ALLIANCE
----------------------
VARIABLE PRODUCTS
----------------------
SERIES FUND
----------------------
CONSERVATIVE INVESTORS
----------------------
PORTFOLIO
----------------------
SEMI-ANNUAL REPORT
JUNE 30, 2000
(UNAUDITED)
<PAGE>
Investment Products Offered
---------------------------
> Are Not FDIC Insured
> May Lose Value
> Are Not Bank Guaranteed
---------------------------
<PAGE>
CONSERVATIVE INVESTORS PORTFOLIO
TEN LARGEST HOLDINGS
June 30, 2000 (unaudited) Alliance Variable Products Series Fund
================================================================================
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
COMPANY U.S. $ VALUE PERCENT OF NET ASSETS
------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Notes $ 9,308,968 32.7%
------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 5.75%, 6/15/01 6,531,624 22.9
------------------------------------------------------------------------------------------
U.S. Treasury Bond, 5.50%, 8/15/28 5,319,702 18.7
------------------------------------------------------------------------------------------
BP Amoco Plc 216,803 0.8
------------------------------------------------------------------------------------------
Citigroup, Inc. 204,850 0.7
------------------------------------------------------------------------------------------
American International Group, Inc. 204,098 0.7
------------------------------------------------------------------------------------------
Nortel Networks Corp. 191,100 0.7
------------------------------------------------------------------------------------------
Pfizer, Inc. 184,800 0.6
------------------------------------------------------------------------------------------
Intel Corp. 173,794 0.6
------------------------------------------------------------------------------------------
Cisco Systems, Inc. 171,619 0.6
------------------------------------------------------------------------------------------
$22,507,358 79.0%
------------------------------------------------------------------------------------------
</TABLE>
1
<PAGE>
CONSERVATIVE INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 2000 (unaudited) Alliance Variable Products Series Fund
================================================================================
Company Shares U.S. $ Value
--------------------------------------------------------------------------------
COMMON STOCKS-21.8%
UNITED STATES
INVESTMENTS-14.8%
TECHNOLOGY-3.3%
COMMUNICATIONS
EQUIPMENT-0.4%
Lucent Technologies, Inc. .................. 1,700 $ 100,725
-----------
COMPUTER
HARDWARE-0.9%
Dell Computer Corp. (a) .................... 2,700 133,144
Hewlett-Packard Co. ........................ 1,100 137,362
-----------
270,506
-----------
COMPUTER
SOFTWARE-0.4%
Microsoft Corp. (a) ........................ 1,400 112,000
-----------
NETWORKING
SOFTWARE-0.6%
Cisco Systems, Inc. (a) .................... 2,700 171,619
-----------
SEMI-CONDUCTOR
COMPONENTS-0.9%
Applied Materials, Inc. (a) ................ 900 81,562
Intel Corp. ................................ 1,300 173,794
-----------
255,356
-----------
MISCELLANEOUS-0.1%
Agilent Technologies, Inc. (a) ............. 419 30,901
-----------
941,107
-----------
FINANCE-2.1%
BANKING - REGIONAL-0.4%
BankAmerica Corp. .......................... 2,399 103,157
-----------
INSURANCE-0.7%
American International
Group, Inc. ............................. 1,737 204,098
-----------
MISCELLANEOUS-1.0%
Citigroup, Inc. ............................ 3,400 204,850
MBNA Corp. ................................. 3,300 89,512
-----------
294,362
