebles, Vice President
Daniel G. Pine, Vice President
Paul C. Rissman, Vice President
Tyler J. Smith, Vice President
Wayne C. Tappe, Vice President
Jean Van De Walle, 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
787 Seventh Avenue
New York, NY 10019
LEGAL COUNSEL
Seward & Kissel
One Battery Park Plaza
New York, NY 10004
TRANSFER AGENT
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, NJ 07096-1520
Toll-free 1-(800) 221-5672
- --------------------------------------------------------------------------------
(1) Member of the Audit Committee.
B-80
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