-----------
601,617
-----------
CONSUMER SERVICES-2.0%
BROADCASTING &
CABLE-0.3%
AT&T Corp. - Liberty Media
Group Series A (a) ...................... 3,700 89,725
-----------
RETAIL - GENERAL
MERCHANDISE-1.7%
Circuit City Stores-Circuit
City Group .............................. 4,300 142,706
Home Depot, Inc. ........................... 2,150 107,366
Target Corp. ............................... 1,800 104,400
Wal-Mart Stores, Inc. ...................... 2,200 126,775
-----------
481,247
-----------
570,972
-----------
ENERGY-1.8%
DOMESTIC
INTEGRATED-0.3%
Kerr-McGee Corp. ........................... 1,400 82,513
-----------
INTERNATIONAL-0.6%
Chevron Corp. .............................. 1,100 93,294
Exxon Mobil Corp. .......................... 1,200 94,200
-----------
187,494
-----------
OIL SERVICE-0.9%
Halliburton Co. ............................ 2,600 122,687
Noble Drilling Corp. (a) ................... 3,200 131,800
-----------
254,487
-----------
524,494
-----------
HEALTH CARE-1.2%
DRUGS-1.2%
Pfizer, Inc. ............................... 3,850 184,800
Schering-Plough Corp. ...................... 2,900 146,450
-----------
331,250
-----------
BASIC INDUSTRY-0.9%
CHEMICALS-0.3%
Union Carbide Corp. ........................ 2,000 99,000
-----------
MINING & METALS-0.4%
Alcoa, Inc. ................................ 3,600 104,400
-----------
PAPER & FOREST
PRODUCTS-0.2%
International Paper Co. .................... 1,900 56,644
-----------
260,044
-----------
CONSUMER STAPLES-0.8%
RETAIL - FOOD & DRUG-0.4%
Kroger Co. (a) ............................. 4,700 103,694
-----------
TOBACCO-0.4%
Philip Morris Companies,
Inc. .................................... 4,300 114,218
-----------
217,912
-----------
CONSUMER
MANUFACTURING-0.8%
AUTO & RELATED-0.4%
Harley-Davidson, Inc. ...................... 3,100 119,350
-----------
MISCELLANEOUS-0.4%
Honeywell International, Inc. .............. 2,800 94,325
-----------
213,675
-----------
UTILITIES-0.6%
TELEPHONE-0.6%
AT&T Corp. ................................. 1,300 41,112
WorldCom, Inc. (a) ......................... 2,800 128,450
-----------
169,562
-----------
2
<PAGE>
Alliance Variable Products Series Fund
================================================================================
Company Shares U.S. $ Value
--------------------------------------------------------------------------------
MULTI INDUSTRY
COMPANY-0.5%
Minnesota Mining &
Manufacturing Co. ....................... 1,800 $ 148,500
-----------
AEROSPACE &
DEFENSE-0.5%
AEROSPACE-0.5%
United Technologies Corp. .................. 2,300 135,413
-----------
CAPITAL GOODS-0.3%
MACHINERY-0.3%
Caterpillar, Inc. .......................... 2,600 88,075
-----------
Total United States Investments
(cost $4,026,606) ....................... 4,202,621
-----------
FOREIGN
INVESTMENTS-7.0%
CANADA-0.7%
Nortel Networks Corp. ...................... 2,800 191,100
-----------
CHINA-0.2%
China Mobile (Hong Kong),
Ltd. (a) ................................ 5,300 46,742
-----------
FINLAND-0.3%
Nokia AB Corp. (b) ......................... 1,600 81,646
-----------
FRANCE-1.1%
Alcatel (a)(b) ............................. 500 32,794
Banque Nationale de Paris (b) .............. 760 73,138
Carrefour, SA (b) .......................... 300 20,507
Castorama Dubois
Investissement, SA (b) .................. 160 39,563
France Telecom, SA (b) ..................... 170 23,760
Sanofi Synthelabo, SA (b) .................. 610 29,060
STMicroelectronics NV (b) .................. 1,070 67,421
Total Fina Elf (b) ......................... 210 32,198
-----------
318,441
-----------
HONG KONG-0.0%
Culturecom Holdings, Ltd. (a) .............. 61,000 8,842
Sunevision Holdings, Ltd. (a) .............. 1,000 815
-----------
9,657
-----------
IRELAND-0.1%
CRH Plc .................................... 1,800 32,565
-----------
JAPAN-1.3%
Advantest Corp. (b) ........................ 100 22,289
Bank of Fukuoka, Ltd. (b) .................. 3,000 20,414
Banyu Pharmaceutical Co.,
Ltd. (b) ................................ 2,000 48,914
Canon, Inc. (b) ............................ 1,000 49,762
DDI Corp. (b) .............................. 1 9,613
Fast Retailing Co., Ltd. (b) ............... 100 41,845
Kao Corp. (b) .............................. 1,000 30,536
Kawasaki Steel Corp. (b) ................... 14,000 20,056
NTT Docomo, Inc. (b) ....................... 1 27,049
Omron Corp. (b) ............................ 1,000 27,143
Sankyo Co., Ltd. (b) ....................... 300 13,147
Santen Pharmaceutical Co.,
Ltd. (b) ................................ 1,000 24,127
Shohkoh Fund & Co., Ltd. (b) ............... 50 11,262
Sumitomo Trust & Banking
Co., Ltd. (b) ........................... 5,000 35,578
-----------
381,735
-----------
KOREA-0.3%
Samsung Electronics
(GDR) (c) ............................... 390 76,440
-----------
NETHERLANDS-0.5%
Akzo Nobel NV (b) .......................... 400 16,993
Completel Europe NV (a)(b) ................ 395 4,902
ING Groep NV (b) ........................... 940 63,537
Koninklijke (Royal) Philips
Elecronics NV (b) ....................... 1,100 51,879
Libertel NV (a)(b) ......................... 500 7,614
-----------
144,925
-----------
SPAIN-0.1%
Repsol, SA (b) ............................. 900 17,915
Telefonica, SA (a)(b) ...................... 1,000 21,481
-----------
39,396
-----------
SWEDEN-0.2%
Securitas AB Series B ...................... 1,300 27,562
Telefonaktiebolaget LM
Ericsson AB Series B (a) ................ 2,100 41,548
-----------
69,110
-----------
SWITZERLAND-0.2%
ABB, Ltd. (a) .............................. 397 47,517
-----------
UNITED KINGDOM-2.0%
BAE Systems Plc (b) ........................ 3,424 21,345
Bank of Scotland (b) ....................... 4,574 43,498
Billiton Plc (b) ........................... 4,100 16,688
BP Amoco Plc (b) ........................... 22,600 216,803
British Sky Broadcasting
Group Plc (b) ........................... 450 8,797
CGNU Plc (b) ............................... 4,700 78,227
HSBC Holdings Plc (b) ...................... 42 480
Invensys Plc (b) ........................... 20 75
Reuters Group Plc (b) ...................... 1,350 23,021
Rio Tinto Plc (b) .......................... 1,000 16,342
Royal Bank of Scotland
Group Plc (b) ........................... 1,091 18,258
Slough Estates Plc (b) ..................... 4,400 24,318
SmithKline Beecham Plc (b) ................ 2,800 36,647
Standard Chartered Plc (b) ................ 44 548
Vodafone AirTouch Plc (b) .................. 14,335 57,913
-----------
562,960
-----------
Total Foreign Investments
(cost $1,730,186) ....................... 2,002,234
-----------
Total Common Stocks
(cost $5,756,792) ....................... 6,204,855
-----------
3
<PAGE>
CONSERVATIVE INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS
(continued) Alliance Variable Products Series Fund
================================================================================
Principal
Amount
(000) U.S. $ Value
--------------------------------------------------------------------------------
DEBT OBLIGATIONS-74.2%
U.S. GOVERNMENT & AGENCY
OBLIGATIONS-74.2%
Federal Home Loan
Mortgage Corp.
5.75%, 6/15/01 .......................... $ 6,600 $ 6,531,624
U.S. Treasury Bond
5.50%, 8/15/28 .......................... 5,800 5,319,702
U.S. Treasury Notes
3.875%, 1/15/09 (d) ..................... 1,775 1,747,461
4.75%, 2/15/04 .......................... 3,800 3,612,964
4.75%, 11/15/08 ......................... 1,900 1,725,428
6.875%, 5/15/06 ......................... 2,160 2,223,115
-----------
Total Debt Obligations
(cost $21,192,820) ...................... 21,160,294
-----------
SHORT-TERM
INVESTMENT- 2.5%
TIME DEPOSIT-2.5%
State Street Euro Dollar
6.00%, 7/03/00
(amortized cost $709,000) ............... 709 709,000
-----------
TOTAL INVESTMENTS-98.5%
(cost $27,658,612) ...................... 28,074,149
Other assets
less liabilities-1.5% ................... 421,360
-----------
NET ASSETS-100% ............................ $28,495,509
===========
--------------------------------------------------------------------------------
(a) Non-income producing security.
(b) Securities, or portion thereof, with an aggregate market value of
$1,561,668 have been segregated to collateralize forward exchange currency
contracts.
(c) Security exempt from registration under Rule 144A of the Securities Act of
1933. This security may be resold in transactions exempt from registration
normally applied to qualified buyers. At June 30, 2000, the aggregate
market value of this security amounted to $76,440 or 0.3% of net assets.
(d) Treasury Inflation Protection Securities.
Glossary:
GDR - Global Depositary Receipt
See Notes to Financial Statements.
4
<PAGE>
CONSERVATIVE INVESTORS PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2000 (unaudited) Alliance Variable Products Series Fund
================================================================================
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investment in securities, at value (cost $27,658,612) ............................ $28,074,149
Cash ............................................................................. 486
Foreign cash, at value (cost $167,996) ........................................... 167,200
Dividends and interest receivable ................................................ 276,115
-----------
Total assets ..................................................................... 28,517,950
-----------
LIABILITIES
Advisory fee payable ............................................................. 9,171
Unrealized depreciation of forward exchange currency contracts ................... 2,489
Accrued expenses ................................................................. 10,781
-----------
Total liabilities ................................................................ 22,441
-----------
NET ASSETS .......................................................................... $28,495,509
===========
COMPOSITION OF NET ASSETS
Capital stock, at par ............................................................ $ 2,376
Additional paid-in capital ....................................................... 27,108,963
Undistributed net investment income .............................................. 640,898
Accumulated net realized gain on investments and foreign currency transactions ... 331,164
Net unrealized appreciation of investments and foreign currency denominated
assets and liabilities ......................................................... 412,108
-----------
$28,495,509
===========
Class A Shares
Net assets ....................................................................... $28,495,509
===========
Shares of capital stock outstanding .............................................. 2,376,429
===========
Net asset value per share ........................................................ $ 11.99
===========
</TABLE>
--------------------------------------------------------------------------------
See Notes to Financial Statements.
5
<PAGE>
CONSERVATIVE INVESTORS PORTFOLIO
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2000 (unaudited)
Alliance Variable Products Series Fund
================================================================================
INVESTMENT INCOME
Interest ...................................................... $ 734,835
Dividends (net of foreign tax withheld of $2,363) ............. 34,917
---------
Total investment income ....................................... 769,752
---------
EXPENSES
Advisory fee .................................................. 110,933
Custodian ..................................................... 49,242
Administrative ................................................ 31,500
Audit and legal ............................................... 1,817
Directors' fees ............................................... 582
Printing ...................................................... 563
Transfer agency ............................................... 546
Miscellaneous ................................................. 1,912
---------
Total expenses ................................................ 197,095
Less: expenses waived and reimbursed .......................... (56,580)
---------
Net expenses .................................................. 140,515
---------
Net investment income ......................................... 629,237
---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS
Net realized gain on investment transactions .................. 482,708
Net realized loss on foreign currency transactions ............ (117,674)
Net change in unrealized appreciation/depreciation of:
Investments ................................................. (417,172)
Foreign currency denominated assets and liabilities ......... 46,968
---------
Net loss on investments and foreign currency transactions ..... (5,170)
---------
NET INCREASE IN NET ASSETS FROM OPERATIONS ....................... $ 624,067
=========
--------------------------------------------------------------------------------
See Notes to Financial Statements.
6
<PAGE>
CONSERVATIVE INVESTORS PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS Alliance Variable Products Series Fund
================================================================================
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31,
(unaudited) 1999
================ ============
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income ............................................... $ 629,237 $ 1,355,255
Net realized gain on investments and foreign currency transactions .. 365,034 2,282,151
Net change in unrealized appreciation/depreciation of investments and
foreign currency denominated assets and liabilities ............... (370,204) (1,957,517)
------------ ------------
Net increase in net assets from operations .......................... 624,067 1,679,889
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A ........................................................... (1,303,934) (1,308,187)
Net realized gain on investments
Class A ........................................................... (2,307,441) (1,740,989)
CAPITAL STOCK TRANSACTIONS
Net decrease ........................................................ (202,900) (4,285,668)
------------ ------------
Total decrease ...................................................... (3,190,208) (5,654,955)
NET ASSETS
Beginning of period ................................................. 31,685,717 37,340,672
------------ ------------
End of period (including undistributed net investment income of
$640,898 and $1,315,595, respectively) ............................ $ 28,495,509 $ 31,685,717
============ ============
</TABLE>
--------------------------------------------------------------------------------
See Notes to Financial Statements.
7
<PAGE>
CONSERVATIVE INVESTORS PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 (unaudited) Alliance Variable Products Series Fund
================================================================================
NOTE A: Significant Accounting Policies
The Conservative Investors Portfolio (the "Portfolio") is a series of Alliance
Variable Products Series Fund, Inc. (the "Fund"). The Portfolio's investment
objective is to seek to achieve the highest total return without, in the view of
Alliance, undue risk to principal. 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"). On January 5, 1999, the creation of a second class of shares,
Class B shares, was approved by the Board of Directors. The Fund offers Class A
and Class B shares. Both classes of shares have identical voting, dividend,
liquidating and other rights, except that Class B shares bear a distribution
expense and have exclusive voting rights with respect to the Class B
distribution plan. As of June 30, 2000, the following Portfolios had Class B
shares issued and outstanding: Growth and Income Portfolio, Growth Portfolio,
Premier Growth Portfolio, Technology Portfolio, Global Bond Portfolio, U.S.
Government/High Grade Securities Portfolio and Money Market Portfolio.
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 accounting
principles generally accepted in the United States, which require management to
make certain estimates and assumptions that affect the reported amounts of
assets and liabilities in the financial statements and amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates. The following is a summary of significant accounting policies
followed by the 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) or on The
Nasdaq Stock Market, Inc., are generally valued at the last reported sales price
or if no sale occurred, at the mean of the closing bid and asked price on that
day. Readily marketable securities traded in the over-the-counter market,
securities listed on a foreign securities exchange whose operations are similar
to the U.S. over-the-counter market, and securities listed on a national
securities exchange whose primary market is believed to be over-the-counter (but
excluding securities traded on The Nasdaq Stock Market, Inc.), are valued at the
mean of the current bid and asked price. U.S. government and fixed income
securities which mature in 60 days or less are valued at amortized cost, unless
this method does not represent fair value. Securities for which current market
quotations are not readily available are valued at their fair value as
determined in good faith by, or in accordance with procedures adopted by, the
Board of Directors. Fixed income securities may be valued on the basis of prices
obtained from a pricing service when such prices are believed to reflect the
fair market value of such securities.
Securities in which the Money Market Portfolio invests are valued at amortized
cost which approximates fair value, 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
8
<PAGE>
Alliance Variable Products Series Fund
================================================================================
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 period end exchange rates are reflected as a component
of net unrealized appreciation (depreciation) of investments and foreign
currency denominated assets and liabilities.
3. 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.
4. Investment Income and Investment Transactions
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Investment transactions are accounted for on the date securities are
purchased or sold. The 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.
5. 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 accounting principles generally accepted in the United States. To the
extent these differences are permanent, such amounts are reclassified within the
capital accounts based on their federal tax basis treatment; temporary
differences do not require such reclassification.
--------------------------------------------------------------------------------
NOTE B: Advisory Fee and Other Transactions with Affiliates
Under the terms of an investment advisory agreement, the Portfolio pays Alliance
Capital Management L.P. (the "Adviser"), an investment advisory fee at an
annualized rate of .75% of the Portfolio's average daily net assets.
During the six months ended June 30, 2000, the Adviser agreed to waive its fee
and to reimburse the additional operating expenses to the extent necessary to
limit total operating expenses on an annual basis to .95% and 1.20% of the
average daily net assets for Class A and Class B shares, respectively. Expense
waivers/reimbursements, if any, are accrued daily and paid monthly. For the six
months ended June 30, 2000, the Portfolio received such waivers/reimbursements
amounted to $56,580. Brokerage commissions paid on investment transactions for
the six months ended June 30, 2000, amounted to $9,141, none of which was paid
to brokers utilizing the services of the Pershing Division of Donaldson, Lufkin
& Jenrette Securities Corp. ("DLJ"), an affiliate of the Adviser, nor to DLJ
directly.
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 six months
ended June 30, 2000, the Fund paid a total of $9,000 which was allocated evenly
among the Portfolios.
--------------------------------------------------------------------------------
NOTE C: Distribution Plan
The Portfolios have each adopted a Plan for Class B shares of the Fund pursuant
to Rule 12b-1 under the Investment Company Act of 1940 (each a "Plan" and
collectively the "Plans"). Under the Plans, the Portfolios pay distribution and
servicing fees to the Distributor at an annual rate of up to .50% of each
portfolio's average daily net assets attributable to the Class B shares. The
fees are accrued daily and paid monthly. The Board of Directors currently limit
payments under the Plan to .25% of each Portfolio's average daily net assets
attributable to Class B shares. The Plans provide that the Distributor will use
such payments in their entirety for distribution assistance and promotional
activities.
The Portfolios are not obligated under the Plans to pay any distribution
services fee in excess of the amounts set forth above. The purpose of the
payments to the Distributor under the Plans is to compensate the Distributor for
9
<PAGE>
CONSERVATIVE INVESTORS PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued) Alliance Variable Products Series Fund
================================================================================
its distribution services with respect to the sale of each Portfolio's shares.
Since the Distributor's compensation is not directly tied to its expenses, the
amount of compensation received by it under the Plan during any year may be more
or less than its actual expenses. For this reason, the Plans are characterized
by the staff of the Commission as being of the "compensation" variety.
In the event that a Plan is terminated or not continued, no distribution
services fees (other than current amounts accrued but not yet paid) would be
owed by the Portfolios to the Distributor with respect to the relevant Plan.
The Plan also provides that the Adviser may use its own resources to finance the
distribution of each Portfolio's shares.
NOTE D: Investment Transactions
Purchases and sales of investment securities (excluding short-term investments)
for the six months ended June 30, 2000, were as follows:
Purchases:
Stocks and debt obligations ..................................... $ 3,468,062
U.S. government and agencies .................................... 9,710,812
Sales:
Stocks and debt obligations ..................................... $ 3,694,556
U.S. government and agencies .................................... 12,477,808
At June 30, 2000, the cost of investments for federal income tax purposes was
substantially the same as the cost for financial reporting purposes.
Accordingly, gross unrealized appreciation and unrealized depreciation
(excluding foreign currency transactions) are as follows:
Gross unrealized appreciation ................................... $ 1,039,169
Gross unrealized depreciation ................................... (623,632)
-----------
Net unrealized appreciation ..................................... $ 415,537
===========
1. Forward Exchange Currency Contracts
All Portfolios (except for the Global Dollar Government Portfolio, U.S.
Government/High Grade Securities Portfolio and Money Market Portfolio) may enter
into forward exchange currency contracts to hedge exposure to changes in foreign
currency exchange rates on foreign portfolio holdings, to hedge certain firm
purchase and sales commitments denominated in foreign currencies and for
investment purposes. A forward exchange currency contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated forward
rate.
The 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
an approximate value equal to the aggregate amount of the respective portfolio's
commitments under forward exchange currency contracts entered into with respect
to position hedges.
Risks may arise from the potential inability of a counterparty to meet the terms
of a contract and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. The face or contract amount, in U.S.
dollars, reflects the total exposure each Portfolio has in that particular
currency contract.
10
<PAGE>
Alliance Variable Products Series Fund
================================================================================
At June 30, 2000, the Portfolio had outstanding forward exchange currency
contracts as follows:
<TABLE>
<CAPTION>
Contract U.S. $ Value on U.S. $ Unrealized
Amount Origination Current Appreciation
(000) Date Value (Depreciation)
======== =============== ======= ==============
Forward Exchange Currency Sale Contracts
<S> <C> <C> <C> <C>
Euro, settling 9/18/00 ................. 608 $586,142 $582,946 $ 3,196
Pound Sterling, settling 8/16/00 ....... 320 485,151 484,777 374
Japanese Yen, settling 8/16/00 ......... 44,161 413,729 419,788 (6,059)
--------
$ (2,489)
========
</TABLE>
2. Option Transactions
For hedging and investment purposes, all Portfolios (except for the Money Market
Portfolio) may purchase and write call options and purchase put options on U.S.
securities that are traded on U.S. securities exchanges and over-the-counter
markets.
The risk associated with purchasing an option is that the Portfolio pays a
premium whether or not the option is exercised. Additionally, the Portfolio
bears the risk of loss of premium and change in market value should the
counterparty not perform under the contract. Put and call options purchased are
accounted for in the same manner as portfolio securities. The cost of securities
acquired through the exercise of call options is increased by premiums paid. The
proceeds from securities sold through the exercise of put options are decreased
by the premiums paid.
When the Portfolio writes an option, the premium received by the Portfolio is
recorded as a liability and is subsequently adjusted to the current market value
of the option written. Premiums received from which written options expire
unexercised are recorded by the Portfolio on the expiration date as realized
gains from written options. The difference between the premium received and the
amount paid on effecting a closing purchase transaction, including brokerage
commissions, is also treated as a realized gain, or if the premium received is
less than the amount paid for the closing purchase transaction, as a realized
loss. If a call option is exercised, the premium received is added to the
proceeds from the sale of the underlying security or currency in determining
whether the Portfolio has realized a gain or loss. 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.
The Portfolio had no transactions in options written for the six months ended
June 30, 2000.
--------------------------------------------------------------------------------
NOTE E: Capital Stock
There are 20,000,000,000 shares of capital stock, $.001 par value per share of
the Fund authorized divided into two classes, designated Class A and Class B.
Each class consists of 10,000,000,000 authorized shares. Transactions in capital
stock were as follows:
<TABLE>
<CAPTION>
--------------------------------- ----------------------------------
Shares Amount
--------------------------------- ----------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended
June 30, 2000 December 31, June 30, 2000 December 31,
(unaudited) 1999 (unaudited) 1999
================ ============= ================ ============
<S> <C> <C> <C> <C>
Class A
Shares sold .................... 36,882 198,340 $ 480,733 $ 2,679,220
Shares issued in reinvestment of
dividends and distributions . 301,450 237,845 3,611,375 3,049,175
Shares redeemed ................ (320,755) (739,222) (4,295,008) (10,014,063)
------------ ------------ ------------ ------------
Net increase (decrease) ........ 17,577 (303,037) $ (202,900) $ (4,285,668)
============ ============ ============ ============
</TABLE>
11
<PAGE>
CONSERVATIVE INVESTORS PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued) Alliance Variable Products Series Fund
================================================================================
NOTE F: 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 G: 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 six months ended June 30, 2000.
12
<PAGE>
CONSERVATIVE INVESTORS PORTFOLIO
FINANCIAL HIGHLIGHTS Alliance Variable Products Series Fund
================================================================================
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
Class A
-----------------------------------------------------------------------------------------
Six Months
Ended Year Ended December 31,
June 30, 2000 ======================================================================
(unaudited) 1999 1998 1997 1996 1995
========== ========== ========== ========== ========== ==========
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .. $ 13.43 $ 14.03 $ 13.10 $ 12.07 $ 11.76 $ 10.07
---------- ---------- ---------- ---------- ---------- ----------
Income From Investment Operations
Net investment income (a)(b) .......... .28 .53 .50 .48 .45 .51
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions ....................... .02 .12 1.31 .86 (.01) 1.20
---------- ---------- ---------- ---------- ---------- ----------
Net increase in net asset value from
operations ......................... .30 .65 1.81 1.34 .44 1.71
---------- ---------- ---------- ---------- ---------- ----------
Less: Dividends and Distributions
Dividends from net investment income .. (.63) (.54) (.38) (.31) (.09) (.02)
Distributions from net realized gains . (1.11) (.71) (.50) -0- (.04) -0-
---------- ---------- ---------- ---------- ---------- ----------
Total dividends and distributions ..... (1.74) (1.25) (.88) (.31) (.13) (.02)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period ........ $ 11.99 $ 13.43 $ 14.03 $ 13.10 $ 12.07 $ 11.76
========== ========== ========== ========== ========== ==========
Total Return
Total investment return based on
net asset value (c) ................ 2.18% 5.04% 14.20% 11.22% 3.79% 16.99%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) .................... $ 28,496 $ 31,686 $ 37,341 $ 30,196 $ 21,729 $ 7,420
Ratios to average net assets of:
Expenses, net of waivers and
reimbursements ................... .95%(d) .95% .90% .95% .95% .95%
Expenses, before waivers and
reimbursements ................... 1.33%(d) 1.18% 1.19% 1.33% 1.40% 4.25%
Net investment income (a) .......... 4.25%(d) 3.92% 3.69% 3.85% 3.93% 4.65%
Portfolio turnover rate ............... 47% 103% 123% 209% 211% 61%
</TABLE>
--------------------------------------------------------------------------------
(a) Net of expenses reimbursed or waived by the Adviser.
(b) Based on average shares outstanding.
(c) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Total investment return
calculated for a period of less than one year is not annualized.
(d) Annualized.
13
<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
Andrew Aran, Senior Vice President
Kathleen A. Corbet, Senior Vice President
Gregory Dube, 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
Peter Anastos, Vice President
Bruce K. Aronow, Vice President
Edward Baker, Vice President
Thomas J. Bardong, Vice President
Matthew Bloom, Vice President
Mark H. Breedon, Vice President
Russell Brody, Vice President
Nicholas D.P. Carn, Vice President
Paul J. DeNoon, Vice President
Joseph C. Dona, Vice President
Vicki L. Fuller, Vice President
F. Jeanne Goetz, Vice President
Gerald T. Malone, Vice President
Michael Mon, Vice President
Douglas J. Peebles, Vice President
Daniel G. Pine, Vice President
Paul C. Rissman, Vice President
Tyler J. Smith, Vice President
Jean Van De Walle, Vice President
Sandra Yeager, Vice President
Edmund P. Bergan, Jr., Secretary
Mark D. Gersten, Treasurer & Chief Financial Officer
Thomas Manley, Controller
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
DISTRIBUTOR
Alliance Fund Distributors, Inc.
1345 Avenue of the Americas
New York, NY 10105
INDEPENDENT AUDITORS
Ernst & Young LLP
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.
14
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